Encouraging economic news from the U.S. on top of unexpectedly strong growth in the Chinese economy and a rally in China markets helped push Hong Kong’s Hang Seng Index up 2.0% to 20,739 in brisk turnover. The index of China companies added 2.9% to close at 11,583.
And the Hang Seng may not be done rising this week. “The crucial point is whether it can break through 20,500,” Conita Hung, head of equities at Delta Asia Financial, told Equities. “If it finds support there is could test 21,000”
The big movers were Chinese financials and raw materials stocks such as oil producer CNOOC (CEO), Hung said. Copper, chemical and cement plays are also strong. Telecoms, a defensive sector that saw some interest recently, stabilized as market sentiment improved.
Encouraging January Figures Coming
China’s January economic numbers are likely to in line with expectations or better, according to a China Macro report from BOCOM International.
The brokerage, an arm of China’s major Bank of Communications, predicted inflation would come in at 4.1% as expected, continuing a downward trend. PPI growth might narrow to 0.8%, signaling declining prices in the means of production.
BOCOM expects export growth to fall to 7%, but that is higher than the market consensus.
It points out that January figures were skewed by the week-long Chinese New Year Holiday, which caused food prices to rise and exports to decline. Because of that distortion, the value of January figures is limited, and BOCOM does not expect China to make significant macro-economic policy moves in the short term. End
Hong Kong Blue Chips: +406, +2.0%, to 20,739, 2-02-12, Hang Seng Index
Chinese Stocks in Hong Kong: +330, +2.9%, to 11,583, 2-02-12, HSCE Index
Shanghai Stocks: +2.0% to 2,313, 02-02-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +6.3, 404.8, 02-01-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong opened higher on the strength of a global market rally and increased its gains in the afternoon as Mainland markets rose. China announced favorable policies for the agricultural technology sector. China Bluechemical (CBLUY) jumped 6.4%, and Tianye Water (0840.HK) gained 7.6%. KGI Research
Quotable: “On 25 January 2012, the US Federal Reserve pledged to keep US interest rates ‘exceptionally low’ at 0.25% for at least three years till late 2014…. Spurred by demand for higher-yielding assets, funds flowed into emerging markets, including Asia, as these economies have a better economic outlook and more room for rate cuts.” CCB International. 1-30-12
Chinese Company to watch: “We maintain our positive view towards the long term growth prospect of Macau’s gaming sector and favor Macau plays with higher mass-market and Cotai exposure, namely Sands China (SCHYY) and Galaxy Entertainment (GXYEY).” Haitong Securities. 2-2-12
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For a list of Chinese companies sold in the U.S. and information on each company go to http://www.adrbnymellon.com/dr_country_profile.jsp?country=CN