China Stocks Gain after Interest Rate Hike

Gene Linn |

Gene Linn Equities.comIt’s been an eventful week for China stocks. The big events have been bad, or looked bad at first glance, but the gateway Hong Kong stock market posted a respectable gain. The picture could clear up a bit Saturday when China releases eagerly awaited inflation figures for June.

For the week, the blue-chip Hang Seng Index rose 1.5%, 328 points, to 22,726. The index of Chinese stocks increased 1.4%, 179 points, to 12,726. But weak turnover, especially at the end of the week, indicated investors were not moving ahead with much enthusiasm.

The first big event of the week for China stocks was the sale of large stakes in Chinese banks CCB and Bank of China by Singapore state investment arm Temasek. The sale on Wednesday pushed the market lower. However, Eric Yuen, head of research at Guoco Capital, said the sale attracted good buying, which was a sign of renewed confidence.

Later in the same day China increased interest rates for the third time this year. That was part of an inflation-fighting tightening of the economy that has spooked investors for months. But the Hong Kong market posted gains the last two days of the week as some analysts asserted there probably would be no more interest rate hikes.

The June inflation figure due Saturday will hit 6.2%, according to CCB International. If it’s not significantly more than that, the story that interest rate hikes are at an end will remain intact.

Another important statistic will be China’s second quarter GDP, which will be released next Wednesday. CCB International expects a moderate decline to 9.4% to 9.5%. That would ease fears of a hard landing in China and add fuel to a rally that has been building in spurts the last several weeks.  End

DAILY FIX --  Chinese Banks, Properties Rise

Hong Kong Blue Chips: +196, +0.7%, to 22,726, 07-08-11, Hang Seng Index

Chinese Stocks in Hong Kong: +116, +0.9% to 12,756, 07-08-11, HSCE Index

Shanghai Stocks: +0.13%, 2,798, 07-08-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: +2.8 to 444.8, 07-07-11, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened higher following solid gains on Wall Street, but weak turnover reflected market consolidation. Chinese banks rebounded: ABC (1288) +1.3%. Chinese properties were also strong: R & F (2777) rose more than 3%. KGI Research

Quotable: "... (T)he interest rate hike cleared the cloud in the market and provided further direction. Investors shall buy in after the consolidation." CFSG. 7-7-2011

Chinese Company to Watch: Yuexiu Property (123) "Jun-11 contracted sales revenue beat our forecast by 5.1%. The company recorded a contacted sales revenue of RMB778m in June, increased by 41.5% MoM." BOCOM International. 7-8-2011

Brokerages and analysts cited have disclaimers on their websites emphasizing their statements are for information only. They do not endorse my blog, and I don't endorse them.

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

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Companies

Symbol Name Price Change % Volume
ALP.P.O Alabama Power Company Preferred Stock 30.23 0.23 0.75 1,325

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