Hong Kong’s Hang Seng Index sank 1.5% to 19,145, and the index of Chinese companies plunged 1.9% to 9, 020. Turnover rose, partly because of share placements.
The Hang Seng has now lost most of the 1,352 points it gained between July 25 and August 9. The gains started on hopes of a European Central Bank bailout plan and mostly persisted for a couple weeks even though the bailout did not materialize and corporate results began to disappoint.
But now sentiment has turned sour, according to Castor Pang, head of research at Core Pacific Yamaichi. Unrelenting weak corporate results are taking a toll, he told Equities, as are downgrades by major brokerages along with a steep drop in mainland stocks, with Shanghai’s Composite Index hitting a three-and-a-half year low of 2,038 Wednesday.
“China-related stocks will continue to drop in the near term because the previous poor economic conditions will drag down profits,” Pang said. Big banks and manufacturers will be among the losers, he said.
Pang said he expected the Hang Seng might drop to 19,000 or a little below before experiencing a weak rebound. End
Hong Kong Blue Chips: -285, -1.5%, to 19,145, 09-05-12, Hang Seng Index
Chinese Stocks in Hong Kong: -175, -1.9%, to 9,020, 09-05-12, HSCE Index
Shanghai Stocks: -6, -0.3% to 2,038, 09-05-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -5.0, 356.7, 09-04-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong lost ground due to a drop in Asian stocks and to placement of shares. Turnover and selling pressure rose, even after taking into account share placements. Chinese coal producers declined after the government said it would close unsafe mines: China Shenhua (CSUAY) -4.1%. KGI Research
Quotable: "Without stimulus action by the Federal Reserve and European Central Bank, the Hang Seng Index is likely to trend downward in September." Guoco Capital. 9-5-12
Chinese Company to Watch: "Belle (BELLY) is in a better position than its peers for retail sales slowdown. Maintain BUY." Guoco Capital. 9-5-12
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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
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