China Stocks Hit New High, but Winners Hard to Pick

Gene Linn |

Shanghai stock exchangeChina stocks hit a 21-month-high close in Hong Kong Wednesday, but it is hard to pick winning stocks amid signs more gains may be hard to come by in the short term.

The Hang Seng Index jumped 0.7% to 23,822, ending a weeks’ long struggle to top resistance at 23,700 and posting the best finish in 21 months. The index of Chinese companies rose 0.8% to 12,172.

A rebound in shares of ICBC helped fuel Wednesday’s rise. The giant Chinese bank fell Tuesday due to Goldman Sach’s share placement.

But a number of factors will limit more gains, according to Ben Kwong, chief operating officer at KGI Asia. A drop in the Hong Kong dollar indicates the inflow of foreign funds is slowing, he told Equities, and there has been a pick-up in fund raising recently to further decrease liquidity. And he added: “Technically the market is overbought.”

On the other hand, strong markets overseas and in China will buoy Hong Kong stocks.

Overall, Kwong said, “With the approach of (Chinese) New Year (February 10) activity will slow and the market will move sideways for the short term.”

Decreasing market activity makes it hard to pick stocks on the rise, he said. Buying is rotating swiftly from one stock and sector to another. “A stock will be good today and bad tomorrow,” Kwong said.

Some possible winners might be stocks that benefit from Chinese government policies, he said. That includes infrastructure plays like China Railway Construction (CWYCY). And telecoms like China Mobile (CHL) and China Telecom (CHA) have lost ground recently and may be due for a rebound. End

DAILY FIX

Hong Kong Blue Chips: +167, +0.7%, to 23,822, 1-30-13, Hang Seng Index

Chinese Stocks in Hong Kong: +94, +0.8%, to 12,172, 1-30-13, HSCE Index

Shanghai Stocks: +24, +1.0% to 2,382, 1-30-13, Shanghai Composite Index.

Chinese Stocks in the U.S.: +0.9, 399.6, 1-29-13, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips rose to a 21-month high close in solid turnover, although February futures contracts failed to break resistance at 24,000. A jump in Mainland A-shares helped Chinese brokerages: Citic Securities (CIIHY) +6.4%. KGI Research

Quotable: "If Shanghai Composite cannot break the current peak in the coming weeks, HSI may be dragged down to test the 20-day MA. The trading range for HSI will be 23,088 to 23,800." Core Pacific Yamaichi. 1-28-13

Chinese Company to Watch: Property company CIFI Holdings (Group) Co. Ltd (884.HK) "The focus on 1st-tier cities, especially Shanghai and Beijing, allows CIFI to tap the robust growth of both purchasing power and demand for properties in large cities.... The current valuation is attractive, in our view, given its solid fundamentals and growth potential." BOCOM International. 1-19-13

Brokerages and analysts cited here 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

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
CLTSD CLTSD n/a n/a n/a 0

Comments

Emerging Growth

IBC Advanced Alloys Corp.

IBC Advanced Alloys Corp is engaged in the production and development of specialty alloy products. Its products include copper alloys and berryllium aluminium alloys.

Private Markets

XY Find It

Founded by serial entrepreneur Arie Trouw, XY Findables follows a single guiding principle: customers should never lose anything important again. With over 50,000 users around the world, more than 100,000…

WayBetter

The spark hit Jamie when he saw co-workers competing to lose weight. Instead of pizzas and subs, they were eating salads and jogging along the river. Some were sneakily leaving…