China Stocks Hurt by Weak Mainland Markets

Gene Linn |

China Stocks RMBChina’s plan to continue to squeeze the property sector not only derailed a China stocks rally Wednesday, according to one analyst it will drive the market down substantially in coming days.

The Hang Seng Index in Hong Kong spent much of the day in negative territory due to weakness on Mainland markets, but ended slightly higher after getting corporate results in-line with expectations. The Index gained 0.2% to 21,353, but the index of Chinese companies sank 0.5% to 11,241.

The Hang Seng was sailing on its way to a fifth day of gains Wednesday, rising some 300 points in the morning before ending lower after an announcement China would continue to try to hold down property prices.

“Premier Wen Jiabao said property prices were still too high for ordinary people,” said Francis Lun, managing director at Lycean Securities. “That made the Chinese stock market drop, and that hurt the Hong Kong market.”

Mainland stocks will continue to drag Hong Kong down, he told Equities. In fact he predicts the Hang Seng will tumble about 1,000 points in the short term.

Lun said that among the main losers will be, naturally, Chinese property stocks such as China Resources Land (CRBJY). Others that will be hard hit are the big four state-owned banks: ICBC (FXI), CCB (CICHY), ABC (ACGBY) and BOC (BACHY).

Companies that announce good results may escape the downturn, Lun said. For example Internet company Tencent (TCEHY) rose 4% Thursday after announcing revenues gained 26% last year. End

DAILY FIX

Hong Kong Blue Chips: +46, +0.2%, to 21,353, 03-15-12, Hang Seng Index

Chinese Stocks in Hong Kong: -60, -0.5%, to 11,241, 03-15-12, HSCE Index

Shanghai Stocks: -0.7% to 2,374, 03-15-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -11.4, 410.5, 03-14-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips opened slightly higher after good results from a "stress test" of U.S. banks, fell due to a poor performance by Mainland markets then closed a bit higher on in-line corporate results. Heavyweight China Mobile (CHL) reported profits meeting market expectations and rose 0.5%. KGI Research

Quotable: "We expect HSI will maintain a range trade pattern in the near term." BOCOM International. 3-15-12

Chinese Company to watch: Tencent (TCEHY) "Given the stable growth of online games/online ads, we revise our 2012/13E EPS by 6%/2%...." BOCOM International. 3-15-12

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
CHL China Mobile Limited 61.89 -0.24 -0.39 1,114,664
PEBK Peoples Bancorp of North Carolina Inc. 20.82 0.32 1.54 119

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