China stocks in Hong Kong on Thursday shrugged off a further decline in the sinking Mainland A-share market to rebound near the year high.
The Hang Seng Index climbed 1.0% to 21,923 in heavier trading, getting within sight of the high for the year of 22,111 set on November 2. The index of Chinese companies rose 0.9% to 10,488. Shanghai’s Composite Index of A-shares, however, buried itself deeper below the important 2,000 level, dropping 0.5% to 1,963.
Shanghai’s tumble below 2,000 earlier this week stalled a rally that started last week fueled by indications the Chinese economy had bottomed out and growth was starting to rise again. But it appears that after a brief consolidation, optimism over the economy, more signs of Chinese fiscal stimulus and gains on U.S. markets eased concerns about weak A-shares.
However, a continued rise in China stocks may be restrained in the next few weeks by a flood of IPOs in Hong Kong, according to Peter So, managing director and co-head of research at CCB International. “Investors may sell stocks to raise money to buy IPOs,” he told Equities.
Better times might come in a few weeks after most IPOs have gone on the market and after a big economic policy meeting in China. “The market will look for a new direction and may improve,” So said.
For now, he said major Chinese banks like ICBC (FXI) could do well because of attractive valuations. CCB International is the brokerage arm of the giant China Construction Bank.
Hong Kong Blue Chips: +214, +1.0, to 21,923, 11-29-12, Hang Seng Index
Chinese Stocks in Hong Kong: +89, +0.9%, to 10,488, 11-29-12, HSCE Index
Shanghai Stocks: -10, -0.5% to 1,963, 11-29-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +2.4, 377.9, 11-28-12, Bank of New York Mellon, ADR Index-China – closed by storm
Insight: Hong Kong opened higher on gains in New York markets and continued to rise due to indications China would pursue proactive fiscal policies. Automakers rose 2% to 7% after China announced it would expand the number of test cities for green vehicles. Great Wall Auto (GWLLY) and Dongfeng (DNFGY) were among the gainers. KGI Research
Quotable: “Market will likely remain volatile without clear direction.” BOCOM International. 11-29-12
Chinese Company to Watch: “We believe Wasion (3393, HK)is one of the few equipment makers that will report net profit growth in 2012, even including the impact of exchange gains booked in 2011. Wasion is now trading at 8.5x 2012F PE and 5.1% yield, which do not look particularly expensive.” UOB Kay Hian. 11-26-12
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=CNtruction Bank. End