This week started with a big loss due to profit-taking, poor U.S. and European economic news and a disappointing preliminary April PMI reading from China. The last four days the market has struggled to recover part of the loss in very thin turnover.
The Hang Seng Index in Hong Kong slipped 0.3% Friday to end the week 1.3% lower at 20,741. The index of Chinese companies barely moved Friday and also closed with 1.3% loss for the week at 10,905.
Next week Mainland markets will close Monday and Tuesday in a so-called “golden week” for the May 1 holiday. Hong Kong will shut down Tuesday. Investors are hoping China will implement an eagerly expected cut on banks’ reserve requirement ratio to boost economic growth.
“(I)t looks like the market is leaning on an upside breakout because of the anticipated RRR cut by the end of the golden week and good earnings results from the big cap Chinese companies,” said Jackson Wong, vice president of sales at Tanrich Securities.
Sectors that would gain from the RRR cut include infrastructure, cement producers, properties, financials and Macau gambling plays, Wong told Equities in an email.
But if China does not announce an aggressive loosening policy in addition to reducing the RRR, the market will hit resistance at 21,400, he said.
Without the RRR move, the market will continue to range trade between 20,400 and 21,000. End
Hong Kong Blue Chips: -68, -0.3%, to 20,741, 04-27-12, Hang Seng Index
Chinese Stocks in Hong Kong: -6, -0.06%, to 10,905, 04-27-12, HSCE Index
Shanghai Stocks: -0.4% to 2,396, 04-27-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +3.5, 402.9, 04-25-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong blue chips opened 107 points higher but slid lower in range trading. Good first quarter results helped Bank of China HK (BHKLY), Up 1.9%, and Petro China (PTR), up 3%. KGI Research
Quotable: “The market sentiment improved slightly as the Development Research Center of the State Council of the PRC expected that China’s yoy economic growth for 2012 would beat the 7.5% target to be over 8%.” Core Pacific Yamaichi. 4-27-12
Chinese Company to Watch: “After transforming its business from edible oils business to gold manufacturing since 2009, China Precious Metal (1194, HK) (CPM or the Company) had turned losses into gains in 2010. In 2011, its profit achieved great increase continually.” Phillips Securities. 4-27-12
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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