Bad news was good news for China stocks last week, but now some actual good news is needed for the stocks to take the next step up.
Hong Kong’s Hang Seng Index lost 0.4% Monday to close at 20,611 in light turnover. The index of Chinese companies sank 0.8% to 10,845.
The Hang Seng jumped 2.8% the last two days of the previous week despite a rise in China’s March inflation and a greater-than-expected drop in March GDP.
One reason was that investors thought weakening growth would prompt China to roll out new policies to stimulate the economy, said Jackson Wong, vice president of sales at Tanrich Securities.
But investors will probably have to see real policies, such as a cut in Chinese banks’ reserve requirement ratio, for the Hang Seng to break 21,000 this week, he said. Support will be 20,200.
A drop in their RRR would help banks and other financials remain strong, Wong told Equities in an email, despite Goldman Sach’s sale of ICBC (FXI) shares Monday morning.
“Cement and building materials and Macau plays should be on the side line since they are at a relative high level,” Wong said. “I do suggest investors to buy them if they correct around 10%.” End
Hong Kong Blue Chips: -90, -0.4%, to 20,611, 04-16-12, Hang Seng Index
Chinese Stocks in Hong Kong: -92, -0.8, to 10,845, 04-16-12, HSCE Index
Shanghai Stocks: -0.1% to 2,356, 04-16-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -3.1, 401.4, 04-13-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong opened lower following weakness in European and U.S. markets Friday and sank almost 200 points at one time, but a rebound in Mainland stocks helped erase some losses. Turnover was light, and included Goldman Sachs’ disposal of shares in ICBC (FXI), which fell 0.8%. KGI Research
Quotable: “For the coming week, investors may eye on any policy relaxation (for example RRR cut) in China, as well as the corporate results announcement in the United States. Given the improving investment sentiment, the benchmark index is likely to test 21,000 points.” BEA Securities. 4-13-12
Chinese Company to Watch: “We continue to see Daphne (DBNEY) as more resilient against China’s slowing consumption growth cycle and to lead the growth (23% FY12-13E EPS CAGR) in the ladies’ footwear sector….” BOCOM International. 4-13-12
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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