China stocks retreated Friday to get off this week’s roller coaster ride pretty much where they got on. The market has good reasons to head back up, but some analysts say gains may be hard-won after major increases since last September.
Hong Kong’s Hang Seng Index fell 0.6% to 22,880, and the index of Chinese companies slumped 0.8% to 11,344. After a big loss due to Italian political uncertainty and a surge upward on the U.S. reaffirmation of its easy money policy, the Hang Seng ended the week with a scant 0.4% increase, and the index of Chinese stocks edged up 0.2%.
The market will continue to benefit from statements from central banks in the U.S. and Europe that the current easing policy will continue, said Ben Kwong, chief operating officer at KGI Asia. And he noted that with China’s national legislature, the National People’s Congress, meeting in early March, investors speculate “that new leaders might launch new measures to reform the economy which results in a more sustainable long-term growth.”
However, Kwong also pointed out that global markets have accumulated significant gains in recent months. The Hang Seng is up 19.5% since early September despite a consolidation in February. Profit-taking will probably emerge at the current high levels, he told Equities in an email, capping gains in Hong Kong.
Winners next week likely will include companies benefitting from favorable Chinese policies promoting a clean environment and urbanization, Kwong said. Investors will also focus on results due from blue chip stocks. End
Hong Kong Blue Chips: -140, -0.6%, to 22,880, 3-1-13, Hang Seng Index
Chinese Stocks in Hong Kong: -93, -0.8%, to 11,344, 3-1-13, HSCE Index
Shanghai Stocks: =6, -0.3%, to 2,360, 3-1-13, Shanghai Composite Index.
Chinese Stocks in the U.S.: -0.8, 379.2, 2-28-13, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong lost ground as selling pressure emerged after Thursday's big rally. Xinyi Glass (XYIGY, see "Company to Watch," below) jumped 6.5% after announcing results that beat expectations. KGI Research
Quotable: "We believe the stock market consolidation is close to an end and expect the Hang Seng Index to move higher in March." Guoco Capital. 3-1-13
Chinese Company to Watch: Xinyi Glass (XYIGY) "Looking forward, we continue to view XYG as a major beneficiary of the urbanization theme and the growing solar energy sector in China." Guoco Capital. 3-1-13
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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
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