News from China will move China stocks more this week than the last two weeks, when drama over Europe’s debt crisis dominated Hong Kong and other global markets. At least on the economic front, the China news should be good.
Europe will still play a role, but the reopening of Mainland Chinese stocks exchanges and government offices after the “Golden Week” holiday will cause investors to look to China a bit more. In addition, Chinese authorities are set to make a significant policy announcement on Wednesday, and release important economic statistics Friday.
On Monday the China factor was slightly negative. The Hang Seng Index opened higher on optimism Europe would come up with a plan to re-capitalize its struggling banks, but weak prices in Mainland markets cut into gains.
The Hang Seng ended almost unchanged in volatile trading, up 0.02% to 17,711, and the index of Chinese companies slipped 0.2% to 8,870.
For the rest of the week, investors should get some encouraging economic news from China, according the CCB International. “We expect China’s macro environment to continue to exhibit healthy growth in 3Q11 despite a mild quarter-on-quarter slowdown compared with 1H11,” the brokerage said on its website last Friday.
Third quarter GDP will expand by 9.2%, CCBI predicted, driven by domestic fixed asset investment and retail sales. GDP growth was 9.7% in the first quarter and 9.5% in the second quarter.
Healthy growth will quell investors’ fears of a hard landing for China as a result of its fight against inflation and the weakening global economy.
On the important inflation front, CCBI said the CPI for September would slip to 6.0% from 6.2% in August as food price rises moderate. That would be good news that inflation continues to drop from a three-year high of 6.5% in July, but the rate is still probably too high to give investors confidence that China would soon begin to loosen monetary policy. End
DAILY FIX -- Early Gains Erode
Hong Kong Blue Chips: +4, +0.02%, to 17,711, 10-10-11, Hang Seng Index
Chinese Stocks in Hong Kong: -18, -0.2% to 8,870, 10-10-11, HSCE Index
Shanghai Stocks: -0.6%, 2,345, 10-10-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: -10.8,to 350.3, 10-07-11, Bank of New York Mellon, ADR Index-China
Insight: China stocks opened higher in Hong Kong due to optimism Europe would recapitize its struggling banks, but a drop on Mainland markets cut into gains. Reduced turnover included heavy trading in warrants, which reflects strong speculative interest. The Chinese government investment arm, Huijin, bought A shares in the four major Chinese banks,leading to a late rebound for these banks, BOC Hong Kong Holdings (BHKLY.PK) rose 2.1%. The parent company's ADR code is (BACHY.PK) KGI Research
Quotable: "All in all, Hong Kong stock market may be choppy next week, and the HSI may test 18,000 points with its support level likely residing at 16,500 points." BEA Securities. 10-7-11
Chinese Company to Watch: YANZHOU COAL (YZC) "Thanks to further acquisition concept, we expect overseas business to account for near 30% of FY12 earnings. Prospective P/E of 7x." KGI Asia. 10-7-11
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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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