The recent rally continued to stall Wednesday, but it may just be waiting for additional good economic news.
A week ago Hong Kong’s Hang Seng Index stormed through strong resistance at the 250-day moving average, about 21,000 points, to hit 21,365. But it has had trouble building on that breakout.
On Wednesday the Hang Seng ended 0.3% higher at 21,549, and the index of Chinese companies rose 0.9% to 11,824.
Jackson Wong, vice president of sales at Tanrich Securities, sees two reasons for the struggles in the last week: The market hit the short-term target of 21,800 on Monday, and investors sold on the good news from China’s cut of banks’ reserve requirement and the second EU bailout result.
“Now we really lack … any good news to support the market to go any further,” Wong told Equities in an email, “so we need to consolidate at above 21,000 for a while before [receiving] any meaningful signs such as China and the US economy are recovering well.”
The big losers early this week were oil stocks, especially Sinopec (SNP). Wong said they took the first hit after leading the rally early on. But he said, Sinopec “… has been down enough and now is at an attractive level to accumulate.”
And he said Investors are rotating from blue chips to other “theme” stocks such as cement producers and social housing-related stocks and other counters with low PEs and high dividend yields. End
Hong Kong Blue Chips: +71, +0.3, to 21,549, 02-22-12, Hang Seng Index
Chinese Stocks in Hong Kong: +134, +0.9%, to 11,824, 02-22-12, HSCE Index
Shanghai Stocks: +0.9% to 2,403, 02-22-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -9.4, 409.8, 02-21-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong opened lower but ended with a gain because of a strong performance on Mainland markets. Chinese housing industries rose: China Overseas (CAOVY) +2.8%. Online business firm Alibaba (ALBIY) announced a 46% premium on its shares in a privatization move, sending the stock 42.7% higher. KGI Research
Quotable: “The Fifth Session of the 11th National People’s Congress [NPC] scheduled to convene in March this year will focus on economic restructuring with an emphasis on encouraging greater consumption by rural and urban consumers as a means of offsetting recent external trade weakness.” CCB International. 2-20-12
Chinese Companies to watch: “Our consumer team believes that the current valuations of most retailers already prices in the negatives from 2011. On this assumption, we expect leading department stores and supermarkets with rural exposure to benefit most. This would include Intime (1833.HK) and Maoye (0848.HK). Haier Electronics (BNY), Chigo Holding (449.HK).” CCB International. 2-20-12
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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