China stocks may be due for a short rally after holding above an important support level in Hong Kong on Thursday, according to one analyst.

The Hang Seng Index, which includes numerous heavyweight Chinese companies, lost 0.6% Thursday, but finished above the 18,300 support level at 18,398. The index of Chinese companies slipped 0.4% to 9,945.

By staying above 18,300, the Hang Seng could now test 18,500, according to Conita Hung, head of equities at Delta Asia Financial. And she told Equities that the market might continue to move up after New Years as investors adjust their portfolios.

One main beneficiary will be the Chinese consumer sector because China will strive to boost domestic consumption to make up for slowing growth in exports, Hung said. She especially likes China Resources (CRPJY).

New energy firms like Kunlun Energy (KLYCY) will likely gain from preferential government policies, and banks will benefit from continued credit loosening. More aggressive investors might go for Minsheng Bankd (CEVIY), Hung said, while those more long-term oriented will like CCB (CICHY).

Subscribe to get our Daily Fix delivered to you inbox 5 days a week

However, after Chinese New Years in late January, market attention will turn to the European debt crisis, according to Hung. At that point she expects the Hang Seng to fall to test 17,500. End

DAILY FIX

Hong Kong Blue Chips: -121, -0.6%, to 18,398, 12-29-11, Hang Seng Index

Chinese Stocks in Hong Kong: -36, -0.4% to 9,945, 12-29-11, HSCE Index

Shanghai Stocks: +0.2%, 2,174, 12-29-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: -2.8, to 356.7, 12-28-11, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips opened 199 points lower, but losses narrowed after Mainland markets rebounded. Mining plays slumped due to the drop in gold prices: Lingbao (3330.HK) -2.0%. KGI Asia

Quotable: "Considering the weakness in A-share market, we expect the Hang Seng Index to move between18,000 and 19,000 in near term." Guoco Capital. 12-29-11

Chinese Company to Watch: "HOPEWELL INFRA (HHILY) "Toll road revenue stabilized with dividend yield of 8%, it is highly defensive." KGI Asia. 12-29-11

Brokerages and analysts cited have disclaimers on their websites emphasizing their statements are for information only. They do not endorse my blog, and I don't endorse them.
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

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.