Actionable insights straight to your inbox

Equities logo

China Stocks Lose Early Gains in Profit-Taking

China stocks fell Monday after a promising start as late weakness in Asian and Mainland stocks triggered profit-taking.Results from banking giant HSBC (HBC), announced after the market close in

China stocks fell Monday after a promising start as late weakness in Asian and Mainland stocks triggered profit-taking.

Results from banking giant HSBC (HBC), announced after the market close in Hong Kong, were disappointing despite a 15% rise in profits in 2011..

The Hang Seng Index in Hong Kong ended 0.9% lower at 21,218 in sluggish turnover. The index of Chinese companies sank 1.3% to 11,540.

Profit-taking pressure is strong after a seven-week win streak pushed the Hang Seng up to challenge resistance at 21,800 early last Monday.

The market looked to bellwether HSBC to kick start gains this week, but the big bank fell on the London market even after announcing substantial gains based partly on increased business in China. Bigger losses in the U.S. helped drag the stock down.

Focus now turns to corporate results announcements from other blue-chip stocks. Jackson Wong, vice president for sales at Tanrich Securities, said he is optimistic that results from these companies will be well received, partly because most of their expectations were lowered in the fourth quarter of 2011.

“However, going above 22000 will require some more external help from China and the US,” Wong told Equities in an email.

If the market firms this week, funds will rotate back to big-cap stocks after chasing second and third-tier counters recently, he said. Chinese cement producers and Macau gambling plays may consolidate after a strong run.

There is risk in the market, though, if recent losses continue.

“If we break (below ) 21000, which is the 20-day and 250-day moving averages, we might see some severe profit taking and the recent up trend might end,” Wong said. End


Hong Kong Blue Chips: -189, -0.9%, to 21,218, 02-27-12, Hang Seng Index

Chinese Stocks in Hong Kong: -150, -1.3%, to 11,540, 02-27-12, HSCE Index

Shanghai Stocks: +0.3% to 2,447, 02-27-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +0.02, 414.2, 02-24-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened higher with futures gaining 200 points, but ended with losses after late weakness in Chinese and other Asian markets triggered profit-taking. The Chinese government announced it would buy only locally made cars this year, boosting automakers. Geely (GELYY) rose 3.8%. KGI Research

Quotable: “Meanwhile, blue-chip company results reporting season has started, which may dominate the market direction. Market focus will inevitably fall on the final-results announcement of the banking giant HSBC (HBC) and Hang Seng Bank (HSNGY), while CLP (CLPHY), New World Development (NDVLY), SHK Properties (SUHJY) and HKEx (HKXCY) will also unveil their 2011 report cards next week. The HSI is seen trading lower around 20,500 – 21,000 level amid a medium-term correction next week.” BEA Securities. 2-24-12

Chinese Company to watch: “ZIJIN MINING (ZIJMY) 70% net profit come from mining business which will benefit from gold price increase. Prospective P/E of 10x.” KGI Asia. 2-27-12

Brokerages and analysts cited here 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

A weekly five-point roundup of critical events in fintech, the future of finance and the next wave of banking industry transformation.