China Stocks May Turn Volatile Next Week

Gene Linn |

China Stocks May Turn Volatile Next WeekChina stocks continued to slide Friday in somnolent trading ahead of Fed Chairman Ben Bernanke’s much anticipated speech.

Hong Kong’s Hang Seng index slipped 0.4% to 19,483, a drop of 2.0% for the week, and the index of Chinese companies sank 0.6% to 9,280 to end the week off 4.1%.

Despite the retreat, the Hang Seng has mostly traded in a narrow range with modest daily movements In the last three weeks. It has also hung onto a large part of the 1,352 points it gained from July 25 to August 9 when hope swelled that major central banks would inject cash into the sagging world economy.

But things could get more volatile next week as investors get a better idea of whether that hope will be fulfilled or dashed, according to Ben Kwong, chief operating officer at KGI Asia. He told Equities in an email that Bernanke’s speech Friday U.S. time will likely give the market some direction by indicating whether the Fed is going to launch new easing policies, the so-called QE3. The European Central Bank will give its own signals on monetary policy next Thursday, and the U.S. will announce August employment data on Friday.

“We believe that a more clear picture would be seen afterward, especially on the aggressiveness of the ECB and the Fed to relax money supply to lift the economy,” Kwong said.

He thinks commodity producers will lose out as hope for QE3 fades. And he said Chinese consumer plays and high-dividend stocks will move into the spotlight because they will suffer less from global economic weakness and are not as vulnerable to government policies. End

DAILY FIX

Hong Kong Blue Chips: -70, -0.4%, to 19,483, 08-31-12, Hang Seng Index

Chinese Stocks in Hong Kong: -61, -0.6%, to 9,280, 08-31-12, HSCE Index

Shanghai Stocks: -5, -0.2% to 2,048, 08-31-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -1.7, 364.7, 08-30-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong traded in a narrow range in light turnover ahead of Fed Chairman Ben Bernanke's speech Friday, U.S. time. Blue chips closed slightly lower to consolidate around the 19,500 level. ICBC (FXI) inched up 0.2% after its interim profits met market expectations. KGI Research

Quotable: "Without stimulus action by the Federal Reserve and European Central Bank, the Hang Seng Index is likely to trend downward in September." Guoco Capital. 8-31-12

Chinese Company to Watch: Sinopharm (1177, HK) "We expect that the company’s 2H results will remain robust, mainly driven by direct sales force expansion and increase in new products sales. The stock is trading at 16.6x 2013 PE, which is not demanding given its strong growth outlook." Tanrich Securities. 8-31-12

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 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 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

Companies

Symbol Name Price Change % Volume
BCS.P.C Barclays Bank Plc 7.750% Sponsored ADS Ser 4 Pref n/a n/a n/a 0

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