In a week of playing follow-the-leader China stocks took their cue Friday from the U.S. market’s flat performance overnight. Continued strong performances in Shanghai and Shenzhen gave some hope of gains next week, but the market faces formidable resistance after a healthy rise so far this year.
The Hang Seng Index in Hong Kong edged up 0.08% to 20,757 for a rise this week of 1.2%. The index of Chinese companies increased 0.2% to 11,606, up 1.4% for the week. Turnover fell Friday from strong levels at mid-week.
Mainland markets did their best to spur Hong Kong, with the Shanghai Composite Index rising 0.8% Friday to 2,330, maintaining the critical 2,300 figure. However China stocks, considered overbought at this point by numerous analysts, face tough resistance at 20,900 to 21,000 for the Hang Seng.
China stocks in Hong Kong may continue next week to be at the mercy of movements in other global markets. “Hong Kong has little autonomy now,” said Castor Pang, head of research at Core Pacific Yamaichi.
He told Equities that if prices do go up they are likely to be led by the big Chinese banks. Even though they appear to be overbought, Pang said, the banks benefit from a rumor their major government shareholder has agreed to a dividend decrease. “This would help the capital ratios of the big four banks,” according to Pang.
Of the four major state-owned banks he likes ICBC (FXI) and CCB (CICHY). End
Hong Kong Blue Chips: +18, +0.08%, to 20,757, 2-03-12, Hang Se ng Index
Chinese Stocks in Hong Kong: +22, +0.2%, to 11,606, 2-03-12, HSCE Index
Shanghai Stocks: +0.8% to 2,330, 02-03-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +3.7, 408.8, 02-02-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong opened slightly lower after a flat performance by stocks in the U.S. and traded in a narrow range to close marginally higher in reduced turnover. Chinese gold producers rose: Zhaojin (1818.HK) +3.9%.KGI Research
Quotable: “Disappointing economic data from China and worries about refinancing of Europe’s sovereign debt could be an excuse for a technical correction of the stock market in near term. We believe the Hang Seng Index may retreat to 19,500 in the first quarter. Short-term investors should take profit on cyclical stocks.” Guoco Capital. 2-3-12
Chinese Companies to watch: “We maintain our bullish view on the cement industry and prefer China National Building Materials (CBUMY) based on its M&A potential and benefiting from industry consolidation, and China Resources Cement (CARCY) and China Shanshui (CCGLF) on their regional advantages.” Haitong Securities. 2-2-12
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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