China Stocks Need Good News This Week

Gene Linn |

hong kong china stocksChina stocks could use some good news this week. After hitting the year-high on April 8, blue chips in the China gateway of Hong Kong slipped 5.1% by the end of last week. Hong Kong’s index of Chinese stocks slumped 5.9%.

The main culprit for the decline is worry about Chinese economic tightening brought about by rising inflation. China will announce the April inflation rate Wednesday, but don’t get your hopes up for good news. March inflation rose from 4.9% in February to 5.4%, the highest rate in almost three years. Conita Hung, head of equities at Delta Asia Financial, told Equities she expects April inflation to rise slightly to 5.5%. Some analyists, such as those at Core Pacific Yamaichi, think inflation will remain stubbornly high, but fall to 5.2%.

The market widely expects a Chinese inflation-fighting interest rate hike, and uncertainty over the rise is one of the biggest drags on China stocks now. Raising interest rates is generally bad news for stocks, but Hung said a hike might relieve uncertainty and spark a rebound.

Chinese and U.S. officials meet in America on Monday and Tuesday. The U.S. is set to press China to raise its interest rate to push the Chinese currency higher, a perennial U.S. concern. Little else is scheduled this week; first quarter corporate announcements have been made, and there are no Chinese company IPOs until next week.  End

DAILY FIX

Hong Kong Blue Chips: +177, +0.8%, to 23,336, 05-09-11, Heng Seng Index

Chinese Stocks in Hong Kong: +86, +0.7% to 12,934, 05-09-11, HSCE Index

Chinese Stocks in the U.S.: +4.1 to 439.7, 05-06-11, Bank of New York Mellon, ADR Index-China

Insight: A rebound in recently hard-hit Chinese commodity producers helped push Hong Kong stocks higher, but turnover was thin amid market uncertainty and ahead of a holiday Tuesday. Investors are waiting for Chinese inflation figures to be announced Wednesday. If inlation continues to be high, as expected, more economic tightening in China is likely. KGI Research

Quotable: "The Chinese CPI inflation, due on Wednesday, is expected to stay stubbornly high at 5.2% in April, after a 5.4% rise in March, which is likely to lead to another rate hike on the Mainland this month. Nonetheless, a decent market rebound in the blue-chip index is expected to stage soon following its long losing streak, with initial resistance near 23,600." BEA Securities. 5-7-2011

Chinese Company to Watch: "Anxin-China (1149): "(The) Chinese government targets market size of (the high-technology security warning) industry to reach RMB500bn by 2015. The Company will benefit from the government policy." Core Pacific Yamaichi. 5-9-2011

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
TNP:CA TransAtlantic Petroleum Ltd. 1.44 0.00 0.00 905

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