China Stocks: No Big Rally Until Second Half 2012

Gene Linn |

China Stocks: No Big Rally Until Second Half 2012Better times are ahead for China stocks, according to one analyst, just not in the next couple months.

On Thursday the Hang Seng Index rebounded 0.9% to 20,327 on strong performances on US. And Chinese markets. The index of Chinese companies climbed 1.5% to 10,665. But turnover remained low, indicating many investors stayed on the sidelines.

China stocks were weak after the holiday season early April, said Peter So, managing director and co-head of research at CCB International. CCBI is an arm of the big Chinese bank CCB. “In the short term the the market will consolidate if overseas stocks stabilize,” So said.

For now the Hang Seng has support at around 20,000, he said. A cut in Chinese banks' Reserve Requirement Ratio is expected later this month and will help manufacturers, cement plays and electrical machinery companies.

But So does not see a big rally this quarter as worry over lower company earnings is absorbed. The range will be between 19,500 and 22,000.

After concern over earnings is digested, the Hang Seng could rally as high as 25,000 in the second half of 2012, So said. Another positive is increased certainty over Chinese policies after the leadership change coming later in the year. End

DAILY FIX

Hong Kong Blue Chips: +187, +0.9%, to 20,327, 04-12-12, Hang Seng Index

Chinese Stocks in Hong Kong: +161, +1.5, to 10,665, 04-12-12, HSCE Index

Shanghai Stocks: +1.8% to 2,327, 04-12-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +5.1, 395.2, 04-11-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips opened 30 points higher after a Wall Street rally and expanded gains as Mainland markets rose. China auto makers were strong. Properties climbed on reports of a possible cut in mortgage rates for first-time home buyers: China Overseas (CAOVY) +0.9% KGI Research

Quotable: “Market expects there will be either a lending rate cut or a reserve requirement ratio cut to be announced before the release of first-quarter GDP data next week (13th April). With the potential short-term boost towards China stocks, we expect the HSI to test higher at 20,800 next week." BEA Securities. 4-5-12

Chinese Company to Watch: “Travelsky Technology (TSYHY) provides IT solutions for China’s air travel and tourism industries. After testing the support level of $4.0 a few times in March, share price has strengthened, rising above sma20-250 mtd with relatively large volume." Guoco Capital. 4-5-12

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

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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
AFSS AmTrust Financial Services Inc. 7.25% Subordinated 25.25 0.10 0.40 6,183

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