China Stocks: No Boost from Re-Opened Mainland Markets

Gene Linn |

Chinese markets re-opened Monday with a whimper after a week-long holiday and China stocks may not have much to shout about for the next few weeks.

The Shanghai composite index slumped 0.6% to 2,074 in the first day of trading after the Golden Week Holiday. Hong Kong’s Hang Seng Index sank 0.9% to 20,885 in thin turnover, and the index of Chinese companies fell 1.3% to 9,840.

There was hope that Chinese markets would lead China stocks in Hong Kong and abroad higher after Mainland authorities last week finally set a day – November 8 – for the key 18th Communist Party Congress. New leaders will be announced at the congress and they are expected to launch new policies to revive China’s struggling economy. The current leadership apparently has shelved any bold economic reforms or stimulus to give the new leaders free rein.

However, anticipation of major changes was not enough to push stocks higher Monday. Any major boost will probably have to wait until the meeting actually starts, according to Dickie Wong, executive director of research at Kingston Securities.

“There will be no major policy changes before November 8,” he told Equities.

And there are other short-term restraints on the market, Wong said. One is strong technical resistance after a sharp rally in September. Another is that there is little upside for major players like HSBC (HBC) and China Mobile (CHL).

Wong expects the market to stabilize in the short term around three big Chinese banks, ICBC (FXI), CCB (CICHY) and Bank of China (BACHY). All three have very low valuations, be said, with single-digit PE ratios and dividend yields of more than 5%. End

DAILY FIX

Hong Kong Blue Chips: -188, -0.9%, to 20,825, 10-8-12, Hang Seng Index

Chinese Stocks in Hong Kong: -125, -1.3%, to 9,840, 10-8-12, HSCE Index

Shanghai Stocks: -12, -0.6% to 2,074, 10-08-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +1.3, 381.3, 10-4-12, Bank of New York Mellon, ADR Index-China

Insight: Despite firm markets in the U.S. and Europe on Friday, Hong Kong fell when Mainland stocks re-opened lower after a week-long holiday. High-end jewelers lost ground due to less-than-expected spending by Mainland tourists last week: Luk Fok (0590, HK) -7.9%. KGI Research

Quotable: "The China domestic stock markets will re-open next Monday after the long Golden Week, while major stock indexes are seen tracking gains in global equities during this week to trade higher. In the local bourse, the Hang Seng Index is expected to consolidate around 20,600-21,100, as investors may take a ‘wait-and-see’ stance before the release of China’s September economic data and the third-quarter earnings results later his month." BEA Securities. 10-5-12

Chinese Company to Watch: "We like (department store operator) Intime (INTIY) because it continued to consolidate its leading position in Zhejiang and further strengthen its competitive position in Hubei, Anhui, Beijing and other Northern egional markets, as well as its strong growth prospect on the back of concentrating stores in its core market." Tanrich Securities.

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
POT Potash Corporation of Saskatchewan Inc. 19.28 0.33 1.74 6,429,039

Comments

Emerging Growth

New Age Farm Inc.

New Age Farm Inc is engaged in the development of the agriculture based business in Langley, British Columbia.

Private Markets

Pinterest

Pinterest is a visual discovery and planning tool. Users ("Pinners") use the site and apps to get ideas for their future, such as recipes, places to travel, and products to…

Almond Smart Home Router by Securifi

Securifi sells user friendly touch screen routers that also have support for IoT/home automation.Securifi’s Almond revolutionized wireless router setup with its easy to use Touchscreen Interface in 2012. Now our…