In the last three weeks Hong Kong’s blue chip Hang Seng Index edged up 0.3% after slipping 0.3% and 0.5% and posted low volume figures that sometimes verged on somnolent. Then Tuesday the Hang Seng surged 2.5% and turnover leaped by 52% from the previous week’s average. In Shanghai the bellwether Composite Index jumped 1.3% after eight-straight days of losses.
But don’t get too excited. Eric Yuen, head of research at Guoco Capital, warned, “I consider the rebound in Hong Kong and Shanghai to be technical rather than a change in direction. The key is still Chinese inflation and the slowing (Chinese) economy.”
He noted that early today China announced bank lending in May plunged more than 30% from the previous month. That is the kind of inflation-fighting economic tightening that Yuen thinks will keep a lid on gains for Chinese stocks.
The lid most likely won’t completely come off until after Chinese inflation peaks. Market consensus now is that will be in June or July. Meanwhile, Yuen expects the Hang Seng Index to trade between 22,500 and 24,000 as it has for the last seven or eight months.
Hong Kong Blue Chips: -58, -0.2%, to 23,626, 06-01-11, Hang Seng Index
Chinese Stocks in Hong Kong: -36, -0.3% to 13,232, 06-01-11, HSCE Index
Shanghai Stocks: +0.0%, 2,744, 06-01-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: +9.5 to 4445.3, 05-31-11, Bank of New York Mellon, ADR Index-China
Insight: China stocks consolidated after Tuesday's huge gains, with turnover slipping from high levels. Worry that the Chinese government would curb bank loans pushed banks lower: Agricultural Bank of China (1288) -2.7%. KGI Research
Quotable: "US$ continued its correction with US$ index losing 0.55% as of the close of HK market, as concerns over Greece debt crisis alleviated. A better risk appetite brought back capital to equity and commodity markets." BOCOM International. 6-1-2011
Chinese Company to Watch: "...[S]ome power generators might increase production on higher electricity prices, adding further coal demand. Coal sector is expected to benefit. Share prices of China Shenhua (1088.HK), Yanzhou Coal (1171.HK) and China Coal (1898.HK) jumped 3.2%, 4.67% and 2.94%, respectively." BOCOM International. 6-1-11
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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
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