China Stocks Not Yet Ready to Restart Rally

Gene Linn |

Not so fast. Late last week it looked like China stocks might be ready to resume a strong rally after a month-long consolidation, but on Monday a plunge in Mainland markets helped drive Hong Kong stocks back near the year-low.

The Hang Seng Index tumbled 1.5% to 22,538 in active trading, just 18 points over the year’s lowest close on February 26, erasing last Thursday’s sharp rise. The Index of Chinese stocks dropped 2.1% to 11,104. The main culprit for the losses was a free-fall in Mainland stocks after authorities announced further tightening measures over the weekend. The Shanghai Composite Index plunged 3.6% to 22,273.

In addition to bad news from China, investors may still not be eager to restart buying in a big way, not in the midst of U.S. budget woes, Italian political uncertainty and before news from this month’s meeting of China’s National People’s Congress.

“I think the market is still trying to find a bottom (where) the investors would feel comfortable to get in, but with uncertainties around the world and NPC in China , investors would prefer shorter term trades on themed sectors to longer commitment,” Jackson Wong, vice president of sales at Tanrich Securities, told Equities in an email.

One prime “themed sector” is renewable energy as China combats bad publicity from stifling air pollution around the country, Wong said. Hydro-power firm Huadian Fuxin (816, HK) is an up-and-comer in the sector that includes Datang Renewable (1798, HK), Comtec Solar (712, HK) and solar energy company GCL-Poly (GCLPY). End

DAILY FIX

Hong Kong Blue Chips: -342, -1.5%, to 22,538, 3-4-13, Hang Seng Index

Chinese Stocks in Hong Kong: -240, -2.1%, to 11,105, 3-4-13, HSCE Index

Shanghai Stocks: -86, -3.6%, to 2,273, 3-4-13, Shanghai Composite Index.

Chinese Stocks in the U.S.: +0.7, 379.9, 3-1-13, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong stocks posted a steep decline in active trading after Mainland markets plunged due to further tightening measures announced by Chinese authorities. Chinese properties tumbled: China Resources Land (CRBJY) -8.9%. KGI Research

Quotable: "Looking ahead, another batch of major blue-chip companies will deliver their earnings results next week, including HSBC Holdings (00005), Hang Seng Bank (00011), Power Assets (00006)…etc, which would be closely watched by investors. Market rebound may continue next week, but the blue-chip index should see trong resistance near the 23,000 level." BEA Securities. 03-01-13

Chinese Company to Watch: NetDragon (NDWTY) "We maintain our view that 91 Wireless has great potential given the continuous rapid development of mobile Internet. NetDragon will benefit from 91’s fast growth. We reiterate Buy on NetDragon with a TP (target price) of HK$13.86." BOCOM International. 3-4-13

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
T.D. Bank Ser 3 Toronto-Dominion Bank (The)
TD.PF.B:CA Toronto-Dominion Bank (The) Non-Cumulative 5-Year
TD.PF.B:APH Toronto-Dominion Bank (The) Non-Cumulative 5-Year
TD.PF.B:PUR Toronto-Dominion Bank (The) Non-Cumulative 5-Year
TD.PF.B:CHI Toronto-Dominion Bank (The) Non-Cumulative 5-Year
TD.PF.B:CX2 Toronto-Dominion Bank (The) Non-Cumulative 5-Year

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