China Stocks Off To Uninspired 2012 Start

Gene Linn |

China Shanghai finance districtAfter an uninspired start to 2012, China stocks face an extension of 2011’s discouraging trading.

The Hong Kong market has gone up and down in very weak turnover the first three trading days of the year, ending Thursday up 0.5% at 18,813. The index of Chinese companies rose 0.5% to 10,141.

“The 2012 trend will be an extension of 2011, i.e., volatile with no real upside,” said Benny Wong, head of research at BOCOM International, the brokerage arm of China’s Bank of Communications.

The market will probably be down in the first half of the year, Wong told Equities in an email, with a rebound in the second half possible.

The pessimistic outlook is the result of questionable macroeconomic prospects, he said. The main risks are that the European debt crisis and slowdown in China’s GDP growth will be worse than expected.

Wong agrees with other analysts who say that the Chinese consumer sector might be a short-term bright spot, but cautioned that a worse-than-expected drop in Chinese growth will restrain consumption.

Companies that will outperform, according to Wong, are those with stable earnings in an uncertain environment and with high yields. He points to Link REIT (00823.HK), which has a dividend yield of 4.2%, and Guangshen Railway (GSH), dividend yield 3.8%).

China toll roads may do well, Wong said. Shenzhen Expressway (SHZNY) and Anhui Expressway (AUHEY) are two possibilities. End

DAILY FIX

Hong Kong Blue Chips: +86, +0.5%, to 18,813, 1-5-12, Hang Seng Index

Chinese Stocks in Hong Kong: +47, +0.5% to 10,141, 1-5-12, HSCE Index

Shanghai Stocks: -1.0%, 2,148, 01-05-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -4.4, to 370.4, 01-4-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong stocks posted a slight rise in weak turnover after U.S. market erased early losses. Chinese oil producers gained on the back of rising oil prices: PetroChina (PTR) +1.6%. KGI Asia

Quotable: "The PBOC just halted the issuance of three-month PBOC bills for the first time in six months, a signal that there may be a further injection of liquidity to boost economic activity."01-03-12

Chinese Company to Watch: "Kingdee (KGDEY) STRONG BUY: A rare buying opportunity. Kingdee is a Shenzhen-based software developer.... [B]etween the major share price falloff in 2008 and the recent retreat, the counter has surged over 400%, outperforming its closest domestic peer, UFIDA, and the HSI by respective 297% and 367%, a testament to its resilience to recover from downturns." Haitong Securities. 01-05-12

Brokerages and analysts cited 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
PRAA PRA Group Inc. 38.35 0.05 0.13 236,616
GSH Guangshen Railway Company Limited 28.45 -0.02 -0.08 2,656
PTR PetroChina Company Limited 70.65 -0.83 -1.16 138,269

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