After 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
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
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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