Trading for China stocks in Hong Kong opened the Year of the Dragon with a roar. Investors are now finding a number of reasons to regain their appetite for risk.
After a holiday for Chinese New Year, the blue-chip Hang Seng Index rose 1.6% to 20,439 on Thursday, and the index of Chinese companies jumped 2.4% to 11,417. The Hang Seng has gained 10.9% since the start of 2012.
“The HK market is still riding on the recent strong momentum and hopes that we are decoupled from the euro crisis,” Jackson Wong, vice president for equity sales at Tanrich Securities, told Equities in an email.
One optimistic theme is that the market may make up some of the 20% in losses from 2011 before the month’s end when EU leaders will announce new plans to address the European debt crisis, Wong said.
The U.S. Federal Reserve Board’s decision to extend its low interest policy into 2014 also whets investors’ risk appetite, he said.
It probably didn’t hurt that investors cashed in some gains after the market opened strongly. Investors in Hong Kong consider it a good sign for the rest of the year if you make money on the first day, Wong said.
He said that among the big gainers were Macau gambling plays as Mainland tourists flooded into the “Asian Las Vegas” during their week-long holiday. End
Hong Kong Blue Chips: +329, +1.6%, to 20,439, 1-26-12, Hang Seng Index
Chinese Stocks in Hong Kong: +270, +2.4%, to 11,417, 1-26-12, HSCE Index
Shanghai Stocks: +1.3%, 2,298, 01-20-12, Shanghai Composite Index. Closed for a Holiday.
Chinese Stocks in the U.S.: +6.1, 398.7, 01-25-12, Bank of New York Mellon, ADR Index-China
Insight: The U.S. Federal Reserve’s decision to extend low interest rates and the prospect of a cut in the reserve ratios of Chinese banks sent the Hong Kong market higher in the first trading day of the Year of the Dragon. Chinese banks led the way: ICBC (FXI) +3.2%. Cement producers also gained: Anhui Conch (AHCHY) +6.8%. KGI Asia. 1-26-12
Quotable: “Hong Kong shares may see further upside in the next week, as market anticipates there will be further cut in required reserve ratio around the Chinese New Year Holidays…. Turnover may stay thin, as China’s stock markets will be closed during the long holidays until 30th January.” BEA Securities. 1-20-12
Chinese Company to Watch: “Zijin Mining (ZIJMY) has outperformed HSCEI by 4% year-to-date, we still rate the counter as our top pick in gold sector amid a potential re-rating following company’s recent resumption of mine acquisitions and its low valuation of 8.2x 2012 PER.” Guoco Capital. 1-26-12
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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