China stocks investors are mainly playing a waiting game ahead of results from a big Chinese government economic policy conference and the long Chinese New Year holiday. The weak trading may open opportunities for those with a longer term perspective.
Turnover in Hong Kong rose slightly Friday but has been very thin for the week as the market experienced up-and-down trading. On Friday the Hang Seng Index sank 1.2% but ended the week 0.9% higher, up 159 points, to 18,593. The index of Chinese companies fell 1.5% Friday, but finished the week up 0.5%, 51 points, at 9,987.
China’s two-day National Financial Work Conference kicked off Friday, tackling banking reform and other topics. “Not much information will be available until the conference closes, and investors are on the sidelines,” said Peter So, managing director and co-head of research at CCB International.
After the conference, investors will start to be occupied by the upcoming Chinese New Year. The Year of the Dragon starts January 23, and the exchange in Hong Kong will close from January 23 to 25, and the Shanghai market will shut down from January 19 to 24.
“Next week investors will begin to take leave for the Chinese New Year and they are not taking many new positions before that,” So told Equities.
But he said, “Investors with a medium-term view will be in a good position to take positions when there’s not much buying interest.”
One attractive sector involves domestic consumption companies, according to So. He likes Chinese auto makers, partly because of their attractive PE levels. For example, Dongfeng Motors (DNFGY) boasts a PE of less than 10X. End
Hong Kong Blue Chips: -220, -1.2%, to 18,593, 1-6-12, Hang Seng Index
Chinese Stocks in Hong Kong: -153, -1.5% to 9,987, 1-6-12, HSCE Index
Shanghai Stocks: +0.7%, 2,153, 01-06-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +4.2, to 379.0, 01-05-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong stocks drifted lower, weighed down by persistent concern about the European debt crisis. The big four China banks’ lending in December hit a three-year high, but bank stocks were soft. KGI Asia
Quotable: “Short-selling activity turned more active, although the market gained slightly. This indicated that investors were not optimistic about the market sentiment.” Core Pacific Yamaichi. 1-6-12
Chinese Company to Watch: “CNOOC (CEO) has priced in all negative news flow – Maintain BUY. Comment: We believe the heightening geopolitical tension between Iran and Western countries directly pushed up oil price. Meanwhile, the improvement of the US economy will fundamentally increase oil demand.” Guoco Capital. 1-06-12
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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