China Stocks Plunge Late on Worries Over Bank Fund Raising

Gene Linn |

Hong Kong stocks rally comes to an end

China stocks appear to be headed for more of the same after ending last week little changed in light turnover. However some sectors look promising.

On Monday the Hang Seng index dropped sharply in the late afternoon, falling below 21,000 before closing at 21,115, down 1.0%. The index of Chinese companies sank 1.6% to 11,036. Turnover accelerated late, but was weak for the day.

“We are still stuck at current level and likely to trade between 21000-21800 again for the week,“ said Jackson Wong, vice president for sales at Tanrich Securities.

The focus for the week will be China banks earnings, he told Equities in and email. Investors will be looking for any sign that the bigger banks would have to raise capital, a move that would push their stock prices down.

Retail stocks are on the sideline, Wong said, because the current session of the National People’s Congress has not announced any measures to stimulate the sector.

On the other hand, energy stocks such as oil producer CNOOC (CEO) look promising. Wong said there are hopes the Chinese government would increase petrol prices and add subsidies for rural consumers if oil prices stay at a high level.

Gas suppliers are strong on good earnings and high demand, he said. One example is ENN Energy (XNGSY).

Macau gaming stocks are rising on good earnings and the hope they will pay decent dividends going forward, according to Wong. End

DAILY FIX

Hong Kong Blue Chips: -203, -1.0%, to 21,115, 03-19-12, Hang Seng Index

Chinese Stocks in Hong Kong: -180, -1.6%, to 11,036, 03-19-12, HSCE Index

Shanghai Stocks: +0.2% to 2,410, 03-19-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -1.3, 410.8, 03-16-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong’s Hang Seng Index opened 100 points higher, but worries over possible fund raising by Chinese banks helped drive the index sharply lower in the late afternoon. Big Chinese banks finished 1 to 2% lower. KGI Research

Quotable: "Looking into next week, investors would focus on the earnings reports from blue-chips like China Resources Enterprise (CRHKY), Henderson Land (HLDCY), China Construction Bank (CICHY) and China Shenhua (CSUAX). We see the HSI to test the resistance level of 21,700 next week." BEA Securities. 3-16-12

Chinese Company to Watch: "CHINA OVERSEAS LAND (CRBJY), 70% of the FY12 completions have been pre-sold, performance is good. 30% discount to book which is attractive." KGI Asia. 3-19-12

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

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