China Stocks Plunge Through Key 250-Day Moving Average

Gene Linn |

china StockAfter weeks of up-and-down trading, China stocks found a direction on Tuesday and it was down. But one analyst says investors will start to accumulate China-related stocks at this lower level.

The Hang Seng Index in Hong Kong plunged 2.2% to 20,806, and the index of Chinese companies tumbled 3.1% to 11,119. Turnover nearly doubled, partly because investors scrambled to sell AIA (AAGIY) stocks after its parent company announced it would sell some holdings.

The Hang Seng had bobbed up and down since surging through resistance at 21,000 to 21,385 February 15. Tuesday it not only fell below 21,000 but also through support at the 250-day moving average (20,897).

The turn below 21,000 was partly a consolidation after a big runup so far this year, according to Peter So, managing director and co-head of research at CCB International. Even after the recent swoon the Hang Seng is up 12.9 % this year.

So also noted that China’s announcement it was scaling back its GDP target for 2012 hurt sentiment, and a stronger U.S. dollar hurt commodity stocks such as those in oil, copper and steel.

But he told Equities, “I expect a rebound. After this consolidation, long-term investors are looking at China and its very low PE. They will begin to accumulate China stocks when the Index is below 21,000.”



The main targets will be stocks that are proxies for the rising A-share market in China, he said. They include securities firms such as Citic Securities (6030.HK) and some properties like China Resources Land (CRBJY). End

DAILY FIX

Hong Kong Blue Chips: -459, -2.2%, to 20,806, 03-06-12, Hang Seng Index

Chinese Stocks in Hong Kong: -352, -3.1%, to 11,119, 03-06-12, HSCE Index

Shanghai Stocks: -1.4% to 2,410, 03-06-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -9.5, 409.8, 03-05-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened lower and extended its losses after Mainland markets fell. Turnover surged as investors unloaded stocks of AIA (1299.HK) after its parent company announced it would sell some of its holdings. Giant bank ICBC (FXI) tumbled 3.8% on rumors large shareholder would sell some of their stocks. KGI Research

Quotable: "Since many stocks were already 'overbought' before the results announcement, investors took the opportunity to unload their shareholding." Core Pacific Yamaichi. 2-6-12

Chinese Company to watch: BJ ENT WATER (371.HK) "It is expected the parent company will inject another 10 sewage treatment project to the Group, helping to strengthen core business development." Kingston Securities. 3-5-12

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

Companies

Symbol Name Price Change % Volume
PCF.UN:CA Energy Credit Opportunities Income Fund 7.22 -0.03 -0.41 1,000

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