China Stocks Post Third-Straight Solid Gain

Gene Linn |

China Stocks Post Third-Straight Solid GainThe latest wave of optimism about progress solving the European debt problem rolled on Tuesday, carrying China stocks in Hong Kong above an important resistance level.

Hong Kong’s Hang Seng Index, which includes numerous Chinese heavyweights, posted its third straight strong rise after European leaders signaled last week they would take concerted action to address their debt crisis. The index rose above resistance at the 250-day moving average, gaining 1.1% to 19,797 on increased turnover. The index of Chinese companies rose 1.6% to 9,674.

However if the Euro debt story continues to play out as it has some many times in the past year and a half, the market will soon by disappointed by piecemeal measures to deal with the problem, and global stocks will plunge.

Balancing that gloomy prospect are a few glowing developments in China and Hong Kong, according to Peter So, managing director and co-head of research at CCB International.

For one thing, corporate results released so far this week are providing an unexpected boost.

Investors generally thought results would be poor because of the slowing economy in China. But the Hang Seng Bank (HSNGY) came in higher than expected Monday, So told Equities, helping market sentiment. On Tuesday big local stocks Hang Lung Properties (HLPPY) and Hang Lung Group (HNLGY) rose 3.8% and 5.3% respectively after announcing interim results.

Another good omen is the promise of a continuing drop in China’s inflation at least through September, So said. This will give China more room to loosen monetary policy.

And he noted that investors are beginning to accumulate big Chinese banks because they think the value of loans will grow in the second half of the year. End

DAILY FIX

Hong Kong Blue Chips: +211, +1.1%, to 19,797, 07-31-12, Hang Seng Index

Chinese Stocks in Hong Kong: +151, +1.6%, to 9,674, 07-31-12, HSCE Index

Shanghai Stocks: -6, -0.3% to 2,104, 07-31-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -3.7, 368.4, 07-30-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips rose above resistance at the 250-day moving average on continuing expectations European leaders will act strongly to deal with the region's debt problem. Good interim results from some big local companies also helped the market. Hang Lung Properties (HLPPY) rose 3.8% Tuesday and the Hang Lung Group (HNLGY) soared 5.3%. KGI Research

Quotable: "We expect the Hang Seng Index to range trade between 18,000 and 20,000 in August but the risk is on the downside." Guoco Capital. 7-30-12

Chinese Company to Watch: Air China (AIRYY). "In mid-July, share price rose above the downtrend since Oct 10. Trend remained solid thereafter. BUY." Guoco Capital. 7-30-12

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

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