China Stocks' Rally Dials It Down

Gene Linn |

China Stocks Rebound from Steep LossesChina stocks’ rally slowed Thursday after the racing start to 2013 on Wednesday, but the direction for the new year still appears to be full steam ahead.

The Hang Seng Index in Hong Kong, following Wednesday’s 2.9% surge, increased 0.4% to 23,399. Turnover remained high. The index of Chinese companies also posted a smaller rise, 0.8% to 11,987 compared to the previous day’s massive 4.0% leap.

The next stop? It’s 25,000 according to Francis Lun, managing director at Lyncean Securities. And he told Equities the index will reach that resistance level “pretty soon.”

“The market (the Hang Seng Index) is still only 12 times 2012 earnings,” he said. “That’s not that high. Chinese stocks still have room to move up. If you look at 2013 projected earnings, the market is trading at only 11 times earnings.”

Chinese banks and insurance companies will be among the leaders in the continuing rally, Lun said. He particularly likes Ping An Insurance (PNGAY) because it is a full-service financial company that can take advantage of the government’s recent decision to allow Chinese insurers to set up mutual funds. End

DAILY FIX

Hong Kong Blue Chips: +87, +0.4%, to 23,399, 1-3-13, Hang Seng Index

Chinese Stocks in Hong Kong: +90, +0.8%, to 11,987, 1-3-13, HSCE Index

Shanghai Stocks: +36, +1.6% to 2,269, 12-31-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +10.3, 413.5, 12-31-12, Bank of New York Mellon, ADR Index-China - closed by storm

Insight: Hong Kong posted moderate gains in brisk trading after starting 2013 with a sharp rise. Wind energy plays surged: CP New Energy (735, HK) rose more than 6%. Home appliance makers rebounded: Gome (GMELY) +10%. KGI Research

Quotable: "We stick to our (2013) year-end target for the HSCEI (index of Chinese companies) at 13,000 implying a further upside of around 10%." Guoco Capital. 1-2-13

Chinese Company to Watch: "Since we recommended a BUY on Glorious Property (845, HK) on 17 October 2012, its share price has increased by 33.0% against a rise of 9.9% for the Hang Seng Index and 14.8% for the HSCEI. However, the company is still a laggard among Chinese property developers." Guoco Capital. 1-3-13

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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