China Stocks Rally on Manufacturing Rebound

Gene Linn  |

The long-awaited turnaround in China’s manufacturing output did wonders for stocks this week as Hong Kong’s Hang Seng Index recovered most of the losses from a two-week slide.

The Hang Seng rose 0.8% Friday to 21,914, and the index of Chinese companies climbed 1.1% to 10,607.

The Hang Seng had plunged 4.5% from a year-high 22,111 on November 2 to 21,109 on November 15. But this week the index soared 3.6%, as did the index of Chinese companies. The Shanghai Composite Index for A-shares rebounded after slipping below the critical 2,000 level briefly on Tuesday, ending the week at 2,027.
The big turnaround started Wednesday due to a rumor China would cut the required reserve ratio for banks to allow them to lend more, according to BOCOM International. Then on Thursday the preliminary November PMI showed growth in manufacturing for the first time in 13 months. This gives investors hope the Chinese economy is recovering after seven quarters of slowing growth.
BOCOM International, the brokerage arm of China’s Bank of Communications, noted in its daily report that China in fact did not reduce the RRR, and said the strong manufacturing showing reduces the need for such stimulus.
“We reiterate our view that there will not be any more RRR cut or interest rate cut for the year,” the brokerage said.

Lack of short-term stimulus may make another big rally unlikely next week. End


Hong Kong Blue Chips: +170, +0.8, to 21,914, 11-23-12, Hang Seng Index

Chinese Stocks in Hong Kong: +115, +1.1%, to 10,607, 11-23-12, HSCE Index

Shanghai Stocks: +12, +0.6% to 2,027, 11-23-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -3.1, 371.5, 11-20-12, Bank of New York Mellon, ADR Index-China - closed by storm

Insight: Stocks in Hong Kong continued to rise Friday after the preliminary PMI number released Thursday reflected a rise in Chinese manufacturing growth for the first time in 13 months. Cement producers and shipping plays were among the leaders. KGI Research

Quotable: "We maintain our bullish view on H shares as the HSCEI is currently trading at undemanding 2012 PER of 8.7x." Guoco Capital. 11-23-12

Chinese Company to Watch: China Rexources Cement (CARCY) "We maintain our view that CR Cement is a solid cement play with SOE (stte-owned enterprise) privileges and a successful track record in M&A." UOB Kay Hian. 11-23-12

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

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