China Stocks Rally on, with Help from Fed

Gene Linn |

Another day, another year-best close for China stocks in Hong Kong.

The Hang Seng Index rose 0.8% to 22,503 in heavier turnover to close at the high point for the year for the third-straight day and fourth time in six trading days. The Index has soared 3.2% since a week ago Tuesday. The index of Chinese companies jumped 1.5% Wednesday to 11,162.

The China stocks rally got its most recent boost from speculation the U.S. Federal Reserve Board would expand monetary easing, so-called QE3, in its meeting today, according to KGI Research.

But the foundation of the surge has been good economic news from China and speculation the new Chinese leadership would launch a new round of stimulus measures and reforms in coming months.

There is still plenty to get excited about on the China front, according to Francis Lun, managing director at Lyncean Securities. He pointed out to Equities that Xi Jinping’s first tour as Communist Party leader was a symbolic trip to fast-growing Guangdong province, a pioneer in China’s Open Door and reform policies.

“China’s open policy will continue and it has committed to maintain a high rate of growth of about 8%,” Lun said.

The current rally may slow a little as investors digest recent big gains, he said, but the Hang Seng should still reach 23,000 by the end of the year. For now properties are strong, as well as cement producers, Lun said. End

DAILY FIX

Hong Kong Blue Chips: +179, +0.8%, to 22,503, 12-12-12, Hang Seng Index

Chinese Stocks in Hong Kong: +170, +1.5%, to 11,162, 12-12-12, HSCE Index

Shanghai Stocks: +8, +0.4% to 2,083, 12-12-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +2.6, 387.0, 12-11-12, Bank of New York Mellon, ADR Index-China - closed by storm

Insight: Hong Kong blue chips hit their third-straight year-high close, this time on speculation the U.S. central bank would expand quantitative easing at its meeting Wednesday. Chinese banks led gains: ABC (ACGBY) +4.8%. KGI Research

Quotable: "We maintain our bullish view on H shares and expect the HSCEI to reach 13,000 by end-2013 (11,162 on 12-12-12)." Guoco Capital. 12-12-12

Chinese Company to Watch: Lead acid battery sector. "Amid the ongoing industry consolidation, Tianneng (819, HK) and Chaowei (951, HK) saw strong sales volume growth in the past few months.

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
NCT Newcastle Investment Corporation 4.49 0.02 0.45 284,539

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