China Stocks Rebound but Face Economic Headwind

Another central bank announced another round of easy money, and China stocks got another bounce Wednesday. The question is, will it last?

Hong Kong’s Hang Seng Index rose 1.2% to 20,842 in heavier turnover, and the index of Chinese companies climbed 1.7% to 9,849. Japan’s central bank helped fuel the gains with a new plan to stimulate the Japanese economy.

The market had a brief consolidation Monday and Tuesday after the U.S. Federal Reserve triggered sharp gains Friday by launching a new wave of quantitative easing. The Friday before it was the European Central Bank that sparked a major rally when it announced a large bond buy-back program.

At least one analyst, however, thinks China’s slowing economic growth will prevent further significant gains until next year.

“I think the Chinese economy will bottom out in the fourth quarter and start to recover in 2013, maybe in the first quarter,” said Francis Lun, managing director at Lyncean Securities. “Now investors aren’t interested in buying stocks. They mainly want to buy bonds. Maybe that will change early next year.”

He told Equities he thinks the Hang Seng will rise modestly to cap out at about 21,000 in 2012,
For the time being, he likes Chinese consumer stocks like Skyworth (SWDHY). End

DAILY FIX

Hong Kong Blue Chips: +240, +1.2%, to 20,842, 09-19-12, Hang Seng Index

Chinese Stocks in Hong Kong: +165, +1.7, to 9,849, 09-19-12, HSCE Index

Shanghai Stocks: +8, +0.4% to 2,068, 09-19-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -1.6, 374.1, 09-18-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong rebounded Wednesday as markets in China stabilized and the Japanese central bank announced moves to stimulate Japan’s economy. Chinese banks were strong: ICBC (FXI) +2.5%. KGI Research

Quotable: “We recommend short term investors to take profit if the Hang Seng Index reaches the range of 20,800-21,000.” Guoco Capital. 9-19-12.

Chinese Company to Watch: “HSBC (HBC) is a leading global bank. QE3 should benefit international financial stocks, including HSBC.” Guoco Capital. 9-19-12

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