China stocks broke out of their up-and-down pattern Friday to post a second-straight day of gains, but low market turnover and the approach of corporate results reporting season In Hong Kong may keep the market in a narrow range next week.
Hong Kong’s Hang Seng Index rose 0.4% to 19,641, and the index of Chinese companies increased 0.6% to 9,571. Following last week’s big losses, Friday’s rise helped the Hang Seng gain 2.9% for the week. The index of Chinese companies, the H-shares, climbed 3.6%.
One factor behind the week’s gains was the expectation the U.S. central bank would soon launch stimulus measures, according to Ben Kwong, chief operating officer at KGI Asia. The hope for Federal Reserve Board action boosted global stock and commodities markets, which also helped China stocks in Hong Kong, he told Equities in an email.
On the Chinese side of the equation, investors looked to an interim economic meeting by the China State Council to introduce new policies to re-energize economic growth.
But Kwong noted that paltry turnover gave the market little momentum. He also said stocks trading should be range-bound ahead of start of the reporting season for major companies on July 30.
“Among sector(s),” Kwong said, “the fixed asset investment sector especially the railway construction (is) the major beneficiary of China government increase in capex in infra-structure investment.” End
Hong Kong Blue Chips: +82, +0.4%, to 19,641, 07-20-12, Hang Seng Index
Chinese Stocks in Hong Kong: +56, +0.6%, to 9,571, 07-20-12, HSCE Index
Shanghai Stocks: -16, -0.7% to 2,169, 07-20-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +6.8, 367.1, 07-19-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong blue chips opened 54 points higher and then traded in a narrow range in weak turnover. Chinese telecoms gained: China Unicom (CHU) +7.2%. But Chinese properties continued to fall: Chinese Overseas Land (CAOVY) -2.6%. KGI Research
Quotable: “HSI saw resistance at 19,600, which was the lower bound of uptrend…. Although it saw some pressure near the lower bound of the uptrend, the overall sentiment was still good.” Core Pacific Yamaichi. 7-20-12
Chinese Company to Watch: “Maintain ‘Outperform’ rating for the (Internet) sector. Tencent (TCEHY) is our top pick for the sector.” BOCOM International. 7-20-12
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