China Stocks Rebound from 'Overdone' Drop -- Cautiously

Gene Linn |

China stocks posted a modest rebound Wednesday from Tuesday’s steep drop as investors appear to be reluctant to make any more big moves with a long holiday approaching.

Hong Kong’s Hang Seng Index bounced back 0.5% to 23,257 in lower turnover after plunging 2.3% Tuesday. The index of Chinese companies regained 0.3% to end at 11,849. The Hong Kong market will close for the Chinese New Year holiday from Monday to Wednesday next week, while Mainland exchanges shut down the whole week.

Tuesday’s big pullback after a long rally was “overdone,” according to Steven Leung, director of institutional sales at UOB Kay Hian. The rebound was muted, he told Equities, because “investors are cautious ahead of the long weekend.”

Still, the outlook for China stocks is positive, Leung said. With Chinese A-shares on the Mainland outperforming other Asian markets this year, he said, securities companies and big Chinese banks stand to gain. He likes major banks like CCB (CICHY) and ICBC (IDCBY). En

DAILY FIX

Hong Kong Blue Chips: +108, +0.5%, to 23,257, 2-6-13, Hang Seng Index

Chinese Stocks in Hong Kong: +36, +0.3%, to 11,849, 2-6-13, HSCE Index

Shanghai Stocks: +1, +0.06, to 2,434, 2-6-13, Shanghai Composite Index.

Chinese Stocks in the U.S.: -10.9, 392.4, 2-5-13, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips opened higher in line with gains in the U.S., once rising more than 200 points. However, gains eroded in cautious pre-Chinese holiday trading. Worries the Chinese government might launch new steps to restrain property prices hit property developers: China Resources Land (CRBJY) -2.5%. On the other hand, Macau gambling plays rose on speculation the central government may rationalize the sector: Sands China (SCHYY) +5.2%.KGI Research

Quotable: "We believe the market correction is healthy and provides good buying opportunities for long term investors." Guoco Capital. 2-6-13

Chinese Company to Watch: Sa Sa International (SAXJY) "(Although) the sentiment on consuming luxury goods by the mainland visitors fell, the demand for necessities remained strong and we are optimistic to the sales of cosmetics this year. The strong sales in Jan, together with the stimulus on the coming Lunar New Year holiday, will boost the revenue of the group in 1Q13." Tanrich Securities.2-6-13

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

Companies

Symbol Name Price Change % Volume
NVEC NVE Corporation 70.00 0.98 1.42 13,763

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