China Stocks' Rebound Likely Short-lived

Gene Linn  |

China stocks enjoyed a rebound Tuesday from recent steep losses, but the good times may be fleeting.

Hong Kong’s Hang Seng Index rose 1.8% to 19,453, making up for part of last week’s 3.6% plunge caused by weakening Chinese economic growth. The Index of Chinese companies climbed 1.8% to 9,381.

The gain Tuesday follows two days of flat trading after China revealed early last Friday that GDP growth fell in the second quarter. A big reason for the upturn is an upcoming meeting of Chinese leaders that promises to stimulate the economy, according to Steven Leung, director of institutional sales at UOB Kay Hian Holdings.

But the boost from the meeting will be short-lived, Leung told Equities, because market sentiment is fragile. In addition to falling growth a number of companies are reporting weaker profits, he noted. “The rebound won’t last long,” Leung said. “The market will consolidate between 18,800 and 19,800.”

Investors probably will not jump back in the market in a big way until they see two or three months worth of evidence that China’s economy has bottomed out and is on the way back up, he said. That would most likely mean there won’t be a sustained rally until September or October.

Subscribe to get our Daily Fix delivered to you inbox 5 days a week

For the short term the leaders’ meeting, which Leung said is likely to happen Wednesday, will probably speed up policies already launched to help certain sectors. Leung favors consumer plays like appliances and infrastructure stocks, including railway company CSR (CSRGY). End


Hong Kong Blue Chips: +334, +1.8%, to 19,455, 07-17-12, Hang Seng Index

Chinese Stocks in Hong Kong: +162, +1.8%, to 9,381, 07-17-12, HSCE Index

Shanghai Stocks: +13, +0.6% to 2,161, 07-17-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -2.1, 359.2, 07-16-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened only slightly higher, restrained by a drop on U.S. exchanges, but rallied to end above 10-day and 20-day moving averages. Chinese insurers rose: China Life (LFC) +3.6%. KGI Research

Quotable: "Meanwhile, capital (is) returning to risk aversed assets such as the US$, pushing the US$ index to climb higher. The shrinking liquidity could curb the HK market performance. " BOCOM International. 7-17-12

Chinese Company to Watch: COSCO Pacific (CSPKY) "We think CP has the advantage of a diverse portfolio of terminals across China and in overseas countries, compared with its listed peers." BOCOM International. 7-17-12

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

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of 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:


Symbol Last Price Change % Change