China Stocks Rebound on Increased Bank Lending

Gene Linn |

Bank of ChinaChina stocks demonstrated their volatility all in one day Wednesday, opening substantially lower and finishing with a healthy gain. And there’s more where that came from in coming weeks.

Hong Kong’s Hang Seng Index rebounded from its weak opening to end 1.9% higher at 19,734. The index of Chinese companies jumped 2.6% to 10,446.

Both main forces that are whipsawing the market emerged Wednesday. At the open it looked like worry over the European debt crisis would lead to a third-straight day of declines. The big concern was that Greece’s decision to hold a referendum on last week’s proposed EU solution to the country’s massive debt problem would derail the plan.

News from China’s economy, the other force, was bad initially. China’s official PMI for October declined from September to 50.4 to reflect slowing manufacturing.

But then good news that China’s “big four” state-run banks increased new loans the last two weeks helped ignite a strong rebound. Chinese banks led the way, according to KGI Research. China Merchants Bank (CIHKY) rose 4.5%.

There will be plenty of news on both European debt and the Chinese economy in the next two weeks to fuel further wide swings in stock prices. A G-20 meeting on Thursday will likely address the European crisis. And details, both good and bad, about last week’s plan and Greece’s proposed referendum are sure to emerge.

Next week China will release important economic statistics for October, including the much-anticipated inflation number.

The Hang Seng Index will probably bounce up and down this week and next by 1,500 to 2,000 points, according to Conita Hung, head of equities at Delta Asia Financial. “The market will be very volatile, mainly based on the economies in Europe and China,” she told Equities. End

DAILY FIX

Hong Kong Blue Chips: +364, +1.9%, to 19,734, 11-02-11, Hang Seng Index

Chinese Stocks in Hong Kong: +261, +2.6% to 10,446, 11-02-11, HSCE Index

Shanghai Stocks: +1.4%, 2,504, 11-02-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: -7.0, to 375.1, 11-1-11, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened lower on renewed worries about the European debt crisis. But after blue chips found early support at 19,000, news that China's "big four" banks had increased new loans the last two weeks triggered a strong rebound in higher turnover. KGI Research

Quotable: "As HK market was already down for the two consecutive days, it drove the market to chase the utility stocks which helped the utility sub-index to gain 0.28% yesterday. All the other three sub-indexes lost." Core Pacific Yamaichi. 11-2-11

Chinese Company to Watch: Properties. "With the market still fluctuating wildly, good stock picking takes on more importance in order to capture returns and limit risk. We suggest buying defensive names that are members of the HSI, including CR Land (CRBJY)." CCB International. 11-2-11

Brokerages and analysts cited 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
WIT Wipro Limited 9.34 -0.01 -0.11 1,221,270

Comments

Emerging Growth

Star Navigation Systems Group Ltd.

Star Navigation Systems Group Ltd is engaged in the development, marketing and promotion of in-flight safety monitoring systems.

Private Markets

MyForce, Inc.

As parents, we constantly worry about the safety of our loved ones. The media bombards us with incidents from across the nation school shootings, frequent assaults on campuses, and crimes…

Initial State

Initial State is an Internet of Things (IoT) data analytics & data management platform company. We turn sensor and event data into information that matters by making it easy to…