China 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
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
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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