China stocks rebounded Tuesday from more than a week of slumping prices, and there appears to be room for the market to climb higher.
Hong Kong’s Hang Seng Index jumped 1.8% to 21.047, and the index of Chinese companies added 2.1% to 10,811. Turnover rose but was still weak.
The turnaround resulted partly from big gains on U.S. markets overnight, but conditions in the Hong Kong stocks exchange also contributed to the rebound.
“The market has discounted bad news like fund raising by banks and consolidation in A-shares (in the mainland),” said Peter So, managing director and co-head of research at CCB International. “And with the weakening of the U.S. dollar, stocks have found support and could rebound.”
Even with a stronger short-term performance, he said, investors are looking for defensive stocks. They are finding some in the consumer sector, such as Belle International (BELLY). Utilities like China Light (002, HK) are attracting buying because of their stable earnings and good dividend yields.
But after short-term gains, the market will be volatile for the next few weeks, So told Equities. He pointed out that despite recent weakness the Hang Seng has gained more than 20% this year. This leaves the door open to profit-taking by nervous investors. End
Hong Kong Blue Chips: +378, +1.8%, to 21,047, 03-27-12, Hang Seng Index
Chinese Stocks in Hong Kong: +220, +2.1%, to 10,811, 03-27-12, HSCE Index
Shanghai Stocks: -0.2% to 2,347, 03-27-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +6.1, 409.6, 03-23-12, Bank of New York Mellon, ADR Index-China
Insight: Buoyed by end-of-quarter window dressing and big rises on Wall Street, Hong Kong broke out of its slump, posting sharp gains. Chinese cement plays surged: Anhui Conch (AHCHY) rose more than 7%. KGI Research
Quotable: “The advancement in the US market will no doubt help the Asian market performance in the next couple of days.” BOCOM International. 3-27-12
Chinese Company to Watch: Greatwall Motors (GWLLY) “The export sales volume of automobile reached 79,000 units, representing an increase of 58.7%, and accounted for 17% of the total sales. Kingston Financial. 3-26-12
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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