Investors should be ready to pounce as China stocks showed signs of a pullback on Monday, according to one analyst.
After soaring 22.9% in 2012 and an additional 2.9% on the first trading day of 2013, the Hang Seng Index in Hong Kong stalled Monday, inching down 0.01% to 23,330. Turnover, however, remained brisk. The index of Chinese companies rose 0.3% to 11,973.
But with hot money still pouring into the market and the Chinese economy continuing to rebound, any weakness in stock prices is likely to be temporary.
“It looks like the market will continue to ride along the 10-day SMA (moving average, 22,902 now) so momentum traders should get in whenever the market pulls back close to this line,” said Jackson Wong, vice president for sales at Tanrich Securities.
Lagging stocks are already attracting buying, he told Equities in an email. Coal producers and second-tier Chinese properties are the top performers now. “Any smaller caps with decent fundamentals which are lagging the market are being bought up as well,” Wong said.
One potential major pitfall is uncertainty in the U.S. concerning the prospect of another bruising fight over raising the debt ceiling. But Wong said the market won’t worry about that for a month or so. In the meantime it will closely track the resurgent Shanghai Composite Index for A-shares, which has surged 16.6% since December 3. End
Hong Kong Blue Chips: -1, -0.01%, to 23,330, 1-7-13, Hang Seng Index
Chinese Stocks in Hong Kong: +36, +0.3%, to 11,973, 1-7-13, HSCE Index
Shanghai Stocks: +8, +0.4% to 2,285, 1-7-13, Shanghai Composite Index.
Chinese Stocks in the U.S.: +0.8, 412.6, 1-04-13, Bank of New York Mellon, ADR Index-China – closed by storm
Insight: Hong Kong blue chips lost 70 points in early trading when Mainland A-shares weakened but gained back most of their losses after A-shares rebounded. Turnover remained strong, reflecting aggressive buying. The Chinese government announced measures to aid the biological sector, boosting Sino-Biopharm ((1177, HK) 4.7% higher. New energy stocks also did well: GCL Poly (GCLPY) +7.6%.KGI Research
Quotable: “Consolidation in the HK stock market is expected to continue next week, as the HSI has gained more than 1,300 points since early December. Profit taking may also be seen in the battered sectors like base metal, as their near-term upside may be capped by possible results warning ahead. China will release CPI data on next Friday (11th Jan), and consumer inflation is seen easing to below 3% in 2012 from 5.4% in 2011.” BEA Securities. 01-04-13
Chinese Company to Watch: CHAOWEI POWER (00951, HK). Benefits from the central government policy of retiring some unqualified battery production — 1H12 net profit rose 1.3x, trading at 7x FY12 prospective P/E, valuation is attractive.” KGI International. 1-7-13
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