Already punished by a stormy opening to this week’s trading with large losses Monday, the China gateway exchange in Hong Kong suffered through a powerful typhoon Tuesday, delaying trading until the afternoon.
When trading resumed so did the losses. The Hang Seng Index sank 0.8% to 18,903 and the index of Chinese companies fell 0.6% to 9,217. And more declines may be on the way.
The cause of Monday’s steep drop, renewed worries over the European debt crisis, is still with us, and now there are new concerns.
“The market is expected to face another round of downward pressure amid the earnings
Season,” BOCOM International said in its daily market report.
The brokerage, an arm of China’s Bank of Communications, noted that China has reported that profits for the large state-owned enterprise sector tumbled 16.4% in the first half of 2012.
BOCOM International stated: “We think the market is too bullish on the earnings of the listed companies and, therefore, selling pressure could (result) if these companies report worse-than-expected results, especially for the cyclicals which are more sensitive to the economy.” End
Hong Kong Blue Chips: -150, -0.8%, to 18,903, 07-24-12, Hang Seng Index
Chinese Stocks in Hong Kong: -54, -0.6%, to 9,217, 07-24-12, HSCE Index
Shanghai Stocks: +5, +0.2% to 2,147, 07-24-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -7.8, 357.8, 07-23-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong extended Monday's losses when it re-opened Tuesday afternoon following a strong typhoon. A substantial rise in the U.S. dollar amid increased worries about European debt is dragging down emerging markets, including China stocks. Hong Kong's blue chip index fell through its first support level of 19,000 with the next support at 18,500. KGI Research
Quotable: "Market short-selling turnover reduced to HK$4.1bn. Its short-selling turnover ratio edged up 0.1ppt to 10.0%. Telecom stocks were under short-selling pressure." Core Pacific Yamaichi. 7-23-12
Chinese Company to Watch: "Our top pick among telecom stocks is (China Unicom, CHU) which should benefit from accelerating 3G net adds and declining handset subsidies ratio in 2H12.... Advice investors to switch from (China Mobile, CHL)" Guoco Capital. 7-23-12
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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
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