China Stocks Retreat from Year-High on Profit-Taking

Gene Linn  |

China stocks pulled back Friday from an intraday year-high in Hong Kong, but look to be poised for more gains.

The Hang Seng Index ended 0.3% lower at 22, 191 after profit-taking brought the index down from a year-best 22,371 in active trading. The index of Chinese companies rose 0.5% to 10,919. For the week, the Hang Seng climbed 0.7% to end above the previous year’s best close of 22,111 set on November 2. The Chinese H shares, which outperformed, increased 2.8%.

Most of the ups and downs of China stocks in Hong Kong and overseas in the last few weeks can be traced to the gyrations of A-shares on the Mainland’s heavily restricted markets. After plunging through the critical 2,000 support level last week, the Shanghai Composite Index rebounded, rising 1.6% Friday to 2,062.

Bullish investors can now focus on a strengthening Chinese economy, the steady inflow of foreign funds and the prospect of new reforms and stimulus measures from a major Chinese economic policy meeting expected to start next week.

“Buying momentum is still strong, with no bad news from the U.S. or China,” said Castor Pang, head of research at Core Pacific Yamaichi.

Chinese financials will probably lead the rising market, he told Equities. He likes Ping An Insurance (PNGAY) because it has a sizeable investment in rebounding A-shares, and banking giant ICBC (FXI) because of its attractive valuation. End

DAILY FIX

Hong Kong Blue Chips: -59, -0.3%, to 22,191, 12-7-12, Hang Seng Index

Chinese Stocks in Hong Kong: +54, +0.5%, to 10,919, 12-7-12, HSCE Index

Shanghai Stocks: +33, +1.6% to 2,062, 12-7-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -0.7, 381.7, 12-6-12, Bank of New York Mellon, ADR Index-China - closed by storm

Insight: Profit-taking pushed Hong Kong blue chips from a year-high intraday level of 22,371 to a slight loss. Chinese properties gained ground: Kaisa Group (KAISY) +10.5%. Prada (PRDSY) surged 10.1% on higher-than-expected earnings. KGI Research

Quotable: "Although the technical indicators are not getting very strong, we still believe that HSI will continue to surge. The target of 22,700 is maintained." Core Pacific Yamaichi. 12-6-12

Chinese Company to Watch: "The housing market is in equilibrium but we are not sure how long this will last. For investors looking to add positions, we suggest the relatively cheap KWG (1813, HK), Sino-Ocean Land (SIOLY), Guangzhou R&F (GZUHY), Poly Prop (119, HK)." UOB Kay Hian. 12-7-12

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

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
PHX Panhandle Oil and Gas Inc 12.24 -0.14 -1.13 29,163 Trade

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