China stocks pulled back Monday ahead of elections in the U.S. on Tuesday and a Chinese Party Congress that will install new leaders on Thursday. Further declines would offer investors good buying opportunities, according to one analyst.
The Hang Seng Index in Hong Kong slid 0.5% to 22,006 in reduced turnover, and the index of Chinese companies fell 0.6% to 10,768.
Hot money flowing into Hong Kong fueled a surge late last week that lifted gains for the previous two months to 15.5%. The easy cash is still coming, but the market has run into headwinds.
“It looks like investors are more cautious this week ahead of the U.S. election and China Party Congress,” said Jackson Wong, vice president of sales at Tanrich Securities. In an email to Equities he added: “The recent pull backs in Euro and Commodities, especially gold, also indicate the situation in (the) Euro area is becoming more problematic.”
He expects the Hang Seng to trade between 22,600, the high from August 2011, and 21,500, the 20-day moving average. Among the market favorites are infrastructure plays and lagging small caps.
“I do recommend investors to be short-term oriented and closely watch for entry/exit point at around 20-day (moving average),” Wong said. End
Hong Kong Blue Chips: -105, -0.5, to 22,006111, 11-05-12, Hang Seng Index
Chinese Stocks in Hong Kong: -65, -0.6%, to 10,768, 11-05-12, HSCE Index
Shanghai Stocks: -3, -0.1% to 2,114, 11-05-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -3.0, 387.4, 11-02-12, Bank of New York Mellon, ADR Index-China – closed by storm
Insight: Hong Kong retreated from last week’s gains amid shrinking turnover in line with losses in the U.S. on Friday. However, solar energy plays did well: GCL (GCLPY) rose 7.1%. Talk in the market that FIIH (2038, HK) would get a contract to manufacture iPhones pushed its stock up 32%. KGI Research
Quotable: “Strong run in the stock market is expected to continue, amid capital inflow and hope for supportive economic policy and relaxation in monetary tightening by the Chinese government after 18th National Congress of Communist Party of China, which is scheduled to start from 8th November. The near-term resistance for the HSI is seen near 22,400-22,800.” BEA Securities. 11-2-12
Chinese Company to Watch: SANY HEAVY EQUIPMENT INT’L (00631) “SNYYY) “1H12 sales rose 32% yoy which drove earnings to increase 16% to Rmb484mn. Recently repurchase at HK$3.70-4.30, downside is limited.” KGI Asia. 11-2-12
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