The surge in optimism on Tuesday about raising the U.S. debt ceiling did not have a dramatic effect on China stocks in Hong Kong similar to the sharp rally it ignited in U.S. markets. But Ben Kwong, chief operating officer at KGI Asia, said it will give Hong Kong a moderate boost in coming weeks.
“Sentiment improved a bit because of hopes the president and Congress will reach some agreement on the debt ceiling crisis,” Kwong told Equities. “Also, risk appetite (for stocks) is improving.”
The improvement won’t launch a broad rally, he said: “Stock performance is very mixed. Investors are trading on news.”
The news anticipated in the next couple of weeks focuses on expected strong results from a number of big Chinese companies. The market thinks oil, coal and cement producers will post impressive 2011 first half profit increases, according to Kwong. He likes offshore oil company CNOOC, Yanzhou Coal and construction company Anhui Conch. Shipping and chemicals may not fare so well, he said.
Buying of companies expected to show fast-growing profits should start next week, Kwong said, ahead of release of results. In addition, he said that because the market has been battered by the U.S. debt crisis, any further good news might be “an excuse for a rebound.” End
DAILY FIX — Chinese Manufacturing Sags
Hong Kong Blue Chips: -16, -0.07%, to 21,987, 07-21-11, Hang Seng Index
Chinese Stocks in Hong Kong: -60, -0.5% to 12,322, 07-21-11, HSCE Index
Shanghai Stocks: -1.0%, 2,766, 07-21-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: +8.9 to 439.3, 07-20-11, Bank of New York Mellon, ADR Index-China
Insight: An indication that Chinese manufacturing might slow in July pushed stocks in Hong Kong slightly lower after they opened higher due to strong performances by HSBC and China Mobile overnight in the U.S. The HSBC preliminary China manufacturing purchasing managers index fell below 50% in July for the first time since July 2010. KGI Research
Quotable: “New fund inflows are rare, and a lack of investment confidence and bad news from China’s fight against inflation mean the HSI may test the year’s low of 21,500 in the coming months.” Haitong Securities. 7-19-2011
Chinese Company to Watch: China Merchants Bank (3968) “If CMB issues the maximum 4.7b additional shares and raises Rmb35b, FY12 EPS may be diluted by as much as 14%.” Haitong Securities. 7-19-2011
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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