Renewed optimism China will act decisively to rescue its struggling economy fueled a rebound in China stocks Tuesday.
Hong Kong’s Hang Seng Index rose 0.5% to 20,937 in moderate but increased turnover, and the index of Chinese companies climbed 1.3% to 9.967.
The bellwether for sentiment about the Chinese economy is the A-share market, particularly the Shanghai Composite Index (SCHOMP). The market expects the index to rise due to prospects that new national leaders will move to reform and stimulate the economy at the Communist Party Congress set for November 8.
Shanghai disappointed investors Monday when it dropped after re-opening from a week-long holiday, but it rebounded sharply Tuesday on news the government’s national asset management company, Huijin, bought A-shares in giant bank ICBC (FXI).
“Today, the SCHCOMP seems to be back on track, (and) now the sentiment is back on the optimistic side that China is going to take care of things after the Party Congress next month,” said Jackson Wong, vice president of sales at Tanrich Securities.
Potential moves by new leaders include new infrastructure programs, financial reforms and stimulus of domestic consumption, Wong told Equities in an email.
For now, he said, funds are rotating back to laggards like Chinese banks, infrastructure plays and machinery producers. Chinese insurers, who get a big chunk of their returns from investment, will gain if A-shares continue to rise, Wong said. End
DAILY FIX
Hong Kong Blue Chips: +112, +0.5%, to 20,937, 10-9-12, Hang Seng Index
Chinese Stocks in Hong Kong: +127, +1.3%, to 9,967, 10-9-12, HSCE Index
Shanghai Stocks: +41, +2.0% to 2,115, 10-9-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +1.3, 381.3, 10-4-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong rose in line with a rebound in Mainland A-shares fueled by news China’s government investment arm bought A-shares in ICBC (FXI). The giant bank gained 1.5%. Sinopec (SHI) rose 3.8% on encouraging news about oil products prices. KGI Research
Quotable: “The first resistance would be May’s high of 21,385, while next resistance would be seen year high’s of 21,760. For support, the first support would be 10DMA (20,789), while next support would be seen at 20DMA(20,541).” KGI Asia. 10-9-12
Chinese Company to Watch: “…(Property company) China Overseas (CAOVY) is an defensive play with healthy financial status, given its first eight months sales was 83.3bn, which achieved 83.3% of full year target, suggest investors accumulate when share price retreated to HK$18.5.” KGI International. 10-9-12
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
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