China Stocks Sink Ahead of Fed Meeting

Gene Linn |

Shanghai Stock MarketOptimism was in short supply ahead of the much-anticipated Federal Reserve Board’s meeting today, as China stocks slumped in Hong Kong. Investors hoped the Fed would announce new measures to stimulate the struggling U.S. economy at its meeting Wednesday night or early Thursday morning, Hong Kong time.

“Before the decision investors are cautious, but sentiment is still negative,” Conita Hung, head of equities at Delta Financial Asia, told Equities.

Speaking before the market opened Wednesday she predicted the Hang Seng Index would trade between 18,700 and 18,900. The Index closed at 18,824, down 1.0%. The index of Chinese companies also sank 1.0%, ending at 9,823.

If the Fed does not come up with new stimulative policies, according to Hung, the Hang Seng is likely to test new lows at 18,200 to 18,300.

If the Fed does introduce new measures there probably won’t be much of a rally, with the Hang Seng climbing around 400 points to about 19,300, she said. “I don’t expect a strong rise because there is concern about European debt and economic fundamentals are still weak.”

Chinese banks and construction materials producers would be among the gainers in the mini-rally, Hung said. End

DAILY FIX -- Volatile Trading Persists

Hong Kong Blue Chips: -191, -1.0%, to 18,824, 09-21-11, Hang Seng Index

Chinese Stocks in Hong Kong: -94, -1.0% to 9,823, 09-21-11, HSCE Index

Shanghai Stocks: +2.7%, 2,513, 09-21-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: -3.3 to 383.0. 09-20-2011, Bank of New York Mellon, ADR Index-China

Insight: The blue-chip Hang Seng Index plunged 300 points in the morning before a rally in Mainland markets helped erase most losses by mid-day. However selling pressure emerged in the afternoon, and the Index closed down 1.0% in volatile trading. Chinese banks sank between 1% and 2%. Construction engineering and cement producers stabilized after a recent sell-off. Cement maker Anhui Conch (OTC AHCHY; 0914 in Hong Kong) slipped 1.1%. KGI Research

Quotable: "The increase in blue-chips short-selling turnover (on Tuesday) showed that investors were cautious. If the blue-chips short-selling turnover ratio keeps rising in the next few trading days, investor should beware of a panic selling." Core Pacific Yamaichi. 9-21-2011

Chinese Company to Watch: "With the highest exposure to the thermal business, Harbin Power Equipment (HBPWF) will likely be the biggest beneficiary of the electricity shortage and the accelerated addition of thermal power capacity in the near future." Haiton Securities. 9-21-2011

Brokerages and analysts cited 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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Companies

Symbol Name Price Change % Volume
SDT SandRidge Mississippian Trust I of Beneficial Inte 1.37 -0.01 -0.72 129,018

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