After U.S. markets surged higher overnight, Hong Kong’s Hang Seng Index rose 1.9%, 336 points, to 18,416 in thin pre-holiday turnover. The index of Chinese companies gained 2.2% to 9,951.
The Hang Seng was up 400 points at one time, but falling prices on Mainland Chinese markets eroded some gains. Chinese A-shares have been sinking for months, which is a major drag on Hong Kong prices because many investors think the decline signals furthers weakness in China’s economic growth.
That worry is one reason Wednesday’s rebound probably will be short-lived. “Uncertainty over European debt and the Chinese economic downturn is the major reason investors are not entering the market in this holiday season,” said Castor Pang, head of research at Core Pacific Yamaichi.
Stocks in Hong Kong will probably drift in a small range to the end of the year, he told Equities, but may stage another short-term rebound early next year when investors adjust their portfolios.
Export-related stocks like Li & Fung (LFUGY) should benefit because of encouraging news about the U.S. economy, according to Pang.
The banking sector stands to gain the most, he said. Bank of China (BACHY) and the Agricultural Bank of China (ACGBY) are the best bets for the short-term, Pang said, but value investors lean toward ICBC (FXI) and CCB (CICHY). End
Hong Kong Blue Chips: +336, +1.9%, to 18,416, 12-21-11, Hang Seng Index
Chinese Stocks in Hong Kong: +211, +2.2% to 9,951, 12-21-11, HSCE Index
Shanghai Stocks: -1.1%, 2,191, 12-21-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: +11.4, to 358.2, 12-20-11, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong blue chips rose 400 points in early trading following large gains in U.S. markets, but a decline in Chinese A-shares led to profit-taking that eroded gains. The rise in oil prices helped PetroChina (PTR) rise 3.4%. KGI Asia
Quotable: "We maintain our view that low (China property) transaction volumes will persist through the end of the year and into 1Q-2Q12 as tightening policies are kept in place." CCB International. 12-19-11
Chinese Company to Watch: WHARF HOLDINGS (WARFY) property developer, port operator "Benefit(s) from strong retail sales of its harbour city, it is expected that full year rental to reach HK$8bn for the Hong Kong property. 58% discount to NAV." 12-21-11
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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
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