China Stocks 'Stand Out' in Global Downturn

Gene Linn  |

China stocks might weather political turmoil in Italy and other potential shocks from the U.S. and Europe better than other markets, according to one analyst.

On Tuesday the Hang Seng Index in Hong Kong stood up relatively well in early trading to worries Italian election results might exacerbate the region’s debt woes, but concerns over possible tightening of the Chinese property market helped push the index lower. It ended with a loss of 1.3% at 22,524, erasing the last of the gains from a strong January. The index of Chinese companies dropped 2.0% to 11,104.

But China stocks can play a trump card not available to other markets, said Steven Leung, director of institutional sales at UOB Kay Hian. “It’s possible that because of China’s economic growth the Hong Kong situation stands out among other global markets,” he told Equities.

“The effect of Italy is not that bad,” he said. “It’s only one factor affecting Hong Kong and China. What’s more important are the sequester in the U.S. and new policies from China’s National People’s Congress starting this weekend.”

Leung expects bargain-hunting to emerge at the 22,300-to-22,400 level and fuel a modest rebound. But he notes that investors are still cautious and sees significant resistance at 23,000 unless the U.S. avoids damaging spending cuts from the sequester and the National People’s Congress comes up with major policies to stimulate and reform the Chinese economy.

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Leung favors big Chinese banks ICBC (IDCBY) and CCB (CICHY) because of the attractive macro-economic outlook in China. And he said the giant banks feature undemanding valuation and good dividend yields. He also likes companies that will benefit from Chinese policies to promote urbanization and a cleaner environment, including shale gas producers and properties. End


Hong Kong Blue Chips: -300, -1.3%, to 22,520, 2-26-13, Hang Seng Index

Chinese Stocks in Hong Kong: -230, -2.0%, to 11,104, 2-26-13, HSCE Index

Shanghai Stocks: -32, -1.4%, to 2,293, 2-26-13, Shanghai Composite Index.

Chinese Stocks in the U.S.: -5.0, 376.4, 2-25-13, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips opened 180 points lower on worries about political gridlock in debt-plagued Italy and fell further in modest turnover. KGI Research

Quotable: "We are bullish about the stock market in the medium term and recommend investors to overweight Chinese banks and property developers which are likely to deliver satisfactory earnings results in March." Guoco Capital. 2-26-13

Chinese Company to Watch: China Aoyuan Property Group (3883,HK) "Considering the Company's clear development strategy and good sales prospects, we assume Aoyuan with a buy rating and 12-month target price of HK$1.98, equivalent to 5.8x 2013E P/E." Phillip Securities. 2-26-13

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

[Image via Flickr]

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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