China stocks slumped Tuesday on the first trading day after Hong Kong’s Easter holiday, hit by bad economic news and shrinking liquidity.
The Hang Seng Index in Hong Kong fell 1.2% to 20,356, and the index of Chinese stocks sank 1.4% to 10,597. Turnover was very weak.
News from Friday of slowing U.S. job growth and Monday’s announcement of higher-than-expected Chinese inflation caught up with Hong Kong on Tuesday. In addition, global markets are hurting because of falling liquidity.
In the first two months of the year, global stocks rose on a tide of cash provided by the European Central Bank to ease the European debt crisis, according to Ben Kwong, chief operating officer at KGI Asia. Prospects of another injection of funds by the U.S. Federal Reserve Board also buoyed world stock markets.
“However, as the Fed and ECB might not soon launch new round of quantitative easing, it has weakened the overall equity market,” Kwong told Equities in an email.
And investors are worried China’s slowing economic growth will cause Chinese stocks in Hong Kong to show disappointing first quarter results, he said. All those factors will likely lead Hong Kong lower, Kwong said, with major support at 20,000.
The focus now will be upcoming Chinese GDP figures and the possibility of Chinese economic easing in the wake of disappointing job news from the U.S.
One bright spot may be China consumer plays, he said. Although China is reluctant to stimulate overall economic growth because of stubbornly high inflation, it is aiding consumer consumption.
One beneficiary will be China Resources Enterprise (CRHKY). End
Hong Kong Blue Chips: -237, -1.2%, to 20,356, 04-10-12, Hang Seng Index
Chinese Stocks in Hong Kong: -148, -1.4%, to 10,597, 04-10-12, HSCE Index
Shanghai Stocks: +0.9% to 2,306, 04-10-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -3.4, 397.3, 04-09-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong fell on the first trading day after the Easter holiday due to Weakening global stock markets and signs of a slowing U.S. recovery. Weaker U.S. growth hurt port and shipping stocks: Cosco Pacific (CSPKY) -3.0%. KGI Research
Quotable: “We believe the Hang Seng Index will move higher in April driven by a loosening in China’s monetary policy. We recommend investors to accumulate China stocks when the index declines to the range of 20,000-20,500. Our top picks are ICBC (FXI), CCB (CCIHY), CNOOC (CEO), PetroChina (PTR), Ping An Insurance (PNGAY), Evergrande (EGRNF) and Longfor Properties (960, HK).” Guoco Capital. 4-10-12
Chinese Company to Watch: “Safe bet on dry bulk cyclical bottom – BUY Pacific Basin (PCFBY)….While the dry bulk market should still be tough in 1H12, we believe the situation will improve from 2H12 onwards as delivery should peak in 1Q12 and ease thereafter.” Guoco Capital. 4-10-12
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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