The week the U.S. Federal Reserve Board was supposed the save world markets turned into a disaster for China stocks. The Hang Seng Index crashed through resistance barriers in one of its worst weeks in years, and Hong Kong’s index of Chinese companies approached its lowest point since April 2009.
A couple weeks ago, many investors thought the Fed would announce strong new easy money policies at its September 20 meeting, but the actual measures were timid. At the same time the Fed offered a gloomy assessment of the U.S. economy and the prospect of a default on Greece’s debt increased. But some analysts think the market reaction was overdone. A slight rebound may be on the way, they say.
For the week, the Hang Seng Index fell 9.2%, 1,786 points, to 17,669, breaking through what were thought to be strong resistance points at 18,880 and 18,000. The index of Chinese companies plunged 11.9%, 1,216 points, to 9,033.
Haitong Securities noted in its daily market review that the Hang Seng’s trailing and forward P/E reached 8.25X and 9.58X, respectively, close to the 7.76X and 8.79X levels during the lowest point of the 2008/9 global financial crisis.
Haitong expects the market to overreact to the current crisis and for selling pressure to continue in the short term. But it said, “The valuation is quite low and the there
is abundant liquidity, and we believe the index is reaching its bottom and will
Ben Kwong, chief operating officer at KGI Asia, told Equities the market is oversold and has a chance to “rebound a bit” next week. Futures expiration and end-of-quarter window dressing could help stop the decline and fuel a slight bounce back, he said. “The HSI is expected to fluctuate between 17,000 to 18,000 next week,” he said. End
DAILY FIX — Lower in Heavy Turnover
Hong Kong Blue Chips: -243, -1.8%, to 17,669, 09-23-11, Hang Seng Index
Chinese Stocks in Hong Kong: -170, -1.8% to 9,033, 09-23-11, HSCE Index
Shanghai Stocks: -0.4%, 2,433, 09-23-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: -20.0 to 349.7. 09-22-2011, Bank of New York Mellon, ADR Index-China
Insight: Falling global markets and a stronger U.S. dollar pushed Hong Kong stocks lower in heavy turnover, although blue chips ended the day of volatile trading slightly off day-lows. KGI Research
Quotable: Prada (PRDSY.PK) ( HK:1913). “We expect Hang Seng Index to remain volatile in near-term, as latest moves of the Federal Reserve failed to restore investors’ confidence on economic outlook.” Guoco Capital. 9-22-2011
Chinese Company to Watch: Prada is likely to benefit from diverse growth drivers, which include the expansion of retail network in emerging markets ( especially China ) and the strong market demand for its Miu Miu’s products.” CFSG. 9-22-2011
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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