China Stocks Struggle to Maintain Momentum

Gene Linn |

China stocks enjoyed a boost from A-share prices Monday, but still are struggling to maintain their positive momentum.

The Hong Seng Index in Hong Kong rose 0.4% to 23,672 as the Shanghai Composite Index staged a sharp 2.4% rebound. Hong Kong’s index of Chinese companies climbed 0.8% to 12,100. However, the Hang Seng fell back after briefly breeching resistance at 23,700, and a significant drop in turnover reflected weak momentum.

The index has stayed ahead of the 10-day moving average (now 23,541) since a strong rally started in early December, but the margins are getting very thin. Investors should expect more profit-taking at the current high level, said Jackson Wong, vice president of sales at Tanrich Securities. Continued gains in A-shares will be key for the market to maintain positive momentum, he told Equities In an email.

Recent “frenetic” moves in second and third-tier stocks may calm down as the market consolidates, Wong said. But there may be some bottom fishing in the infrastructure sector following recent selling that set in 10 days ago when the Ministry of Railways announced a lower-than-expected 2013 fixed asset investment target.

Wong also said international banks like HSBC (HBC) may benefit from improved and stabilized European markets. End

DAILY FIX

Hong Kong Blue Chips: +91, +0.4%, to 23,672, 1-28-13, Hang Seng Index

Chinese Stocks in Hong Kong: +98, +0.8%, to 12,100, 1-28-13, HSCE Index

Shanghai Stocks: +55, +2.4% to 2,347, 1-28-13, Shanghai Composite Index.

Chinese Stocks in the U.S.: -4.4, 398.7, 1-25-13, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips rose above resistance at 23,700 in early trading due to a sharp rise in Mainland A-share markets, but lost some of their gains as reduced turnover reflected weak momentum. HSBC (HBC) continued its rally, gaining 0.9%. China Mobile (CHL) rose 0.2% after finding support at its 250-day moving average. KGI Research

Quotable: "Market consolidation is expected to continue next week, as investors would stay on the sidelines ahead of the two-day (29th-30th Jan) FOMC meeting of the Federal Reserve. The Fed chief Bernanke may shed more lights on the US jobs market as well as comments on the US debt ceiling debate. The HSI is expected to trade near 23,000-23,600." BEA Securities. 1-25-13

Chinese Company to Watch: China Eastern Airlines (CEA) "Capacity growth is estimated at 10% in 2013, faster than the 2012 level. In demand, with macroeconomic steadiness and increase as well as continuous warm-up of outbound tourism, the Company passenger load factor is expected to increase by 11%, slightly higher than the supply." Phillip Securities. 1-28-13

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 http://www.adrbnymellon.com/dr_country_profile.jsp?country=CN

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. 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: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BLX Banco Latinoamericano de Comercio Exterior S.A. 30.08 0.70 2.38 122,096

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