China Stocks Stuck in Neutral

Gene Linn |

China Stocks RMBIf breaking up is hard to do, breaking out is almost as tough for China stocks. Optimism that China will launch policies that will boost its economy and stocks seems to be balanced by worry about the long-running European debt crisis.

The Hong Kong market opened slightly lower Tuesday, range traded, and ended marginally higher in extremely weak turnover. The Hang Seng Index edged up 0.06% to 18,080, and the index of Chinese companies rose 0.1% to 9,780.

“Again we are in a difficult situation to break out the trading range between 17600-18700 because no one wants to take a huge bet on either side of the market,” said Jackson Wong, vice president of equity sales at Tanrich Securities.

He noted there is still some hope for China stocks even though the Chinese government did not lower banks’ reserve requirements and buy A-shares in major Chinese banks last weekend as many expected.

On the plus side, the RMB has strengthened since last week, Wong said, indicating the central government might eventually “rescue” the Mainland A-share market. “So, I think this is the main positive catalyst in the market now,” he told Equities in an email.

In addition, he said the infrastructure sector is doing relatively well because investors think China may repeat its 2008 stimulus strategy, though on a much smaller scale, to spur growth.

But pushing against any optimism is the euro crisis, which Wong said “is still driving the overall direction of the market.” End

DAILY FIX

Hong Kong Blue Chips: +10, +0.06%, to 18,080, 12-20-11, Hang Seng Index

Chinese Stocks in Hong Kong: +13, +0.1% to 9,740, 12-20-11, HSCE Index

Shanghai Stocks: -0.1%, 2,216, 12-20-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: -7.8, to 346.8, 12-19-11, Bank of New York Mellon, ADR Index-China

Insight: After stocks fell in the U.S., Hong Kong opened slightly lower and range-traded before ending marginally higher in very weak pre-holiday turnover. A preferential Chinese tax policy for new-energy autos helped battery and car maker BYD (BTDDY) gain 2.9%. KGI Asia

Quotable: "...(T)he short-selling) turnover also shared 18.1% of blue-chips turnover. This implied that short-selling pressure was increasing and investors were taking chances to reduce their shareholdings." Core Pacific Yamaichi. 12-20-2011

Chinese Company to Watch: Belle Intl. (BELLY) sales of shoes and sportswear "Despite the anticipated slower China consumption growth outlook, we expect the growth momentum to remain solid in 4Q11E,..." BOCOM International. 12-20-11

Brokerages and analysts cited 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
MX:CA Methanex Corporation 58.66 0.65 1.12 262,748

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