Investors held their breath in the China gateway market of Hong Kong waiting to see if the Federal Reserve Board would try to jolt the U.S. economy to life with another round of easy money policy. The real news for China stocks, however, probably won’t come until Chinese inflation figures are announced in the next month or two.
Hope that Fed Chairman Ben Bernanke would at least hint at launching the third round of Quantitative Easing helped the Hong Kong blue-chip Hang Seng Index break a four-week losing streak. Robust interim results from Chinese companies also bolstered the market.
But in the end, worries over the European debt crisis and weak U.S. economy stifled gains. Doubt also emerged that Bernanke would announce strong measures in a speech scheduled for early Friday, U.S. time. The Hong Kong market slumped Friday afternoon in some of the thinnest trading of the year.
For the week, the Hang Seng Index rose a modest 1%, 183 points, to 19,583. The index of Chinese companies edged up 3 points to 10,300.
The Bernanke speech undoubtedly will move Hong Kong and other global markets one way or the other depending on what he says. But it’s questionable if the move will be sustainable, especially given that there may not be a lot the Fed can do to boost the U.S. economy.
It’s possible “The Speech” will be just one more news event that whips the market up or down before the next news event comes out.
For Chinese stocks, the game-changer will probably be an indication that China’s stubborn inflation is finally subsiding. That won’t come until at least early September with release of August inflation numbers, and maybe not until September figures are announced in October. End
DAILY FIX — Awaiting Bernanke Speech
Hong Kong Blue Chips: -170, -0.9%, to 19,583, 08-26-11, Hang Seng Index
Chinese Stocks in Hong Kong: -131, -1.2% to 10,300, 08-26-11, HSCE Index
Shanghai Stocks: -0.1%, 2,612, 08-26-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: -3.1 to 399.9, 08-25-2011, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong stocks slumped in extremely slow trading ahead of a speech to be given by U.S. Fed Chairman Ben Bernanke early Friday, U.S. time. Hope that Bernanke would announce another round of easy money policies helped blue chips squeeze out a small gain for the week. Banking giant ICBC (1398) rose 1.4% on better-than-expected interim profits. KGI Research
Quotable: “The immediate resistance would be 10DMA (19,838), while next resistance would be last week’s high of 20,504. For support, the first support would be Tuesday’s low of 19,383 while next support would be seen at this week’s low of 19,048.” KGI Asia. 8-26-2011
Chinese Companies to Watch: Chinese property developers. “Prefer developers with limited exposure to (residential) purchase limits and focusing on the commercial space. In this group are KWG and Soho China.” CCB International. 8-25-2011
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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