China Stocks Surge as GDP Comes in Lower Than Expected

Gene Linn |

china eu chinese new yearBad news can be good news sometimes, and China’s drop in GDP in the fourth quarter apparently fits the bill.

Locked in a credit-tightening fight against inflation and slowing exports to struggling foreign economies, Chinese announced Tuesday its GDP fell to 8.9% from 9.1% in the third quarter. But the drop was smaller than expected and – at least temporarily -- eased fears of a steep decline.

Hong Kong’s Hang Seng Index surged 3.2% to 19,628, and the index of Chinese companies jumped 4.5% to 10,962. Turnover nearly doubled from Monday’s anemic level. Shanghai’s Composite Index rose 4.2% to 2,298.

Not everyone is so sure China will escape a hard landing. The government itself warned Tuesday of a difficult export environment. BOCOM International, the brokerage for China’s Bank of Communications, has said Chinese economic statistics are not reliable, and a better indication of the direction of the economy is the late-2011 swoon in Chinese stock markets.

For now, China stocks will likeliest go back to thin trading based on developments in the European debt crisis ahead of Chinese New Year’s on January 23. The exchange in Hong Kong will close from January 23 to 25, and the Shanghai and Shenzhen markets will shut down from January 19 to 24. End

DAILY FIX

Hong Kong Blue Chips: +616, +3.2%, to 19,628, 1-17-12, Hang Seng Index

Chinese Stocks in Hong Kong: +474, +4.5% to 10,962, 1-17-12, HSCE Index

Shanghai Stocks: +4.2%, 2,298, 01-17-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +5.2 to 379.0, 10:44 am ET, 01-17-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened higher and kept rising in much higher turnover as investors cheered a lower-than-expected drop in China's fourth quarter GDP to 8.9%.KGI Asia

Quotable: "More investors are expected to sit on the sidelines ahead of the Lunar New Year holidays, leading to a thinner market turnover. We see the HSI to be range-traded next week with resistance at 19,500. BEA Securities

Chinese Company to Watch: "GUANGDONG INV (GGDVY)-- Steady growth of its water supply business to HK. Prospective P/E of 10.5x and dividend yield of 3.8% which is defensive." KGI Asia. 1-17-12

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
ONR.DB.C:CA OneREIT 5.50% Extendible Convertible Unsecured Sub
OneREIT 5.50% De OneREIT
ONR.DB.C:AP OneREIT 5.50% Extendible Convertible Unsecured Sub
ONR.DB.C:PU OneREIT 5.50% Extendible Convertible Unsecured Sub
ONR.DB.C:CH OneREIT 5.50% Extendible Convertible Unsecured Sub
ONR.DB.C:CX OneREIT 5.50% Extendible Convertible Unsecured Sub

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