China stocks knocked on the door of a year-high in Hong Kong the last two weeks, but a moribund A-share market on the Mainland held them back. Then Wednesday China stocks blew the hinges off the door following a massive rebound in A-shares.
The Shanghai Composite Index charged to a gain of 2.9%, closing above the important 2,000 barrier at 2,032. A report by a major Chinese think tank predicting an economic rebound triggered the A-share reversal, according to KGI Research.
The Hang Seng Index in Hong Kong jumped 2.2% to 22,271 in heavy trading, beating the previous year-high close of 22,111 on November 2. The index of Chinese companies soared 2.9% to 10,830.
How far this upturn will go is not clear. The market had already begun to assume the Chinese economy had bottomed out after seven quarters of slowing growth. Are the bulls now going to take this optimism and run, or will the market settle back into up-and-down movements below the new high for the year?
Certainly the market is vulnerable to another slide in A-shares and to bad news in U.S. Fiscal Cliff negotiations. And, as always, lurking in the background is the possibility of another flare-up in the European debt crisis.
But some sectors look promising despite the uncertainty. Cement producers, capital goods makers and coal mining stocks will benefit from a technical rebound, according to the head of research at one Hong Kong brokerage. And he told Equities that Chinese properties will gain from good sales in the physical market. End
Hong Kong Blue Chips: +471, +2.2%, to 22,271, 12-5-12, Hang Seng Index
Chinese Stocks in Hong Kong: +306, +2.9%, to 10,830, 12-5-12, HSCE Index
Shanghai Stocks: +57, +2.9% to 2,032, 12-5-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -0.4, 377.0, 12-4-12, Bank of New York Mellon, ADR Index-China – closed by storm
Insight: Hong Kong surged to a year-high in heavy turnover after an optimistic economic report by a Chinese think tank ignited an abrupt turnaround in tne Mainland’s A-share market. Ping An Insurance (PNGAY) rose 4.9% after HSBC (HBC) sold its stake in the company. Bank Of East Asia (BKEAY) gained 2.2% on news it had successfully placed shares. KGI Research
Quotable: “We maintain a bullish view on H shares in 2013 but see limited upside for the Hang Seng Index in December. Short-term investors should put focus on second and third- liners.” Guoco Capital. 12-5-12
Chinese Company to Watch: “Beijing Enterprises Water Group (BJINY) develops water treatment systems. Long term prospect in sewage treatment remains bright given government’s intention to encourage environment protection and to boost economic growth.” Guoco Capital. 12-5-12
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