Finally, China stocks posted solid gains after weeks of losses. But don’t get too excited. “We expect a technical rebound, but it will be very weak,” Conita Hung, head of equities at Delta Asia Financials, told Equities.
A number of brokerages had predicted a modest technical rebound this week after the Hong Kong blue-chip Hang Seng Index plunged 11.5% from the year-high of 24,396 on April 8 to the year-low of 21,600 Monday. For more than two months stocks in Hong Kong fell even after big gains on Wall Street and tumbled through one resistance level after another.
But as blue chips approached 21,500, investors seemed to decide it was time to buy some bargains. Both the Hang Seng and the index of Chinese stocks rose 1.2% Tuesday, although turnover was light.
Chinese commodities will drive the mini-rally, Hung said. Metals and coal producers will be the leaders, rather than oil companies. She likes Jiangxi Copper and coal producers Shenhua and Yanzhou.
One reason the rebound is tepid, according to Hung, is a wait-and-see attitude ahead of the U.S. Federal Reserve meetings Tuesday and Wednesday. Investors want to see what the Fed Chairman says about the U.S. economy and monetary policy.
In addition, big problems with Chinese inflation and European debt still weigh on stocks. Hung expects the current upturn to end before the Hang Seng reaches 22,300. End
DAILY FIX -- Solid Gains; Telecoms Strong
Hong Kong Blue Chips: +251, +1.2%, to 21,851, 06-21-11, Hang Seng Index
Chinese Stocks in Hong Kong: +139 +1.2% to 12,149, 06-21-11, HSCE Index
Shanghai Stocks: +1.0%, 2,646, 06-21-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: +0.2 to 409.9, 06-20-11, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong posted healthy gains in bargain-hunting after local stocks listed in the U.S. rose and Asian markets stabilized. Chinese telecoms announced May figures Tuesday, and brokerages gave them the thumbs up. China Unicom (0762) rose 2.2%, and China Telecom (0728) gained 3.7%. KGI Research
Quotable: "We expect Hong Kong’s stock market to make a technical rebound this week." Guoco Captial. 06-20-2011
Chinese Company to Watch: Shougang Fushan Resources (0639:HK) "We reiterate our bullish view on high-quality coking coal given its scarcity in China, and believe that recent retreat of share price creates a good buying opportunity for long-term investors." Guoco Capital. 6-20-2011
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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
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