China Stocks Trading on Hold Until Fed Meeting

Gene Linn  |

China stocks investors stayed away in droves Tuesday, apparently awaiting news on monetary loosening from a Federal Reserve Board meeting later this week.

Hong Kong’s Hang Seng Index closed almost unchanged in anemic turnover, inching up 0.07% to 19,812. The index of Chinese companies slipped 0.2% to 9,522.

Concern over a weakening Chinese economy weighs on the market, according to Francis Lun, managing director at Lycean Securities. “Premier Wen Jiabao said the export situation is very dire,” Lun told Equites, referring to a comment from the premier on Monday. Lun also noted that China’s preliminary PMI number for August tumbled to 47.8 last week from 49.7 in July. A figure under 50 indicates manufacturing is contracting.

The main hope for a rebound is for the Fed to launch another round of quantitative easing, QE3, Lun said, and he thinks that is “unlikely.”

With Chinese manufacturing and exports suffering, according to Lun, raw material plays like copper, cement and steel are set to fall. Insurers are also sinking. Lun expects the Hang Seng to slump to 19,000 within two weeks.

What should investors do in the meantime? “They can buy U.S. Treasuries,” Lun said with a laugh. He was joking – wasn’t he? End


Hong Kong Blue Chips: +13, +0.07%, to 19,812, 08-28-12, Hang Seng Index

Chinese Stocks in Hong Kong: -23, -0.2%, to 9,522, 08-28-12, HSCE Index

Shanghai Stocks: +17, +0.8% to 2,073, 08-28-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -2.3, 364.3, 08-27-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong traded in a narrow range in weak turnover as investors waited for news about possible monetary easing from a meeting of the Federal Reserve Board later this week. China Southern Airlines (ZNH) sank 2.8% after reporting an 85% drop in interim profits. The sharp decline dragged down the China aviation sector. KGI Research

Quotable: "We expect the Hang Seng Index to move between 19,800 and 20,300 in near term." Guoco Captital. 8-27-12

Chinese Company to Watch: Shimao Property (SHMAY) "Given its satisfactory sales record, with in line results and healthy financial status, the counter remains as our pick. Its current price is trading at 45% discounted to its estimated net asset value,..." KGI Reseach. 8-28-12

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.

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