Further tightening by the Chinese central bank, the People’s Bank of China, fueled a second day of steep losses in Hong Kong’s Hang Seng Index, which plunged 1.5% to 22,557 in increased trading. In two days the index has surrendered the hard-won 23,000 level and approached the support range of 22,400 to 22,500. The index of Chinese companies plummeted 2.3% to 11,037.
In the good old days of September 2012 through January, foreign fund inflows helped trigger a strong rally in Hong Kong. But institutional investors began having second thoughts around the end of January, said Steven Leung, director of institutional sales at UOB Kay Hian.
“The mood changed quite clearly after Chinese New Year (January 23) with a slight weakening of the Chinese economy and tightening by the People’s Bank of China,” he told Equities.
Leung said there was another factor for big investors to consider: China’s stumble in economic recovery coincided with a better economic outlook in the U.S. and Japan.
Confidence remains in China’s longer-run economic prospects, he said, and institutional selling has not been on a big scale.
One relatively bright spot will likely be large Chinese banks, according to Leung.
They are expected to announce good results soon, but the rebound will be muted by worries about lessening market liquidity. End
Hong Kong Blue Chips: -334, -1.5%, to 22,557, 3-13-13, Hang Seng Index
Chinese Stocks in Hong Kong: -255, -2.3%, to 11,037, 3-13-13, HSCE Index
Shanghai Stocks: -23, -1.0%, to 2,264, 3-13-13, Shanghai Composite Index.
Chinese Stocks in the U.S.: -6.2, 374.8, 3-12-13, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong opened lower and continued to dive on news the Chinese central bank would further tighten liquidity. In addition, Chinese banks sank after authorities announced they would firm up control of financial products: CCB (CICHY) -2.7%, KGI Research
Quotable: "We expect that HSI will continue to be volatile for the coming week. Particularly, HK market may be unable to follow the good performance in US market and continue to be affected by the volatile China A-Share market." Core Pacific Yamaichi. 3-11-13
Chinese Company to Watch: CITIC Securities "Considering CS's obvious competitive advantages and the better market environment in 2013, and in addition, recently the regulators approved the residents of Hong Kong, Macao and Taiwan who are living in the Mainland now can invest in A Shares, which will bring new driving force to domestic stock market and securities companies." Phillip Securities. 3-12-13
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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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