China Stocks Unsteady on Higher Perch

Gene Linn |

China Stocks Unsteady on Higher PerchHeartened by large gains in U.S. and European markets last Friday, China stocks broke above their recent trading range on Monday. But their footing at the higher level may be precarious.

Hong Kong’s Hang Seng Index jumped 1.7% higher to close one point below the important 20,000 level. The index of Chinese companies rose 1.6% to 9813.

“However, the volume is still on the low side so it’s not considered strong enough to sustain at above 20,000 and vulnerable to any bad news,” said Jackson Wong, vice president of sales at Tanrich Securities.

Beneficiaries of Monday’s sharp rise included big caps like HSBC (HBC, up 2.2%) and previously beaten-down sectors like sportswear makers (Li Ning, PINX, rose 12.2%) and automakers (Brilliance China, BCAUY, up 8.2%).

When investors chase laggards, Wong told Equities in an email, “it usually shows the market is unwilling to go further unless (there is) more good news but will take the risk at current level on smaller caps….”

He sees short-term resistance for the Hang Seng at 20,300 and support at 19,375. End

DAILY FIX

Hong Kong Blue Chips: +333, +1.7%, to 19,999, 08-06-12, Hang Seng Index

Chinese Stocks in Hong Kong: +152, +1.6%, to 9,813, 08-06-12, HSCE Index

Shanghai Stocks: +22, +1.0% to 2,155, 08-06-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +5.4, 371.1, 08-03-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong followed U.S. and European markets higher, with blue chips ending one point shy of the significant 20,000 level. Turnover rose from Friday but was still thin. Anta Sport (ANPDY) reported decent results and soared 17.2% to bolster the beaten-down sportswear sector. KGI Research

Quotable: "The blue-chip index is expected to consolidate near 19,000-19,600, as investors await central bankers to shed more lights on the policy outlook. Meanwhile, China will release the key July CPI on 9th Aug, while inflation is seen dropping below 2% last month.BEA Securities. 8-3-12

Chinese Company to Watch: "We believe the world’s PCs market will recover in the 2H12 and Lenovo (LNVGY) can continue to show faster growth, given its greater potential in emerging markets and also gaining more market share in developed markets. The recent price weakness may provide a good buying opportunity." Tanrich Securities. 8-3-12

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

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
JPM.WS J P Morgan Chase & Co Warrant expiring October 28 24.63 0.85 3.57 317,321

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