Investors have to look hard these days to find a few points of light in the murky China stock market. Companies that beat expectations with corporate profit reports provide some illumination. The Chinese government’s cautious monetary and fiscal policies don’t support the overall market, but some sectors benefit from special treatment.
In Friday’s gloomy trading telecom giant China Unicom (CHU) ignited a spark by surging 3.7% on higher-than-expected earnings. On the special policy front increased government spending in the medical area helps stocks in that sector. “Sinopharm (SHTDY) has solidified (its) leadership position in domestic pharmaceutical distribution that should (reap) benefits,” Ben Kwong, chief operating officer at KGI Asia, told Equities in an email. Sinopharm rose 4.8% Friday.
But aside from exceptions like China Unicom and Sinopharm, this week was dismal and next week doesn’t promise to be any better. The Hang Seng Index in Hong Kong slipped 0.5% to 22,115 Friday, off 1.85% for the week. The index of Chinese companies slid 0.4% to 10,896, a drop of 1.1% for the week.
Heightened worry over the European debt crisis, increasing attractiveness of U.S. assets and the yen, and China’s conservative monetary policy all figure to continue to weigh on emerging markets next week, Kwong said. “We believe (the) local market is likely to test the support of 22,000 level,” he said. End
Hong Kong Blue Chips: -111, -0.5, to 22,115, 3-22-13, Hang Seng Index
Chinese Stocks in Hong Kong: -48, -0.4%, to 10,896, 3-22-13, HSCE Index
Shanghai Stocks: +4, +0.2%, to 2,328, 3-22-13, Shanghai Composite Index.
Chinese Stocks in the U.S.: -3.4, 366.6, 3-21-13, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong opened lower and continued to slid in weak turnover. Exporter Li & Fung (LFUGY) rebounded from low levels, rising 1.7%. KGI Research
Quotable: “We reiterate our view that current valuation of the stock market is attractive to long term investors.” Guoco Capital 3-22-13
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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