The headline number of 7.4% growth in third quarter GDP, a drop from 7.6% in the second quarter, was only in line with expectations. But September retail sales rose a higher-than-expected 14.2%, and fixed assets spending also posted a strong gain.
“Overall …, with the better economic data in September, including fixed asset investment and retail sales, it is likely that 3Q12 will be bottom of the year,” said Ben Kwong, chief operating officer at KGI Asia.
The encouraging numbers boosted Hong Kong’s Hang Seng Index 0.5% higher to 21,519 in much stronger turnover, although profit-taking ate into early gains. The index of Chinese companies, the H-shares, jumped 1.4% to 10,636.
Further gains may be led by the retail sector, which has been lagging the market, Kwong told Equities in an email. Infrastructure plays also stand to benefit from increased economic growth, but he noted they have already enjoyed a strong rally this month and might see some profit-taking. End
Hong Kong Blue Chips: +102, +0.5%, to 21,519, 10-18-12, Hang Seng Index
Chinese Stocks in Hong Kong: +145, +1.4%, to 10,636, 10-18-12, HSCE Index
Shanghai Stocks: +26, +1.2% to 2,132, 10-18-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +0.6, 387.7, 10-17-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong rose ahead of the release of Chinese economic numbers in increased turnover, but profit-taking at the higher level cut into gains. Infrastructure stocks surged: Zoomlion (ZLIOY) +6.6%. Iron and steel companies also rose: Chongqing Iron (CGQNF) +22%. KGI Research
Quotable: “We remain bullish on performance of H shares in the fourth quarter.” Guoco Capital. 10-18-12
Chinese Company to Watch: Maker of facial masks and other skincare products. Magic Holdings (1633, HK) “On top of Magic’s earnings growth prospects, we think Magic could be appealing to some global skincare player(s) who are keen to penetrate China’s mass market given (1) Magic’s leading market share with further gain in a rapidly-expanding segment; (2) favorable company shareholder structure; and (3) attractive valuation (10x CY13 P/E and 6x P/E excl. cash).” BOCOM International. 10-18-12
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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