China stocks surged above a key resistance level Wednesday, fueled by a global stocks rally and prospects for a turnaround for China’s weak economy.
The Hang Seng Index in Hong Kong rose 1.0% to 21,417, significantly over the resistance set by last May’s high of 21,300. Turnover also increased substantially. The index of Chinese companies climbed 1.2% to 10,491.
In addition to gains in the U.S. and other global markets, some optimistic investors seem energized by the prospect that Chinese third quarter GDP numbers due Thursday will signal China’s economy has bottomed out and that the fourth quarter will be the start of a turnaround.
“I think the third quarter GDP growth will be about 7.5%,” said Francis Lun, managing director at Lyncean Securities. “That’s down from 7.6% in the second quarter but it will signal the bottom of the economy. I think the fourth quarter growth will be back to 8.0%.
“The market is on a run. We’ll see 22,000 maybe next week or at least by the end of the month.”
Noting that last Saturday’s export figures were encouraging, Lun told Equities that the export-related sector would be among the leaders in an economic rebound. He also likes resources plays like Jiangxi Copper (JIXAY), aluminum-maker Chalco (ACH) and coal-producer China Shenhua (CSUAY). End
Hong Kong Blue Chips: +210, +1.0%, to 21,417, 10-17-12, Hang Seng Index
Chinese Stocks in Hong Kong: +124, +1.2%, to 10,491, 10-17-12, HSCE Index
Shanghai Stocks: +7, +0.3% to 2,106, 10-17-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +1.9, 387.1, 10-16-12, Bank of New York Mellon, ADR Index-China
Insight: A global stocks rally helped lift Hong Kong higher in increased turnover that reflected stronger momentum. Chinese banks performed well: ICBC (FXI) and CCB (CICHY) both rose 1.8%. KGI Research
Quotable: “‘Over-bought’ pressure remains. HK market may need more time to finish the consolidation.” Core Pacific Yamaichi. 10-17-12
Chinese Company to Watch: “The (property) sector’s valuation is not stretched at 5.6x and 0.9x FY13F PER and PBR…. Our top pick is Poly Property (119, HK). We also favour CR Land (CRBJY) as a long-term play.” Core Pacific Yamaichi. 10-17-12
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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