Chinese Medical, Telecom Equipment Stocks Defy Downturn

Gene Linn  |

The medical sector and telecom equipment makers offered a bit of hope Friday as China stocks ended a dismal week.

Market leader Sinopharm (1099, HK) heads a sector that is benefitting from increased government spending, according to Ben Kwong, chief operating officer at KGI Asia. Another big firm in that area is Shangpharm Corp (SHP). Telecom giant China Mobile (CHL) is ramping up spending on 4G systems, Kwong told Equities in email, which will help equipment plays like ZTE (ZTCOY).

Overall, though, the Hang Seng Index in Hong Kong lost ground for the fourth day this week, sinking 0.4% to 22,533. The index of Chinese companies fell 0.7% to 11,021. For the week the Hang Seng tumbled 2.4% and Chinese companies plunged 4.0%.

Worry that China’s central bank will continue to tighten credit to blunt a recent rise in inflation will constrain stocks next week, said Kwong. But he expects the downside to be limited by the market’s reasonable valuation of 11-to 12X prospective PE with consolidation at 22,300 to 23,000 next week. End

DAILY FIX

Hong Kong Blue Chips: -86, -0.4%, to 22,533, 3-15-13, Hang Seng Index

Chinese Stocks in Hong Kong: -81, -0.7%, to 11,021, 3-15-13, HSCE Index

Shanghai Stocks: +8, +0.4%, to 2,278, 3-15-13, Shanghai Composite Index.

Chinese Stocks in the U.S.: +2.2, 372.9, 3-14-13, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips ended a volatile, active day of trading 0.4% lower, extending the week's losses to 2.4%. Ping An Insurance dipped 1% after reporting lower-than-expected net profit. KGI Research

Quotable: "We maintain our overweight recommendation on Chinese stocks especially banks and property developers because they are likely to deliver satisfactory earnings results in March." Guoco Capital. 3-15-13

Chinese Company to Watch: "Yuexiu Property (GUAZY) distinguished itself among peers by its strong property pre-sales, solid recurrent income and low financing cost." Guoco Capital. 3-15-13

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

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