The Hang Seng Index In Hong Kong started Tuesday with a gain, inspired by the powerful rally on Wall Street. However, as Mainland A-share markets tumbled and concerns about a slow-down in China’s economic recovery re-emerged, the index plunged to a 0.9% loss at 22,891 in lackluster turnover. The index for Chinese companies fell 1.3% to 11,292.
The consolidation that started after the Hang Seng hit a 21-month high of 23,822 on January 30 still grips the market, said Castor Pang, head of research at Core Pacific Yamaichi. The index is fated to bounce around between 22,400 and 23,400 for the time being, he told Equities.
But he noted that reforms in the medical industry for the last two year have added diseases and a conditions that can be covered by insurance. Now Chinese citizens can get more insurance coverage and spend more money treating some diseases like cancer.
In addition to helping ordinary people the reform is bulking up profits for companies like Sino Biopharm (1177, HK). The firm’s parent company is expected to finish trials soon on a new drug to treat liver cancer and then turn the drug over to Sino Biopharm, Pang said, increasing profits and valuation.
He said another attractive company is CMS (867, HK), which has agreements with Western companies to import drugs that are not produced in China. End
Hong Kong Blue Chips: -200, -0.9%, to 22,891, 3-12-13, Hang Seng Index
Chinese Stocks in Hong Kong: -144, -1.3%, to 11,292, 3-12-13, HSCE Index
Shanghai Stocks: -24, -1.0%, to 2,287, 3-12-13, Shanghai Composite Index.
Chinese Stocks in the U.S.: +3.8, 381.8, 3-11-13, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong blue chips opened with a gain of 43 points due to the continued rally on Wall Street, but weakness in Mainland markets drove Hong Kong stocks sharply into negative territory. The Chinese government's subsidy for solar energy was less than expected, hurting companies like GCL Poly (GCLPY), which lost 6.4%. KGI Research
Quotable: "We expect the Hang Seng Index to end higher in March and maintain our overweight recommendation on Chinese stocks especially banks and property developers." Guoco Capital. 3-12-13
China will release February CPI data on Saturday (9th Mar), which is expected to surge 3.0% on rising food prices during Lunar New Year. Investors will also keep eyes on the US Feb payrolls report due on Friday (8th Mar). The Hang Seng Index may see breakthrough from the recent trading range of 22,500-23,100 should the two economic reports delivered positive surprise." BEA Securities. 3-8-13
Chinese Company to Watch: "Galaxy (27 HK) owns the biggest share of the Cotai area among its all peers which (implies) good growth potential.... The rumor of tighter control on high rollers has lead down-turn by the entire gaming sector which still indicates a buying opportunity given its cheaper valuation, we suggest a buy on Galaxy."Tanrich Security. 3-12-13.
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