Monday’s big drop was fueled largely by overseas factors like the worsening Euro debt crisis and weakening U.S. economic data, Ben Kwong, chief operating officer at KGI Asia, told Equities. But he said at mid-week the market found strong support at the 250-day moving average and rebounded. Chinese commodity plays helped lead the way after commodity prices stabilized.
Better-than-expected results from Gome (0493) and Lenovo (0992) supported Friday’s surge in prices.
For the week the blue chip Hang Seng Index slipped 0.3%, 81 points, to 23,118. The index of Chinese companies edged up 0.1%, 13 points, to 12,948.
Whether there is a replay next week still depends on global market investment flows, according to Kwong. Investors may continue to cut long positions due to uncertainty about the effect of the end of U.S. money-easing measures at the end of June. Movement of the U.S. dollar will be a key signal of the direction of fund flows. A stronger dollar indicates funds are flowing out of Hong Kong. End
Hong Kong Blue Chips: +217, +1.0%, to 23,118, 05-27-11, Heng Seng Index
Chinese Stocks in Hong Kong: +209, +1.6% to 12,961, 05-27-11, HSCE Index
Chinese Stocks in the U.S.: +2.4 to 429.0, 05-26-11, Bank of New York Mellon, ADR Index-China
Insight: Chinese resources plays like PetroChina (0657) led a strong rally. Turnover rose, but remained weak. KGI Research
Quotable: "We expect the index to stay weak in the near term and investors should remain cautious." BOCOM International. 5-26-2011
Chinese Company to Watch: "Tiangong Int’l (0826) has obtained abundant orders for 2011 with a full production schedule till the end of the year. It is expected that the production of HSS cutting tools, die steel and HSS could grow 40% YoY, 30% and 25%, respectively....The recent correction provides very good buying opportunities." BOCOM International. 5-26-2011
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