Clean Energy, Consumer Stocks Shine in Dull China Market

Gene Linn  |

Last week’s Lunar New Year Holiday didn’t bring much cheer to China stocks, with the gateway Hong Kong market on Tuesday continuing its recent slump.

The Hang Seng Index dropped 1.0% to 23,144 in thin trading, and the index of Chinese companies tumbled 1.8% to 11,526. The Hang Seng surged 24.4% from September 5 last year to January 30 to a 21-month high of 23,822. Since then it has slid 2.8% in a downturn that spanned the holiday closing of the Stock Exchange of Hong Kong from Monday to Friday last week. Mainland markets reopened Monday after being shut down all week.

In the current “long-awaited correction” the Hang Seng will likely trade between 23,000 and 23,600 for the short term, according to Jackson Wong, vice president for sales at Tanrich Securities.

However he told Equities in an email that there are some themes bolstering certain sectors. “The (bad) pollution news in China is turning investors away from traditional energy stocks to clean energy, such as natural gas, shale gas, wind power stocks,” he said. He likes Anton Oilfield (ATONY) and also clean environmental project construction company China Everbright (CHFFF).

And a growing middle class is supporting fashion shoemaker Prada (PRDSY) and automaker Great Wall (2333, HK), Wong said. End


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Hong Kong Blue Chips: -238, -1.0%, to 23,144, 2-19-13, Hang Seng Index

Chinese Stocks in Hong Kong: -210, -1.8%, to 11,526, 2-19-13, HSCE Index

Shanghai Stocks: -39, -1.6%, to 2,383, 2-19-13, Shanghai Composite Index.

Chinese Stocks in the U.S.: -0.6, 389., 2-15-13, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong followed Mainland markets lower in weak turnover. Chinese properties and cement producers retreated due to worries authorities would take further steps to control the property market: China Resources Land (CRBJY) -4.4%. KGI Research

Quotable: "Mainland markets will reopen on next Monday (February 18) and we see the HSI having good support at 22,600 before the reporting season goes full steam the week after next." BEA Securities. 2-15-13

Chinese Company to Watch: Jeweler Luk Fook Holdings (590, HK) "Coupled with undemanding valuation (FY14E PE of 10.5x, at a steep 39% discount to the sector leader - CTF) and gradually improving sector visibility, we believe the stock’s subdued FY13E earnings outlook is more than priced in." BOCOM International. 02-19-13

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