Analysts continue to build their case for a rally for China stocks as Hong Kong-listed Chinese companies announce robust results. And some of them insist that the turmoil in global markets and the global economy present investors with a golden opportunity to buy China stocks.
A common thread is that these stocks will boom because China’s stubborn inflation will peak soon and recede, allowing the government ease tight economic measures. But there is another driver for Chinese growth, according to Haitong Securities analyst Edward Huang. It is a seasonal surge sparked by back-to-school shopping, China Golden Week holidays in early October, the Thanksgiving to Christmas shopping season and the Lunar New Year early in 2012.
“Based on previous experience, China’s exports and consumer spending may bounce back nicely and the revenue and profit of manufacturers will improve,” Huang said in Haitong’s daily market commentary on August 15.
He acknowledges that European and U.S. debt woes and worries about global economic growth have hit Hong Kong and China stocks hard, driving the blue-chip Hang Seng Index down 3,110 points from July 29 to August 9 in wild volatility.
But he also notes that the decline has helped make stocks in Hong Kong attractive. The Hang Seng FY2011 P/E is within one point of the historic low reached during the Asian financial crisis in the late 1990s. Meanwhile Chinese companies post impressive profits. On Wednesday stocks of China Coal (1898 in Hong Kong) soared 6.9% on better-than-expected profits.
Huang advised investors not to be influenced by “temporary” events in global markets. “We suggest investors to take advantage of unexpected negative events to accumulate stocks…,” he said.
His targets are the services and consumer goods sectors, favoring luxury consumer products over ordinary consumer goods. End
DAILY FIX — Expansion of RMB Use Boosts HK Stocks
Hong Kong Blue Chips: +77, +0.4%, to 20,289, 08-17-11, Hang Seng Index
Chinese Stocks in Hong Kong: -11, -0.1% to 10,936, 08-17-11, HSCE Index
Shanghai Stocks: -0.3%, 2,601, 08-17-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: -7.4 to 398.5, 08-16-2011, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong blue chips broke above the 25,000 barrier after visiting Chinese Vice Premier Li announced new measure for RMB use in Hong Kong, but fell back due to profit-taking. The RMB announcement helped Bank of China (HK) (2388), which gained 4.4%. KGI Research
Quotable: “We expected that HSI still have room to surge but the short-term outlook will turn into see-sawing. We expected that HSI can gain support at 20,000 in short-term. However, once if HSI break the support at 20,000, it will trigger stop-loss or profit-taking activities. We believe that HSI will range bounce between 19,800 and 20,500 in short-term.” Core Pacific Yamaichi. 8-17-2011
Chinese Company to Watch: “SINOPEC CORP (00386) Oil price decline which would help Sinopec refining business to turn around. Prospective P/E of 6x.” KGI Asia. 8-17-2011
Brokerages and analysts cited 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