Defensive China Stocks May Stand Out in Dull Week

Gene Linn  |

For the first Monday in three weeks, China stocks started the week without the impetus of a major central bank stimulus plan from the previous Friday. Add continued weakness on mainland stock exchanges and the approach of a long Chinese holiday season, and this week looks like it will be nothing to write home about.

Monday was a snoozer in terms of turnover in Hong Kong with trading falling below last week’s already modest levels. The Hang Seng Index slipped 0.2% to 20,695, and the index of Chinese companies last 0.4% to 9,767.

“After several adrenaline shots from around the world’s central banks, it looks like the Hong Kong market is taking a breather this week ahead of the Golden week Holiday,” said Jackson Wong, vice president of sales at Tanrich Securities. Golden Week centers on the founding of the People’s Republic of China on October 1.

China will drag the market down in the first part of the week, he told Equities in an email, with the Shanghai Composite Index expected to slip below 2,000 – it ended at 2,033 Monday.

But Shanghai should find support around 1,960 toward the end of the week, according to Wong. That along with end-of-the-quarter window dressing should buoy Hong Kong toward the end of the week.

“I expect to see some buying into high-quality defensive stocks in the last few trading days; these sectors are HK properties, Chinese Banks, Chinese properties, and Tele Coms,” Wong said. End


Hong Kong Blue Chips: -40, -0.2%, to 20,695, 09-24-12, Hang Seng Index

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Chinese Stocks in Hong Kong: -30, -0.4, to 9,767, 09-24-12, HSCE Index

Shanghai Stocks: +6, +0.3% to 2,033, 09-24-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +3.3, 377.2, 09-21-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips fell as much as 200 points in early trading as the Shanghai Composite Index tested support at 2,000. But Shanghai reversed its decline, and Hong Kong trimmed most of its losses. A rise in cement prices helped producers: Anhui Conch (ACCHY) +4.8%. Research

Quotable: "Hong Kong shares may not see significant upside in the coming week due to limited positive newsflow, unless China will announce its new round of monetary easing and the Sino-Japanese conflicts markedly recovered. The HSI may see its resistance level at around 21,000 points." BEA Securities. 9-24-12

Chinese Company to Watch: Anoton Oilfield (ATONY) "Forming a JV and maintaining close relationship with Schlumberger will increase opportunities for the Company to acquire top-class technologies and develop businesses that have not yet been available in domestic peers. We believe the Company's niche in providing high-end services to customers will help the Counter outperform its peers going forward." Core Pacific Yamaichi. 9-21-12

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

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