Euro Optimism Fuels China Stocks Rally

Gene Linn |

china StockChina stocks started the week with a bang, bolstered by hope the European summit scheduled for Wednesday would come up with a comprehensive solution to the region’s debt crisis.

Hong Kong’s Hang Seng Index soared 4.1% to 18,772, and the index of Chinese companies shot up 5.4% to 9,718.

However turnover was modest and there may not be much more upside momentum until the EU reveals its decision. Jackson Wong, vice president of equity sales at Tanrich Securities, told Equities in an email that the Hang Seng would probably be limited to 19,000 prior to Wednesday’ EU action.

“(W)e should really wait until the decision to come out, because like before, their decisions were likely a short term fix rather than the so-called ‘comprehensive’ one,” he said.

Another positive for the market was an indication China’s manufacturing sector emerged from the doldrums this month. The preliminary HSBC China Purchasing Managers Index released Monday showed manufacturing is expanding slightly in October after retreating for three months. The rebound eased worries of a hard landing in China’s fight against inflation.

For now the rally is broad based, Wong said, with expectations of good results this week from Chinese banks and other big cap stocks. “Building materials and natural resources are leading the way because of their ‘real asset’ nature,” he said. End

DAILY FIX -- Chinese Banks Post Strong Gains

Hong Kong Blue Chips: +746, +4.1%, to 18,772, 10-24-11, Hang Seng Index

Chinese Stocks in Hong Kong: +498, +5.4% to 9,718, 10-24-11, HSCE Index

Shanghai Stocks: +2.3%, 2,370, 10-24-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: +5.3, to 363.0, 10-21-11, Bank of New York Mellon, ADR Index-China

Insight: The Hong Kong market rose sharply due to gains in Hong Kong-listed ADRs in the U.S. on Friday and to optimism Europe would solve its debt crisis at a regional summit on Wednesday. In addition, the preliminary HSBC PMI for China expanded, easing worries of a hard landing for China's economy. Strong corporate results are expected from Chinese banks this week. Agricultural Bank of China (ACGBY) jumped 8.1%, and China Merchants Bank (CIHKY) surged 10.9%. KGI Research

Quotable: "Looking ahead, all eyes will be focused on the EU summit in Brussels this weekend, with measures to tackle the European debt crisis at the top of the agenda. However, the summit will likely result in disappointment as Germany and France still remain divided on key issue of the rescue fund. We see the HSI to test the 17,500 level next week." BEA Securities. 10-21-11

Chinese Company to Watch: Yingde Gases will outperform the market in economic downturn given the defensive nature of its business. Yingde Gases, the largest independent on-site industrial gas supplier in China, has outperformed the market with a drop of 4% in past three months versus the 18% decline for Hang Seng Index." Guoco Capital. 10-21-11

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

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Companies

Symbol Name Price Change % Volume
SCSC ScanSource Inc. 36.29 -0.04 -0.11 114,386

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