Focus on China Stocks Shifts to Second and Third Tiers

Gene Linn  |

China stocks opened strong Monday following big gains in the U.S. on Friday, with the Hang Seng Index in Hong Kong starting above formidable resistance at 21,000.

But the index could not break the 250-day moving average of 21,056, according to KGI Research, and fell back amid worries about looming bad news about the European debt crisis and weak performance on Mainland exchanges.

The Hang Sent ended down 0.2% at 20,710, and the index of Chinese companies sank 0.4% to 11,565. Turnover in Monday’s volatile trading was heavy.

The next run at 21,000 may be more successful. Jackson Wong, vice president of sales at Tanrich Securities, said market sentiment is “very positive.” Barring discouraging news from Europe and with continued good news about the U.S. economy, he said the Hang Seng could break through to challenge 21,700 before the end of February.

In the current trading, Wong said, blue chips are mainly tracking the market. “Investors are focusing on second and third-tier stocks,” he said. “Since Friday that includes medical stocks.”

Among the big gainers in this sector are China Medical Systems Holdings (CMED), Sinopharm (1099.HK) and Sihuan Pharm (460.HK), according to Wong. End


Hong Kong Blue Chips: -47, -0.2%, to 20,710, 2-06-12, Hang Seng Index

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Chinese Stocks in Hong Kong: -41, -0.4%, to 11,563, 2-06-12, HSCE Index

Shanghai Stocks: +0.03% to 2,331, 02-06-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +3.7, 408.8, 02-03-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips challenged strong resistance at 21,000 at the open, but worries about the European debt crisis and weak performance in Mainland markets triggered a retreat. The Chinese telecom sector declined: China Telecom (CHA) -4.2%. KGI Research

Quotable: "For the coming week, investors would eye on the China’s January consumer price index which is likely to see softened inflation, a sign of more accommodative policies ahead. As the Hang Seng Index has gained 12.6% year-to-date, it is likely to see mild correction in the near term with resistance level at 21,000 points." BEA Securities. 2-6-12

Chinese Company to watch: "SINOFERT (SNFRY) First policy document will emphasize on agricultural science technology. Fertilizer sector will be benefit. P/B of 1x which is attractive." KGI Research. 2-6-12

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