Hong Kong’s blue-chip Hang Seng Index opened lower in line with losses in the U.S., but a good showing by Chinese banks helped the index close with a modest gain, according to KGI Research. The Hang Seng rose 0.4% to 20,999, barely under the 21,000 level it topped last Friday. The index of Chinese companies, the H-shares, rose more, 1.9%, to 10,231. Turnover improved.
The approach of the key Party Congress on November 8 in China has failed to spark a sustained rally in Hong Kong, with stocks moving up and down. But while the Hang Seng has slipped a few points, the index of Chinese companies is up 2.7%.
“Investors will watch China more closely for a few days,” said Steven Leung, director of institutional sales at UOB KAY Hian.
He doesn’t expect China to make a big move like an interest rate cut or reduction in banks’ required reserve ratio in the run-up to the Congress, but told Equities the government is stimulating stocks in less dramatic ways. In the last two days, the government investment arm bought stock on Mainland markets in giant bank ICBC (FXI), and the parent company of China Coal (CCOZY) purchased A-shares in that company.
“Sentiment has been up the last few days, and H-shares should benefit from government policies,” Leung said.
He likes the steel and cement sectors, including Angang Steel (ANGGY) and building materials maker CNBM (CBUMY). He also said renewed subsidies may help auto and home appliance makers. End
Hong Kong Blue Chips: +79, +0.4%, to 20,999, 10-11-12, Hang Seng Index
Chinese Stocks in Hong Kong: +190, +1.9%, to 10,231, 10-11-12, HSCE Index
Shanghai Stocks: -17, -0.8% to 2,103, 10-11-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: +1.0, 375.6, 10-9-12, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong blue chips opened 106 points lower in line with a drop on Wall Street, but a good showing by Chinese banks reversed losses in improved turnover. Major bank ICBC (FXI) rose 2.4%. Good data helped home appliance makers: TCL (1070, HK) +5.7%. KGI Research
Quotable: "Investors’ projection on HK market relied on the A-Share market. If HSI can maintain above 20,800, the overall market sentiment will remain good in short-term." Core Pacific Yamaichi. 10-11-12
Chinese Company to Watch: China Minsheng Banking Corp. (CMAKY) "Therefore, overall, considering strong profit growth and sharp decrease of share price recently, we upgrade CMBC to Buy with 12-m target price of HK$7.30, 17.7% higher than the latest closing price and equivalent to P/E3.9x and P/B0.97x in 2013 respectively. The valuation now is quite attractive." Phillip Securities. 10-11-12
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