Whether you call it a correction or a consolidation, the pause in China Stocks’ October rally didn’t last long as the inflow of foreign funds sparked a solid rise Wednesday.
Hong Kong’s blue-chip Hang Seng Index rebounded from a three-day slide by rising 1.0% to 21,642. The index had climbed 10-straight trading days before last Friday. The index of Chinese companies, which began its consolidation earlier last week, increased 1.2% to 10,582.
Turnover was modest, but the Hong Kong Monetary Authority’s release of HK$2.7 billion into the market indicated foreign funds were coming in and putting upward pressure on the Hong Kong dollar.
The recent brief downturn was a consolidation, not a correction, according to Peter So, managing director and co-head of research at CCB International.
High-beta stocks like Chinese properties and the Hong Kong Exchanges and Clearing Ltd (0388, HK) would lead the recovery, he told Equities. “Infrastructure stocks will recover faster than the market because they have been under pressure recently,” he added.
So’s year-end target for the Hang Seng is 22,500. End
Hong Kong Blue Chips: +213, +1.0, to 21,642, 10-31-12, Hang Seng Index
Chinese Stocks in Hong Kong: +124, +1.2%, to 10,582, 10-31-12, HSCE Index
Shanghai Stocks: +6, +0.3% to 2,069, 10-31-12, Shanghai Composite Index.
Chinese Stocks in the U.S.: -4.4, 386.8, 10-26-12, Bank of New York Mellon, ADR Index-China – closed by storm
Insight: Hong Kong blue chips ended a three-day slump as the Hong Kong Monetary Authority injected HK$2.7 billion into the local market. The rise in funds helped Chinese banks and local properties. Chinese shipping companies rose on the back of good earnings reports: China Shipping (CSDXY) +7.1%. KGI Research
Quotable: “Market will show its true colour after the index futures expiry yesterday.” BOCOM International. 10-31-12
Chinese Company to Watch: China Petroleum and Chemical Company (SNP) “Going forward, we believe continued earnings recovery given an economic rebound and potential implementation of the new fuel policy will lift returns from the petrochemical segment and secure a stable refining margin.” UOB Kay Hian. 10-30-12
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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