Foreign Funds Spark China Stock Rebound

Gene Linn |

China Currency RMBA persistent inflow of foreign cash fueled China stocks’ rebound Wednesday, at least temporarily overcoming economic worries from the U.S. and Europe.

Hong Kong’s Hang Seng Index jumped 1.2% to 21,447 after tumbling 4.1% in the previous four trading days. The index of Chinese companies surged 1.7% higher to 10,406. Thin turnover signaled that investors are still cautious.

Trepidation over the approach of a U.S. fiscal cliff of tax hikes and spending cuts set off the decline last Thursday, and worries about the Greek debt bailout plan added to the downward push.

But a strong Hong Kong dollar and appreciating Chinese Renminbi shows foreign cash is still washing into the market, according to Peter So, managing director and co-head of research at CCB International. With hot money pushing against gloomy news from overseas, he told Equities, this week will be “quite mixed.”

In the short-term uncertainty some investors are parking money in cash and bonds, So said. But some are putting money in Hong Kong ETFs for Chinese A-share stocks. (These funds do not invest directly in A-shares, but in derivatives.) In addition to an index fund, there are ETFs for A-share stocks in areas such as banking and retailing. End

DAILY FIX

Hong Kong Blue Chips: +253, +1.2, to 21,447, 11-14-12, Hang Seng Index

Chinese Stocks in Hong Kong: +176, +1.7%, to 10,406, 11-14-12, HSCE Index

Shanghai Stocks: +8, +0.4% to 2,055, 11-14-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -7.7, 373.5, 11-12-12, Bank of New York Mellon, ADR Index-China - closed by storm

Insight: Bargain-hunting and firmer Mainland markets fueled a rebound in Hong Kong after recent sharp losses. But weak turnover indicated investors are still cautious. Chinese banks bounced back higher: ICBC (FXI) +3.2%. KGI Research

Quotable: "We believe after the National Congress, there will be more policy initiatives. Regarding rural areas development, emphasis on home appliances to rural area may be re-iterated once more. Chinese government will release details of the rural areas subsidiary programme by the end of this year. We expect the old-for-new programme for agricultural machines and subsidies polices to be released soon." UOB Kay Hian. 11-14-12

Chinese Company to Watch: Evergrande Real Estate Group (EGRNF) "As Evergrande’s sales rebound, we believe its financials should gradually improve. Coupled with its share price underperformance (19.88% vs major peers by 59% YTD) should drive its share price higher." Tanrich Securities. 11-14-12.

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 http://www.adrbnymellon.com/dr_country_profile.jsp?country=CN

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
NEE.P.Q NextEra Energy Inc. Corporate Units 60.75 0.07 0.12 8,572

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