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Foreign Funds Spark China Stock Rebound

A 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

A 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