Strong corporate results were supposed to help cure the China stocks consolidation that started in late January. Hasn’t happened. But as the downturn grinds to the end of its second month, some sectors and companies are benefitting from encouraging results.
Among them are major Chinese banks, according to Steven Leung, director of institutional sales at UOB Kay Hian. CCB (CICHY) announced good earnings last week, and ICBC (IDCBY) was expected to follow suit Wednesday. Leung expressed a slight preference for CCB to Equities, because of better valuation, growth rate, and loan quality.
Independent power producers are also on the rise. In 2012 they had to write down some assets, known as impairment, but showed strength heading into 2013. A UOB Kay Hian research piece states: “In 2013, we forecast 36% yoy earnings improvement given full-year benefit of coal price weakness in mid-12, two rounds of interest rate cuts and the low base effect in 4Q12.”
Huaneng Power (HNP) rose 7.0% last week after announcing strong earnings, while China Resources Power (CRPJY) jumped 16.3% when its results beat expectations. Leung likes China Resources better because it fares better as a result of low coal prices.
But as some sectors thrive the market as a whole continues to trade in a range between 22,200 and 23,000 for the Hang Seng Index in Hong Kong. Wednesday the index rose 0.7% to 22,465 in weak turnover, and the index of Chinese companies gained 1.0% to 11,034, led by the big banks. End
Hong Kong Blue Chips: +154, +0.7, to 22,465, 3-27-13, Hang Seng Index
Chinese Stocks in Hong Kong: +108, +1.0%, to 11,034, 3-27-13, HSCE Index
Shanghai Stocks: +4, +0.2%, to 2,301, 3-27-13, Shanghai Composite Index.
Chinese Stocks in the U.S.: +3.0, 371.0, 3-26-13, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong rose due to gains on Wall Street and end-of-quarter window dressing, but low turnover showed that many investors stayed on the sidelines.A government-authorized rise in prices aided refineries: Shanghai Petrochem (SHI) +4.8%. KGI Research
Quotable: "We believe that HK market will mainly be dominated by the weak sentiment with trading range from 21,700 to 22,500." Core Pacific Yamaichi. 3=25-13
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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
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