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Hot Money Heats Up China Stocks

Hot money continued to heat up China stocks Friday, pushing Hong Kong blue chips above the 22,000 level to a year-high, with 23,000 possible in sight.The Hang Seng Index rose 1.3% to 22,111 in

Hot money continued to heat up China stocks Friday, pushing Hong Kong blue chips above the 22,000 level to a year-high, with 23,000 possible in sight.

The Hang Seng Index rose 1.3% to 22,111 in heavy trading, while the index of Chinese companies jumped 1.2% to 10,834.

“The inflow of hot money is pushing up stocks,” said Francis Lun, managing director at Lyncean Securities. “Since last Friday there has been HK$22 billion (US$2.8 billion) in hot money coming into Hong Kong. The Hong Kong property market is off-limits to foreigners, so the money goes into stocks.”

Asked where this easy money is coming from, Lun laughed and said, “Bernanke.” The U.S. central bank that Ben Bernanke heads is printing so much money, Lun told Equities, that investors don’t know what to do with all of it, and some ends up in China stocks in Hong Kong.

The tide of hot money is actually just the most recent impetus for a strong two-month rally.
In early September, China stocks wallowed in poor corporate results and continuing signs of a Chinese economic slump. Then the European Central Bank announced a major bond-buying program. A week later the U.S. Federal Reserve launched QE3 to pump money into the economy. A couple weeks later, China eased political uncertainty by setting a date for the major 18th Party Congress. Then encouraging Chinese September economic statistics began to emerge.

Add in the recent run of hot money, and the Hang Seng has surged 15.5% since September 5.

Lun said investment from abroad will continue to push the index up to 23,000 by the end of the year. Among the beneficiaries, he said are big Chinese banks like ICBC (FXI) and cement producers like Anhui Conch (AHCHY). End


Hong Kong Blue Chips: +289, +1.3, to 22,111, 11-02-12, Hang Seng Index

Chinese Stocks in Hong Kong: +133, +1.2%, to 10,834, 11-02-12, HSCE Index

Shanghai Stocks: +13, +0.6% to 2,117, 11-02-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +7.0, 390.4, 11-01-12, Bank of New York Mellon, ADR Index-China – closed by storm

Insight: A surge of hot money lifted Hong Kong above the 22,000 level for the first time this year. MAcau gambling plays, jewelry stocks and Chinese steel producers helped lead the way. Angang Steel (ANGGY) jumped 6.1%. KGI Research

Quotable: “Oct (2012): Improved Manufacturing PMI Shows China’s Economy Is Bottoming Out.” UOB Kay Hian.

Chinese Company to Watch: Fortune Real Estate Investment Trust (778,HK) “As at 30 Sep 2012, the dividend yield of HS REIT index was approximately 5.1%. The Hong Kong REIT sector enjoyed a prolonged rally in FY12, and we expected this rally to continue as the yield gap between the REITs and treasury is still significant.” Phillip Securities. 11-1-2012

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

As the markets put the debt ceiling debacle in the rearview mirror, more than a few issues remain open.