Improving Chinese Economy Lifts Stocks

Good news from overseas may be needed to fuel a sustained rally in China stocks after encouraging Chinese economic numbers helped the market end this week strong.

The Hang Seng Index in Hong Kong rose 1.1% Friday to 23,602, and the index of Chinese enterprises jumped 2.1% to 12,106. For the week the Hang Seng gained 1.4%, and the Chinese company index climbed 2.2%.

Release of encouraging Chinese fourth quarter economic figures sparked Friday’s upturn. The 7.9% growth in GDP was the first year-on-year quarterly rise since the fourth quarter of 2010, confirming the Chinese economy hit bottom in the third quarter of 2012 and is slowly adding strength.

However, although encouraging, the numbers were expected and “failed to bring further new positive surprises to the market,” according to Ben Kwong, chief operating office at KGI Asia.
Further gains next week might depend on a rally in the U.S., he told Equities in and email.

“In fact, (the) US market has been consolidated at high level for a while, (and) any breakthrough could improve global market sentiment as well as might be a good indicator for the continuous fund re-allocation from bond to equity,” Kwong said.

Japanese yen movements may also push funds into riskier emerging markets, including China, he said.

Chinese brokerages may continue to be star performers next week after Chinese authorities announced early this week they would expand plans for qualified foreign institutional investors to but Chinese A-shares and also allow Chinese institutions to purchase more foreign stocks. After brokerages accumulated large gains this week, Kwong said, investor might buy on any weakness. End

DAILY FIX

Hong Kong Blue Chips: +262, +1.1%, to 23,602, 1-18-13, Hang Seng Index

Chinese Stocks in Hong Kong: +248, +2.1%, to 12,106, 1-18-13, HSCE Index

Shanghai Stocks: +32, +2.1% to 2,317, 1-18-13, Shanghai Composite Index.

Chinese Stocks in the U.S.: -0.8, 405.3, 1-17-13, Bank of New York Mellon, ADR Index-China

Insight: Encouraging economic figures confirmed the Chinese economy is starting to rebound, push Hong Kong stocks higher.

Quotable: “Consensus has a point that stocks are overbought near term, and beg a consolidation before the next leg up. But a consolidation is by no means the end of the rally. And the strong rally since December contrasts with the harsh sell-off in the previous eleven months. Recent market strength in face of bad news such as property tax, especially the resilience at closing after some dramatic intraday sell-off, should be noted. It is plain that there will be dips, but dips should be bought.” BOCOM International. 1-17-13

Chinese Company to Watch: “With the coming of Chinese New Year (February 10), Gaming market is expected to improve with increasing cash flow. Therefore, SJM Holdings (880, HK) can be a beneficiary of this trend.

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