With stubborn inflation finally falling and demand for Chinese exports stalling, authorities are gradually unwinding months of credit tightening. Chinese bank loans surged to a new high in October, confirming the change In macro economic policies, according to KGI Asia’s Daily Market Report Monday.
Hong Kong’s index of Chinese companies jumped 2.8% Monday to 10,717, while the broader Hang Seng Index rose 1.9% to 19,508.
However, European bank woes continue to hang over the market. The most recent news from Greece and Italy was good, but fundamental problems are far from solved and more bad news is inevitable.
For now, good economic data from the U.S. gives the market solid ground to withstand bad news from Europe, said Jackson Wong, vice president of equity sales at Tanrich Securities.
“We got hit hard last week and I do expect the market will try to recover the losses this week, which means we will see resistance at 20,000,” he told Equities in an email. Short-term support looks solid at 19,000, he said.
Big gainers will probably be stocks that would benefit from Chinese credit easing and are not greatly affected by the weak global economic environment, including financials, natural resources and building materials.
The market is looking ahead to the Italian bond auction Monday night Hong Kong time for a signal on investor confidence in Italian reforms. U.S. retail sales, CPI and jobs data will also be important. “One side note is that the almost forgotten U.S. debt reduction committee is about to announce [its] progress (Nov. 23) and this might be a major focus next week. “ End
Hong Kong Blue Chips: +371, +1.9%, to 19,508, 11-14-11, Hang Seng Index
Chinese Stocks in Hong Kong: +287, +2.8% to 10,430, 11-14-11, HSCE Index
Shanghai Stocks: +1.9%, 2,508, 11-14-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: +6.4, to 394.0, 11-11-11, Bank of New York Mellon, ADR Index-China
Insight: A rise in Chinese bank lending in October confirmed China's shift in macro economic policies, sending China stocks higher in Hong Kong. However, weak turnover indicated lack of momentum for further gains. Chinese insurance companies gained: China Life (LFC) +5.4%. KGI Research
Quotable: "The HSI is likely to test the supporting level of 19,000 again next week on profit taking." BEA Securities. 11-11-11
Chinese Companies to Watch: "CHINA SOUTH AIR (ZNH) Mainland passenger revenue accounted for 73% of sales which is not hurt much by US/Europe slow down. RMB appreciation also benefit." KGI Asia. 11-14-11
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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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