Is the Worst Nearly Over for Chinese Economy?

China stocks treaded water Monday after discouraging Chinese economic figures touched off a big drop last week. But one analyst sees relief from the bad economy and spies opportunities for some stock sectors.

After sinking 3.6% last week, Hong Kong’s Hang Seng Index ended Monday 0.15% higher in very thin trading. The index of Chinese companies fell 0.2% to 9,219.

Investors have focused on a string of poor Chinese economic figures including a drop in GDP growth to 7.6% announced Friday. But Jackson Wong, vice president for sales at Tanrich Securities, said there were some encouraging developments. Last week for example fixed asset investment, a crucial part of China’s economy, posted a strong gain.

And two recent interest rate cuts will start helping the economy soon, he told Equities in an email. “We do think the two interest rate cuts will help in this quarter and the GDP number should see the bottom in 3Q and rebound about 8% in the 4th quarter,” Wong said.

Added to the boost from interest rate cuts, he noted that Chinese Premier Wen JiaBao has recently repeated that China would introduce new measures to stimulate the economy.

Among the sectors that will gain the most will be infrastructure plays like railway equipment producer CSL Corp. (CSRGY) and cement stocks, including Anhui Conch (AHCHY), according to Wong. Property developers such as China Overseas Land (CAOVY) also should do well. End

DAILY FIX

Hong Kong Blue Chips: +29, +0.15%, to 19,121, 07-16-12, Hang Seng Index

Chinese Stocks in Hong Kong: -18, -0.2%, to 9,219, 07-16-12, HSCE Index

Shanghai Stocks: -38, -1.7% to 2,148, 07-16-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: +5.0, 361.3, 07-13-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong opened significantly higher following a rally on Wall Street Friday, but a sharp drop in Mainland markets pared gains for Hong Kong blue chips. Chinese sportswear companies plunged after reporting large unsold inventories: Anta (ANPDY) -6.0%. KGI Research

Quotable: “For the coming week, investors may eye on any new stimulus measures and monetary easing in China, which may give a boost to the shares. The HSI is expected to see a strong support at 18,900.” BEA Securities. 7-13-12

Chinese Company to Watch: “China Oilfield Services Limited (CHOLY) is China’s largest comprehensive oilfield service provider,… Sustainable growth of the company performance benefits from production growth brought about by successive operation of new drilling equipment and long-term guarantee of daily rate levels.” Phillip Securities. 7-16-12

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