Jobs Stimulus Plan Fails to Stimulate China Stocks

Gene Linn |

Hang SengChina stocks in Hong Kong opened higher after President Barack Obama proposed a US$445-billion job stimulus package. Investors considered the news "moderately positive" because the amount was higher than expected, according to Ben Kwong, chief operating officer at KGI Asia.

But he told Equities that investors would likely start to worry that the plan would not be enacted due to Republican opposition. And sure enough, gains evaporated and the market ended slightly lower. Turnover barely had a pulse, reflecting investors' caution.

The Hang Seng Index edged down 0.2% to 19,867, and the index of Chinese companies sagged 0.3% to 10,469. The Shanghai Composite Index was almost unchanged, slipping 0.05% to 2,498. Overnight the BNY Mellon ADR Index for China dropped 4.3 to 394.1.

The closely watched Chinese inflation figure came in at 6.2% for August, in line with expectations. The result had little effect on the market. Although the number is lower than July's 6.5%, Kwong said investors would not feel confident that China would relax inflation-fighting monetary tightening until price increases had fallen for several months to below 6%

Without good news on inflation, Chinese banks closed the day mixed. ABC (ACGBY) fell 2.8%. Auto plays surged due to encouraging sales numbers: Brilliance (BCAUY) put on 5.3%.

For the week, China shares were not able to completely recover from the sharp drop caused by disheartening U.S. employment numbers last Friday. The blue-chip Hang Seng sank 1.7%, 346 points.The index of Chinese companies lost 1.8%, 195 points.

The outlook for the rest of September is looking up, Kwong said. One reason is a rise in the number of IPOs in Hong Kong. And window dressing at the end of the third quarter might lift prices for some down-trodden stocks. Investors also are hopeful the U.S. Federal Reserve Board will launch new easy money policies.

But Kwong noted that U.S. economic and European debt woes won't go away. "Uncertainty is still there, and it is unlikely the market will have a strong upside," he said.

One company to watch is Yurun Food (1068). BOCOM International said in its daily report: "Based on our forecasts, Yurun is currently trading at 7.0x FY11 and 5.8x FY12 PE (vs. peers FY12E average PE: 12x). We believe the stock’s valuation is undemanding." End

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BIR.PR.A:CA Birchcliff Energy Ltd. cumulative redeemable 5-yea 24.88 -0.02 -0.08 1,000
TTI Tetra Technologies Inc. 5.84 -0.02 -0.34 38,522
TGE TGE n/a n/a n/a 0
NOA North American Energy Partners Inc. (no par) 3.50 -0.05 -1.41 1,145
KEG Key Energy Services Inc. n/a n/a n/a n/a
NR Newpark Resources Inc. 7.68 -0.08 -0.97 11,113
WG Willbros Group Inc. (DE) 2.72 -0.05 -1.81 34,132

Comments

Emerging Growth

CMX Gold & Silver Corp.

CMX Gold & Silver Corp is an exploration stage company. The Company is engaged in the acquisition, exploration and development of silver and copper/gold properties in the USA.

Private Markets

8tracks

Our mission is to be the best place for people who care about music to create and discover thoughtfully curated playlists. In essence, 8tracks is a platform for online mixtapes.

Cross Campus

With over 500 members and operating 80,000 square feet by summer 2016, Cross Campus is one of the country’s top ten shared, collaborative office or "coworking" operators in the US.…