'Muted Market' for China Stocks

Gene Linn  |

A pleasant surprise from China’s official PMI numbers failed to improve sagging market sentiment Monday.

The Hang Seng Index slipped 0.2% to 20,518, and the index of Chinese companies edged 0.1% higher to 10,652. Turnover was very weak.

With only three trading days this week because of holidays Wednesday and Friday, along with weak investor sentiment, the Hong Kong market is in “a muted mood,” according to Jackson Wong, vice president of sales at Tanrich Securities.

“Investors are still waiting for the market to find the short-term bottom,” he told Equities in an email. “So expect a light shortened trading week.”

The market received good news when China announced a March PMI of 53.1, well above forecasts of 50.5 and an indication of solid growth. The encouraging result eases some concern about slowing Chinese economic growth.

But the significance of the strong results was clouded somewhat because the HSBC final March figure was a much-lower 48.3.

In addition, uncertainty over the on-going investigation into corruption charges against two executives at Hong Kong property giant Sun Hung Kai (SUHJY) is hurting overall sentiment, according to Wong.

At the same time, accounting scandals at some privately owned Chinese companies put that sector under pressure.

As for possible winners in what shapes up as a lackluster week, Wong said encouraging official PMI numbers will help consumer stocks. “Expect some the department stores, retailers or even Macau stocks to perform a bit stronger.” End


Hong Kong Blue Chips: -33, -0.2%, to 20,523, 04-02-12, Hang Seng Index

Chinese Stocks in Hong Kong: +19, +0.2%, to 10,659, 04-02-12, HSCE Index

Shanghai Stocks: +0.5% to 2,263, 03-30-12, Closed for a holiday April 2 - 4.Shanghai Composite Index.

Chinese Stocks in the U.S.: +4.9, 401.8, 03-30-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong ended mixed as worries about corruption charges at Sun Hung Kai Properties (SUHJY) and Chinese private firm accounting scandals countered encouraging Chinese PMI figures. Turnover was paltry as investors stayed on the sidelines ahead of holidays on Wednesday and Friday.

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Quotable: "Investors are seen turning to the sideline next week, as the week will be shortened by the Ching Ming Festival and Good Friday holidays. The HSI should hold its support level near 20,200, as the US is expected to report a good payrolls report on Friday." BEA Securities. 3-30-12

Some market participants are hoping on significant easing of monetary policy from the PBOC (People's Bank of China) but the magnitude will likely by mild, in our opinion, given the risk of inflation." BOCOM International. 3-30-12

Chinese Company to Watch: Agricultural Bank of China (ACGBY) "Its low loan to deposit ratio which enables its net interest income growth. P/B of 1.2x." KGI Asia. 4-2-12

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

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