China stocks bulls likely won’t do much pre-holiday celebrating this week, but they probably won’t retreat a lot either.
Buyers could be excused for taking a rest after a 23.7% surge in the Hang Seng Index in Hong Kong since September 5, two days before a European bond-purchasing spree set off a powerful rally. The market has begun to look “tired,” according to Jackson Wong, vice president of sales at Tanrich Securities. And investors may turn cautious ahead of the Chinese New Year holiday next week when markets In China will shut down the whole week and Hong Kong will close Monday through Wednesday.
This Monday the Hang Seng slipped 0.2% to 23, 685, and the index of Chinese companies slumped 0.5% to 12,157.
For now, Wong told Equities in an email, strong performances in U.S. and Chinese markets are keeping the Hang Seng above the 10-day moving average that it has ridden since early December.
“Investors are rather short term now and ready to take profit when there are chances,” he said. “But they also worry about missing a big break out upwards if the correction doesn’t happen, that’s why the choppy trades at high level.”
Chinese financial stocks should continue their strong run based on rising A-shares in the Mainland, Wong said, and infrastructure plays may extend their modest rebound. End
Hong Kong Blue Chips: -37, -0.2%, to 23,685, 2-4-13, Hang Seng Index
Chinese Stocks in Hong Kong: -58, -0.5%, to 12,157, 2-4-13, HSCE Index
Shanghai Stocks: +9, +0.4% to 2,428, 2-4-13, Shanghai Composite Index.
Chinese Stocks in the U.S.: +3.0, 403.3, 4-1-13, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong blue chips opened higher after strong gains on Wall Street Friday, but fell back to negative territory after hitting resistance at 24,000, Chinese insurers slumped despite a continued rally in Mainland A-shares: Ping An (PNGAY) -2.8%. KGI Research
Quotable: “With Lunar New Year Holidays coming closer, investors will likely take profits following a rally of around 4,500 points since September 2012. Therefore, we expect a mild correction for the market in the coming week, and the benchmark index may test 23,000.” BEA Secutities. 2-1-13
Chinese Company to Watch: XIAO NAN GUO (03666, HK) “Major restaurant chain in China which will benefit from consumer sentiment rebound. Current price below listing price of HK$1.50.” KGI Asia. 2-4-13
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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