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Poor HSBC Results Stall China Stocks Rally

China stocks’ rally continued to stall Tuesday due to troubling news from Hong Kong market giant HSBC (HBC).The Hang Seng Index in Hong Kong slipped 0.3% to 21,944, and the index of Chinese

China stocks’ rally continued to stall Tuesday due to troubling news from Hong Kong market giant HSBC (HBC).

The Hang Seng Index in Hong Kong slipped 0.3% to 21,944, and the index of Chinese companies edged 0.3% lower to 10,734.

Turnover was modest as some investors stayed on the sidelines ahead of the U.S. election November 6. Some analysts think the election results won’t have much effect on China stocks, but they are split about whether Obama or Romney would be best for the market. Peter So, managing director at CCB International, said Romney might be better because he is more friendly to corporations. However, Francis Lun, managing director at Lyncean Securities, thinks there may be a correction if Romney is elected because he has threatened to attack what he calls China’s currency manipulation.

For now, the hot money that powered last week’s late surge in a two-month rally is still coming into Hong Kong, according to Lun. But discouraging third quarter results and the possibility of criminal charges of money laundering at Hang Seng heavyweight HSBC dragged the market down.

“It was overbought anyway,” Lun told Equities, adding that the downturn would be a good time to pick up China stocks.

He likes Chinese properties, which he says have attractive valuations. “The Chinese government has tried for three years to suppress property prices, but the companies have survived well,” Lun said. “Now is their time to rebound.”

Luns favorites are two of the big boys, China Overseas Land (688, HK) and China Resources Land (CRBJY).


Is the “China Story” over? Economic problems and political change threaten the fast growth in China stocks that has entranced investors for years. See tomorrow’s column for two different views. And Thursday we’ll check out the thoughts of Barings fund manager William Fong. End



Hong Kong Blue Chips: -62, -0.3, to 21,944, 11-06-12, Hang Seng Index

Chinese Stocks in Hong Kong: -34, -0.3%, to 10,734, 11-06-12, HSCE Index

Shanghai Stocks: -8, -0.4% to 2,106, 11-06-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -3.0, 387.4, 11-05-12, Bank of New York Mellon, ADR Index-China – closed by storm

Insight: Reflecting caution ahead of the U.S. election and worry over poor third quarter results from HSBC (HBC), Hong Kong blue chips fell as much as 170 points but later trimmed losses. HSBC fell 1.4%. KGI Research

Quotable: “The total market short-selling turnover ratio remained much the same at 9.6%. This showed that investors were not eager to sell short the market even when HSI was trading at the current high. In that case, HK market may see more upside potential.” Core Pacific Yamaichi. 11-6-12

Chinese Company to Watch: “China Railway Construction Corporation (CWYCY) announced encouraging 3Q12 results with net profit climbed 41% to RMB1,904.3m, driven by a 88.3% YoY surge in newly signed contract to RMB 181.8bn as a result of the recovery of the domestic infrastructure market and rapid increase in overseas contracts. We believe rail construction players like CRCC will be one of the key beneficiaries of the investment boost.” Tanrich Securities. 11-6-12

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

As the markets put the debt ceiling debacle in the rearview mirror, more than a few issues remain open.