Prospect of Monetary Easing in U.S., Europe Aids China Stocks

Gene Linn  |

China stocks rebounded Thursday – barely – with a hopes of little help from some rich friends.

After sinking 3.9% in the first three days of the week, Hong Kong’s blue-chip Hang Seng Index edged 0.08% higher to 18,893. The index of Chinese companies slipped 0.1% to 9,211.

Fears of a deepening European debt crisis triggered the headlong retreat early this week, and the struggles of U.S. and Chinese economies also hurt stocks. Things got so bad that investors began to see hope of a rescue from big central banks.

“There’s talk the Fed will do something to stimulate the economy, maybe start QE3 (a third round of “quantitative easing),” said Francis Lun, managing director at Lycean Securities. “And in Europe the central bank may also begin printing money. Spain and Italy need vast amounts of money to stay afloat.”

But the prospect of a new flow of cash barely is counteracted by sinking corporate profits following a drop in China’s economic growth in the first half of the year, he said.

If the U.S. and Europe crank up the money printing presses, Lun said, Chinese banks could benefit. He likes China Merchants Bank (CIHKY) and Minsheng Bank (CMAKY). End

DAILY FIX

Hong Kong Blue Chips: +15, +0.08%, to 18,893, 07-26-12, Hang Seng Index

Chinese Stocks in Hong Kong: -8, -0.1%, to 9,211, 07-26-12, HSCE Index

Shanghai Stocks: -10, -0.5% to 2,126, 07-26-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: -1.0, 357.6, 07-25-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips opened a thin seven points higher after heavy losses earlier in the week, but further gains were blunted by weakness on Mainland markets. However, China announced solid growth in telecom business, helping stocks in that sector maintain their rally. KGI Research

Quotable: "We continue to recommend a defensive stance, and investors should tread carefully in any fleeting technical rebounds." BOCOM International. 7-26-12

Chinese Company to Watch: Macau gaming sector. "SJM (0880, HK) has net cash of HK$20bn which enables the Group to maintain handsome dividend policy which will be most defensive company of the sector." KGI Research. 7-26-2012

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

Stock price data is provided by IEX Cloud on a 15-minute delayed basis. Chart price data is provided by TradingView on a 15-minute delayed basis.

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