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Risk Fears Retreat; China Stocks Advance

Investors bought China stocks in Hong Kong on Friday with an enthusiasm not seen for months as fears over the risk of debt crises in Europe and the U.S. retreated.A 2.1% surge Friday enabled the

Investors bought China stocks in Hong Kong on Friday with an enthusiasm not seen for months as fears over the risk of debt crises in Europe and the U.S. retreated.

A 2.1% surge Friday enabled the blue-chip Hang Seng Index to rise 2.6% for the week, up 570 points to 22,445. The index of Chinese companies jumped 2.2% Friday and closed the week up 2.7%, 333 points to 12,599. Turnover also rose Friday, but was still well below what you would see in a strong bull market.

Ben Kwong, chief operating officer at KGI Asia, had noted investors’ increased appetite for risk in this column yesterday, even buying interest was modest. The reason for the turnaround was emergence of hope for a settlement of the U.S. struggle to raise its debt ceiling to avoid default.

On Friday Europe approved a bailout plan for Greece. Castor Pang, head of research at Core Pacific Yamaichi, told Equities, “Then investors’ risk-averse attitude reversed, and money flowed back into the stock market.”

It’s hard to tell how far this new rally can go, Pang said, but the market is out of the trough of the recent correction and there’s a decent chance gains will continue. The coming week will have no major corporate results or release of important Chinese economic statistics. “Next week will be fairly quiet, which will help stocks rebound,” Pang said.

Investors’ growing willingness to take on risks in the stock market may help Chinese banks, he said. This sector has staggered recently under the weight of concern over fund-raising and of big sales of stock by strategic shareholders. Now, Pang said, “The valuations of most Chinese banks is too low, and the stocks are quite attractive.”

Pang likes ICBC (1398 in Hong Kong) because Core Pacific Yamaichi research indicates its chances of launching a rights issue to raise funds are low.  End

DAILY FIX —  Bailout for Greece Lifts Stocks

Hong Kong Blue Chips: +458, +2.1%, to 22,445, 07-22-11, Hang Seng Index

Chinese Stocks in Hong Kong: +277, +2.2 to 12,599, 07-22-11, HSCE Index

Shanghai Stocks: +0.2%, 2,771, 07-22-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: +0.7 to 440.6, 07-21-11, Bank of New York Mellon, ADR Index-China

Insight: Agreement on a bailout plan to help Greece solve its debt crisis boosted the Hong Kong market. KGI Research

Quotable: “There will be a high probability for HSI to have a break-through since the US and Euro market performed quite well last night. We expect HSI will trade at the range from 21,900 to 22,300 Today.” Core Pacific Yamaichi. 7-22-2011

Chinese Companies to Watch: China Insurance Sector. “Although we expect strong earnings for casualty insurers, the companies may report market beating earnings on lowerthan-expected combined ratio. “Outperform” rating maintained for the sector. Ping An is our long-term pick; CPIC is a good buy in the short term.” BOCOM International. 7-22-2011

Brokerages and analysts cited 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

The astronomer Carl Sagan said, “It was easy to predict mass car ownership but hard to predict Walmart.”