Sagging A-shares Pull Hong Kong Down

Gene Linn |

Hong Kong stocks rallyChina stocks got some temporary relief Monday from bad news on the European debt front, but in the end it didn’t help. A steep drop in Chinese A-shares helped reverse early gains in Hong Kong in very weak, cautious trading.

The Heng Seng Index in Hong Kong fell 0.5% to fall further below the 19,000 psychological level to 18,897. The index of Chinese companies plunged 1.5% to 9,364.

The euro-debt theme will likely reassert itself during the rest of the week, according to Jackson Wong, vice president of sales at Tanrich Securities. The Euro Summit scheduled at the end of the week is a particular focus.

“Investors don't expect a huge agreement coming out from it, but a softened Germany stance on Euro bonds, common debt, or (things) like that would help,” Wong told Equities in an email.

There might be some good news coming early next week, he said, when Hong Kong celebrates the 15th anniversary of the return of sovereignty to China. The Chinese government usually announces some pro-Hong Kong economic policies to mark the anniversary, and Wong said this could help local financials like BOC Hong Kong (BHKLY).

Other possible gainers this week include Chinese properties, which might rebound from last week’s sharp sell-off, according to Wong.

DAILY FIX

Hong Kong Blue Chips: -98, -0.5%, to 18,897, 06-25-12, Hang Seng Index

Chinese Stocks in Hong Kong: -140, -1.5%, to 9,364, 06-25-12, HSCE Index

Shanghai Stocks: -36, -1.6% to 2,225, 06-25-12, Shanghai Composite Index.

Chinese Stocks in the U.S.: n/a, 358.4, 06-22-12, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong stocks rose in the morning in line with gains on Wall Street Friday, but weakness in Mainland and Asian markets led to losses in the afternoon. Turnover was very low, reflecting investor caution. The steep decline of Chinese A-shares hurt Chinese brokerages: Citic Securities (6030.HK) -2.6%. KGI Research

Quotable: "Downside to the local bourse is seen limited next week, as window dressing may emerge during the final week of the first half of the year. Hope for supportive policies (‘gifts from the Chinese government’) is also likely to lend support to the market, amid the visit of President Hu in the territory for the 15th anniversary of the HKSAR establishment." BEA Securities. 6-22-12

Chinese Company to Watch: "Lenovo (LNVGY) - BUY on weakness. Lenovo’s share price lost 10.5% in past two trading days after a Taiwanese media reported that the company cut shipment guidance from 20-25% yoy to 15% yoy. Comment: Lenovo’s management has already clarified the issue in two fronts." Guoco Capital. 6-25-12

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

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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