The short-term traders who dominate China stocks these days pushed prices sharply lower Monday, seizing on news Greece may not meet its debt reduction targets and on growing worry over bad loans at Chinese banks.
Hong Kong’s Hang Seng Index plunged 4.4% to 16,822, and the index of Chinese stocks tumbled 5.7% to 8,408 in moderately active trading.
Another short-term worry is that retail sales during this week’s Mainland holiday season are lackluster, according to Jackson Wong, investment manager at Tanrich Securities.
Hard-hit sectors were Chinese cement producers, retailers and Macau gambling plays. “They seemed to be the favorites for short term investors either on the long and short sides, depending on the news coming in,” Wong said.
A substantial rebound usually follows big sell-offs like Monday’s. But Wong said in this market every rally will probably trigger another big drop until there is a clear sign the European debt crisis will not spread. He is looking for upside resistance for the Hang Seng at 17,600, and initial support at 16,400. End
DAILY FIX — Chinese Banks Lead Sell-off
Hong Kong Blue Chips: -771, -4.4%, to 16,822, 10-03-11, Hang Seng Index
Chinese Stocks in Hong Kong: -509, -5.7% to 8,917, 10-03-11, HSCE Index
Shanghai Stocks: Closed for holiday 2,359, 10-03-11, Shanghai Composite Index.
Chinese Stocks in the U.S.: -9.4 to 349.9, 09-30-11, Bank of New York Mellon, ADR Index-China
Insight: A sharp drop on Wall Street Friday and growing worries over bad loans at Chinese banks helped trigger a sell-off of China stocks in Hong Kong. Chinese financials were hit hard: ABC (ACGBY) -8.1%. KGI Research
Quotable: “For the coming week, investors will pay attention to the release of key US economic data, including retail sales on Monday, ISM Non-Mfg Index on Wednesday and unemployment rate on Friday. Nevertheless, the equity market is unlikely to see a significant rebound in the short-term, as the overall sentiment remains weak and nobody is willing to buy stocks at this moment. We see the HSI may test the next support level of 17,000.” BEA Securities. 9-30-11
Chinese Company to Watch: “Lenovo agreed to form a joint venture with Compal Electronics (2324.TT) to make notebook computers in China, an unusual tie-up between a major brand and a contract manufacturers. Lenovo hopes it will help move up its global PC ranks.” BEA Securities. 9-30-11
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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