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Sobering Economic Numbers Help End China Stocks Rally

For a welcomed change, good news from Europe pushed China stocks higher this week. Sobering economic figures from China, however, gave investors a reminder that the market’s extreme volatility

The inflation number of 6.1% was expected, but still a reminder that price increases are high even though inflation fell from 6.2% in August and from a three-year high of 6.5% in July.

Kwong told Equities in an email that inflation should continue to drop gradually through the end of the year due to the economic downturn in the U.S. and Europe and falling prices for commodities, especially pork.

But he gave Equities a long list of potential problems for the rest of the year, including a flare-up of the European debt crisis, a rise of non-performing loans in Chinese banks, local Mainland government debt levels and credit problems for Chinese small and medium-sized enterprises.

Stock prices are likely to continue to swing significantly as governments take measures to deal with these problems. According to Kwong: “Defensive stocks with higher dividend yield such as utilities plays and REITs are better choices ( in ) the recent volatile market.” End

DAILY FIX — China Stocks in Hong Kong End Six-day Rally

Hong Kong Blue Chips: -256, -1.4%, to 18,502, 10-14-11, Hang Seng Index

Chinese Stocks in Hong Kong: -218, -2.2% to 9,585, 10-14-11, HSCE Index

Shanghai Stocks: -0.3%, 2,431, 10-14-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: -2.0, to 369.8, 10-13-11, Bank of New York Mellon, ADR Index-China

Insight: Weak regional markets and S&P’s downgrade of Spain’s sovereign rating brought an end to Hong Kong’s sharp six-day rally. Chinese inflation figures came out in line with expectations at 6.1%, but Mainland bank stocks fell: Agricultural Bank of China (ACGBY) tumbled 5.3%. KGI Research

Quotable: “Particularly, RSI was still trading below the over-bought region of 70. Thus, the risk for a sharp decline in HSI is low.” Core Pacific Yamaichi. 10-13-11

Chinese Company to Watch: Shougang Fushan Resources (FSHYF) “Although SFR has rebounded 45% from recent low on October 4, its share price has still retreated 34% over the past three months. Yet we believe the correction is overdone in view of the stagnant coking coal price in China.” Guoco Capital. 10-13-11

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

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