Strong 3Q Results Help China Stocks Extend Rally

Gene Linn |

chinaChina stocks’ upward momentum slowed a bit Tuesday after Monday’s big gains. But the market was still positive ahead of results from Europe’s Wednesday summit on the debt crisis and expected good profits from large Chinese companies.

Hong Kong’s Hang Seng Index rose 1.05% to 18,968 after surging 4.1% Monday. Turnover also declined. The index of Chinese stocks gained 1.5% to 9,861.

Although the market is encouraged Europe is seriously addressing its debt crisis, a number of analysts are pessimistic the EU can come up with the hoped-for “comprehensive” solution.

“There’s very small chance for an immediate solution,” Castor Pang, head of research at Core Pacific Yamaichi, told Equities. “The problem is how to divide responsibility for covering the debt.” If European banks have to take significant losses, he said, it could lead to major financial problems.

If European leaders manage to solve debt problems, the Hang Seng could break through the current strong resistance at 19,000 and approach 20,000, according to Pang. But if they fail the index could test 16,500.

For the short term, energy companies are flourishing, partly on prospects for higher U.S. growth, Pang said. He likes Chinese oil producer CNOOC (CEO) and Yanzhou Coal (YZC). End

DAILY FIX -- U.S. Gains Lead the Way

Hong Kong Blue Chips: +196, +1.05%, to 18,968, 10-25-11, Hang Seng Index

Chinese Stocks in Hong Kong: +143 +1.5% to 9,861, 10-25-11, HSCE Index

Shanghai Stocks: +1.7%, 2,410, 10-25-11, Shanghai Composite Index.

Chinese Stocks in the U.S.: +16.2, to 379.2, 10-21-11, Bank of New York Mellon, ADR Index-China

Insight: Strong performances by U.S. markets helped Hong Kong extend its rally. However, gains and turnover declined after Monday's big rise. the Agricultural Bank of China (ACGBY) surged 4.2% ahead of release of its third quarter results. KGI Research

Quotable: "We expect stock market to be volatile in coming two weeks and recommend selling into strength as the benchmark index is likely to close below 18,000 this month." Guoco Capital. 10-24-11

Chinese Company to Watch: CHINACOMSERVICE (CUCSY) "China will launch another trial of integration of fixed line, cable network, it would benefit China Communication Service. Dividend yield of over 4%." KGI Asia. 10-25-11

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 http://www.adrbnymellon.com/dr_country_profile.jsp?country=CN

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Companies

Symbol Name Price Change % Volume
MPG Metaldyne Performance Group Inc. 15.89 0.07 0.44 21,653

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