Hong Kong's blue-chip Hang Seng Index, which features numerous big Chinese companies, rose sharply in early trading in line with an overnight increase on Wall Street. But the index fell back when it hit strong resistance at 20,200, according to Jackson Wong, vice president of equity sales at Tanrich Securities.
Stability, Wong told Equities, is technically near the mid-point of last week's precipitous drop from 21,000 to 19,300, at about 19,800.
The Hang Seng ended down 0.7%, 135 points, at 19,913. The index of Chinese companies sank 0.4%, 45 points, to 10,500. The Shanghai Composite Index fell 0.7% to 2.499.
Trading in Hong Kong was very light as the market waited to hear President Barack Obama's speech on job creation later today, Hong Kong time, and to find out China's latest inflation figures on Friday.
Wong said he expects positive results from both events. Obama's speech will likely be a step forward in solving the major U.S. unemployment problem, he said. And he thinks China's August inflation will come in at 6.2%, below the consensus estimate of 6.3% and the July figure o 6.5%.
A drop in inflation will assure the market that China will not continue with interest rate hikes and other money tightening measures. Wong said. "This will be good for banks, industrials and real estate companies, which have been hit hard recently," he said.
On Thursday, China Rareearth (769 in Hong Kong) soared 13.4% following a report that China would consolidate the rare earth industry.
Guoco Capital said one company to watch is Citic Pacific (267 in Hong Kong; OTC: CTPCY.PK):. "According to Chinese media, China may take favorable measures to support research and development of new material industry, including special steel. CITIC Pacific Special Steel, being the largest special steel manufacturer in China, is likely to benefit from the above measures in our view." End
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