Time to Buy Battered Chinese Stocks?

Gene Linn  |

Battered China stocks on Friday continued their three-week descent from a 21-month high, but it may be time to remember the old axiom: buy low.

The Hang Sent Index in Hong Kong slid 0.5% to 22,782, and the index of Chinese companies, H shares, dropped 1.0% to 11,317. For the week, the Hang Seng tumbled 2.8% and H shares 4.4%. One body blow this week was emergence of concern the U.S. Federal Reserve Board would end of curtail its easy money policy sooner than expected. The Hang Seng has fallen 4.4% after soaring 24.4% between September 5 and January 30.

But some analysts in Hong Kong are unconcerned about the consolidation.

Ben Kwong, chief operating officer at KGI Asia, told Equities in an email that “since the major index has already returned to last yearend level, together with anticipated recovery of China’s economy, we believe that the current retreat would be a good entry opportunity….”

He favors sectors likely to be aided by new policies expected to be launched by the National People’s Congress, China’s national legislature, in March. The policies include steps to stimulate urbanization, growth of renewable energy and internationalization of the national currency.

Renewables have already seen significant buying, so Kwong likes urbanization plays like cement producers, which have been beaten down recently. End


Hong Kong Blue Chips: -124, -0.5%, to 22,782, 2-22-13, Hang Seng Index

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Chinese Stocks in Hong Kong: -109, -1.0%, to 11,317, 2-22-13, HSCE Index

Shanghai Stocks: -12, -0.5%, to 2,314, 2-22-13, Shanghai Composite Index.

Chinese Stocks in the U.S.: -2.9, 378.2, 2-20-13, Bank of New York Mellon, ADR Index-China

Insight: Continued losses in U.S. and Chinese markets triggered another drop in Hong Kong. However, early losses of more than 200 points in blue chips narrowed by the end of the day in thin trading. KGI Research

Quotable: "We are bullish about the stock market in the medium term and recommend investors to overweight Chinese banks and property developers which are likely to deliver satisfactory earnings results in March." Guoco Capital. 2-22-13

Chinese Company to Watch: "According to the newest guidance from NDRC, as a continuation of home appliance benefit program to rural area(s), NDRC expanded list of appliances to be listed under this program.... Hisense (921, HK) is a leading home appliance producer and announced its 2012 results expectation last month that the company expects the profits to be (RMB) 681-794 million, an over 200% gain yoy. We expect Hisense to be a major beneficiary of this new guidance." Tanrich Securities. 2-22-13

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 necessarily 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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