Wall Street Exuberance Boosts China Stocks -- Temporarily

Gene Linn  |

Exuberance – rational or not – spread to China stocks Wednesday from Wall Street after the Dow’s record-high close. But the next few months might not be so happy for the Hong Kong and China market, according to one analyst.

The Hang Seng Index jumped 1.0% to 22,778, and the index of Chinese companies in Hong Kong surged 1.7% to 11,359.

But the gains did not mark the restart of a strong rally that ended abruptly in February, said Steven Leung, director of institutional sales at UOB Kay Hian.

“Technically the mood is not good,” he told Equities. “Some liquidity is leaving Hong Kong as profit-taking.”

For the short term, Leung doesn’t see much news coming in the next few days from China’s on-going National People’s Congress capable of boosting overall stock prices.
“I think 22,500 provides some support, but if the market doesn’t break 23,000 or 23,100 there will be technical problems,” he said.

With corporate results season underway, the main winners will be companies with good profits, mainly Chinese banks, according to Leung. He also likes companies that benefit from government policies. They include renewable energy firm Goldwind (2208, HK), natural gas producer Kunlun Energy (KLYCY) and shale gas company Honghua Group (196, HK).

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And after the Congress ends and the current corporate results season finishes, Leung sees little hope for another rally. “In the second quarter we’ll still worry about liquidity,” he said. End


Hong Kong Blue Chips: +217, +1.0%, to 22,778, 3-6-13, Hang Seng Index

Chinese Stocks in Hong Kong: +190, +1.7%, to 11,359, 3-6-13, HSCE Index

Shanghai Stocks: +21, +0.9%, to 2,347, 3-6-13, Shanghai Composite Index.

Chinese Stocks in the U.S.: +3.0, 378.2, 3-5-13, Bank of New York Mellon, ADR Index-China

Insight: Hong Kong blue chips opened 190 points higher on the strength of Wall Street's record-high close and managed to slightly expand gains as Mainland markets continued to rebound. Chinese banks and properties bounced back from sharp losses: China Overseas Land (CAOVY) +3.3%, Minsheng Bank (CMAKY) +2.8%. KGI Research

Quotable: "We expect the Hang Seng Index to end higher in March and believe market correction in near term presents a good buying opportunity." Guoco Capital. 3-6-13

Chinese Company to Watch: "JIANGXI COPPER (JIXAY) Mainland infrastructure construction increase which will boost copper demand. Prospective P/E of 8.8x." KGI Asia. 3-6-13

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

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