The frightening expansion of the Japanese nuclear crisis drove Hong Kong sharply lower along with other global markets. Hong Kong stocks are battered enough that they could rebound next week, according to KGI chief operating officer Ben Kwong, but there are too many uncertainties for the rise to gain momentum.
The Hong Kong blue chip Hang Seng Index which includes numerous big Chinese companies, finished the week down 4.5%, 950 points, to 22,300. The loss came in two days of panic-driven trading when the nuclear crisis mounted. The index of Chinese companies fell 2.5%, 324 points, to 12,428.
In addition to the obvious damage done to the market by the Japanese crisis, Kwong told the Weekly Report, strengthening of the Japanese yen hurt Hong Kong stocks. Funds flowed into the robust yen and away from commodities and equities, including those in Hong Kong. Pushed into the background by the Japanese crisis, rising oil prices due to unrest in North Africa and the Middle East also weighed on stocks.
Commodity producers were particularly weak, partly due to the flight of funds into the yen. Among the few winners were alternative energy plays such as Goldwind (2208), a maker of wind energy equipment.
By the end of the week, Hong Kong blue chips seemed to find support at 22,000, near the 250-day moving average, Kwong said. They could move higher next week, but probably not much. “Hong Kong is oversold, so there is bound to be some rebound,” Kwong said, “but momentum remains weak.”Friday’s trading looked like a preview of what Kwong expects, as blue chips opened substantially higher but lost most of their gains in the afternoon. He sees resistance at 22,600. End
Hong Kong Blue Chips: +16, +0.1%, to 22,300, 03-18-11, Heng Seng Index
Chinese Stocks in Hong Kong: -30, -0.2% to 12,428, 03-18-11, HSCE Index
Chinese Stocks in the U.S.: -11.9 to 417.8, 03-17-11, Bank of New York Mellon, ADR Index-China
Insight: Hong Kong blue chips opened higher after the G7 and central banks intervened to push the value of the surging Japanese yen lower. This at least temporarily slowed the flow of investors' funds from commodities and equities to the yen. However, gains narrowed sharply in the afternoon in strong turnover. KGI Research
Quotable: "We expect the Hang Seng Index to test 22,000 in the near term given the Japan’s nuclear crisis." Guoco Capital. 3-17=2011
Companies to Watch: After the Japanese disaster: "Winners include ABC (1288 HK, Neutral), CQRC Bank (3618 HK, Not Rated), ICBC (1398 HK, Outperform) and CCB (939 HK, Not Rated),..., Yanzhou Coal (1171 HK, Outperform) and Sinopec Corp (386 HK, Not Rated)." CCB. 3-15-2011
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