Weekly Report: Bank on It; Hong Kong Breaks Through

Gene Linn  |

Good news from Japan and China fueled a healthy rebound in Hong Kong this week, Belle Liang, head of research at Core Pacific Yamaichi, told the Weekly Report. A late surge by Chinese banks helped blue chips break above the well-tested 23,000 level.

The blue chip Hang Sent Index rose 3.8%, 859 points, this week to 23,159. The index of Chinese stocks soared 4.4%, 548 points, to 12,976.

News from Japan about an easing of the nuclear crisis was good mainly because last week’s reports of possible melt downs were so scary, Liang said. Stabilization of the Japanese yen helped Hong Kong stocks because the soaring yen after the earthquake sucked investment from commodities and equities. “Investors did some bargain-hunting given that valuations were really low,” Liang said.

China news wasn’t all good. Authorities raised reserve requirements for banks again to fight inflation, but Liang said the rise was expected. On a positive note, the Bank of China reported strong results on Friday. Chinese properties bounced back because the market gained confidence that tightening measures in Beijing, Shanghai and other major cities would not hurt property developers very much.

“The focus of the market this week was Chinese banks and properties,” Liang said.

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Next week Mainland banks should again be strong. “Other big banks will report and people think results will be stronger than forecast (earlier),” Liang said. But she said the market is still concerned about further Chinese economic tightening to fight inflation, especially because March inflation figures are expected to rise. Liang said: “After the strong rebound this week, next week the market should consolidate.”  End


Hong Kong Blue Chips: +243, +1.1%, to 23,159, 03-25-11, Heng Seng Index

Chinese Stocks in Hong Kong: +144, +1.1% to 12,976, 03-25-11, HSCE Index

Chinese Stocks in the U.S.: 3.2 to 437.0, 03-23-11, Bank of New York Mellon, ADR Index-China

Insight: After several attempts earlier in the week to go over 23,000, Hong Kong blue chips burst through that milestone, helped by better-than-expected results from the Bank of China (3985), which rose 2.6%. Turnover also increased as other Chinese banks gained on expectations they would report strong results next week. KGI Research

Quotable: "Initial support will be last week low of 22,123, and second support is 250DMA (22,061). For the resistance, if Hang Seng regained the 23,000 level and stayed above, it will further test 50DMA(23,384)." KGI Research

Company to Watch: "ABC is the cheapest and least leveraged banking franchise in China. BoCom and CMB are the most expensive and most leveraged....BUY ICBC/ABC and SELL BoCom/CMB." CCB International. 3-21-2011

Revenue increased by 274% yoy to $18.47bn mainly due to strong growth in the solar business and full year contribution from the power business.... We believe GCL-Poly Energy offers good value to long-term investors given its robust earnings growth momentum in the coming years." Guoco Daoheng Capital. 3-22-2011

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