Main reference: Story in Changjiang Commercial Times
CHALK IT UP to chutzpah.
Here are a few arguments for why China’s long-suffering A-shares might be on the verge of a historic bull run.
Part of the confidence comes from a more chipper outlook for China’s all-important manufacturing sector.
The go-to litmus test for factory vitality in the PRC is the PMI, which HSBC just reported stood at 51.5 for the month of December, up from 50.5 the previous month and setting the highest mark since May of 2011.
The UK-based research house said that December’s PMI – the fourth consecutive monthly rise – benefitted from the growth of a whole range of so-called “new industries” as well as the final stage of destocking across a wide swath of sectors.
Yingda Securities Chief Li Daxiao said the higher-than-expected PMI for the final month of 2012 is an unequivocal boost to China’s A-share markets and he sees the possibility of a historic bull run in the making for the PRC’s domestic capital markets.
Post New Year Shakeup
Hong Bo of Guodu Securities said securities firms had recently signed up a growing number of funds to throw their hats into the financial sector, specifically banking and insurance shares, on assumptions of more upbeat earnings performance going forward.
Not only has a better showing by financial institutions of late helped spur on the December A-share market rally, but value investors are getting into the ring as more upside is anticipated for these large-cap firms and their heavy weightings on the benchmark Shanghai Composite Index.
The market finished 2012 strong, and began the pre-New Year one day holiday period on an upswing, with the Index up 5.1% for the final five trading days of the calendar year.
On Wednesday, following the one-day January 1 break, the Index added another 1.61% to finish the day at 2,269, getting the year 2013 off to a flying start.
Hong added that blue chips are still undervalued and underappreciated, overall, and their return to favor with investors will be the main storyline of any near-term recovery in 2013.
Financial sector and real estate shares in particular are likely to do most of the heavy lifting in the expected early-2013 A-share rally, with 2,300 to be the next upside challenge for the benchmark Index.
QianKun Investment believes that the Shanghai Composite still has a lot of ground to make up for after the bearish 2012 period, and the Index is more than up to the task.
The research house said that the first week of the new year will likely see some reorganization as not all sectors and individual counters deserve to be part of the late-2012 run.
It recommended that investors patiently await the anticipated near-term winnowing process to play itself out before jumping headfirst back into the A-share markets.
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