Getting sector specific

18 Jan

In China, like most other markets, investors will have to focus more on individual companies and sectors rather than riding the general upward trend enjoyed in 2009.  The market has lost 1.7% this year on concerns that lending might be tightened to avoid asset bubbles.  This makes China the worst performing Asian market in 2010.  Nonetheless there are still opportunities, as today’s trading highlighted: for every stock that lost ground in China during today’s trading, about 2 were up.

Air and rail fared well today.  Air China, China’s largest international carrier, gained 5% reaching 11.13 Yuan, its highest level since June of 2008 on news that it may have swung to a profit in 2009.  Railways inched up on the prospect of improving orders , including Daqin Railway, the operator of China’s largest coal transport network.

However, without a macro catalyst it looks like the market is set to consolidate at current levels.  The upshot is that it will be more important to pick those sectors and companies most likely to benefit in the coming environment which is likely to witness the continuing tightrope of inflation (BNP forecast it could reach 8% this year) and the gentle tightening of credit (as per the increase in banks reserve ratios mandated last week).


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