The mainland and Hong Kong stock markets have been moving sideways recently, prompting investors to switch from heavyweight stocks into sectors with potential to attract government support.
This will be a short-term trend, which means investors should make short-term trades instead of long-term investments.
And stocks may post divergent performances in the earnings season as well.
Several leading banks have focused on the agenda of the “two sessions” in Beijing — the annual meetings of the national legislature and the country’s top political advisory body.
Statistics from the past decade show equities usually rally before the meetings but in many cases give up the gains during them.
The ongoing crackdown on corruption has weighed on Macau’s gaming revenues. However, some gaming stocks rebounded on Tuesday.
That followed the news that the city’s gaming revenues dropped by 48.6 percent in February from a year earlier, beating the market expectation of a 53.5 percent slide. Gaming revenues in the year’s first two months fell about 35 percent, but revenues during the last five days of February showed some improvement.
The Macau gaming sector has been fairly transparent. And the whole sector surprisingly rebounded despite repeated negative comments from leading banks.
The corruption crackdown has already become the new norm in China, and investors should be patient and wait until valuations reach attractive levels.
The Ministry of Finance, the Ministry of Civil Affairs and the General Administration of Sport unveiled a joint circular saying they would step up their efforts in overseeing the lottery industry and suspend online lottery sales.
The stock price of V1 Group Ltd. (00082.HK) slumped 11.3 percent after it resumed trading on Tuesday, following news that the company will halt its online and mobile lottery business. REXLot Holdings Ltd. (00555.HK) also touched a new low.
Tightening supervision over lotteries will benefit such firms in the long term. As some have pointed out, there are frauds in the lottery market, and Beijing is keen to develop sports lotteries, so the crackdown will have significant implications for the industry.
For the moment, investors should stay away from lottery stocks.
Retail investors were speculating on government policy-driven stocks before the “two sessions”. A hard-hitting documentary on air pollution produced by former state TV reporter Chai Jing has boosted the environmental protection and new-energy sector.
Hanergy Thin Film Power Group Ltd. (00566.HK), a firm in the solar power sector, has soared a further 10.5 percent, boosting its market capitalization to HK$218.6 billion (US$28.2 billion), which exceeds that of many blue chips.
GCL-Poly Energy Holdings Ltd. (03800.HK) rallied 4.6 percent after Deutsche Bank said it expects its annual earnings to rise 20 percent.
Comtec Solar Systems Group Ltd. (00712.HK), Solargiga Energy Holdings Ltd. (00757.HK) and Xinyi Solar Holdings Ltd. (00968.HK) rose between 3.4 percent and 8 percent.
And the market hype regarding new energy has also powered nuclear stocks.
China Nuclear Industry 23 International Corp. Ltd. (00611.HK), CNNC International Ltd. (02302.HK), CGN Meiya Power Holdings Co. Ltd. (01811.HK), CGN Power Co. Ltd. (01811.HK), Dongfang Electric Corp. Ltd. (01072.HK) and Shanghai Electric Group Co. Ltd. (2727.HK) have all shown signs of market speculation recently.
However, most major local investors are staying on the sidelines while retail investors in the mainland have been chasing these policy-driven stocks.
This article appeared in the Hong Kong Economic Journal on March 4.
Translation by Julie Zhu
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