DeMark Sees Shanghai Index Resuming Jump: China Overnight
The Shanghai Composite Index will rebound this week to resume a rally from a December low that will leave it 48 percent higher within the next six months, according Tom DeMark, the founder of Market Studies LLC.
We “are identifying a low-risk entry zone just beneath today’s low of the Shanghai Composite which should be a bottom prior to the resumption of the advance,” DeMark, who correctly predicted a retreat in the Chinese domestic stock gauge last month, said by e-mail yesterday.
The Shanghai Composite, which closed at 2,257.43 yesterday, will resume the rally once it falls below 2,232 today or tomorrow, DeMark said. The Paradise Valley, Arizona-based creator of indicators to show turning points in securities said Feb. 6 that the measure would decline about 8 percent to within a range of 2,230 to 2,250 before rebounding. The index was down 8 percent from when he made the call to the March 18 close of 2,240.02.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese stocks in the U.S. slid 0.8 percent to a four-month low of 90.40 in New York yesterday, as China Mobile Ltd. (941) led a retreat among phone operators. Solar panel maker Suntech Power Holdings Co. extended declines to a second day after defaulting on a bond payment.
China Mobile, the world’s largest phone company by users, said last week that it would boost capital spending by 49 percent this year. The Hong Kong-based company’s American depositary receipts sank 0.9 percent to $52.20, the lowest level since June yesterday. China Telecom Corp. (CHA) slipped the most in a month, declining 2.3 percent to $50.33 in New York.
“People in general have concerns about the carriers’ increasing investments this year on their third-generation or fourth-generation networks,” Jun Zhang, an analyst at Wedge Partners Corp., said by phone from San Jose, California. “Internet companies are adding pressure on operators.”
The cost of building a trial 4G network will be shifted from China Mobile’s state-owned parent, China Mobile Communications Corp., to the listed company, boosting capital spending to 190.2 billion yuan ($30.6 billion) this year, from 127.4 billion yuan last year, it said March 14.
China Unicom (Hong Kong) Ltd. (CHU) sank 1.9 percent to $13.44 in U.S. trading, the lowest close since July. ADRs of the Hong Kong-based company, each representing 10 underlying shares, traded 0.1 percent below its Hong Kong stock, from a 1.3 percent premium March 18.
The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., slid 1.2 percent to $36.34 in New York, the lowest close since Nov. 20. The Standard & Poor’s 500 Index (SPX) slipped 0.2 percent to 1,548.34.
DeMark, who has spent more than 40 years developing market indicators, said Dec. 4 that the Shanghai Composite would climb as much as 48 percent within nine months. That advance will be achieved before September, he said by e-mail yesterday. The index, which added 0.8 percent yesterday, has jumped 14 percent from the Dec. 4 close.
DeMark is chief executive officer of Market Studies, which makes money by charging traders for access to its indicators. The company also sells subscriptions to the indicators on the Bloomberg Professional service for $500 a month. Bloomberg LP, the parent of Bloomberg News, takes a percentage. DeMark has a similar arrangement with Thomson Reuters Corp. DeMark won’t say how many subscribers he has.
Suntech, the world’s largest maker of panels, tumbled 8.6 percent to 59 cents in New York yesterday, a record low. The company, based in Wuxi, China, said March 18 that it received a notice of default from the trustee administering the convertible bonds, which matured March 15.
The fact Suntech was allowed to default signals that the government and China Development Bank Corp., which bankrolled the industry, are reluctant to continue funding the sector’s expansion, according to Angelo Zino, an analyst with Standard & Poor’s.
China, forecast to become the largest solar-power market globally this year, may abolish subsidies for some of the largest alternative energy projects and target aid for smaller ones, Meng Xiangan, vice chairman of the China Renewable Energy Society, which acts as a conduit between government and industry in Beijing, said last week.
Ambow Education Holding Ltd. (AMBO) slid 2.3 percent to $1.27 in New York. The Beijing-based tutoring company said yesterday that it appointed Justin Chen, a counsel at PacGate Law Group, as the chairman of its audit committee, which will continue an internal investigation announced in July into allegations by a former employee of financial impropriety and wrongful conduct in connection with the purchase of a training school.
The tutoring company surged 53 percent March 15 after saying Baring Private Equity Asia Ltd. offered to take it private for $1.46 per ADR. The company received resignation letters from three board members March 18. Two of the directors cited disagreements with the company’s management as reasons for their departure.
The Hang Seng China Enterprises Index (HSCEI) slipped 0.5 percent to 10,740.05 yesterday, extending a three-day slump.
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