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Profit Taking May Dent China Shares

1/20/2013 7:50 PM ET

The China stock market on Friday wrote a finish to the two-day slide in which it had given away more than 40 points or 1.9 percent. The Shanghai Composite Index closed just above the 2,315-point plateau, and now investors are bracing for more volatility when the market opens on Monday.

The global forecast for the Asian markets is mixed, thanks to a batch of conflicting global catalysts. Support may be gleaned from positive news about the impending showdown over the U.S. debt limit, but consumer sentiment in the U.S. unexpectedly deteriorated in January. In Europe, the Bank of Italy slashed its economic forecast for this year to project a worse contraction than was expected. And on the earnings front, the results were mixed. The European and U.S. markets were mixed on Friday, and the Asian markets are expected to open in similar fashion.

The SCI closed sharply higher on Friday with broadly based gains following upbeat data, although the property stocks and resource plays were particularly solid.

For the day, the index surged 32.16 points or 1.41 percent to finish at 2,317.07 after trading between 2,285.97 and 2,324.51. The Shenzhen Composite Index spiked 1.5 percent to end at 935.70.

Among the gainers, Shahe Industrials surged by the 10 percent daily limit, while Baoan Hongjin Real Estate advanced 6.3 percent, China Merchants Property Development climbed 5.9 percent, China Shenhua Energy jumped 1.7 percent, Yanzhou Coal Mining added 1.4 percent and China Coal Energy soared 1.8 percent.

The lead from Wall Street is cautiously optimistic as stocks ended Friday's trading mostly higher after showing a lack of direction for much of the session. The markets benefited from late-day buying interest that lifted the Dow and the S&P 500 to five-year closing highs.

The late rally followed the latest news about the impending showdown over the U.S. debt limit as House Republican leaders indicated they will hold a vote to authorize a three-month temporary debt limit increase to give lawmakers time to pass a budget that reduces spending.

White House Press Secretary Jay Carney said he was encouraged by signs the GOP may back off their insistence on holding the economy hostage to extract drastic cuts in Medicare, education and other programs that benefit the middle class.

In earnings news, financial giant Morgan Stanley reported a better than expected fourth quarter profit compared to a year-ago loss, while GE also beat the street on revenues that increased by more than anticipated.

On the other hand, semiconductor giant Intel saw earnings exceed estimates but revenues missed and the company also gave downbeat revenue guidance. Shares of Capital One Financial also fell sharply following disappointing earnings and guidance.

On the economic scene, consumer sentiment in the U.S. unexpectedly fell in January, according to Thomson Reuters and the University of Michigan. The preliminary reading on the consumer sentiment index for January came in at 71.3 compared to the final December reading of 72.9.

The major U.S. averages were mixed on Friday as the Dow added 53.68 points or 0.4 percent at finish at 13,649.70, and the S&P 500 climbed 5.04 points or 0.3 percent to end at 1,485.98. The NASDAQ also moved to the upside in late-day trading, but the tech-heavy index ended 1.29 points or less than a tenth of a percent lower at 3,134.71. For the week, the NASDAQ edged up 0.3 percent, while the Dow and the S&P 500 rose 1.2 percent and 0.9 percent, respectively.

In economic news, the Chinese economy expanded 7.9 percent on year in the fourth quarter of 2012, the National Bureau of Statistics said on Friday - faster than the 7.4 percent growth in the third quarter. Economists had expected a 7.8 percent gain last quarter. For all of 2012, GDP climbed 7.8 percent compared to forecasts for a 7.7 percent increase.

The statistical office also reported that industrial production grew 10.3 percent on year in December, accelerating from a 10.1 percent rise in November. Economists had forecast a 10.2 percent increase. Retail sales grew 15.2 percent annually in December, faster than 14.9 percent expansion in the previous month and beating forecasts for 15.1 percent. China's urban fixed asset investment in the 12 months through December was up 20.6 percent on year - in line with forecasts for an increase of 20.7 percent.

by RTT Staff Writer

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