Hang Seng Index closed down 0.3% at 19,200 led by local banks and property stocks. Heavily weighted HSBC (5) fell 1.0% whilst BOC Hong Kong (2388), Hang Seng Bank (11) and Bank of East Asia (23) tumbled 1.1%-1.6%. Cheung Kong (1), Henderson Land (12), Wharf (4) and New World Development (17) shank 1.2%-3.0%. Tencent (700) added 2.5% since first quarter earnings beat market expectation. Consumption stocks rallied. Tingyi (322), Want Want China (151) and Hengan (1044) advanced 3.0%-4.3%. China Resources Power (836), the best performing index stock for a second day, rose 5.0%. HSCEI declined 0.4% although Shanghai SE Composite Index surged 1.4%. Negligible loan growth for large banks in the first two weeks of May put a drag on financial stocks. ICBC (1398), CCB (939), BOC (3988) slid 0.4%-0.9%. China Life (2628), Ping An Insurance (2318) and PICC P&C (2328) sank 1.0%-2.7%. China Cosco (1919), the worst performing HSCEI stock, lost 4.1%. Automobile and railway stocks rallied. Dongfeng Motor (489), Guangzhou Automobile (2238), China Railway Construction (1186) and China Railway Group (390) gained 2.2%-3.9%.

Hang Seng Index has been technically oversold with 9-day RSI at 21, giving an excellent buying opportunity for long term investors. We recommend an overweight position on large cap China stocks.