Friday, 19 June 2009 (After Market Post)

Summary
Hang Seng Index 17,920.930 (Change: +144.27/0.81%)
Range: 17,759.86 - 18,015.11
Turnover HKD62.906B.

Hang Seng Index
Would have preferred it if HSI closed above 18,000. It did break through a few times during the day, but failed to keep the momentum, closing eventually just under 80 points shy.

Breaking the first of a consecutive 4-day decline, I suppose investors are taking a sigh of relief as we enter into the weekend. I must emphasize that it may have to be a brief sigh, considering that today was not all that great of news. Momentum continued to be weak, while turnover fell again, closing the week just under HKD63B. The market still seems to lack direction and continues to hover around 17,700 and 18,000. I fear to believe that if HSI does not break through 18,000, together with continued low turnover, HSI may experience a further decline, possibly to the next resistence mark at the 50-day moving average, 16,843. (As of today, HSI's 10-day and 20-day moving averages stands at 18,398 and 18,138).

More negative news also comes from short trading activity. Today the amount jumped another 24.9% to HK$3.607B, accounting for 5.73% of total market turnover. Unless we see a strong change in direction from the US tonight, I fear another day in the red on Monday (and quite possibly the week), following suit the first two Monday's of the month.

China Construction Bank (0939.HK)
I just feel a bit obligated to mention briefly about this favorite of mine. Unfortunately, it did not close at the HK$5.60 mark that I suggested yesterday, but rallied again today, closing up HK$0.21 (3.79%) at HK$5.75. I did mention about the positive earnings expectations in my previous blog, so I'll mention a few other points:

1. Momentum continues to be strong (as is volatility), with turnover being at HKD7.091B, accounting for almost 11.3% of total turnover for the market.

2. FTSE Xinhua Index (新华富时指数) adjusted CCB to a larger proportional weighting, from 3.8% to 8.3%. As a result managers may need to follow-suit by increasing their funds' proportional share.

3. Relative to CCB A-shares, it is interesting to point out that A-shares also closed up another 4 cents to RMB5.91 (0.68%). To date, over the past month A-shares have rallied 28.2% while H-shares have only jumped 15.93%. Month-to-date, figures come to 25.48% and 10.79%, respectively. For the past three months, since the rally, H-shares have traded on an average premium to A-shares (after RMB/HKD conversion) at about 16.92% (YTD: 14.26%). As at today's close, this premium stands at only at 10.31%. Possibly room for another ~4-6% price appreciation.

4. CCB remains relatively lagged compared to HSI and HSCEI performance, with HSI and HSCEI up 36.48% and 35.94%, respectively, over the past three months, while CCB remains up only 30.98%. Possibly room for another ~4-5% price appreciation.

Evidently, I still have very positive views on CCB, targeting atleast the price of HK$6.00 before I decide to exit. However, with that said, it's also worth noting that with the market's overall lack of direction, together with a possible correction, CCB's price may very well follow suit. On top of that, of the short trade plays today, CCB also took part with ~HK$197.92 bet.

New IPOs for June
With the recent market rally, evidently comes the hype of new IPOs trying to ride the waves. In the pipeline before the month ends are:

1. 361 Degrees International Limited (01361.HK), a sporting apparel company in China, often compared to the country's two large players Anta (02020.HK) and Li Ning (02331.HK). Target IPO price in the range of HK$3.15 - 4.35 per share.

2. China Qinfa Group Limited (00866.HK), a coal-producing company in China, not state-controlled, but also not owning any coal mines either. Target IPO price in the range of HK$2.00 - 2.52 per share.

Going to look into these and talk more about my thoughts. One other IPO not yet open to the public yet is Ba Wang Herbal Shampoo, which recently launched pretty massive advertising campaigns (quiet lame) with Jackie Chan (thumbs down) as their spokes-person. So far, this one seems to be the market's favorite. Will add to this one as well.

Happy weekend.