Thursday, 18 June 2009 (Mid-day Post)

Summary
Hang Seng Index 17,728.080 (Change: -356.52)
Range: 17,655.82 - 18,069.76
Turnover ~HKD36.1B.

Hang Seng Index
Yesterday night, FedEx's poor outlook and gloomy earnings overshadowed the fact that inflation is still in check. Early signs that may suggest the need for a rumored interest rate hike by 25 basis points as early as November may not be called for. Indeed this should be a good sign for equity markets. But after so many good economic news, the expectations may have already been priced into the market, and negative news is prevailing. HSI is following suit, opening in the negative territory, as did the Nikkei and Straits Times.

Not good, not good indeed, closing down significantly by mid-day, dropping as low as -400 points, it may be pretty difficult for the HSI to recover back to safety (and many investors' psychological mark) at 18,000 during afternoon trading. If this remains true, this will be the fourth consecutive day drop, and the first time since the rally in early March. Two more negative indicators include:

1. HSI has fallen through its 10-day and 20-day moving average. Meaning short-term trends have already followed the bear route.


2. Turnover up to this point is has been the lowest since March, exceeding Monday's first and record low turnover.

Re-affirming yesterday's thought, China A-shares continue to rally, reaching its one-year high and up ~1%. Let's see how HSI goes after opening bell this afternoon, although I don't think it would be much better.

China Construction Bank (0939.HK)
First time since its rally, CCB is following HSI closing down ~2.2% to HK$5.55. Conversely, CCB's A-shares (612939.SH) closed up ~6% to RMB5.90 (+0.32), now trading at a premium to its fellow H-shares.

My thoughts? At HK$5.50-0.55 (mid-day HK$5.54), CCB remains a very attractive investment for short, mid and long-term. It seems to have finally given in to the overall market sentiment. However, turnover for this one continues to remain strong, almost ~HK$2B by mid-day. Quite possibly, it should recover back to HK$5.60-$5.65 by the day closing bell.