Tuesday, 23 June 2009 (After Market Post)

Summary
Hang Seng Index 17,538.370 (Change: -521.18/2.89%)
Range: 17,375.96 - 17,682.87
Turnover ~HKD66.238B.

Hang Seng Index
After the World Bank lowered their global economic growth, the Vice Governor of the PBOC came out and also added to fragility of the Chinese economic recovery. Why he did so, beats me? Especially since it contradicts Grandpa Wen's comments this past weekend. But that said, it obviously added to the jitters.

Out from the US, cyclical sectors such as financials, energy and materials led the S&P’s decline. While results from Bank of America also brought out renewed concerns about the banking industry. Tonight the Fed starts its two day policy meeting on interest rates, while we also have to look out for weekly sales data, unemployment and existing home sales as well - I remain optimistic on these.

I believe HSI was oversold today.

I also expect most of the European exchanges and the US ones to close up today, simply as a result of a technical rebound after a day of massive selling. Likewise, I believe that most of Asian indices will follow-suit and close up tomorrow. HSI, though closing lower was still able to maintain levels above 17,300. This week will probably be a bumpy ride, but closing the week off, it should close up higher, prior to next week.

GOME Electrical Appliances (0493.HK)
I pointed out yesterday that GOME should perform well after resuming trades. Today it jumped HK$0.77 (+68.75%). If you got in today, good for you. I would have expected it to close at a slightly higher price, but I guess from the selling pressure and the overall market sentiment, it wasn't able to do so. Holding this one for the next 3-6 months should prove a good play.

You also have Bain Capital joining the game after they invested in 7-year convertible bonds with an option to convert at HK$1.18 a share. Existing shareholders can also buy in 18 additional shares at $0.67 a share for every 100 existingly owned. Considering that Ernst & Young have signed off on internal control practices, and that the board now has three non-executive independent members appointed by Bain Capital, GOME may have reshaped itself and prove to shareholders that its back on track. Slowly share prices will show this.

Keeping the post short today. Hope you have already subscribed to IPOs, particularly Ba Wang, already +34x oversubscribed.