Tuesday, 30 June 2009 (After Market Post)

Summary
Hang Seng Index 18,378.73 (Change: -149.78/0.808%)
Range: 18,364.81 - 18,883.24
Turnover HKD65.13B

Hang Seng Index
HSI ends off 1H09 a little ugly, down just shy of a percent, and closing above its 10-day and 20-day averages. For the first half of 2009, HSI closed up 3,336 points (22.18%) from 15,042.81, reaching a low of 11,344.58 (Mar. 9) and a high of 18,889.68 (Jun. 12) ~ intra-day trading reached a high of 19,126.

1. Compared to DJI, HSI performed better. The Dow closes the day before 1H09 slightly down at 8,438.38 from 9,034.69 at the beginning of the year, down 596.31 points (6.6%), which reached a low of 6,547.05 (Mar. 9) and a high of 8,799.26 (Jun. 12). Dow futures are up 18 points at this point.

2. Compared to Nikkei, HSI performed better. The Nikkei 225 closed 1H09 slightly better, up 915.32 points (10.12%) to 9,958.44 from 9,043.12. Nikkei too was quite volatile during this first half, reaching lows of 7,054.98 (Mar. 10) and a high of 10,135.82 (Jun. 12).

3. Compared to Shanghai, HSI gets overshadowed. In fact, Shanghai is probably the leading performer for all of Asia, rising a staggering 1,078.64 points (57.35%) from 1,880.72 to 2,959.36, already its low and high, and just shy of 3,000 points.

Of HSI contributors, the best performer was Foxconn (2038.HK), rising $2.05 (67.66%) from HK$3.03 to HK$5.08. Worst performer was HSBC (0005.HK), down $11.35 (14.74%) from $77 to HK$65.65 (though it closed up HK$32.65, just shy of 100% from it's all-time low of HK$33 on Mar. 9).

HSI Outlook for 2H09
HSI is already at ~17x P/E, which is not that cheap. However, given current conditions, and depending on 2Q earnings to come out in July/August, HSI could possibly reach or even surpass 21,000 points. At this range, HSI P/E would be approximately ~20x-21x. However, given that HSI is bubbling from a liquidity-backed market, it can suffer a strong pull-back if capital is drained.