Wednesday, 24 June 2009 (After Market Post)

Summary
Hang Seng Index 17,892.150 (Change: +353.78/2.02%)
Range: 17,375.96 - 17,682.87
Turnover ~HKD56.715B

Hang Seng Index
I must admit that I am cheating a bit today, considering that I'm posting this while the US markets are already open, I obviously will start off with an optimistic view on tomorrow's open.

First off, France-based Organization for Economic Cooperation and Development (OECD), came out to pretty much revert what the World Bank had stated on Monday. They boosted their expectations on member countries' economies, and raised their economic growth to 4.3% over the 4.1% they had forecast earlier - its the first time they have revised expectations in over two years.

Secondly, US durable goods orders were up in May, up 1.8% last month over what economists had expected a decline in 0.8%.

Two good results to start the morning off, already pushing the Dow and Nasdaq up ~1.20% and ~2.10%, respectively.

On the negative side, which seems to have been brushed off by investors, is the fact that new home sales dipped 0.6%; higher than economists expected. I suppose what investors are really looking forward to are:

- what the Fed has say about their economic outlook
- how well the auction on US treasuries will turn out

Both can really change how the US performs tonight.

As for HSI today, pretty much following the board of increases already Asia, but more so on the rally in Shanghai and Shenzhen, both meeting their all-time high over the past year. I do continue to be afraid of turnover, lowering once again to only ~HK$57B today. Though there actually seems to be more signs of capital flowing into Hong Kong (HKMA once again had to inject more into its reserves), it may possibly be for 1. IPO investments, or 2. simply waiting for price bargains. I still remain positive for tomorrow's performance, and remain confident that it should close and remain above 18,000 by the end of the week. Next week though...

Denway Motors (0203.HK)
Today's Close: HK$3.11 (+0.08/2.64%)

Remember a while back when Warren Buffett invested in BYD Company, China's biggest maker of rechargeable batteries with an ambition of making environmentally-friendly battery cars? If you didn't, now you do.

That gave a lot of attention to the Chinese motor sector. Since then Denway Motors, along with most others, has gone from its low of HK$1.41 to its high of HK$3.93 (a couple of weeks ago). Investors have digested the positive news that came out in early June, after Denway announced that it expected sales to exceed their original forecast of 330,000 units for the year. Year-to-date (May 2009), they already sold 128,000 units, shy of 2,000 units to 130,000 they had originally anticipated for the first half of 2009.

Since the rally in March 2009, Denway has ended up +37% (today's close), and closed down -20.5% since the positive news early in June. Likewise, HSI has edged been up +42% and closed down only -7.15% month-to-date. Either way, it seems to me that it has lagged the rally, and over-done the brief correction this month. Perhaps, the outlook caused too positive of a price movement, but at prices well below the average of April-May, prices prior to the positive announcement, the drop doesn't seem justified either. I anticipate their price to recover back to their 10-day and 20-day MA range at HK$3.55-3.63. Denway does not announce quarterly results, so we shall have to wait eagerly in July for their interim results. Their earnings were down 3.5% for 2008.

For the time-being, though their price seems attractive, I would still hold off. Considering that I'm worried about an expected further correction in July.

Attractive Range: HK$2.85-$2.90
Target Price Range: HK$3.55-3.63

Over and out. Good night.