Week's Wrap-Up, Week's Outlook

Wrapping up this past week, the Hang Seng Index jumped by over 700 points, with banking stocks and rumors on acquisitions driving up buying sentiment. Closing the week off though, we had quite a few negative earnings and economic news out from the US. Rather than having the bears charge back in with a big sell-off, investors seemed to have brushed it off once again. On Friday, consumer confidence levels came off short, this coincided with lower 3Q numbers from major retail outlets such as Wal-Mart, JCPenny and Abercrombie & Fitch. Regardless, on Friday both Dow Jones and Nasdaq closed in positive territory.

On the Hong Kong front, this coming week seems promising to test the 23,000 boundary again. The HKMA again boosted the reserves on Friday with continued capital flowing into the region keep equity and real-estate markets afloat. Chinese banks should continue to be the leaders with China Minsheng Bank's (1988.HK) IPO subscription still open to the public (more on my take of the IPO below). CCB (939.HK), ICBC (1398.HK), BOC (3988.HK) and Citic Bank (998.HK) continue to be my favorites. However, caution should be taken entering towards the end of the month, with average increases already far exceeding HSI and HSCEI by as much as 3x over the past few months subsequent to 3Q results (investors should remember that 4Q remains the quieter time for loan issuance). The rally as a result of better than expected 3Q numbers should just about be properly digested by the market, ending their recent rally.

On another agenda, I also favor Petrochina (857.HK). After disappointing 3Q numbers, China last week finally raised oil prices since September 30th. This would be the seventh time this year, which points to possibly better 4Q results. Furthermore, it lags it's counterpart CNOOC (883.HK) with a 96% positive correlation in price movement, HSI and HSCEI - pointing to a spark sometime soon.

1-Month Change (HSI: 2.52%, HSCEI: 4.68%, CNOOC (883): 4.33%, Petrochina (857): -0.70%)
2-Month Change (HSI: 8.09%, HSCEI: 10.74%, CNOOC (883): 17.20%, Petrochina (857): -10.93%)

As for China Minsheng Bank's IPO that will raise US$4.68 billion, I give two thumbs up. Being one of the first-to-list non-state controlled bank, they have more room to adjust quicker to market changes. Furthermore, at the higher range of HK$9.5 per share, P/B ratio will only be trading at 1.9 to 2.0x. Compare this with the other comparable Chinese banks that average between 2.0 to 2.8x, and it seems to be a good deal. On top of this HK$9.5 is only approximately a 2% premium to their A-shares last closing price of RMB8.13. To add more confidence, five major institutional investors have also joined in, including of which are Ping An Insurance, China's sovereign fund China Investment Corp., and notably George Soro's investment fund.

Finally, with US President Obama making his first visit to Shanghai, China - on the table for discussions will most likely be the Renminbi, environmental reforms and other economic incentives. Together with the USD finally reaching some resistance level, it may trigger a rally of the USD in the coming weeks. Environment related Chinese stocks may also be of focus with these talks.

Monday, 9 November 2009 (After Market Post)

Summary:
HSI 22,207.55 (Change: +377.83/1.73%)
Range: 21,941.62 - 22,214.85
Turnover HKD65.09B

HSCEI 13,318.48 (Change: +301.28/2.314%)
Range: 13,103.84 - 13,318.92

Update:
Alright, it's been quite a few months since I last posted any of my own personal investment thoughts. I've done rather, fairly, really, incredibly good these past few months (but then again, any rational investor would have done so as well). So I've decided to keep updating my investment journal again, but this time, it'll be based on actual investments and more thorough research with my own personal funds, my family's, as well as a few friends who have trusted me with some of their hard-earned money. A minimal amount just slightly above half a million HKD.

Once again, any insights are only for reference only, and are not to be relied upon or interpreted as investment recommendations. Please read for personal enjoyment and feel free to share with me your disagreements or other insights I might have missed.

Today's Wrap-up:
So the Hang Seng Index finally closed above 22,200 again, which was a very important psychological barrier being it's 50-day average. Last Friday after market close, US unemployment figures for the month of October was higher than expected, but investors seemed to have brushed away the lagging indicator and looked upon the leading factor that the change in unemployment, although at it's highest 10.2% is recovering and was at it's best this year. At this point, US Futures are pointing to a positive start, with the DJI +85 points and Nasdaq +15.75 points. The Hang Seng Index should continue its positive start this week, targeting approximately 22,400 range which should be the next initial resistance points marked on October 27.

Week's Outlook:
This week Hong Kong equities will be influenced greatly by earnings coming out of the USA. For Hong Kong itself, Alibaba.com will be reporting tomorrow, and figures from HSBC Finance Corp. (US) will be coming out overnight. Major consumer retail outlet chains in the USA will also be coming out, with Wal-Mart and Walt Disney on Thursday and JC Penny, Abercrombie & Fitch on Friday. On the economic front, we have initial unemployment claim figures coming out on Thursday, and trade balance figures and Michigan's consumer sentiment on Friday.

This Week's Buy:
Chinese banking stocks should continue to outperform the market this week, primarily China Construction Bank (939), Industrial & Commercial Bank (1398) and Bank of China (3988) to be the headers (BOC still lags CCB and ICBC, and ICBC closed at its one year high) - mainly given China's Minsheng Bank's IPO that starts subscriptions on Friday - the news should generate some hype in the market. There also seems to be capital flowing into the mining sector primarily into coals.