Friday, 26 June 2009 (Mid-day Post)

Summary
Hang Seng Index 18,487.65 (Change: +212.62/1.163%)
Range: 18,360.71 - 18,519.69
Turnover HKD32.82B

Hang Seng Index
Why does turnover continue to shrink day-over-day? Especially with so much capital coming into the market? Those questions keeps bothering me. And because of those nagging issues, I still don't see HSI jumping massively, rather I see it go up and down and up and down in the near run.

But having said that, things are definitely looking good at the moment. Today head of HKMA, Joseph Yam again said that they will be injecting more funds into their reserve to maintain the USD peg. That's two consecutive days in a row now, and hence capital continues to keep liquidity in the market. But how long can this persist? How about this, I believe we can still see positive upside until around July 3-5, when the super hyped and 420x oversubscribed IPO Ba Wang comes onto the market. Like Jackie Chan in his ridiculous commercials comments, trading activity should "ba-huang huang" and soar in secondary trading. Also with the release of so much capital that frozen-up, the following few days should also drift nicely.

Yesterday the US finally closed up, catching up with world indices after four days of dropping. Ironically, negative news on unemployment and decline in GDP was overlooked, and doesn't seem to be having an impact on Asia either. Neither did the news out of UK that British Banks will still be experiencing some trouble in the coming months. But evidiently, HSBC is getting some selling pressue at HK$65, down HK$0.85 (-1.29%).

For the third consecutive day, HSI has gone up above 20-day average, gaining everything that was lost last week. As I mentioned in my earlier blogs, HSI should continue to close up above 18,000, and prior to end of June as managers close their 2H books.

China Construction Bank (0939.HK)
Closing at HK$6.10, CCB has gone up far beyond my expected HK$6.00. News today that loans in June may have surpassed initial expectations brings positive optimism again. Perhaps this will be my first time I am starting to get concerned. Although long-term wise (over the next year), I still see CCB HK$6.70+, in the near-term (over the next month), growth should be limited (possibly only another ~1-2%) before a mild correction.

GOME Electrical Appliances (0493.HK)
Closing at HK$1.90, it's gone down quite a bit from it's high of HK$2.32 a couple of days ago. I don't see it jumping substantially in the short-term, but to hover around HK$1.80-1.99. I still remain very optimistic though, seeing its price to rise as high as HK$2.50 over the next year. If you think about it, at HK$1.90 you're really paying for HK$1.71 a share after subscribing to new shares (Remember: every 100 shares has the right to buy 18 new shares at HK$0.64). A price appreciation to HK$2.00 is a good 17% gain, HK$2.50 an even better gain of 46.2%.

Wednesday, 24 June 2009 (Mid-day Post)

Summary
Hang Seng Index 17,771.75 (Change: +233.38/1.33%)
Range: 17,484.06 - 17,823.07
Turnover HKD30.209B

Hang Seng Index
Up across the board in Asia this morning, Tokyo's Nikkei +0.7%, Taiwan's Taiex +3.5%, Shanghai and Shenzhen also up +0.7% and +1.4%, respectively. Hong Kong's evidently following suit after yesterday's over-selling. Strong resistence at the 50-day average is keeping HSI afloat; however, turnover continues to remain low, which is a point to note and to worry. I fear subsequent to June, it might not be able to sustain it's position.

Rumour also has it that PBOC may lower the minimum reserve requirement for Chinese banks. This news is beneficial for financials of course, and should help boost up prices come this afternoon for H-shares. CCB (0939.HK) and ICBC (1398.HK) remain the favourites - worth watching how their prices should do - anticipating CCB to close ~HK$5.78 - 5.82, while ICBC should close ~HK$5.20 - 5.25.

Goldman Sachs also upgraded their target prices on China Life (2628.HK) and Ping An Insurance (2318.HK) to HK$32 and HK$62, respectively. Meanwhile Nomura also upgraded GOME Electronic Appliances (0493.HK) to HK$2.10.

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.

Monday, 22 June 2009 (After Market Post)

Summary
Hang Seng Index 18,059.55 (Change: +138.15/0.77%)
Range: 17,906.39 - 18,398.92
Turnover ~HKD62.685B.

Hang Seng Index
I got ahead of myself earlier this afternoon. I take back everything I said. HSI lacked the momentum to keep it's position, eventually closing slightly above 18,000. Below 10-day and 20-day moving average, and starting the week with low turnover again. Tomorrow, HSI should close back in the red, below 18,000.
Could it possibly be because of capital flowing into the IPOs? Possibly, I'm not going to rule that out. But considering how low the capitalization is by aggregate, I don't think it would really impact the market that much.

China Construction Bank (0939.HK)
Lagged a bit again today, only up HK$0.05 (+0.87%), with average Chinese banking stocks jumping ~2% (Bank of China, 3988.HK), to ~4.85% (Bank of Communications, 3328.HK). Reports that personal loans in China may have risen as much as RMB6.5 trillion, a positive sign for credit and lending.

One stock that I also recommend looking into more closely is GOME Appliances (0493.HK), a stock that has been suspending for the past seven months as a result of investigations into its CEO's corruption and market manipulation charges. Things seem to be clearing up and possibly released for trading again soon. And guess what, it's missed the rally we've all been watching, and as investors continue to seek out underpriced securities, this one looks to catch up. Will give this one some more thought.