Hong Kong/China Market

Transcription

1 Morning Flash 14 January 8 Hong Kong/China Market Technical Strategy Hong Kong market moved down mid-week after a Cheung Kong block sales and brokers downgrade, risk of downside break has risen Market Comment. Indices Latest Chg. Pts HSI 26, DJIA 12,6-247 S&P 1,1-19 NASDAQ 2,4-49 H-share, Red-chip 6,17-16 Shanghai Comp 5, Shenzhen Comp 1,554-2 The Hong Kong market continued its downward move as it digested China s moves to freeze prices/tariffs of necessities and reacted to brokers downgrades. The market opened up 5 points but soon declined. The fall steepened as news of Merrill Lynch taking another sizeable writedown surfaced. The HSI closed the day off another 363 points, or 1.34%, bringing the weekly loss to 652 points or 2.36%. HSI 12-month performance Thermal Coal stocks gained. Supply and demand dynamics and firm prices offer solid fundamentals and China Coal (1898), China Shenhua (88), Yanzhou Coal (1171) are well set up for further outperformance Dec-6 1-Jan-7 1-Feb-7 1-Mar-7 1-Apr-7 1-May-7 1-Jun-7 1-Jul-7 1-Aug-7 1-Sep-7 1-Oct-7 1-Nov-7 1-Dec-7 1-Jan-8 On Friday, US stocks declined. The S&P fell 1.4% and NASDAQ declined 2%, taking the YTD declines to 4.59% and 8.1% respectively. ML s $ billion writedown and lower profit guidance by American Express and Tiffany & Co. added to recession fears and investors chose to ignore positive news of Bank of Amercia s $4 billion takeover of Countrywide and Citigroup s possible equity injections by Prince Alwaleed and China Development Bank. DJIA 12-month performance Investment Theme -Sep-6 -Nov-6 -Jan-7 -Mar-7 -May-7 -Jul-7 -Sep-7 -Nov-7 UBS downgrades of HSI target to 28, has stopped a positive trend in its tracks. The index promptly reversed course and lost more than points on Thurs and Fri. This is a bad sign and reflective of fragile investors sentiment. Overseas market weakness adds to uncertainties. We have numerous false moves this month and another test of the uptrend support at 26, is inevitable this week. The market will tell us the direction of the next big move which we now see is downside biased after failure of an upside breakout last week. 7 VC Brokerage Ltd. Opinions, projections and other information contained in this report are based upon sources believed to be accurate, but no responsibility is accepted for any loss occasioned by reliance placed upon the contents hereof.

2 Morning Flash 14 January 8 Corporate News (2888 HK) STANDARD CHARTERED: Standard Chartered has agreed to acquire Yeahreum Mutual Savings Bank. Yeahreum was established by the Korea Deposit Insurance Corporation in Dec6 by transferring assets and liabilities from three regional mutual savings banks, with over, retail customers and over corporate customers. (23 HK) BANK OF EAST ASIA: The bank s chairman said in an interview that BEA plans to establish a holding company to hold the businesses arms of the bank. BEA would also welcome new investors including sovereign investment fund China Investment Corp. Spain's Criteria CaixaCorp has doubled its stake in the bank to 8.89% for HK$3.95 bn in Dec7. (67 HK) CHINA EASTERN AIRLINES: China National Aviation Corp, the parent company of Air China (753), is reported to consider an offer of share-swap instead of cash acquisitions of China Eastern Airlines shares to counterbid for 24% stake in the airline. However, China Eastern said earlier to demand for cash acquisition and said "capital injection through share subscriptions will improve the capital structure and financial position" of the airline. (235 HK) CHINA STRATEGIC: entered into a framework agreement with Resource Development Branch Office of China Railway Group Limited (3 HK). The company will acquire part or entire share capital of Sunitezuo Xiao Bei Yang Mining Co. Ltd and not less than % of share capital of Sunitezuo Mang Lai Mining Co. Ltd. together with the share capital of mining and railway companies invested by China Railway in Mongolia. The company will pay not less than % of the consideration by cash and the remaining by issue of new shares. Xiao Bei Yang Co. and Mang Lei Co. has coal mine reserve of 1.4bn tonnes and 993m tonnes respectively. (4 HK) RISING DEV: agreed to acquire % interest in the PRC Company for HK$1,13bn, to be satisfied by HK$ million by cash and HK$837m by issue of the Convertible Notes at conversion price of HK$.28 per Sharer and carrying 1%. per annum. The latest close was HK$.375. The PRC Co. is incorporated with a registered capital of RMB2.8m holding a vanadium mine located in Xunyangba County, Ningshan Town, Shanxi Province. Vanadium s primary use is as a steel hardening agent to increase the strength and corrosion resistance of steel. The PRC Co. has already commenced Phase I refinery with the daily production of tonnes ores. There is reserve quantity of ore ad metallic quantity of 26.67m tonnes and,761 tonnes in the mine respectively. Results announcements (8 HK) MING FUNG JEWEL: Final results ended Sep7: net profit of HK$97m (+7% yoy); Turnover of HK$6m (+27% yoy), Final dividend of HK$.5 (unchanged yoy) 7 VC Brokerage Ltd. Opinions, projections and other information contained in this report are based upon sources believed to be accurate, but no responsibility is accepted for any loss occasioned by reliance placed upon the contents hereof.

3 Morning Flash January 14, 8 TECHNICAL STRATEGY Shenhua Energy (88, HK$48.65) John Schofield CFA, MSTA, MFTA (852) john@tempusinvestment.com Shenhua Energy broke out last Thurs and followed through on Fri with volume. The stock may firm up the recent gains around current levels before rising further. Buy or Hold with a HK$46. stop. -day m.a. China Coal Energy (1898, HK$26.) China Coal Energy has broken above the downtrend resistance and seems to have consolidated around HK$-26 area. Buy or Hold with a stop loss at HK$ day m.a. 5 Zhaojin Mining (1818, HK$.) Zhaojin Mining has rallied sharply on the back of rising Gold price. The stock is overbought and may have to consolidate recent gains now. Take profit or Hold with a HK$38. stop. -day m.a. Additional information on the securities discussed within this report is available upon request. 8 Tempus Investment Research Limited. All rights reserved. Room 17, Nan Fung Tower, 173 Des Voeux Road Central, Hong Kong

4 Morning Flash January 14, 8 TECHNICAL STRATEGY 1 Wing Hang Bank (2, HK$116.) 1 John Schofield CFA, MSTA, MFTA (852) john@tempusinvestment.com 1 1 Wing Hang Bank is testing the Dec 12 high of HK$118 as RSI inflects upwards. The stock is well supported around HK$6. Hold with a HK$111. stop. -day m.a. Wing Lung Bank (96, HK$96.) Wing Lung Bank has risen over % since late Nov. and the stock has stayed at an overbought level with reduced turnover. Take profit or Hold with a HK$95. stop. 7 -day m.a. 7 Sector Index Day Week MTD YTD (%) (%) (%) (%) Hang Seng Composite Sectors Hang Seng Index (HSI) Hang Seng Composite HSCI Telecommunication HSCI Energy HSCI Utilities HSCI Property & Construction HSCI Industrial Goods HSCI Info Technology HSCI Services HSCI Conglomerates HSCI Financials HSCI Materials HSCI Consumer Goods HS Mainland Composite HS China Enterprises HS China H-Financial HS China Affiliated Corps HS HK Composite HS HK Large Cap HS HK MidCap HS HK Small Cap Additional information on the securities discussed within this report is available upon request. 8 Tempus Investment Research Limited. All rights reserved. Room 17, Nan Fung Tower, 173 Des Voeux Road Central, Hong Kong

5 Morning Flash 14 January 8 Analyst Certification Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report. DisclaimerT This document has been prepared by VC Brokerage Limited ( VC ) to provide information about the securities mentioned herein. It is for distribution only under such circumstances as may be permitted by applicable law. It has no regards to the specific investment objectives, financial situation or particular needs of any specific recipient. It is published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is it intended to be a complete statement or summary of the securities, markets or developments referred to in this document. It should not be regarded by the recipients as a substitute for the exercise of their own judgment. Any prices or levels contained in these pages are indicative and may vary in accordance with changes in market conditions. Investors are warned that the price of securities may fall in value as rapidly as it may rise and holders may sustain a total loss of their investment. No liability is accepted whatsoever for any direct, indirect or consequential loss arising from the use of this document. Any opinions expressed in this document are subject to change without notice. VC is under no obligation to update or keep current the information contained herein. VC and its affiliates, their directors, officers and employees or clients may have or have had interests or long or short positions in the securities or other financial instruments referred to herein, and may at any time make purchases and/or sales in them as principal or agent. VC and its affiliates may have or have had a relationship with or may provide or has provided investment banking, capital markets and/or other financial services to the relevant companies. Employees of VC and its affiliates may serve or have served as officers or directors of the relevant companies. 7 VC Brokerage Ltd. Opinions, projections and other information contained in this report are based upon sources believed to be accurate, but no responsibility is accepted for any loss occasioned by reliance placed upon the contents hereof.