The HK stock market rose 0.41% to close at 25,618 ending a week of big swings.
Top story for the day was the placement of 400 million shares of China Construction Bank (CCB #939) at HK$7.05 which is a discount of 2.5% to the market close of HK$7.23 yesterday. CCB closed today at 7.04 bid and 7.05 offer.
The 400 million is only 0.18% of the 224.7 billion shares issued and amount to only 1 day’s turnover in the stock. However, investors are concerned that other strategic investors who were allocated stock in the IPO will start selling. Bank of America which holds 9% will be able to sell in October 2008 at the end of the lock up period. Temasek still has 5.99% which it can sell.
Strategic investors sell their stakes for a variety of reasons which may or may not have anything to do with the company’s performance. Mostly, sales are made to replenish the strategic investors’ own capital and this may be the case in the aftermath of the subprime crisis. Sales by strategic investors do tend to dampen market interests because of the fear of an overhang of stock coming to the market.
As Temasek sold at this level last year, it is reasonable to assume that this would be a good level to use as a base. CCB went as high as HK$9.00 last year and I believe that it would go much higher as Chinese consumers discover banking and financial products, and more deposits find their way into the system.
Accumulate CCB at the current levels.
END
www.goldride.com
Friday, May 16, 2008
Thursday, May 08, 2008
Oil reaches USD120 per barrel
The HK stock market fell in line with the mainland market. The Hang Seng Index fell 651 to 25,610 (2.48%) while the Shanghai Index fell 4.13%.
Investors on the mainland are worried that there will be a flood of new shares from the end of the moratorium on majority shareholders, and the proposed share offering by Ping An Insurance of RMB 120 billion A shares and RMB 41 billion of bonds.
The price of oil reaching USD 120 also spooked investors especially since Goldman Sachs is now predicting USD 200 per barrel. Goldman was very prescient last year when they predicted that oil will top USD 100 per barrel by the yearend.
There were also rumours of housecleaning at the CSRC (China Securities Regulatory Commission) which added to market woes.
We do not see the market falling back to the 21,000 level where there had already been substantial consolidation, and has been tested 3 times. The market has fallen 10,000 from the high of 31,000 in October 2007 to the 21,100 level in January 2008. Since then the market has recovered about half the losses. Short term target on the upside is 27,000 to 28,000 with a downside to 24,000. At 24,000 there is good opportunity to accumulate shares for the next leg up.
The fallout from subprime is coming to an end. The bad news on the horizon is oil price.
END
Investors on the mainland are worried that there will be a flood of new shares from the end of the moratorium on majority shareholders, and the proposed share offering by Ping An Insurance of RMB 120 billion A shares and RMB 41 billion of bonds.
The price of oil reaching USD 120 also spooked investors especially since Goldman Sachs is now predicting USD 200 per barrel. Goldman was very prescient last year when they predicted that oil will top USD 100 per barrel by the yearend.
There were also rumours of housecleaning at the CSRC (China Securities Regulatory Commission) which added to market woes.
We do not see the market falling back to the 21,000 level where there had already been substantial consolidation, and has been tested 3 times. The market has fallen 10,000 from the high of 31,000 in October 2007 to the 21,100 level in January 2008. Since then the market has recovered about half the losses. Short term target on the upside is 27,000 to 28,000 with a downside to 24,000. At 24,000 there is good opportunity to accumulate shares for the next leg up.
The fallout from subprime is coming to an end. The bad news on the horizon is oil price.
END
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