HK - Market Direction 01 (Jan 12 - Jul 15)

[winston]

Timetable set for Shanghai-Hong Kong Stock Connect

BEIJING, July 19 (Xinhua) -- China's securities regulator announced on Friday, more plans for the pilot program to connect the Shanghai and Hong Kong stock markets.

Supporting policy documents and business rules will be released soon, with two network tests scheduled for the end of August and mid-September, said Zhang Xiaojun, spokesman for China Securities Regulatory Commission (CSRC).

The Shanghai-Hong Kong Stock Connect is a stock exchange connectivity mechanism jointly announced by CSRC and Hong Kong Securities and Futures Commission on April 10 this year. Investors will be allowed to trade on each other's market. Previous reports said preparation is expected to last about six months before the program is formally launched.

The CSRC released draft rules in late April for public comments, and published a set of core rules in June.

As of Friday, 90 brokers -- 91 percent of all eligible brokers from the Chinese mainland -- had applied for the pilot program. A total of 215 from Hong Kong have also applied, 43 percent of those qualified.

Source: Xinhua

[winston]

Citi lists beneficiaries of 3 major structural thematic reforms (Table)

1. Hukou reform beneficiaries
Stock / Investment Ratings / Target Price (HK$)
ABC (01288.HK) / Buy / $4.2
CQRC BANK (03618.HK) / Buy / $5
GEELY AUTO (00175.HK) / Buy / $4
MENGNIU DAIRY (02319.HK) / Buy / $41
CSPC PHARMA (01093.HK) / Buy / $8.6
FOSUN PHARMA (02196.HK) / Buy / $38
PING AN (02318.HK) / Buy / $86
Vanke A (000002.SZ) / Buy / RMB15.2
AIR CHINA (00753.HK) / Buy / $6.08
BELLE INT'L (01880.HK) / Buy / $10

2. Fiscal reform beneficiaries
CQRC BANK / Buy / $5
ABC / Buy / $4.2
PING AN / Buy / $86
CHINA LIFE (02628.HK) / Buy / $27
MENGNIU DAIRY / Buy / $41
CHINA RAIL CONS (01186.HK) / Buy / $11.3
CHINA RAILWAY (00390.HK) / Buy / $5.2
CHINA RES POWER (00836.HK) / Buy / $26.5
HUANENG POWER (00902.HK) / Buy / $10

3. SOE reform beneficiaries
SH PHARMA (02607.HK) / Buy / $21
SINOPHARM (01099.HK) / Buy / $23
BAIYUNSHAN PH (00874.HK) / Buy / $35.69
CHINA AGRI (00606.HK) / Buy / $3.85
Shanghai International Airport(600009.SH) / Buy / RMB17.23
CHINA RAIL CONS (01186.HK) / Buy / $11.3
China CNR(601299.SH) / Buy / RMB6.5
AVICHINA (02357.HK) / Buy / $5.5
Baosteel(600019.SH) / Buy / $RMB5.7
SINOPEC CORP (00386.HK) / Buy / $8.23
ICBC (01398.HK) / Buy / $6.6
HAITONG SEC (06837.HK) / Buy / $13.5
DONGFENG GROUP (00489.HK) / Buy / $15
MENGNIU DAIRY / Buy / $41
Poly China (600048.SH) / Buy / RMB7.2

Source: AAStocks Financial News

[winston]

Learning From The Past

We should remember that the index had risen from 20,000 in January 2007 to its historical high of 31,958 in October 2007 - up more than 50 percent in just nine months!

Just after these sharp gains, the HSI reversed course. It went from 31,958 in October 2007 to 10,676 in October 2008, losing 65 percent in one year. Those who were late to cut their losses saw the value of their portfolios depleted.

Every investor hopes to make a fortune, so long as the exposure to risks is controllable. But how many can actually be successful?

Source: Dr Check, The Standard HK

[winston]

Francis Kwok: Be aware of downswing at high level

Francis Kwok, Marketing Director of Bright Smart Group, said fueled by the upcoming launch of Shanghai-Hong Kong Stock Connect program, the Hong Kong market saw a strong uptick, with the Hang Seng Index once advancing to 24912 pts yesterday, only 16 pts from the high of 24,988 as seen on 8 November 2012.

Moreover, as turnover continued to increase recently, the upswing looks robust, but investors need to be aware that the market has accumulated growth of 3232 pts from 21680 (7 May) to yesterday's day-high of 24,914, so any actions for riding the uptrend should not be too radical.

Source: AAStocks Financial News

[winston]

M Stanley: SH-HK Stock Connect has five investment themes

According to the latest research report by Morgan Stanley, the introduction of the Mutual Market Access (MMA) between HK and Shanghai is an important step to establish a "One China" equity market.

The research house expected the linkage will sustain the bull market in H-shares, and may also end the 4-year bear market in A-shares.

Morgan Stanley mentioned Shanghai-HK Stock Connect has 5 investment themes.

Firstly, the continuous narrowing of A/H price spread.

Secondly, HK-listed blue chips (such as HSBC HOLDINGS (00005.HK) -0.700 (-0.840%) Short selling $109.84M; Ratio 12.531% , CHEUNG KONG (00001.HK) +0.100 (+0.070%) Short selling $15.43M; Ratio 5.959% , AIA (01299.HK) -0.450 (-1.070%) Short selling $72.95M; Ratio 18.651% , SANDS CHINA LTD (01928.HK) -3.100 (-5.581%) Short selling $95.96M; Ratio 15.859% and TENCENT (00700.HK) -1.900 (-1.430%) Short selling $342.87M; Ratio 13.227% )will provide an attractive investment opportunity to investors in Shanghai.

Thirdly, [b]revenues of securities brokers and the trading house [/b]will soar continuously.

Fourthly, A-shares respond slower than HSI or MSCI China to improvements of China's macro economy, and A-shares are trading at a 7% discount to HSI.

Fifthly, the MMA may reproduce the synchronized A & H-share ultra-bull scenario in 2006-2007

Source: AAStocks Financial News

[winston]

<Research Report>Citigroup selects best expected earning revisers after result release in August

Citigroup selected the best expected earning revisers after the result release in August:

Stock / 2014 EPS revisions in consensus / 2015 EPS revisions in consensus
FOSUN INTL (00656.HK) / +26% / +19%
CHINA EB LTD (00165.HK) / +12% / +17%
CHINA OILFIELD (02883.HK) / +9% / +8%
GCL-POLY ENERGY (03800.HK) / +9% / +3%
NCI (01336.HK) / +8% / +9%
ANTA SPORTS (02020.HK) / +7% / +10%
GOME (00493.HK) / +7% / +2%
ZTE (00763.HK) / +6% / +4%
SINOPHARM (01099.HK) / +6% / +10%

Source: AAStocks Financial News

[winston]

DBS outlook bullish

DBS Hong Kong is bullish on the yuan, as well as local and mainland stocks ahead of the Shanghai-Hong Kong Stock Connect.

The bank's head of consumer banking group and wealth management Pearlyn Phau, said investors got cold feet in the first half due to the yuan's depreciation, resulting in a mere 3 percent growth in the bank's investment income.

She expects the yuan to pick up steam, edging to around US$6.07 (HK$7.64) by the year end.

DBS is also upbeat about the second half because of the stock connect, expecting it to stimulate investors' appetite and activate the market.

Executive director of consumer banking group and wealth management Janet Chong said DBS had updated its trading system ahead of the potential boom, noting the bank's trading volume of securities in August was already 20 percent higher than the previous month.

Meanwhile, the Mandatory Provident Fund reported a 0.63 percent return in August, according to Lipper.

Source: The Standard HK

[winston]

Mixed views on Stock Connect

Investment bank Goldman Sachs believes the Shanghai-Hong Kong Stock Connect, will allow the combined entity of local and mainland equity markets, to become the second-largest bourse in the world in terms of market capitalization.

It will also convince benchmark compiler MSCI to include A shares in its emerging markets index by next year.

But UBS chief China equity strategist Chen Li said A-share market cap will increase by just 5 percent driven by the Stock Connect, while H-share strategist Lu Wenjie thinks the Hang Seng Index has not much room to climb further over the next few months.

Lu added the daily quota for buying Hong Kong shares is unlikely to be used up in the coming 12 months.

However, CITIC Securities International Investment Management director Danny Yan Kai-chi, estimates investors on both sides will run out of daily transaction quotas in the first 10 minutes after the Stock Connect launches, as the quota is far less than the daily transaction volume.

Goldman Sachs expects mainland investors to prefer dually listed firms which are traded relatively lower in the local market.

HSBC expects large-cap value A shares with high dividends and mid-cap growth companies in the Hong Kong market to be popular.

An estimated 263 Hong Kong shares, representing 81 percent of the local market capitalization, will be eligible for trading through the Southbound Trading Link, and 568 Shanghai-listed shares can be traded through the Northbound Trading Link, contributing 90 percent market cap in Shanghai.

Source: The Standard HK

[winston]

TOL:-

The Red Chips in HK are trading at a premium to their A Shares in Shnaghai.

When they "connect" in late Oct, there could be an arbitrage opportunity:-
1. Short the Red Chips in HK
2. Buy them in Shanghai

Some Examples:-
1. ICBC - HK$5.33 in HK; HK$4.53 in Shanghai
2. CCB - HK$5.97 in HK; HK$5.23 in Shnaghai
3. BOC - HK$3.75 in HK; HK$3.44 in Shanghai
4. China Life: HK$24 in HK; HK$19.97 in Shanghai
etc

If the above is done, wouldn't the HSI drop while the SSE will go up after the 'Connect" ?

So why have the "experts" not done this already ? They can short shares in HK and they can buy A shares in Shanghai using their QFII quota.

[winston]

Observatory: To consider issue of Storm Signal No. 8 tonight

The Strong Wind Signal, No. 3 is now in force. The Observatory said as Typhoon Kalmaegi is forecast to move west-northwest at about 30 kilometres per hour towards the vicinity of western Guangdong to Hainan Island.

As Kalmaegi moves closer to the coast of southern China, its associated rainbands are affecting the Pearl River Estuary.

Winds over offshore waters also strengthened significantly. According to the present track, local winds will continue to strengthen overnight.

The Observatory will consider the need to issue the Gale or Storm Signal No. 8 tonight.


Source: AAStocks Financial News