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

[winston]

At this level, maintain your current holdings.

There is no rush to sell and let's hope that the index will hover around 24,000.

The worst case will see firm support at around 22,300

Source: Dr Check, The Standard HK

[winston]

Shanghai-Hong Kong Valuation Gaps Disappear Before Link

Arbitrage opportunities between dual-listed stocks in Hong Kong and Shanghai are disappearing as prices move toward parity before the cities link their bourses.

The Hang Seng China AH Premium index, which measures the weighted average gap between the largest dual-listed shares, rose as much as 2.1 percent to 100.19, signaling the discount on mainland shares had been erased, and closed at 99.18. Readings of 100 show parity. Mainland companies tumbled in Hong Kong amid the biggest police crackdown on protesters since the city returned to Chinese rule in 1997.

The link, which allows a [b]net 23.5 billion yuan ($3.8 billion) of daily cross-border purchases, [/b]will make it easier for investors to move money between the two markets. Morgan Stanley predicted last month that valuation gaps would disappear as the program leads to the creation of a “one-China” market.

“We’ve seen massive inflow” into mainland shares, Wu Kan, a fund manager at Shanghai-based Dragon Life Insurance Co., which oversees about $3.3 billion, said by phone today. “With the exchange connect coming closer, the market is expecting foreign investors” to buy Chinese shares, he said.

The Hang Seng China Enterprises Index (HSCEI) of so-called H shares in Hong Kong dropped 1.4 percent. The Shanghai Composite Index added 0.4 percent.

While the average gap as measured by the Hang Seng premium index has been erased, there are still many dual-listed stocks with different valuations. Tsingtao Brewery Co. (168)’s mainland shares trade at an 11 percent discount versus Hong Kong counterparts, while Anhui Conch Cement Co. (914) is valued at an 18 percent discount in China, according to data compiled by Bloomberg. Great Wall Motor Co. (2333) trades at a 25 percent premium on the mainland.

Changing Gap

Hong Kong’s exchange released updated rules for the link on Sept. 26. It will reject bids deemed too far below prevailing share prices as authorities seek to prevent investors from “hogging” the daily quota of buy orders available for cross-border trades.

The link, part of China’s effort to open up its financial system and promote wider use of the yuan, will begin with limits on both daily and aggregate purchases as policy makers seek to maintain some control over capital flows. The quotas may eventually be expanded or removed, Charles Li, the chief executive officer of HKEx, said in a blog posting last month.

The Hang Seng China AH Premium index has traded below 100 since March and fell as low as 88.97 on a closing basis in July. The gauge has had an average reading of about 116 since Bloomberg began compiling the data in 2006 and reached 208.06 near the height of a rally in mainland shares in January 2008

Source: Bloomberg

[winston]

<Research Report>Deutsche's China equity model portfolio for 4Q, 2014 (Table)

In a research report, Deutsche Bank listed its China strategy model portfolio for 4Q2014 based on its top-down sector preference and sector analysts? estimates.

Stock / Investment Rating / Target Price (HK$)

BRILLIANCE CHI (01114.HK) / Buy / $16.7
SUNART RETAIL (06808.HK) / Buy / $10.5
WH GROUP (00288.HK) / Buy / $8.3
PETROCHINA (00857.HK) / Hold / $11.53
YIZHENG CHEM (01033.HK) / Buy / $5.5
ICBC (01398.HK) / Buy / $6.8
CCB (00939.HK) / Buy / $7.45
PICC P&C (02328.HK) / Buy / $17.3
CHINA OVERSEAS (00688.HK) / Buy / $27.74
SIHUAN PHARM (00460.HK) / Buy / $7.4
BEIJING ENT (00392.HK) / Buy / $81.5
TENCENT (00700.HK) / Buy / $159
LENOVO GROUP (00992.HK) / Buy / $13.2
CHINA TELECOM (00728.HK) / Buy / $5.6
CHINACOMSERVICE (00552.HK) / Buy / $4.4
HUADIAN POWER (01071.HK) / Buy / $6.7
GUANGDONG INV (00270.HK) / Hold / $9.2

Source: AAStocks Financial News

[winston]

TOL:-

HSI is now at 22,973.

There are some Bull Calls with Strike Price of 22,750 t0 22,800.

Let's see whether they would push the HSI down to 22,750 today to hit those Bull calls.

If at 22,750, then it's another 223 points from here.

[winston]

Deutsche's suggested portfolio of Chinese stocks (Table)

In a research report on Chinese stocks strategy, Deutsche Bank reiterated that the HSCEI is expected to test the lower level of 9,800 at the end of the year, indicating 6% downside compared to yesterday's closing level.

Investors are suggested to overweight defensive sectors. The bank also revealed the suggested portfolio of Chinese stocks as follows:

Stock / % in portfolio / Investment Rating
BRILLIANCE CHI (01114.HK) / 5% / Buy
SUNART RETAIL (06808.HK) / 5% / Buy
WH GROUP (00288.HK) / 4% /Buy
PETROCHINA (00857.HK) / 5% / Hold
YIZHENG CHEM (01033.HK) / 5% / Buy
ICBC (01398.HK) / 8% / Buy
CCB (00939.HK) / 8% / Buy
PICC P&C (02328.HK) / 7% / Buy
CHINA OVERSEAS (00688.HK) / 5% / Buy
SIHUAN PHARM (00460.HK) / 5% / Buy
BEIJING ENT (00392.HK) / 6% / Buy
TENCENT (00700.HK) / 8% / Buy
LENOVO GROUP (00992.HK) / 5% / Buy
CHINA TELECOM (00728.HK) / 8% / Buy
CHINACOMSERVICE (00552.HK) / 7% / Buy
Huadian Power (01071.HK) / 5% / Buy
GUANGDONG INV (00270.HK) / 4% / Hold

Source: AAStocks Financial News

[winston]

UBS: Focus more on dividend yield growth in rising rate environment
2014/11/21

UBS said in a report that it has been positive on high yield investment since 2009 given the low real interest rate.

The bank said the US 10-year bond yield is forecast to rise to 3.5% but it will not destroy the yield investment theme though it will bring challenges.

The bank held that investors should adjust income funds portfolio if the bond yields rise and certain yield stocks with dividend growth perform better than straight yield proxies in a rising rate environment Therefore, investors should consider future dividend yield when paying attention to the dividend yield.

Based on the above concept, the bank selected a list of stocks for consideration, including:-
1. DATANG POWER (00991.HK) -0.020 (-0.474%) Short selling $4.29M; Ratio 10.516% , which may be re-rated for its potential restructuring and rated Buy,
2. CCB (00939.HK) +0.020 (+0.358%) Short selling $71.23M; Ratio 8.053% , with the tier 1 core capital quality better than its peers, was also rated Buy.

Other Hong Kong-listed stocks on the list include
1. BANK OF CHINA (03988.HK) +0.020 (+0.539%) Short selling $92.05M; Ratio 11.395% ,
2. BOC HONG KONG (02388.HK) +0.200 (+0.752%) Short selling $29.66M; Ratio 15.129% ,
3. CHINA COMM CONS (01800.HK) -0.080 (-1.148%) Short selling $84.40M; Ratio 25.549% ,
4. CM BANK (03968.HK) 0.000 (0.000%) Short selling $17.70M; Ratio 3.406% ,
5. MINSHENG BANK (01988.HK) 0.000 (0.000%) Short selling $37.95M; Ratio 9.272% ,
6. CHINA OILFIELD (02883.HK) +0.400 (+2.732%) Short selling $44.83M; Ratio 11.934% ,
7. CHINA RES POWER (00836.HK) -0.050 (-0.244%) Short selling $69.86M; Ratio 22.999% ,
8. COUNTRY GARDEN (02007.HK) -0.020 (-0.694%) Short selling $6.49M; Ratio 13.304% ,
9. FRANSHION PPT (00817.HK) +0.030 (+1.449%) Short selling $4.91M; Ratio 20.836% ,
10. HANG SENG BANK (00011.HK) -0.700 (-0.543%) Short selling $13.37M; Ratio 10.509% ,
11. ICBC (01398.HK) +0.020 (+0.405%) Short selling $85.94M; Ratio 8.558% ,
12. PETROCHINA (00857.HK) +0.160 (+1.874%) Short selling $50.96M; Ratio 4.714% ,
13. SHIMAO PROPERTY (00813.HK) +0.260 (+1.639%) Short selling $15.70M; Ratio 21.211% and
14. YINGDE GASES (02168.HK) -0.070 (-1.211%) Short selling $21.07M; Ratio 26.928% .

Source: AAStocks Financial News

[winston]

<Research Report>Stanchart picks of Mainland rate-cut beneficiaries

Standard Chartered selected the following to be the main beneficiaries of the interest rate reduction in Mainland:

GALAXY ENT (00027.HK)
MGM CHINA (02282.HK)
CHOW TAI FOOK (01929.HK)
HUTCHISON (00013.HK)
SHK PPT (00016.HK)
HANG LUNG PPT (00101.HK)

Source: AAStocks Financial News

[winston]

IPOs

The local bourse is set to embrace a record high 109 IPOs this year, a KPMG report said.

With HK$225 billion raised, Hong Kong is likely to become the world's second-largest IPO market after the New York Stock Exchange.

KPMG, one of the "big four" auditors, expects 110 companies to come and tap more than HK$200 billion from public listings next year.

Ernst & Young partner Ringo Choi Wai-wing said Hong Kong will remain attractive thanks to its regulatory system and full access to international investors, though the Shanghai bourse may surpass the local exchange once it fully opens.

"The one-share-one-vote rule is not a must, as long as regulations ensure market transparency and rights of small or medium investors," Choi added.

Source: The Standard HK

[winston]

Deutsche 2015 Top Picks of Chinese stocks (table)

In a research report, Deutsche Bank listed the top 10 Chinese stocks in 2015 as follows:

PING AN (02318.HK) +0.800 (+0.963%) Short selling $377.87M; Ratio 19.511%
CHINA OVERSEAS (00688.HK) +1.500 (+6.000%) Short selling $183.49M; Ratio 21.960%
CITIC SEC (06030.HK) -0.100 (-0.328%) Short selling $32.71M; Ratio 9.909%
CHINA RAIL CONS (01186.HK) -0.200 (-1.934%) Short selling $5.26M; Ratio 3.548%
BBMG (02009.HK) +0.460 (+6.609%) Short selling $6.24M; Ratio 4.484%
CSPC PHARMA (01093.HK) -0.070 (-1.048%) Short selling $384.94K; Ratio 1.335%
CHINA POWER (02380.HK) +0.050 (+1.282%) Short selling $1.57M; Ratio 2.865%
BJ ENT WATER (00371.HK) -0.030 (-0.566%) Short selling $1.19M; Ratio 5.360%
HUADIAN FUXIN (00816.HK) +0.070 (+1.902%) Short selling $2.00M; Ratio 3.223%

Source: AAStocks Financial News

[winston]

<Research Report>DBS Vickers expects HSCEI to hit 14,200 at end-2015; gives top ten BUY list

In the latest research report, DBS Vickers believes there is still upside for A-shares in 1H15, however, the momentum may lose in mid-2015 when policy expectations tighten.

Its 2015 year end targets for Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) are 25,700 and 14,200, respectively.

Stocks in the research house's top ten Buy list are shown as follows:

Stock / Target Price (HK$)
ANHUI CONCH (00914.HK) / 35
CCB (00939.HK) / 7.72
C FIBER OPTIC (03777.HK) / 3.9
CM BANK (03968.HK) / 22.3
COUNTRY GARDEN (02007.HK) / 4.76
CHINA RES LAND (01109.HK) / 23
CGS (06881.HK) / N.A.
HAIER ELEC (01169.HK) / 27.51
VALUE PARTNERS (00806.HK) / 6.88
WASION GROUP (03393.HK) / 9.2

Source: AAStocks Financial News