HK & China - Market Direction 01 (May08 - Oct08)

[winston]

From UOB-Kay Hian:-

Several ways to play August relief rally. If investors have not staked any will support Beijing’s policy tilt towards promoting economic growth. (A PMI reading above 50 indicates that the manufacturing economy is generally expanding, and one below 50, indicates shrinkage.)

There are three main ways to play the rally:

Trading-oriented investors can go for severely bashed up stocks and sell into strength later during the rally. Some badly-battered counters are PICC (2328.HK), Chalco (2600.HK), Ping An (2318,HK), Datang International (991.HK), Guangzhou R&F (2777.HK), and China
National Bldg (3323.HK). They are down between 50-70% from their 52-week highs whereas the H-share index was down about 40%.

Buy oversold but still solid stocks. Coal and steel stocks have fallen sharply in the past few weeks because of fears of new or potential price caps. Yanzhou Coal (1171.HK) is our top coal pick, and Angang Steel (347.HK) our top steel pick. Yanzhou can be a short-to-medium term BUY, whereas we advise buying Angang and sell into strength in the short-term, as price pressures are building up strongly fro steel mills.

Stocks to gain from price liberalisation. Power, energy and fertiliser plays ought to gain from expected further price hikes post-Beijing Olympics. We will go for Datang (991.HK), PetroChina (857.HK) and China Bluechem.

Sectors to short at the height of the August rally. We have just downgraded the shipping sector involved in the international dry bulk trade as China’s iron ore imports should fall strongly in 3QFY08.

Banking and property, Any loosening of loan quotas will benefit the banks, of which China Merchants Bank is our top stock pick. The property market is still too much driven by negative newsflows. Unless we see a clear policy shift, any rise of the share price will be short-lived.

[purplecloud]

Aug. 1 (Bloomberg) -- China is restricting approvals for share sales to arrest a decline in the world's worst-performing major stock market, twopeople familiar with the matter said.The China Securities Regulatory Commission is delaying the issuance of written approval documents, the final regulatory stage, to companies preparing initial public offerings, said the people. They declined to be identified because they aren't authorized to speak publicly on the matter.

Regulators rejected Great Wall Motor Co.'s planned share sale last month,and about a third of IPO applications were turned down, compared with 8.3 percent when stocks peaked in October, based on data from the watchdog's Web site.

CSRC Chairman Shang Fulin is trying to cushion a market that plunged 48 percent this year, making the CSI 300 Index the worst performeramong the 20 biggest benchmarks.``Controlling share sales is an important tool for CSRC, and it's effectivein the short term,'' said Leo Gao, who helps manage the equivalent of $2.3billion at APS Asset Management Ltd. in Shanghai. ``More stock sales in a bear market is bad news'' for investors.There were 91 billion yuan ($13.3 billion) of IPOs in China in the first half, a 26 percent drop from the same period a year earlier, according todata compiled by Bloomberg. The CSI 300 fell 1.6 percent at 11:28 a.m.local time today.

Great Wall, China's largest maker of sport-utility vehicles, had its application for a secondary sale in Shanghai rejected by regulators on July14.

[-dol-]

Shanghai Composite 2,741.74; down -60.08 (-2.14%)
--> More than undoing Friday's rebound on President Hu's comments on growth

Hang Seng Index 22,514.92; down -347.68 (-1.52%)
--> Mirroring China market's movements

Only 4 more days to 08 08 2008.

[winston]

Hi Dol,

Dont look too strong leh..

Watched the HSI call the whole afternoon but decided against it for today

Take care,
Winston

[-dol-]

Hi winston,

Not many participants in the market - so left to brave, smart, resourceful and nimble traders to fight it out among themselves. It is quite a spectacle.

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Source: Reuters

Market watchers had been hoping to see a strong rally in local shares in August with Beijing Olympics fever prompting market-boosting measures from the Chinese government.

"It's a bit of an anti-climax, but with the U.S. economy teetering on the brink of a recession Hong Kong stocks look poised to sink further. The HSI may slip below 22,000 this week," said Francis Lun, general manager with Fulbright Securities.

[Dubby]

State comment points to looser lending policy
KatherineNg
Tuesday, August 05, 2008

Amid high expectations that China may loosen macroeconomic measures, a senior official interviewed by the state- run People's Daily yesterday confirmed that further tightening is unlikely.

"There is no need for China to step up macroeconomic controls as the impact of measures has already taken effect," Liu He, a deputy director of the general office of the premier-led State Council central finance committee, was reported as saying.

Economists said Liu's comment in the state mouthpiece signaled further relaxation in bank lending and the property market was highly likely. Last week, rumors were rife that mainland banking regulators will soon allow commercial banks to increase their lending quotas for this year by about 5 percent.

"Beijing is cautious not to repeat the US experience of the economy being dragged down by a worsening property sector," said JPMorgan economist Frank Gong.

"We cannot sacrifice economic growth for curbing inflation or the other way round," Liu said in the interview. He said measures should be tailored to accommodate different sectors' needs, especially with small and medium-sized enterprises. "We need to help SME firms out from the water through lending policy changes and stabilizing our export trade through export tax rebate adjustments," said Liu.

In the second quarter, China recorded economic growth as low as 10.1 percent, which brought first-half GDP growth down to 10.4 percent. The economy expanded 10.6 percent in the first quarter.

Inflation remained high at 7.1 percent in June while the producer price index rose by 8.8 percent. Despite a decline in consumer prices, the State Council's Development Research Center believes full-year inflation will not fall below 7 percent.

Liu said China must strengthen efforts to control inflation, and at the same time rationalize domestic energy prices to smooth price distortions by balancing supply and demand.

"The target to effectively curb fast rising prices is attainable," Liu added.

[winston]

No Luck. Bought some Calls late yesterday. The Dow went up 330 points and they may have to close the stockmarket

==================================================

Hong Kong Issues Cyclone Warning, Closing Schools
By Jacob Greber and Bruce Grant

Aug. 6 (Bloomberg) -- Hong Kong schools and government offices will be closed and the stock market probably shut today as the city, which is hosting some Olympic events, braces for Tropical Storm Kammuri.

The city raised the No. 8 Storm Signal at 5.40 a.m. local time, meaning that winds with speeds of 63 kilometers per hour or more are forecast, the city's weather observatory said in a statement on its Web site today.

The city's stock market will ``most likely'' be closed, Hong Kong Exchanges and Clearing Ltd. spokesman Henry Law said by phone today. Hong Kong trading can start two hours after the No. 8 signal is lowered, Law said. Trading in the city usually starts at 10 a.m.

Kammuri is about 170 kilometers (106 miles) south of Hong Kong and moving west-northwest at about 14 kilometers an hour, the observatory said. The storm is forecast to be closest to Hong Kong at about midday local time and winds are expected to strengthen. Hong Kong's airport is operating as normal so far, according to an airport authority spokesman who declined to give his name.

Equestrian Events

Hong Kong, which is regularly buffeted by tropical storms and typhoons during the northern hemisphere's summer, is hosting equestrian events for the Olympics from Aug. 9. Contingency plans are in place if a storm should hit during the events, according to Chief Secretary Henry Tang, the city's second- highest ranking official.

``If necessary, the events will either be postponed or rescheduled to another day,'' Tang said in an interview with Bloomberg TV last week.

The observatory advised Hong Kong residents to lock all windows and doors and put adhesive tape on large panes to reduce damage by broken glass. It told people to stay away from the shoreline because of rough seas.

Kammuri is the Japanese name for the constellation Corona Borealis, which resembles a crown, according to the Hong Kong Observatory, which lists names used for tropical storms and typhoons formed in the northwest Pacific.

[millionairemind]

W,

If DOW cheong another 200pts tonight, HSI will gap up 1000pts on Thursday.. THEN YOU SUPER HUAT AR!!!

Congrats!!!

Cheers,
mm

[winston]

Hi MM,

Let's hope u r right ! However, Shanghai is off it's peak now.

Those who shorted the HSI yesterday, must be thanking their lucky stars now

Take care,
Winston

[winston]

Market rally after Games unlikely
Katherine Ng
Thursday, August 07, 2008

Hopes of a pre-Olympic rally in mainland stocks have been dashed and a rebound after the Games may be unlikely because underlying risks in China's economic growth still linger.

"Both concerns of corporate earnings and offloading of unlocked shares continue after the Games. Although there could be positive measures to revive sentiment, a big rebound is unlikely," said Andrew Wong Wai-hong, head of research and retail equity president at Glory Sky Group.

China's benchmark Shanghai Composite Index has fallen 48 percent this year, closing at 2,719 points yesterday.

Institutional investors have been staying away as turnover in Shanghai A shares have shrunk to an average 30 billion yuan (HK$34.2 billion), the lowest in 19 months, in contrast to the experience of previous Olympics hosts.

One year before the 1988 Seoul Games, Korea's KOSPI index rose 48.5 percent, and it was 30 percent up a year after the event. Australia's ASX Index gained 6.4 percent 12 months ahead of the 2000 Sydney Games but a year later the increase was only 1.8 percent.

"Stock market performance all depends on economic fundamentals," said Xue Lan, head of China research at Citigroup. "The rising cost contributed by high raw material prices and slowing economy has worried investors. Whether there is a pre- Olympic rally or post-Olympic rally does not matter now."

China's economy has slowed to a 10.1 percent rise in the last quarter, because of lower external demand and surging raw material prices.

Economists estimate China's economy will slow to about 10 percent this year and may dip to 9 percent next year.

Vincent Wang of UBS last month forecast the mainland's best performing banking sector to record a mere 7 percent growth next year as non- performing loans will be significantly higher.

"Big players have been staying away from the market. Despite the industry regulator restricting those offloading in secondary market, data showed offloading has not eliminated as placement of shares are on the increase," Wong of Glory Sky found.