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

[-dol-]

SSE has done quite a few of such moves - but they became preludes to further falls. I think there have been many capitulations in the Chinese market until they are becoming quite common. May be their bear market will die with a whimper rather than with a loud bang...

After SSE close rather positively with a small loss, HSI did not recover but continue to extend their losses into the close. I am unsure if we are there yet in terms of being able to buy and cry (either with tears of joy or agony).

Actually, I am not even sure we should be looking for capitulation because many in the market are too focused on this aspect. May be a few more capitulations is required to really shake out all traces of bullish expectations...

[learn2win]

HSI @ long term support. Make or break?

[helios]

shattered vase @ 21,200!!

(very cool chart)

[kennynah]

like dat....got chance to hold the support lah....(hope so lah)

[learn2win]

Today up 99.39 points..Got chance.

[-dol-]

Just 2 days ago, hope springs eternal.

Today, less so....

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HONG KONG, Aug 15 (Reuters) - Hong Kong shares fell 1.1 percent on Friday, with the main index closing at its lowest level in nearly five months, after a spate of disappointing earnings announcements triggered analyst downgrades.

"With weak corporate earnings pouring in almost everyday and we have been seeing heavy selling since the beginning of the month," Alex Tang, research director with Core Pacific-Yamaichi said.

The blue chip Hang Seng Index <.HSI> has given up more than 7 percent since end-July and 3.3 percent this week.

"Funds have taken to rotational selling with Chinese banks going first, then conglomerates, HKEx and utilities today. Property stocks seem next in line, with a few big results expected next week," said Tang.

[winston]

One more week to go ....

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China regulator says to help stabilise stocks

SHANGHAI, Aug 16 (Reuters) - China's securities regulator said it was concerned about the plunge of Chinese stock prices and would work to stabilise the market.

"We are paying close attention to the fluctuations in the market," a spokesman for the China Securities Regulatory Commission said in a statement carried on the front pages of major business newspapers on Saturday.

The benchmark Shanghai Composite Index .SSEC hit a 19-month closing low on Thursday and is down 60 percent from last October's record peak, dragged down by high inflation, slowing corporate profit growth and heavy supplies of fresh equity.

Regulators have issued periodic statements this year pledging to help stabilise the market. It was not clear if the measures outlined in the latest statement would have an impact.

The commission said it would tighten supervision of sales of shares made tradable by the expiry of lock-up periods related to initial public offers and the reforms of state shareholding structures. Tens of billions of dollars of such shares will become tradable this year and next, pressuring the market.

Restrictions on large-lot sales of the shares will be enforced with a new monitoring system, and the commission will seek to limit the impact of disposals via the use of instruments including exchangeable bonds, it said without elaborating.

The commission said it would pay close attention to supply and demand when approving new issues of shares, and pledged to promote more long-term investment in the market by institutions such as foreign funds and Chinese insurers and pension funds.

Procedures for companies to buy back their own shares would be streamlined, and regulations would be improved to encourage firms to pay dividends. The commission added that it would crack down further on abuses such as insider trading and inaccurate valuation of assets during corporate restructurings.

[winston]

Some decoupling between SSE and HSI last Friday..

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China Stocks Advance as Inflation Concern Eases; Ping An Rises
By Zhang Shidong and Chua Kong Ho

Aug. 15 (Bloomberg) -- China's stocks rose, led by financial companies, as some investors took advantage of the cheapest valuations in more than two years to buy shares and as lower oil prices eased concern that inflation will accelerate.

Ping An Insurance (Group) Co., China's second-biggest insurer, and China Merchants Bank Co. led the advance. Panzhihua New Steel & Vanadium Co. jumped by the 10 percent daily limit after a bigger rival bought a stake in the company. Zijin Mining Group Co. retreated after gold futures dropped.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, rose 4.10, or 0.2 percent, to 2,447.61 at the close, trimming its weekly loss to 5.6 percent. All but 37 stocks in the measure fell this week, by as much as 34 percent. The gauge is at 18 times reported earnings, the lowest since March 2006, according to data compiled by Bloomberg.

``Valuations now look extremely attractive to medium-term investors with a two- to three-year view,'' Geoff Lewis, the Hong Kong-based head of investment services at JF Asset Management Ltd., which oversees $110 billion, told Bloomberg Television. ``So far, the economy is headed for a soft landing and earnings reports have on the whole been satisfactory.''

Merchants Bank on July 4 said first-half profit may have more than doubled as the company extended more loans. It's scheduled to report the earnings on Aug. 19.

Global Indexes

China's benchmark index has tumbled 54 percent this year, the most among 88 global measures tracked by Bloomberg, on concern government measures to cool inflation will damp earnings. The gauge's 14-day relative strength index, showing how rapidly prices have advanced or dropped during the specified time period, was at 27 yesterday. Some investors regard readings below 30 as a trigger to buy securities.

Ping An rose 1.8 percent to 41.83 yuan. Merchants Bank, the nation's biggest dual-currency credit-card issuer, added 1.8 percent to 21.99 yuan. Shanghai Pudong Development Bank Co., the Chinese partner of Citigroup Inc., rose 0.7 percent to 21.26 yuan.

Crude oil dropped as much as 1.4 percent to $113.36 a barrel in after-hours trading. Yesterday, the futures fell 0.9 percent to settle at $115.01 a barrel on the New York Mercantile Exchange. Prices have tumbled 23 percent from the record $147.27 reached on July 11.

Panzhihua

Panzhihua Steel, the publicly traded unit of southwest China's biggest steelmaker, jumped 10 percent to 7.58 yuan. The company said Anshan Iron & Steel Group bought a 5.09 percent stake for at least 1.07 billion yuan.

Maanshan Iron & Steel Co., one of China's biggest producers of construction steel, gained 2.6 percent to 4.38 yuan. Maanshan Steel said first-half profit more than doubled to 2.26 billion yuan after it raised prices on increased demand.

Zijin Mining, China's largest gold producer, lost 1.5 percent to 5.34 yuan. Zhongjin Gold Corp., the second-biggest, slid 4.5 percent to 33.08 yuan. Shandong Gold Mining Co., the No. 3, sank 7 percent to 37.27 yuan.

Gold fell 2 percent to $814.50 an ounce in New York yesterday. The metal is down 5.8 percent for the week and about 20 percent from its record of $1,032.70 on March 17.

Haitong Securities Co., the country's largest listed brokerage by market value, dropped 3.9 percent to 16.88 yuan. The company reported a 1.4 percent decline in first-half profit as the country's equity market plunged, trimming fees and trading income. Net income fell to 2.01 billion yuan.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, added 0.6 percent to 2,450.61. The Shenzhen Composite Index fell 0.2 percent to 697.13.

[winston]

GaveKal: Chinese equities looking increasingly attractive

“After selling off -9.4% in the last two days of trading, and -60% since its peak last October 16th, the Shanghai Composite is now back to December 2006 levels (i.e. below 2500).

“How do we explain this? After all, we have been arguing that the main reason the Chinese equity bubble burst so long before the Olympics (the previously anticipated catalyst) was that commodity prices soared, which in turn squeezed margins, hampered domestic demand, raised political uncertainty and risk premiums, etc…

“So today, with oil and other commodity prices in determined decline, shouldn’t Chinese equities be catching a break? We have come up with four potential explanations for the continued selloff:
1) foreign outflows;
2) continued inflation concerns;
3) excess inventories; and
4) disappointing government support.

“Needless to say, the continued selloff in Shanghai shares is concerning. However, since Chinese shares are now massively oversold and valuations are looking increasingly attractive , we are getting cautiously optimistic. And if commodities can continue to moderate, perhaps the most significant weight on Chinese equities will be lifted …”

[winston]

China stocks slide 3pc on coal shares, listing

China's main stock index tumbled more than 3 percent, pulled down by coal producers after a hike in the coal export tax, and by a drain of funds into China South Locomotive & Rolling Stock Corp as the firm listed.

The Shanghai Composite Index was down 77 points at 2,373.56 just before noon. Excluding trade in South Locomotive, turnover was extremely thin.

Major coal producers such as Shenhua Energy sank after China late on Friday said it was raising export taxes on coke, coking coal and thermal coal to address a coal shortage. South Locomotive surged 70 percent from its initial public offer price to 3.71 yuan (HK$4.22).

REUTERS