Quam Views QuamSwer Tony's Portfolio
Daily Quomments
16 Aug ,2000
A volcano erupted in Hong Kong. There had been rumblings under the property section of the market, as had been forecasted by Quamnet two months ago, and the volcano erupted this week.
Sun Hung Kai Props, #16, perhaps the leader of the straight property development counters, had been traded at $42.50 only on 29 May 2000, seven weeks ago, and was yesterday traded up to $75, before closing up $3.25 at $74.50. This is symptomatic of this section of the market with Henderson Land, #12, up $1.50 to $42.10, having emerged from #27.50 during the last week of May, and Sino Land, #83, yesterday up 15 cents to $3.925 after wallowing at $2.25 during May. Sino Land had started this week at $3.45, so a 13.75% rise in just 2 days cannot be sneezed at. Henderson Land had started on 1 August at $35, and a 20% rise within three weeks is also worth considering.
The market has been encouraged by the response to recent new development offerings, especially in the more luxury class housing where money seems to be being amassed rather than at the lower end where money is still very tight. These three companies, as well as Hang Lung, #10, up to $7.30, up 35 cents, having started at $4.80 at end May, and New World, #17, up $1.25 to $12.65 yesterday, having started June at $7.15, a colossal rise of 75% within 2 months, have June financial year ends, and therefore they will be reporting their full year results during September, with inefficient laggards perhaps not reporting to October. But these results will be seen to be good, and on the strength of current sentiment that improvement will be further expanded upon during 2000/2001. Also many of those companies had made some really unwarranted provisions during the years of 1998/1999, which will need to be reversed, even if not this year then certainly during the next financial year.
Regarding the government's view of the housing situation, where they have been abandoning provision of housing for the poor in the interests of forcing more demand from the poorer classes back to the private section. I heartily endorse William Overholt's view, at a forum yesterday, "My view is that we should be worrying about the half of the population which does not own property and not the impoverished feeling of those who do".
This volcanic effect is not just reserved for property developers but the property investors as well. Kerry Properties, #683, the property conduit of the Malaysian Kuok family, rose $1.20 to $10.20. This company has a rounded portfolio of properties with big interests in godowns mixed with a selection of excellent high-grade residential properties for lease. This company may be expected to be in the bidding for a new government site in Kowloon Bay for bidding on 25 August. It is amongst these portfolio companies that investors can sleep more comfortably, even if their profits may not be so great.
The market had been fuelled by the big guns, with HSBC, #5, adding $2.50, after having gone ex div the previous day, and is now standing at a capitalisation greater than $1 trillion, into the 10 figure numbers, and China Mobile, #941, up $3 to $62.75, recovering all of its earlier two day falls. China Mobile's current market value is now $860 billion, showing the ebbing tide of the telecoms, media and technology stocks as this share had been up to $80 during early March when its own capitalisation had been greater than HSBC and its market value was then at over $1 trillion. However it is still too early for the cock to crow as when China Mobile issues more shares, as it will need to, to encompass its inclusion of the new 7 territories mobile phone networks, its own capitalisation can quite probably go back to between $1.2 trillion to $1.4 trillion, and ahead of HSBC.
Yesterday the property eruption carried the HSI higher by 465 points to 17,464 in a larger, but still not as much as previous daily turnover, in fact still below its average over 1 year. The index had moved up from 17,029 to 17,536, with 414 gainers outweighing 232 losers. Red chips did join in the jollity being up 15 to 1,426 but H shares missed out and fell 12 to 514. A shares in China also had mixed results, up 1 to 2,201 in Shanghai and down 1 to 685 in Shenzhen, in turnover of RMB22.6 billion.
First Tractor, #38, came out with another warning, and announced that they will need to report a loss. This followed Guangdong Kelon, #921, disappointing profit figures, as they had previously warned, but yesterday saw another 16.5 per cent taken off its share price, down 55 cents to $2,775. This highlights the risk of investment in PRC companies, especially the industrial ones, where the standard of reports seems to fall short even of the standard maintained in Hong Kong. In fact yesterday the SEHK had to rap another China company, China Aerospace, #31, lightly over the knuckles for disregarding the listing rules.
We had received many enquiries over a period as to whether it was good to buy China United, at 1 cent per share. Our emphatic answer was a decided no, and now those who still persisted in buying it can see that by consolidating the shares even 1 cent was too high, as they consolidated 5 shares into 1 share which is now being traded at 2.8 cents, and it is doubtful that even that can be sustained.
"We are not in financial difficulties", say the directors of China United in today's advertisement, "but the company has ¡Kreached in principle agreements with all the banks¡Kregarding debt restructuring involving the amount of $396.7 million. The directors have said yesterday¡Kthe company would next week work on the non.bank creditors involving debt of $198.4 million". We really do wonder what being in financial difficulties would entail. (End)
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