stockhouse@the bell - StockHouse.com.hk's Daily Wrap on The Markets
January 4, 2001
Today in the Markets
Bulls Roar After Rate Cut
Hong Kong stocks rallied across the board as turnover more than tripled on turnover Thursday. Wall Street came back to life after the US Federal Reserve's surprising 50-basis point interest rate cut overnight. All Asian markets echoed Wall Street's rejoicing and moved higher. Market observers were amazed by both the magnitude and speed of the rate cut, signaling an urgency in halting a slowing US economy.
The Hang Seng Index jumped 645 points, or 4.4 percent, to 15,235, after reaching an intraday high of 15,312, up 5.0 percent. Gains were broad-based as mirrored in the healthy turnover of $14.4b, against Wednesday's $4.7b.
The NASDAQ rocketed 14.2 percent to post its biggest one-day percentage gain ever, while the Dow soared a rather moderate 2.8 percent after the Fed cut its key federal funds rates by a half-percentage point to six percent. On Thursday, the Hong Kong Monetary Authority followed suit by cutting the base rate it charges banks to borrow from its overnight discount window by 50 basis points to 7.5 percent.
Interest-rate sensitive property counters outperformed the other sectors on heavy short covering as lower borrowing costs could stimulate the loan market for banks as well as the real estate market. The Hang Seng Property Sub-Index surged 7.7 percent to 19,222. Leading the sector's gains were New World Development [17], Sun Hung Kai Properties [16] and Henderson Land [12]. New World scored the highest percentage point gain of 13.0 percent to $10.45. The sector's most active Sun Hung Kai leapt 9.2 percent to $80.50, while Henderson Land put on 10.3 percent to $41.90.
Hysan Development [14] and Hang Lung Developent [10] each also rose more than nine percent to $11.85 and $7.80, respectively. Second actively traded property leader Cheung Kong [1] gained 5.9 percent to $104.00. Wharf [4] and Amoy Properties [101] both hit 52-week highs. The former added 5.8 percent to $20.10 and the latter was up 6.3 percent to $9.35.
Telecoms came second as the days' biggest gainers. Heavyweight China Mobile [941] moved up 5.4 percent on the day's largest turnover for an individual stock of $1.3b. Hutchison Whampoa [13] and Pacific Century CyberWorks [8] climbed 4.5 percent to $99.00 and 6.2 percent to $5.15, respectively.
"Institutional funds returned to the market on the bullish sentiment. Telecom stocks will benefit because Japan will commence 3G mobile phone operations in May. Many wireless companies have to borrow money for 3G investments and cheaper credit will be good to debt-heavy telecom counters," said Steve Cheng, Executive Director of Tanrich Securities.
Banking shares underperformed the broader index with comparatively lesser gains as some outperformers have technically reached overbought positions, and the analyst believes future upside is rather limited. Hang Seng Bank [11] and Dao Heng Bank [233] finished the day at their 52-week highs at $106.00 and $45.00, forwarding 4.4 percent and 3.4 percent, respectively. HSBC [5] moved up 3.6 percent to $116.00 with $1.2b worth of shares changing hands.
Hong Kong exporters to the US, which were hit badly in the previous trading days, rebounded significantly. Li & Fung [494] and Legend [992] soared 9.9 percent to $13.85 and 8.3 percent to $4.88. Micro-motor maker Johnson Electric [179] clawed back a gain of 6.3 percent to $11.80.
H-share heavyweight PetroChina [857] jumped 11.1 percent to $1.40, leading the H-share sub-index's outperformance.
Market Preview
Positive sentiment seems to have arrived back into the market as inflows of funds bolstered the Index. The US Fed last night hinted that further interest rate cuts could be on the way, "perhaps as early as the next scheduled FOMC meeting on January 30 and 31", the Financial Times suggests in a report on Thursday. Due to the limited upside of property and banking shares as some of them have been technically overbought in the wake of the recent tech weakness, beleaguered telecoms are set to roll. Some funds are seen to have switched back to the sector on Thursday.
"Gains in the Hang Seng Index will be ahead of the NASDAQ as our economy are picking up whilst the US's is slowing. Investors trading in the Hong Kong market are eyeing opportunities bestowed by China's impending WTO accession, which is not seen in the US markets" said Mr Cheng.
Mr Cheng believes the Hang Seng Index may consolidate in the short run but gains will be sustained. In the longer term, resistance is seen at 16,000.
STOCK WATCH
HOT STOCK
China Merchants Hldgs Int'l [144] may rise after the management revealed that a corporate restructuring would take place during the Lunar New Year. Meanwhile, UBS Warburg also recommends the stock, citing the benefits from the re-opening of direct shipping link between Taiwan and the mainland.
COLD STOCK
Prosper eVision [979] may face pressure as some key shareholders may offload their holding due to disagreements.
StockHouse Financial News
Pro Picks: CASH Online / Capital / StockHouse Seminar - Speakers Give Their Top Year Of The Snake Stocks
By Agnes Tsang
CASH Online, Capital Magazine and StockHouse Media will be jointly hosting a seminar on January 6 2001. We have invited the three speakers to give StockHouse readers an early look at their top three stock picks for the Year of the Snake.
Full Story
Banking Sector: Rate Cut Beneficiaries
By Grace Lee
That US interest rates are set to be cut is all but confirmed. That Hong Kong banking stocks will benefit is also widely believed but the question of which local banks are best positioned for a US interest rate cut is less clear.
Full Story
Phoenix Satellite Television: Early Bird Catches More Ads
By Alice Poon
The newly launched Phoenix InfoNews Channel of Phoenix Satellite [8002] may not be the only foreign satellite channel carrying global financial news to a Mainland audience but it is likely the first such channel to broadcast in the national language of Putonghua. As such, the new channel, together with the Company's popular Chinese channel, is expected to take a dominant position in the fast growing China TV advertising market.
Full Story
Ming Pao Enterprise: Sale of Magazine Has Intangible Benefits
By Alice Poon
Fierce competition in the local print media industry has led to major ownership changes at Sing Tao [233] and Sing Pao this year. In a sign of the hardships arising from operating in a depressed environment, Ming Pao Enterprise [685] announced its intention to sell 50 percent of its weekly Yazhou Zhoukan magazine to Tom.com [8001]. The move was preceded by a September sale of a 5-percent interest in the Company's online subsidiary, Mingpao.com, to Yahoo! Inc [YHOO].
Full Story
CEO Interview: WellNet Holdings' Chan Shing Blurs The Distinction Between Old Economy and New
By Barton Tse
WellNet Holdings [24] has successfully used the Internet to enhance its business and operations. It owns and operates WorldMetal.com, a metal trading platform that functions as an on-line marketplace. In an exclusive interview with StockHouse, Company Chairman Chan Shing spoke about the blurring of the old and new economies and how WellNet aims to capitalise on the narrowing differences between the two. Mr Chan also discussed why investors should view the operational strategy of WorldMetal.com positively. Nevertheless, the share price of the metal trader has languished over the past year, closing Thursday trading at $0.72, 51 percent below its February 16 year-high of $1.39.
Full Story
View From the US: Bullish Ariba Could Rally 56%
By Yola Edwards
Technically, the share price of software maker Ariba [ARBA] looks ready to start a significant new advance. The company's chart shows tremendous support at approximately $50, where a triple bottom has formed. Its share price could rally above the critical 10-day moving average, which is currently at $57. The average is acting as a temporary barrier, but a decisive move through it might propel Ariba's price significantly higher--possibly to as much as $90 a share.
Full Story
News in Brief: Editor's Selection
Sogo Sells H.K. Building For $452.6 Million, Buyer Says
Sogo, the failed Japanese department store operator has raised money to help the company repay its 1.87 trillion yen of debt by selling its Hong Kong building to Chinese Estates Holdings [127] and New World World Development [17].
Full Story
Slower Growth On The Horizon
Hong Kong's real gross domestic product is forecast to have grown by 11% last year but the growth rate is expected to slow to 5.1% in the first three months this year as the economy moves out of deflation.
Full Story
Strong Interest In Park-and-Ride Project
More than 20 developers have shown initial interest in taking part in the Mass Transit Railway Corp's [66] residential and park-and-ride development above Choi Hung Station, including Cheung Kong [1], Henderson Land Development [12], New World Development [17], Sino Land [83], Amoy Properties [101], Kerry Properties [683] and Wharf [4].
Full Story
Cathay's Resolve To Build New Lounges In Region Seen As Boon For Contractors
Cathay Pacific Airways [293] is providing a much needed filip for the hard-pressed construction industry with plans for new passenger lounges at Chep Lap Kok, Bangkok and Seoul airports as design and construction teams are expected to be appointed within the next few weeks.
Full Story
Mergers and Acquisitions
Global China in Talks to Buy Lazard's Sing Tao Stake
Global China Technology [1105], a consumer-electronics distributor is in talks to buy Lazard Asia Fund's controlling stake in the Hong Kong newspaper publisher Sing Tao Holdings.
Full Story
Property Report
Brokerage Bullish On Property
Rental yields are forecasted to surpass mortgage rates later in 2001, encouraging long-term investors to enter the market and limit further significant declines in the market, according to ING Barings.
Full Story
Company Report
Cedar Base 1H Net Profit Down 11.34% to HK$25.6 Million
Cedar Base Electronic [855], a manufacturer of liquid crystal display-based electronic products announced an 11.34% drop in net profit to HK$25.6 million for the six months through September.
Full Story
Company Report
CyberWorks Terms Fail To Draw Bankers
Pacific Century CyberWorks' [8] US$4.7 billion refinancing plan may have to be revised to make it more attractive to sub-underwriters, according to bankers.
Full Story
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