Hong Kong Market Review
2000-03-13
Hutchison, 13, rose $10 to $146.50 on Friday. This virtually compels Li Ka-Shing to announce either a split or a bonus issue. The latest price, nearly $150 perhaps, would cost a normal investor $150,000 for the minimum board lot of 1,000 shares, and that is a hell of a lot of bread. Of course a purchase of the minimum board lot of Cheung Kong, 1, at $110,000 would not be much more better, so at the final announcements of profits for the year 1999 the question will be put to K S Li as to whether he wants the rank and file of investors to participate in his two prime shares. At $110 per share, Cheung Kong is valued at $250 billion, at less than the $280 billion, at which its 50% share in Hutchison is now valued by the market.
If ever there was a strong case for a share split then this is it, because even HSBC, whose minimum market board lot is 400 shares would now cost less than $40,000, and even that is rather forbidding for an ordinary investor. The meetings of these two companies are on 23 March 2000.
K S Li and his companies are now contributing to a new dot.com, this one called ICG, for Internet Capital Group, another speculator in dot.com stocks which since its inception last August has done very well from its US$7 start although it has recently turned back down. ICG had reached US$212 in January and has since contracted back to US$143 last Friday having been down to US$130 on Wednesday. Although Hutchsion has spawned a whole litter of dot.coms it has been Tom.com, 8001, which has drawn the public's attention. On Friday this receded 60 cents to $11.80, a price level which values it at $33 billion, another achievement for a company whose aims have not yet really been made known, other than to make a lot of money.
CWHKT, 8, fell 65 cents to $23.90, at which this company is considered to be worth $290 million whilst PCCW, 1186, down 80 cents to $22.15, which gives it a market value of about $225 billion, now considerably less than its prey. With hindsight at today's share prices one wonders whether the PCCW bid would have looked so appealing to Cable and Wireless's directors, although it can still hold water, unless the market takes it into its head to downgrade PCCW.
That of course is what Yoshitaka Kitao, of Softbank did on Friday at a press conference launching his new Softbank I.A (Strategic), a phoenix rising from the ashes of Cheung Wah Development, 648. In a diatribe he lashed out at Richard Li as being just a speculator looking for fast profits, a call which could as easily be used to describe Softbank itself whose profits come almost entirely from its investments and potential capital gains. He also fulminated against his Japanese rival Yushimatsu Shigata, president of Hikari Tsushin who he described as a copycat. Of course Masaoshi San, president of Softbank did not associate himself with these ideas, and sought to dispel them.
But if the internet war is to become bloodier then the market may decided to withdraw for the time being, and under those conditions share prices are unlikely to hold at these very high levels.
In the meanwhile on Friday Hikari Tsushin came in for another barrage in its home country as the president was being investigated for insider trading. Its stock plunged 25% to 94,000 yen. In Hong Kong Golden Power, 603, fell $1.35 to $10.65 whilst Cheung Wah, 648, closed 95 cents down at $8.80.
Whilst declines, at 462 issues, almost doubled rises, at 246 issues the HSI still managed to gain 195 points to 17,832, with the HSI at one stage again capping the 18,000 mark, at 18,001, before falling to 17,574 during the afternoon under the brunt of these internet plays. Turnover was $18.6 billion.
Red-Chips fell 23 to 1,649, under the influence of Legend, 992, which shed $1 to $14, ex split, equivalent to $56 cum. H shares were more or less unchanged at 349. On the mainland Shanghai A shares fell 29 points to 1,815 whilst those in Shenzhen fell 8 to 559. Turnover drifted to RMB31.7 billion. The Taiwan situation remains tense.
Harbour Ring, 715, was the latest small company to be singled out as a shell for international stock speculator, this because Hutchison had a stake already. This was a toy manufacturer often working in collaboration with Playmates, 635, which fell 62 cents to $1.38. This was surprising as Harbour Ring had gained $6.60 to $7.85, at which it is capitalised at $13.5 billion. Playmates has over 10%, giving it a value of $1.35 billion for this holding. Try that one Max.
Tom.com, 8001, itself fell only 60 cents to $11.80 whilst Hongkong.com, 8006, on its second day of listing dropped another $1.30 to $5.45, also in a vast turnover of $1.5 billion.
Swire Pacific B came in with very satisfactory results at midday, with the B shares earning profits of 57 cents, and with a share price of $4.75 that represents an earnings return of 12%. Next year the company will fire on both its barrels, as airline profits are likely to be at least $3 billion, a 50% improvement, and properties will also be better, the rate being dependant on property completions and sales. Dividend was 22 cents per "B" share.
One share that fell on Friday was JIMH, 100, which fell to $1.99. At this level it has PE of 8.7 times, fair but not magnetic, but with a dividend yield of 11.75%. Threats by Chrysler to take over its distribution of Mercedes could perhaps be true, but that would in all likelihood be quite disastrous for Chrysler, but the new American management has to share its weight even to the disadvantage of the company. So assuming this decision will be overruled at the top, where perhaps the German board who has more knowledge of the Hong Kong market than has the US sales director, whose efforts in Hong Kong to sell US products have been so far a dismal failure. This could be a good spec for the next six months, as the company is expanding in UK.
China Telecom, 941, will have to face more competition. China Unicom is in the process of being dressed up for a listing, but now the Wu Jichuan, the Minister of Information Industry has announced a third competitor China Century will be supported by his ministry.
China.com has pointed out that we made a mistake in the capitalisation of this company. In fact at US$128, the closing price on Friday, on the 480 million outstanding shares it should be US$6.15 billion, or HK$48 billion. This is well ahead of the capitalisation of Tom.com, at $11.80 of $35 billion, or of Hongkong.com, 8006, now capitalised at $22 billion after the decline of $1.30, 20% to $5.45 on Friday. (end)
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