Week in Review: The Bulls Rush In to Close Mixed Week: Techs Surge and Li's Talk
Jan 19, 2001 - 17:59:33 HKT - QuamResearch
Volatility ruled -- except Tuesday -- in a signal that it's the punters who were driving things until Friday when market activity swelled following huge overnight gains in the U.S. which dragged along a number of local plays. The HSI ended the week at 15,933.55, a 404.80 point gain on the day and a 638.13 point, 4.2% gain on the week. Turnover rose to HK$14.72 billion, about 70% above the average of the past week and a half.
Previous Friday: up 205 to 15,295
Monday: down 1.66 to 15,294 -- non-HSI movement, techs.
Tuesday: up 69 to 15,363, -- no direction; U.S. closed previous for MLK holiday
Wednesday: down 102 to 15,261 -- red chips victims
Thursday: up 267 to 15,528 -- surge in PCCW and China plays
Friday: up 405 to 15,934 -- surge on U.S. and large volume
The Nasdaq jumped 3.2% overnight with a lack of bad news or negative profit surprises the cause. This alone suggests one retain at least a little caution. Hopes of stronger Fed action in dropping rates and Republican hysteria at having Dubya in and Bubba out may also have added excitement to the floor. It was this that was largely responsible for the frenzied Hong Kong Friday as a number of stocks with ADRs traded in the U.S. saw large overnight gains. In some of these cases, a small number of enthusiasts across the great waters helped influence positive feelings here at home. For example, PCCW (8) saw its ADRs rise 11% last night, but volume was just 457,500 units, or a little under HK$18 million in turnover. Compared to today's HK$724 million in turnover in HK -- an above average but not unduly strong day -- the U.S. trading was small, yet it yielded enormous influence. Today, Friday, PCCW rose in HK, 37.5 cents or 8.8% -- Lucky Richard -- to $4.625. PCCW got beaten severely this week and dove strongly into the $3 range, but surges yesterday and today left the stock above last Friday's $4.55 close.
Speculation helped the Internet startup turned teleco. Richard and his father were eating together at a restaurant when the son gave a small interview and expressed confidence in his company and the stock. We do not share his enthusiasm though we agree if the elder Li steps in to bail out his woeful son, then not only would the stock improve but also the prospects of the business itself. There may have also been a bit of short covering that helped the stock hold its short-term gains. But the shorts have not yet gone home. The stock market today recorded HK$464.77 million of short selling orders on 28 stocks, and PCCW alone accounted for HK$103.4 million, 22%, of the total.
The ADR story is not limited to PCCW. Even grand old HSBC (5) will sometimes be pulled by its U.S. semi-shares. Overnight, the bank's ADRs rose 1.4% to US$75 each. With a 1-5 ratio, that equated to about HK$116.70 per share, and sure enough, the bank opened up at HK$117 and spent the rest of Friday in Hong Kong floating around that level. There were some 6.3 million shares traded here for turnover of HK$738 million. In contrast, the overnight ADRs that set today's range in motion counted 83,300 for turnover of around HK$48 million. The tail that wags the dog?
Technology-related shares and China plays seemed the most active this week. The first three days of the week were happy ones for pessimists, but Thursday and Friday saw a marked reversal of direction. Unfortunately, despite the apparent strength, one would not be alone in wondering if the rebound was technical.
China shares were at first dogged by fears over increasing regulation of listed shares in the mainland -- surely a good thing -- but punters decided that enough damage had been done by the middle of the week that the counters were once again worth a bet. The H-shares actually ended this Friday about where they were last Friday despite the day-to-day gyrations (Sinopec, 386, at $1.20 vs. $1.15 last week; Petro, 857, at $1.38 vs. $1.32; Kelon, 921, at $1.18 vs. $1.16; Shanghai Pechem, 338, at 78 cents vs. 78 cents; Great Wall Tech, 74, unchanged for the week at $2.475 despite a 6.5% rise today; etc).
The picture over the week was not that much divergent among the red chips. They were generally little changed, or perhaps down, but for the tech contingent, which survived only by virtue of today's power rise: China EB, 165, at $7.75 vs. $8.95 last week despite a 2% rise today; China EB Tech, 256, at $41.5 cents vs. 42 cents, despite a 3.75% rise on the day; Citic Ka Wah, 183, at $2.775 vs. $2.75; Shanghai Industrial, 363, at $14.50 vs. $15.10. The three main technology plays in the red chip index were up for the day and the week: Stone, 409, at $1.36 vs. $1.24 with today's rise worth 12 cents; Founder, 418, at $2.375 vs. $2.175 -- up 17.5 cents today; Legend, 992, at $6.85 vs. $5.65. Legend was not saved by one day's miracle rise. The stock rose 75 cents to end the week.
Favor flowed away, then favor flowed back: technology. China Mobile (941) rose $2 today, 4%, to $49.40 and is strongly above last week's $45.10 close. Unicom (762) rebounded strongly with a 60 cent, 4.7% rise today to $13.30 compared to $11.65 last week. Hutch (13) was a real superstar, especially for a conglomerate, with a $5, 5% rise to $104 versus $97.25 last Friday. More thrilling risers were Johnson (179) -- 6.5% today to $13.05 or 18.6% for the week -- and Smartone (315), 10.5% today to $13.70 and 20% for the week. For PCCW followers, despite its Friday rise, its just 1.6% up for the week. VTech (303) rose 9% today to $7.15 and 16% for the week. Varitronix (710) rose 6.5% to $9 and 17.6% for the week. ASM (522) rose 0.7% today to $14.75 and 26% for the week.
The week was wild, but next week in HK will probably be quiet: there are just two days of trade as the Chinese New Year (Year of the Snake) holidays start on Wednesday*. Some punters may get restless. "With that many days off, what will happen should something really good / bad happens in the U.S. during the holiday? I won't be able to touch my stock for a full five days." Those are the questions that devour day traders rather than Quam-like investors, those by definition who don't think 5 days of uncertainty have any significance for fundamental businesses and investments.
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* This means I'm taking off Tuesday, Wednesday and Thursday nights. HAPPY NEW YEAR! |
