Evening Wrap: HSI Softens on Bank and Hutch While PCCW Rockets to $3 on Heavy Turnover
May 03, 2001 - 19:48:49 HKT
QuamResearch
quamnet.com
The stories were not necessarily positive today, but no doubt there are a number of grateful PCCW (8) punters energized by a sudden influx of money into the stock after having seen it drift in the doldrums for what must have seemed an eternity. The HSI closed down 96.10 points, 0.7%, to 13,718.14 on turnover of HK$9.8 billion. The financial stocks were down due to The Bank while the commercial and industrial sub-index saw green due to China Mobile (941) and PCCW.
Properties
The property market is perhaps more depressed than we imagined. Not only is there huge oversupply -- some twice the annual average of the past decade -- but prospective buyers are just not finding it in their hearts to bail out the SAR's notoriously whiney negative equity owners or the property conglomerates that have been stuffing HK for years with small, ill-fitted flats and overpriced office space.
The Land Registry today said it received 7,853 sale and purchase agreements in April. Unfortunately, this number, which applies to both residential and non-residential units, is 31.2% lower from the previous month and 14.1% down from April 2000. The month-on-month volume decrease is slightly mitigated by a lower percentage decrease in dollar terms as the total amounted HK$18 billion, just 15.4% less than in March. Compared to the 31.2% decrease in volume, this suggests that the dollar value of transactions has increased, and this could be a positive signal for luxury properties. The year-on-year dollar decrease was 15.7%. Quam news reported that the statistics relate to transactions executed up to four weeks prior to their submission for registration due to the time lag between the deals and their registration.
The numbers seem to have been released after market close, so tomorrow could be an interesting day for property stocks. Today, the sub-index was mixed with Wheelock (20) the biggest gainer, up 15 cents or 2.3% to $6.55 and Henderson (12) the biggest loser, down $0.50 or 1.4% to $35.50. Cheung Kong (1) gained 25 cents to $89.50, and SHK (16) rose 75 cents to $74.
Henderson's decline came despite, or maybe because of, an altruistic expression of respect -- could we perhaps even say love? -- for one of HK's greatest institutions, the bedrock of our society, the example to our children and our children's children, and the closest thing most humble Hongkongers come to the higher power: the HK Monetary Authority. Yes, today Henderson revealed that the HKMA is buying its new home in 14 stories of the yet-to-be completed International Finance Center (IFC) Phase II for just HK$3.7 billion, a big figure which is nevertheless below the going market rate.
Henderson said it originally wanted HK$3.9 billion for floors 77 to 88 of IFC Phase II and the lobbies on floors 55 and 56. In fact, even more originally, Henderson was planning on keeping the top floors in the towering Central waterfront building for itself. However, Henderson decided to both sacrifice the glory of the top shelf and cut the price by $200 million because the HKMA would lend prestige to the superstructure.
Prestige.
Banish the thought ye mere mortals! It had nothing to do with a weak property market!
Banks / Financials
The banks were mixed evenly in the sub-index but were strongly down amongst the secondary issues. BEA (23) rose 10 cents to $18.20, and Dao Heng (223) rose 25 cents to $58.50. Hang Seng Bank (11) fell 25 cents to $90.50, and HSBC (5) dropped a massive $4 to $97 on turnover of HK$1.02 billion.
HSBC was of course the most pivotal stock in dragging down the index, and the reason centered on concerns that the company was planning to issue new shares to fund acquisitions with Merrill Lynch the one tipped to be bought. HSBC is reportedly seeking the O.K. to issue new shares worth as much as 17 billion pounds (HK$189.4 billion). The 1.9 billion potential new shares represent 20% of the bank's existing capital. The scary thing is our Quamnet news team only managed to get the proverbial no comment out of David Eldon, chairman of Hongkong and Shanghai Banking Corp., when he was asked about it today. A spokeswoman at Hongkong Bank also declined to comment on the rumors but said HSBC had no plans to issue new shares for now.
The second-line banks were more down than up, and the hardest hit were Wing Hang (302), down $2.25 or 7.2% to $29.05, and HKCB (655), down 17.5 cents or 4.8% to $3.50. Merger rumors are beginning to be displaced.
Commercial & Industrial
China Mobile (941) rose 50 cents to $41.80, Hutchison (13) fell 25 cents to $86.25, Johnson (179) gained 15 cents to $15.65, and Li & Fung (494) dropped 15 cents to $15.25.
Stock in Focus
As mentioned above, PCCW (8) was a darling today, but I'm afraid this is a darling with a terribly dangerous bite, and despite the rapturous joy of many a punter on seeing the share climb more than 9% on the day to $3.00, those believing it represents a real turnaround will surely feel pain again soon. The stock's jump today had nothing to do with "bargain-hunting" by investors, as some reports are saying, but a mysterious sudden influx of funds, with somebody buying huge chunks in just a few large bites. The turnover of the stock was $1 billion versus just $116 million yesterday. One Quam reader asked if there was any potential upside -- this is it! Get off now if you can.
Are we saying the stock will fall again? No fool is going to predict such a price movement for a stock that attracts attention like this, but we do not believe the fundamentals support the stock, we do not believe the management is the best available, and we certainly do not believe any sane, conservative investor should touch this thing. In fact, today's action, if taken as "evidence" of anything substantial, could prove suicidal. PCCW topped today's short-selling list at $169.09 million worth of shares sold short. Short-covering comes to mind.
Results Announcements for Main Board
4-May
FAIRYOUNG HOLD
(231)
FIN
Y.E.31/12/00
8-May
KING PACIFIC
(72)
INT
6-MTH-ENDED30/09/00
11-May
AUTOMATED SYS
(771)
FIN
Y.E.31/03/01
15-May
STAR CRUISES
(678)
1ST
3-MTH-ENDED31/03/01
18-May
ONFEM HOLDINGS
(230)
FIN
Y.E.31/12/00
6-Aug
HSBC HOLDINGS
(5)
INT
6-MTH-ENDED30/06/01
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