Watching Superman fly
2001-05-19
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Why pay attention to whether tycoons like Hong Kong's Li Ka-shing buy or sell shares in their own companies?
Every time Li Ka-shing buys shares in Cheung Kong or Hutchison Whampoa, the Hong Kong stock market's Hang Seng index goes up around 11% three months later. Lately he's been very quiet. His last major purchase was in June, when he bought 12 million shares of Cheung Kong, and the fact that he's not buying is a signal that it's a bearish market. He's not confident enough to put any money down.
Who are the other corporate directors or insiders worth watching?
The major tycoons are lead buyers, so they are worth watching -- aside from Li, there are the Kwoks of Sun Hung Kai Properties, Run Run Shaw of television station TVB, the Kadoories of Hong Kong and Shanghai Hotels, and Lee Shau Kee of Henderson Investment. Whenever I see them all buying at the same time, it's almost certain that the market will rise a few months later. This year, there hasn't been a lot of buying. Richard Li of Pacific Century Cyberworks is also interesting. A lot of PCCW's top directors have cashed out over the past year -- that's how bearish it is. Richard Li, by not cashing out, is the only one supporting the share price. It will be interesting to see what he does amid all the negative news.
Let's talk about a hot sector, like banks. Many banks that looked like takeover targets surged ahead of Development Bank of Singapore's purchase of Dao Heng Bank.
Bank directors are actually selling now. They started unloading shares because they knew prices would go down [once a deal had happened and the rumors stopped]. There's been selling in Liu Chong Hing Bank and the Bank of East Asia. Some directors of Dao Heng have also sold shares recently. Directors of banks have been net sellers for the past two months because share prices have been rising sharply. I think they are just cashing in early, ahead of interest rate deregulation, just in case share prices fall further.
So all we have to do is follow the directors in order to succeed on the stock market?
According to our scoring system (listed on asiascores.com), any director with a score over 70 is considered reliable. Li Ka-shing, for example, usually averages over 80. But just because directors buy their company's shares does not mean that you should too. Some directors buy and buy, and nothing happens.
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