Market Wrap: Market Falls Ahead of Fed Decision -- PCCW Hits Another Ground-Thumping Low
Jun 26, 2001 - 18:37:43 HKT
QuamResearch
Another rainy Monday, and the generally depressed feeling around town was echoed on the local bourse as the HSI dropped 212.05 points to fall below the 13K level once again. The index closed down at 12,961.97. Market turnover was a relatively slim HK$7.76 billion. In the absence of any truly significant news, traders sold down key stocks such as HSBC, China Mobile, and Hutch.
Properties:
Properties were mixed even though an interest rate decrease in the U.S. would be followed by the same measure here, something that should boost transactions in the property market. However, despite the appealing offers being made by a number of banks for mortgages with rates several points below prime, the residential market is still soft, and local banks can probably not go much further, perhaps even revising some of their current deals to less of a cut below prime.
Cheung Kong (1) ended at $85, down $0.50, Henderson Land (12) lost 20 cents to close at what we think is a quite appealing $33.60, and SHKP (16) lost $1 to close below $70 at $69.75.
Financial:
The HSI banks were down, except for Dao Heng, but the picture was slightly more mixed amongst the smaller banks, perhaps because of the scenario just painted above.
BEA (23) close down 30 cents at $18, HS Bank (11) fell 50 cents to $80.25, and The Bank -- HSBC (5) -- lost $1 to $92.50.
Both properties and financials are at -- dare we say it again? -- reasonable prices. Long term investors should not feel afraid to get their feet wet, though of course we do not know what the short term price fluctuations will be.
Comm. & Industrial
Cathay (293) is still holding up well despite the threat of industrial action, itself having come out with an ultimatum for the pilots. The airline will stop talks if the pilots begin their strike. One might wonder if Cathay has something up its sleeve. However, despite the news on that front, there is a piece of business news slightly worrying. The iMail reported that a British freight operator, Air Freight Express, is set to begin services between London and HK. Freight is, of course, rather lucrative, and this will add pressure to the already smarting Cathay as well as its kissing cousin, Dragon Air. The Air Freight Express move is a result of a recent decision to allow an increase, from 35 to 41 per week, in the number of flights to HK by Brit airlines.
On the other hand, the increase applies only to passenger/cargo flights. There will still only be 6 cargo-only flights per week operated by the Brits.
Cathay closed unchanged at $10.15.
The same can't be said for PCCW (8). The stock dropped again to yet another 52-week low, losing 7.5 cents or 3.2% to $2.25. The company, according to the SCMP, is expected to announce that it has secured an investment-grade bond rating from S&P, enabling it to go hunting for more debt to pay off its existing debt or fund new businesses. The "NOW" project was mentioned again -- we thought that thing was dead and gone, but perhaps has the blessing of being the brainchild of a certain Li family member, and thus no one will be allowed to kill it. No one but the market, that is. Investors of course are seeing such struggling for money by the company as ample evidence that their investment money would go down the drain. Thus the stock isn't reacting very well right now. One does wonder, however, if a $50 billion cap is starting to look inexpensive. However, given the ones at the helm, even that is not yet enough to entice punters back to the once-golden stock.
China Mobile (941) and Unicom (762) both declined. Mobile dropped 3.8% to $40.10, and Unicom 15 cents to $13.15. Despite wonderful sounding subscriber numbers released by Unicom, investors know that the mix -- contract to pre-paid -- is developing in an unfavorable directions.
China Plays
Red chips were generally down with only 10 counters ending in positive territory. The biggest losers were China Resources Beijing (1109), down 5% to $2.30, and China Everbright (257), down 4% to 48 cents. Then it looks like Guangdong province took a hit, with the next three declines being Guangdong Brewery (124), Guangdong Investment (270), and Guangnan (1203), falling between 3.3% and 3.5%.
It was a similar picture, though slightly improved, amongst the H shares. Beer lost again with Tsingtao (168) showing a frothy decline:
Click on link for table
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