Market Wrap: Punters Meekly Return After Killer Rabbit Forces Holiday -- PCCW Stock Crumbles in the Aftermath
Jul 26, 2001 - 19:49:15 HKT
QuamResearch
The HSI fell 174.28 points to 12,039.82 with market turnover of HK$9.0 billion. Today's close was the lowest in more than two years.
Yesterday was a holiday, in case anyone hadn't noticed, due to Typhoon Yutu, which, as we pointed out on Tuesday ahead of the event, means "Jade Rabbit." Fortunately the thing was such a let-down, that we can now proceed with killer rabbit references, or Bono for the newer generation. It was a good day for bowling.
Since the fierce creature Yutu meant no trade yesterday, today's higher turnover needs to be taken with a grain of salt. It did, after all, contain two days worth of trading activity.
Oil bubbled to the top again as OPEC decided to decrease production in order to sustain prices, which have been falling as the global economy stumbles. As demand drops and economies falter, supporting oil prices through cutting output has suddenly become a potential sin due to fear that oil support could end up dampening any quick recovery. Perhaps the uncertainty was part of the reason for a generally mild reaction among the locally-listed oil plays.
The market was also quiet ahead of bank announcements which will be kicked off next week with BEA, though punters got a little hint of what is ahead due to JCG's announcement.
Gov't. Stats -- Trade:
After market close, the government announced the latest trade figures, and they weren't pretty. The values of Hong Kong's total exports and imports of goods continued to show year-on-year declines in June 2001.
Exports (comprising re-exports and domestic exports) fell 8.4% YoY to $115.6 billion. Re-exports make up the lion's share of the total at close to 90%. These fell 7.5% to $102.7 billion. Domestic exports plummeted 14.8% to $12.9 billion. Imports declined 6.6% to $123.8 billion.
The difference between the two is a trade deficit of $8.2 billion for the month, a 30% increase over the June 2000 trade deficit.
For the first half of 2001, exports fell 1.4% with re-exports slightly up and domestic exports down 13.3%. Imports decreased a tiny 0.1%. The first half trade deficit was $58.2 billion, up 20% over 2000's first half.
The second quarter numbers, which we won't list here, confirm the picture supplied by the six month and latest month figures: it's getting worse. What investors want to look for is an increase in imports, on the assumption that these are used in the production of exports and thus act as a possible predictor of a turnaround. Since this hasn't happened, we can figure it's going to stay dark for a while.
Properties:
Properties fell 2.5%. Cheung Kong (1) dropped $2.75 or 3.5% to $75.75, Henderson (12) fell $1.10 or 3% to $35.40. SHK (16) dropped $1.50, 2.2%, to $66.25, NW Development (17) fell 20 cents, 2.4%, to $8.10, and Sino (83) dropped 12.5 cents, 4.1%, to $2.925.
The reason for today's drop escapes us, but the first three in this list are quite attractive. Consider this: once the property market regains some strength (we won't even use the word "rebound"), and foreign funds start sniffing about, who do you think they'll invest in? Thus the bigger players should receive the benefit not only of an improvement in the property market but also the benefit of an inflow of foreign funds.
Banks / Financials:
HSBC (5) fell $1.50 or 1.7% to $86.50, Hang Seng Bank (11) was flat at $84.25, and BEA (23) declined 5 cents to $18.10. Dao Heng (223) rose 50 cents to $63.50.
Dao Heng only has a few days left as an HSI constituent. But if you wanted to buy into it before its takeover, you're too late as today was the last day of dealing in its shares. Dao Heng's listing will be not be withdrawn, however, until 10:00 am on Tuesday, Sept. 4.
Comm. & Industrial:
China Mobile (941) dropped 70 cents while Unicom (762) gained 25 cents to $34.30 and $12.85 respectively. Turnover in both was quite strong. Johnson (179) gained 20 cents to $10.70 following newspaper reports on the company's growth strategy (acquisition), but this was off the high of $10.90 hit during the day.
PCCW (8) dropped 2 cents or 1% to $1.98, having traded as low as $1.96 during the day. The stock just cannot seem to stop floating down. It's still high. With a $44 billion cap, it may look like a great discount to its U.S. GAAP NAV of $146 billion, but considering that $160 billion of that total represents goodwill from the HKT acquisition (goodwill can be thought of as how much you overpaid), the HK GAAP NAV (negative $15 billion) more accurately represents their asset-liability status. Even on a more conventional valuation, the company is trading at 2.75x its (HKT) turnover. The stock still has room to fall, though the market may at some point start seeing some interest in it in terms of speculative value.
Hutchison (13) fell $2.75 to $72.75. Hold or buy.
H-Shares / Red Chips:
The PRC oil shares were mixed but generally not terribly responsive to the oil news, though this in part was due to gains on Tuesday made in anticipation of the OPEC decision. PetroChina 857 rose 2 cents to $1.63 (Tue: 4.5% rise), Sinopec 386 fell 2 cents to $1.36 (Tue: 5.3% rise), Zhenhai 1128 rose 1 cent to $1.42 (Tue: 2.9% rise), and CNOOC 883 rose 20 cents or 2.5% to $8.10 (Tue: 5.3% rise). CNOOC's gain, however, had a bit more to do with the news of its index inclusion. |
