The very next Sunday, another SCMP recommendation: "Whatever happens, I believe the equity market will rebound once the war uncertainty disappears. The rebound could be substantial, about 10 to 15 per cent. I have, therefore, decided to fully invest my portfolio this week to capture the possible rebound in the near term..."
columns.scmp.com March 16
Sunday, March 16, 2003
Preparing for the rebound in the face of uncertainty
PAUL PONG
News of a super-secret meeting with the Iraqi military on Thursday - which was later denied - gave investors some relief, boosting United States equities and the greenback. Investors were led to believe that the Iraq crisis may come to an end in the near term, whether war is avoided or the US sees a speedy victory.
The Dow Jones Industrial Average and Nasdaq Composite both jumped in Thursday trade, showing their biggest percentage gains of 2003.
Whatever happens, I believe the equity market will rebound once the war uncertainty disappears. The rebound could be substantial, about 10 to 15 per cent. I have, therefore, decided to fully invest my portfolio this week to capture the possible rebound in the near term.
Hong Kong's blue-chip stocks followed the Wall Street trend for the week. After hitting their October lows of 8,772.48 in intraday trading during the past two weeks, the Hang Seng Index surged almost 2 per cent to 8,956.17 points at Friday's close. My portfolio performed slightly worse than the Hang Seng Index. The best performers in my portfolio over the period have been Yue Yuen Industry (Holdings) and Jiangsu Expressway.
Despite poor February retail sales in the US, Yue Yuen managed to perform well relative to the market after the company's first quarter net profit grew 32.3 per cent year on year to US$69 million. The strong revenue growth was mainly attributable to the beneficial impact of the 67 upstream material companies the group acquired in October 2002, together with rapid expansion in Vietnam and steady growth in China operations. This could signify the beginning of strong growth for Yue Yuen.
Yue Yuen's recent move to split its shares is also considered a move in the right direction. This might help boost retail investor participation and the stock's liquidity. As a result, my 4,000 units at a purchase price of HK$28.
20 have turned into 8,000 units at HK$14.10. I will continue to keep the company in my portfolio, given its solid core footwear manufacturing, successful integration of upstream business, strong finances and good dividend yield.
Shares of Jiangsu Expressway have risen 1 per cent in the past two weeks, largely due to the market's preference for defensive stocks and better-than-expected net profit growth of 15 per cent to 890 million yuan (about HK$835.53 million) for financial year 2002. The company's robust revenue growth was driven by a 20 per cent rise in traffic. Based on the economic strength, I expect an ongoing increase in traffic, translating to increased net profit growth over the next two years. However, a change in tariffs is my major concern. In the mean time, I will keep the stock in my portfolio.
My portfolio was fully invested this week. I put 5 per cent of its value into China Oilfield Services, Anhui Expressway, Tack Fat, Sa Sa and Lung Kee. In addition, I put 2.5 per cent into Hang Fung Gold Technology and Kenfair International Holdings. I believe these stocks should have additional stimulus to generate growth. Tack Fat's strong orders, particularly in swimwear, and growth in its casual-wear business driven by network expansion in Blue Cat speciality stores, are likely to boost profits. |
