Today is the first trading day of the New Year. The Snake has emerged from his egg to govern how the next year will perform.
Hong Kong is and will be just a puppet, one manipulated between China and United States. Although these two immerse countries are not in competition with one another, other effects will influence all Hong Kong's movements. On the face of it, and at the year's inception, US will be the face of caution whilst China will be the face of hope.
To an extent the Hong Kong stock market is split into two halves, although that is a simplification that can be made to look absurd. But it is being held together, perhaps only temporarily, by the technical shares, and the past 1,000 points on the index has been due almost exclusively to the tech shares led by China Mobile, #941. These share prices are very much dictated by the moves on the NASDAQ index, and so far as I am concerned this index is now hovering on a precarious perch. With NASDAQ still at 2,800 points I live in trepidation that it will suffer another major fall, even though it has already fallen by nearly 50% last year.
China Mobile and Legend, #992, appear to me to be far too high at $49.60 and $6.75, and I very much doubt that they will be able to endure these levels throughout the year. Then there are the good and constructive technical manufacturers, which are perhaps cheap based on this year's profit performance, but whose future prospects remain uncertain and possibly clouded, shares like ASM, #522, QPL, #243, Varitronix, #710, and perhaps, but on a different profits-tack VTech, #303. But then there are the ridiculous, shares like Tom.com, #8001, now at $2.925, for a capitalisation of $9 billion, for a company with no real plan and a collection of smaller but disconnected inconsequent parts.
Whether the GEM market can uphold a 300 point level, down by nearly 70% since its formation less than a year ago, seems to be very doubtful. There are also innumerable inconsequential and no-profit companies, whose shares are now dispersed amongst the myriad punters, and have very little foundation of substance.
But there are plenty of shares which are well worthwhile to buy, and a number of these come from the Chinese section, particularly the H shares. The oil companies are very cheap, PetroChina, #857m at $1.40 and Sinopec, #386, at $1.18 and some of their subsidiaries, Jilin Chemicals, #368, Zhenhai Refinery, #1128, BJ Yanhua, #325, Yizhen Chems, #1033, and Shanghai PetroChems, #338. These subsidiaries should do well, as if they succeed in their operations these shares should in any case do well, but if they do not then they should be absorbed back into their parent company, at an advantage to shareholders.
There will be new large IPOs, CNOOC and Bank of China, which should also ginger up this section, and the results due to be released in March should also give it some encouragement.
China will be a force for good for Hong Kong shareholders. Most especially if China proceeds to develop itself, and to prepare its currency for free convertability. If that process is advanced then this could add zest and fervour to the Chinese stock market.
The other trend will be the slow relaxation of currency rates, as Alan Greenspan uses his fingers to loosen the interest ratchet during the year. This will ensure that property prices will be maintained, even if not increased, over the next year. Without too much conviction, I expect property prices to advance over the year, and this will be a major influence on the HSI. This will be another breeze from the US.
Overall I expect the index to rise marginally over the whole year, but I expect that these optimists looking for levels of 20,000 are very optimistic. But there can be no reason why the HSI should slip below 10,000. So taking a mean than I would expect this year to close at around 15,000, more or less where it is now, but with sharp swings in between. (End)
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Jan 29, 2001 - 09:01:59 HKT
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