Evening Analysis: Computer Questions as Market Ends Slack, PCCW HKET Rebuttal
Feb 06, 2001 - 19:48:24 HKT
QuamResearch
The HSI may have looked up, but it was decidedly unclear with low turnover, nearly the same number of gainers and losers, and new lows tromping new highs. The HSI rose 82.4 points to 15,913.24 on turnover of HK$6.2 billion.
There were 352 gainers versus 299 losers, and 44 counters posted new lows versus the 8 new highs. In the major sub categories, properties inched up, as did financials and utilities, and the commercial and industrial plays were practically even. Techs moved up or down depending on the way you choose to weight the same set of shares. The HS ITI index was up 0.3% but the HS ITP index was down 0.65% -- the difference between the two is not in the stocks but the methodology. ITI measures full market capitalization and ITP discounts the large cap stocks to a degree. Even then, three stocks (Mobile, 941, PCCW, 8, and Legend, 992) take up over 60% of the weighting compared to the one stock (Mobile) in the ITI than accounts for 80% of the weighting. Rather useless measures, one would think.
Tech stocks may have been affected by both our California cousins and Nippon neighbors. Though the Dow managed a near 1% rise yesterday, the Nasdaq still faltered just under 0.7% but at least did not see a precipitous fall. Nevertheless, earnings worries persist, and with Cisco (NSDQ: CSCO; HKSE: 4333) releasing its earnings tonight in the U.S., HK punters were generally unable to psych themselves into a buying frenzy. The locally-traded version dropped 0.7% as 980 shares were traded. However, Tokyo ended the day down at a four-week low, primarily on high-tech woes. Toshiba was named as a major influence there, and the problem again was earnings prospects. Toshiba dropped nearly 4% and was followed by a similar fall, 3.1%, in NEC. These types of firms are also theoretically experiencing pressure due to "influential analyst Dan Niles of Lehman Brothers" (according to Reuters) saying he expects semiconductor sales growth to fall. Thus in Hong Kong, punters seemed to move out of a few potentially exposed stocks such as Legend (992), down 20 cents or 3% to $6.25. Legend, of course, is and has been for quite some time an outrageously overpriced stock and only fit for punters anyway.
ASM (522) was a more obvious victim of Lehman prognostication, losing 4%, 60 cents, to $14.25. The stock lost 3% yesterday. The industry has cyclical aspects, so it is not surprising that it should give up some ground, though more important for ASM is the astounding rise in its price over the past few weeks. ASM owners should not necessarily be ready to bail, though issues to consider are the price ($5.4 billion cap versus its 5 times expected P/E for the upcoming results) and the state of the industry. Meanwhile, QPL (243) managed a rise, 2.5 cents or 0.5% to $4.70, but this contradiction may be in part explained by perhaps a little bounce, since it lost 5% yesterday. QPL is a manufacturer and assembler of integrated circuits and IC leadframes.
China Mobile moved very little, but it was up, so that offset most TMT weakness. The counter finished ahead 30 cents, 0.6%, to $48.90.
PCCW closed down 5 cents, 1.1%, to $4.625. PCCW issued a statement about the release of earnings guesses for HKT. Obviously ticked off that someone got their hands on numbers which were supposed to be used only for getting a few lenders to help out, the local punter favorite said, "the directors of the Company wish to emphasize that the information contained in the Confidential Memorandum was provided to the prospective lenders on a strictly confidential basis for the limited purpose described above." The "purpose described above" was to get a loan, and the numbers the HK Econ Times reported seemed quite insider. Considering those two points, one may wonder about the next part of the PCCW announcement: "The information has not been audited and was prepared on the basis of numerous assumptions and qualifications." Question: did one of the numerous assumptions and qualifications include pigs flying? Earnings could be worse than their own internal optimistic forecasts. However, in the spirit of fairness, they could also be substantially better, though we rather doubt that scenario.
One should also remember this very important point: we haven't seen a real HKT earnings statement since one year ago. HKT's fiscal year was to March 31. The last time we saw anything, it was in September when PCCW announced its interim numbers through June and added in 6-month figures for PCCW with the bottomest line being operating profit though EBITDA was added for good measure. The critical issue here is that is just provided an extra three month's description of HKT from the end of its March fiscal year to June, before PCCW actually started controlling the thing. The only thing those extra few months told us was "no significant change."
As for the rest of the market, properties were mildly up with Cheung Kong (1) flat at $102 and SHK (16) up 75 cents to $80. Each of the four financials gained with The Bank (HSBC, 5) up $1.50 to $120.50. Hutchison (13) fell $1.50 to $100 and pretty much matched and offset the gain given by Mobile. Johnson (179) bounced back a bit with a 45 cent, 3.5% rise to $13.20. We like the company but still don't like the price.
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