Evening Wrap: Properties Dive; Mobile, Hutch and PCCW Decline
Apr 09, 2001 - 19:46:24 HKT
QuamResearch
Is this a bear market? It certainly doesn't seem very bullish, and investors are migrating to the sidelines and waiting for something positive to stir up the waters. Monday reported just HK$6.6 billion in trading turnover, and the HSI dropped 184.51 points or 1.5% to 12,202.10. Properties were the sector most hit, though Mobile and Hutch also fell back on the lack of exciting news, while PCCW just disappointed investors again by dropping to another 52-week low. All was not black, however, as second-tier financials gained support on renewed hopes of buyouts.
Properties
Properties declined en masse with two issues supposedly causing the sector to fall: first, they hadn't been damaged as much as other sectors and were thus seen as being at higher price levels. Second, the possibility of interest rate cuts being delayed in the U.S. hurt the sector. NW Development (17), officially in the commercial and industrial sub-index but a developer nonetheless, dropped nearly 7% to $8.10. The company's massive debt burden weighs it down, and every drop in interest rates helps relieve some of that burden. We don't particularly like the stock, but at this level is could be a speculative buy as it tends to one of the most volatile of blue chips, and that can be a nice positive on the way up. Exercise caution, though.
A better property play is Henderson (12), which fell 6.1% to $33.80 today. Henderson goes ex-dividend tomorrow, so it needs to be adjusted down 55 cents. This should be a wonderful price to pick up one the best quality stocks in the SAR.
Of the other property-related plays, Cheung Kong (1) dropped $2.25 to $77.75, SHK (16) fell $2.50 to $67.75, Wheelock (20) dropped 35 cents or 5.6% to $5.95, Wharf (4) dropped $1.15 or 6.2% to $17.50, and Sino Land (83) fell 22.5 cents or 7% to $3.00.
Banks / Financials
The big banks were mixed with one suspended from trading. HSBC (5) rose 25 cents to $91.75, Hang Seng Bank (11) was even at $90.75, and BEA (23) declined 25 cents to $16.35. HSBC and BEA are at very nice prices while Hang Seng may still be at a little bit of a premium though is in no way a bad purchase.
Dao Heng (223) was suspended at $37.60, awaiting news most likely of an asset injection by parent Guoco (53). Both were suspended last week pending an announcement on a potential corporate transaction, and Salomon Smith Barney said Guoco will probably inject its financial assets into Dao Heng. This may mean the rumored acquisition by DBS Bank will not go ahead, unless Guoco is dressing up Dao Heng to fetch a higher price and exit the sector, though the rumors are still going to influence the stock.
The news re-ignited interest in second tiers: Wing Lung (96) gained 3% to $34, Wing Hang (302) gained 4.4% to $25.05, Citic Ka Wah (183) rose 6% to $2.175, and HKCB (655) gained 9.8% to $2.25. There may be some profit-taking tomorrow, though we aren't taking any bets.
IBA (636) gained 8.8% to $1.73, fueled by the sector enthusiasm as well as news of the retirement of its non-executive chairman Sheikh Ali Jarrah Al-Sabah. Punters figured this to be a sign that IBA's controlling shareholder, Arab Banking Group, may be looking to sell its 55% stake. However, an IBA spokeswoman told Quamnet News that the retirement was just that -- the reward for 16 years of service, and that it was not a signal of a sale. Quamsters may want to remember that IBA has repeatedly denied sale rumors, and this type of speculation is more likely to end in pain for those who decide to take the gamble.
Commercial & Industrial
The biggest losers here were stocks officially in the C&I sub-index but heavily influenced by property -- namely Wharf (4) and NW Development (17). Most of the rest of the sector was also down but by lesser degrees with the exception of TVB (511) which fell $3 or 7.35% to $37.80.
Cathay Pacific (293) dropped 30 cents to $10.55, a new 52-week low. On Friday, the company's HK and China sales manager said the airline is likely to report an 8% drop in passenger traffic for the first four months of 2001. This would reverse the 13% growth in the first three months. The drop was said to be due a shift of HK holiday schedules. More important, the company was "cautious" regarding growth in passenger traffic for the rest of the year.
China Mobile (941) dropped 60 cents or 1.8% to $32.40. The company reported annual results today, but despite the 276% jump in profit, after the effect of provisions for both 1999 and 2000 and following the growth via acquisitions, the market refused to be cheered since the results were not terribly surprising. In fact, they were below expectations due to higher-than-expected provisions. The stock may seem attractive, but write-offs are sure to repeat in the future in this capital-intensive business.
PCCW (8) dropped 7.5 cents or 2.9% to HK$2.45, a new 52-week low. Rumors via the Oriental Daily said that PCCW may seek to raise HK$9 billion via a rights issue at HK$2 per share. This extra piece of pressure came on the back of C&W's share dumping last week. The article said PCCW denied the report.
The market is not likely to see substantial (or fundamental) advances considering the lack of direction and continued worries coming out of the U.S. and being exacerbated by other regional issues. However, large swings in either direction are not unlikely due to the low trading volume, which just adds to volatility.
quamnet.com |
