Index recap
The benchmark indices gained momentum in the first half of this month, withboth the HSI and HSCEI reaching monthly highs on 16 Nov., at 22,944 and13,146. But the HSI’s monthly gains were wiped out by last Friday’s slump,with the HSI posting its biggest one-day drop in eight months at 4.8%. Localbank shares tumbled after Dubai World attempted to reschedule its debtrepayments. The HSI had gained 590 points or 2.7% month to date beforeFriday; the HSCEI had risen 405 points or 3.2%.
November was a big month for fundraising, accounting for more than 35% oftotal funds raised year to date. Twelve new IPOs have listed in Hong Kong,and Sands China (1928.HK) debuts today. Sany Heavy EquipmentInternational (631.HK) was the best performer, up 61.5% on its first twodays of listing, compared with the HSI’s 1.8% drop. PRC property IPOscontinued their poor run, with the two worst performers Yuzhou Properties(1628.HK) and Mingfa Group (846.HK) down 13% and 12.6% respectively.
Fantasia Holdings (1777.HK) was better received by investors, but is stilldown 1.4% since listing. China Minsheng Banking (1988.HK) was thelargest fundraiser this year, but lost 3.1% on its first day, following the sector’spoor performance.
The HSI’s forward P/E declined slightly to 18.3X, from 18.8X at the end oflast week, still one SD above its 10-year mean. The HSCEI fell more, andtrades at a forward P/E of 16.4X, less than one SD above its 10-year mean.
The HSI’s P/E premium over the HSCEI increased to 11.6% premium.
HSI velocity (annualized daily HSI turnover to market cap) increased from the30% level to 57% on 27 Nov., on about a 70% rise in market turnover.
Price performance – sector?? 19 of the 40 major sectors have posted negative performances for the past fivedays. Hong Kong leaders: PRC insurance (up 6.7%), airlines & airports (up4.5%) and agriculture (up 3.7%); losers: auto parts (down 7.0%), ports &shipping (down 5.6%) and PRC banking (down 4.8%).
PRC insurance led the way. PICC (2328.HK) was the best performer in thepast five days, up 10.5%, while China Taiping (966.HK) was the best so farthis year, gaining 153% ytd. All four stocks in the sector reached year highs inthe past five days. The third largest life insurer, China Pacific Insurance(601601.CH) has received approval to launch its Hong Kong IPO, whichcould be a positive catalyst for the sector.
Airlines & airports extended their uptrend. The good sector performance wasmainly due to Hainan Meilan Airport (357.HK), which gained 23.2% in thepast five days. It announced last week that it would probably acquire a nearbycompetitor.
PRC banks underperformed, with the six Hong Kong-listed banks down3%-8% in the past five days, dragging down the debut performance of newlylisted China Minsheng Banking (1988.HK). According to news reports, theCBRC has requested banks to increase their capital bases following the surgein loans made to support the economic recovery. This could be reflected in thesharp share-price decline.
