Navigator Report
Taifook 2009 26 MarchResearch is available electronically on bloomberg, taifook.com, knowledge.reuters.com., securities.comhttp://www.taifook.com and Thomson first call http://www.taifook.com Hong Kong and China Equity
Hiccup after the rash rally
Sector Performance
Strong: beverages, gold, paper Weak: autos, coal, financial, power, property, telecom
HSI and HSCEI - 12M
28000 17000 26000 15000 24000 13000 22000 11000
Unsurprisingly, the market went through a correction on Wednesday after witnessing the HSI rally over 1,000 points in the preceding two days, or a dramatic 2,566 points (23%) from the trough reached on 9 March. Yet, profit taking was only moderate with mixed performances among stocks in major sectors, and the index loss was mainly attributed to the setback in HSBC Holdings (0005.HK, $43.65, BUY), which jumped over 10% in the first two days of its rights trading that started Monday. Turnover dwindled to $54b from an average of $60b for the preceding two days, also an indicator that investors just took a break to wait for a consolidation. Among the exceptions that continued to power ahead included Sinopec (0386.HK, $4.64, BUY) in response to the surprise move by the National Development and Reform Commission to raise refined oil prices, about 5% for the retail price of gasoline and 4% for diesel. This was the second price hike so far this year, after the 2-3% increases for major oil products in mid-January, reflecting a swifter reaction to changing oil prices in the international markets. In fact, one of the major work objectives of the central government is implementing more radical price reforms in certain sectors, particularly concentrating on the relationship between crude oil and refined oil prices, and coal and electricity prices. While the banking sector was mixed, Bank of China (3988.HK, $2.42, BUY) bucked the downtrend after reporting mediocre results for FY08. Its Hong Kong operations were disappointing, as BOC...