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Investment Daily


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Investment Daily

  1. 1. Investment Daily January 2 2007 Major Market Indicators The Hang Seng Index is expected to struggle around 20,000 Profit taking pressure has been seen in the last trading day of 2006. The Hang Seng Index fell 29 Dec 28 Dec 27 Dec below the psychological level at 20,000 and closed 31 points lower at 19,971. Market turnover sharply reduced to HK$43,618mn as most investors preferred to stay sideline before Mkt. Turn. (mn) 43,618 54,288 48,474 the new year holidays. Several directors reduced their stakes on China Mobile (0941.HK) Stock Advances 475 364 362 triggered selling pressure on the counter which declined 1.1% on the day. Owing to speculation for the sale of Indian Telecom operation, Hutchison Telecom (2332.HK) added Stock Declines 359 447 463 3.8% to HK$19.66. China plays also retreated on the day with the Hang Seng H share index declining 27 points to HSI 19,965 20,001 19,725 10,337. Since MII said that the issuance of 3G licenses to improve the competitiveness of fixed line operators, China Telecom (0728.HK) has been boosted which rose 6.0% during the Change -37 +276 +405 day. Performances of financial plays were mixed. Thanks to the strong performance in the A HSI Turn. ($mn) 14,412 19,663 14,228 share market, Bank of China (3988.HK) added 2.9% to HK$4.27. HSCEI 10,340 10,363 10,258 US stock market closed lower on the last trading day of 2006 as investors sold shares to lock Change -23 +105 +665 in profit. The Dow and the Nasdaq closed 38 points (to 12,463) and 10 points (to 2,415) respectively. The local market will lack clear direction amid the closure of China and Japanese HSCEI Turn($mn) 12,723 17,465 16,153 market due to holidays. The HSI will likely continue struggling around 20,000 in the short term. China stocks will remain the trading focus in the near term. HSI Technical Indicators Technical analysis The local market has climbed significantly on the year end window dressing activities. Technical Indicators Technical overbought condition will limit further upside in the short term. It is expected to 10-day SMA 19,366 open higher on the first trading day of 2007 and retreat afterwards for consolidation. Historic high of 20,049 will see the initial resistance. 19,700 and 19,400 (10 day MA) will offer initial 50-day SMA 18,873 and major support respectively. 250-day SMA 16,858 14 days RSI 70.10 Major Headlines Secondary resistance 20,500 Primary resistance 20,000 ! A seris of H shares and red chips will continue to list their shares on the A share market. According to souces from Ming Pao, China Mobile (0941.HK) has been appointed Primary support 19,521 Goldman Saches's mainland joint venture, to prepare to list in the A share market. It is Secondary support 19,000 expcted that the listing might be completed in 2007 while share offer size reaches US$10bn (HK$78bn). China Mobile will seek special approval from CSRC, try to be the first red chips to list on the A share market. If China Mobile could successfully listed on the A share market, it could pave the way for other majoe red chips like CNOOC HSI Futures (0883.HK). Apart from China Mobile and CNOOC, there are several heavy-weighted H 29 Dec 28 Dec 27 Dec shares including PetroChina (0857.HK), China Shenhua (1088.HK), CCB (0939.HK) and Bank of Communications (3328.HK) to be encouraged to be listed on the A share market Jan 20,018 20,111 19,810 this year. In fact, as the mainland government encouraged high earnings quality large-sized China plays to list on the A share market to improve the mainland stock Volume 24,610 43,389 37,216 market's quality, together with the fever and ample liquidity in the A share market, those HK-listed China plays will have strong incentives to plan listing on the A share market. Of Open interests 115,621 114,511 108,606 which, as there are news saying that red chips like China Mobile will also seek special Feb 20,060 - - approval to be listed on A share, it might triggered speculative interest on this sector (in fact, red chips have lagged behind H shares in the recent rally). We expect speculative Volume 509 - - interest will concentrate on major red chips like CNOOC, China Mobile, China Netcom Open interests 318 - - (0906.HK) and China Merchant (0144.HK) in the near term. ! PICC P&C (2328.HK) announced that they have got the insurance order for 2008 Beijing Olympics, the only mainland insurance underwriter to be one of the partners, estimated HSI Options insurance amounts ranged from US$ 100 to $200 million. Olympics related premium Jan income in this year is expected to be mainly come from coliseum and site construction Call Vol. Put Vol. and other building projects, year 2008 will be the peak for premium income. Premium 19,600 699 21 288 995 income for the first eleven months of PICC rose 9% to RMB 66.091 billion. Besides, PICC 19,800 562 26 360 202 has become one of the strategic investors of China Life Insurance’s (2628.HK) A share 20,000 450 882 445 826 and bas been allotted 30 million shares, lock-up period is 12 months, owing to the rising 20,200 350 1237 540 911 momentum of mainland A-share market, investment income is expected to increase significantly. Based on the current price, 06 forecasted P/E of PICC is 23.6x, which is 20,400 263 144 655 4 much lower than 49.4x and 41.4x of China Life insurance and Ping An (2318.HK) 20,600 193 628 -- -- respectively, its share price also lag behind them which were in the rising rally recently. Apart from the increase in investment income and getting the Olympics insurance order, its motor insurance business also grew continuously which reflects brilliant prospect of the Group. Therefore, we suggest investors to buy the counter at around $3.5-$3.6 for medium and long term investment. January 2, 2007 1
  2. 2. HSCEI Technical Indicators HSI Chart Technical Indicator Daily Q.HSI 12/16/2005 - 12/29/2006 (GMT) 10-day SMA 9,570 50-day SMA 8,402 Price 250-day SMA 7,004 HKD 14 RSI 84.65 18,000 Secondary resistance 11,000 17,000 Primary resistance 10,500 16,000 Primary support 10,085 15,000 Secondary support 9,600 .12 Volume HKD 500M HSCEI Futures .1234 29 Dec 28 Dec 27 Dec 28 Nov Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Q1 2006 Q2 2006 Q3 2006 Q4 2006 Jan 10,275 10,405 10,330 Volume 20,327 28,555 21,995 Source: Reuters Open interests 55,783 55,568 50,702 Feb 10,336 - - HSCEI Chart Volume 74 - - Open interests 30 - - Daily Q.HSCE 12/15/2005 - 12/29/2006 (GMT) Price HKD 8,000 Ten Most Active Stocks 7,000 Stock Code Change CloseTurnover 6,000 (%) ($) ($mn) .12 ICBC 1398 -0.090 4.830 4,055 CHINA LIFE 2628 -0.450 26.550 2,769 Volume HKD BANK OF CHINA 3988 +0.120 4.270 2,697 HSBC HOLDINGS 0005 -0.200 142.60 1,750 1B CNOOC 0883 +0.230 7.390 1,506 CHINA MOBILE 0941 -0.750 67.200 1,391 .1234 CCB 0939 -0.100 4.950 1,295 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec CHINA TELECOM 0728 +0.240 4.260 1,053 Q1 2006 Q2 2006 Q3 2006 Q4 2006 PETROCHINA 0857 -0.100 11.020 992 Source: Reuters China Commcons 1800 +0.010 7.690 987 China Telecom (0728.HK) Daily Q0728.HK 12/16/2005 - 12/29/2006 (GMT) Price HKD 3.6 3.2 2.8 .123 Volume HKD 200M .1234 J F M A M J J A S O N D Q1 2006 Q2 2006 Q3 2006 Q4 2006 Source: Reuters January 2, 2007 2
  3. 3. ↑19 Investment Daily Stock Picks Denway Motor(0203.HK/203 HK) Closing Price=$3.15 06 EPS=HK$0.30 Denway Buy Target Price=HK$3.40 06 P/E=10.5x 70 3.40 60 3.30 3.20 50 ! Sales performance in line with expectation. FY06 prospective P/E of 3.10 40 11x. 3.00 30 2.90 20 2.80 10 2.70 0 2.60 10/9 10/18 10/27 11/8 11/17 11/28 12/7 12/18 12/29 成交量 股价 Source: Bloomberg CSCL(2866.HK/2866 HK) Closing Price=$2.10 06 EPS=HK$0.11 60 22.00 CSCL Buy Target Price=HK$2.40 06 P/E=19.1x 50 21.00 20.00 40 19.00 ! Laggard China plays. Rebound of shipping tariff in 2H06 might lift its 30 earnings 18.00 20 17.00 10 16.00 0 15.00 10/9 10/18 10/27 11/8 11/17 11/28 12/7 12/18 12/29 成交量 股价 Upcoming Events 29 Dec (Fri) A-max (0959.HK) Interim result 12 Jan 07 (Fri) JIUZHOU DEV (0908.HK) Interim result Disclaimer Some of KGI Asia equity research and earnings estimates are available electronically on KGIEWORLD.COM. Please contact your KGI representative for information. The information and opinions in this report are those of KGI Asia internal research activity. KGI Asia does not make any representation or warranty, express or implied as to the fairness, accuracy, completeness or correctness of the information and opinions contained in this report. KGI Asia accepts no liability whatsoever for any loss arising from use of this report or its contents. This report is not to be construed as an invitation or offer to buy or sell securities and/or to participate in any investment activity. This report is being supplied solely for informational purposes and may not be reproduced or published (in whole or in part) for any purpose without the prior written consent of KGI Asia. Members of the KGI group and their affiliates may provide services to any companies and affiliates of such companies whose securities are mentioned herein. Members of the KGI group, their affiliates and their directors and employees may from time to time have a position in or with the securities mentioned herein. KGI Asia or its affiliates has or have an investment banking relationship with Xiwang Sugar within the last 12 months January 2, 2007 3