Microsoft word - dailycommentary_20131125.docx

Hong Kong
Daily Commentary
25 November 2013
Investment Advisory Team
 Suggest trade of the day: China Railway Construction (1186)
 Companies with positive newsflow today:
 Digital China (861), Fosun International (656), Fosun Pharma (2196), Anxin China (1149), China Financial Service (605),  Companies with negative newsflow today:
Landsea Green Properties (106), Sinopec (386)  Positive profit alert:
U-right International (627), Lisi Group (526)  Profit warning:
ITC Corporation (372), China Healthcare (673), IWS (923), Royale Furniture (1198), China Environmental Energy (986)  Daily market outlook commentary:
 The US market was helped by the dovish comments of the Fed officials. Our market still lags behind the US and European market by miles, and the low-interest rate environment would justify our market to somehow catch up. One of the reasons for the unimpressive performance of the HK market is the dominance of Chinese financials in HSI and HSCEI. After the China plenary meeting, it seems that investors became more bullish on the Chinese financials, and a structural re-rating may happen. At the moment insurers and brokers are still preferred to banks.  Not a lot on corporate news. Clarifications from Fosun International (656) and Fosun Pharma (2196) should please the market, and share price of both stocks are likely to rebound. Investors are still very sensitive on any of these allegations on corruptions etc. This may in fact drive investors’’ appetite towards big-cap SOEs, as share price of them usually held up well even under corruptions allegations. Chalco (2600) is a good example. Talking about SOEs, Sinopec’s (386) ADR closed 4% below the HK closing, likely because of the explosion in Qingdao. The accident happened during the trading hours last Friday, and share price did not react much. If share price follow the ADR weakness,  Kerry Properties (683)’s spin-off Kerry Logistics look interesting, and there is no similar plays in the market. According to the online (http://www.hkexnews.hk/reports/prelist/Documents/EKERRYL- 20131122-full.pdf), 1H13 gross profit margin was 15%. 1H13 core net profit was up YOY 6% to HKD455m. For the whole year the profit forecast for core net profit is HKD880m, up 8% YoY. Kerry logistics intend to pay out 20% of earnings as dividend. Talking Key Indices
about IPOs, CNR (601299 CH) announced plans to seek for H- Index Last
share IPO. This may be positive to sentiment for the railway sector. Can look at China Railway Construction (1186) today, the company announced that it won several projects, total amount was CNY20.6b, around 4.3% of last year’s total revenue. The IPO market is hot, and HKEx (388) would be the natural winner. SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
25 November 2013
 Another acquisition from Greenland Hong Kong (337). The company has been aggressive, market will still speculate injection of assets from parent company. On the other hand, its peer company Landsea Green Properties (106) announced rights issue this morning, which may dampen sector sentiment.  Anxin China (1149)’s substantial shareholder increased stake in the company, likely to see some support in share price. For the “national security” theme, AviChina (2357) seems to be a better play.  Mixed results from media companies. Next media (282) finally turned into profit, while profit of Oriental Press (18) fell by around 50% (already issued profit warning before). There were lots of one-off factors though; Next media was helped by the special gain, while Oriental Press was dragged down by the weakness in AUD. The future of these companies depends on how to integrate with Internet and smartphone, and on this aspect it seems that Next media did better than its peers. For those who want to punt on the lottery sales figures released by Ministry of Finance, can look at China Lotsynergy (1371) and Rexlot (555). Similarly, there were positive data point for coal sector (Coking coal price rose for 9 consecutive weeks, and Nov13 coal sales may reach YTD high) and insurance sector (Jan-Oct13 premium income rose by 12% YoY, higher than the 11.2% growth for Jan-Sept13). Names like China Life (2628), Ping An (2318), China Shenhua (1088) are the leaders in industries.  China Financial Services (605) is the latest company running into the small loan industry, share price unlikely to react much. The media reports on Baiyunshan (874, formerly known as “Guangzhou Pharm”) are interesting, company signed letter of intent with Nobel laureate Dr. Ferid Murad, who is also known as the “Father of Viagra”. 1) The S&P 500 closed above 1,800 for the first time ever. The Dow Jones Industrial Average rose to a new all-time high above 16,000, a key level crossed for the first time this week. The Nasdaq rose nearly 0.5%, and is less than 10 points from 4,000, a level not seen since 2000. The Dow and S&P 500 both ended higher for a seventh week. The Nasdaq posted its third consecutive weekly gain. Since January, the Dow has climbed by 22%, the S&P 500 is up by 26% and the Nasdaq has soared by 31%. The surge is thanks in large part to the massive stimulus program administered by the Fed, which has supported the economic recovery with monthly bond purchases. Shares of movie studio Lion's Gate Entertainment (LGF) were higher. Investors are betting on a huge opening at the box office for "Catching Fire" -- the second movie in "The Hunger Games" franchise -- this weekend. Microsoft (MSFT) shares were up as the company's new Xbox One goes on sale. This is Microsoft's first new gaming console in eight years. Foot Locker (FL) shares rose to an all-time high after the retailer reported better-than-expected quarterly results. (Source from CNNMoney) 2) Crude down 0.63% to US 94.84 per barrel, Gold up 0.04% to US 1,244.1 per ounce. Yield of US 10-Year treasuries down 3 ppt. to 2.75%. Page 2 of 6
25 November 2013
3) ADR mostly up. ADR of China Mobile up 0.39% vs HK closing; equivalent to HKD81.02 per share. ADR of HSBC up 0.26% vs HK closing, equivalent to HKD86.88 per share. ADR of Hutchison up 0.25% vs HK closing, equivalent to HKD97.14 per share. Cheung Kong’s ADR closed at HKD122.73, 0.02% higher than HK closing. ADR of Tencent closed at HKD429.58, 1.17% higher vs HK closing. 4) Short sell to market turnover (%): 8.7 (vs 1 week average: 9.2). Stock alert: Belle Int’l (1880), CAM CSI300 (3188), Huaneng Power (902), UPC (220), Beijing Ent (392), Zhejiang Express (576) 5) From HKEx daily quotation on 22 November trading, stock advanced = 2,867 stock declined = 2,011 stock unchanged = 2,415. (Advance vs Decline ratio 1.4: 1). 6) Selective share buyback transactions on 22 November 2013 : Prince Frog (1259) – 500k shares at HKD3.67 to HKD3.69

Source: http://www.kimeng.com.hk/upload/daily_bulletins/DailyCommentary_20131125.pdf