HSI forecast – 30 Oct

With US recording the 1st increase in GDP over the last 3 quarters, and at 3.5%. It certainly provided some re-assurances to the market that the economy is indeed recovering, hence the US market actually recorded the biggest surge in 3 months time. 

Expectedly I’d say today is a re-bound day, particularly with the China banking stocks. There could be potential concerns over whether the Shenzhen GEM board will freeze captial in the market, but overall we should still be seeing more positive signs with the market.

Successfully got Espirit (0330) yesterday with the bid price, but didn’t manage to get Geely Auto (0175). I’ll still put a bid for today perhaps at a slightly higher around HKD2.9-ish, and at the same time, I’ll be looking at ICBC (1398), possibly a bid price at around HKD6.1-ish but for long term.

A note woth mentioning though, ICBC does have around 12 billion shares where the lock-in period has expired on 27th Oct. So there is still possiblity where the stock will be short in the market, but I’m betting that with the 3rd quarter results, and with the potential of the stock, the share price would stand rather firm.

Placing a bid price this afternoon

Another day where HSI is plunging. Believe this is largely due to the unexpected fall in the numbers of housing sales in US, along with a downward trend in the China stock market. However believe this is a temporary adjustment, unless the unemployment figures coming out from the US tonight is also going bad.

With Hong Kong government trying to impose measures to curb the property prices and asset bubbles, most property stocks and banking shares are virtually all moving downard.

Bidding for this afternoon – Geely Auto (0175) - intended bid price at around HKD2.8, and Espirit Holdings (0330) – intended bid price at around HKD51

Note: picking up from the last entry where I was looking at China Comm Cons (1800) – my conclusion is, it is not a stock to buy for the time being.

3rd quarter results – Coal Stocks

It’s time for most firms to release their 3rd quarter results. Good timing to re-evaluate some of the items holding in the portfolio. The news that caught my eye for the week was the announcement of 3rd quarter for both Shenhua (1088) and China Coal (1898).

 If we look at the China market for coal demand, by statistical figures, it should be quite optimistic. Aside from the fact that for september, net import of coal into China has raised 6.6% (per monthly stat), and if we look at figures from Q1 to Q3, net import actually rose 22 folds already. On top of that, coal market is mainly dominated by Shenhua and China coal, with rest of the small firms scattering around which the government is trying to “re-organize”. With the economic gradually picking up, with increasing demand of steel and energy, I’d expect Q4 to be another good quarter for coal demand.

Looking back at a firm level, China coal (1898) is recording a gain which translate to EPS 0.11, vs last year, it represents a fall of 35.29%. As to Shenhua (1088), gains recorded at 14.6% better than last year, with EPS at 1.13.

I’ll maintain position to hold Shenhua (1088) in my portfolio, but I will not increase the proportion unless the share price drops through HKD32 per share. As for China Coal, I won’t touch it for the time being.

Re-balancing the portfolio

It is becoming increasingly difficlt to find time trying to keep the blog fresh. But I hope you have reviewed the few recommendations posted before, and have captured some decent gains.

As of today -

• Pacific Basin (2343) – raised through HKD6 per share vs my intended buy price below HKD5 (which occured after the week I posted the entry). For those holding this stock, and do not intend to invest in long term until 2010 – it’s time to cut gains. Baltics Dry Index will start to fall
• Singamas Conatiner (0716) – raised through HKD 1.6 per share as of today vs my intended buy price below HKD1.3. Personal opinion – you can still hold on this one because for a little while.

I intend to cut gains on my short-term portfolio. Yes, perhaps the market will rise even more, but as normal individual investors, you normally won’t be able to sell at the highest price and buy at the lowest price. Capture the gains, don’t look back, and spend the dollar on shares that is lagging behind.

Rising through 22,000… I’m betting there will be some interim adjustments to HSI, thus buy rationally and don’t “chase” after the stocks. As of now, I think it is still ok to consider buying Espirit (0330) – current price is at HKD53.55.

Coming up next, I’ll try to make time to finish the analysis on the stocks that I’m watching now – China Comm Constructions (1800), and aside from that, I think I’ll probably check out IDS Group as well since they’ve just finished an M&A activitiy with an indonesian firm. Stay Tuned!

Stock Watch – Pacific Basin (2343)

Busy with projects lately, and with the market rising so much versus a few months ago, it’s no longer easy to find best buys in the market.

Thus, I’m sharing with you on a stock that is on my watch list. This stock is currently  luke warm, and I may invest a little when the next adjustment comes.

1) The Company

• Pacific Basin is one of the world’s leading dry bulk operator, and it also focuses on towage and RoRo
• They have a fleet size of around 150 and serve mainly the Asia pacific market.
• Their customer base is dynamic (over 200 customers and 100 commodities), and risk management tactics is also sound (making contracts payable upon loading completion to combat potentials of bad debt in bad economy)
• Good EPS benchmarking major competitors, and have a policy to pay out dividend minimum at 50% (exclude vessel disposal gain though).

2) Prospects

• The group is currently having high cash flow, and they’re conserving capital to invest in opportunities when arise
• Investment in RoRo business is about to generate profit. Plus, forecast this segment is going to have high growth to generate revenue (low order booked for new vessels, and 40% fleet is 25 years old and over)
• Group-wise cost curbing measurements, where they’ve successfully negotiated a few vessels to be delivered only in 2011 (instead of 2010)

Personal opinion – there is a risk of excess tonnage hitting in 2010 still. But with canceling of new orders and scrapping of old vessels, the market may reverse. There are analysts actually speculating that the Baltic-dry index (BDI) will actually raise over 3000 in 2011, if so, the company will be really in great position.

Currently the stock is performing behind HSI, but from the books, this should be a solid company. Ideally, I want to buy when it falls through HKD5 (which I think it might), and I intend to hold this stock for mid-long term.

IPO – Sinopharm & Metallurgical

Wah… a few busy day burrying myself in the project, the stock market suddenly went more than crazy!!

Quick overview on what I’m doing now -

1. Using my cash portion to buy IOP
2. Checking gold price
3. Checking out details for the RMB bond sales in Hong Kong

What comes up must come down, with HSI rising like 400, 500 points, there will bound to be adujstments be it big or small. Thus don’t rush into the market, and try to apply rationality

If I have more time next week, I’ll try to finish my pending article on the 6 major banks in China.

Understanding Oil & Gas, Petrol-Chemical Stocks

Applying the same principle – if you want to understand a certain stock, you’ll first have to understand what business are they in. So I’ve made a small diagram to explain the oil and gas industry in a diagram from up-stream to down-stream, along with the key players in the market –

 

When it comes to investing in China oil stocks, one must understand that you cannot look at the international oil price and decide if the company is going to do well or not. Main reason being China has price control on oil (成品油), which means no matter how much international prices are, there is always a ceiling for per barrel of refined oil that you’re selling. Hence last week when China announces the up-tuning of oil price, Sinopec (0386) actually did well in the market despite the general downtrend in the market.

Looking at the existing market, my interim conclusion is, with the cash that I’m holding I will probably not be touching on oil stocks. Too long a wait, and not strong enough for short term speculation.

HSI forecast – 2 Sep

Just a very short note to recap that US stock market experienced a major fall yesterday, Shanghai stock exchanged opened low despite we’re seeing initial signs of re-bound as of 09:50 am.

• 上証綜指 2,711.57  +27.84  (1.04%) 
• 深証成指 10,693.71  +79.43  (0.75%)

Expect today’s HSI will be following the China trend still, there shouldn’t be drastic variance over 19,000 points.

Extra note though – China government announced the adjustment of product oil price, hence we maybe seeing positive movements on oil and refinery stocks like Sinopec Corp (0386). More in the opinion there maybe further adjustments downards in general, hence if it’s a re-bound, and you’re in short of cash flow – consider selling the weaker stocks to maintain your liquidity. If I have time later on, I’ll start posting more commentaries.

Sharing on my Investment Direction

It is often said that the pick up of a stock market is always the prior sign of economic recovery. Generally, stock market walks ahead of the actual market 6 months in time – which is indeed a very true theory with practical figures supporting it. Just remember, every recovery is different, so historical stats are reference, but not bible.

In view of the turbulent market, I’m just going to share with you a few things that I’ll be doing gradually over the next few months -

1)      Identify good stocks for long-holding (around 50%)

Mainly, what I’ll be doing is to try finding the undervalued strong blue chips, and those who’s falling slightly behind on their interim. Reason being, in good markets, you’ll never be able to buy strong blue chips because they’re way too expensive. These stocks, if I purchase, I’ll intend to keep it for long term, and earn dividend out of it.

2) Maintaining a small short-term speculation (around 20-30%)

When doing short term investment, normally I’ll be looking at the potentials for the coming 1-3 months. Sometimes I just love market fluctuations, as without the highs and lows, you’ll never be able to speculate. Just being a slightly risk “adverse” person, I’ll only venture a part of my investment now.

3) Freeing out cash-flow (around 20-30%)

Often when it comes to making investments, what happens is when the market slumps, your stock basically turns into “crabs”, hence you’re constantly in a loss position, and unable to recover since you don’t have cash flow to buy. Hence, I’ll always keep around 10-30% on hand if nothing major is happening

All in all, it’s just a short sharing, and please only take it as a reference. Ultimately, everybody’s initial capital, investment goals, risk adversity etc are all different.

HSI forecast – 31 Aug

Hey folks, looks like today’s going to be a fall day. Starting this morning, both Shanghai and Shenzhen stock market both plunged.

If this continues, likely today can go below 20,000 points. In case that happens, I’ll try to bid for Esprirt (330) at around HKD 44, Singamas Cntr (716) only if it falls below HKD1.3, China Shenhua (1088), if it goes close or below HKD29. China Life Ins (2628) is worth to take a look as well, but I’ll still say should buy only when it falls back to close to HKD30-ish below (-ish is in cents, not in dollars). Lets see how it goes for today.