Celestial Research

by mabs Thu 24 Nov 2011, 11:09

Market
Outlook

Hong Kong market
might fall with external markets. Hong
Kong stocks continued to close down on Wednesday. Due to the worse
than expected preliminary HSBC China PMI in November, Hang Seng Index closed
down 387.16 points or 2.1% to 17,864.43 points. The China Enterprises
closed at 9,476.15 points, down 269.2 points or 2.7%. European
stocks dropped overnight. The rescuing plan on DEXIA bank in Belgium
might flop. Euro Zone’s PMI in November was 46.4, hitting a new low since
July 2009 while the auction of German bunds was worse than expected. UK
FTSE 100 Index closed at 5,139.78 points, down 67.04 points or 1.29%. France
CAC 40 Index closed at 2,822.43 points, down 48.25 points or 1.68%. Germany DAX
30 Index closed at 5,457.77 points, down 79.62 points or 1.44%. The loss
extended to Wall Street. Market investors were worried about the spread
of debt problems to other healthy entities such as Germany,
thus, resulting a subscription rate of only 65% for the German bunds auction
overnight. Along with the worse-than-expected PMI of Euro Zone and the
thin turnover at thanksgiving holiday eve, three major stock markers in U.S.
were down. The Dow Jones Industrial Average Index closed at 11,257.55 points,
down 236.17 points or 2%. Nasdaq closed at 2,460.08 points, down 61.2 points or
2.4%. Standard & Poor’s 500 Index closed at 1,161.79 points, down 26.25
points or 2.2%. Hang Seng Index followed the falling trend of external markets
yesterday. The turnover of derivatives’ markets accounted for 39.9% of the
total turnover, indicating that risk appetites of investors are low. Hong
Kong market is expected to fall with the external markets and might
test the support level around 17,200 points today. Investors could pay
attention to the report quoted by foreign media that the required reserves rate
of five rural credit cooperatives was tuned down by 0.5% to 16%. It is
widely believed that this is a sign of an ease in monetary policy. However,
with the absence of significant increase in new loans, investors should keep
cautious on the Chinese bank sector.

Sector
Update

HSBC’s China
PMI in November hit 32-month-low. The
preliminary HSBC China Manufacturing PMI in November dropped to 48, far lower
than 51
in October and was a 32 month low. At the same time, the
index fell below 50, indicating that the manufacturing activities are in
contraction. Among the sub-indices, the Output index fell to 46.7 from
October’s 51.4 while New orders index dropped to 45.7, which might lead to a
much slower economic growth in China.
The urgency of pushing out stimulating policies is increasing. On the
other hand, the Input and Output prices both dropped by around 10%. This
showed that inflation in China
is cooling off, therefore leaving more room for the Government to fine tune its
monetary policy, which will support China’s
stable economic growth in the long run. Therefore, we believe such sharp drop
in PMI reading could be quickly digested by investors and its effect on the
stock market will be limited.

Stock
Pick

Huabao International’s (00336.HK) outlook gets
weaker. Huabao Int’l announced its interim results
recently. For the six months ended 30 September 2011, its revenue increased
18.6% yoy to HK$1.525 billion while its net profit advanced 8.30% to HK $815
million. Its gross profit margin was 70.6%. The group explained that the
decelerated growth rate of its flavours business was attributed to the slowdown
of consolidation of the tobacco industry and the safety problems found in both China’s
food and beverage and food additives industry. While the revenue
generated from its flavours business accounts for 87% of the total revenue, the
slowdown in that business line eventually hits the profitability of the Company
directly. The group is currently engaged in implementing a centralized
and streamlined management system in the hope of further reducing its
management costs and improving unit efficiency. The Company also has a
leading research and development platform with experienced crews.
However, in light of a gloomy economic outlook and signs of economic slowdown
in mainland popping out, we hold a pessimistic view towards the Company’s
outlook in Q4. Therefore, investors are advised to reduce the Company’s
stake at suitable times.

by **phoenix777** Thu 24 Nov 2011, 12:40

thanks for the info +1 rep

by **Cals** Thu 24 Nov 2011, 13:46

wa power Mabs Thumbs Up

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