Hong Kong: Celestial Research Daily Report 3rd April

Market Outlook

Turnover might remain weak.

Hong Kong stocks closed down on its first trading day of 2Q2012. Although the benchmark Hang Seng Index opened 107 points higher in the morning, the rising momentum was not sustained. The index once fell to 20,417 points, down 137 points. During the afternoon session, with support of European stock market, the loss was narrowed down a bit. The Hang Seng Index finally closed at 20,522.26 points, down 33.32 points, or 0.16%. The China Enterprises Index rose by 18.06 points, or 0.18%, to close at 10,658.76 points. Turnover significantly reduced to HKD45.511 billion. European stock markets opened low but closed up overnight. European stock markets plummeted during early trading hours amid a sluggish manufacturing index and high unemployment rate in Euro-zone. The euro zone released its final PMI manufacturing index for March, where the index fell from 49.0 in February to 47.7. It was the eighth consecutive month that the index stayed in contraction territory. New orders index of Euro zone also fell for the tenth month in a row, which exacerbate investors’ worries over a sharp slowdown of Europe’s economy. However, with the better-than-expected official PMI of U.S. and China, the European markets rebounded. France CAC40 index closed at 3,462 points, up 39 points, or 1.14%t; Germany DAX index closed at 7,056 points, up 109 points, or 1.58%; UK FTSE 100 index closed at 5,874 points, up 106 points, or 1.85%. U.S. stocks blossomed on the back of some upbeat PMI of U.S. and China. U.S.’s ISM manufacturing index in March rose to 53.4 points, which was better than expected. Market sentiment improved amid this accelerated manufacturing industrial growth. Dow Jones Industrial Average closed up 52 points or 0.4%, to 13,264 points; Standard & Poor's 500 index rose 10 points, or 0.75% to 1,418 points; Nasdaq composite index rose 28 points, or 0.91% to 3,119 points. HK ADRs generally closed up, which hinted a slightly higher opening of Hong Kong market this morning. In recap, Hong Kong market softened yesterday, with turnover further shrinking to HKD45.5 billion, which showed that investment sentiment remained weak. In short run, Hang Seng Index might be capped below its 250-days moving average, around 20,714 points. More, as the Chinese market will be closed today, Hong Kong market will lose an important reference. We believe transaction volume of Hong Kong market will stay weak.

Sector Update


China’s official PMI in March reached a 14-month high.

China Federation of Logistics and Purchasing and National Bureau of Statistics announced the official purchasing managers index (PMI) on Sunday. The March PMI added 2.1% on top of the reading in February to 53.1, which was considerably higher than market expectation of 51. This was a new high since January 2011. However, this official gauge hinted a quite divergent result with the recently released PMI by HSBC and Markit. The official gauge showed that the manufacturing industry is expanding while the latter gauge showed that it is contracting. This difference could be attributed to the survey sample. The official survey focused on large state-owned enterprises while HSBC’s focused on small and medium-sized enterprises. The weaker HSBC PMI indicated tougher operating environments for small and medium-sized enterprises. Another reason for the deviation is that the official PMI index have not been adjusted by seasonally effects of Lunar New Year. Therefore, the index results yesterday and not Hong Kong stocks added the slightest stimulation, and continued weakness.

Stock Pick


Beijing Capital International Airport (00694.HK) handed out a satisfactory report.

Beijing Capital International Airport announced its annual results yesterday. For the year ended 31 December, the total revenues of the Company rose 12.5% to RMB6.5 billion. Amongst, aeronautical revenues increased 6.9% to RMB3.8 billion, and non-aeronautical revenues increased by 21.6% to RMB2.7 billion. The cumulative aircraft movements reached 533,300 sorties, representing an increase of 3.0% over the previous year. The cumulative passenger throughput reached 78.68 million person-times, representing an increase of 6.4% yoy. The cumulative cargo and mail throughput reached 1.64 million tonnes, representing an increase of 5.7% yoy. Overall, the performance was satisfactory. In specific, spotlight should fall on its non-aeronautical concession revenue, which was up by 32.7%, from RMB1.396 billion in 2010 to RMB1.853 billion in 2011. Its stocks is currently valued at 16.09x PER, which is quite fair. Technically, its stock price has escalated to a new high since April 2010 yesterday, with cohered turnover volume. This hinted that its trend might remain strong in short run. A Hold rating is given.