Market Outlook

Hang Seng Index closed up 1.5% at 21,018. Market turnover expanded to $76.1 billion. Heavily weighted HSBC (5) and China Mobile (941) added 1.8% and 1.2% respectively. HKEx (388) rose 3.1%. Hong Kong property stocks outperformed the benchmark index. Cheung Kong (1), SHK Properties (16) and Wharf (4) advanced 2.5%-3.6%. HSCEI surged 1.8% led by automobile, shipping, cement and non-ferrous metal stocks. BYD Company (1211), Dongfeng Motor (489), China Cosco (1919), Anhui Conch (914), CNBM (3323), Chalco (2600) and Jiangxi Copper (358) soared 5.5%-9.5%. Three largest oil producers, four largest Chinese insurers and ten largest Chinese property developers all increased with an average gain of 2.0%, 2.5% and 5.9% respectively. Eight largest Chinese banks grew an average 0.7%. China Shenhua (1088), the worst performing HSCEI stock, declined 1.5%.

We reiterate our view that short-term investors should take profit on cyclical stocks and wait for another buying opportunity. The best entry point for the Hang Seng Index is 20,000 or below.