Turnover (HK$ bn) Hang Seng Index EAST ASIA SECURITIES COMPANY LIMITED 9/F, 10 Des Voeux Road Central, Hong Kong. Dealing: 2308 8200 Research: 3608 8097 Facsimile: 3608 6113 HONG KONG RESEARCH Restricted circulation Weekly Report Analyst: Paul Sham 21 st March 2014 300 270 240 210 180 150 120 90 60 30 0 75.47 s plunge as Yellen signals rate rise HSI Weekly Movement 21,539 21,474 21,584 21,569 55.78 64.86 64.17 21,182 74.82 21,437 91.71 14-Mar Mon Tue Wed Thu Fri Turnover Hang Seng Index 23,000 22,500 22,000 21,500 21,000 20,500 20,000 19,500 19,000 Weekly Market Statistics Week ended 21/3/2014 14/3/2014 Change % Hang Seng Index 21,437 21,539-103 -0.5% HS Red Chip Index 3,974 3,977-3 -0.1% HS China Enterprises Index 9,427 9,299 +129 +1.4% HS Hong Kong 35 Index 2,607 2,619-12 -0.5% HS Mainland 100 Index 6,239 6,223 +16 +0.3% Growth Enterprise Index 568 559 +9 +1.6% Avg Daily Turnover 70.3 69.6 +1 +1.0% (HK$ bn ) Sectoral Indices Finance 28,526 28,776-250 -0.9% Utilities 46,383 46,503-121 -0.3% Properties 25,971 25,907 +64 +0.2% Comm & Ind 13,435 13,467-32 -0.2% Review & Outlook of Market Performance Hong Kong equities mainly moved sideways at the beginning of the week as investors turned their attention to the later FMOC meeting in the US. The meeting turned out to be more aggressive than expected as testimony from the new US Federal Reserve chairman, Janet Yellen, suggested the target Fed Fund Rate may rise as early as spring 2015 (around six months after its asset purchase program comes to an end). Her comment hit global stock markets, including the Hang Seng Index, which slumped 386 points on Thursday, as investors previously assumed interest rate won t rise until late 2015. The benchmark index staged a rebound before the end of the week to recapture the 21,400 level as A-share markets rallied the most in four months amid speculation the government may relax funding restrictions by approving bank to issue preference shares. Eventually, the Hang Seng Index recouped the earlier losses and closed at 21,436.70, down 0.48% w-o-w. The daily average turnover amounted to HK$70.3 billion, up from HK$69.6 billion in the previous week. In addition to Yellen rate hike remark, the benchmark index was also weighed down by the underperformance of index giant, China Mobile (00941). The world s largest mobile carrier tumbled 7.2% w- o-w to HK$64.50 after it reported the first annual earnings decline in 14 years. Another index bellwether, Tecent (00700) posted 4Q13 earnings up 13% y-o-y to RMB3.91bn, missing analyst estimates, due to the rising spending on its e-commerce and game operations to compete against Alibaba. Shares of Tencent once dropped below HK$550 before closing the week at HK$572.50 (+1.3% w-o-w). Looking into next week, investors will focus on earnings reports, in particular of the big four banks in China and China Life. With the potential short-term boost towards Chinese stocks on speculation over liquidity relaxation by the PBoC, we expect the HSI to rebound to 22,000 next week. Nevertheless, further upside seems limited in view of debt problems in China, an earlier rate hike in the US and depreciating RMB. This report has been prepared solely for information purposes and we, East Asia Securities Company Limited are not soliciting any action based upon it. Neither this document nor its contents shall be construed as an offer, invitation, advertisement, inducement or representation of any kind or form whatsoever. This document is based upon information, which we consider reliable, but accuracy and completeness are not guaranteed. Opinions expressed herein are subject to change without notice. At the time of preparing this report, we have no position in securities of the company or companies mentioned herein, while other Bank of East Asia Group companies may from time to time have interests in securities of the company or companies mentioned herein.
US & Regional Markets Weekly Update Date US US JAPAN SINGAPORE MALAYSIA BANGKOK TAIPEI Dow Jones NASDAQ Nikkei Avg STI KLSE Index SET Index Weighted Index 21st March 16,331.05* 4,319.29* 14,224.23 3,073.39 1,820.48 1,357.84 8,577.17 14th March 16,065.67 4,245.40 14,327.66 3,073.72 1,805.12 1,372.18 8,687.63 Change +265.38 +73.89-103.43-0.33 +15.36-14.34-110.46 % +1.7% +1.7% -0.7% -0.0% +0.9% -1.0% -1.3% Remark: (*) closing as of 20 th March 2014 Major Changes in Index Constituent s (Week ended 21 st March 2014) Hang Seng Index (HSI) Code Closing Price @21/3/2014 W-O-W Change Remarks / Comments Absolute % China Mobile 00941 HK$64.50 -HK$5.0-7.2% Net profit of China Mobile fell 5.9% y-oy in 2013, its first decline in 14 years, attributable to the rising costs to build high-speed networks. Li & Fung 00494 HK$12.48 +HK$2.46 +24.6% Global exporter Li & Fung posted a net profit of US$725m for 2013, beating forecasts of US$577.1m. The global exporter also said it plans to spin off its global brands and licensing business under its Global Brands Group and list it in Hong Kong this year as part of the Company's three-year strategy. Hang Seng China Enterprises Index (HSCEI) Code Closing Price @21/3/2014 W-O-W Change Remarks / Comments Absolute % China Longyuan 00916 HK$8.02 -HK$1.34-14.3% Net income of China Longyuan fell 21% y-o-y to RMB2.05bn in FY13, missing market estimates of RMB2.99bn. The profit decline was due to rising maintenance, depreciation and amortization costs as well as higher impairment loss on its biomass projects. Hang Seng China-Affiliated Corporations Index (HSCCI) China Resources Power Code Closing Price @21/3/2014 W-O-W Change Remarks / Comments Absolute % 00836 HK$19.88 +HK$2.18 +12.3% Mainland power shares rose this week on news that a new scheme would boost the participation of power companies in the nation's energy market. The new scheme encourages direct purchases by large users from power producers, thereby encouraging a more market-based approach. 2
Summary of US Economic News Indicator Change/Index Comments Industrial Production Consumer Price Index Housing Starts FMOC Meeting Announcement Federal Funds Rate Existing Home Sales Initial jobless claims week ended 15 th March 2014 +0.6% m-o-m +0.1% m-o-m -0.2% m-o-m Unchanged -0.4% m-o-m +5,000 w-o-w Industrial production rebounded 0.6% after dipping 0.2% in January, better than market expectations of 0.3% gain. Factory activity in February mostly recovered from depressed production in January due to cold weather. Consumer price inflation remained quite soft in February. Inflation rose 0.1% m-o-m, matching the pace in January and also matching market expectations. Housing starts nudged down 0.2% to a 907,000 annual rate from an upwardly revised 909,000 rate for January. It appeared that housing sector has been coming out of the severe winter weather doldrums. The Fed left policy rates unchanged. Tapering remained as scheduled with another US$10 billion cut. For the sixth time in seven months, sales of existing homes contracted 0.4% in February following a very severe 5.1% contraction in January. Cold weather in February, together with weak job market, held sales back. Initial jobless claims for the week ended 15 th March rose 5,000 to 320,000, near its four-month low. Major Results Announcements during the Week China State Construction (03311) China Coal Energy (01898) Kerry Properties (00683) FY2013 Net profit y-o-y change HK$2,772m +30.1% RMB3,805m -57.0% HK$13,154m +89.0% BYD (01211) RMB553m +580% Drivers of performance The better earnings were supported by solid top-line growth in the affordable housing projects & other infrastructure projects and better profit margins in its Hong Kong and Macau operations. China Coal Energy reported 57% y-o-y decline in net profit in FY13, owing to slumping profit from coal sales amid dropping thermal coal prices. Excluding the revaluation gains on investment properties of HK$4,416m (2012: HK$2,265m) and disposal gain of Kerry Logistics of HK$4,325m (2012: nil), underlying profit fell 6.0% y-o-y to HK$4.41bn. BYD posted a sharp rise in 2013 net profit of RMB553m, up from RMB81.38m a year earlier, on the back of higher vehicle sales as well as continuing narrowed losses from its solar operations. However, the car-maker forecasts a sharp decline in first-quarter earnings because of softening demand for low-end cars. Share price w-o-w chg +4.0% +9.5% -0.4% -7.6% 3
Galaxy Entertainment (00027) HK & China Gas (00003) FY2013 Net profit y-o-y change HK$10,052m +36.2% HK$6,854m -11.1% Tencent (00700) RMB15,502m +22.0% Henderson Land Development (00012) HK$15,948m -21.1% Li & Fung (00494) US$725m +17.5% China Mobile (00941) RMB121,692m -5.9% PetroChina (00857) RMB129,599m +12.4% China Resources Enterprise (00291) HK$1,908m -51.6% Drivers of performance Galaxy Entertainment posted a 36% increase in net profit for 2013 as Chinese visitors flocked to its flagship property in Macau. Stripping out one-off items such as property income and revaluation gains, core earnings surged 10% y-o-y to HK$6.3bn y-o-y. Earnings growth was mainly driven by 20% higher profit from the mainland utilities business, partly offset by a 9.5% earnings decline from the new energy business. Net income of Tencent rose to RMB3.91bn in 4Q13, up 13% q-o-q, but was the slowest quarterly profit growth in almost two years after heavy spending to promote its mobile messaging app WeChat and e-commerce sites in competition with Alibaba. Henderson Land Development posted a better-than-expected 26% gain in underlying profit to HK$8.94bn, helped by an increase in property sales on Mainland China. Li & Fung s 2013 net profit rose 17% due to a turnaround of its US business group. It plans to spin off the Global Brands Group, its brand and licensing division, in 2014. China Mobile posted its biggest decline in profit since 1999, with net profit down 5.9% y-o-y, on rising costs to build highspeed networks. PetroChina said its profit rose 12.4% y-oy in 2013 after higher retail gasoline prices helped narrow heavy losses for its refining unit. Excluding the effect of asset revaluation and disposal gain of non-core investments, underlying profit of China Resources Enterprise increased moderately by 7.5% y-o-y to HK$1,642m, in-line with market expectation. Share price w-o-w chg -1.3% -2.8% +1.3% +1.6% +24.6% -7.2% +2.5% +2.8% 4
v Forthcoming Important Announcements / Events 24 th March 2014 (Monday) HK : Anhui Conch (00914) final results ENN Energy (02688) final results Tingyi (00322) final results US : No important announcements/ events 25 th March 2014 (Tuesday) HK : Agricultural Bank of China (01288) final results Air China (00753) final results China Communication Construction (01800) final results China Life (02628) final results CNBM (03323) final results COSCO Pacific (01199) final results Zhuzhou CSR Times Electric (03898) final results Fosun Int l (00656) final results Jiangxi Copper (00358) final results External Merchandise Trade Statistics US : New Home Sales 26 th March 2014 (Wednesday) HK : Bank of China (03988) final results BOC Hong Kong (02388) final results China Eastern Airlines (00670) final results China Communications Services (00552) final results Dah Sing Financial (00440) final results Dah Sing Banking (02356) final results Huishang Bank (03698) final results Melco Crown (06883) final results Weigao Group (01066) final results ZTE (00763) final results US : Durable Goods Orders 27 th March 2014 (Thursday) HK : Brilliance China (01114) final results China Cinda (01359) final results China COSCO (01919) final results CITIC Bank (00998) final results CITIC Securities (06030) final results ICBC (01398) final results Wharf Holdings (00004) final results US : Initial jobless claims week ended 22 nd March 2014 GDP Q4 2013 28 th March 2014 (Friday) HK : Optics Valley Union 00798) trading debut BBMG (02009) final results CCB (00939) final results China Everbright Bank (06818) final results China Railway Construction (01186) final results China Railway (00390) final results China Merchants Bank (03968) final results CNOOC (00883) final results CPIC (02601) final results CQRC Bank (03618) final results Dongfeng Group (00489) final results PICC Group (01339) final results PICC P&C (02328) final results Wheelock (00020) final results Zijing Mining (02899) final results US : Personal Income and Outlays 5
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