HONG KONG MARKET FOCUS: 21 JULY 2010

Last Change Chg (%)

Hang Seng Index 20,264.59 173.64 0.86%
Shanghai Stock Exchange 2,528.73 53.31 2.15%
Nikkei 225 9,300.46 -107.9 -1.15%

Top 5 Gainers Last Change Chg (%)

China Shenhua Energy Company HK$28.90 0.75 2.66%
China Overseas Land & Investment HK$16.46 0.38 2.36%
COSCO Pacific Limited HK$9.62 0.22 2.34%
CITIC Pacific HK$14.94 0.34 2.33%
Bank of Communications HK$8.42 0.19 2.31%

Morgan Stanley saw Hutchison BOC HK Seen Outperforming on CNY

Whampoa’s 1H Net Profit Down 27%
YoY
th
The results which due August 5 are seen to show
net profit at $4.18 billion, down by 27% YoY. Port,
property, retail earnings are seen up while 3G
operation is expected to turn EBIT positive.
Hutchison currently underperform HSI by 3% YTD. It
has 0.7x P/B, 9.4 P/E against 2011 estimates. While
near-term drivers absent, it may do well within 18-
24 month horizon. Rating kept at OVERWEIGHT. Citi
trims target to HK$63 from HK$67 on rollover to
2011 NAV but keeps Hutchison at BUY as it is
currently considered as ‘relatively cheap’. Citi sees
1H10 net profit of HK$4.955 billion or -14% YoY. GS
also maintain BUY rating.
Pact
A pact between China and Hong Kong signed
Monday is seen benefiting BOC HK as the number
one CNY deposit market share holder. BOC HK is the
only CNY clearing bank in HK and that the pact will
widen CNY usage and circulation in HK. JP Morgan
sees strong OUTPERFORMANCE on BOC HK’s shares.
Bank of East Asia target price lowered
to HK$24.00
Deutsche Bank lowered BEA’s target price to
HK$24.00 from HK$26.10 as BEA seen to be
vulnerable to China’s policy measures. China NPL
coverage ratio of 32% is seen too low compared to
regulatory requirement of 150% for local Chinese
banks. DB keeps HOLD call. Loan growth may need
to be sacrificed in 2011 to meet 75% CNY loan-to-
deposit ratio by end-2011.

Hang Lung Properties FY10 Net Profit
Seen Up 193% YoY
Positive factors such as the booking of 425 garden-
view units of The HarbourSide sold in 1H10 and
rental income growth by 15% are likely contributors
to the FY10 net profit of HK$7 billion, according to
Credit Suisse. CS also projects 50% of residential
units are to be sold in FY11 as it maintains HLP at
NEUTRAL stance.
Insurance Sector Oversold but No
Urgency to Get Back in
CLSA sees lack of near-term driver and the valuation
will keep insurance sector weak due to lack of
investor confidence in their underwriting discipline.
Impact from proposed price liberalization of
traditional life products in China insurance market
also seen to have limited impact. China Life still
rated at UNDERPERFORM due to expensive
valuation, Ping An kept at OUTPERFORM.
Goldman Sachs: China Stocks’
Valuations Low
Positive catalysts seen near-term, such as policy
turning neutral and clearance of stock issuance
overhang. H-shares currently trading at 10.8x 12-
month forward P/E.
Larvotto in Focus
Sun Hung Kai Properties is seen to maintain recent
outperformance as 100 units of luxurious residential
units were snapped on Saturday. Larvotto’s higher-
than-expected ASP (HK$18,000 psf) is seen
supporting SHKP’s share prices as well as Kerry
Properties.
China Mobile Adds 5.06M Total Users
in June
China Mobile’s end-June 3G users reached 10.461
mln, as 1.141 mln 3G users were added in June vs
917,000 in May. Total users by the end-June were
554.042 mln or 5.06 mln higher from May’s 4.77 mln
users.
Bocom International: China Shenhua
Energy at NEUTRAL
HK Unemployment Rate in April –
June 4.6% As Expected
HANG SENG INDEX FUTURES JULY’10

Resistances:
20,440/50; 20,790; 21,000

Supports:
19,935; 19,870; 19,675

Commentary:
Declining MACD and rejection near EMA 50-day & 100-day signified strong resistance around 20,440/50. The index
will attempt another move upside but only above 20790 will alter the stance from NEUTRAL to MILDLY BULLISH.
Downside remains vulnerable, but expect EMA 200-day to lend solid support at 19,870. Look to SHORT near
20,440/50 area, aiming at the return towards 19,870 (EMA 200-day). Risk for reversal is seen at the break of
20,440-20,450 resistance zone.

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