List of HK call warrants

Many of the HK-CWs closed at a discount last Friday as traders and investors disposed of their shares; partly because many do not want to hold any positions over the weekend and also force-selling activities. The Dow Jones industrial index closed slightly lower last Friday at 13,895.63 (-17.31 points). Traders can watch out for the CWs with huge discount, such as CHMOBIL-C1 (1.83% discount), CNOOC-C1 (2.08% discount), & ICBC-C3 (1.87% discount). Nevertheless, do stay cautious as many of the underlying stocks have already risen quite a lot.

New listing: CHLIFE-C4, PETROCH-C4

China Life (2628)
CHLIFE-C4 @ RM0.32 ; underlying share @ HKD 43.20 ; premium 2.02%
At a premium of 15%, CW price is RM0.57 (25 cents / 78.0% gain)
CHLIFE-C3 closed at 20 cents today (premium 15.70%), thus CHLIFE-C4 should be trading at around the same premium too.

Petro China (0857)
PETROCH-C4 @ RM0.145 ; underlying share @ HKD14.06 ; discount 6.62%
At a premium of 15%, CW price is RM0.416 (27 cents / 186.58% gain)
It's been a long time since we last saw call warrants hit more than 100% gain on the first day of trading. Even with a 5% premium, PETROCH-C4 can go to 29 cents, a 100.28% gain in price!
Are the glory days of the call warrants coming back?

New listing: ANGANG-C1, CHEUNGK-C1, CCCC-C4, CHLIFE-C3

The table above shows prices of the call warrants at different premiums (from 0% to 25%), based on the latest closing prices of the underlying shares.
By referring to past information, we can assume that investors are most likely willing to purchase newly listed CWs at 15% premium on a normal trading day. If the market is extra bullish, a 20% premium wouldn't be much of a problem. Using a premium of 15%, we can roughly guess the prices of the CWs for tomorrow.

Angang Steel (0347)
ANGANG-C1 @ RM0.10 ; premium 11.85%
At a premium of 15%, CW price is RM0.113 (13.18% gain)
Note: Angang Steel's H-share is still trading around 30% discount to its A-shares.

Cheung Kong (0001)
CHEUNGK-C1 @ RM0.11 ; premium 9.94%
At a premium of 15%, CW price = RM0.147 (33.93% gain)
Note: The recent rate cut in Hong Kong has benefited property stocks.

China Communications Construction (1800)
CCCC-C4 @ RM0.11 ; premium 19.14%
At a premium of 15%, CW price = RM0.088 (20.36% loss)
Note: CCCC's share price has not moved much for the past 2 weeks, causing its CW to have a higher premium. Nonetheless, I reckon CCCC-C4 will still be able to stay on the green side tomorrow.

China Life Insurance (2628)
CHLIFE-C3 @ RM0.11 ; premium 5.44%
At a premium of 15%, CW price = RM0.169 (53.69% gain)
Note: China Life's share price has just started to move, and is heading to 45HKD.

Fed reduced interest-rate; HSI closed at record high

Hong Kong shares ended sharply higher, with the main index finishing above 25,000 points for the first time. In a widely anticipated move, the Fed cut its benchmark rate by half a percentage point, its first reduction in four years, to 4.75 percent on Tuesday in a move to avert a possible economic slowdown in the US.
The benchmark Hang Seng Index closed up 977.79 points or 4%at 25, 554.64, after hitting a fresh intraday high of 25,648.44. Breadth was positive as gainers outpaced decliners 572 to 409 while 151 stocks were unchanged. Volume traded reached 18.17 billion share worth 131.81 billion HK dollars.

Market heavyweight CNOOC ended at a record high, up 1.32 dollars or 12.4% at HKD11.98. CNOOC, the listed arm of the mainland's largest offshore oil producer, China National Offshore Oil Corp, surged after oil prices breached 82 US dollars per barrel in after-market trading today. Brokerage house Goldman Sachs has a "buy" rating on CNOOC as it expects the company to benefit more than its peers from the higher oil prices. Its call warrant CNOOC-C1 surged a 6 cents (44.44%) to close at an intraday high of 19.5 cents.

China raised lending rate... again..

China raised its benchmark one-year lending rate by 27 basis points to 7. 29 percent, the highest level in nine years, in a continuing effort to cool the economy and curb inflation. It is the fifth time this year that the Chinese authorities have increased rates. The annual rate of inflation in the mainland accelerated to 6.5 percent in August, the highest since December 1996, as the economy expanded at an annual rate of 11.9 percent in the second quarter, the fastest pace in 12 years. Aside from raising rates, analysts also expect China to increase the amount of reserves that banks should deposit with the central bank to cut bank lending and ease consumer spending.

The 2 Giant Chinese energy companies: China ShenHua Energy & CNOOC

China Shenhua Energy was sharply higher after news that mainland regulators will review the company's A-share issue plan on Monday. The stock surged 2.05 hkd or 5.32 pct to 40.6, off an all-time-high of 41. 1.
The China Securities Regulatory Commission (CSRC) said it will review China Shenhua Energy's plan for an initial public offering on the Shanghai Stock Exchange. According to a draft prospectus, Shenhua Energy, China's largest coal producer, will issue up to 1.8 bln A-shares for listing.
Quoted from the Forbes' Fabulous 50: "China is burning coal faster than its largest miner can pull it out of the ground. So China Shenhua is looking for more, both at home and abroad. Plans to raise $7 billion with a new listing in Shanghai's roaring market (it listed in Hong Kong 2 years ago), even though it has plenty of cash. Will use the proceeds to expand its 21 domestic mines, to acquire more mines, add more power plants and beef up its railroad and harbor infrastructure. Chairman Chen Biting aims to make China Shenhua, now number 2, the world's largest coal miner. Is 80% owned by Shenhua Group, a government entity."
SHENHUA-C1 surged 4.5 cents (+25.71%) to close at 22 cents (premium 3.14%) with an intra-day high of 23 cents last Friday.

With the oil price touching a new high, the next counter to look out for is the China National Offshore Oil Corporation Ltd. (CNOOC) and its call warrant, CNOOC-C1.
Quoted from the Forbes' Fabulous 50: "China's buccaneering offshore oil company goes where few Western giants dare in search of resources. Signed an exploration contract in war-torn Somalia in May and is reportedly negotiating in Iran. The shares, listed in Hong Kong, have risen 22% in the last 12 months, but net income has been growing at 32% on average over the last 5 years. Came to embody Western fears of Asian state-owned companies buying up corporate America and Europe after its bid for Unocal was blocked by the US government in 2005. CNOOC is 66% owned by government entities, but independent board members are in place to speak for international shareholders."
CNOOC added 20 cents to closed at HKD 10.34 last Friday. Meanwhile its call warrant, CNOOC-C1 closed at 12.5 cents (+1 cent / +8.7%) last Friday, and currently having a premium of 6.62%.

H-shares trading at discount to A-shares; the CWs to look out for are...

At present, only call warrants of these four companies are being listed on bursa (CHALCO, CHINA LIFE, ICBC, and SINOPEC).
By allowing investors from mainland China to invest overseas, H-shares in Hong Kong which are trading at discount to their A-shares counterparts in Shanghai/ShenZhen would definitely be at the top of the list. Most likely, these H-shares prices will rise and A-shares prices will fall as investors would opt for H-shares which are much more cheaper.
The orange column shows the price of the H-share if it was to rise to at least half the level of the A-share price. And from there, we can project the expected price for its call warrant. Please refer to the table above.

HKEX's price skyrocketed!

The Hang Seng index closed up 17.09 points or 0.1 percent at 23,999.7, off an earlier low of 23,578.11. The index rebounded in the afternoon session, taking it to the day's high of 24,123.66. The index's rebound was helped mainly by shares of Hong Kong Exchanges and Clearing (HKEx), which gained HKD 32.10 or 20.3 % to 190.10 dollars after the government raised its stake in the exchange operator to 5.88 percent on Friday. The stock hit a new intraday high of 197 dollars.

The Hong Kong government's increased stake in Hong Kong Exchanges and Clearing Ltd (HKEx), operator of one of the world's largest stock markets, highlights its intention to establish closer links with mainland bourses and promote cross-border trading between stock markets, analysts said Monday.

The government's decision to become the company's largest shareholder with a 5.88 percent stake also demonstrates its confidence in HKEx long-term prospects and it will probably raise it even further, they said. "The reason for raising the stake is unclear at this point, but the news was well received by the market which stands to benefit from any positive policies resulting in a likely alliance between the HKEx and Shanghai (in the future)," said Eugene Law, research head at Celestial Asia Securities.

Local media have interpreted the government's move as a first step towards merging the local bourse with mainland exchanges by swapping shares with the Chinese government. The Hong Kong government has not commented on the speculation.

"The main reason you are acquiring a stake is if it's a very good buy. If (the market's) turnover continues to grow the way that it has over the last few months the exchange will be worth more than the price that the government paid," said Tony Espina, chairman of Hong Kong Stockbrokers Association.

In August, the exchange operator reported a 110 pct rise in first-half net profit to 2.33 bln Hong Kong dollars due to a sharp increase in activity in the local stock and derivatives markets. The Hong Kong stock market benefits from the perception that its shares act as a proxy for China's economic growth. The Chinese economy has been expanding at a record pace of more than 10 percent a year. Because foreign investors have limited access to yuan-denominated shares, Hong Kong shares provide an alternative opportunity to get exposure to the mainland.

The announcement was followed by reports that Hong Kong is seeking permission from China for the city's investors to trade yuan-denominated A shares. ""Hong Kong investors might eventually be able to trade the A-shares. This could happen as the Hong Kong and mainland markets are getting more interactive with each other,"" the South China Morning Post said Monday. The paper was citing Secretary for Financial Services and the Treasury Bureau Chan Ka-keung.

On Aug 20 China said it will allow its citizens to trade Hong Kong shares. But the scheme has yet to be implemented. At present, investors in Hong Kong and the mainland can invest in each others' markets only through government-approved funds

Fed to cut interest rate

Billionaire publisher Steve Forbes urged the US Federal Reserve on Sunday to cut a key interest rate by a full percentage point when it meets later this month, to solve an ongoing credit crisis.
The central bank should also focus on addressing the root of the problem - excess liquidity in the economy, Forbes said at lunch hosted by the Singapore Press Club.
Forbes said the Fed should cut the interest rate, now at 5.25 percent, by 100 basis points when it meets September 18 and make it clear "that while they're going to solve the short-term crisis, they will, over the next year or so, start to mop up the excess liquidity.
"Removing excess liquidity - the Federal Reserve selling bonds from its portfolio and withdrawing funds from the market - that is tightening which the Fed has not done," he said.
Economists increasingly believe the Fed will cut the rate by at least one-quarter percentage point at the September meeting.
The Fed has not lowered the rate in four years, but pressure has been building on it to do so to help ease credit conditions. Lower rates would reduce borrowing costs for everyone from potential homeowners to companies looking to finance activities and purchases.

China to raise reserve requirement ratio

China will raise the reserve requirement ratio by 0.5 percentage points for commercial banks as of September 25, the People's Bank of China (PBOC) announced on Thursday.
It is the seventh time this year the Chinese government has opted to raise the reserve requirement ratio to curb excess liquidity.
The central bank said the move was aimed at "strengthening liquidity management in the banking system and checking excessive money and credit growth".
PBOC statistics show that China's foreign exchange reserves reached US$1.33 trillion at the end of June, up 41.6 percent over the same period last year.
A total of US$266.3 billion was added to the country's foreign exchange reserves in the first half of 2007, US$144 billion more than a year earlier.

"8,530-TEU", First China-made Container Ship

The first 8,530-TEU container ship, of which China owns the full intellectual property rights, had been delivered to China Shipping Container Lines Co. Ltd. (Shanghai) and left for its maiden voyage to the United States on Sunday.
It has made China the fourth country in the world, after the Republic of Korea, Japan and Denmark that is able to design and build such giant container ships, said experts.
The ship, named "New Asia", is the first of five container ships of the same type to be designed and built by Hudong-Zhonghua Shipbuilding (Group) Co. Ltd. for the China Shipping Container Lines Co., Ltd.
The 101,000-dwt container ship, 335 meters long and 42.8 meters wide, can sail at a speed of 25 knots an hour.
The Shanghai-based shipbuilding company spent six years to build the ship, the largest container ship independently designed and built by China. It is one of the mainstream type of container ships in the world.
So far the company has confirmed nine orders for its 8,530-TEU container ships, including four for the Greek Costamare Shipping Co.

Property industry to remain hot next 10 years

Due to the wide demand-supply gap in the property market in China, the property industry in the country is expected to maintain a rapid growth in the next ten years.
According to Yang Shen, former Vice Minister of Construction, total floor space of houses had increased by 8.86 billion sq m in 1980 – 2006. The average floor space of houses per capita in China is larger than the figure in many other countries.
In the past decade, the property industry has been soaring continuously at an average annual growth of 14%, contributing to 4.5% of China’s GDP. It is estimated that the growth of the property industry will take up 8% of the country ‘s GDP by 2010.
With nuclear family taking the place of extended family in China, housing demand has become stronger and stronger in the market.
In the next 10 years, commercial houses with the total floor space of 9.9 billion sq m will be needed. That is to say, the property industry must manage to keep an annual growth of 13.2%. However, taking China’s shortage of farmland into consideration, it will be very hard for the property industry to achieve it.
Nevertheless, the shortage of land might also present a chance of rapid growth of business value of the property industry.

ARJ21... Time to fly

China's first self-developed regional aircraft ARJ21 completed the specific design and started manufacturing in April 2006 by China Aviation Industry Corporation I (AVIC I)
AVIC I and the Lao Airlines signed a Memorandum of Understanding of two ARJ21 jets, which marked a milestone for the exportation of China self-made aircraft.

The picture shows the cabin section of ARJ21 aircraft which attracted many visitors at the Asian Aerospace International Expo and Congress 2007 currently held in Hong Kong.