China Construction Bank (0939.HK) TP10.10

JP Morgan raised its target price on China Construction Bank (CCB) to 10.10 hkd from 7.1 hkd after the mainland Chinese bank reported strong third-quarter results. The bank's Hong Kong listed H-shares retained their ""overweight"" rating. CCB posted unaudited net profit of 22.85 bln yuan in the third quarter to September in accordance with both Chinese and international accounting standards. The bank earned net interest income of 50.09 bln yuan, with fee and commission income reaching 10.27 bln yuan and investment gains of 424 mln yuan during the July-September period. ""CCB's strong third-quarter results were another evidence of strong earnings momentum in the Chinese banking sector,"" the brokerage said, noting that the bank's third-quarter net profit is about the same as the second-half of last year, and accounts for 67 pct of the first half's net profit, suggesting very strong sequential and annual growth. JP Morgan said the bank's net interest margin (NIM) performance was better than expected -- a further gain of 10 basis points to 3.21pct in third quarter -- due to further optimization of its funding mix and rising asset yields. A strong equity market also supported sharp fee growth, it added. ""CCB's better-than-expected results confirmed our view that in the current environment, in particular, favors bigger banks,"" it said. The brokerage also increased its 2007-2009 earnings estimates by 6-7 pct to 73.17 bln yuan, 97.2 bln yuan and 118.02 bln, respectively. According to Thomson Financial, the mean net profit estimate of 27 brokerages for CCB is 68.25 bln hkd.

Buy CHCBC-C1 at 18.5sen and below!

BUY China Life Call Warrant

Merrill Lynch said it has raised its target price on China Life Insurance Co's Hong Kong-listed H-shares to 60.88 hkd from 43. 59 hkd. The brokerage maintained its ""buy"" call on the China insurer. ""China Life remains one of the top picks (in) the sector. The stock is likely to benefit from the strong A-share market, strong third quarter results and premium recovery"" in the fourth quarter, it said. Merrill Lynch noted that China Life is likely to post strong third-quarter results on the back of strong investments given the company only realized a small portion of its investments in the first half. It said the company had begun to see a pick-up in regular premiums in protection products due to the various campaigns its has launched. ""We expect premium growth (under Chinese accounting standards) to recover to around (the) low teens in fourth quarter 2007,"" it said, adding that China Life has been a laggard. Meanwhile, Merril Lynch also raised the target price on Ping An Insurance to 110.92 hkd from 73 hkd and maintained its ""neutral"" rating on the stock as it believes the recent rally in the stock has already priced in most of the good news. The brokerage gave a ""sell"" rating on PICC Property & Casualty and cut its target price to 9.0 hkd from 10.12 hkd as the current share price has detached itself from fundamentals after a gain of 308 pct year to date.

Based on TP of HK60.88, the ChLife-C4 will be at RM1.06 with zero premium attached.
ChLife is currentlt trading at 51.85 , ChLife-C4 is at 72 sen 11:52am 26 Oct07.

Use your brain, not your feet...

WOW, what an incredible opening for today's 4 HK CWs! Pls refer to the table provided earlier.
ChMerch-C1 at 19.5 sen fetched 46.1%, HKEX-C4 at 34.5 sen 55.4%, Zijin-C1 at 19.5sen 55% and CHCBC-C1 19 sen is 34.1% premium.

The prices are TOO BULL to pay for.

Pay more attention to CHLife-C4, currently trading at 68sen, 10 to 1, Exe. price at HK36.88. Premium is only 2% ! Expiry date is 23/5/2007. Too good to be true!

But, this ChLife-C4 is issued by CIMB, seems like those CWs issued by CIMB received luke warm respond by the market especially retailers. What's wrong with CIMB issued CW? Any one know why?

Remember to bottom fish if the market continuesly dropping for 3/4 days!

New listing: CHCBC-C1, CHMERCH-C1, HKEX-C4, ZIJIN-C1

Since the issue price of the warrants are cheap and given the bullishness of the HK market, I will set a premium of 20% to estimate the trading price of the CWs tomorrow.

China Construction Bank (0939)

CHCBC-C1 @ RM0.10 ; underlying share @ HKD7.30 ; premium 13.14%

We set a premium of 20%, the price of the call warrant would be RM0.14 (+4cents / 36% gain in price)

China Merchant Holdings (0144)

CHMERCH-C1 @ RM0.10 ; underlying share @ HKD45.45 ; premium 20.34%
We set a premium of 20%, the price of the call warrant would be RM0.10 (no gain in price)

Hong Kong Exchange (0388)

HKEX-C4 @ RM0.11 ; underlying share @ HKD252.60 ; premium 11.07%
We set a premium of 20%, the price of the call warrant would be RM0.16 (+5cents / 45% gain in price)

Zijin Mining (2899)

ZIJIN-C1 @ RM0.07 ; underlying share @ HKD13.36 ; premium 5.68%
We set a premium of 20%, the price of the call warrant would be RM0.11 (+4cents / 59% gain in price)

Post-NCCP phobia

The 17th NCCP was unveiled on 15th October and will last until 21 October.
According to the track record of post-NCCP performances since 1977, the HSI should decline in the first three months. On average, HSI lost 6.7% in the first month after the NCCP, 9.8% in the second month and 8.9% in the third month. Please refer to the table.
Nevertheless, UOB KayHian research expects "the decline to be short-lived and the correction to be shallow", as "the abundant liquidity coming into the market this time could help narrow downside risk."

RED means STOP!

Share prices closed at yet another record high as strong gains in China financials, coal stocks and oil firms helped the key index break the 29,000 points level. Liquidity inflows due to China's expanded qualified domestic institutional investor (QDII) program and a fresh high on the Shanghai bourse helped H-shares maintain their momentum.
The Hang Seng index closed up 563.69 points or 1.97% at 29,133.02, off a low of 28,609.68 and just a tad off the new all-time-high of 29,133.76. Turnover was heavy at 178.71 billion HKD. The Hang Seng China Enterprises index closed up 932.13 points or 5.1% at 19,218.05, slightly off a new all-time-high of 19,219.44.

Coal stocks surged and hit new all-time-highs, with China Shenhua Energy outperforming after UBS raised its target price on the stock to HKD101.00 from HKD35.15 citing strong demand for coal. China Shenhua closed up 11.2 HKD or 24.01% at HKD57.85, off an all-time-high of HKD57.95.
Oil stocks were higher after crude prices rose overnight. PetroChina was up 86 cents or 5.9% at HKD15.44, with investors ignoring news that US Investor Warren Buffett's Berkshire Hathaway cut its stake further in China's largest oil producer to 3.1%. CNOOC was up 72 cents or 5.6 pct at 13.58 and Sinopec rose 1.16 HKD or 11. 39% to HKD11.34.

The market has gone crazy. Funds and even retail investors ignored all fundamentals and just kept on buying as if there is no tomorrow. I feel that a major correction is just around the corner and this is definitely not the time for new investments as nearly all stocks are already overbought. Anyone who has just joined the market now should play for the short term and should lock in profits quickly. "I expect the market to cool down a bit next week during (China's) 17th Communist Party Congress as the Chinese government may announce stronger austerity measures to cap growth in housing and stock markets," said Castor Pang, a strategist at Sun Hung Kai Financial group. The market correction is imminent, therefore please buy cautiously!

New listing: ZB-CIMB, ZC-CIMB

Two new basket call warrants will be listed tomorrow. The details are as follows:

1) Black Gold basket CWs; ZC-CIMB (0900ZC)
Comprising ordinary shares of SCOMI (x 1.0), SAPCRES (x 1.0), PETROCHINA (x 1.0), CNOOC (x 1.0), and SINOPEC (x 1.0).
Based on today's closing prices, ZC-CIMB is currently having a premium of 18.50%.
By applying a 20% premium, it is expected to be trading around RM0.355 (+3cents or +9.23% gain in price).

2) 3 Treasures basket CWs; ZB-CIMB (0900ZB)
Comprising ordinary shares of BURSA (x 2.0), HKEX (x 0.5), and SGX (x 1.0).
Based on today's closing prices, ZB-CIMB is currently at 10.37% premium.
A 20% premium will raise the basket cws to RM0.650 (+23cents or +54.76% gain in price).

Please refer to the table above for more details.