Hong Kong Market Review – Thursday, August 19th 2010

China Mobile Tumbled On Profit-Taking

China Mobile slightly beat forecast as shown by the results announced by the company on Thursday. Net profit during 1H10 were up 4.2% to 57.64 billion yuan while the consensus saw the average forecast of 56.29 billion yuan. H1 revenue was at 229.82 billion yuan and 1H dividend was at HK$1.417. The company is to keep the full-year dividend payout ratio at 43%. The results sent the biggest player in the China’s telecommunication industry tumbling 3% to HK$81.75 after gaining 7.3% since the beginning of August. Also, the company has placed Executive Director and Vice President Li Yue as chief executive effective immediately replacing Wang Jianzhou. Wang will stay as chairman. The change was aimed to separate the roles of chairman and chief executive, in accordance to the HK stock exchange guidelines.

Still in the telecommunication sector, China Telecom reported that it plans to list information service provider and portal operator Best Tone. Best Tone, which had an annual revenue of 7 billion yuan in 2009 also aiming at expansion towards other countries in Asia, including Taiwan.

ICBC obtained approval from the regulators regarding its plan to issue up to 25 billion yuan in convertible bonds in Shanghai. The news brought support to the shares as ICBC eked out a 0.2% gains to HK$5.69.

On the economic front, HK’s economic growth is seen in line with the city’s historical growth trend, according to the government economist Helen Chan. Historically, HK’s annual growth for the last 10 years had been around 4% in 2H. European crisis which recently subsided, may finally deal its economic impact in 2011. US economic uncertainties are also a threat to the HK’s economic growth in 2011. Recently the government report revealed that HK’s GDP was up 6.5% in 2Q 2010 annually from 1Q annual growth of 8.0%. Both were higher than 2009’s 1Q and 2Q growth rates of -7.7% and -3.8%, respectively. Full-year GDP growth forecast was raised to 5%-6% from 4%-5%.

Upgrades / Downgrades

• Citic Pacific target set at HK$15.90 by Citigroup, higher than prior HK$13.30,
• Sino Land was raised to BUY from SELL by Deutsche Bank, target raised to HK$15.75 from HK$13.40,
• Hutchison Whampoa initiated at OVERWEIGHT with target at HK$82 by JP Morgan.

Rounding up the top, China Shenhua was up 4.59% to end at HK$29.65, China Resources was 3.66% higher at HK$31.15, and Sinopec gained 3.59% at HK$6.35. Joining China Mobile at the bottom were BOC Hong Kong and Bank of East Asia with 2.58% and 0.82% declines.

Hang Seng Index ended the session at 21,072.46 or up 49.73 points, close to the bottom of the day’s trading range. It printed the day’s high at 21,297.62 while the day’s low was at 21,023.30.