Positive earnings surprises likely to drive market
Stock market punters can look forward to another solid week, with a steady flow of earnings data likely to contain more upside surprises than disappointments.
However, as so long has been the case, traders will be keeping one eye on the US and its economy in the hopes that consumers there will maintain their healthy appetite for Asian-made goods.
A handful of data on the US economy should help guide the market this week. New home sales figures and the core PCE price index should offer signs of how strong the economy there is. Inflation and the mortgage markets remain constant concerns.
Energy issues could feature large in Chinese business with President Hu Jintao heading to Russia this week. Estimates on the total value of the trade deals to be signed, covering everything from energy to ships, steel and real estate, range from US$2 billion to US$4 billion.
But topping the agenda will be China's thirst for Russia's oil and gas. Russia last year promised to build two natural gas pipelines to China and to become one of the country's biggest gas suppliers in the next decade, and China's need to take delivery on those promises is rising.
Energy companies will also dominate this week's earnings reports. Some of the names opening their books include China Resources Power, Titan Petrochemicals, China Oilfield Services, CNOOC and Shanghai Petrochemical.
Those companies involved in oil and gas exploration and production should benefit from continued high oil prices, while petrochemical and refinery companies could show signs of stress because mainland price controls limit their ability to pass higher oil prices on to the consumer. Refinery margins are also lacklustre at the moment.
Coal prices have risen in the past year due to strong demand, but power producers have managed to grow profits by expanding their production capacity.
Other companies set to report earnings include China Insurance and China Telecom today, Shangri-La Asia tomorrow, PCCW on Wednesday, and China Unicom on Thursday.
The party for the Hong Kong Rugby Sevens will be gaining momentum early in the week, with Credit Suisse's 10th annual Asian investment conference bringing bankers and traders into town from around the globe.
After honing their money-making skills from tomorrow through Friday, most of them will be heading to the stadium for a pint or ten.
Still, there will be many a banker left knocking on doors to pre-market their initial public offerings. Luoyang Luanchuan Molybdenum Group and women's shoe retailer and distributor Belle Holdings will be pitching their deals, valued at US$600 million and about US$1 billion, respectively. Citic Bank is also in pre-marketing mode.
Regal Reit is set to begin trading on Friday after pricing at US$298 million and shares of Citic 1616 Holdings, the telecommunications valued-service provider being spun off from Hong Kong-listed mainland conglomerate Citic Pacific, are set for pricing on Wednesday.
Asia's top airline executives will be in town on Thursday and Friday to discuss industry plans to deal with airline carbon dioxide emissions. The Green Skies conference will feature Philip Chen Nan-lok and Tony Tyler of Cathay Pacific Airways, Singapore Airlines chief Chew Choon Seng, and industry newcomer Tony Fernandes, founder of Malaysia's AirAsia Group.
MGM Grand Macau will be launching its recruitment drive on Friday, and it is expected to attract a sizeable crowd of job-hoppers and unemployed from Hong Kong as well as Macau. The joint venture between MGM Mirage and Pansy Ho Chiu-king is expected to further sap an already tight labour market in Macau and add some cost pressures to casino operators. The lure of working in Macau's bright lights is expected to lure a noticeable amount of mid-management talent from Hong Kong.