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Rate fears take hold but market is abuzz with IPOs
Worries that the Chinese central bank will soon raise interest rates again will be hanging over the market like a dark cloud this week, but expect investors to keep on playing until there's actual rain.
Markets on Friday made a good show of recovering from their Thursday losses, which were sparked by better than expected first-quarter economic growth in the mainland. The 11.1 per cent growth in the first quarter is so spectacular that investors don't think it can continue at this pace, and they predict that the government will take steps to cool the engines.
Economists are predicting one to two more rate increases in the short term, on top of the three the central bank has already delivered in the past year.
But don't expect the market to slink off into a corner just yet. Several high-profile initial public offerings will debut this week, and solid new entrants always lend their cheer to the broader market.
Strong consumer demand
Hong Kong will be releasing its consumer price index for March today. The data is expected to show continued strong consumer demand fuelled by the solid labour market.
The Japanese market will be focused on earnings announcements this week, with many of its top names releasing quarterly data. The weak yen could mean that manufacturers will log better than expected results. The Bank of Japan will be meeting to discuss monetary policy on Friday.
Fears of a hard landing in the US economy appear to be subsiding, and markets there will this week focus on housing and durable goods data. The housing data is expected to show that a large overhang of housing supply remains a concern.
Two to make listing debut
Two high-profile share offerings will make their trading debut this week. China Molybdenum, the mainland's largest producer of the steel hardener, will hit the market on Thursday and its shares are predicted to gain about 35 per cent on the open.
The company has raised the size of its offering to HK$7.3 billion in response to strong demand.
China Citic Bank Corp will begin trading on Friday, with traders expecting an opening pop of 20 to 30 per cent. The bank's US$5.4 billion initial public offering attracted a lot of attention from retail investors in Hong Kong after it lowered its offering price ranges, leaving more gravy for investors.
Belle International, a mainland women's shoe retailer, will start pre-marketing its offering today with a target IPO size of US$750 million.
Capxon Holdings, a Taiwan-based electronic capacitor manufacturer, will open the retail book on its HK$311 million offering this week, with the trading debut expected in the first week of May.
Stake holders to ask questions
There are several annual general meetings scheduled for this week that could prove interesting. Expect green groups to cause some noise at CLP Power's annual meeting tomorrow.
The company's proposal to build a liquefied natural gas terminal on South Soko Island - designated a marine park - has environmentalists up in arms, although the Environmental Protection Department has already issued a permit for its construction.
Pacific Century Insurance will be meeting today, and investors will be looking for more news on Pacific Century Regional Development's sale of its controlling stake in the insurance company. The meeting may give investors a chance to hear what buyer Fortis Insurance International has planned for the company.
Hong Kong Exchanges and Clearing will meet on Thursday to elect two new board members.
