Further gains in store as earnings spice up the market
Hong Kong shares are expected to make further gains this week as the Hang Seng Index nears the 23,000 level and money flows into the market, thanks to an expanded qualified domestic institutional investor scheme.
The second-quarter earnings season is beginning, which may take the focus off macroeconomic issues for a few weeks. Rising finance costs and inflation pressures have nagged the market and a weak US dollar threatens demand for Asian exports. Investors will be watching to see if all those macroeconomic concerns have filtered down to hurt corporate profits.
One speed bump for equity investors could be the price of energy. Oil supplies from Nigeria and Iran may be disrupted due to political issues and worries over lower United States petrol output are pushing oil prices to near last summer's highs.
The International Energy Agency on Friday will make its monthly global market report, which may provide some insight into how much of the black gold is available. Also on the commodity front, the US agricultural department on Thursday will release its estimates on global crop conditions and size. With mainland crop data hard to come by, many investors will look to the department's numbers to see how much their next bowl of rice will cost.
In the property business, developers will begin making bids on a site in Changsha, Hunan province. Rights to the residential development, the biggest single government site offered so far, will net a minimum of four billion yuan.
Elsewhere in the region, the Bank of Japan meets on Wednesday and Thursday to discuss economic policy. Although no interest rate change is expected, the central bank is expected to raise rates in the coming months, so investors want to hear what they say about the economy.
South Korean central bankers are also meeting on Thursday and they could possibly raise rates given inflation concerns sparked by the strong share rally there.
It will be a busy week for trading debuts. Initial public offerings are expected to slow for the holiday season after the next batch of companies hit the market. The highlight tomorrow could be Anta Sports Products. The sports shoe company raised HK$3.1 billion and the retail offering was oversubscribed more than 300 times, promising healthy after-market interest.
Shares of Regent Manner International Holdings, a Taiwanese circuit board assembler, will also trade tomorrow after it raised some HK$470 million. Action is expected to be muted as retail investors have eyes only for mainland-focused companies. Another company to hit the market tomorrow is Vinda International, a paper tissue maker, which raised US$142 million.
New World Department Stores could be the main event on Thursday as its shares begin trading. The company raised HK$2.36 billion.
Shares of China Automation, which provides safety and critical control systems to chemical and railway companies, will also be coming to market. The company's HK$360 million offering was greeted with muted retail interest.