Profit-taking likely as Hang Seng Index hits 21-month high
Goldman Sachs seeks to make US$1b with sale of stake in ICBC while investors turn cautious
The risk of a short-term correction may be rising for the Hang Seng Index after it hit a 21-month high yesterday, as investors look to book short-term profits.
The rise has already prompted Goldman Sachs to sell shares in ICBC and would probably encourage others to book profits, strategists say.
Goldman Sachs is hoping to raise about US$1 billion by selling a stake in ICBC at HK$5.77 a share, according to people familiar with the matter. The offer price represents a discount of 3 per cent on yesterday's closing price. The New York-based investment bank sold US$2.5 billion of shares in ICBC last April. The Beijing-based bank has gained 15 per cent since.
The Hang Seng Index added 91.45 points, or 0.39 per cent, yesterday to finish at 23,671.88, its highest since April 2011. Daily volume, however, fell to HK$67.5 billion, a one-week low, in a sign that investors are turning more cautious after the index's rise of 22 per cent since September.
Strategists see limited room for further growth for the index in the lead-up to the earnings season in March, saying some sectors are already overbought. The index is trading at 1.58 times to book value, against a five-year average of 1.69 times.
Matthew Kwok, chief strategist at China Yinsheng Wealth Management, said: "Profit-taking has already started and will spread to blue chips soon. The index will feel huge selling pressure around the 23,800 level."
Yesterday's gains were mainly driven by mainland banks and infrastructure-related firms, after new official data showed industrial companies' profits rose for a fourth straight month in December. The key Shanghai index jumped by 2.41 per cent, the biggest increase in two weeks.
In Hong Kong, China Construction Bank rose 0.6 per cent to finish at HK$6.71 while Bank of China was up 0.8 per cent to finish at HK$3.79.
Investors flocked to cement firms, after the financial website Yicai.com said at least 19 provinces or municipal cities on the mainland are targeting to boost their fixed-asset investment by up to 20 per cent this year. The nation's largest cement producer, Anhui Conch, rose by 3.48 per cent to finish at HK$29.75.
Mainland brokerages rose after the central government said it would allow more stocks to be used for margin trading and short selling. Haitong Securities, the nation's second-largest broker, was up by 1.03 per cent to finish at HK$3.93.
Frasers Property China announced last night that it would raise about HK$468 million by selling shares equal to 9 per cent of the existing share capital. The new shares are priced at the low end of the indicative range, at 78 HK cents each, a discount of 13 per cent on yesterday's closing price.