Market Open: Rally may continue in Hong Kong market after Fed's action

Jeanny Yu

BIO

Jeanny Yu covers stock markets for the South China Morning Post, with a focus on Hong Kong equities. She interviews top economists, fund managers and key market players. She is a graduate of the University of Hong Kong and used to work for Bloomberg and Hong Kong Economic Journal.

Steel sector held back by lack of stimulus

Any attempts on Monday to continue last week's Federal Reserve inspired rally in the local market may be capped by growing concerns over faltering growth in the world's second biggest economy, China.

"The Fed offered what investors needed because the easing (third round of quantitative easing announced overnight on Thursday) is potentially unlimited," said First Shanghai Securities strategist Linus Yip. "This will not be a one- or two-day rally. It could go on until the benchmark sees some resistance around 20,600."

The US Federal Reserve announced last week that it would buy US$40 billion a month of securities supported by real estate loans and extend its ultra-low short-term interest rate regime until mid-2015, in a bid to bolster the country's anaemic economic recovery.

Yet market sentiment could still be held back by concerns about the second biggest economy in the world; of all A-share firms that have announced third-quarter earnings forecasts, nearly half have warned that they expected to suffer losses during the period, the Beijing News reported on Monday.

Overnight, the Standard & Poor's 500-stock index closed up 5.78 points, or 0.40 per cent, to 1,465.77, the highest since December 2007. The Nasdaq Composite gained 28.12 points, or 0.89 percent, to 3,183.95, the highest since November 2000. In London, the FTSE-100 Index added 95.63 points, or 1.64 per cent to end at 5,915.55.

Hot Stocks of the day:

Hong Kong property developers
The city's government announced new measures on Friday to curb the local housing market after the US quantitative easing measures. The maximum term on all new mortgages will be limited to 30 years. Mortgage payments for investment properties must not be more than 40 per cent of buyers' monthly income, down from the 50 per cent ceiling currently. Sun Hung Kai Properties (0016.HK) and Cheung Kong (0001.HK) may be hit by profit-taking after their recent strong gains.

Chinese banks
China will soon release a five-year plan for the 2011-2015 financial reform, which will cover areas including freeing up market rates, and internationalising the nation's currency, the renminbi or yuan, Pan Gongsheng, deputy governor of the People's Bank of China, said on Saturday.

Sunshine Oilsands Ltd (2012.HK)

The Canada- based oil sand developer said it would repurchase up to C$50 million worth of common shares on hte open market in Hong Kong, which accounts for no more than 5 per cent of the total number of its common shares on issue. The company said its current share price "does not fairly represent the value and potential of ... (its) asset base".

China Coal (1898.HK)
The top Chinese coal producer said coal sales declined 4.6 per cent to 11.1 million tonnes in August compared to the same month in 2011, as domestic coal trading dropped sharply during the period, but coal sales from January to August totaled 88.9 million tonnes, up 4.3 per cent year-on-year.

New Environmental Energy (3989.HK)
The new energy developer said the two projects it has agreed to acquire are valued more than the agreed offer price. The Duyun Target Company, which they agree to buy for 33 million yuan, is worth 59.87 milliion yuan, New Environmental Energy said. It said the Weng’an Target Company, which it had agreed to buy for 21 million yuan, was worth 37.11 million yuan.

GCL-Poly Energy Holdings (3800.HK)
Indian businesses had filed a complaint against Chinese solar panel productswith India's anti-dumping authority on September 12, Shanghai Securities News reported on Saturday. The news fuels speculation that other markets might also join the US and the EU whihc have already taken action against China's solar photovoltaic (PV) industries.