Swings and roundabouts for market without rudder

It was a directionless week for the Hang Seng, with investors absorbing many rounds of earnings news.

China Life on Tuesday announced a 28 per cent drop in first-half profit (year on year). The ensuing share price drop wiped out about US$4 billion of the issuer's equity value. It was by far the biggest disappointment of the week.

Otherwise, issuers' earnings have been strong. Huaneng Renewables (958) on Tuesday posted a 131 per cent first-half profit rise. China Longyuan Power (916), showed a 66.5 per cent rise in profit. Both stocks surged. (See Ticker Board.) Elsewhere, Lenovo Group (992) got a big share-price boost last week after being added to the Goldman Sachs' convictions list (the list of stocks the bank rates as must-own), and on news of acquisitions expected to be robustly earnings accretive.

Todd Martin, Asia equity strategist at Societe Generale, notes that 76 per cent of the stocks of the Hang Seng China Enterprises Index have reported earnings, and that these firms have registered a 24 per cent weighted average growth in profit.

Yet the HSCEI is trading at just 7.4 times next year's earnings - profit growth is strong and PEs are low, suggesting value.