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Friday 16 January 2009
Recovery in Blue Chips Running Out of Steam, Analysts Warn
The battered blue chips of 2008 have pulled off a strong turnaround so far this year, but analysts caution that the trend may have started to run out of steam as bargain-hunting interest tapers off.
Recovery in Blue Chips Running Out of Steam, Analysts Warn
Nick Westra 12 January 2009
The battered blue chips of 2008 have pulled off a strong turnaround so far this year, but analysts caution that the trend may have started to run out of steam as bargain-hunting interest tapers off.
As the second full week of trading begins today, however, last year’s losers are still leading the pack.
Citic Pacific and Aluminum Corp of China (Chalco) are up 31.74 and 10.29 per cent respectively after each nosedived more than 70 per cent last year. And Foxconn International Holdings, last year’s worst performer, is second best so far after surging 24.51 per cent.
“Right now it’s just a technical rebound,” said Linus Yip, a strategist at First Shanghai Securities. “The market had a good move in the past two months so it has [given] some laggards a chance to recover.”
The Hang Seng Index has climbed 30.52 per cent to 14,377.44 since hitting a 4-1/2 year low on October 27. But the benchmark has edged down 0.07 per cent this year after declining in four of the five trading sessions last week.
“When the market is losing momentum, stability is getting weaker,” said Mr. Yip. “And most large-cap [stocks], like mainland banking plays, mainland telecommunication plays, and HSBC are all under pressure.”
The sharp gains posted by last year’s laggards have been mostly attributed to bargain hunting and short covering by investors who thought the stocks were oversold. But as gloomy sentiment sets in with fourth-quarter earnings due to be released, investors could consider the laggards overbought and take profit.
“These kinds of rebounds may not be sustainable because the fundamentals have not changed yet,” said Steven Leung, a director of institutional sales at UOB Kay Hian.
“I don’t see any long-term money getting into these counters. They have just been candidates for short-term trading.”
Institutional investors were watching last year’s underperformers closely but might wait for clearer signs of market stabilisation before coming off the sidelines, he added.
The market may not recover until next year, however, and could only mount a modest rally in the second half of this year if global economic stimulus plans showed signs of working, said Leon Goldfeld, the chief investment officer at HSBC Global Asset Management (Hong Kong).
“And the US in many ways is driving this whole downturn, so when the US bottoms it may be the time for much of the rest to bottom,” said Mr. Goldfeld. “For people who want to be into the market, they should do it gradually and in tranches because we don’t see a number of opportunities before the market finally bottoms.”
The Hang Seng Index could trade in a range of 10,000 to 16,000 points and might finish the year at the higher end of that range, he added.
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Recovery in Blue Chips Running Out of Steam, Analysts Warn
Nick Westra
12 January 2009
The battered blue chips of 2008 have pulled off a strong turnaround so far this year, but analysts caution that the trend may have started to run out of steam as bargain-hunting interest tapers off.
As the second full week of trading begins today, however, last year’s losers are still leading the pack.
Citic Pacific and Aluminum Corp of China (Chalco) are up 31.74 and 10.29 per cent respectively after each nosedived more than 70 per cent last year. And Foxconn International Holdings, last year’s worst performer, is second best so far after surging 24.51 per cent.
“Right now it’s just a technical rebound,” said Linus Yip, a strategist at First Shanghai Securities. “The market had a good move in the past two months so it has [given] some laggards a chance to recover.”
The Hang Seng Index has climbed 30.52 per cent to 14,377.44 since hitting a 4-1/2 year low on October 27. But the benchmark has edged down 0.07 per cent this year after declining in four of the five trading sessions last week.
“When the market is losing momentum, stability is getting weaker,” said Mr. Yip. “And most large-cap [stocks], like mainland banking plays, mainland telecommunication plays, and HSBC are all under pressure.”
The sharp gains posted by last year’s laggards have been mostly attributed to bargain hunting and short covering by investors who thought the stocks were oversold. But as gloomy sentiment sets in with fourth-quarter earnings due to be released, investors could consider the laggards overbought and take profit.
“These kinds of rebounds may not be sustainable because the fundamentals have not changed yet,” said Steven Leung, a director of institutional sales at UOB Kay Hian.
“I don’t see any long-term money getting into these counters. They have just been candidates for short-term trading.”
Institutional investors were watching last year’s underperformers closely but might wait for clearer signs of market stabilisation before coming off the sidelines, he added.
The market may not recover until next year, however, and could only mount a modest rally in the second half of this year if global economic stimulus plans showed signs of working, said Leon Goldfeld, the chief investment officer at HSBC Global Asset Management (Hong Kong).
“And the US in many ways is driving this whole downturn, so when the US bottoms it may be the time for much of the rest to bottom,” said Mr. Goldfeld. “For people who want to be into the market, they should do it gradually and in tranches because we don’t see a number of opportunities before the market finally bottoms.”
The Hang Seng Index could trade in a range of 10,000 to 16,000 points and might finish the year at the higher end of that range, he added.
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