Fewer margin calls now but the trick is to separate winners from black sheep
By LYNETTE KHOO 22 May 2009
S-chips or Chinese listings have seen their market values increase, but analysts are holding back their re-ratings of these stocks as they have largely been driven by the broader market momentum - with uncertainties in the sector still persisting.
‘Investors need to be vigilant still, though the general upturn of the market should reduce the margin calls from pledged shares,’ said CIMB-GK analyst Ho Choon Seng.
Year-to-date, the combined market caps of 149 S-chips grew 19.8 per cent to $29.14 billion. The Prime Partners China Index surged 25 per cent from the start of this year to 77.1 points yesterday and the FTSE ST China Index put on 17.7 per cent to 218.9 points. This compares to a 25 per cent jump in the benchmark Straits Times Index year-to-date.
UOB KayHian dealing director Chan Tuck Sing noted that the surge in S-chips was largely a result of investors seeking out underperforming stocks to play catch-up with the broad market rally.
‘S-chips are generally considered higher beta stocks, so they have rebounded sharply along with the market,’ added Kim Eng analyst James Koh.
Most are still trading at undemanding valuations of below 5 times historical price-to-earnings ratio and less than one time price-to-book (P/B).
Guangzhou Investment Co remains the biggest S-chip by market cap at $3.71 billion, while the rest played musical chairs. Yanlord moves up two places to be runner-up, nudging Cosco Corp off to fourth place. Epure got into the top 10, while China Hongxing fell off the league.
Since the beginning of this year, Yanlord’s market cap has doubled from $1.63 billion to $3.23 billion and Yangzijiang’s market cap surged 62.6 per cent to $2.7 billion.
Interestingly, Yanlord is also well placed in the Governance and Transparency Index (GTI), an index launched by The Business Times and NUS Corporate Governance and Financial Reporting Centre (CGFRC); of the 676 companies reviewed, it came in 111th.
Midas, ranked 61st on the GTI, enjoyed an 11.2 per cent growth in Q1 earnings and saw its market value jump 24.7 per cent year- to-date to $511.4 million.
The same story could be told for some other S-chips as well, suggesting that investors tend to reward companies for good governance.
But recent scandals in S-chips have caused investors to turn the other way and paint the whole sector with the same broad brush. Mr. Chan of UOB KayHian noted that many fund managers got their fingers burnt by S-chips such as FerroChina and Fibrechem. ‘These sorts of memories may cause them to avoid such stocks,’ he said.
A more significant reason for these stocks falling off the radar of fund managers, however, is that many S-chips - Beauty China, China Energy, China XLX, Delong, Fibrechem and China Sky - have now been reduced to penny stocks.
China Aviation, China Fishery, Cosco Corp and Yanlord are among the handful in the sector that trade above a dollar.
CIMB-GK analyst Ho Choon Seng noted that the free-float in many cases is also quite low since a large chunk of shares are held by insiders.
Some brokerages have slowly shrunk their coverage of these stocks. Westcomb Securities, for instance, has dropped its coverage of S-chips, except for those that come under the SGX Research Incentive Scheme, which is a paid scheme under the Exchange.
CIMB-GK has also dropped seven S-chips from its coverage this year while Kim Eng has stopped covering one or two S-chips.
‘The market has certainly lost some interest in S-chips, after corporate governance issues with the likes of Fibrechem and China Sun,’ said Mr. Koh of Kim Eng. ‘Also, some management ‘guidance’ in terms of plans and profits has proved quite misguided.’
Analysts feel that perhaps more could be done to assure investors that good companies do exist among S-chips.
‘While there are black sheep among them, if the communication issue had been dealt with in a more mature manner, we would not have this kind of depressed valuation,’ said Alan Lok, director at Sabio Global.
In assessing the valuation of S-chips using the P/B ratio, there is a concern that the accounting book ‘may not be the actual book’ given the credibility issues clouding the sector, Mr. Lok said. ‘If we factor in the corporate governance issue, a P/B ratio of 0.5-0.7 times would be a good target.’
There is also the opaque issue of pledged shares. But don’t write off S-chips just yet, analysts say.
Henderson Global Investors fund manager Andrew Mattock said he sees ‘exceptional value in some of the Chinese property stocks’ and favours mid-caps with domestic exposure.
Mr. Lok suggests that investors look into S-chips whose earnings have not been badly hit by the crisis - those with a sound business model, good branding and reasonably low valuation.
‘I would go into the mid-caps that are on the way to becoming blue chips,’ he said.
3 comments:
S-chips gain weight as market powers ahead
Fewer margin calls now but the trick is to separate winners from black sheep
By LYNETTE KHOO
22 May 2009
S-chips or Chinese listings have seen their market values increase, but analysts are holding back their re-ratings of these stocks as they have largely been driven by the broader market momentum - with uncertainties in the sector still persisting.
‘Investors need to be vigilant still, though the general upturn of the market should reduce the margin calls from pledged shares,’ said CIMB-GK analyst Ho Choon Seng.
Year-to-date, the combined market caps of 149 S-chips grew 19.8 per cent to $29.14 billion. The Prime Partners China Index surged 25 per cent from the start of this year to 77.1 points yesterday and the FTSE ST China Index put on 17.7 per cent to 218.9 points. This compares to a 25 per cent jump in the benchmark Straits Times Index year-to-date.
UOB KayHian dealing director Chan Tuck Sing noted that the surge in S-chips was largely a result of investors seeking out underperforming stocks to play catch-up with the broad market rally.
‘S-chips are generally considered higher beta stocks, so they have rebounded sharply along with the market,’ added Kim Eng analyst James Koh.
Most are still trading at undemanding valuations of below 5 times historical price-to-earnings ratio and less than one time price-to-book (P/B).
Guangzhou Investment Co remains the biggest S-chip by market cap at $3.71 billion, while the rest played musical chairs. Yanlord moves up two places to be runner-up, nudging Cosco Corp off to fourth place. Epure got into the top 10, while China Hongxing fell off the league.
Since the beginning of this year, Yanlord’s market cap has doubled from $1.63 billion to $3.23 billion and Yangzijiang’s market cap surged 62.6 per cent to $2.7 billion.
Interestingly, Yanlord is also well placed in the Governance and Transparency Index (GTI), an index launched by The Business Times and NUS Corporate Governance and Financial Reporting Centre (CGFRC); of the 676 companies reviewed, it came in 111th.
Midas, ranked 61st on the GTI, enjoyed an 11.2 per cent growth in Q1 earnings and saw its market value jump 24.7 per cent year- to-date to $511.4 million.
The same story could be told for some other S-chips as well, suggesting that investors tend to reward companies for good governance.
But recent scandals in S-chips have caused investors to turn the other way and paint the whole sector with the same broad brush. Mr. Chan of UOB KayHian noted that many fund managers got their fingers burnt by S-chips such as FerroChina and Fibrechem. ‘These sorts of memories may cause them to avoid such stocks,’ he said.
A more significant reason for these stocks falling off the radar of fund managers, however, is that many S-chips - Beauty China, China Energy, China XLX, Delong, Fibrechem and China Sky - have now been reduced to penny stocks.
China Aviation, China Fishery, Cosco Corp and Yanlord are among the handful in the sector that trade above a dollar.
CIMB-GK analyst Ho Choon Seng noted that the free-float in many cases is also quite low since a large chunk of shares are held by insiders.
Some brokerages have slowly shrunk their coverage of these stocks. Westcomb Securities, for instance, has dropped its coverage of S-chips, except for those that come under the SGX Research Incentive Scheme, which is a paid scheme under the Exchange.
CIMB-GK has also dropped seven S-chips from its coverage this year while Kim Eng has stopped covering one or two S-chips.
‘The market has certainly lost some interest in S-chips, after corporate governance issues with the likes of Fibrechem and China Sun,’ said Mr. Koh of Kim Eng. ‘Also, some management ‘guidance’ in terms of plans and profits has proved quite misguided.’
Analysts feel that perhaps more could be done to assure investors that good companies do exist among S-chips.
‘While there are black sheep among them, if the communication issue had been dealt with in a more mature manner, we would not have this kind of depressed valuation,’ said Alan Lok, director at Sabio Global.
In assessing the valuation of S-chips using the P/B ratio, there is a concern that the accounting book ‘may not be the actual book’ given the credibility issues clouding the sector, Mr. Lok said. ‘If we factor in the corporate governance issue, a P/B ratio of 0.5-0.7 times would be a good target.’
There is also the opaque issue of pledged shares. But don’t write off S-chips just yet, analysts say.
Henderson Global Investors fund manager Andrew Mattock said he sees ‘exceptional value in some of the Chinese property stocks’ and favours mid-caps with domestic exposure.
Mr. Lok suggests that investors look into S-chips whose earnings have not been badly hit by the crisis - those with a sound business model, good branding and reasonably low valuation.
‘I would go into the mid-caps that are on the way to becoming blue chips,’ he said.
复苏嫩芽 慎变枯草
王 冠 一
22 五月 2009
美国联储局於4月底的会议纪录中，把经济预测下调，并把失业率预测数字调高，对经济前景的看法明显较1月时悲观。消息导致美股的升势逆转，三大指数同时倒跌，惟跌幅尚算温和。
联储局调低今年全年经济增长的预测，由年初估计的下滑0.5%至1.3%，修订至下跌1.3%至2%。近期的数据显示经济放缓步伐已趋温和，但首季录得负增长6.1%，即使前主席格林斯潘指次季负增长可收窄至1%的预测准确，下半年又开始呈现增长，但要收复首季经济插水的失地，又谈何容易！联储局同时调低未来两年的增长预测，但仍预期可以录得正增长。
联储局预期失业率今年会升至介乎9.2%至9.6%之间，较1月估计的8.5%至8.8%高，只是面对现实的做法。最新数据显示，4月份失业率已攀升至8.9%，超越了联储局年初估计的上限，而根据近期走势，就业市场短期内仍将继续恶化。联储局认同部分行业的就业水平将难复旧观，失业率要回落至5% 或以下，料需时不少於5年，而出口要重返高峰，亦需要一段不短时间。总统奥巴马周三与经济复苏问委员会16名成员会晤时亦坦言，失业率高处未算高。
市场最关心的，是联储局加大回购长债力度的意愿。联储局於3月的会议决定斥资3000亿美元回购公债，同时加码8500亿购买按揭抵押证券和包括两房发行的代理债券，令10年孳息应声下跌接近半厘，但上月底的会议却没有进一步动作，以致孳息冉冉回升，近日更已超越3月会议前的水平。会议纪录显示，部分与会成员仍倾向在公开市场购买更多的公债及长期证券，为经济加添动力。
虽然联储局主席伯南克近日指经济已露曙光，并以「嫩芽」(green shoots)形容经济初呈生机，成为市场热话，但会议纪录显示，部分成员认为，中期而言，一些因素会局限了复苏的步伐，信贷危机只可以慢慢淡化，美国家庭仍会对花钱维持审慎取态。他们更关注商厦问题一旦恶化，会令仍在与楼价下跌和按揭违约等问题缚斗的金融机构雪上加霜。
格林斯潘相信，在楼价止跌前，美国仍要面对可大可小的潜在按揭危机，金融危机不会随着借贷成本回落而消失，银行亦有需要筹措更多巨额资金。最新的新屋动工和建筑批文数字均创下历史新低，正好反映楼市仍未稳定。嫩芽会否变成野草？投资者对经济复苏又会否过度乐观？高追股市，确实要步步为营，加倍小心。
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