Both Hong Kong and mainland stocks at one stage fell yesterday as two major Chinese banks reported weaker first-quarter earnings. But both indexes recovered towards closing.
The Hang Seng Index ended just 42 points lower at 28,400, while the Shanghai Composite Index closed flat at 4,476 points after touching an intra-day low of 4,398.
Bank of Communications (3328) reported a sharp fall in its first-quarter net interest margin, while Agricultural Bank of China (1288) posted its slowest quarterly profit growth in six years with higher bad debts.
Mainland banks do not want to lend to small and medium sized businesses facing financial difficulties or those with modest collateral.
But many good quality and big companies do not need to borrow. That means mainland banks need to find new sources of income. China Minsheng Banking (1988) said it was in talks to acquire a controlling stake in the local securities firm Quam (952). Shares of Quam surged 69 percent yesterday.
This strength spread to stocks of other small brokerages such as Get Nice (064) and Emperor Capital (0717), which surged 39 percent and 32 percent respectively. Emperor has seen its stock rally 183 percent in just one month.
I urged everyone to be alert on GIC Group (1669) in this column in February when that stock was trading at HK$4, or 37 times historical earnings. Yesterday, it dived 37 percent, closing at HK$3.11, or 26 times historical earnings, without any reason. GIC Group still looks expensive. Dr Check and/or The Standard bear no responsibility for any decision made based on this column.
Source: http://www.thestandard.com.hk/news_detail.asp?we_cat=2&art_id=156595&sid=44366663&con_type=1&d_str=20150430&fc=7
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