Weekly Overview: Dec 11 to Dec. 16, 2006

Hong Kong stock market rode on a roller coaster this week. Traveling via a bumpy road, Hang Seng Index climbed back to 19,110, up 1.98% this week. IPOs remained hot focuses of the market.....

YT Kum, CFA 19.12.2006
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Hong Kong stock market rode on a roller coaster this week. Traveling via a bumpy road, Hang Seng Index climbed back to 19,110, up 1.98% this week. IPOs remained hot focuses of the market. China Communication Service (0552) and Jin Jiang Hotels (2006) skyrocketed for more than 70% on the launching day. More IPOs are set to debut next week, attracting further market attention. Market expected Chinese telecom companies will be granted the 3G license in near term, boosting China Mobile (0941) and China Netcom (0906) on Monday. After a sharp rise, profit taking activities as well as the weakening US market after the Fed meeting dragged HSI down for 189 points on Wednesday. But the market soon regained momentum. Driv

en by utility sector, property sector and the behemoth HSBC (0005), Hong Kong stock market rebounded to close above the 19,000 line. RMB continued its way of accelerating appreciation, pushing H-Share Index and Shanghai A-Share Index up. The H-Share Index closed at a new high of 8,989, up 4.16% for the week.

After hitting a record high in previous week, the Taiwan's TWSE slumped 1.28% this week to close at 7,538.82. The disappointing performance of the opposition party in the municipal election brought Taiwan stock market a cloudy opening this week. Later market regained some ground as heavyweight sector in TWSE, Electronics, is expected to have a good season in 1Q07. The Singapore Straits Times Index rose 2.31% to 2,931.29 for the week.

Bank of Japan's influential Tankan survey showed improving sentiment among large Japanese businesses for past three months. The rebounding dollar helped to lift exporters, like Honda Motor. Besides, Japan Tobacco, the world's third largest tobacco company, confirmed to buy British cigarette maker Gallaher Group Plc. The NIKKEI 225 gained 3.02% to 16,914.31 for the week.

US stock market advanced this week, thanks to some M&A news, better than expected November retail sales figure and upbeat corporate earnings from the banking sector. However, the upside momentum was curbed by the increasing oil price and the dashing hope of near-term rate cut. The market rumored that Citigroup is considering a divestiture; some kinds of M&A activities are also anticipated in the airline industry. Besides, the US November Retail sales rose at a faster than expected pace of 1%, bringing investors a more buoyant view to the economy. Bear Stearns and Lehman Brothers, two leading investment banks in the US, posted a strong quarterly result that also helped to fuel the rally. On the flip side, the latest FOMC statement dashed the hope of a near-term rate cut. The US Fed maintained the key interest rate unchanged at 5.25% on Tuesday, based on the substantial cooling of the housing market and moderate expansion pace of the economy. The Dow Jones Industrial Index added 138 points, or 1.12%, to 12,445.52 this week; the Nasdaq Composite edged up 0.81% to 2,457.2; and the S&P 500 closed at 1,427.09 this week, up 1.2%.

Benefiting from US market's strength, European market also had a fruitful week. Rebounding dollar and commodity prices helped to build an uptrend of relevant stocks. Continuous M&A activities also fueled European major bourses to new highs. After British dropping an investigation into its past deals with Saudi Arabia, BAE Systems jumped 6.9% on Friday and became a top gainer in FTSE 100. For the week, the London FTSE 100 added 108 points, or 1.75% to 6,260; Frankfurt Xetra DAX closed at 6,588.83, up 2.51%; Paris CAC 40 advanced by 2.92% to 5,541.62 and Milan MIBTel moved up by 1.69% to 31,805.

Optimistic US economic data boosted the dollar. The dollar was quoted at 118.1700 Yen and the euro was $1.3081. British pound was quoted at $1.9523 and Aussie, $0.7815. January crude oil rose to $63.43 per barrel, up 2.26% as the OPEC decided to further cut production. Gold future lost 1.78% to $615 per ounce, opposite to US dollar.

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About Author

YT Kum, CFA  YT Kum is a consultant for Morningstar, contributing to manager selection and asset allocation activities in Asia, and is responsible for providing investment thought leadership on topics relevent to investors in Asia.  

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