Weekly Review

HSI Weekly Movement	Weekly Market Statistics

Review & Outlook of Market Performances

The Hang Seng Index fell 1.3% week-on-week ahead of the long weekend. The local market suffered from a 4% drop on Monday following the release of strong growth figures in the U.S. last week which raised fear of a higher-than-expected interest rate hike by the Federal Reserve. However, the fall prompted bargain-hunters to enter the market and subsequent rebound of the Dow provided support for the local bourse. The finance sector was under pressure after a 0.25% rate hike in the U.S. last night, but the Bank of East Asia broke the trend with a 3.89% gain on improved prospects for future growth. Internet and high-technology continued to be the main investment theme of the market. Companies which announced investments, or rumoured to be investing in technology-related projects surged. China Resources rallied 3.29% on reports of the company’s plan to invest in hi-tech projects. Similarly, CITIC Pacific soared 16.56% on rumours that it would form a joint venture with Lucent Technologies to build a fibre-optics network in the mainland. TVB topped the gainers’ list as investors chased after media stocks on expectations that they might become targets for mergers or acquisitions. The sector was being re-rated after the AOL-Time Warner merger and reports which suggested that Star TV might seek a listing. Second and third liner stocks were actively traded during the week as investors looked for potential shell companies for foreign firms seeking back-door listings in Hong Kong.

Several pieces of U.S. economic data are scheduled to be announced before the end of the week. The employment report is the most important one and should provide indication on whether the Federal Reserve will need larger interest rate increase to counter inflationary pressure in the next FOMC meeting in March. On the local front, blue chips are expected to remain stable ahead of the upcoming reporting season with HSBC and Hang Seng Bank scheduled to announce their 1999 final results at the end of February. However, the telecommunications sector and selected big-cap counters may see volatile trading if they announce more technology tie-ups and investments. We expect the market to be technology-news driven and the HSI to trade between 15,500 and 16,200 in the coming week.

Note: The Dow Jones figure was market closed on 2/2/2000

• Total lending from SAR banks dropped 1% to $1.93 trillion in 4Q99, following a 1.2% decline in the previous quarter. Lending to stockbrokers grew 8.4% in the last quarter, following a sharp 34.6% decline in 3Q99. Credit card advances increased 4.7% to $37.34 billion, following a 2.38% gain in the third quarter. Advances to transport and equipment sector grew 3.3% while lending for construction and property development and investment edged up 0.3% over the same period. However, trade financing fell 6% while loans for the wholesale and retail trade was down 5.4%.

　

• The Information Technology and Broadcasting Bureau (ITBB) has issued letters of intent to 13 local and overseas companies for cable-based external fixed telecommunication network services (EFTNS). The companies plan to set up a total of seven new submarine cables and four new overland cables with a combined investment of HK$9 billion over the next three years. Among the recipients are Hong Kong-based City Telecom [1137], PSINet and CLP Telecommunications, a subsidiary of CLP Holdings [0002].

• Bank of East Asia [0023] has formed an alliance with Swiss life insurer Winterthur Life Hong Kong for selling the bank’s MPF products. Winterthur has 800 sale agents and 60 financial planners in Hong Kong and was the first European insurer to gain a license to offer general services in Shanghai four years ago.

　

• Hang Seng Bank [0011] will waive one-year premium on group accident insurance and other commercial insurance products for its MPF clients. The bank will also lower charges on payroll account services and credit cards. Meanwhile, Manulife said it would waive fees and offer cash bonuses to employers that join its plans before the end of April, 2000.

　

• HSBC Bank Canada posted net profit of C$165 million for 1999, an annualised increase of 5.8% over the 14 months ended 31st December 1998. The bank changed its accounting year-end from October to December in 1998. Non-interest income surged 34.7%, mainly attributable to securities commissions contribution from institutional investment dealer, Gordon Capital, which was acquired in January 1999. Return on equity was 18.4%, down from 21% in 1998. Total capital ratio was at 10.9% while tier-one capital ratio was at 7.9%.

　

• Asia Container Terminals (ACT) has secured a 10-year HK$3.4 billion project-financing from a group of seven banks to fund the construction of the Container Terminal 9 (CT-9) at Tsing Yi Island. Interest rate for the loan is 1.8%-1.9% above HIBOR. Total investment for CT-9 is estimated to be about HK$5.1 billion and ACT’s 62.75% stake translates to about HK$3.2 billion. The remaining HK$200 million in borrowings will be used as working capital. Shareholders of ACT include New World Infrastructure [0301], Hongkong Land, Sun Hung Kai Properties [0016] and Sea-Land Orient Terminal (SLOT).

　

• Hutchison Whampoa’s [0013] Internet subsidiary Tom.Com has invested US$4.2 million for a 15% in OneAsia.Com, an e-commerce company that offers multi-lingual Asian music. Tom.Com has an option to increase its stake to 30% before OneAsia.Com’s listing and 50% at the time of its IPO. On the other hand, the conglomerate plans to roll out a healthcare service partnering up with Health Care International Operations. Under the proposal, Hutchison Telephone will offer mobile medical consultation service where customers can obtain medical advice through a call centre staffed by medical professionals.

　

• Sun Hung Kai Properties [0016] announced that it had submitted an application to the Stock Exchange of Hong Kong for a separate listing of its Sunevision on the GEM. Sunevision is the flagship holdings company for the developer’s investments in information technology and Internet including iHON, iAdvantage, SuperHome.net, Red-Dots, PropertyStreet.net and InsuranceStreet.net. The company is expected to raise about HK$1 billion from the spin-off.

　

• Cheung Kong Infrastructure [1038] has joined Japan-based Itochu to tender for a liquefied natural gas (LNG) terminal project in Guangdong. The newly formed company will bid for a 35% stake in the Sino-foreign joint venture scheduled to operate in 2005.

• Far Eastern Polychem [8012] closed at HK$4.675 on its trading debut, slightly lower than its issue price of HK$4.68. The plastic bottle maker offered 61.546 million shares for sale in its IPO, which was 1.5 times subscribed.

　

• Information appliance and computer software maker Yuxing Infotech [8005] rose 1.8% to closed at HK$4.275 on its trading debut. The company originally offered 100 million shares for sale at HK$4.2 each in its IPO. However, the listing was aborted after the China Securities Regulatory Commission (CSRC) intervened. After a month-long delay, Yuxing finally secured approval for the listing. All the shares were placed and none were offered for sale to the public.

　

• Airport operator Beijing Capital International Airport [0694] closed at HK$1.79, or 4.28% below its issue price of HK$1.87, on its trading debut. The company raised HK$2.517 billion through its IPO of 1,346 million shares at HK$1.87 each. The public offering portion of the issue was only 19.7% subscribed.

　

• Mainland leather manufacturer Hua Lien International [0969] fell 21% on its trading debut to close at HK$0.79. The company offered 102.96 million shares at HK$1 each, including 34.32 million old shares, in its IPO. The share offer received 1.02 times subscription.

　

• Mainland health food maker PNF Food Holdings [0702] has received permission from the Stock Exchange to proceed with its share offer. The company’s listing plan was delayed as the share issue attracted fewer subscribers than the minimum number (100) required by the listing rules. Trading of the shares is scheduled to commence on 9th February.

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Disclaimant

This report has been prepared solely for information purposes and we are not soliciting any action based upon it. Neither this document nor its contents shall be constructed as an offer, invitation, advertisement, inducement or representation of any kind or form whatsoever. The information is based upon information which we consider reliable, but accuracy or completeness is not guaranteed. Opinions expressed herein are subject to change without notice. East Asia Securities Company Limited and other associated with it may have positions in the securities of the company or companies mentioned herein