HSI Weekly Movement

WEEKLY REVIEW

Foreign fund flow lifted the hsi

*HSI Weekly Movement*		*Weekly Market Statistics*

Review & Outlook of Market Performance

At the beginning of the week, investors remain sidelined awaiting for the price fixing of China Mobile’s new shares placement and the expiry of the October HSI futures. Property and banking stocks then helped lifting the stock market on hopes of an early cut in US interest rates. Meanwhile, China Mobile announced the price of its US$6.6bn new share at $48 per share, a 4.48% discount to its closing price on 31st Oct. Tracking the rally of the US markets on Tuesday, the HSI staged a strong rebound on Wednesday. Buyings were across the board with HSBC, Hutchison Whampoa and Cheung Kong being the leads. In addition, the removal of the overhang on China Mobile’s share placement also accounted for the surge of the HSI. The index was however pulled back slightly on Thursday by PCCW and China Mobile after US telecom company WorldCom had lowered its profit forecasts, offsetting gains in banking and property stocks. The HSI closed the week at 15,594.12, up by 4.6% w-o-w. HSBC hitted a nine week high of $117.5 and closed Friday at $116.5 (up 5% w-o-w) as market expected that the US interest rates had peaked and its US and Canada subsidiaries reported 53.7% and 11.1% 3Q profit growth respectively. Some property stocks had been sold down by investors due to the still uncertain outlook of the property market. Nevertheless, underpinned by Cheung Kong (up 6.3% w-o-w to $93.25), the property sub-index still rose by 6.8% w-o-w. Internet and telecom stocks also picked up as US semiconductor company Intel revised upward its profit forecast. China Mobile closed at its intra-week high of $51.25 against its intra-week low of $49.6 on the back of a higher weighting in the MSCI after its share placement. HSCE and HSCC index were up by 7.3% and 9.2% over the week respectively on hopes for the PRC’s entry to WTO at the end of the year and a strong interim results reported by Legend Holdings. In addition, the aviation authority allowed PRC airlines to raise their air fares also helped boost airline companies and HSCE index.

We expect the HSI index to trade between 15,400 to 15,800 in the coming week with an improved market sentiments as there are signs of a stable Euro and oil prices which should bode well to the stock market. Nevertheless, further upside of the HSI would very much depend on the performance of China Mobile.

US & Regional Markets Weekly Update

Results Announcement

Turnover

HK$m

Operating profit

HK$m

Share of profits from associated companies

HK$m

Net profit

HK$m

DPS

HKcents

EPS

HK cents

13,090.3

(+78.5%)

456.9

(+135.9%)

-1.2

(N/A)

408.3

(+135.3%)

1.1

(+76%)

5.4

(+125%)

Legend reported a surge of 135.3% y-o-y in net profit to $408.3m for the 6-month ended 30th September with a 78.5% growth in its turnover. Its gross margin also increased from 12.1% to 12.3% in 1H01.

The surge in profit was a result of strong demand for personal computers in the PRC as well as the favourable response to bundled services such as Internet access with PC purchases. Legend’s PCs accounted for 59.6% share of turnover followed by foreign brand computers distribution (26.4%).

The company had sold 718,000 PCs during April to June, bringing total first half sales to 1.22m units, or 30% of the PRC’s PC market. Sales of home PCs and notebook personal computers also grew by 164% and 127% respectively.

Its system integration unit recorded a $4.84m operating profit in 1H01, compared with a loss of $5.68m in 1H00. Motherboard division reported a $47.84m operating profit in 1H01 compared with $24.08m loss in 1H00. Nevertheless, its Internet division reported a $47m loss in 1H01 and the management did not expect an immediate improvement.

The company also announced that it would acquire 40% of a stock trading platform company, Yestock.

Index Weighting Changes (week ended 3rd November 2000)

Hang Seng Index (HSI)

Stock	Stock Code	Closing price @3/11/00 (HK$)	W-O-W Changes		Remarks / Comments
			Absolute (HK$)	%
CITIC Pacific Ltd	0267	$32.6	+$3.65	+12.6%	Share price was boosted by the news that its potential partner in a mainland cable TV venture had bought stakes in 2 Chinese TV networks.
HSBC	0005	$116.5	+$5.5	+5.0%	Market expected that the US interest rates had peaked and a 53.7% and 11.1% 3Q profit growth of its US and Canada subsidiaries respectively boded well for its share price.

Hang Seng China Affiliated Corp Index (HSCCI)

Stock

Stock Code

Closing price @3/11/00

(HK$)

W-O-W Changes

Remarks / Comments

Absolute

ICBC (Asia)

0349

$7.5

+$1.85

+32.7%

There was news that Industrial and Commercial Bank of China planned to inject its assets to ICBC (Asia).

China Enterprise Index (HSCE)

Stock	Stock Code	Closing price @3/11/00 (HK$)	W-O-W Changes		Remarks / Comments
			Absolute	%
Beijing Datang	0991	$1.87	+$0.31	+19.9%	Share price was boosted by the news that E. ON Energie AG, a subsidiary of Germany’s second largest power company acquired 493m shares of Beijing Datang (34.4% of outstanding number of the company) from New World Infrastructure at $2.25 per share, representing some 21% premium to the counter’s closing price of $1.86 on 31/10.
CPCC	0386	$1.63	+$0.16	+10.9%	Share price was stimulated by the news that OPEC would increase its oil output by 500,000 barrels per day.
China Southern Airlines	1055	$1.93	+$0.44	+29.5%	Investors reckoned that the aviation authority approved PRC airlines to raise air fares would be positive to the two companies.
China Eastern Airlines	0670	$1.20	+$0.29	+31.9%

Summary of US News

Indicator	Change/Index	Comments
Consumer confidence index (Oct)	135.2	The fall in the index was mainly attributable to a volatile stock market and high oil price.
NAPM index (Oct)	48.3	The index fell below 50 for three consecutive months and was the lowest since Dec 1998. suggesting a slow down in the manufacturing sector.
Productivity (3Q)	+3.8% m-o-m	Despite 3Q GDP growth slowed down, productivity still reported a stronger than expected 3.8% growth. Unit labour cost was up by 2.5%, a result of robust gains in labour productivity and compensation. Nevertheless, unit labour cost was unchanged compared with a year ago. The figures implied a low inflationary pressure.
Unemployment rate (Oct)	3.9% m-o-m	The unemployment rate was the same as September. Payrolls were 137,000 mainly attributable to the weakness in manufacturing sector while service sector jobs rose by 99,000 and the number of temporary workers fell by 82,000. Wage growth was 3.8% y-o-y, similar to the growth in past five years.

Forthcoming Important Announcements / Events

6th November, 2000 (Monday)

Cisco Systems - 3Q results

Voice Stream Wireless - 3Q results

SIIC Medical Science and Technology (8018) - 3Q results

7th November, 2000 (Tuesday)

Far Eastern Polychem Industries Ltd (8012) - 3Q results

Greencool Technology Hldg Ltd (8056) - 3Q results

Hongkong.com Corporation (8006) - 3Q results

8th November, 2000 (Wednesday)

Consumer credit (Sept)

Automated Systems Hldg Ltd (0771) - Interim results

CyberM International Hldg Ltd (8017) - Interim results

Syscan Technology Hldg Ltd (8083) - 3Q results

Wah Sang Gas Hldg Ltd (8035) - Interim results

9th November, 2000 (Thursday)

Initial jobless claims (Nov 5)

PPI - (Oct)

Dell - 3Q results

Chinadotcom - 3Q results

Manulife Financial Corp (0945) - 3Q results

Panda Recruit Ltd (8073) - 3Q results

Sino Biopharmaceutical Ltd (8027) - 3Q results

Systek Information Technology Hldg Ltd (8103) - Interim results

10th November, 2000 (Friday)

China Agrotec Hldg Ltd (8011) - 1Q results

CLP Hldg Ltd (0002) - 3Q results

Neolink Cyber Technology (Hldg) Ltd (8116) -3Q results

SW Kingsway Capital Hldg Ltd (0188) - Final results

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.