The Hang Seng Index (HSI) has been range-bound at 24,300 points in recent days, with mainland insurance stocks and bank plays missing out on a rally triggered by a sweeping reorganization of Li Ka-shing’s business empire.
There are two main types of mainland investors — deep-pocketed institutional investors and retail investors.
Institutional investors are good at speculating on government policy direction while retail investors are always chasing trends and ignoring fundamentals.
However, retail investors account for about 80 percent of market liquidity.
As a result, H shares might become one of the most challenging markets after the launch of Shanghai-Hong Kong Stock Connect and the forthcoming stock link between Hong Kong and Shenzhen.
HSI is likely to hover around 22,800 to 25,000 points in the short term. Investors can put some bet at attractive levels.
They should diversify their portfolio into various sectors for short-term profit and shuffle their bets frequently amid increasing market volatility.
Investors should look for clear signs of market entry opportunity.
At the moment, there is yet no clarity, so investors should be more patient given the market is in the middle of a transition into the Lunar New Year.
Last week, Li unveiled a complex restructuring of his business empire and the market clearly liked the idea.
By the close of trade on Tuesday, shares of Cheung Kong had soared nearly 15 percent while those of Hutchison Whampoa had jumped 12.5 percent.
The market reaction was triggered by expectations that the restructuring will unlock shareholder value by eliminating the “holding company discount”.
Obviously, there is a possibility of high-digit growth in Li’s overseas operations ranging from oil, shipping, retail and telecoms. There are also expectations of future mergers and acquisitions.
In addition, the Li family is very likely to increase its stake of about 30 percent in the new company.
All of the real estate assets held by Cheung Kong and Hutchison will be put into Cheung Kong Property Holdings. Investors can monitor its latest investments.
Meanwhile, the new company CKH Holdings will have more flexibility in overseas investment in the future.
The move further burnishes the group’s international image given that the Li family already operates in other countries and territories.
Some investors might hope that other family-controlled businesses would follow the example of Li’s flagship companies.
Listed firms such as Wheelock & Co. (00020.HK), Henderson Land Development Co (00012.HK), New World Development (00017.HK), Hysan Development Co., (00014.HK), Regal Hotels International Holdings (00078.HK), Sung Hung Kai Properties (00016.HK) and Hopewell Holdings (00054.HK) have gone through family share restructuring in the past decade.
Translation by Julie Zhu
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