The roller-coaster stock market action portrayed in the famous TV series The Greed of Man, now in a rerun, is being played out every day as the Hang Seng Index (HSI) soars, then plunges, then soars.
Heavyweight (in size, not political power) legislator Christopher Cheung Wah-fung treated reporters to a nice lunch on Monday during which he demonstrated how easily money can be made by a well-fed broker these days.
Hong Kong Exchanges and Clearing (HKEx, 00388.HK) is the stock of the month. Its price shot up HK$100 in the past month as the influx of mainland liquidity propelled it to as high as HK$300 last week.
During the lunch Cheung hosted, the HSI started falling after the afternoon session began.
To calm media fears, he kept talking about how bullish the market will be once Beijing approves Shenzhen-Hong Kong Stock Connect.
HKEx, the largest exchange in the world by market cap, will hit HK$400, he said.
Putting his money where his mouth was, Cheung picked up the phone to his broker and placed an order to buy 50,000 shares of HKEx at HK$270, a price at which he stressed many times the stock would be a screaming buy.
Ten minutes later — as the HSI continued to plummet, at one point dropping as much as 700 points — his order was filled. He bought another 50,000 shares at HK$268.
The market’s plunge was expected.
Financial Secretary John Tsang Chun-wah warned Sunday morning on his blog that the market might gap down the next day because of the introduction of stock lending measures for short sellers.
What Tsang failed to predict was that the drop came only in the afternoon, as the market reacted positively in the morning to China’s central bank cutting the reserve requirement ratio for banks by 100 basis points (1 percentage point) Sunday afternoon.
Although the market closed near the low of the day Monday, HKEx closed above Cheung’s purchase price, giving him a paper gain of over HK$300,000.
No wonder Cheung can keep buying lunches without budget constraints for his friends.
One may wonder if Cheung, who represents stockbrokers in the Legislative Council, should consider concealing his joy in punting on stocks.
He might find it hard to be fair in case regulatory issues concerning HKEx are discussed in Legco.
Cheung led a delegation to Shenzhen this month to learn more about the upcoming Stock Connect scheme before raising his stake in HKEx in front of the media.
He is certainly not the only one who made gains on the stock.
Last week it was revealed that Jacinto Tong Men-leung, who has predicted an imminent bursting of the property bubble, sat on over HK$100 million in paper profit, thanks to a switch from HSBC to HKEx.
He got the stock tip from fund manager Andrew Look, who told him HKEx would hit HK$500 one day.
Ironically, Look wound down his fund early this year, just before the rally began.
But we shall hear more stories of HKEx shareholders who made millions, if not billions, as the drama of real life mirrors television.
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