Tuesday, August 28, 2007
Hold Till When?
For those long or very long in China H-shares covered warrants, you should be feeling good. Now, many are asking "hold till when"? You have to monitor the Shanghai and Hongkong markets to get a sense of perspective. You also have your own investing objectives.
Some Pointers :
a) If your aim is to get 50% or 100% returns, you can get out soon, if not already.
b) If you generally agree with what I have been writing on H-shares' attraction, then you should HOLD TILL the buggers expire. This is because the entire H-shares discount scenario, pouring in of China money into H-shares will play itself out over 6-12 months.
c) The longer term factor in that most will have to requote their shares back to Shanghai can only narrow the discount. We should see some having dual listings in HK and Shanghai. Some may completely leave HK and just list in Shanghai owing to government's directive and its more lucrative to re-sell shares in Shanghai (easier to raise funds and get better valuations).
d) Or, they will more likely use my strategy prediction - keep dual listing, but keep buying free float in HK H-shares, then re-sell for a subsequent second listing in Shanghai.
e) Of course, if the China markets start to look shaky dropping by more than 100 points a day, you may want to take profits and wait for re-entry levels.
I can also sense some holders will want to trade these covered warrants instead of holding to maturity, that's their perogative. The need to time the markets and incur transaction costs may/may not work in your favour. If you bought at 10 sen or lower, just let it ride, you would be amazed at the price at expiry. Then we might be able to say we have a 5-bagger or even a 10-bagger.