Major Update: China & HK Covered Warrants
They have outperformed outrageously for the past 4 weeks. Below were the recommendations on Sep 7 and their actual performance to date. Bold are the current market prices and the performance to date in percentage. Naturally, if you annualised the returns, the figures would be enormous, but you shouldn't for trading purposes.
Category: Ridiculously Cheap Covered Warrants & Excellent China/HK Exposure
CCCC-C1 / 0.425 / 31 Jan 2008 0.46 +8.2%
CCCC-C3 / 0.115 / 4 Apr 2008 0.165 +43.4%
HKEX-C3 / 0.575 / 4 Apr 2008 2.45 +326%
HSBC-C1 / 0.155 / 4 Jan 2008 0.26 +67.7%
HSI-C1 / 0.40 / 29 Feb 2008 0.645 +61.2%
HWL-C1 / 0.275 /13x 2 Jan 2008 0.44 +60%
Sinopec-C1 / 0.105 / 31 Jan 2008 0.17 +62%
Category: Cheap Covered Warrants & Good China/ HK Exposure
CNOOC-C1 / 0.105 / 25 Feb 2008 0.225 +142%
China Mobile-C4 / 0.40 / 28 Mar 2008 0.49 +22.5%
ICBC-C1 / 0.195 / 29 Feb 2008 0.25 +28.2%
ICBC-C3 / 0.18 / 2 Jan 2008 0.25 +38.8%
Petrochina-C1 / 0.185 / 29 Feb 2008 0.31 +67.5%
Petrochina-C3 / 0.165 / 17 Jan 2008 0.29 +75.5%
Shenhua-C1 / 0.125 / 25 Feb 2008 0.295 +136%
Some of the returns have been incredible over less than 4 weeks, but some were abberations rather than genuine fundamental purchases. The jump in HK EXchange was an example. It makes you look better than in reality. You take those in your stride, don't think you are superman now, take in the lows with the highs. When you lose money in a bear market, not all is your fault, when you make tons in a bull market, a lot of credit does not go to you as well.
The key now, I guess is to ascertain if the China & HK covereds ARE STILL worth buying or holding.
Company / Price / Premium / Gearing / Maturity
Top Buys, Hold Till Maturity For Full Bang
CCCC-C1 / 0.475 / -5% / 8x / 31 Jan 2008
CCCC-C3 / 0.17 / 12% / 11x / 4 Apr 2008
Sinopec-C1 / 0.17 / 12% / 11x / 31 Jan 2008
Buys, Hold Till Maturity For Full Bang
China Mobile-C4 / 0.485 / 1% / 5x / 28 Mar 2008
CNOOC-C1 / 0.235 / 6% / 4x / 25 Feb 2008
HKEX-C3 / 2.51 / 2% / 5.6x / 4 Apr 2008
HSBC-C1 / 0.26 / 15% / 25x / 1 Apr 2008
HSI-C1 / 0.665 / -3% / 15x / 29 Feb 2008
HWL-C1 / 0.44 / 5% / 8.5x / 1 Feb 2008
ICBC-C3 / 0.25 / 5% / 5x / 1 Feb 2008
Petrochina-C1 / 0.31 / 10% / 4x / 29 Feb 2008
Petrochina-C3 / 0.30 / 10% / 4x / 17 Jan 2008
Shenhua-C1 / 0.30 / 5% / 3.4x / 25 Feb 2008
Important News On These Covereds:
a) A thirst for quality stocks among mainland investors has allowed the A shares of several Hong Kong-listed mainland companies to command high offering prices. China Shenhua Energy (1088) said yesterday that its A shares will sell in the range between 34.99 yuan and 36.99 yuan apiece, raising about 66.58 billion yuan. The mainland's biggest coal miner plans to sell 1.8 billion A shares.
It will use the proceeds to expand its mines, power production, railroads and harbors, and also to fund acquisitions. The Beijing-based coal company will list following offerings by China Construction Bank (0939) and China Oil Services Limited (2883).
The price range on Shenhua's A shares is equal to a discount of 12.05 percent to 16.8 percent when compared with its closing price of HK$43.6 Friday. Current discount between A-shares and H-shares is more than 40%, which means successful subscribers of Shenhua's A-shares IPO should see returns of 45%-60% on listing day.
b) Petrochina confirmed that it will be reviewing (again) its plan to sell shares in Shanghai. Positive news. It is crucial that the upcoming A-shares listing be successful, or even wildly successful as that is required to pave the way for more A-shares offerings in the future. It is a crucial part of Beijing's strategy to bring back more shares (and hence options/ alternatives) to soak up the liquidity within mainland China.
c) Shenhua will list following offerings by China Construction Bank (0939) and China Oil Services Limited (2883). The CCB and COSL IPO price discounts to H-shares were 10 percent and 13.75 percent respectively when compared with the two stocks' Friday closing prices. For its 500 million A shares, COSL has set a price of 13.48 yuan, which is at the top of its indicative range of 12.88 yuan to 13.48 yuan per share. China Construction Bank's A-share price has been set at 6.45 yuan per share, also at the top of its indicative range of 6.15 yuan to 6.45 yuan per share. CCB's A shares will debut Tuesday, and there is widespread expectation that the shares should reach 8.5 yuan easily. Chances are high that it may scale to 10 yuan, which would bring about a huge jump in companies with upcoming listings such as COSL, Shenhua and Petrochina. Mark down tomorrow as a crucial trading day.
p/s a good stock tip is the prize for the first ten to identify the man in the picture above