The share price of MTR Corporation (066.HK) broke record high on Wednesday (May 17) after it had announced its plans to a joint bid with a mainland rail giant to build the Kuala Lumpur-Singapore link as its first attempt to capitalise on China’s “Belt and Road” trade strategy.
Given MTR’s world-class management capabilities, I think it is highly possible that it could win the bid to work with mainland rail companies like China Railway Group (390.HK), China Railway Construction Corp Ltd (1186.HK), and China Communications Construction Co Ltd (1800.HK).
Ideally, each would play to its strengths, with the mainland companies in charge of construction works and MTR Corp in charge of operations management.
Just two days ago, Cathay Pacific Airways (293.HK) had been removed from MSCI’s Benchmark Hong Kong Index, which resulted in a drastic fall in its share price. However, the lost ground was recovered a day later.
Another bad news for investors was that MSCI suddenly said that Meitu Inc (1357.HK) would no longer be included in its index from June 1. But just on Tuesday (16 May), it had added Meitu to its China index as part of its quarterly review, and this was probably what caused a significant rise in Meitu’s share price then.
Now that Meitu has been removed, its share price also tumbled drastically. I wonder if investors who had bought Meitu at a high price would sue MSCI for its sudden change of mind.
Henderson Land’s Purchased Land is Expensive for a Good Reason
Henderson Land Development Co is paying a record HK$23.3 billion for a car park in Hong Kong’s central business district. According to Bloomberg calculations, the price per square foot for the deal is about HK$50,000.
Theoretically speaking, Champion REIT, which owns the nearby Three Garden Road, Central (formerly Citibank Plaza) should be a beneficiary, but its share price only rose by 0.59 percent on May 17. Conversely, in faraway Guangzhou, Yuexiu REIT (405.HK), which also owns landmark buildings, saw its share price rise by 1.3 percent.
Some people could not understand why Henderson Land paid a record high price to purchase land. To them, it’s like flour is more expensive than bread. But I think it makes sense, considering that many commercial buildings in the central business district are getting older by the day.
Some even have dispersed ownership and no hope of reconstruction. Therefore, the properties are not worth much. If it is possible to demolish these buildings for reconstruction, the land price should be close to HK$50,000 per square foot.
Tencent’s profit grew by 58% in the first quarter
The world today is the world of the new economy. China’s “King of stocks” Tencent Holdings (700.HK) recently posted a 58 percent jump in first-quarter profit, which reached 14.4 billion Renminbi. Tencent has been registering strong earnings growth for many years, and we know that its share price and valuation are supported by real money and its tangible profits instead of just intangible assets such as customer base. We see Tencent’s revenue grow by leaps and bounds every year, and thus I see it as a rare gem that is hard to come by.
I also recall the sad fact that Alibaba Group was turned away by HKEx (388.HK) and was forced to be listed in the US instead due to Hong Kong regulations (which were meant to protect retail investor interests). Ironically, Hong Kong’s retail investors were the ones who paid the price (as HKEx loses out on one of the world’s most anticipated listings since Facebook). It is a shame that Hong Kong is tied down by some rigid and rather baffling shareholding rules.
In my opinion, a stock market is a place where participants willingly take the bait. As long as the rules are made clear, just let them take the bait if they want to!