The Hang Seng Index broke above 28,000 points at a point (on 28 August), but it fell back down after making strong gains and closed at only 15 points higher.
The stock that dealt the heaviest blow to the Hang Seng was none other than the “King of stocks”, Tencent Holdings Limited (700.HK).
On 28 August, Tencent closed at 5.0% lower than its recent high, but most retail investors still did not see that as an incentive to buy at a bargain.
That’s because HK$323 (Tencent’s share price after the drop) is still a very high price for most retail investors.
The reason that the Hang Seng could break above 28,000 points on Monday could probably be attributed to the momentum brought about by the surge of China A shares, which drove up brokerage shares as well.
Plenty of buy orders emerged on the Shanghai Stock Exchange for A shares and brokerage shares, driving up share prices significantly.
It seems that the speculation is unlikely to end soon, and that is something worth noting.
Merging coal and electricity
On Monday afternoon, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) suddenly announced the formal approval of the merger of China Shenhua Energy Co Ltd (1088.HK) and China Guodian Group.
The long-standing rumour has finally been confirmed. The biggest advantage of a coal-electricity merger is the stabilisation of profits.
Coal is an important raw material for the generation of electricity, but coal prices tend to fluctuate greatly and go through huge ups and downs.
That would then impact the share prices of electricity companies that generate electricity using coal. When coal prices rise, so do the costs of power generation, and profits are damaged.
Sometimes, these electricity companies have no choice but to raise electricity bills, which would, in turn, affect the lives of the people.
The shipping industry is another one that faces great fluctuations in supply and demand. In 2009, when the economic situation was rising back up from rock bottom, I had made some money from speculating the shares of Singamas Container Holdings Ltd (716.HK).
I only own some odd lots of the shares now, and I was lucky to have sold most of my shares before the company made a turn from profit to loss. I managed to be safe by the time its share price fell drastically.
However, when Singamas announced its interim results on Monday – a turn from loss to profit – I felt a bit tempted again. The worst days for Singamas might have passed.
The shrinking of balance sheet is a tiny movement
The Yuan has risen against the Hong Kong dollar repeatedly, thus increasing the incentives for purchasing A shares and H shares. On the other hand, the Yuan fell against the Euro.
It can also be said that the “rise” of the Yuan in 2017 is actually due to the fall of the US dollar, or simply because the greenback fell by a greater magnitude.
The main reason behind the fall of the dollar is that investors are gradually holding the view that the US Federal Reserve is inclined to not raise interest rates. The Fed’s shrinking of the balance sheet, on the other hand, is just a tiny movement.
We should be careful when the market is filled with such views.
After all, the US Federal Reserve would not wish to see the dollar grow too weak, as a weakened dollar would affect the international status of the United States.
This article was translated from Chinese to English by Chen Xushuang. Click here to read the original article.