Nomad Investors

Morgan Stanley expected that the share price of BYD ELECTRONIC (00285.HK)    +0.650 (+9.003%)      Short selling $37.81M; Ratio 44.766%      will rise in 15 days, with a possibility of 60% to 70%. The expected increase was due to the attractive valuation in near-term after the recent sharp decline. The stock is trading at PE of 9.6x, compared with 10x to 14x in the past profit growth periods. The share price of BYD Electronics was corrected by approximately 30% from its peak on 8 October, as dragged down by the intensive competition in metal casings and negative news of its parent company.

JP Morgan predicted that the U.S. stocks have a positive outlook next year, the target of S&P 500 Index for 2015 was set at 2,250, suggesting potential upside of nearly 9%; and index constituents' 2015 earnings growth was predicted to be 8%, representing an estimated comprehensive P/E of 17.7x.  Moreover, the broker also anticipated that the Federal Reserve might start to raise interest rates in June 2015 and the market will reflect the liquidity factors, so the volatility of the market next year will be greater than the first half and the fourth quarter of this year.

Shanghai Composite Index and Shenzhen Component Index traded mixed in the afternoon session. The former peaked at 3,117 and eventually gained 51 pts or 1.67% to 3,108, fueled by the rally of banking and brokerage shares. Shenzhen Component Index fell 38 pts or 0.36% to 10,627. Turnover of the Shanghai and Shenzhen markets equaled RMB515.6 billion and RMB285.6 billion, respectively

BYD COMPANY (01211.HK)    -10.150 (-28.835%)      Short selling $7.37M; Ratio 6.180%     , in response to the request of the HKEx, said in a statement that it is not aware of any reasons for today's price or volume movements.  The H shares once slumped over 40% today, and it was last traded at $26, down 26%, on volume of 233 million shares

Morgan Stanley maintained the rating of SMARTONE TELE (00315.HK)    +0.500 (+4.630%)      Short selling $737.70K; Ratio 4.934%     and HUTCHTEL HK (00215.HK)    +0.050 (+1.656%)      Short selling $65.64K; Ratio 1.550%     as Overweight after the spectrum auction. HKT-SS (06823.HK)    +0.320 (+3.265%)       Short selling $1.40M; Ratio 15.869%     and PCCW (00008.HK)    +0.010 (+0.194%)      Short selling $3.82M; Ratio 20.462%     was kept at In-line. The broker pointed out that SmarTone Telecommunications and Hutchison Telecommunications Hong Kong sustained the spectrum at a low price, which was 27% lower than estimates, while CHINA MOBILE (00941.HK)    -2.100 (-2.238%)      Short selling $54.29M; Ratio 9.546%     and SmarTone Telecommunications acquired the additional block at 3.1% and 6.3% higher than the reserve price. Morgan Stanley also expected upside for the payout ratio of SmarTone Telecommunications, with a lift from 3% to 5-6%

Shanghai Composite Index and Shenzhen Component Index saw rising sell orders in the afternoon and finally ended at 2,856 and 10,116, down 5.4% and 4.2% respectively. Turnover of the two markets increased to RMB793.3 billion and RMB473.1 billion (or RMB1.2664 trillion in total, hitting a record high again).  In the Shanghai-Hong Kong Stock Connect sector, 40 stocks were suspended against further decline. 

At midday close, Hang Seng Index and China Enterprises Index were last traded at 24087 and 11805, up 85 pts and up 204 pts, respectively, on turnover of $57.435 billion.  Mainland insurers and banks led market gainers. PING AN (02318.HK)    +3.150 (+4.315%)       Short selling $769.86M; Ratio 25.880%      soared 4.4% to $76.2, being the best performer of blue chips; CHINA LIFE (02628.HK)    +0.500 (+1.789%)       Short selling $97.34M; Ratio 10.521%      jumped 1.6%; BANK OF CHINA (03988.HK)    +0.190 (+4.600%)       Short selling $107.07M; Ratio 6.114%      ICBC (01398.HK)    +0.200 (+3.650%)       Short selling $87.18M; Ratio 4.339%      and CCB (00939.HK)    +0.240 (+3.890%)       Short selling $86.09M; Ratio 3.041%      advanced 3.1%, 2.9% and 2.9%, respectively. As Shanghai Composite Index was nearing 3,000 level, X ISHARES A50 (02823.HK)    +0.580 (+5.000%)       Short selling $1.24B; Ratio 30.338%      and CSOP A50 ETF (02822.HK)    +0.620 (+5.201%)       Short selling $777.24M

UBS stated that the MIDH group of LENOVO GROUP (00992.HK)    +0.120 (+1.130%)      Short selling $6.53M; Ratio 5.489%     has been marginally profitable since the group sold a number of models at low prices and expanded the operating scales. The broker believed that Lenovo is streamlining its product portfolio, of which the supply chain management is better than MIDH group. The broker believed that it's relatively easy for the company to reach the pre-tax income target of US$250 million in the third quarter due to the gradual recovery of PC demand in China. The earnings forecast in 2015 to 2017 was lowered from US$0.084/0.111/0.128 to US$0.078/0.104/0.119, reflecting the share dilution and revised assumption for business earnings forecast on Motorola and X86 server business. The target price was cut from $13 to $12.8 and the rating was maintained at Buy.

JP Morgan stated that the earnings of PRADA (01913.HK)    -3.300 (-6.984%)      Short selling $21.97M; Ratio 21.799%     achieved a yearly decrease of 28% in the first nine months with a plunge of 44% in the third quarter, missing the estimates. Hence, the earnings forecast was trimmed by 10% and 6% in 2014-15 and the target price was cut from $46.2 to $40. The valuation was not attractive despite the continuous fall since early 2014. The rating of Prada was maintained at Neutral since the revolution in leather goods business was not yet successfully implemented. 

JP Morgan stated that LINK REIT (00823.HK)    -2.300 (-4.492%)      Short selling $83.38M; Ratio 14.000%     closed at historical high at $51.2 due to its inclusion in the Hang Seng Index at the close on 5 December. However, the DPU failed to support the current valuation. Since the current valuation is too high, the rating was maintained at Neutral with a target price of $47.5. Since the stock price will be faded by 7.7% in general over a month following the re-balancing, it is believed that the share price may be reversed in the near-term and hence suggested investors to take profit from the stock.

China export value continued higher by 4.7% yearly in November, but missing estimates for 8%. Meanwhile, the export value fell 6.7% yearly, intensifying hopes for reduced RRR in near term.  Shanghai Composite Index and Shenzhen Component Index closed the day at 3020 and 10554, up 2.8% and up 4.8%, on turnover of RMB593.4 billion and RMB387.5 billion, respectively.  Brokers soared on back of high market turnover. CITIC Securities (600030.SH) and Haitong Securities (600030.SH) were caped for further growth at RMB25.5 and RMB19.72, respectively. Meanwhile, the four major insurers gained 3.7%-9.6%. Ping An Insurance (601318.SH) closed at RMB64.83, hitting a new high. Meanwhile, China Construction Bank (601939.SH) continued higher by 7.2% to the new high RMB6.11.