Dr Chan: Patiently Wait for Lagging Stocks to Pick Up Pace

Hang Seng Index constituent stocks rise across the board

After the Hang Seng Index had risen for 14 consecutive days, bearish investors finally made a right bet, but a small one—the Hang Seng merely stopped rising for a day, but resumed “normal service” on Tuesday (16 Jan). This time, the Hang Seng registered an even more rapid rise. After shooting up by 565 points in one go, it was just 54 points away from its historical high in 2007.

As we enter 2018, almost all the Hang Seng constituent stocks went on an uptrend, with most of the lagging stocks catching up. Among the lagging Hang Seng constituents, China bank stocks have a relatively high weightage. The rise of China banks stocks across the board seems to be the result of institutional investors giving them a strategic push.

Currently, among China bank stocks, Bank of Communications Co Ltd (3328.HK) is a relatively underperforming one. Those who wish to chase laggards can pay attention to it.

Laggard stocks will catch up as long as they get positive mentions from big investment banks.

It seems that China Mobile Ltd (941.HK) is the most disappointing Hang Seng constituent stock to retail investors, and many of them had given it up due to disappointment. However, I still believe that the stock would not underperform in the long run when the stock market is bullishly white-hot and continuously driven up by speculation. Thus, I believe that investors who hold China Mobile shares should wait patiently.

Another stock to take note of would be blue chip CK Hutchison Holdings Ltd (001.HK). It owns a wide variety of businesses, including retail, ports, telecommunications, oil, gas, public utilities, etc. Thus, it’s unlikely for the common retail investor to have the ability to assess its value.

Even analysts from big investment bank were unable to come up with a real valuation before the restructuring of the old Cheung Kong (Holdings) and Hutchison Whampoa.

Currently, Hutchison Telecommunications Hong Kong Holdings Ltd (215.HK), has made a lot of money from the sale of its fixed-line network business. The prices of oil and natural gases have also hit a three-year high. As the economy recovers, retail businesses grow, and public utilities receive steady revenue.

In short, though there is no unfavourable news to the businesses under CK Hutchison Holdings yet its share price is still unable to reach a record high. Perhaps, in order for its share price to soar, the recommendations of big investment banks are required.

On the other hand, the share price of Galaxy Entertainment Group Ltd (027.HK) has hit its three-year high, and K Wah International Holdings (173.HK) holds an interest in Galaxy Entertainment of around $10.3 billion Yuan in market capitalization.

Considering that K Wah has a market cap of about 14.5 billion Yuan, and its real estate business is valued at 4.2 billion Yuan, I cannot describe how discounted this stock is.

As the Hang Seng Index enters a great bull market, it’s only a matter of time before this kind of severely undervalued stocks would be discovered by big investment banks, who would announce their positive outlook. The share price of these stocks would then make a “triple jump” once they receive the positive forecast.