WASHINGTON (AFP) - - A comprehensive recovery strategy by US President Barack Obama's administration has steered the world's largest economy from the brink of collapse, his economic pointman said Thursday.
"We've traveled a long way from January. Back then, across the country for the first time in many of our lives, our economy was on the verge of collapse," Treasury Secretary Timothy Geithner said.
"Today, because of a comprehensive strategy enacted by President Obama, we are back from the brink," he said in a speech in Ohio, among states reeling from recession since December 2007.
Geithner said the pace of economic decline and job loss had slowed while banks that borrowed taxpayer funds to avert collapse were starting to pay the government back.
Credit markets were also starting to unfreeze and the housing market -- epicenter of the financial crisis that drove the economy to near-collapse -- was starting to stabilize, he said.
"And, overall, widespread fear is giving way to emerging confidence."
But Geithner cautioned of the long road ahead to restore sustained economic growth.
"We have a long way to go, but we are starting to see signs of stability, and these signs mark the first steps to recovery," he said.
Referring to the recovery in Ohio in particular, he said in January the state was losing jobs at a rate of 100,000 a month but by last month, the rate had "slowed sharply" to 30,000.
"That's 30,000 too many, and unemployment is still to high," he added.
Hong Kong is Out of Recession; and HSI Will Reach a New High in 2011!
August 19, 2009
Hong Kong is officially out of recession in 2Q 2009 and the economy expanded 3.3% quarter-on-quarter.
Author : iFAST Research Team
Chart 1: Five-year Performance of the JCI, KLCI and STI
Chart 2: Price of Coal and Crude Palm Oil
Keynotes
Hong Kong is officially out of recession in 2Q 2009
Benign interest rate environment supports a sustainable economic recovery
Current estimates are reasonable,, but too conservative in our opinion
We expect earnings to stay flat in 2009, and rise by 21.1% in 2010 and 23.5% in 2011
Our 2011 HSI target: 30,000 – 37,000
The Hong Kong economy has been in recession since the third quarter of 2008, after negative quarter-on-quarter GDP growth for two consecutive quarters (2Q 08and 3Q 08). In the first quarter of 2009, the economy shrank 7.8% quarter-on-quarter, which was even worse than the second quarter of 2003 amidst the outbreak of SARS. Four consecutive quarters of declining GDP have been recorded between 2008 and 2009. Though it’s not comparable to the 1998 Asian Financial Crisis when Hong Kong suffered from five consecutive quarters of decline, these figures still suggest the current downturn to be one of the worst recessions on record.
However, we believe that the worst has passed and the recovery has taken place. The economy expanded 3.3% quarter-on-quarter in the second quarter of 2009, the fastest pace in almost six years. The figure has beaten the market consensus of 1.2% growth, marking an economic turnaround. On the year-on-year basis, the second quarter GDP growth was still negative; however, the contraction has reduced to -3.8% from -7.8% in the first quarter.
In terms of the GDP components, exports was up more than expected by 11.6% quarter-on-quarter while a largest rise in nearly six years was recorded in consumer spending. The rebound has also enticed the corporations into spending more. Hence, corporate investment (non-seasonally adjusted) climbed 3.4% in the second quarter. It shows the economy has stopped deteriorating and is on course for an early recovery from the recession.
A Faster-than-Expected Recovery
Recently, there are more encouraging signs of a faster-than-expected recovery. For example, Hong Kong exports fell by the least in seven months in June 2009. The positive growth of exports is expected to be seen as early as August 2009. In addition, the Purchasing Managers’ Index rose for a ninth consecutive month in July 2009 while retail sales showed a smaller year-on-year decline in recent months as consumer confidence improved. Home sales also surge to a 17-month high as low interest rate encourages buyers to enter the market. These economic figures, as prelude, signal that a sustainable recovery for Hong Kong is under way.
Benign Interest Rate Environment Supports the Sustainable Economic Recovery
Since March 2009, strong capital inflows have continued to keep the Hong Kong Dollar spot rate to stay on the 7.75 strong side of the convertibility zone. In order to maintain the exchange-rate stability, Hong Kong Monetary Authority has injected HKD into the market, directly boosting the aggregate balance of the local interbank market. The historical low interest rate contributed by the excessive liquidity help to justify the local asset markets rally in the past few months.
Property prices in Hong Kong climbed as the Centa-city Leading Index which tracks secondary residential property prices showed an increase of 25% since 2009 as at 27 July 2009. The property transaction also rose by a large margin of 58% in the same period to 14039, hitting one and a half years’ high. Hang Seng Index surged over 34% year-to-date as at 14 August 2009. The balance sheet effects and the wealth effects of asset prices have made positive contribution on the local consumption and corporate investment.
Besides, the abundant liquidity led by the net capital inflow has lowered the borrowing costs. It could help to support a modest recovery in domestic credit in the second quarter of 2009 following the two consecutive quarter drops. We expect the easing liquidity situation and the improving economic activity to increase the money multiplier and gradually accelerate the recovery of bank loans, hence supporting a sustainable recovery of the economy.
Revision of Earnings Outlook
The earnings season has been kicked off, with Hong Kong listed companies reporting results for the second quarter of 2009. HSBC Holdings, Europe’s biggest bank, which had been expected to post a US$600 million loss, surprisingly reported a pre-tax profit of US$3.35 billion in the first half of 2009. Hong Kong’s property developer, Chung Kong Holdings reported a 5% growth in net profit year-on-year in the first half of 2009.
In addition, out of the 12 Hang Seng Index’s member swhich reported its second-quarter or first half earnings, 7 of them (i.e,-more than half) reported earnings better than the consensus estimation. The earnings surprise (as compared to consensus) varies from 6.8% to 335%. As Hong Kong and Asia have just passed the inflection point of the economic cycle, we believe that the consensus is slow in their forecasts, and will likely revise earnings and the target prices upwards a few quarters down the road as corporate earnings and economic data surprise to the upside.
Table 1: Top 10 weighting members in the Hang Seng Index
From 18 July 2009 - 17 August 2009
FY 2010 Earnings Estimation Revisions
No. of revised up
No. of revised down
Total coverage
HSBC Holdings PLC
1
3
4
China Mobile Ltd
2
0
2
China Construction Bank Corp
4
0
4
Bank of China Ltd
4
1
5
Industrial & Commercial Bank of China
3
2
5
China Life Insurance Co Ltd
2
1
3
CNOOC Ltd
2
1
3
PetroChina Co Ltd
2
0
2
Sun Hung Kai Properties Ltd
1
1
2
Hong Kong Exchanges and Clearing Ltd
5
1
6
Source: Bloomberg and iFAST Compilations
Table 1 shows the earnings revision in last month. There are a total of 36 earnings forecast revisions for 2010 earnings for the top 10 weightings for the Hang Seng Index. 72% of the revision has led to an upward adjustment. It shows that analysts are becoming more optimistic for companies’ profitability in 2010. We believe that more earnings revision is coming in the second half of 2009.
According to the market consensus, as of 17 August 2009, the earnings growth in 2009 is estimated to drop by 2.7%. It will climb in 2010 and 2011 by 18.3% and 20.4% respectively (see Table 1 and Chart 2). Based on the aggressive earnings revision as shown in table 1, we believe that the current market consensus estimated earnings is still too conservative. Table 2 and Chart 2 show our in-house estimated earnings growth for the next 3 years. We are looking forward to seeing the market’s earnings integer to beat 2007’s level by 2011.
Table 2: iFAST Estimated Earnings Growth for the next 3 years
EPS Estimates
2009
2010
2011
Consensus
1208
1430
1722
% Growth
-2.66%
18.34%
20.44%
iFAST Estimates
1241
1503
1856
% Growth
0.00%
21.10%
23.50%
Source: Bloomberg, iFAST Compilations
Table 3: Hang Seng Index to reach its all time high in 2011!
Scenario Analysis
2009
2010
2011
Earnings Integer
1241
1503
1856
PE Level
16X
19858
24048
29703
18X
22341
27055
33415
20X
24823
30061
37128
Source: Bloomberg, iFAST Compilations
On 31 October, 2007, Hang Seng Index reached an all-time high and closed at 31,638 points. Based on the estimated earnings growth, we will see the Hang Seng Index to reach its all time high again by 2011 at 33,400 point if we based on a fair value PE multiple of 18X. A PE level of 18X incorporated the relatively higher valuation among the Chinese H-Share and Red Chips in the index. The H-Share and Red Chips accounted for more than half of the market capitalisation of the Hang Seng Index. In fact, our target range for the Hang Seng Index for 2011 is from 30,000 (conservative) to 37,000 (aggressive)!
As at 17 August 2009, estimated PE for Hong Kong is at 16.2X and 13.9X for 2009 and 2010 respectively. We are still bullish on the Hong Kong market due to its attractive valuation and potential earnings growth in the next 3 years. We maintain Hong Kong market at a “very attractive” rating of 4.5 stars.
THE difference between distributable income and distribution per unit (DPU) became sharply obvious to investors when Rickmers Maritime Trust (RMT) became the last of the three SGX-listed shipping trusts to release second-quarter results at the end of last week.
RMT said back in May that it expected to see an increase in distributable income in Q2 due to the delivery of new vessels. It delivered on that, posting a 42 per cent rise in distributable income to US$19.6 million. Charter revenue and cash flow from operating activities both rose 59 per cent and 56 per cent respectively to US$37.6 million and US$28.7 million from the second quarter the year before.
However, the rub lies in the actual returns to unitholders in the form of distribution per unit - DPU plunged 73 per cent to just 0.6 of a US cent. Like the other two trusts reporting before it, RMT cited conserving cash as a reason for the cut. It also chose to use the results briefing to highlight some major challenges facing the trust's management, while declining to give a DPU forecast for the coming quarters. In the process, RMT has positioned itself as the shipping trust with the most negative outlook.
Investors naturally reacted negatively on Monday, selling down the trust, which lost over 20 per cent to close at 46.5 cents from 58.5 cents on Friday.
To be fair, the issues that management flagged are not new. The refinancing of RMT's US$130 million top-up loan facility maturing in April 2010 and unsecured funding for its four 13,100 TEU ships, due for delivery in the latter part of 2010 have been hanging over it for most of the year, as has the question of value-to-loan (VTL) covenants and the need to negotiate a waiver on them.
Analysts have also turned bearish on RMT. Maintaining its 'sell' call on RMT, Citigroup's Rigan Wong said DPU was lower than consensus expectations of 1.5 US cents and went on to add that: 'We believe RMT's share price may de-rate, given the low Q209 DPU payout and lack of dividend guidance.'
The question that needs to be asked is why did they choose to reiterate them at this particular juncture. One answer might be that the prognosis has gotten worse and management feels investors should be further warned of the risks. 'PwC highlighted the 'existence of a material uncertainty that may cast significant doubt on the group's ability to continue as a going concern', noting that RMT's US$130 million loan maturing in April 2010 has yet to be refinanced and that it is also in talks with banks on its VTL covenants,' said Mr Wong.
The other possibility is that in depressing the unit price, it helps make the yield look a little better. The 5.9 per cent annualised yield at last Friday's closing is far below the average 15 per cent yields the other two are producing, but with yesterday's closing price of 45 cents, it goes up to 7.7 per cent. As the unit price drops, the yield picture might start to look better going forward because, barring some pretty drastic restructuring moves, the future looks very grim indeed for RMT. Barring questions of whether one buys business trusts for capital gains or dividend yields, this may well be the only bright spot ahead.
I strongly believe we will see good return. Just need to be patience.
bennykusman ( Date: 20-Aug-2009 11:56) Posted:
i think better put ur money into other shares.. this one still can catch up even until next month.. lots of volume for past 3 days but still price at 0.055
Have you another place in mind? other than Bt Timah hill.???
louis_leecs ( Date: 19-Aug-2009 22:27) Posted:
seventh month ghost month finally alive tonight.......................sell signal again,,,,,,,,,,today rebound strong just for those buy deep cash out last chance,,,,,,,,,,,,,,im predict that the seliing wave going strong,,,,,,,,,,,,,,,,,,,,,,and weak and strong selling akan datang.................y6ou better watch out the bear come again,,,,,,,,,,,,,,,,,,tis time look like last rally,,,,,,,,,,,,,bear bear omn the way,,,,,,,,,,,,giant bb and bb ,,,,,,,,,,,,pro trader try very hard dressiong the share price,,,,,,,,,,,,,,,,,,,,,signal bb profit and cash out,,,,,,,,,,,,,,,,,,,,,,bear already quiet,,,,slowly come againj,,,,,,,,,,,,,,,,,,,,,im 80% cash and go to bukit timah hilll,,,,,,,,,,,,,,,,BUKIT TIMAH HILL DAY THREE,,,,,,,,,,,,,,,,,,,,,,
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