Found Some Good News

Date: Fri, 19 Aug 2011 10:43:56 +0800
Subject: Found some good news

 

“Never be afraid to try something new. Remember, amateurs built the ark; professionals built the Titanic.” – Anonymous

I found a piece of good news today: it’s Friday. That’s all that I want to say other than I am still Ursa Major. However, Ben is taking the gang to Jackson Hole, Wyoming next week. Last year that was where he announced QE2 and markets took off. This time around it will be more difficult to pull the same tired rabbit out of the same tired hat and expect applause but I think he will say something supportive to equity markets.

Feel lucky?

 

Good friend to central banks everywhere, George Soros, gave an intriguing interview to the German weekly newsmag, Der Spiegel. I have ripped it off and put it in the Word file, attached. The most interesting part of the exchange was when he answered a question that has been bothering me all year long – why has the Euro held up so well? Great museums, superb wine and well built girls aside, Europe is a mess. The Euro should be at parity with the dollar, in my view, but it has refused to break down despite its very survival being called into question. George says there is a “mysterious buyer” out there in the market which must have an alternative to the dollar and needs to keep the Euro alive for political purposes: China. Hmmm. Nefarious indeed.

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Stocks we still like despite the carnage around us include:

China Mobile (941 HK, Buy). The company reported good H1 results and Eric Wen is raising his target price one whole dollar to $94 – the highest on the street. Eric says do not underestimate the power of CM’s 2G voice network, the best in China. This is the hook they have to retain customers. Top line, EBITDA and ARPU growth are all improving. The biggest uncertainty for China Mobile is the timing of TD-LTE. With a dividend yield approaching 5%, the attractions of China Mobile should not be ignored.

Lenovo (992 HK, Buy). We saw great H1 numbers from the company. Lenovo has the best of both worlds right now with exposure to the commercial PC market and the emerging market consumer. These are the only two areas of growth in the sector. Roxy Wong, who was early and right on his upgrade of Lenovo early June, believes OP margins will continue to expand to 2.1%. He raises his target price slightly to $6.55 and maintains a Buy rating.

I also think news overnight concerning HPQ will vault Lenovo into the number one PC maker globally. Hewlett-Packard’s disastrous acquisition of Compaq, which cost Carly F. her job ten years ago, has proven to be a failure. They are exiting the PC business. Lenovo still has a lot of cash and would be a likely buyer for part of it. Standard PCs and notebooks are utility items like washing machines or jumper cables and are clearly a developing country business model.

Notes on both companies found in our daily today.

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Our guys in Korea have been watching the National Pension Fund support the market. They have made a list of the top 20 stocks the NPF has been buying or selling for the last week, month to date and year to date as well. The top stock they have pumped money into so far this year? The NPF has bought KRW 600 bn Hyundai Heay (009540 KS), down 29% ytd. The NPF has sold KRW 260 bn of Semco (009150 KS), which has halved over the same period. Worth looking at, I’d think. See attached excel spreadsheet for more.

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You can get our research by typing MASR <Go> on Bloomberg.

Cheers.

Derek Hillen, CAIA

Mirae Asset Securities: Risk is to the Upside

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