HSBC

Stock code: 0005.HK

Last close: HK$92.60

Entry: HK$85

Target: HK$100

By Castor Pang

HSBC announced that its dividend payout in the third quarter was $0.18, a result which has reduced the market's concern over the bank and basically lessened the pressure on the overall market.

However, HSBC experienced a massive sell-off recently, which forced its stock price to a low of HK$75.

The stock price has rebounded since then, effectively eliminating the pressure caused by the previous irrational sell-off.

However, as the rebound appears to be relatively strong, the stock price is expected to meet resistance at its 10-day moving average. As such, it is thought that HSBC Holdings will enter a period of fluctuation and may push below HK$90.

If the stock price retreats back to HK$85, investors are advised to enter with a target of HK$100. With the stock price now still at a low level, investors don't need to set for stop loss price.

The author is a strategist with Sun Hung Kai Financial Group.

Bank of Communications

Stock code: 3328.HK

Last close: HK$11.58

By Paul Lee

Bank of Communications (BOCOM) has become our top sector pick as we believe it outshines peers in risk management, which may become critical as the credit cycle turns.

Being the first mainland bank to list overseas, BOCOM emerged from the previous down cycle in better financial shape than others.

We also like HSBC Holding's (0005.HK) more entrenched involvement relative to strategic investors of other mainland banks, which should lend a helping hand in enhancing risk management at BOCOM.

We also note that BOCOM is free from exposure to structured bond investments.

BOCOM reported a net profit of 7.24 billion yuan (EPS: 0.144 yuan) during the third quarter, which represents a growth of 21 percent, year-on-year.

For the first nine months of the year, the group still reported a 56 percent jump in net profit to 22.81 billion yuan (EPS: 0.464 yuan), which represents 78 percent of our full-year earnings estimate of 29.255 billion yuan (EPS: 0.597 yuan) and 77 percent of the market consensus estimate of 29.715 billion yuan.

There have been few signs of stress on BOCOM's loan quality, as the bank's non-performing loan ratio edged lower by 8 basis points during the third quarter or 30 basis points for the first nine months of the year to 1.75 percent.

While BOCOM holds $4.8 billion in foreign currency bonds that accounts for some 1.3 percent of total assets, the group has no exposure to subprime MBS or structured bond investments.

An affiliated company(ies) of Taifook Research Limited make(s) a market in the securities herein covered and/or any warrants or options on these securities herein covered.

The author is an analyst with Taifook Securities.

Sinopec

Stock code: 0386.HK

Last close: HK$4.76

Target: HK$6.04

Support: HK$4.41

By Lai Wai-shing

According to mainland accounting standards, Sinopec saw third quarter earnings reach 8.17 billion yuan, down 39.1 percent, year-on-year.

Its net profits during the first three quarters narrowed to 63.7 percent.

According to international accounting standards, its interim profits attributable to shareholders reached 8.26 billion yuan, down 77 percent, year-on-year.

This reflects its third quarter business had improved.

Its refinery business saw a loss of 18.3 billion yuan in the third quarter, lower than the average of 23 billion yuan in the firs two quarters.

The central government offered a subsidy of 11.7 billion yuan to the company in the third quarter, but it still had to pay windfall tax of 18.7 billion yuan.

The company's crude oil production grew 7.25 percent, year-on-year.

With the drops of global oil prices, it is predicted that Sinopec's refinery business will stop loss.

The author is a senior independent commentator.

(HK Edition 11/05/2008 page3)