Daniel's World of Finanomic

What's the Best Option for Hong Kong? 商品及服務稅的"利與弊"?

2006-07-27T02:26:00.000-07:00

After a week's analysis, the writer finally come to his conclusion: Goods and services Tax is not the only possible solution,but the Best and fairest option for Hong Kong!
The best option , in the residents' view, of course is no need to pay any additional tax or even decrease the current tax rate. However, in the government's view or the view of the future community, it is not! To ensure her resident can continue to enjoy the social facilities, the social welfares, the cheap education and medical fee, the income of the government must be maintained or even increased. Broadening the tax base is a must.
In these few days, we can easily hear that a lot people come out and oppose the GST. Here, let the writer sum up some of their reasons:
a) It would bring a more difficult living to the low-income individual or family as they need to pay tax since then.
b) With GST, the cost of shopping would be higher, tourism would be badly affected. Tourist number would decrease, lots of shops would find difficulty in running their business.And thus HK economy would become poor.
c) It is costly to setup the system ( it is now estimated as 0.5 billion), as the efficiency of GST is still a question!
d) Investing environment may thus be affected; Hongkong may lose her position as the international financial centre.
Well, we cannot just look at the surface!
First, the writer think GST probably would not affect the current life of the low-income group including those under the protection of Comprehensive Social Security Assistance and those who are not. It is because the government would give them upfront,one-off supplement or allowance in order to compensate for GST's impact. You may argue that the proposed allowance announced now may not fully compensate for its impact. But do not forget, it's just the beginning of the consultation. In the writer's view, the government would finally give a greater allowance to this group if much of the people have this request and if the government really want to carry out this policy. So, people in the low-income group, don't worry!
Second, would GST really bring a decrease to the income from tourism? Frankly, the writer cannot confirm to say a "yes" or "no" because it depends. If the GST was set very high, Hong Kong's competitive and her tourism would of course be badly affected. But if the GST is relatively low and refund scheme for visitors is carried out together, even there is bad effect from GST, the effect would be small. Now, for Hong Kong's case, the GST is only set at 5% ( which is the same as that of Japan, Singapore, but lower than Australia and South Korea). Tourist who buys things over HKD$1500 in the same shop can get refund. Therefore, tourism in HK would not greatly affected. Moreover, as every one knows that the tourism is one of the main incomes of Hong Kong, would the government do such silly thing to attempt suicide? One can think about the answer.
What comes to our third, GST's ultimate use. We cannot deny that the initial cost for implementation of GST is quite expensive, but we should know that once GST is carried out, it will last for a long time. Its main ulimate use is not to increase its tax income but just to enhance and maintain the stable tax income for the government. As the againg problem could not be solved in the short future, number of labor force and salary tax income for the government would therefore decrease and become unstable. What make us concern most is that the government still need great financial support to settle the aging problem, even her salary tax income is decreasing .Since GST is independent of wage of the resident or the labor force, it would therefore give a good support for the government's expense on medicine and building elderly houses. With its long-run and important ultimate goal, the initial cost of GST is not worthless.
Fouth, investing environment will not be affected! Why? We can just look around the other financial centre in the world like US and Japan, their example in implementing GST tell us that GST is not that horrible. In addition, the Profits Tax, Property Tax will be cut if GST is carried out in Hong Kong.Some credit rating financial institutions also agree to carry out GST in HK because it brings the government a stable and healthy financial support.
GST is not the only option! If there is no GST, in order to maintain the government stable and healthy income, the government can greatly increase the salaries tax, or greatly decrease in the personal allowances. If so, as the consultation document said, nearly all the salary earners(even those who do not need to pay salary tax before) would be brought into the Salary Tax net. Moreover, this method cannot tackle the aging problem. When aging problem become more serious in the future, the labor force and salary tax will drop but the expense for aging problems (mainly the medical and living expense) will increase. The government would face a very difficult financial situation.
All in all, GST is not the only option for us, but after consideration of different levels and with different refund and allowance schemes, it would be the best option for HongKong and for our elderly life!

Disappointed Regional Politics 　地緣政治，令人失望

2006-07-14T19:50:00.000-07:00

When the five veto-wielding Security Council mebers including US, Britain, China , Russia and France still do not make a conclusion on the resolution to respond against North Korea for his seven missile test on 5 th July,2006, on the other side of the world, Israel attacks her neighbour country Lebanon. As an investor, the writer feels very disappointed about this kind of investing environment! A lot of questions will come to the investors' brains: Will US or Japan start a war against North Korea? Will North Korea continue make its missile test or even make a nuclear bomb? Will the middle-east situation be uncontrolable? Is the oil supply from middle-east countries still stable?
So, wt's the result?
NYMEX Augest Crude oil Future price rises to US $78.40, October Future price reachs US $80.05. Nearly all the market indexs in the world fall down by about 1-2% on HongKong time 14th July,2006.
As the writer mentioned in Oil Focus I, the limit supply of oil is generally digested by the market. Where the fluctuation of oil comes from is the troublesome political matters. These two week's political unstability have already given more than enough evidence or say supports for the raise of oil. At the same time, many investors short out their stocks holdings in the financial markets due to their worries about high oil price and unstable regional situation.
(What's more, Japan announces to raise the interest rate from 0% to 0.25% today so as to compensate the inflation. It is expected that this action would lead to the decrease of global liquid cash. The financial market may face a little shock as a result.)

OiL Focus II: 石油多面睇 II

2006-07-13T00:30:00.000-07:00

After getting understand on the basic reasons for the high pricing of oil, some of you may immediately want to ask: What are the great effect of high oil price to our economy? And what's more important: the ways to minimize this problem.
Basically, the first way the high oil price affects us is the cost of transport. No matter you are living in US or UK, Hong Kong or Mainland China, Japan or Korea, you must find that your traffic cost become more expensive (except you are living in middle-east or other oil rich countries). Sometimes, when the oil company announced to raise the fuel (mainly petroleum and LPG) price by coming mid-night, you may even find a long line of vehicles waiting outside the oil stop for cheaper refills at that night. You can imagine how great effects the oil bring to the people's living! However, it's just the surface of the matter...
With increase of oil price, the cost of production of many manufacturing industries would increase. Since oil has multiple function, they can be used to make plastic,dyes..etc. The industries which makes plastic-related product would face a higher production cost. Even some industries do not make oil or plastic related product, they would also need to face the higher exportation cost when they export their products to other places. But the merchant are not fools,when they face higher cost, they would simply transfer the cost to the consumers. So, what's the result? Nearly all the things you want to buy become more expensive when you compare to the last two years. And that's the inflation!
Inflation caused by high oil price, would bring our economy to a undesirable situation, HIGH natural unemployment rate. It is because when the companies maintain constant nominal wage given to their worker, their workers are however facing higher price in their consumption, the real wage to them are decreasing. If the real wage continue to decrease, more and more of them would leave the job, higher unemployment rate results. If we assume the production factor of each labor is unchanged before and after the inflation--say, one labor can make one unit of product, the increase in natural level of unemployment would lead the same amount decrease of output. GDP would therefore go down.
Crude oil, the energy source that brings convenience to us, also brings trouble to our economy. Though the technology is improving, we cannot escape from using oil as out main energy source.To minimize its effect to us, the most possible ways are reduce and recycle. For reduce, we can simply take more public transports instead of driving our own cars. For recycle, people can take used bottle or plastic bag to recycle bin or recycle stop instead of throwing them on the streets or rubbish bin. Only through this way, can the demand of oil and thus its price become stable or even be decreased. Frankly, either reducing or recycling would bring us inconvenience. However, before the new energy like ethanol can be widely used, in order to minimize the oil effect, we should take care of the importance of conservation.

OiL Focus I : 石油多面睇 I

2006-07-13T00:29:00.000-07:00

Oil, the most common energy source nowadays, plays an extremely important role in the economy of the world! We cannot excape from using it due to its multiple functions. With oil, not only can people drive a car,ship or plane, they can also use it to make plastics,lubricating oil...etc. Without oil,human's activities must be poorly affected. However, oil is not cheap! Its price even raise a lot during these two years.
This week, the writer will deeply explore into the matter of it: Why is the oil so expensive? Will the oil price get sharp increasement continually? How can the oil affect the world's economic and financial market? What are ways to minimize the effect of it?
On 8th July,2006,the Augest crude oil future price is US 74.09, which is quite expensive to the common people,compare with US$28-40 two years before. How come the oil become so expensive? To come to the answer, we should understand the supply and demand of it:
Oil or Crude oil is known as a kind of fossil fuel. It is formed from the dead animals,plants and marine lifes million or billion years ago. When these animals or plants died, they were covered by the mud. With the high pressure, temperature and bacteria actions, they finally become today's oil or natural gas. As this process take a long period of time,oil supply is very limited. Many scientists even think that the oil will run out in the coming 30-40 years.
Even so, people cannot limit their demand on oil. As mentioned above, the crude oil can be seperated for multiple purpose. Other than the car fuel, the plastic cup, the water pipe you used are also made of oil. Its demand also has a trend to increase due the need of manufacturing industries in some developing countries like India and China.
With incresing demand, but limited supply, the oil price would be expensive. However, the oil price is already over US$70, would it raise up contiually when the supply of oil becoming less and less? The writer does not think so! The reason is that the limit supply of oil is being known in the market, the investors have already reflected their information about oil on the financial market. Therefore, without other special news on the oil like oil war, political problem in Iran, Iraq and other Middle-east countries,or greatly increase in demand by China, the oil price would not have a sharp increasement even the oil supply become smaller. Of course, there is an exception case: The institutional investment, because they may not need to reflect any market information!

Interest rate II: The time BEFORE and AFTER the raise of interest rate 　息口系列二：　加息前後

2006-07-04T05:25:00.000-07:00

On 29th June, US finally announced to raise interest rate by 0.25 percantage points. Today, the writer want to talk about what happens to the financial market at the time before and after the interest rate was raised.
First of all, before talking on it, let's ignore the time, and just discuss on the effect on the raising of interest rate!
To the stock market, as the interest rate is increased, the cost of investment (either the cost of borrowing money or the opportunity cost from losing interest in saving account) would increase. Thus, it would normally led to less investment on the stock market. Some investors would leave the market and therefore the stock would face a great shock.
To the currency market, say the US currency, as the interest rate of holding US dollars increase, many people would like buy and hold US dollars compare to those foreign currency of which the interest rate hasn't be raised. As a result, the US currency would appreciate while others depreciate.
Some of you may say "What!? How come today's stock market rebound so much just after the US Fed made its announcement on raising interest rate?" Yes, you are correct! This comes to our topic today.
As mentioned in INTERST I, before the announcement of US fed, the writer and many other investors have already predicted the raise of interest rate. When investors have made their prediction, they would immediately reflect it on the market. For the stock market investors, they would leave the market or take profit first, and therefore led to shock in stock market. For Currency market, just opposite as mentioned above.
However, after the announcement of US Fed, as the raise of interest rate by 0.25 %pts is already under the expectation, the market no need to make another adjustment on it. Instead, if the US Fed does not raise interest rate or raise too much which is out of the expectation of the market investors, both the currency and stock market would change. This time, since the term used by US fed is comparatively gentle, and the market expects the US GDP growth would deccelerate, thus the pressure of inflation decrease and the stock market rebound!

Interest rate I: Why does the Fed need to raise Interest rate? 息口系列一：　點解聯儲局仲要加息？

2006-06-28T19:40:00.000-07:00

In this wednesday and thursday, the US Federal Reserve will decide the adjustment of interest rate again. And it is expected that the new Fed chairman Bernanke will raise the Fed interest rate by 0.25 to 0.5 percentage points. What are the factors leading to the continuely raising of interest rate?
Actually, interest rate is a very important and essential factor in the global economy. Interest rate not only can affect the cost of borrowing or lending money, but also the investment rate, the consumption and production rate, employmant rate as well as currency exchange rate.So, to decide whether increase ,decrease or maintain the cuurent interest rate, we need to take a look on some reference index like Consumer Price Index, employment rate, GDP...etc.
Firstly, let's take a look on CPI. CPI is actually an index indicating the condition of inflation and deflation. If the CPI increase like the past three months(May, April and March), it means that the market have great pressure on inflation. In order to control the inflation, it is certain that the Fed would raise interest rate.
Secondly, we look at the US employment rate. US Bureau of Labor Statistics would periodatically announce the US unemployment rate. The lower the unemployment rate would imply the greater pressure to inflation, and therefore the interesr rate. For May, there are only 75,000 new posts for workers, which is lower than expectations. Though the overall unemployment is lowered by 0.1% from April, the market do not think enough.Thus, it will only bring little pressure to the interest rate.
Thirdly, GDP(Gross Dpmestic Product)!As the second quarter US GDP is not yet announced, so the writer cannot guess its effect on interest rate. In general, if the GDP grows too fast , the Fed would raise interest rate so as to control the consumption and therefore maintain a stable but not overheated economy.
All in all, US Fed will also take look at different other economic index and statistics, before making their decision on interest rate.Generally, inflation problem still occurs in US. Thus, the market would expect the Fed to raise interest rate, but exactly how much? We can wait to thursday's offical announcement.

Half Time Rest 　半場休息

2006-06-28T19:38:00.000-07:00

Half time rest?!
If one want me to describe the current Hong Kong financial market, i will use " HAlf time Rest".
In a football event, players would normally have more energy and power to kick the football. And when the time passed, the player would depreciate and have less power.Similar to that, HangSeng Index has once rised a lot during the first half year and reached 17328 pts on 8th May 2006. However, as time goes on, HS index depreciates like the football players during the past two month.
From 22nd May to 23rd June (except 5th June), the HS index was floating between 15,234.42 to 15,963.77. HSI is now taking a rest!
Basically, the writer cannot see the supporting factors to HK changed. The floating of HS index mainly due to many institutional investors want to take profits at the high level first and wait for another time to enter it again.In additional, the lock of great cash flow during IPO of Bank of China may also be a reason to that. But after the BOC's IPO, there is not much special good news to the market . Instead, it is expected that the US would raise the interest rate by 0.25 to 0.5 percentage points. Thus, investors would temporarily wait for a while or some exit the market during past few weeks.
Nevertheless, half time rest is only 15 minutes! Without great change of basic condition, and after the interest rate's news was digested, the writer think the investors would probably enter the HK market again during the next half year. But as seen that the drop of HSI in May and June depend much on global economy and institutional investors, how much it will rebound after June still depend on the global market.

Great Shock in GOLD Price 金價大瀉

2006-06-19T20:33:00.000-07:00

As the writer and most of the people remember, the metal price expecially the gold price has a sudden and sharply raising during the mid-April. Until the early May 2006, the price of gold has rised to 730.4 US. However, there is no continue support to this high price; the gold, silver and copper prices all drop together since then .
Until last wednesday, the gold price reached 540 US which is about 26% decrease from the highest price in this period.
Is it good to take this chance to buy some gold now?
Yes for those take it for long run, but NO for others, as fluctuation still occurs in metal prices in this period due to the inflation and interest rate matters. What's more, investors should not use the view of sharply raise during the last two month, to see the future's gold market. During April and early May, the raise of gold price is mainly due to the activities of some retirement and hedge Funds. But as interest rate is expected to rise and therefore US currency, most fund managers decide to use this reason or say excuse to take profit at the high point first. In coming short period(2-3 month), as the US may still raise the interest rate, the gold wold not be seen as tools for short run investment. And it is expected to float between 550 US and 580 US.
For long run, the writer think the gold price can return to 700 US level at the end of the year and even 800 US next year mainly due to the continuely great demand of gold in China and India. This year, 2006, is also a special good year for marriage in Chinese, therefore the price of gold in long run can be looked good.
(Other factors need to be considered: The inflation rate of US, the political problem of Iran and Iraq, the hedging activities of the hedge funds.)

Raised reserve requirement by China Central Bank 央行調高存款後備金比例

2006-06-19T20:31:00.000-07:00

On 16 June,2006, the People's Bank of China announced that by 5th July 2006, all the deposit-taking financial institutions in China are reuired to raise the reserve requirement level by 0.5 percentage points. In other words, financial institutions like Commerical Bank of China and other state commerical banks, have to change their reserve requirement level from now 7.5% to 8%.
Except rural credit cooperatives(including rural cooperative bank), all other credit cooperatives are also being affected.
WHAT are the impacts of it? Is this policy good or not?
A great increase in GDP growth is not bad, but a stable increase is much more important and healthy to China. In the writer's view,it's a good policy.As this policy indirectly reduces the credit rate, the applicaion for investmant loan is expected to be more difficult. And thus, not only can it give a support to the state macro control, but also help relaxing the overheated investment expecially the property market in China in these two years. Watching small bubbles in property market developed in some cities like Shanghai recently, it is very reasonable Central Bank to take this action immediately.
What's more, this policy is only the first step taken by the State. To ensure a more effective macro control and soft-landing of the whole economy, the writer think the central bank would raise interest rate by 0.25 to 0.5 percentage points in her next step following this one.

Sign a Contract or NOT ?? 簽唔簽合約？？

2006-06-14T19:15:00.000-07:00

Nowadays, it is common that the consumers have to sign contracts when they want to buy some service. A familiar case is the contracts of buying telecommunication service. It is usual that we always have sign a contact of one to two yrs. So, should we sign these contracts? What whould we compare when we are deciding to sign this contact?
　Being a financial consultant, the writer often sees some of his clients compare the length of product contract in order to differentiate a good product. But it does not make any sense ! An example: As the World Cup event comes, many people want to watch world cup event in their home. However, to watch the great world cup events, consumers has to sign an one yr contract with i-cable TV which broadcast world cup event exclusively in Hong Kong. So, during this period, we cannot say i-cable TV is a bad product even signing a contract is required.
In fact, the length of contract is not too important to consumers. In economists' view, there is no difference for sign a contracts of 1 or 10 years as long as their net benefit of signing a contract are the same in the competitive market. You may ask what benefit it is!? Why the companies must give the consumers some benefit when they'r willing to sign a contract? Will consumers get lose in signing contracts as it restricts them to have a change during the contract period?

Actually, benefits are the extra service, products, discount given to customers when they sign a contact. For example, when we sign a contract with telecommunication service, the companies would usually give us discounts, free mobile phone...etc. For i-cable TV, it gives its watcher a right to watch World Cup event exclusively.To be competitive, the longer the contracts, the greater the benefits the service or good providers should give. Thus, in competive market, there should be no big difference between long or short contracts.
Why must the companies give some extra benefit when their customers sign a contract? Well, it is because without the benefits, the consumers would have no incentive to sign any contracts. It is known that we can change the service or goods providers easily according to the changing market. But with contracts, we cannot. In other words, we can say that those providers would have more stable income or benefits when the customers sign a contract with them. However, the world is not perfect, there must be tradeoff!!! To promote the customers signing a contract, the service or goods provider must give out some extra benefit they can get from the contract to their customers. But ( a kind notice to consumers) these benefits given to customers may not be able to compensate their loss for signing a contract(e.g., the disability of changing service providers even the service providing is poor) before the long run equilibrium.
In conclusion, contract would give extra benefits to the customers, at the same time, it is noticed that the benefits given may not cover the loss of signing a contract.To be smart consumers, we cannot only focus on the great benefits given to us for signing a contract or the length of contract, but also compare with the case that we do not sign contract.
Happy Goods Hunting!

World Cup and Hong Kong Economy 世界盃與香港經濟

2006-06-10T05:14:00.000-07:00

FIFA World Cup Germany 2006 has just started since 9th June, football lovers gradually arrived Germany from different countries. It is clear that Germany and the surrounding European Countries would have an extra and great income generated by the World Cup Event. But, how about the small city far away from Eupore?Would small city like Hong Kong gets benefit from this football event?
The writer think not at all!
In Hong Kong, the main income is come from tourism. However, during the World Cup event, tourists over the world would have a new and valuable choice---Germany. Going to Germany, not only can they enjoy the beautiful environment there, but they can also take a chance to look at the big World Cup event lively. The utility they can get from Germany may therefore be higher than HK(at least for medium rich or even richer people). In another word, Hong Kong would be comparatively less attractive,the number of tourists and thus income from tourism are expected to decrease.
Hong Kong people are drinking MORE beers and wine during this period. This fact would be definitely true. However, the extra income from beer and wine may be compensated by the loss of business from cinema and shops selling clothes, watches, glasses... etc, because when people go to the bar or pub to watch football early after their work and they would have less time to go around the other shops or shopping malls. That's why some shopping mall instore some televisions to allow their consumers watch World Cup Event during this period! This method though may be effective in maintain the consumer flows, but only small no. of shopping mall can do so and shops on the streets would certainly cannot provide that service.
Therefore, in the writer's view, World Cup Germany 2006 may not benefits Hong Kong at all. However, even so, the effect to Hong Kong is only short run! Over all, the annual HK GDP would not be greatly decreased or increased by this event.

BRIC Focus II 金磚四國面面睇II

2006-06-08T09:27:00.000-07:00

After the introduction of China's market yesterday, today, the writer will continue to discuss the Brazil, Russia and India market.

India, one of the keen competitors of China, grows very fast in last year. Its financial market grows even faster than China's. What are factors supporting India? India is actually also a manufacturing country. Same as China, its labour force is relatively cheap, thus products of India are also relatively cheap in price. What's more? The education level of Indian is comparatively higher than China. Since India has once been the British colony, most of the Indian can speak English very well. And this gives a reason why many foreign and international investors such as HSBC would like to set up the back-up office in India. Moreover, Indian's IT level are quite high, so quite a lot IT companies like to hire indian to help them make software or other researchs. In addition, India has better relationship with US compare with China, together with its flurent English communication skills, India therefore would be seen as most powerful developing country in future 10-20 years.

Brazil and Russia can be looked together, because they are both the country of raw materials and energy. Brazil, located ar South America, has extremely good climate for aricultural products such as corn, bean, nuts. All this products not only provide us food, but also the new energy source-----ethanol which will in long run be used to replace Crude oil. And at the same time, brazil also has rich mining ore. All these raw materials and aricultural products would certainly make Brazil as one of the most important materials supplier to both developed and developing countries, and thus Brazil' economy can be looked higher in future . Russia, the second largest crude oil supplier in the world, has critical role to the world's economy. Her effects on the whole world, in the writer's view, are the most important and largest among BRIC. Since the new energy such as ethanol mentioned above cannot be well used in this short moment while oil is estimated to run out within 40-50 yrs. Therefore, Russia's stable oil supply is essential to the world' economy. Emerging market like China and India need stable oil supply from Russia. Develped countries like US and UK need to have great oil reserve to prepare for internal use as well as sudden war. Facing a great demand of oil, the supplier (Russia) would of course make a great profit!

BRIC Focus 金磚四國面面睇

2006-06-07T09:18:00.000-07:00

In these two days, writer would like to start a topic about the four popular emerging markets BRIC: Brazil, Russia, India, China.

BRIC, this term is actually firstly used in the thesis proposed by one of the Goldman Sacha investment bank's economists in 2003, Jim O'Neil. The main idea he pointed out is that Brazil, Russia, India, China would have great potential to grow rapidly and become the four most dominant economies by 2050. After this thesis released, many investors and finance organizations get great interest on this four markets. By April 2005, HSBC also make a very successful Fund on BRIC( HSBC BRIC Freestyle). Within half year, it has raised for about 50%, and now become one of the most competitive and popular emerging market fund in Hong Kong.
What are the main selling points of each market? What are the factors supporting these emerging market? Today, the writer will focus on CHINA, my mother land first. Tomorrow, the other three markets will also be discussed.

China, located at the central of Asia, is getting a more and more important role in the economy in Asia Pacific and even the whole world. Its main competitive factor is its large population size and low labour(both low-skilled and management level) wage. This allows China producing most of the low-tech. products such as clothes and toys at a relative cheap prices. After entering the WTO in 2000, China's product can be exported to more countries and in greater amounts. All these, give important supports to the rapid GDP growth in few years.

What's more!? In 2008, Beijing would held her first olympic games. In 2010, Shanghai would also held the world expo 2010. These world-class events would clearly give a valuable chance for China to expore more herself to the foreign countries. At the same time, foreign investors would also like increase their investments in China during all these events.

However, China still some uncertainties such as Taiwan political problem, quota of import set by US and Eupore..etc. All in all, the writer think so long as the China does not great internal political problem, its role in world-class manufacturer would be maintained and even be strengthened.

Callable Bull/Bear Contracts ARRIVES HｏｎｇKｏｎｇ II 牛熊證抵港 II

2006-06-06T06:49:00.000-07:00

Follow with the yesterday's introduction, today the writer would give an example of CBUC so as to explain its main differences:
The same as the futures and options, the price of CBUC is mainly based on a particular underlying assets. However, its main difference from options is that there is a "call price" for CBUC,beside the strike price. This call price is a particular pre-seted price of the underlying assets, at which the CBUC product provider would immediately receive back the product without further notice and the investors would thus get a loss.
An example: CBUC for HSBC(005.HK)
strike price is $110
call price is $ 125
management fee is $3
current HSBC stock value is $134.5
The price of this CBUC is calculated by 134.5-110+3=$27.5
If the HSBC stock price raise to $138(increase about 2.6%), then its CBUC become $31, and thus CBUC investor earn a profit of $3.5 (that is about 12.7%).
However, if the HSBC price go down to $130( decrease about 3.3%), then its CBUC become $23, the CBUC investor would get a loss of $4.5 which is about 16.3%.
In the worse case, HSBC stock go down to a price at or below call price($125), the product provider would immediately receive back the exiting CBUC in the market and stop any further trading. In this case, the investors can only receive back the management fee i.e. $3, and loss $24.5 per unit.
The same as warrants, CBUC/ CBEC also has a maturity from 3 months to 5 yrs. However, as mentioned above, if the underlying stock price falls to or below the call price, CBUC/CBEC will be received back and cause a loss to investors immediately even before the maturity date. But the warrant investors can still have chance to wait for recover until the maturity date.
Nevertheless, CBUC/CBEC still have its advantage, because it is easier and more efficient to trade CBUC compared to common warrants. Moreover, CBUC does not has time value, thus the time to maturity has less effect on the CBUC pricing.
So, try to buy CBUC/CBEC or not? Really depends. Writer would leave it to the readers to think about it themselves, but, in the meantime, it is suggested that the investors should better look at the details of each CBUC/CBEC or warrants before making any decision as both of them correspond to a relative high risk investment.

Callable Bull/Bear Contracts ARRIVES HｏｎｇKｏｎｇ牛熊證抵港

2006-06-05T09:14:00.000-07:00

After the nearly one yr's decision making, HKEX is finally getting start to open the market of Callable BULL/BEAR Contracts!! But to many common or even professional investors, they may respond with "What is it???"

Well, many people may understand or hear the name of options, futures and warrants, but (even the writer) never see a thing called " Callable bull contracts(CBUC)". It's natural!CBUC/CBEC is actually invented for only about three yrs ago. It is invented as an alternative for the warrants or options, so that the investors can have more choices of tools on the derivatives market.From the first stage to now, it has been one of the fast growing tools for investment in Europe and Australia. For Hong Kong, it will be arrived on 12th June,2006. And several Financial organizations such as Societe Generale would like to provide the products of it in HK.

But, again wt is it? What is its difference between the warrants and CBUC/CBEC? Tomorrow, the writer will continue it~~

中行Bank of China（３９８８．ＨＫ）上市, IPO

2006-06-01T07:46:00.000-07:00

Today, one of the hottest stock Bank of China (BOC) was successfully released on the main board through IPO.
It is happy that each of the nearly one million applicants can get at least one lot. As one of the applicant, the writer also get one.The first day final price is 3.4 which has increased 15% from its intial price 2.95. In other words, each applicant can earn about HKD 450.
Well, release it now or not?
The writer think BOC still have potential to grow 15% to 20% more, mainly because BOC's high reputation in HK and Overseas. BOC is one of the first state owned bank which expand their service overseas. Foreign investors are relatively familiar with BOC than CHINA CONSTRUCTION BANK and BANK OF COMMUNICATIONS.Of Bank of China's IPO shares, 75 percent were sold in Asia, 18 percent in Europe and the rest in the United States, with reference to UBS. So, it is expected that BOC can be looked higher in the short future. Nevertheless, writer suggested the shareholders can hold it for long run, since even it raise to HKD 4.00, they can earn not much for one lot!

Hello~Nice to meet U all!

2006-05-31T09:55:00.000-07:00

Hello,everyone! I am really happy to meet you all here~~~
Today is the first day i start use blog~
The main aims of starting this blog are:
1) Give me a page to express my own view on the world of finance and economic (And that's how FINAN OMIC comes from!)
2) Set a record of my stock portfolio on Hong Kong Market, and may be Mutual funds
3) Open a communciation tunnel for you and me to communicate and share views
That's it!