Trading the china market with american depository receipts how to play greater china with a winning edge

www.ebook3000.com flast.indd x 02/10/12 12:36 PM Trading the China Market with American Depository Receipts www.ebook3000.com ffirs.indd i 11/10/12 9:23 AM Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States With offices in North America, Europe, Australia and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding The Wiley Trading series features books by traders who have survived the market’s ever changing temperament and have prospered—some by reinventing systems, others by getting back to basics Whether a novice trader, professional or somewhere in-between, these books will provide the advice and strategies needed to prosper today and well into the future For a list of available titles, visit our website at www.WileyFinance.com ffirs.indd ii 11/10/12 9:23 AM Trading the China Market with American Depository Receipts How to Play Greater China with a Winning Edge ALAN VOON John Wiley & Sons Singapore Pte Ltd www.ebook3000.com ffirs.indd iii 11/10/12 9:23 AM Copyright © 2012 by John Wiley & Sons Singapore Pte Ltd Published by John Wiley & Sons Singapore Pte Ltd., Fusionopolis Walk, #07-01, Solaris South Tower, Singapore 138628 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as expressly permitted by law, without either the prior written permission of the Publisher, or authorization through payment of the appropriate photocopy fee to the Copyright Clearance Center Requests for permission should be addressed to the Publisher, John Wiley & Sons Singapore Pte Ltd., Fusionopolis Walk, #07-01, Solaris South Tower, Singapore 138628, tel: 65–6643–8000, fax: 65–6643–8008, e-mail: enquiry@wiley.com Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose No warranty may be created or extended by sales representatives or written sales materials The advice and strategies contained herein may not be suitable for your situation You should consult with a professional where appropriate Neither the publisher nor the author shall be liable for any damages arising herefrom Other Wiley Editorial Offices John Wiley & Sons, 111 River Street, Hoboken, NJ 07030, USA John Wiley & Sons, The Atrium, Southern Gate, Chichester, West Sussex, P019 8SQ, United Kingdom John Wiley & Sons (Canada) Ltd., 5353 Dundas Street West, Suite 400, Toronto, Ontario, M9B 6HB, Canada John Wiley & Sons Australia Ltd., 42 McDougall Street, Milton, Queensland 4064, Australia Wiley-VCH, Boschstrasse 12, D-69469 Weinheim, Germany ISBN 978-1-11831602-3 ISBN 978-1-11831603-0 ISBN 978-1-11831604-7 ISBN 978-1-11831605-4 (Cloth) (ePDF) (Mobi) (ePub) Typeset in 10/12 pt, Century Std Book by MPS Limited, Chennai, India Printed in Singapore by Ho Printing Pte Ltd 10 ffirs.indd iv 11/10/12 9:23 AM Contents Preface vii Acknowledgments ix PART I An Introduction to American Depository Receipts CHAPTER How I Discovered Making Money in China with American Depository Receipts (ADRs) CHAPTER What Are ADRs? 13 CHAPTER Finding and Interpreting News to Enter the Market 39 CHAPTER Trading ADRs 59 CHAPTER Using Leverage Instruments to Enhance Return 77 CHAPTER What Could Go Wrong? 89 PART II ADR Case Studies 99 CHAPTER Case Study 1: An Earnings Surprise 101 CHAPTER Case Study 2: Earnings Disappointments 111 v www.ebook3000.com ftoc.indd v 11/10/12 9:24 AM vi CONTENTS CHAPTER Case Study 3: Government Policy Changes CHAPTER 10 Case Study 4: Material Company-Specific News APPENDIX The Art of Decoding the Earnings Announcement 121 129 141 By Paul Lau, Certified Public Accountant ftoc.indd vi About the Author 167 Index 169 11/10/12 9:24 AM Preface W hen I was at university, my finance professor kept saying that there was no free lunch in the stock market Indeed, it is very difficult to find free lunches or risk-free profits, especially in today’s well-connected global market place, where any new piece of information is immediately digested and reflected in market prices While the above statement is true to a large extent, there must be some way to get a free lunch, as I not believe the market is completely efficient Residing in a country where the capital market is not sufficiently well developed, I find risk-free opportunities in the stock market and have been able to take advantage of such opportunities as they arose in the past As someone who treats the stock market as the love of his life, I strive to gain an edge in investing by exploring many non-mainstream investment approaches and utilizing various instruments to enhance return I have since written two books on warrants and how to achieve better returns using such derivatives catering to the local market But, I always wanted to write a book that had mass international appeal Through many months of research and real-life experience, I managed to discover a relatively risk-free trading strategy utilizing price-moving, after-market news in Asia to build a position in ADRs and/or their derivatives (where available) in the U.S markets When the news indeed moved the share price the next trading day in Asia, profits could then be realized when the U.S market opened and the open position was closed I truly believe this strategy can help investors and traders from all over the world to acquire some free lunches in the stock market Part One of this book begins with a case study of a company associated with the richest man of Chinese origin, and how I utilized after-hours market earnings announcements to trade the company’s ADR listed in the United States, making money before the ADR prices reflected the earnings news I then go on to introduce ADRs in Chapter Different types of ADRs are explained and also the mechanism of creating and canceling ADRs To make it easier for you to start utilizing this strategy, I also present ten companies vii www.ebook3000.com fpref.indd vii 02/10/12 12:36 PM viii PREFACE that you should keep an eye on to take advantage of possible price-moving news In Chapter 3, I offer where to look for possible price-moving news released in the after-hours Asia market I also give a brief guide to how such news can be interpreted Chapter is more about practical knowledge to start implementing the strategy I also talk about what facilities the stockbroker must provide in order for traders to better implement such strategies After equipping you with information to give you a trading edge, I indicate that you must maximize such opportunities when available to enhance gain Chapter discusses when to introduce various derivatives to magnify trading gains Chapter deals with the possible pitfalls of using this strategy and provides examples of when such a seemingly sure thing can sometimes go wrong Part Two comprises Chapters to 10 In it, case studies illustrate how the strategies in Part One can be implemented when companies announce earnings surprises and shocks I also point out that changes in government policies can have an impact on share price Finally, some examples dealing with company specific news are illustrated I have been using the strategies in this book to make money with ADRs when opportunities arise following significant price-moving news released after Asian markets close After reading this book, I am sure many traders will be able to join me in making some easy money from the stock market fpref.indd viii 02/10/12 12:36 PM 165 Appendix Readers should always try to determine the real drivers causing positive contributions in earnings Digging down into the relevant sections of a listed company’s annual report should be used to isolate the pitfalls, as addressed in the statement made by the management of the listed company In return, readers will get a more concrete understanding of the earnings announcement without getting confused by false information www.ebook3000.com bapp.indd 165 02/10/12 12:32 PM bapp.indd 166 02/10/12 12:32 PM About the Author A lan Voon is the chief executive officer of Von Capital Limited and its associates at Warrants Capital Group, which are involved in asset management and capital market consultancy services He is also the investment committee co-chairman of Huatai Von Malaysia Fund Segregated Portfolio, a Cayman Islands fund established by Huatai Financial Holdings (Hong Kong) Limited Huatai Financial Holdings is a wholly owned subsidiary of Huatai Securities Company Limited, one of the largest stock brokers in mainland China and is listed on the Shanghai Stock Exchange Huatai Von Malaysia Fund invests primarily in securities with a Malaysian theme throughout the world Mr Voon hails from Kuala Lumpur, Malaysia and is considered an expert in Malaysia’s warrants and derivatives market He is the author of Make Money Investing in Warrants on Bursa Malaysia and Money in Warrants, the only books written on warrants in Malaysia thus far He also conducts training and seminars in equity derivatives such as warrants and options Mr Voon graduated from the DeGroote School of Business at McMaster University, Canada, in 1993 with a Master of Business Administration degree, majoring in Finance Before that he completed an Honors Degree in Commerce, majoring in Accounting, at the same university Mr Voon is a contributor to major newspapers and magazines in Malaysia such as the Star, Nanyang SiangPao, China Press, Malaysia Business, writing on topics related to derivatives, such as warrants, convertibles, options, and so on His articles are also featured in www.warrants com.my, a local warrants website run by Warrants Capital Group He is also a sought-after speaker and consultant in the area of his expertise His clients include international warrants issuers and listed companies In recent years, Mr Voon has expanded his investment research into securities in the Greater China region and also into American Depository Receipts (ADRs) Through hard work and as a labor of love, he has quickly established a name in the international arena and has been invited to speak at various international investment fairs and conferences 167 www.ebook3000.com babout.indd 167 02/10/12 12:32 PM babout.indd 168 02/10/12 12:32 PM Index A AAStocks.com Limited, 49–50 accounting profit, 69 accounts receivable turnover, 150, 152 Acer, 28, 34 acquisition of new businesses, 154 active-matrix organic light-emitting diode (AMOLED), 34 actual liability, 162 ADRs (American Depository Receipts) See also news from Asia Asian exchanges, primary listings in, 44 call options, 82 choosing what to monitor, 63–65 conversion services, 19 created by American banks, 14–15 defined, 13–14, 39 depositary receipt trading, 19 dual-listed, 20 exchange ratio, 72 with Greater China Region theme, 20 issuance and cancellation of, 18–19 Level ADR, 15–17 Level ADR (listed ADR), 16–17 Level ADR (public issue), 16–17 listed on various U.S markets, 59 new ADRs, 18 over-the-counter (OTC) markets, 17–18, 59 portfolio watch list, sample, 65 post-market-hours news from Asia and, 18 price vs Hong Kong share, 73 pricing vs underlying shares, 18 primary exchanges, listed in, 18 program, terminating an, 35–37 ratio, 5, 8, 10 terminated ASDRs, 36–37 traded in U.S., 54 trades, executing, 71–73 trades at big discount, trading ADRs in Asia, 19–20 12-hour time difference as window of opportunity for investors to make some quick profits, 39 types of, 15–16 unsponsored ADR programs by depository banks, 17 unsponsored ADRs listed on OTC market, 17 U.S.-listed, 89 watch list, 64 American Stock Exchange (AMEX), 15 AMEX See American Stock Exchange (AMEX) AMOLED See active-matrix organic light-emitting diode (AMOLED) analysis of earnings to latest period, 69 annual report, 142–43, 155, 161–62, 165 Arab spring events, 33 arbitrage, 19 A-shares issuance news, 129–33 169 www.ebook3000.com bindex.indd 169 02/10/12 12:32 PM 170 Asia Satellite Telecommunications Holdings, 35 ask price, 83–84 asset quality, 91 assets, 144 Assets Supervision and Administration Commission (SASAC), 24 at-the-money call option, 83 at-the-money put option, 84 audit opinion, 155–56 AU Optronics, 20 Australian investors, 23 available-for-sale investments, 164 B balance breakdowns, 159–61 Bank of China, 21 Bank of New York Mellon Corporation, 18 basket of shares, 78 bid-ask price for options, 83 bid-ask spread, 105 Bloomberg Businessweek, 56, 95, 111 BNY Mellon, 4, 20, 64 bonus issue of warrants, 94 bonus issues, 53 borrowed shares, 75 Brazil, Russia, India and China (BRIC), 13 breakeven point, 78–79 BRIC See Brazil, Russia, India and China (BRIC) broker, full-service, 76 brokerage accounts, 58, 75, 139 brokers See international brokers; U.S based brokers bullish statement by company, 109 Bursa Malaysia, 31, 47 business confidence, 51 business strategy, 154 buying on rumors, 92–93 bindex.indd 170 INDEX C call option, 77–78, 80–83, 88 capital assets, 162 capital commitment and contingency, 157, 161–62 capital structure, 142, 146, 148 car manufacturers in Europe, 52 Carnaby Downs thermal coal project (Queensland, Australia), 24 cash balances, 146, 162–63 cash call, 91 cash equivalents, 145, 148 CASH Financial Services Group, 62–63 cash flow, 141, 146–48 cash payoff, 78 CBOE See Chicago Board Options Exchange (CBOE) CFD See contract for difference (CFD) Charles Schwab, Hong Kong, Ltd., 61 Charles Schwab Bank, 61 Charles Schwab & Co Inc., 61 Charles Schwab Corporation, 61 Cheung Kong Holdings, 96 Chicago Board Options Exchange (CBOE), 82 China Daily, China Mobile ADR, 14 China Mobile Ltd., 42–43, 64 China Petroleum & Chemical Corporation (Sinopec) about, 20–23, 55 government policy changes (March 24, 2009), 121–23 government policy changes (July 28, 2009), 123–25 China Securities Journal, 49 China Securities Regulatory Commission (CSRC) about, 48, 129 Public Offering Review Committee, 129–30 02/10/12 12:32 PM 171 Index China Shenhua Energy Company Limited about, 20, 29–31, 65 company-specific news, 130 earnings disappointment, 115–16 China Southern Airlines, 93 China Unicom (Hong Kong) Limited about, 108–9 company-specific news, 133–34 earnings surprises, 108–9 Chinese Lunar New Year, 90 Chinese newspapers, 12 Citibank, CNOOC Ltd., 21 combined cycle gas turbine (CCGT) power plant, 33 commission charges, 83, 86 commodities, 85 company financial results, 69 company share buy-back, 94–96 company shares, buying, 89–91 company-specific news, 53 A-shares issuance news, 129–33 China Shenhua Energy Company Limited, 130 China Unicom (Hong Kong) Limited, 133–34 operational statistics news, 133–34 PetroChina, 130–33 profit alerts/warnings, 134–38 Sinopec Shanghai Petrochemical, 135–38 comparative ratios, 152 consensus forecast, 70 consolidated income statement, 144 consolidated statement of cash flows, 147–48 consolidated statement of financial position, 145 Construction Bank of China, 21 consumption numbers, 51 contingency due to arbitration/or litigation, 157 contract for difference (CFD), 62–63, 77, 84–86, 88 core earnings figure, 69 corporate guarantees, 157, 162 corruption case, high-profile, 96 cost margins, 69 creditor’s financing, 146 credit rating downgrades of U.S government, 143 crude oil prices, 121 CSRC See China Securities Regulatory Commission (CSRC) current assets, 144–46, 149, 153 D debt to equity ratio, 150–51 deferred rights issue, 93 Dell, 28, 34 depository bank, 15–19, 35, 37 depository receipts (DRs), 13, 15, 18–19, 35 Depository Trust Company (DTC), 18 depreciation as a percentage on net sales, 152 derivative instrument, 78 Devonian Potash Inc (Canada), 25 Disclosure of Interests (DI), 41 disposal of investments profits, disposals of noncore business, 154 dividend-payout ratio, 161 dividend policy, 143, 148, 153 dividend rate, 79, 81–82 D-Link Corporation, 45 domestic banking industry, 51 domestic oil price adjustment, 122 Dow Jones Industrial Average, 10–11 Dow Jones Newswire, 102 drop in profit, 69 DRs See depository receipts (DRs) DTC See Depository Trust Company (DTC) www.ebook3000.com bindex.indd 171 02/10/12 12:32 PM 172 E earnings news, interpreting, 67 news search, 67 for period under review, 142 release date, 66 shocks, 52–53, 86, 118 earnings announcements about, 101, 149, 153, 162–65 pitfalls in, 162–64 quarterly, 54–55, 66 earnings disappointments, 94–95 China Shenhua Energy Company Limited, 115–16 Huaneng Power International Inc., 116–18 Li & Fung Limited, 11–113 Yanzhou Coal Mining Company, 113–15 earnings surprises about, 52–53, 89–91 China Unicom (Hong Kong) Limited, 108–9 Guangshen Railway Company Limited, 103–6 at Hutchison Whampoa, 6–7 Lenovo Group Limited, 101–3 Yanzhou Coal Mining Company Ltd., 106–7 earthquakes, 52 effective tax rate, 149 efficient market theory, ELI See equity-linked instruments (ELI) employees’ remunerations, 161 employment figures, 51 equities options list, 82 equity-linked instruments (ELI), 62 Esprit (casual apparel brand), 25 Esprit Holdings Ltd., 20, 25–26, 37 ET Net Limited, 50, 55–57 bindex.indd 172 INDEX E*Trade Financial Corporation, 61 Euro exchange rates, 160 exchange rate, 143, 160, 164 exercise price, 78–79 expiration date, 78–79, 87 F fair value, 144, 160–61, 163 final earning number, 69 financial leverage ratios, 150–51, 153 financial position statement, 142–43, 155–57, 161–62 financial statements about, 142–43, 149, 154–56, 163 notes to, 142, 149, 156 fixed assets turnover, 150, 152 fixed payout dividends ratio, 148 foreign currency, 78 foreign exchange, 69 gains, 92 rate, 72 reserves, 51 Form 20-F registration statement, 16 free shares, 53 free warrants, 93 Fresen, Erik (R-Miami), 126 future prospects, 68 G gains on overseas subsidiary companies, 164 GEM See Growth Enterprise Market (GEM) Genting Berhad, 20, 31–32, 125–27 Genting International, 31 Genting Malaysia, 31 Genting Plantations, 31 global financial crisis, 35 GlobalQuote initiative, 45 GlobalQuote platform, 19–20 Gloucester Coal (GCL), 24 02/10/12 12:32 PM 173 Index Goh Tong, Lim, 31–32 government policy changes, 55 China Petroleum & Chemical Corporation (Sinopec), 121–25 Genting Berhad, 125–27 Grey Market of the OTC Market, 71 grey market stocks, 71 gross profit, 79 window, 164 growth/drop in net sales, 152 Growth Enterprise Market (GEM), 40–41 growth momentum, 69 Guangshen Railway ADR, 72 Guangshen Railway Company Limited earnings surprises, 103–6 H Hang Seng Index Price Chart, 11 Haosheng Coal Mining, 24 Hari Raya celebration, 90 Henderson Land Development, 94 Hewlett-Packard Co., 28 high-yield currency, 85 HKEx See Hong Kong Securities Clearing Company Limited (HKEx) Hong Kong Economic Times Group, 50 Hong Kong Futures Exchange Limited, 40 Hong Kong Securities Clearing Company Limited (HKEx) about, 40–44 HKExnews website, 64, 67, 70 Hong Kong Stock Exchange, 3, 133 ADRs listed on, 14 Hutchison Whampoa, 3, 7, 10 H-shares, 129–31 Huaneng Power International Inc about, 20, 26–28 earnings disappointment, 116–18 Huatai Financial Holdings (Hong Kong) Limited, 62 Hutchison Whampoa earnings surprises at, 6–7 Hutchison Whampoa American Depositary Receipts (ADR), Hutchison Whampoa Limited ADR price, 5–6, 8, 10 earnings news, 6–8, 10, 12 earnings per share, final results, financial statements, net profit (2010), 3–4 operating profit, price chart, 6–7 share price, 5–6, 8, 10 share price and its ADR equivalent price, 5, HXEnews, 41–43 Hyflux Ltd., 20, 32–34, 95 Hyflux Water Trust, 33 I IdeaPad, 29 IFRS See International Financial Reporting Standard (IFRS) IG Markets, 63 impairment losses, 159–60 indices, 85 Industrial Commercial Bank of China, 21 industry dynamics, 91 inflation numbers, 51 initial public offer (IPO), 21–22 insurance company shares, 91 intangible asset purchase, 163 Interactive Brokers, 60, 75 interbank rate of currency, 85 interest coverage, 150–51 interest rate, 79, 143, 161 interest rates spreads, 91 www.ebook3000.com bindex.indd 173 02/10/12 12:32 PM 174 international brokers See also U.S based brokers CASH Financial Services Group, 62–63 Huatai Financial Holdings (Hong Kong) Limited, 62 IG Markets, 63 Monex Boom Securities (H K) Limited, 62 Phillip Capital, 62 International Financial Reporting Standard (IFRS), 16 in-the-money call option, 105 in-the-money put option, 113, 118 intra-market trading, 19 intra-market trading accounts, 18 intrinsic value, 80, 83–84, 143 inventory turnover, 150, 152 investing offshore, 13–15 investment property reevaluations, 10 investments, disposal of, 10 investments profits, disposal of, investment valuation ratios, 149–51 investors’ preferences, 91 IPO See initial public offer (IPO) J J.P Morgan, 4, 13 K Kok Thay, Lim, 31–32 Kuala Lumpur Stock Exchange, 47 L Lenovo Group Limited, 20, 28–29, 101–3 earnings surprises, 101–3 leverage, 76 leverage instruments, 77 LG, 34 liabilities, 144 Li & Fung Limited earnings disappointment, 11–113 Li Ka-Shing, bindex.indd 174 INDEX liquidation of the contract, 87 liquidity measurement ratios, 149–51 liquidity ratios, 153 Listing Rules, 40 London Stock Exchange, 13–14 long contract, 88 long share, 78 long-term debts to net working capital, 150–51 M macroeconomic factors, 51 Main Board, 40–41 Malaysian Stock Exchange, 47 management of cash flows, 142 margin call, 114 margin deposit, 85 margin products, 85 market inefficiency, Market Observation Post System (M.O.P.S.), 45 market value of securities, 69 mark-to-market accounting, 87 mergers and acquisitions, 52 modifications to the auditor ’s opinion, 155–56 monetary policies, 51 Monex Boom Securities (H K) Limited, 62 money management principles, 97 M.O.P.S See Market Observation Post System (M.O.P.S.) moving in-the-money, 81 Muslim calendar, 90 Muslim’s Hari Raya celebration, 90 My Gateway on SGX, 46–47 N NASDAQ, 15–17, 35, 59 National Development and Reform Commission (NDRC), 121, 123 natural disasters, 52 02/10/12 12:32 PM 175 Index NDRC See National Development and Reform Commission (NDRC) negative earnings growth, 92 negative profit warnings, 70–71 net cash from operations, 147–48 net margin, 143 net payoff for call option, 78–79 new business segments, 69 new products and services, 69 news earnings, interpreting, 67 earnings release date, 66 earnings search, 67 financial, finding, 65–67 from inside U.S., 125–27 media, Western, 96 new and irregular, 63 pitfalls of positive, 92 price-sensitve, 96 results announcements, 66 upstaged by more impactful news, 96–97 news from Asia See also risk-free profits after-hours, 89, 97 after-market, 9, 12, 20 post-market-hours, 18 12-hour window of opportunity for investors to make some quick profits, 39 news sources AAStocks.com Limited, 49–50 Asian exchanges, other, 44 Bloomberg Businessweek, 56 China Securities Journal, 49 company announcements, specific, 41 company information, latest, 41–42 company-specific announcements/ events, 53 company-specific news, 40 corporate exercises such as rights issues, bonus issues and stock splits, 53 earnings announcements, quarterly, 54–55 ET Net Limited, 50, 55–57 Government policy change, 55 HKExnews website, 64, 67, 70 Hong Kong Exchanges and Clearing Limited (HKEx), 40 how to interpret, 53–55 HXEnews, 41–43 Internet search, advanced, 42–44 Internet search, simple, 42 profit estimates, 55 Quamnet.com, 50 Shanghai Securities News, 48–49 stock exchange official announcements page, 58 Western media, 48, 53–54 New Technology Development Inc., 29 New York Stock Exchange (NYSE), 14–15, 30, 34, 59 noncurrent assets, 145–47 nonvetted issuer documents, 40 North Atlantic Potash Inc (Canada), 25 Norwegian Cruise Line, 31 notes to financial statements, 142, 149, 156 See also financial statements NYSE See New York Stock Exchange (NYSE) O offshore trading account, 13 old rule of thumb, 13 OneChicago, 87 operating margin, 149 performance ratios, 150, 152–53 segment information, 157 targets, 69 operational statistics news, 133–34 www.ebook3000.com bindex.indd 175 02/10/12 12:32 PM 176 options bid-ask price for, 83 to enhance return, 78–79 factors affecting price of, 79–82 holder, 80–81 Options Clearing Corporation, 87 OTC See over-the-counter (OTC) OTC-listed securities, 76 outlook paragraph, 154 out-of-the-money call option, 83, 122 options, 88 put option, 84 overnight gain, 86 overnight interest rate, 85 over-the-counter (OTC) market, 15, 17–18, 59 products, 84 owner ’s equity, 141–42, 144, 150, 154 P panic buying, 90 past profits, 69 Peabody Energy of America, 30 PE ratio, 141, 152–53 PE ratio/dividend yield, 153 perfect co-incidence theory, PetroChina about, 21, 41, 53, 64, 121 company-specific news, 130–33 PGN See principal-guaranteed notes (PGN) Phillip Capital, 62 Pink OTC Markets (Pink Sheets) Genting Berhad ADR (GEBHY), 126–27 Hutchison Whampoa ADR (HUWHYsymbol), 4, 10 placement offer, 146 post-market-hours news from Asia, 18 previous financial periods, 69 price discrepancies, 76 bindex.indd 176 INDEX movement ahead of earnings announcement, 68 movements when management makes comments, 68 moves, 67–69 of the underlying security, 79 of underlying shares, 68 primary exchange, 17–18 principal-guaranteed notes (PGN), 62 production costs, 69 profit alert, 70–71 alerts/warnings, 134–35 deviations, 70 margin, 149 profitability indicator ratios, 149–51, 153 property revaluation, 69 put option, 77, 79–84, 113–14 PV module plants, 35 Q QFII See Qualified Foreign Institutional Investors (QFII) Qualified Foreign Institutional Investors (QFII), 44 qualitative understanding, 142, 149, 153–54, 156 Quamnet.com, 50 quantitative understanding, 142, 149, 155 quarterly comparisons, 90 earnings, 90 earnings report, 69 R ratio analysis, 143, 149–53 real estate stocks, 69 real purchasing power, 143 recovery of losses, 69 Red Earth (brand), 25 02/10/12 12:32 PM 177 Index Resorts World Miami, 126 restricted program, setting up, 16–17 results, interpreting them differently, 91–92 retail investor, 139 return on equity, 149 revenue, 69 rights issue, deferred, 93 issues, 53 issues of shares, 91 risk-free profits, 12, 77 See also news from Asia S sales margins, 69 Salon Esprit, 25 Samsung, 34 SASAC See Assets Supervision and Administration Commission (SASAC) schedules of borrowing, 160 Scottrade, 61 seasonal pattern, 69 SEC See Securities and Exchange Commission (SEC) Securities and Exchange Commission (SEC), 15 Form 20-F registration statement, 16 Regulation S, 16–17 Rule 144A, 16–17 security price, 80, 82 segment reporting, 158–59 Self Regulatory Organization (SRO), 71 selling on news, 92–93 selling short, 74 SGX See Singapore Stock Exchange (SGX) Shanghai Securities News, 48–49 Shanghai Stock Exchange, 21, 44, 132 share index, 78 share prices, 69 earnings surprise or shocks, 52–53 factors affecting, 50–53 Government policies and, 51–52 macroeconomic factors and, 51 mergers and acquisitions, 52 natural disasters and, 52 shares available for shorting, 75 Shenzhen Stock Exchange, 44 short availability, checking, 74 short CFD trade, 85 short covering, 90 shorting the full share, 84 shares available for, 75 stocks available for, 74 short position, 85, 87 short sellers, 90, 101 short selling, 74 short-term loan, 163–64 short-term trading, 77 Singapore desalination plants, 32–33 Singapore Stock Exchange (SGX), 19–20, 45–47 single-stock futures, 87–88 SingSpring, 33 Sinopec See China Petroleum & Chemical Corporation (Sinopec) Sinopec Shanghai Petrochemical company-specific news, 135–38 smartphones, 34, 69 snowstorms, 52 solar calendar, 90 solar cells, high-efficiency, 35 solar energy, 34 solar farming, 35 SRO See Self Regulatory Organization (SRO) Star Cruises in Asia Pacific, 31 www.ebook3000.com bindex.indd 177 02/10/12 12:32 PM 178 statement of financial position, 142–43, 155–57, 161–62 See also financial statements stockbrokers with access to trading OTC market ADRs, 59–60 in China, 62 Chinese-speaking, 61 Interactive Brokers, 75 inventory of stocks for short sale, normally keep, 74 stock codes, 41–42, 55 The Stock Exchange of Hong Kong Limited, 40 stock price, 142–43, 146, 148, 154, 156–57 stocks available for shorting, 74 stock splits, 53 strike price, 78–80, 82–84, 118, 124 surplus funds, 149 Syntech Resources, 24 T Taiwan Stock Exchange, 34, 44–45 Taiwan Stock Exchange Corporation (TWSE), 44 targeted securities, 77 Tavan Tolgoi coal project, 30 TD Ameritrade, 60–61 TD Ameritrade Holding Corporation, 61 TD Bank Financial Group of Canada, 60–61 TD Waterhouse USA, 60 Temasek Holdings Ltd., 33 ThinkPad, 29 third-party brokers, 75 time to expiration, 79–81 Tokyo Stock Exchange, 52 total comprehensive income window, 164 touch-screen tablets, 29 trade figures, 51 TradeStation Group, 62 bindex.indd 178 INDEX trading-day market bias, 73 trading edge, trading gain, 83–84 transactions with a related party, 164 true and fair view, 155 tsunamis, 52 Tuas Power Ltd (Singapore), 27 20 percent rule, 68 TWSE See Taiwan Stock Exchange Corporation (TWSE) typhoons, 52 U underlying security buy or sell, 78 cost of buying, 81 derivative from, 80 dividend rate, 81 price increase and put option, 80 price of, 79 price vs option price, 80 sale of, 81 volatility of, 79, 81 underlying share price, 73, 79–80 unexpected cash outlays for claims, 162 Unipac, 34 U.S based brokers Charles Schwab Corporation, 61 E*Trade Financial Corporation, 61 Interactive Brokers, 60 Scottrade, 61 TD Ameritrade, 60–61 U.S Generally Accepted Accounting Principles (U.S GAAP), 16–17 U.S government credit rating downgrades, 143 U.S stock market, V volatility of underlying security, 79 02/10/12 12:32 PM 179 Index W warrants causing price drop, 93–94 web portals (Google or Yahoo!), 65 websites english.cnstock.com, 48 home.boom.com.hk, 62 www.aastocks.com, 49, 72 www.adrbnymellon.com/dr_ watchlist.jsp, 64, 66 www.bursamalaysia.com, 47 www.cashon-line.com, 62 www.cs.com.cn/english/, 49 www.csrc.gov.cn, 129 www.etnet.com.hk, 50, 55 www.etrade.com, 61 www.hkex.com.hk, 40 www.htsc.com.hk, 62 www.igmarkets.com, 63 www.interactivebrokers.com, 60 www.poems.com.sg, 62 www.quamnet.com, 50 www.schwab.com, 61 www.scottrade.com, 61 www.sgx.com/mygateway, 47 www.tdameritrade.com, 60 www.twse.com.tw/en/, 44 Western media, 48 Western news media, 96 wind-power plants, 28 X Xinhua News Agency, 49 Y Yankuang Group Co Ltd., 24 Yanzhou Coal Mining Company earnings disappointment, 113–15 Yanzhou Coal Mining Company Ltd., about, 20, 23–25, 92, 106–7 earnings surprises, 106–7 www.ebook3000.com bindex.indd 179 02/10/12 12:32 PM ... For a list of available titles, visit our website at www.WileyFinance.com ffirs.indd ii 11/10/12 9:23 AM Trading the China Market with American Depository Receipts How to Play Greater China with. .. enough to show substantial value and at the same time low enough to attract the participation of retail investors If, for example, ABC Company trades at HKD 5, an ADR with a ratio of to would trade... Stock Exchange (AMEX), or the NASDAQ The depository bank sets the ratio of U.S ADRs per primary market share This ratio can be anything less than or greater than The ratio is adjusted so that