MARKET TALK: Long CCB, Short BoCom - DBS Vickers

13th Jul 2010 09:08

0808 GMT [Dow Jones] DBS Vickers advises long China Construction Bank (0939.HK), short Bank of Communications (3328.HK) pair trade; expects BoCom to underperform sector in coming month, due to glut of new shares from rights issue (3.460 billion new H-shares will become tradable July 19). Even if excluding shares took up by HSBC (0005.HK), supply of new shares would still be chunky at 769 million, representing about 15 days of trading volume. DBS expects BoCom's share price to mirror that of China Merchants Bank's (3968.HK) April performance, when it underperformed sector by 12% following issuance of new shares. "An open short of BoCom is risky in our view, given already cheap valuations," DBS says; hence recommends to long CCB, short BoCom to play on this expected weakness. CCB +0.9% a HK$6.54, BoCom +0.7% at HK$8.57. ([email protected]) Contact us in Singapore. 65 64154 140; [email protected] (END) Dow Jones Newswires July 13, 2010 04:08 ET (08:08 GMT)