CWs for HK stocks as at September 12, 2007

The updated CWs valuation table for Hong Kong stocks is appended below. CWs, which traded at premium of less than 4%, are highlighted in green.



With the Hang Seng Index ('HSI') making a new high yesterday, I expect the above CWs to rise further. Nevertheless, it is noted that the sharp rise of HSI has been propelled by gains in share prices of Chinese-owned companies listed on the Hong Kong Exchange. The rise of these stocks is akin to a bubble and one must exercise caution in buying into derivatives (such as the above CWs), which is a highly leverage trade. In a bullish market, the gain can be very handsome. On the other hand, the losses can be very substantial in the event of any correction.