ANZ Bank

We like bank shares for one reason. While market is not doing well, the attractive dividend is a bonus to sail through the hard time. When the worst is over, the share price soar and it is time to pocket the profit.

Australian banks are among global banks that did quite well after GFC. They posted positive profit, high dividend payout to shareholders and most importantly, share price broke higher than pre GFC historical high.

We bought Australian & New Zealand Bank share (AU: ANZ). The company reported $7.2 billion profit for this year, paying $0.95 per share to shareholders. At today's closing price at $28.17, this translates to 3.37%. This is only one time payout. ANZ bank releases dividend twice a year, in July and December. In order words, full year dividend is around 6.3%, which is way better than leaving money in savings account.

ANZ Bank focus their business in Australia and New Zealand, as well as the Asia region. We believe slowing economy in Asia might affect ANZ business in near future. Moreover, the higher capital requirement might put ANZ into a challenging environment. Anyway, since the share price retraced from 52 weeks high, also record high at $37.25 to 52 weeks low $26.38, we think it is ok to hold some ANZ shares. Near resistant target at $30-$32. If the share price broke $26, downside support $22.

We'll add our holdings when the price is down. Conversely, reduce the holdings when share price soar.

HSI closed down 35 on China rate cut

HSI opened gap up in the morning. Market cheer on the news of interest rate cut & RRR reduced. The highest we saw was 23423.64 for cash market; futures highest 23415. However, profit taking came in and we started to see decline in HSI.

As we mentioned earlier, the market rebounded almost 3000 points since the first day of October. It is normal for investors to take profit and sellers came in to short sell the market. HSI dropped to lowest at 23036 in the afternoon, closed almost day low @ 23043 (-137) for October futures while cash market closed -35 @ 23116.

We sold half of our holding from Bank Of China, pocket some of the profit and will see how it goes. If the market further rally, we still have half of the holding and other Chinese Bank shares from ICBC and ABC. HSI need to go through correction in order to move higher. If correction come, we'll continue adding our portfolio according to market condition.

China Cut Interest Rate and RRR

The People's Bank of China (PBOC) announced yesterday to cut China's interest rate and to reduce bank's Reserve Ratio Requirement (RRR). This is the 6th time China reduced interest rate since November 2014 to stimulate economy.

When the news was released on Friday, DJIA futures rose more than 100 points before market opened and night market for Hang Seng Index futures surged up; closed at 23460 (+280). 

We think the news is positive for Chinese bank shares and we believe the top four Chinese banks listed in Hang Seng Index-- China Construction Bank (CCB), Industrial and Commercial Bank of China (ICBC), Bank Of China (BOC) and Bank of Communications will lead the surge on Monday. 

DJIA closed +157 on Friday while Hang Seng Index closed +306 @ 23151.94. We see Hang Seng Index will move higher on Monday because of this news and we see resistant at 23880. October futures closed at 23180 (+336); range of the week for October futures traded between 22710-23289 (579). Since next week is final week of October and it is rollover week for spot and next month futures contract, we see support for HSI at 22850. Further support 22450.

Bank Of China

Bank Of China (HK:3988) is one of our favourite Chinese bank shares. Listed in both Shanghai Composite Index and Hang Seng Index, it is one of the top 4 Chinese bank which is aggressively expanding to overseas.

With P/E ratio at 5, it is not only a high dividend bank shares, the price also has the potential to go up. Since BOC HK3988 retraced from 52 weeks high at HK$5.68 in April to 52 weeks low at $3.25 in September; we think the 42% correction presents a buying opportunity. While we might not see a lower price than $3.25 from now, we are happy to hold 3988 for mid to long term.