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Zhang Shidong

Srinivasan Iyer

It was day of chopping trading in Hong Kong, with the benchmark fluctuating between losses and gains throughout the day.
Ultimately, the Hang Seng Index closed higher for the first time in three days.
Here's how the day unfolded.
And if you would like the Live Stocks Blog emailed to you each morning, click here. 
- Zhang Shidong in Shanghai and Srinivasan Iyer in Hong Kong
Note: Information in this blog is on an "as is" basis and not a solicitation or offer to buy or sell any securities or otherwise; and is not investment/professional advice or services in this regard.  It is subject to our T&C.  SCMP (as defined in T&C) shall not be liable for any loss, damage and costs relating to any investments in securities or otherwise in this connection.


Hang Seng Index closes up for the first time in three days after US-China sign phase one deal 

An investor walks by an electronic board displaying stock prices at a brokerage in Beijing. Photo: AP Photo

Business

Markets

China stocks fall for third session in a row, with telecom and internet stocks among the biggest losers
China's 2019 GDP growth may have exceeded 6 per cent last year, according to Vice-Premier Liu He


It was a day of chopping trading in Hong Kong, with the benchmark fluctuating between losses and gains throughout the day.


Stocks

China stock market

A-shares

Trade war

Investing

Live

Overnight markets/what futures foretell  -- Overnight in US markets, the S&P 500 gained 0.2 per cent, the Nasdaq rose 0.1 per cent, and the Dow added 0.3 per cent.  -- Hong Kong futures were 0.5 per cent higher, while the FTSE China A50 futures climbed 0.2 per cent.   IPO debuts: Beijing-Shanghai High Speed Railway (601816 CH) will start trading in Shanghai today, while seven companies will debut in Hong Kong. They are Activation Group Holdings (9919 HK), Entertainment Group Values Cultural Investment (1740 HK), Sanvo Fine Chemicals Group (0301 HK), QP Group Holdings (1412 HK), Shanghai Gench Education Group (1525 HK), Huijing Holdings Company (9968 HK) and Kwung’s Holding (1925 HK).   Economic statistics/central bank action: The People’s Bank of China will release the December numbers on new lending and aggregate financing today, while the National Bureau of Statistics will reveal the monthly data on home prices in China’s major cities.   Corporate events: earnings, meetings, news conferences - nothing major.   Tomorrow: China’s statistics bureau is expected to release a raft of key economic data, including full-year economic growth.


Morning guidance

Beijing-Shanghai High Speed Railway (601816 CH), the operator of the rail networks between China’s two biggest cities, rose 43 per cent from its offer price to 6.99 yuan on the first day of trading on the Shanghai exchange.
The company took only 23 days for its initial public offering to get approved by the regulator, faster than any other IPO reviews on the mainland’s exchanges. It is expected to post net income of as much as 12 billion yuan (US$1.74 billion) in 2019, and remain profitable for a sixth consecutive year.
-- Zhang Shidong


Beijing-Shanghai High Speed jumps on debut

Traders in the mainland and Hong Kong were unexcited by the signing of a tentative trade deal between the US and China, with benchmarks in the two markets edging down at the open.
The Shanghai Composite Index and the Hang Seng Index both fell 0.2 per cent at the open. Most of the optimism may have already been priced in given their decent run-up recently.
-- Zhang Shidong


China and Hong Kong stocks fall after trade deal

Bestmart 360 (2360 HK) will invest HK$30 million, originally set aside for setting up more stores in Hong Kong, to expand in Macau and mainland China, it said in a filing to the stock exchange.
The snack shop chain was the target of anti-government protesters who thrashed 75 of its stores across the city.   
  Billionaire Li ka-Sing’s CK Asset (HK:1113) said it was considering its option to buy a 40 per cent stake in a Shanghai project where it currently holds a 60 per cent stake.
The Hong Kong-listed developer said that it has the right to buy the stake in Upper West Shanghai, a mixed-use project in Shanghai, from mainland shareholder, Herun Group.
The project, estimated to cost 20 billion yuan, is spread over a gross floor area of 1.1 million square metres in downtown Shanghai.
-- Pearl Liu 


Overnight filings

Seven companies debuted on the Hong Kong stock exchange today. 
Entertainment group Values Cultural Investment (1740 HK) jumped 96 per cent to HK$0.98 from its IPO price of HK$0.5. The company produces TV series shown in mainland China.
Shanghai-based events organiser Activation Group Holdings (9919 HK) shed 10.89 per cent to HK$1.80 from its IPO price of HK$2.02. The company hosts events and exhibitions for luxury brands in the mainland market.
Shares of Shanghai Gench Education Group (1525 HK), a private school operator, rose 10.74 per cent to HK$6.07 from its IPO price of HK$6.05. The group manages Shanghai Jian Qiao University. 
Property developer Huijing Holdings Company (9968 HK) climbed 0.52 per cent to HK$1.94 from its IPO price of HK$1.93.
Shares of paper manufacturer QP Group Holdings (1412 HK) dropped 2.54 per cent to HK$1.15 against its IPO price of HK$1.18.
Home furnishing maker Kwung's Holding (1925 HK) opened 25 per cent lower at HK$0.96 against its offer price of HK$1.28.
Sanvo Fine Chemicals Group (0301 HK) opened flat at HK$1.30.
-- Kathleen Magramo
 
Seven companies debuted on the Hong Kong Stock Exchange today.@SCMPNews @scmpbusiness pic.twitter.com/KdQtKaHtsK
  — Kathleen Magramo (@kathmaemagramo) January 16, 2020


Seven companies debut on HKEX

Global markets may still endure volatility this year even after China and the US reached a truce in the trade war, as some key issues between the two nations remain unaddressed, according to JPMorgan Asset Management.     “Highly sensitive issues like the US’s export ban on several Chinese companies, increased scrutiny on Chinese investments abroad, and China’s application of its commitment to treat foreign and domestic business alike within China are likely to make headlines throughout the year,” said Hannah Anderson, a strategist for global markets at the asset management firm. “Markets will likely continue to price in an elevated risk premium, which could be a source of volatility throughout 2020.”     The phase-one deal will not do much to boost growth in the world’s two largest economies, Anderson said. Tariffs remain extremely high - the US tariff rate cut included in the agreement only reduces the average tariffs on Chinese imports to 19.3 per cent, compared with 3.1 per cent before the trade war started, she said.     “Given the amount of speculation by the markets and commentary by officials ahead of Wednesday’s signing, it is unsurprising markets have not rallied too strongly upon final signing,” she said. “In the US, investors largely seem to have accepted this pause in escalation and gotten back to focusing on fundamentals, like what the ongoing earnings season tells us about the outlook for the US equity market. Asia investors are likely to take the same approach.”
-- Zhang Shidong


Markets could still be volatile after China-US trade deal, JPMorgan Asset says

ZTE (63 CH) rose 2.3 per cent to 37.78 yuan after it announced this morning that it plans to issue 380 million shares to raise 11.513 billion yuan. The company said it will use the funds to invest in 5G research and product development projects and replenish liquidity.
Its Hong Kong-listed shares (763 HK) rose 3.51 per cent to HK$28. 
-- Iris Ouyang


ZTE rises on share sale plan

Tencent Holdings (700 HK) had its share-price estimate raised by 18 per cent to HK$480 at Citic Securities, which cited potential improvement in the online advertising business at the Chinese social-media giant and stable growth in its online gaming and fintech segments.
Tencent’s shares added 0.8 per cent to HK$402 in Hong Kong today.
-- Zhang Shidong


Tencent price target raised by 18 per cent at Citic Securities

China Jinmao Holdings Group (817 HK) was rated outperform as Shenwan Hongyuan Group initiated the coverage of the property developer.
Sales may double to 300 billion yuan (US$43.6 billion) in 2022, with profit margins stabilising, as the developer holds cheap reserves of land, Zhang Beibei, an analyst at the Shanghai-based brokerage, wrote in a research note today.
China Jinmao is expected to trade at HK$6.90, a 30 per cent discount to its book value, the report said. The shares gained 3.1 per cent to HK$6.26 in Hong Kong.
-- Zhang Shidong


China Jinmao rated outperform in initial coverage by Shenwan

Hong Kong drinks maker Vitasoy International Holdings (0345 HK) declined in early trading after an anonymous short seller alleged the company had overstated its profits and capital expenditure.
Valiant Varriors, which describes itself as “a group of activist investors” on its official website, claimed in a report released earlier today that Vitasoy “has been grossly overstating its Chinese and Australian profits and capital expenditures, inflating its margins while underplaying the impact of rising costs on its bottomline”.
The short seller said it found a staggering discrepancy between profit figures reported by Vitasoy in earnings and what it filed to China’s regulator, the State Administration for Industry and Commerce.
Vitasoy fell as much as 5.1 per cent in early trading, before paring the losses to 0.5 per cent at HK$27.55.
Shares of the company soared in 2017 and 2018 on its fast expansion into China, but dipped last year as earnings failed to catch up with the market’s high expectations.
-- Yujing Liu


Soymilk maker Vitasoy falls on short seller attack

Shares of Guangzhou Automobile Group (GAC) traded in Hong Kong and the mainland fell today after Chinese media reported that it planned to invest US$1 billion in Chinese electric carmaker Nio, which is facing a cash crunch.
However, GAC clarified that the discussions with Nio were at an early stage and that its investments in the Tesla challenger will not exceed US$150 million. GAC’s Hong Kong shares (2238 HK) fell 3.7 per cent to HK$9.4, while its Shanghai-listed shares (601238 CH) shed 1.3 per cent to 11.92 yuan.
Overnight, New York-listed Nio surged 14.1 per cent to US$4.29 on the back of the news reports. On December 30, Nio warned in its quarterly report that the company did not have adequate cash for continuous operation in the next 12 months and it was looking for external financing.
-- Iris Ouyang


GAC falls on Nio investment plans

Shanghai New Culture Media Group (300336 CH) surged by the 10 per cent daily limit to 5.79 yuan in Shenzhen, after the movie producer said it signed a framework agreement on strategic co-operation with a local company that manages online celebrities.
The two companies agreed to tap their own resources to raise public exposure, New Culture said in an exchange statement. The Shenzhen bourse has however asked the company to elaborate more on the partnership, such as detailed plans of co-operation and the specific timetable.
-- Zhang Shidong


Filmmaker New Culture jumps on partnership with web-celebrity firm

Chinese ride-hailing start-up Dida Chuxing is seeking to raise as much as US$300 million and is considering an initial public offering, escalating competition with larger rival Didi Chuxing, Bloomberg reported quoting people familiar with the matter.
IDG Capital-backed Dida is raising between US$250 million to US$300 million in a pre-IPO round that it pitched to a wide range of investors, the people said, asking not to be named because the matter is private.
Dida has mulled floating on exchanges in mainland China or Hong Kong, but prefers the latter, one person said. A Dida spokeswoman declined to comment.


Didi rival seeking up to US$300 Million in pre-IPO round

China property stocks rose broadly after the National Bureau of Statistics released December housing prices in 70 cities.
China Overseas Grand Oceans Group (81 HK) gained 6.9 per cent to HK$5.98, Times China Holdings (1233 HK) was up 5.37 per cent to HK$16.1, and Shimao Property Holdings (813 HK) climbed 5.11 per cent to HK$3.9.
The average housing price in December rose 0.4 per cent month on month and 6.8 per cent year over year, according to calculations by E-house China R&D Institute.
-- Iris Ouyang 


Chinese developers rise after monthly data release

The yuan appreciated against the US dollar in both onshore and offshore markets after the US China inked the phase one trade agreement.
The onshore Chinese currency strengthened to 6.8871 against the greenback today, while it rose to 6.8848 in the offshore market in Hong Kong.
-- Zhang Shidong


Yuan strengthens after trade deal

The Shanghai Composite Index dropped 0.3 per cent to 3,081.38 and the Hang Seng Index slipped 0.1 per cent to 28,752.32.
While the US and China signed a tentative trade deal to declare an official truce, investors including JPMorgan Asset Management said the relationship remains frayed, as issues like increased scrutiny of exports to some specific Chinese companies have not be addressed.
-- Shidong Zhang


China and Hong Kong stocks end morning trading lower

Shenzhen Desay Battery Technology (000049 CH) climbed by the 10 per cent daily limit to 46.41 yuan, after saying in a preliminary statement that net income probably rose by as much as 30 per cent year on year to 520 million yuan (US$75.5 million) in 2019.
The company cited strong sales, smaller losses at a subsidiary and an adjustment of foreign debts for the profit increase in an exchange filing.
-- Zhang Shidong
 


Apple supplier Desay Battery surges by daily limit on profit increase

China’s economy may have expanded by more than 6 per cent last year, Vice-Premier Liu He said in an interview with the state-run Xinhua news agency after signing the phase one trade agreement with the US in Washington.
The economy has got off with a good start in 2020, with some high-frequency data signalling better-than-estimated growth, he said. China’s growth is now more driven by consumption demand and innovation rather than debt, Liu said.
The National Bureau of Statistics is expected to reveal the GDP data and other key economic indicators tomorrow morning. China’s economic growth probably reached 6.2 per cent last year, according to a Bloomberg survey.
-- Zhang Shidong


China’s 2019 growth may exceed 6 per cent, vice-premier says

Stocks related to China’s railway sector rose after the state planning body approved a massive railway project. 
Transit equipment producer Beijing Dinghan Technology Group (300011 CH) was up close to the daily cap of 10 per cent to 7.5 yuan. Oriental Yuhong (002271 CH), which provides waterproofing system and products for high-speed railway projects, jumped 5.25 per cent to 28.02 yuan and high-speed train accessories provider Guangdong Huatie Tongda High-speed Railway Equipment (000976 CH) climbed 4.12 per cent to 6.06 yuan. 
Earlier yesterday, Beijing-Shanghai High Speed Railway (601816 CH), the operator of the high-speed rail link between China’s two largest cities, soared 40.78 per cent to 6.87 yuan on its debut in Shanghai.
China’s economic planning body, the National Development and Reform Commission, said in a statement on its website that it has approved an 81.49 billion yuan (US$11.84 billion) railway project from Xining, capital of Qinghai province to Chengdu, capital city of Sichuan province.
-- Iris Ouyang


Railway stocks on the fast track

The signing of a partial trade agreement failed to boost stocks on the mainland, with the Shanghai Composite Index falling 0.5 per cent for a third straight day.
Investors including JPMorgan Asset Management said most of the optimism had been priced in before the signing and the two nations still have a lot of work to do to iron out thorny issues.
Telecom and internet stocks were among the biggest decliners.
-- Zhang Shidong


China’s stocks fall for third day after signing of trade deal

Aggregate financing stood at 2.1 trillion yuan (US$304.7 billion) in December, the People’s Bank of China said after the market close.
That exceeded the estimate of 1.65 trillion yuan in a Bloomberg survey. New lending was 1.14 trillion yuan against the projected 1.2 trillion yuan.
-- Zhang Shidong


China’s December aggregate financing beats estimates

Vitasoy International Holdings (0345 HK), a Hong Kong-based drinks maker, has denied allegations by activist short seller Valiant Varriors that the firm had inflated profits, capital expenditure and other financials.
“The board vigorously denies the allegations contained in the [Valiant Varriors] report and considers them to be inaccurate and misleading,” Vitasoy said in a filing to the stock exchange.
The company will clarify and address the allegations in upcoming announcements, it said.
Shares of Vitasoy reversed early losses and jumped by 5.4 per cent to HK$29.2 in the latest trading.
-- Yujing Liu


Vitasoy denies short seller’s allegations of inflating earnings

Semiconductor Manufacturing International Corporation (981 HK) gained 4.9 per cent to HK$15.1 on news circulating since earlier this week that Huawei’s semiconductor design subsidiary HiSilicon has asked SMIC to manufacture 14 nanometre chips, replacing Taiwan Semiconductor Manufacturing Company.
On Wednesday, Goldman Sachs raised its target price for SMIC to HK$16.3 from HK$14.5 and maintained its "buy" rating.
-- Iris Ouyang


SMIC rises on chip manufacturing deal with Huawei subsidiary

The Hang Seng Index rose 0.4 per cent to 28,883.04 at the close. Thirty-two out of the 50 members on the benchmark gained.
Sino Biopharmaceutical (1177 HK) was the best performer, climbing 4.8 per cent.
-- Zhang Shidong
