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Zhang Shidong

Deb Price

Happy Friday, traders --
The death of Li Wenliang – the 34-year-old doctor who tried to alert the public about the virus outbreak, only to be reprimanded by local police -- has dampened trading sentiment in both Hong Kong and the mainland. 
In mainland China, the official death toll due to the novel coronavirus is 636 people.
We've got you covered on all the major moves and news in Hong Kong and mainland markets. So come back to see us throughout the day.
-- Zhang Shidong in Shanghai and Deb Price 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.


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Hong Kong stock market

Hong Kong stocks slip as whistle-blower doctor dies of virus

Patients infected with the novel coronavirus are seen at a makeshift hospital converted from an exhibition center in Wuhan, central China’s Hubei province on February 5. Photo: Xinhua

A Meituan Dianping delivery rider waits for a customer outside of an office in Shanghai on Monday Feb. 3, 2020. Photo: Bloomberg 

Business


Death toll on mainland from coronavirus hits 636, including 34-year-old whistle-blower doctor
Sa Sa International seeks temporary 75 per cent pay cut for executive directors
	 



Death toll on mainland from coronavirus hits 636, including 34-year-old whistle-blower doctor. Shanghai Composite Index rises for fourth straight session. 
 


Live

Li Wenliang – one of the first doctors who tried to alert the public about the coronavirus outbreak, only to be reprimanded by local police – has died, Wuhan Central Hospital confirmed early Friday morning, hours after it initially denied reports of his death.
  “In the fight against the pneumonia epidemic of the new coronavirus infection, our hospital’s ophthalmologist, Li Wenliang, was unfortunately infected. He passed away after all the efforts we’ve taken to resuscitate him. We deeply mourn his passing,” the hospital said on its official Weibo account.
Li, 34, died at 2.58am on Friday, the hospital added.
The announcement capped several chaotic hours in which Chinese media first reported Li’s death, only for the hospital to respond that Li was alive, though in critical condition.
Read full story here.    


Whistleblower doctor dies of coronavirus at 34 years old

China’s internet watchdog is tightening controls on social media platforms after a brief period of tolerance, as it cracks down on content that may sow fear and confusion amid the coronavirus crisis.
The Cyberspace Administration of China (CAC) said in a statement released late on Wednesday that it has set up supervision on platforms that include those run by microblogging service provider Sina Weibo, short video and news apps operator ByteDance, and Tencent Holdings, which owns the ubiquitous multipurpose app WeChat.
The regulator said it required internet platforms and local authorities to “create a good cyberspace environment to win the battle against the [coronavirus] epidemic”.  Baidu, operator of China’s dominant online search service, has been summoned to rectify what the CAC described as lenient management on illegal information posted by its users, according to the statement.
The watchdog said it has also removed a social app called Pipi Gaoxiao from app stores for “posting harmful videos, and spreading fear and panic” about the coronavirus outbreak, as well as taken down some media and blogger accounts for fake news.
Read full story here.    


China tightens control over social media platforms amid virus outbreak 

Sa Sa International (178 HK), Hong Kong’s biggest cosmetics retailer, is asking its executive directors to take a 75 per cent pay cut for three months to help reduce costs, after sales during the Lunar New Year holiday slumped amid the coronavirus outbreak.
  The move follows a report showing the group’s sales in Hong Kong crashed by 77.9 per cent in the first week of the Chinese New Year as the coronavirus outbreak kept mainland tourists at home. Including Macau, sales slumped 76.9 per cent.
The company compared its sales data during the January 25 to 31 week with the same festive week last year that fell on February 5 to 11, it said in a Hong Kong stock exchange filing on Thursday.
The crunch suggests there is no immediate relief for Hong Kong retailers after they took a beating from months of anti-government protests in the city for much of 2019. The viral outbreak has now undermined efforts by Sa Sa and other retailers to shift their focus to the mainland market as China locked down cities and curbed travels to contain the outbreak.
The stock rose 0.7 per cent to HK$1.44 on Thursday. At the end of May, just before anti-government protests began, it traded at HK$2.20.
Read full story here by Martin Choi.   


Sa Sa International seeks temporary 75 per cent pay cut for executive directors

Snack manufacturer Zhou Hei Ya International Holdings (1458 HK)  said its chief production officer Cheng Rongran passed away on Tuesday as a result of acute myeloid leukemia, according to a stock exchange filing on Thursday.  
The company has arranged qualified staff to carry out Cheng’s duty to oversee and coordinate with the respective general managers of group’s production plants, which are not expected to be interrupted. 
The group closed 4.7 per cent higher on Thursday at HK$4.01.
-- Enoch Yiu   


Snack maker Zhou Hei Ya’s chief production officer dies of leukemia

Greentown Group (3900 HK), a mainland developer, sold 1,334 units with a saleable area of approximately 170,000 sqm in January for a total of 4.6 billion yuan (US$660.14 million), according to a stock exchange filing on Thursday. 
  Adding with other types of sales, the group sold total areas of about 420,000 sqm, with a total contracted sales of approximately 7.8 billion yuan, representing a year-on-year increase of approximately 16.4 per cent. 
The company closed at 2.25 per cent higher on Thursday at HK$9.55.
-- Enoch Yiu   


Greentown Group sees 16.4 per cent year-on-year increase in contracted sales in January

Overnight markets/what futures foretell
  - In overnight trading, all the three major US stock gauges closed at records. The S&P 500 and the Dow Jones Industrial Average added 0.3 per cent and the Nasdaq gained 0.7 per cent.
- Hong Kong futures were 0.9 per cent lower, while the FTSE China A50 futures slid 1.1 per cent
IPO debuts: Fuzhou Rockchip Electronics (603893 CH) will start trading in Shanghai today.
Economic statistics/central bank action: nothing major
Corporate events, earnings, meetings, news conferences: nothing major


Morning guidance

All members of the board and senior management of Tsui Wah Holdings (1314 HK) will see a 30 per cent pay cut for a period of three months starting February 1 to reduce costs amid the coronavirus outbreak, the restaurant chain said in an exchange filing. 
The Hong Kong cuisine caterer operates over 60 branches, including 28 in Hong Kong, and 37 in mainland China, of which 2 are in the epicentre of the novel coronavirus outbreak in Wuhan.
-- Kathleen Magramo


Caterer Tsui Wah to cut pay of board, senior management by 30 per cent amid virus

The Hang Seng Index fell 0.5 per cent to 27,363.18, as selling pressure returned before weekend uncertainties around the coronavirus outbreak.
Hong Kong stocks have risen for five straight sessions, running up big gains as traders bet effort to contain the virus will succeed and treatments emerge.
Tencent (700 HK) slipped 0.2 per cent to HK$399.20, while Alibaba (9988 HK) declined 1.1 per cent to HK$215. 
  Mengniu Dairy (2319 HK) fell 2.2 per cent to HK$30.55.
  -- Deb Price    


Hang Seng falls, with Tencent, Alibaba, Mengniu Dairy among decliners

 The mainland’s stocks face some selling pressure after a run of three consecutive days of gain.
The Shanghai Composite Index lost 0.2 per cent to 2,860.63 at the open today, while the ChiNext gauge of small-caps continued to rally, rising 0.4 per cent.
-- Zhang Shidong


China’s stocks face selling pressure at open

Semiconductor maker Fuzhou Rockchip Electronics (603893 CH) surged by the 44 per cent daily limit to 13.94 yuan on the first day of trading in Shanghai today.
Gains on debutants on the main board of the Shanghai and Shenzhen bourses cannot exceed 44 per cent on the first day of trading, according to exchange rules.
-- Zhang Shidong


Mainland IPO Fuzhou Rockchip jumps by daily cap 

The novel coronavirus will cut global real GDP by 0.4 percent this year if confinement measures taken by Chinese authorities stay in place until the end of February, IHS Markit said in a research report today.  
  “At the time of SARS, China was the sixth largest economy, accounting for only 4.2% of world GDP. China is now the world’s second largest economy, accounting for 16.3% of world GDP,” IHS Markit said. “Therefore, any slowdown in the Chinese economy sends not ripples but waves across the globe.”
If confinement starts to lift on February 10 in the mainland, the epidemic would cut global annual growth this year by 0.1 per cent, as China’s GDP growth drops 0.4 per cent. 
As China’s economy is more vulnerable than it was in the 2003 Sars outbreak amid downward economic pressure and trade frictions with the U.S., household consumption would be impacted the most. 
Auto sales would be hit hard, according to IHS Markit Automotive. 
“The 11 Chinese provinces which have announced an extended holiday period are normally responsible for over two thirds of vehicle production in China,” it said.   It said it expects crisis-induced first quarter production loss of around 350,000 units (minus 7%) if vehicle makers are idled until February 10.
If the factory idleness is extended into mid-March and expands to adjacent provinces, shortages of auto parts from Hubei, a major component hub, would have “wide-reaching impact,” it said. 
  Global oil consumption and trade would also bear the brunt as China is the second-largest importer in the world and accounted for half of global oil demand growth in 2019, IHS Markit Energy and Natural Resources said.
-- Iris Ouyang    


Coronavirus to cut global real GDP growth by 0.4 per cent: IHS Markit

Hang Seng loss deepens to 0.7 per cent

Hong Kong stocks have come under selling pressure this morning, but the losses are stabilising on the main benchmark.
The Hang Seng Index is down 0.5 per cent to 27,362.03. The Shanghai Composite Index is off about 0.1 per cent at 2,864.
-- Deb Price 


Hang Seng losses stabilising; Shanghai down only a bit

Hang Seng down 0.7 per cent; Shanghai losses deepen to 0.4 per cent

The novel coronavirus outbreak is a one-off exogenous shock that does not change China’s underlying growth trend despite its substantial impact, Picet Wealth Management said in a new research report. 
  “Many factors that have supported our view of a cyclical recovery are still in place, and could come back into play once the epidemic peters out,” it stressed. 
Picet downgraded its forecast for China’s GDP growth this year to 5.6 per cent, citing the virus outbreak as the major reason. It expects growth to start to rebound in the second quarter as the epidemic is contained and the government possibly launches more stimulus policies. 
The wealth management firm predicts further interest rate cuts by the central bank after its recent liquidity injection of 1.7 trillion yuan in total into the banking system and cut of reverse repo rates by 10 basis points. 
Local government’s fiscal support especially for small- and medium-sized enterprises would also ensue, other than already-issued policies such as cuts or even rebates on small businesses’ social  welfare contributions, reductions in rental fees and postponement of tax payment deadlines, it said.
“However, these measures are unlikely to fully compensate for the loss of output in the near term, due to the fact that much of the loss is in the form of reduced consumption of services,” Picet said. 
“The services sector, which has accounted for about 60% of Chinese growth in recent years, will be the most heavily hit,” Picet added. “Especially tourism, restaurants and hotels, entertainment, retail sales, logistics and so on.”
-- Iris Ouyang   


Coronavirus one-off shock to China’s economy: Picet Wealth Management

“The Hang Seng index had a strong rebound from a low base at the start of the week,” said Louis Tse Ming-kwong, managing director of VC Asset Management.
“There is some selling pressure across industries but it is a normal reaction as there is a more cautious sentiment," Tse said, pointing to the death of the whistleblower doctor.
Utility stocks have dipped as demand weakens at a time when shops are closed with fewer people travelling and commuting, Tse explained. 
CLP Holdings (2 HK) fell 0.97 per cent to HK$81.45.
Hong Kong and China Gas Company (3 HK), commonly known as Towngas, fell 0.4 per cent to HK$15.12.
Focusing on chip manufacturers -- which the Chinese government has strongly supported -- could offer better gains in the medium term, Tse said. 
China’s biggest chip maker SMIC (981 HK) gained 2.21 per cent to HK$17.56. Tse believes the stock could touch HK$20 in the next few sessions.
-- Kathleen Magramo


Whistleblower doctor’s death weighs on Hong Kong trading sentiment, says Louis Tse

The sell-off on the mainland’s stock deepened, with the Shanghai Composite Index falling 0.6 per cent to 2,848.08 towards the end of the morning session.
The benchmark rose over the past three days on expectations that the spread of the coronavirus will be contained.
The ChiNext gauge of small-caps tumbled 1 per cent.
-- Zhang Shidong


China’s stocks extend declines

NetDragon Websoft (0777 HK), a Chinese online gaming company, reached a 52-week high of HK$28.2 during the day. The stock has gained 18 per cent at HK$28.20. The company also has five online education products partnered with global education institutions.
  Koolearn Technology (1797 HK), an online tutoring platform, also broke through a 52-week high, reaching HK$35.4 during the day. It is now trading at a  9.6 per cent gain at HK$ 35.35.
  Schools are still closed until further notice in mainland China, forcing nearly 260 million students to study from home. 
Read full story on schools in China embracing online learning by Tracy Qu here.
-- Kathleen Magramo


Online education stocks reach 52-week highs amid coronavirus outbreak

Wynn Macau (1128 HK) declined 2.1 per cent to HK$17.30, as Jefferies reiterated its ‘hold’ rating on the casino and resort operator in Macau. 
  “Although management is positive on longterm outlook, we sense near-term reopening uncertainty with daily US$2.4 - 2.6 mn/day operating burn-rate (1H19 ~US$750 mn cash),” Jefferies said.  “Maintain Hold as the virus will remain a headwind until outbreak is controlled,” Jefferies analysts wrote.
“Near term is likely to remain a problem as management did not provide a definite date for Macau casino reopening while estimating total operating cost burn-rate US$2.4 - 2.6 mn/day,” the investment bank noted. “Within this, staff costs is US$1.8-1.9mn/day with no plans to reduce headcount or wages.”
But Jefferies foresees brighter long-term prospects as Wynn Macau recorded US$4 million/day normalised EBITDA -- earnings before interest, tax, depreciation and amortization -- in October and between December 23, 2019  and January 10 before the coronavirus outbreak, up from US$3.8 million/day EBITDA during 4Q in 2019. 
Higher VIP gamblers at Wynn Macau supported the company’s 4Q2019 adjusted EBITDA at a decline rate of negative 12 per cent to US$348 million instead of the negative 14 per cent expected by Jefferies. 
But Jefferies views the consensus expectation of US$334 million as too high, 
“We have a cautious view on high-end (VIP and top-end Premium) mass segments,” it said.  “We do expect a recovery in Macau driven by pent-up demand, but timing is unclear and our earnings are -12% below consensus.”
-- Iris Ouyang   


Jefferies maintains ‘hold’ on Wynn Macau 

The steam ran out of mainland stocks in the morning session, with the Sanghai benchmark gauge set for the first decline since Monday.
The Shanghai Composite Index dropped 0.6 per cent to 2,849.51 at the break and the ChiNext measure of smaller growth companies reversed gains, falling 0.8 per cent.
Pharmaceutical, commodity producers and consumer-discretionary companies led the market lower.
-- Zhang Shidong


China’s stocks end morning trading lower

Hong Kong’s benchmark fell to 27,279.31.


Hang Seng ends morning session with 0.8 per cent decline

The pangolin is the potential intermediary host for the novel coronavirus, according to the latest findings by South China Agricultural University.
The Guangzhou-based university announced the result at a press conference today after a team analyzed more than 1,000 gene samples.
The virus strain from pangolin has a 99 per cent resemblance to the one that infects humans, the findings show.
The coronavirus, which has forced a lockdown of at least 50 million people in China, was traced to a seafood market in Wuhan, where wild animals were also sold after being slaughtered.
-- Zhang Shidong


Pangolin is intermediary host for coronavirus: Chinese university

China’s central will probably lower the borrowing costs it charges commercial lenders via the Medium-term Lending Facility (MLF) when it conducts open-market operations next time, said Pan Gongsheng, deputy governor at the People’s Bank of China, at a briefing in Beijing today.
The loan prime rate, a market-based lending rate linked to the MLF, may also drop on its monthly publication date due February 20, he said.
The coronavirus outbreak will only have a temporary impact on the economy and growth will stabilise quickly once it is put under control, he said.
-- Zhang Shidong


China may cut MLF and LPR rates, PBOC says

In early afternoon trading, the Hang Seng Index is at 27,272.38, while the Shanghai Composite Index is at 2,844.


Hang Seng Index falls 0.8 percent; Shanghai also down 0.8 per cent

Work from home arrangements across China have boosted demand for communication and software solutions, according to Nomura. 
Kingsoft (3888 HK), a software company with cloud services and business management models, jumped to a 52-week high at HK$29.5 during the day.
It is now trading at a 9.47 per cent gain at HK$28.9.
Cloud service vendor Kingdee International Software (0268 HK) reached a one-month high at HK$10.46 during the day. The stock is trading 6.73 per cent at HK$10.30.
-- Kathleen Magramo 


Cloud services, office software stocks surge on demand from remote work arrangements

Chinese brick-and-mortar retailers selling discretionary items, travel service providers and transportation companies are most exposed to disruptions  from the coronavirus outbreak, Moody’s Credit Ratings said in a report today. 
"The ongoing transportation suspensions, travel bans and overall reduced customer traffic flows are weakening sales and cash flow -- thereby  raising credit risk -- in particular, for companies in the Chinese retail, travel and transport sectors," Cedric Lai, a Moody's vice president and senior analyst wrote.  
Credit risk for companies in the advertising, auto, cement, chemical, construction, food and beverage, mining, property, refining and steel sectors is moderate, although it would increase if disruptions are to be extended, the report said. The ratings agency also expects funding conditions will remain favourable for most rated state-owned companies, as well as for local government financing vehicles (LGFVs) with sound balance sheets, although weaker demand for public services and lower fiscal revenue and land sales income for regional and local governments would be credit negative for LGFVs.
--Iris Ouyang


Retailers, travel service providers, transportation firms hit most by coronavirus: Moody’s

Hang Seng loss at 0.9 per cent; Shanghai trading down 0.5 per cent

Shanxi Xinghuacun Fen Wine Factory (600809 CH) gained 3.5 per cent to 85.28 yuan in Shanghai trading after the liquor distiller said in a preliminary earnings statement that net income increased 38 per cent from a year earlier to 2.02 billion yuan (US$289.9 million) in 2019.
The company cited increases sales of upscale liquor as the rise in profits.
-- Zhang Shidong


Shanxi Fen Wine climbs after profit increase

The Shanghai Composite Index added 0.3 per cent to 2,875.96, trimming its weekly loss to 3.4 per cent this week after a 7.7 per cent rout on Monday.
The ChiNext gauge of smaller companies added 0.2 per cent, extending the gain for the five-day period to 4.6 per cent and making it the first major benchmark to recuperate all the loss triggered by the sell-off.
-- Zhang Shidong


China’s stocks rise for fourth day after sell-off

Hong Kong’s Hang Seng Index fell 0.3 per cent, closing at 27,404.27 points. That snapped a four straight session winning streak.
Only 16 out of its 50 constituents posted gains.
Lens maker Sunny Optical (2382 HK) dropped by 3.6 per cent to HK$126.40
Among sub-indexes, finance declined 0.3 per cent, utilities dropped 0.54 per cent, properties fell 0.36 per cent, and commerce and industry dropped 0.45 per cent.
Tencent (700 HK) rose 0.05 per cent to HK$399.8 and Alibaba (9988 HK) fell 0.9 per cent to HK$215.4. Food delivery giant Meituan Dianping (3690 HK) rose 0.2 per cent to HK$101.9
-- Kathleen Magramo


Hong Kong stocks slip as whistle-blower doctor dies of virus

Death toll on mainland from coronavirus hits 636, including 34-year-old whistle-blower doctor Sa Sa International seeks temporary 75 per cent pay cut for executive directors

Death toll on mainland from coronavirus hits 636, including 34-year-old whistle-blower doctor

Sa Sa International seeks temporary 75 per cent pay cut for executive directors