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Deb Price

Iris Ouyang

Kathleen Magramo

Good day, traders --
The death toll from the coronavirus continues to mount, as China tries to get people back to work and its factories back humming. 
Catch up on the day's action below.
If you would like the Live Stocks Blog emailed to you each morning, click here. 
-- Deb Price, Kathleen Magramo and Iris Ouyang 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.


Hong Kong, mainland stocks gain on hopes coronavirus containment efforts are working   

People wear masks traveling on a street in the central business area of Beijing on February 10, 2020, the first working day after the extended Chinese New Year holiday. Photo: Simon Song  


Business

China lets local governments sell more debt to offset economic effects of coronavirus
Ping An Good Doctor sees rush of new users amid coronavirus but gets clobbered in early trading
	 


China lets local governments sell more debt to offset economic effects of coronavirus


Stocks

China stock market

Hang Seng Index

Coronavirus pandemic: All stories

Live

Petroleum tubular products maker Dalipal Holdings (1921 HK) announced Tuesday that operation of its production facilities will remain suspended after the Chinese New Year holidays.
The suspension and disruption of product deliveries are caused by emergency health measures and traffic restrictions in China as well as the company’s effort to protect its employees, Dalipal said. Its shares declined 3 per cent to HK$1.30 Tuesday.
--Iris Ouyang


Dalipal Holdings extends production suspension

China allowed local governments to sell 848 billion yuan of debt before March, in addition to an earlier approved quota of 1 trillion yuan in bonds.
The new quota includes 558 billion yuan of local government debt and 290 billion yuan of “special debt” mainly used to finance local infrastructure, according to the Ministry of Finance.
  -- Kathleen Magramo   


China lets local governments sell more debt to offset economic effects of coronavirus

Net income for Beijing Oriental Yuhong Waterproof Technology (002271 CH) increased 38 per cent from a year earlier to 2.09 billion yuan (US$299.7 million) in 2019, the maker of waterproof materials said in a preliminary earnings statement.
The company cited increases in sales and construction incomes and improvement profit margins as the profit gain.
-- Zhang Shidong   


Oriental Yuhong 2019 profits rise 38 per cent

The value of contracted sales decreased 30 per cent from a year ago to 23.6 billion yuan (US$3.4 billion) in January, Poly Developments and Holdings Group (600048 CH) said in an exchange statement.
Sales dropped 31 per cent in terms of areas, the property developer said.   
-- Zhang Shidong   


Poly Developments’ January sales tumble 30 per cent

Here’s what we are watching this morning:
US overnight markets/ What futures foretell  --The S&P 500 rose 0.2 per cent, the Nasdaq gained .1 per cent and the Dow Jones Industrial Average was flat.  -- Hong Kong futures are up 0.2 per cent, while the FTSE China A50 futures are inched up 0.03 per cent 
IPO debuts: None to note
Economic statistics: None to note
Central Bank action: None to note
Earnings: None to note   


Morning guidance

Lansen Pharmaceutical Holdings (503 HK) said production at its plants is either on hold or still preparing to gradually get going again in the next seven to 10 days, “subject to the further development of the epidemic and government advice or restrictions.”
Extension of efforts to contain the spread of the deadly novel coronavirus may further limit production and sales of its products and could negatively impact its operation and financial performance, Lansen said in a stock exchange filing. 
--Iris Ouyang


Lansen Pharmaceutical struggling to get production going again

The Shanghai Composite opened 0.2 per cent lower on Wednesday at 2895.56.
  Kweichow Moutai (600519 CH), the world’s most valuable liquor distiller, slipped 0.82 per cent to 1,089 yuan.
The Shenzhen Component Index fell 0.31 per cent to 10735.05 at the open.
AirPod assembler Luxshare Precision Industry (002475 SZ)  shed 1 per cent to 45 yuan.
-- Kathleen Magramo


Shanghai and Shenzhen open lower after climbing for six sessions

The Hang Seng Index opened 0.3 per cent higher at 27,660.
Ping An Good Doctor (1833 HK), a new economy in the spotlight due to a spike in use of online medical services amid the coronavirus outbreak, rose 0.72 per cent to HK$77.
Tencent (700 HK) was up 0.2 per cent to HK$410.
-- Iris Ouyang


Hang Seng rises; Peng An Good Doctor climbs

Daikiya Group Holdings, a Japanese-style hotpot chain based in Hong Kong, has decided to not proceed with its share listing on the main board originally scheduled on Friday "due to the consideration of several factors, including the prevailing market conditions", it said in an exchange filing today.
This makes it the first company to pull out of an initial public offering in the city since the outbreak of the coronavirus epidemic.
Daikiya was planning to raise as much as HK$200 million through the IPO by selling 100 million shares at HK$1.6 to HK$2 apiece. It is unclear whether the company will revive the listing at a later time.
-- Yujing Liu 


Daikiya halts share listing in Hong Kong

Several Chinese property management companies are expected to report positive results for the full year of 2019, Jefferies said.
 A-Living Services (3319 HK) said on Tuesday its net profits in 2019 will grow more than 45 per cent year over year.
Jefferies maintains a bullish view on A-Living.
“We see the next short-term catalyst for the stock is the potential inclusion in stock connect (to be announced on 21 February) given its significantly enlarged free-float market-cap over the past few months,” it said. 
The investment bank also expects S-Enjoy Service Group (1755 HK), Country Garden Services Holdings (6098 HK) and Ever Sunshine Lifestyle Services Group (1995 HK) will hand in good results to investors. 
But Jefferies recommends investors be selective.
“We find the current >31x forward P/E valuation expensive, and recommend investors to be selective after the recent sector rally,” it said. “Also, we believe the upcoming IPOs of other large and high quality players in 2H20-2021 may potentially ‘de-rate’ the current list-cos.”
-- Iris Ouyang


China property management firms to report positive results: Jefferies

Henderson Investment (97 HK) lost 1.6 per cent to HK$0.63 after the company said it expects an around 36 per cent year-on-on year decline in its profit attributable to equity shareholders for the year ended 31 December. 
The weaker economy dragged down by social unrest in Hong Kong in the past few months contributed to the reduction, Henderson said in stock exchange filing Tuesday.
The profit drop is also due to costs caused by the closure of the PIAGO store at Telford Plaza in March last year and lower sales after a four-month renovation of the UNY store at Lok Fu Place, Henderson added.  
The profit decline warning is based on preliminary assessment of the group’s unaudited consolidated management accounts, it said, noting audited final results would be announced in March. 
--Iris Ouyang


Henderson Investment slides on profit warning

Guotai Junan Securities downgraded Air China (753 HK) and China Eastern Airlines (670 HK) to “neutral”, as it expects the trend of flight cancellations and reduced passenger traffic to continue amid the coronavirus outbreak.
They estimate industry revenue passenger kilometer (RPK) may drop by 22 per cent year-on-year in 2020 in a base case scenario that the novel coronavirus is contained by June.
Air China (753 HK) dropped 0.3 per cent to HK$6.85 and China Eastern Airlines (670 HK) shed 0.52 per cent to HK$3.76.
“Despite cheap valuation as stocks retreat, we do not suggest to buy at the moment as significant uncertainties exist for the sector such as when the situation will be contained and a pickup in air travel demand. We expect stock price to fluctuate in the meantime,” said analyst Toliver Ma at Guotai Junan Securities.
Meanwhile, China Southern Airlines (1055 HK) rose 0.88 per cent to HK$6.85.
-- Kathleen Magramo


Guotai Junan Securities downgrades Chinese aviation stocks to ‘neutral’ 

Ping An Good Doctor (1833 HK) is getting hammered this morning, despite posting results Tuesday that showed a rush of new users to its health care platform amid the coronavirus.
The drop is due to a rapid rise in the share price recently and growing confidence that China’s containment efforts are working, says Alan Li, portfolio manager at Atta Capital.
“Good Doctor benefited from the virus outbreak,” Li said. “The share price is trading at an  extremely high premium. As the daily new confirmed infections peaked out on February 4, and dropped to around 2,000 yesterday, people see the situation as likely under control.
Ping An Good Doctor plunged 5.6 per cent to HK$72.20.
Eric Ng reports that Ping An Healthcare and Technology, its official name, reported a smaller than expected annual loss on Tuesday. It said its online health care platform had seen a jump in the number of new users amid the coronavirus outbreak. 
The platform – already China’s largest by registered users – recorded an increase of 10 times in the number of new registered users every day on average between January 22 and February 6, compared with the first 21 days of January, the company said. Its daily online consultations had also grown nine times on average over the same period.
Ping An Good Doctor, is providing free online and telephone consultations to people concerned about catching the deadly virus.
  “Throughout the coronavirus outbreak, it has been demonstrated that online medical consultation is an efficient, convenient method that allows patients to avoid catching infectious diseases,” said Wang Tao, its chairman and chief executive, adding that it was referring suspected patients to hospitals.
-- Deb Price    


Ping An Good Doctor plummets as investors expect coronanvirus will be controlled

Equities look decently valued during the novel coronavirus outbreak, compared with that in 2015 during the RMB panic, Jefferies said.
“The bottom line is that the bounce in share prices helped by lower bond yields appears to be coming to an end,” it said. 
The Hang Seng Index has gained 0.7 per cent to 27,776.74.
--Iris Ouyang


Bounce in equities could end soon: Jefferies

The Shanghai Composite Index has turned up, gaining 0.1 per cent to 2,905.


Shanghai Composite turns up

Ganfeng Lithium (1772 HK) soared 7.5 per cent to 32.9 yuan, after Nomura initiated coverage with “buy” rating for the company with a 12-month target price of HK$42.1. That would be nearly a 28 per cent rise from the intra-day price.
Meanwhile, its Shenzhen-listed stock (2460 CH) surged 9 per cent to 57.91 yuan. 
“Ganfeng is the main lithium hydroxide supplier for Tesla,” Nomura said today.
“After two consecutive years of earnings decline, we see three catalysts for a strong earnings recovery in 2020-21:1) lower spodumene concentrate costs; 2) strong hydroxide orders from top-tier EV/EV battery clients; and 3) fast-growing True Wireless Stereo (TWS) battery business. ” 
Lower spodumene prices amid price stabilization of lithium would boost performance of Ganfeng, Nomura said.
“We forecast global lithium capacity growth to slow to 5% in 2020 from 21% in 2019 after a series of production cuts at major lithium miners/converters,” it said. “In the meantime, we expect Ganfeng to start to receive low-cost spodumene supply from the Pilgangoora mine and gradually deplete its high-cost spodumene inventory,” the note said.
“We believe that Ganfeng's long-term outlook is promising but downgrade the A shares to Reduce on rich valuation,” Nomura stressed. “We prefer Ganfeng H (1772 HK, Buy). ”
--Iris Ouyang


Ganfeng Lithium shoots ups as Nomura initiates coverage with ‘buy’ rating for Hong Kong shares  

Hang Seng Index rises 0.7 per cent to 27,772.61

The Shanghai Composite Index rose 0.21 per cent to 2907.8 in morning trading. 
A gauge tracking solar sector stocks shot up 7.9 per cent after Chinese authorities decided Tuesday to expand subsidy coverage of renewable energy projects.
Jiangsu Linyang Energy (601222 CH) jumped 10 per cent to 1.53 yuan. 
Meanwhile, Kweichow Moutai (600519 CH) shed 0.16 per cent to 1096.20 yuan.
The Shenzhen Component Index gained 0.87 per cent to 10,862.4 at the break.
 Apple AirPod supplier Luxshare Precision Industry (002475 CH)  fell 1.47 per cent to 44.83 yuan.
-- Kathleen Magramo


Mainland markets gain in morning session

Hong Kong’s benchmark finished the morning session with a gain of 0.7 percent at 27,774. 
  Of its 50 constituent members, 37  posted gains. 
Gaming stocks advanced. Sands China (1928) rose 3.7 per cent to HK$40.45 and Galaxy Entertainment Group (27 HK) shot up 3.5 per cent to HK$56.5.   -- Iris Ouyang 


Hang Seng Index gains 0.7 per cent in morning session

The Hang Seng Index gained 0.9 per cent to 27,8131.60 in early afternoon trading. 
“Market sentiment is driven by [China] policy expectation, as news says President Xi told officials that their response on coronavirus had already harmed the economy,” said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.
“Secondly, hopes on virus containment is another key positive factor,” said Wen.
Of the 50 constituent members of the Hang Seng, 41 stocks show gains. Financials, properties, and commerce and industry have advanced at least 0.8 per cent.
Among high turnover stocks in the city, index heavyweight Tencent (700 HK) rose 0.8 per cent to HK$412.40, Alibaba (9988 HK), the e-commerce giant and owner of the South China Morning Post, rose 1.2 per cent to HK$214.80, and food delivery service titan Meituan Dianping (3690 HK) jumped 4 per cent.
Investors continued to pull out of Ping An Good Doctor (1833 HK), which has fallen 5.8 per cent to HK$72 in early afternoon trading. From February 3 through Monday’s close, the stock was on fire as investors looked for stocks that would benefit from China’s unprecedented lockdown of more than 50 million people, rising 20 per cent over five sessions. 
Despite Ping An Good Doctor posting better-than-expected results for 2019 and growth in users during the virus outbreaks, investors took profits as confidence grows that virus containment efforts will be effective.
-- Deb Price  


Hang Seng extends gain in early afternoon trading

The slump of Chinese travel to other regions in Asia Pacific has become a “black swan” event weighing on airlines and economies in the region on travel bans issued by various governments and cancellations of flights on concerns about the contagious novel coronaviru, IHS Markit said in a report today.  
“The rapid rise in household incomes in China has triggered a boom in Chinese tourist visits abroad, which have risen from 20 million in 2003 to 150 million in 2018,” wrote Rajiv Biswas, Asia Pacific chief economist at IHS Markit.
“Consequently, the vulnerability of many Asia-Pacific economies to a complete halt in Chinese tourist visits has increased significantly over the past two decades,” he wrote.
Thailand, Singapore, Malaysia, Vietnam, Hong Kong, Japan, South Korea and Cambodia are the most impacted Asian economies by the collapse of Chinese tourism, Biswas added. 
--Iris Ouyang


Novel coronavirus a ‘black swan’ event for Asia-Pacific commercial aviation

In afternoon trading, the Hang Seng Index is up 1 per cent to 27,861.76, while the Shanghai Composite Index is ahead 0.7 per cent to 2,923.


Hong Kong, mainland stocks gain more in afternoon trading

The impact of the coronavirus outbreak will dent China’s first quarter gross domestic product (GDP) growth, thus prompting more government stimulus, according to new note from Fidelity International. 
“Even in a ‘contained’ scenario of the virus outbreak, global growth could fall at least half a percentage point in Q1, with some recovery thereafter. The overall impact is likely to be protracted and may well extend further into the year,” Fidelity analysts wrote. 
“We started 2020 with a cautious view on valuations in global credit markets, and we continue to de-risk portfolios. China, in particular, is likely to remain in risk-off mode for some time, with rates outperforming credits. The credit risk/reward ratio is now even less compelling than it was, due to slower China growth and the impact of the virus on global supply chains,” wrote Steve Ellis of Fidelity International Global CIO Fixed Income.
Fidelity International’s portfolio managers are reducing credit exposure in sectors connected with Chinese manufacturing such as autos, commodities and chemicals, according to Ellis. They look to increase long exposure to US and Australian sovereign bonds and reduce short positions in European and UK sovereign bonds.
“Additionally, we take a cautious view that residual effects of the outbreak, even once it is under control, could weigh on fixed income risk assets. So rather than buying market dips, we are monitoring the situation and taking chips off the table where valuations remain rich,” he added. 
-- Kathleen Magramo   


Amid coronavirus, cut credit exposure to Chinese manufacturing, : Fidelity International

The prolonged novel coronavirus is expected to pose downward risks for banks in Asia-Pacific although government support could alleviate the pressure, Moody’s said today in a report.      “The coronavirus outbreak comes at a time when Asia Pacific banks are already grappling with slowing economic and credit growth, as well as falling interest rates, which will weaken their profitability and asset quality,” the ratings agency said. 
Moody's expects that banks will be affected through travel and tourism, private consumption, supply chains, commodities, property prices and financial markets.
“Moody's expects that governments and regulators will take measures to support their economies if disruptions from the outbreak worsen,” it said. “Such as fiscal stimulus, monetary policy easing, the removal of some macroprudential measures, as well as forbearance or direct support to affected industries and borrowers. Such actions would somewhat mitigate the negative impact on banks.”
   --Iris Ouyang


Prolonged epidemic outbreak would hurt banks profitability and asset quality: Moody’s 

The Shanghai Composite Index extended its winning streak into a seventh session, rising 0.7 per cent to 2,923.
In mainland markets, sectors that rose included software and information technology, manufacturing, accommodations and catering, scientific research, and agriculture and animal raising. About six stocks gained for every one that posted losses, and 38 stocks hit the upside limit.
Despite the winning streak, the benchmark index is down nearly 5 per cent for the year. 
The CSI 300 of large cap stocks on the Shanghai and Shenzhen exchanges rose 0.7 per cent to 3,981.76.
Apple AirPod supplier Luxshare Precision Industry (002475 CH) declined 0.9 per cent to 45.10 yuan. 
Kweichow Moutai (600519 CH) saw a narrow loss of less than 0.1 per cent to 1,097.27 yuan. 
-- Deb Price    


Shanghai Composite extends gains

Liquor and beer stocks could soon recover as new confirmed cases of the novel coronavirus appear to be declining on a daily basis, Jefferies said in a report today. 
“The share prices of liquor and beer sector stocks have declined 1–17% so far this year on the virus panic,” it said. “We expect share prices in the sector to rebound, firstly on a decline in newly confirmed cases, then on a recovery in sales growth in subsequent quarters, and finally on rolling the earnings focus from 2020 to 2021.”
The investment bank recommended buying quality names such as Kweichow Moutai (600519 CH) and China Resources Beer (291 HK) on expectations of sentiment recovery in the near term.
Moutai’s official tone that it will maintain a 10 per cent sales growth target after the outbreak assures positive outlook of the company, Jefferies noted.“In the medium term, we still like Tsingtao (168 HK) for its improving fundamentals and Yanghe (2304 CH) on the completion of channel restructuring,” Jefferies said. 
--Iris Ouyang


Select liquor and beer stocks offering buying opportunities after coronavirus: Jefferies

The Hang Seng Index rally could peak at 28,000 within the week but it may not stay above that level for long, said Louis Tse Ming-kwong, managing director of VC Asset Management. 
Online healthcare stocks could have a bright future but their price rally has peaked to levels that are not supported by their profitability, deterring investors from buying-up such stocks, Tse said.
Ping An Good Doctor (1833 HK) fell 5.4 per cent to HK$72.35, after posing financial results that Tse considered “not impressive”, while AliHealth (241 HK) increased by 1.3 per cent to HK$13.76.
Meanwhile, today’s rise of automobile-related stocks is a coattail reaction to news on Geely’s merger talks with Volvo.
“Auto stocks have been sold down quite a bit because car sales haven’t been great in China. Also, subsidies on electric cars have gradually died down,” Tse said. “Geely’s talks with Volvo offers some positive notes to the industry.”
Geely Auto (175 HK) rose 1.7 per cent to HK$14.72  and BYD (1211 HK) rose 0.7 per cent to HK$45.65.
“It’s still illogical to go all in for the market rally. There are perhaps some short positions being squeezed right now to take profits,’ Tse added.
-- Kathleen Magramo


Hang Seng index could hit 28,000 this week, but not stay there, says Louse Tse

Hong Kong stocks closed 0.9 per cent higher at 27,824, the second consecutive gain.
It was led by increases in gaming, automobile and catering stocks.
Galaxy Entertainment Group (27 HK) reported the largest rise of 4.4 per cent today among all of the Hang Seng’s 50 components.
Solar energy companies recorded broad gains, with GCL-Poly Energy Holdings (3800 HK) jumping 10.1 per cent to HK$0.44. Meanwhile, Jinchuan Group International Resources (2362 HK) surged 28.1 per cent to HK$0.82 on expectations of higher cobalt prices. 
Hong Kong Television Network (1137 HK) retreated 13.5 per cent to HK$5.2. That was its second consecutive drop after its 26.2 per cent surge on Monday over positive results. 
--Iris Ouyang
