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Iris Ouyang

Kathleen Magramo

Deb Price

Welcome to a fresh week, traders!
The coronavirus is spreading in Italy and South Korea, raising alarms. That hurt sentiment in Hong Kong and mainland markets.
Catch up on the day's action below.
 And if you would like the Live Stocks Blog emailed to you each morning, click here. 
-- Iris Ouyang, Kathleen Magramo 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.


Hong Kong stocks clobbered as fears grow about global spread of coronavirus

Workers have lunch on the roof of the building of an electronics factory to ensure the distance from each other and good airflow to prevent the coronavirus spread in Suining city in southwest China's Sichuan province on February 14, 2020.  Phot: EPA-EFE


Business


Casino stocks hammered -- again 
China stocks slip; Kweichow Moutai falls 2.3 per cent



China stocks fall; Kweichow Moutai tumbles 2.3 per cent. In Hong Kong, casino stocks continue losing streak. 


Hong Kong stock market

Live

Here's what we are watching this morning:
US Friday markets/ What futures foretell
--The S&P 500 fell 1.1  per cent, the Nasdaq declined 1.8 per cent and the Dow Jones Industrial Average dropped 0.8 per cent.
-- Hong Kong futures rose 0.3 per cent, while the FTSE China A50 futures shed 0.6 per cent
IPO debuts: None
Economic statistics: Nothing major
Central Bank action: None to note
Earnings: CLP Holdings (2 HK) and Hithink RoyalFlush (300033 CH)


Morning guidance

Jefferies reiterated its “buy” rating on the Hong Kong-listed shares of Great Wall Motor (2333 HK), with a 12-month price target of HK$7.7, after the Chinese SUV and high-end pickup truck maker beat expectations with its preliminary results for 2019.
  “The significant ASP [average selling price] gain was driven primarily by 1) launching of the high-end pickup truck, 2) more of the premium WEY SUV models, and 3) low base effect from aggressive discounting in 4Q18. Notably, the substantial tax cut and incremental more government grant on R&D spending seemingly offset the weak top line growth. Both the topline and bottomline trend are likely to continue into FY20 despite the coronavirus disruption,” Jefferies analysts wrote in a fresh note.
Fourth quarter earnings grew 23 per cent yera-on-year to 1.6 billion yuan, beating consensus and Jefferies forecasts.
  “Stronger than expected 4Q19 could continue into FY20. The significant ASP gain was driven primarily by 1) launching of the high-end pickup truck, 2) more of the premium WEY SUV models, and 3) low base effect from aggressive discounting in 4Q18. Notably, the substantial tax cut and incremental more government grant on R&D spending seemingly offset the weak top line growth. Both the topline and bottomline trend are likely to continue into FY20 despite the coronavirus disruption,” they wrote.
“We lifted our FY20 earnings forecast by 4.1% and kept our FY21 forecast unchanged. Great Wall-H is one of our top picks for rural development without any JV risks. We keep our Buy rating with PT of HK$7.7, indicating 30% upside. We maintain Great Wall-A’s rating at Hold with PT of Rmb9.1,” the analysts wrote.
  “Great Wall-H is one of our top picks for rural development without any JV [joint venture] risks,” they add said.
-- Deb Price    


Great Wall Motor beats expectations for 2019; Jefferies reiterates H share ‘buy’

Jefferies reiterated its “buy” rating on Sands China (1928 HK) and its 12-month price target of HK$45. From Friday’s close, that would be about a 17 per cent upside potential.
  Sands China released its 2019 results on Friday after market close, and they were in line with consensus and Jefferies expectations. The casino operator said 2019 net profits increased 8.4 per cent year on year to US$2.03 billion. Weaker VIP high rollers were offset by higher margin mass gamblers -- the “minnow” mom and pop gamblers who are being fought over by operators on the flashy Cotai strip area. 
Analysts led by Andrew Lee said they expect “near-term headwinds subsiding and the quarantine-led cabin fever is likely to lead to overseas trips.“
Casinos are slowly reopening in Macau after being shut down for 15 days to control the spread of the dangerous coronavirus. But China has yet to resume the visa programme that allows the bulk of visitors from the mainland to visit Macau. That will need to happen before casinos can get rolling again.
Here’s a feature on why most analysts are bullish on Macau casino stocks, whose prices have been hammered by the coronavirus.    
-- Deb Price


Jefferies reiterates ‘buy’ on Sands China

Hang Seng Index fell 0.7 per cent to 27,105.35.
Index heavyweight Tencent (700 HK) declined 1.9 per cent to HK$393.2.
Meanwhile, its net profits attributable to shareholders dropped 13.7 per cent to 4.493 billion yuan in 2019 year on year, while total revenue fell 2.8 per cent to 9.6455 billion yuan, according to an exchange filing.
Sands China (1928 HK) tumbled 1.3 per cent to HK$38 at the open as it continues to take a hit from the coronavirus outbreak. The casino operator’s net profit rose 8.4 per cent in 2019 year on year, while net revenues gained 1.7 per cent.
-- Kathleen Magramo


Hang Seng falls at the open, Tencent falls below HK$400

China stocks opened lower today.
The Shanghai Composite Index dropped 0.39 per cent to 11,620.63. The Shenzhen Component Index opened 0.1 per cent lower at 5,454.81.
--Iris Ouyang


China stocks start week lower 

Hang Seng losses deepen; falls 1.3 per cent to 26,959

Great Wall Motor (2333 HK) surged 4.2 per cent to HK$6.17 in morning trading.
  The SUV and high-end pickup maker beat market expectations with its new results.
Fourth quarter earnings grew 23 per cent year-on-year to 1.6 billion yuan, beating consensus and Jefferies forecasts.
Jefferies reiterated its “buy” rating on the Hong Kong-listed shares of Great Wall Motor, with a 12-month price target of HK$7.7.
-- Deb Price    


Great Wall surges on strong results

Tencent Holdings (700 HK) declined 1.7 per cent to HK$394.2 as its weighting in the Hang Seng Index was capped at 10 per cent from the previous 11.9 per cent. 
The announced change by the Hang Seng Indexes Company in its quarterly review results released on Friday will come into effect on March 9, 2020. 
AIA Group (1299 HK) and HSBC Holdings (5 HK) also dropped on a 10 per cent adjustment of weighting in Hang Seng Index.
AIA Group fell 1.4 per cent to HK$78. HSBC was down 0.1 per cent to HK$56.6.
 --Iris Ouyang


Tencent, AIA, HSBC down as HSI adjusts weightings

Telecommunication stocks jumped as China vowed to speed up 5G development and resume production levels of the sector, said the country’s Ministry of Industry and Information Technology.
China’s second-largest telecom equipment supplier ZTE Corp. (763 HK) surged 6.6 per cent to HK$34.10.
 
China Tower Corp. (788 HK) advanced 3.8 per cent to HK$1.91.
In the mainland, a gauge tracking 5G related stocks from data provider Xuangubao gained 5.3 per cent.
-- Kathleen Magramo


Telecommunication stocks jumped as China vows to speed up 5G development

Surgical mask and related material producers recorded big gains today.
Xiamen Yanjan New Material (300658 CH), Hunan Huasheng (300658 CH), Shandong Dawn Polymer (2838 CH) all surged by the daily cap of 10 per cent. 
Secretary General of China’s economic planning body National Development of Regulatory Commission Cong Liang said today that the government will ratchet up support for surgical mask manufacturers to help contain the novel coronavirus.
All 30 provincial-level jurisdictions across China except Tibet have added new production lines of masks, with more approaching, he said.
As of February 22, daily production of surgical masks had almost tripled to 547.7 million per day, Cong added. 
The gains of surgical mask producers also came after Premier Li Keqiang on Friday stressed the need to increase production of masks in a short period during his visit to mask production lines in Beijing, requiring daily production to exceed more than 100 million per day, according to a report by the Xinhua News Agency on Friday night. 
--Iris Ouyang 


Surgical mask-linked stocks surge on Beijing signal of further support

Bestore (603719 CH), a Wuhan-based snack business, debuted in Shanghai this morning via a virtual initial public offering, the first time in A-shares.
The virtual IPO, broadcast online, was arranged because of the coronavirus outbreak. 
It opened and remained at 17.14 yuan, up 44 per cent from the 11.9 yuan IPO price.
 --Iris Ouyang


Bestore rises 44 per cent in first virtual IPO of A-shares

The Shanghai Composite Index was down 0.3 per cent to 3,029.22 at the break.
The CSI 300 gauge of large-caps listed in Shenzhen and Shanghai fell 0.5 per cent to 4,130.93 in morning trading. 
Meanwhile, the Shenzhen Component Index bucked the trend, advancing 0.7 per cent to 11,710.43.
Kweichow Moutai (600519 CH) the world’s most valuable liquor distiller dropped 1.9 per cent to 1,091.45 yuan. 
Apple AirPod supplier Luxshare Precision (002475 CH) gained 0.2 per cent to  50.47 yuan.
Here’s a feature for investors on what to expect for Apple’s China suppliers amid the virus outbreak. 
-- Kathleen Magramo


Shanghai benchmark to start afternoon trading in the hole

Fiscal policies have to be the main force to buoy China’s economy, which is being battered by the novel coronavirus, Zhang Bin, senior researcher at leading think tank China Finance 40 (CF 40) said today in an online press conference. 
The fiscal policies could be more “targeted,” said the former researcher at the Chinese Academy of Social Sciences, which advises the central government. 
He was referring to targeted fiscal policies that could benefit specific groups and sectors, compared with monetary policies which will take at least months or even a year for the effect to be truly transmitted. 
More sovereign bonds should be issued as soon as possible to fill the current credit gap, Zhang stressed.
 --Iris Ouyang


Fiscal policies need to lead China support to counter virus impact, says researcher Zhang Bin 

  Stock traders in Hong Kong and mainland China may have found the answer for overcoming the market jitters caused by the coronavirus – by lightening up their holdings on Fridays to skirt potential headline shocks on weekends.
  Dialling back risk appetite before the weekend appears to have some traction, going by trading patterns this year. The MSCI All Countries World Index has posted declines in five of the seven Fridays, after the killing of an Iranian top general on January 3. Investors avoided a 0.5 per cent loss on average on those occasions.
The Hang Seng Index has fallen in two of the past three Fridays since the Hong Kong market reopened after the Lunar New Year, suggesting traders are taking few chances. The CSI 300 Index, which tracks the nation’s biggest companies on the Shanghai and Shenzhen exchanges ⁠— has dropped in one of two Fridays since the onshore markets restarted on February 3.
“As the uncertainty increases, more people for sure will join the rank of selling shares on Fridays to shield from possible bad news on weekends,” said Chen Hao, a strategist at KGI Securities in Shanghai. “Investors are worried that there will be a resurgence in the disease outbreak.”
Read full story by Zhang Shidong here.   


‘Sell on Friday’ is way traders are fighting coronavirus jitters

Italian luxury fashion brand Prada (1913 HK) says designer Raf Simons will join the company on April 2 as co-creative director and will work in partnership with Miuccia Prada.
Simons is a Belgian fashion designer who was the creative director at Christian Dior between 2012 to 2015 and the chief creative officer between 2016 to 2018.  
The first Prada collection designed by the pair will be the Spring/Summer 2021 womenswear show, presented in Milan in September 2020, the company said in a stock exchange filing on Sunday.
Prada declined 2.3 per cent to HK$27.85 in the morning session.
-- Enoch Yiu


Prada welcomes Belgian fashion designer Raf Simons

Yufeng Financial (376 HK) chief executive Li Ting has resigned for family reasons, the company said in a stock exchange filing on Sunday.
The company has appointed non-executive director Olivia Hai Ou as executive director and interim chief executive.  
Yufeng tumbled 3.4 per cent to HK$4 in the morning session.
-- Enoch Yiu  


Yufeng Financial appoints interim chief executive

The Hang Seng Index declined 1.5 per cent to 26,903.84 at the lunch break, led by losses from commerce and industry.
Casino operator Galaxy Entertainment (27 HK) was the biggest loser among bluechips, tumbling 3.6 per cent to HK$54. 
Index heavyweight Tencent (700 HK) declined 2.2 per cent to HK$392.2, falling below the psychologically important $400 share price level.
Oil giants also suffered. 
China’s largest oil producer PetroChina (857 HK) dropped 3.6 per cent to HK$3.26. CNOOC (883 HK), China’s third-largest national oil company, fell 3.4 per cent to HK$11.76.
New economy stocks broadly declined.
E-commerce giant Alibaba (9988 HK) shed 2.7 per cent to HK$206.8. Food delivery app Meituan Dianping  (3690 HK) fell 2.9 per cent to HK$100.2. Smartphone maker Xiaomi (1810 HK) lost 3.9 per cent to HK$12.22.
China’s largest online healthcare platform Ping An Good Doctor (1833 HK) tumbled 3.3 per cent to HK$74.95.
-- Kathleen Magramo


Hang Seng Index falls, new economy stocks broadly decline

Hang Seng down 1.5 per cent; Shanghai benchmark down 0.5 per cent

ZTE Corporation (763 HK)  shot up to a three-year high at HK$35.20 during the day.
It was trading 9.1 per cent higher at HK$34.9.
Morgan Stanley raised the stock to “overweight”  with a target price of HK$36 and expects ZTE to outperform its peers in the coming 30 days, 
Its A-shares listed in Shenzhen surged to the daily limit of 10 per cent, reaching 50.11 yuan.
-- Kathleen Magramo


ZTE Corporation jumps to a three year high

Shares of Purapharm Corporation (1498 HK) jumped to HK$1.5 during the day -- a 76.4 per cent surge -- after gaining approval from authorities to manufacture a Traditional Chinese Medicine (TCM) remedy for the coronavirus, according to an exchange filing over the lunch break. 
It is now trading 31.8 per cent higher to HK$1.12.
Purapharm Corporation was authorised by the Food and Drug Administration of  Guangxi Zhuang Autonomous Region on February 20 to produce Qing Fei Pai Du Tang (QFPDT), a TCM remedy recommended by the National Administration of Traditional Chinese Medicine as clinical treatment for the coronavirus.
Meanwhile, other TCM manufacturers fell. China Traditional Chinese Medicine Holdings (570 HK) slipped 1.4 per cent to 4.36. SSY Group (2005) declined 1.2 per cent to HK$6.66.
-- Kathleen Magramo


Purapharm Corporation surges on Traditional Chinese Medicine approval for virus

Gold-linked stocks surged in Hong Kong as the spot price of the yellow metal jumped to US$1,665.49 per ounce amid fears of the coronavirus.
Gold has gained 9.4 per cent so far this year.
In Hong Kong, gold-linked stocks are the top industry gainer, according to a gauge, with an average rise of 3.4 per cent.  Dragon Mining (1712) shot up 13.3 per cent to HK$1.7, Tongguan Gold (340 HK) gained 6.7 per cent to HK$0.48, while Bay Area Gold (1194 HK) jumped 5.8 per cent to HK$0.055.
SD Gold (1787 HK) advanced 5.7 per cent to HK21.25 and Zhaojin Mining (1818 HK) rose 2.5 per cent to HK$9.73.    Gold-related stocks were mixed in China.
Zhongjin Gold (600489 CH) rose 1.7 per cent to 8.93 yuan but Gansu Gangtai Holding (600687 CH) fell 1.4 per cent to 1.37 yuan.
YanTai Yuancheng Gold (600766 CH) rose 1.2 per cent to 8.62 yuan, while Shandong Gold Mining (600547 CH) advanced 3.5 per cent to 38.52 yuan.
-- Deb Price   


Select gold-linked stocks surge on coronavirus fears

Fears that the coronvirus is spreading rapidly from China is the main cause of the pullback in Hong Kong stocks today, said Alan Li, portfolio manager at Atta Capital.
Sentiment was hit by “global fears on the virus spread as Japan and South Korea clearly failed to contain the infection,” Li said.
The Hang Seng Index is down 1.7 per cent to 26,853, with losses deepening in the afternoon.
The Shanghai Index is also down, but less so, falling 0.3 per cent to 3,031.
“The investment logic in A share is quite special. Although the People’s Bank of China is pulling back excessive liquidity in open market operation, they still believe their government has no choice but release money eventually,” Li said.
-- Deb Price


Fear of coronavirus spread globally spooked Hong Kong traders, says analyst Alan Li

The Shanghai Composite Index fell 0.3 per cent to 3,031.23  at the close.
The CSI 300 gauge on large-caps listed in Shanghai and Shenzhen slipped 0.4 per cent to 4,132.84.
The Shenzhen Component Index advanced 1.2 per cent to 11,772.38.
Liquor distiller Kweichow Moutai (600519 CH) dropped 2.3 per cent to 1,087.18 yuan.
Luxshare Precision Industry (002475 CH) rose 1.3 per cent to 51 yuan.
The aviation sector fell 3.4 per cent and hospitality related stocks shed 2.1, according to gauges tracking them, as tourism continues to take a hit amid the coronavirus outbreak.
Low-cost carrier Spring Airlines (601021 CH) tumbled 5 per cent to 37.98 yuan and Juneyao Airlines (603885 CH) dropped 4.6 per cent to 12.37 yuan.
Tourist hotel caterer HNA Innovation (600555 CH) declined 5.4 per cent to 2.12 yuan.
Full-service restaurant company Shanghai Jin Jiang (600754 CH) tumbled 4.6 per cent to 28.22 yuan.
Meanwhile, a gauge tracking stocks in China related to surgical face masks surged 8.1 per cent.
-- Kathleen Magramo


China stocks end lower; stocks linked to surgical masks soar

Macau casino stocks are continuing their unlucky streak today.
  Sands China (1928 HK) fell 1 per cent to HK$38.10, Melco International (200 HK) fell nearly 2 per cent to HK$17.08,  Wynn Macau (1128 HK) declined 2.1 per cent to HK$16.68,  Galaxy Entertainment (27 HK) tumbled 3.5 per cent to HK$54.05, MGM China (2282 HK) fell 3.5 per cent to HK$11.06, and SJM Holdings (880 HK) dropped 2.6 per cent to HK$8.95.
Macau casino stocks have crashed since January 17, as the impact of the coronavirus became clearer. Meanwhile, casinos had to shut down for 15 days, and are only slowly re-opening. They’re each losing millions of dollars daily, several have said.
Here’s a feature for investors about why analysts are bullish on Macau casino stocks over the long term.
-- Deb Price    


Casino stocks tumble -- again

The Chinese government has ramped up measures to ease the drag of the novel coronavirus on its economy, with more to come.
In a meeting chaired by President Xi Jinping Sunday discussing further efforts to contain the novel coronavirus and achieve goals of economic development this year, Xi stressed the need to strengthen macroeconomic policies. 
Fiscal policies need to be proactive, he said. The government will continue to study targeted policies on tax and fee reductions and help small- and medium-sized companies, Xi said, according to a report released by the official Xinhua News Agency yesterday.
He also pointed to further measures to stabilize employment, ensure agriculture production and stabilize foreign investment.
The meeting came as economists tracked by Reuters estimated China’s GDP could drop to 3 per cent growth in the first quarter from the 6 per cent in fourth quarter last year.
That would be the weakest gain in nearly 30 years, according to Reuters.
Zhu Min, former senior executive with the International Monetary Fund, said the epidemic may have cost China as much as 1.38 trillion yuan (US$196 billion) in the first two months of the year because of huge drops in consumer spending and tourism. 
In a separate press conference today addressed by high-level officials from major economic departments, it was confirmed that China “can achieve all economic growth targets for this year”, according to Cong Liang, secretary general of China’s economic planning body National Development Reform Commission. 
The government’s policy support started to increase since the end of January, with the banking and insurance watchdog encouraging financial institutions to reduce loan interest rates, extend loan terms, increase medium- to long-term loans for businesses.
In early February, the central bank People’s Bank of China (PBOC) said it would guide financial institutions to increase loans for the real economy especially businesses related to virus containment. The PBOC also injected 1.7 trillion liquidity into the market. Additionally, the central bank last Thursday lowered the February five-year loan prime rate (LPR) by 5 basis points and the one-year LPR by 10 basis points to 4.05 per cent.
Earlier on Monday, it reduced the one-year medium-term lending facilities (MLF) down to 3.15 per cent from 3.25 per cent.On February 14, the security regulator issued new rules to make it easier for small- and medium-sized companies to raise additional funds.
On February 14, officials announced the exemption of companies that are impacted by the epidemic from social insurance for three to six months and delay their payment of housing provident funds to reduce burdens, with expectation for the social insurance reduction to exceed 500 billion.
Here is more on how the China economy is being impacted.
 -- Iris Ouyang


China ramping up stimulus steps

“People are having the sentiment to reap profits,” said Delun Wang, chief strategist at Industrial Securities.
“On the other hand, it might be due to concerns on economic fundamentals as the economic data [for February] would be released in early-March.”
“But in fact, liquidity in the market is relatively abundant,” he noted. “Plus policies for the capital market are relatively neutral,” he said.
Wang noted the coronavirus impact on the stock markets was mainly on February 3, when markets reopened after the Spring Festival.
“But it has recovered now from the first date of the Spring Festival, and the ChiNext tech board even saw a gain higher than before.”
He stressed investors are increasingly optimistic about the new economy and technology development, with related companies being on track to climb.
“Companies in the tech boom would be decent [choices],” he said. “For example, new energy vehicles, remote services such as online education and companies providing remote work services,” he said.
-- Iris Ouyang 


Mainland shares weighed down by profit-taking, concerns about February data: Wang of Industrial Securities 

The Hang Seng Index slipped 1.8 per cent to 26,820.88, the lowest level it has been at in more than two weeks. On February 5, the HSI closed at 26,786,74.
Of the 50 constituents, 47 constituents were down, one flat and two others up.      Petroleum companies saw bigger drops.
PetroChina (857 HK) led the decline, sliding 4.7 per cent to HK$3.22. That was its lowest level in 15 years, according to Wind Information. The drop came after UBS lowered its target price for the company to HK$4.5 from HK$5.2 on the gloomy outlook of the international oil market.  CNOOC (883 HK) lost 3.6 per cent to HK$11.74. China Petroleum & Chemical Corp.  (386 HK) fell 2.1 per cent to HK$4.12.     Index heavyweight Tencent (700 HK) dropped 2.6 per cent to HK$390.4. Its weighting in the Hang Seng Index was capped at 10 per cent from the previous 11.9 per cent.
Casino stocks fell.
Galaxy Entertainment Group (27 HK) declined 3.8 per cent drop to HK$53.9.  Sands China (1928 HK) tumbled 1 per cent to HK$38.1 as it continues to take a hit from the coronavirus outbreak. The casino operator’s net profit rose 8.4 per cent in 2019 year on year, while net revenues gained 1.7 per cent.     -- Iris Ouyan
