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Kathleen Magramo

Deb Price

Good day, traders --
 
The Hang Seng Index turned positive in mid afternoon. Mainland stocks also gained.
Catch up on the day's action below.
And if you would like the Live Stocks Blog emailed to you each morning, click here. 
-- 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.

 


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Stocks

Hong Kong, China stocks gain, even as new cases outside China top new cases inside    

Workers wearing protective gear clean at Shu Kuk street and King's road outside Maylun Apartment where Fook Wai Ching She Buddhist worship hall is located in Hong Kong. More people who have been at Fook Wai Ching She temple in North Point have tested positive for coronavirus. Photo: Xiaomei Chen


Business

Budweiser Brewing APAC falls as investors give thumbs down to results 
Daiwa Capital Markets reiterates its 'buy' rating on the Hong Kong Stock Exchange 


“People in China tend to believe virus to be under control while people in other markets are afraid of further spread outside of China. Hong Kong is the middle of them, extremely bullish and bearish here,” Atta Capital Portfolio Manager Alan Li said. 


China stock market

Hang Seng Index

Coronavirus pandemic: All stories

Live

Budweiser APAC (1876 HK) recorded a 1.8 drop in net profit to US$994 million in 2019 compared to the previous year.
Profit attributable to equity holders fell 6.2  per cent to US$898 million last year compared to the previous year. Its adjusted earnings per share was at US$0.0752.
It will pay a final dividend of US$ 0.0263 per share to shareholders, which represents 35 per cent of its normalized profit attributable to our equity holders in 2019. 
The Asian arm of the world’s largest brewery said its business in South Korea was impacted by an overall industry decline due to weaker consumer sentiment and competitive pressure in the segment, its said in a stock exchange filing this morning.
“Though we faced industry headwinds in our most relevant markets, we continued to grow revenue as a result of our premiumization strategy across the region. In the full year ended 31 December 2019 (FY19), our revenue grew by 1.8 per cent while revenue per hl [hectoliter] grew by 4.9 per cent. Volume declines of 3 per cent  were primarily driven by South Korea and China, partially offset by strong volume growth in India and South East Asia.”Budweiser’s IPO on the Hong Kong bourse was the second largest listing globally last year after Uber Technologies. It’s share price advanced nearly 3 per cent to HK$24.30 on Wednesday’s close.
-- Kathleen Magramo


Budweiser APAC’s net profit falls 1.8 per cent

* "The substantial fiscal easing in Hong Kong’s budget for 2020-21 should provide a degree of support for economic activity in the face of slower global and domestic growth," said Martin Petch, vice president of the sovereign risk group at Moody's Investors Service.
"Although cash payments to households, along with business tax cuts and subsidies to sectors most affected by the slowdown, should stimulate spending, the extent to which consumer spending is lifted will likely be constrained by two factors. First, there are uncertainties around the impact of the coronavirus on global and Mainland China’s growth, and second, Hong Kong faces the lingering effects of the protests that dominated the latter part of 2019. That said, Hong Kong’s high level of fiscal reserves provides a large scope for fiscal easing without significant credit impact," he said. 
* "The SME sector has been particularly hard hit, and we applaud the extension of the SME Financing Guarantee Scheme (SFGS) to give 100% loan guarantees to companies that play such a crucial role in employment, growth and the long-term welfare of Hong Kong," said HSBC's deputy chairman and chief executive Peter Wong, adding that the largest Hong Kong bank "welcomes" the budget speech.
“The upcoming two-way wealth management connect scheme in the Greater Bay Area will not only enrich the RMB product suite for international investors, but also provide more opportunities for the wealth management sector. Hong Kong has been a key partner in the liberalisation of mainland capital markets through the successful launch of Stock Connect (2014) and Bond Connect (2017). We are confident that the wealth management connect scheme will accelerate the development of RMB internationalisation. With regard to the development of bond market in Hong Kong, we are glad that the government will continue to issue green bonds, Silver Bonds and the inflation-linked retail bonds (iBond). These will further extend the breadth and depth of the HKD bond market. Overall, it is encouraging to see government, businesses and the community coming together to support each other in these difficult days. HSBC remains committed to partnering with relevant parties to help its customers and the broader community in any way it can.”
* "The series of measures enhancing livelihoods mentioned in the Budget, such as reducing salaries / profits tax and tax under personal assessment for 2019/20 by 100% (capped at HK$20,000) and the cash payout of HK$10,000 will help ease the financial burden of the public, including non-taxpayers," said Wilson Cheng, co-chairman of the tax sub committee at the Association of Chartered Certified Accountants (ACCA). "The government can consider waiving the second installment of provisional salaries and profits tax. In effect, waiving provisional tax payment will not reduce government tax revenue, but could increase taxpayers’ cash flow and stimulate spending, and thereby fostering the betterment of livelihoods."
* "The government has put the society’s needs in consideration in introducing relevant measures," said Stanley Ho, co-chairman of the tax sub-committee at the Association of Chartered Certified Accountants (ACCA) in Hong Kong. 
"Whilst the global economy remains uncertain, adding to months of local social unrest as well as the recent outbreak of the COVID-19 virus, Hong Kong is facing critical challenges. Facing the pressure of slowing economy, the government should take an active role in enhancing the livelihood of citizens and supporting the business sector. We look forward to more sustainable and effective measures on improving the competitiveness of the local business environment, ensuring bright economic prospects and a better standard of living in the long run. Though we are expecting a gloomy economic outlook for Hong Kong, fortunately our reserve is still abundant. Hong Kong’s rich financial reserve is a result of collective contributions from every member of the society over the years, and the Government should make good use of our resources to further invest in the city’s future."


Reviews on Hong Kong’s HK$120 billion relief plan

Ascletis Pharma (1672 HK) said it has obtained ethical approval on clinical trials for oral Ganovo and Ritonavir combination therapy for the novel coronavirus, according to an exchange filing.
Three patients have been discharged after applying the combination treatment, which gained  approval from the ethics committee of the Ninth Hospital of Nanchang on February 16.
The treatment development was led by Dr. Hongyi Chen, director of the mentioned hospital.
Ganovo, an oral Hepatitis C virus (HCV) protease inhibitor, is a commercialised product of the company and was approved by the National Medical Products Administration for market launch in June 2018.
-- Kathleen Magramo


Ascletis Pharma says 3 coronavirus patients discharged after combination therapy

Here's what we are watching this morning:
US overnight markets/ What futures foretell
--The S&P 500 dropped 0.4 per cent, the Dow Jones Industrial Average fell 0.5  per cent. Meanwhile, the Nasdaq rose 0.2 per cent. 
-- Hong Kong futures gained 0.06 per cent. The FTSE China A50 futures were flat.
IPO debuts: China Resources Microelectronics (688396 CH) 
Economic statistics: Nothing major
Central Bank action: None to note
Earnings: Galaxy Entertainment (27 HK)


Morning guidance

Contemporary Amperex Technology (300750 CH), known as CATL, said it aimed to raise 20 billion yuan in a share placement on the Shenzhen Stock Exchange to fund lithium battery projects and replenish capital.
  The company said 10 billion yuan raised from the private offering would be invested to set up lithium-ion battery production projects.
CATL is in talks with Tesla to use batteries without cobalt -- one of the most expensive ingredients in electric vehicle batteries.
– Daniel Ren   


CATL plans to raise an additional 20 billion yuan

Fashion group Esprit Holdings (330 HK) said its loss for the first half narrowed as its turnaround plan to cut jobs and reduce the number of products improved productivity.
  The company posted a loss of HK$331 million for the six months ended on December 31, compared to loss of HK$1.4 billion in the same period a year earlier.
Revenue dropped 11.8 per cent to HK$5.76 billion.
Chief executive Anders Kristiansen said in a statement that the results were in line with the company’s expectations. 
– Daniel Ren   


Fashion house Esprit posts narrower H1 loss

The Shanghai Composite Index was up 0.2 per cent to 2,992.49 at the open.
The Shenzhen Component Index rose 0.5 per cent to 11,555.82
The CSI 300 gauge on large-caps listin in Shanghai and Shenzhen gained 0.3 per cent to 4,084.08.
The ChiNext Price Index jumped 0.9 per cent to 2,200.38.
GoerTek (002241 CH) advanced 3.1 per cent to 25.70 yuan, while Luxshare Precision (002475CH) stayed flat at the open at  47.61 yuan. They both make Apple AirPods.
Kweichow Moutai (600519 CH), the world’s most valuable liquor distiller, rose 0.2 per cent to 1,076 yuan.
-- Kathleen Magramo


Mainland benchmarks opened higher 

The Hang Seng Index was down 0.6 per cent to 26,529.17 at the open.
Index heavyweight Tencent (700 HK) slipped 0.2 per cent to HK$399.
AAC Technologies (2018 HK), which derives half of its revenue from Apple, slipped 1.4 per cent to HK$54.6.
Lens maker Sunny Optical (2382 HK) slipped 0.9 per cent to HK$127.30.
Budweiser APAC (1876 HK) dropped 2.7 per cent to HK$23.65, after posting profit declines for 2019 overnight.
-- Kathleen Magramo


Hang Seng down at the open

China Resources Microelectronics (688396 CH) skyrocketed 248.4 per cent to 44.59 on its Shanghai Star Market debut. 
It makes micro electronic products and semiconductors.
There is no daily cap on the first week of trading of stocks on the Nasdaq-like Star board. Such IPO stocks are not available to northbound traders on the Stock Connect.
-- Kathleen Magramo


Star Market IPO surges

Macau casino stocks continued to fall this morning. Investors are concerned about losses operators are taking as they slowly re-open after a 15-day shutdown to try to contain the spread of the coronavirus. Also, China has not resumed the visa programme needed for all-important mainlanders to visit the world’s top gaming capital. 
Melco International (200 HK) fell 2.6 per cent to HK$16.38. 
Sands China (1928 HK) fell 1.7 per cent to HK$36.85. 
Wynn Macau (1128 HK) fell 1.2 per cent to HK$16.14. MGM China (2282 HK) declined 1.6 per cent to HK$10.80.
SJM Holdings (880 HK) slipped 0.8 per cent to HK$8.92 and Galaxy Entertainment (27 HK) fell 1.7 per cent to HK$52.80.
Here’s a feature for investors on why analysts are bullish about the long-term outlook for Macau casino stocks. 
-- Deb Price   


Casino stocks extend losses

Analysts are bullish on casino stocks. Here’s why.
  Apple suppliers like Luxshare Precision and Goertek are expected to catch up on production after the coronavirus disarray. Here’s what analysts think.
  New economy stocks like Ping An Good Doctor are expected to gain over the long term as Chinese consumers in lockdowns try out apps and grow more confident about online health and other services. Here’s what analysts say.   


ICYMI: Features for investors on casino, Apple suppliers and new economy stocks

Tim Graf, head of macro strategy for EMEA at State Street Global Markets, offers his latest view on the Coronavirus impact on markets:
“The price action since the weekend is a clear departure from the strikingly calm conditions of prior weeks. Our measure of systemic risk, which captures the underlying fragility of equity markets and their susceptibility to shocks, is spiking following one of the biggest two-day drawdowns in US equities of the last 40 years. A rise in this metric, alongside the higher volatility observed in equity markets, typically is a signal for larger-than-normal drawdowns and persistence of volatility, which should keep the already-strong demand for safe haven assets in place.”   


Measure of systemic risk ‘spiking,’ says State Street Global Markets

Investors aren’t liking results from Budweiser Brewery APAC (1876 HK).
The stock fell 3.5 per cent to HK$23.45 in early trading. 
It recorded a 1.8 drop in net profit to US$994 million in 2019 compared to the previous year, it said in a stock exchange filing.
Profit attributable to equity holders fell 6.2  per cent to US$898 million last year compared to the previous year. Its adjusted earnings per share was at US$0.0752.
-- Deb Price    


Investors not toasting Budweiser Brewery results; stock falls 3.5 per cent

Hang Seng Index on track for second day of losses -- down 0.8 per cent

Daiwa Capital Markets reiterates its “buy” rating on the Hong Kong Stock Exchange (388 HK), with a 12-month target price of HK$307.80.
HKEX was trading 1.1  per cent lower at HK$257.0 in midday trading. 
Various structural factors are beginning to take shape and bear fruit for HKEX, including its derivatives platform and capital market integration with China, Daiwa Capital’s analysts wrote in a fresh note.
“HKEX 2019 net profit rose by 1 per cent year on year to an all-time high of HK$9.4 billion despite an 18 per cent year on year decline in ADT [average daily turnover] in HK,” analysts said. 
HKEX stated that its ADT is showing signs of structural growth due to increasing participation of Algo/Quant funds in both the derivative and cash markets of HK.
However, Daiwa Capital believes this trend has yet to run its course and it will be augmented further by what they see as a disconnection between HK’s relative share of global ADT and its relative share of global market cap for equities.
“We believe the factors driving a structural earnings growth for HKEX have finally fallen into place, but the market may have yet to fully recognise this.”
-- Kathleen Magramo


Daiwa Capital Markets reiterates ‘buy’ on HKEX

The past 24 hours was the first time since the coronavirus outbreak on December 8 when new cases outside mainland China (459) surpassed those on the mainland (412) , according to the World Health Organization.


For first time, new infections are more outside than inside China

GoerTek (002241 CH) rose 0.6 per cent to 25.07 yuan in the morning session.
The Apple AirPod supplier reported a 59.6 per cent year on year jump in its net profit attributable to shareholders to 1.307 billion yuan in 2019.
Its revenue grew 48 per cent to 35.161 billion yuan last year.
It said its smart wireless headsets and smart wear products business developed smoothly last year.
Stocks related to Apple’s supply chain rose 0.5 per cent, according to a gauge compiled by data provider Xuangubao.
Shenzhen Sunway Communication (300136 CH) advanced 3.8 per cent to 54.10 yuan. It makes mobile terminal antennas for Apple’s iPhones, iPads and Macbooks.
Shenzhen Desay Battery (000049 CH) went up 0.8 per cent to 47.96 yuan.
Meanwhile, Luxshare Precision (002475 CH) fell 0.3 per cent to 47.48 yuan.
-- Kathleen Magramo


GoerTek gains, Apple supply chain stocks up

The Shanghai Composite Index advanced 0.6 per cent to 3,004.99 in the morning session.
The Shenzhen Component Index rose 1.2 per cent to 11,635.59.
The CSI 300 gauge on large-caps listed in Shanghai and Shenzhen gained 0.8 per cent to 4,106.19.
The ChiNext Price Index jumped 1.9 per cent to 2,222.89.
GoerTek (002241 CH) was up 0.6 per cent to 25.07 yuan, while Luxshare Precision (002475CH) fell 0.2 per cent to 47.53 yuan. They both make Apple AirPods.
Kweichow Moutai  t(600519 CH), the world’s most valuable liquor distiller, rose 1.7 per cent to 1,091.99 yuan.
-- Kathleen Magramo


Mainland markets to start afternoon session with gains

The Hang Seng Index was down 0.7 per cent to 26,519.65 at the break.
Index heavyweight Tencent (700 HK) slipped 0.9 to HK$396.
Galaxy Entertainment (27 HK) fell the most among bluechips. It dropped 2.7 per cent to HK$52.25, before it was to announce financial results over the lunch break.
-- Kathleen Magramo


Hang Seng to start afternoon trading with loss

Standard Chartered (2888 HK) missed analysts’ estimates for its 2019 underlying profit and warned its income is likely to grow at a slower pace this year as it faces headwinds from weaker global growth, a battered Hong Kong economy and the coronavirus.
The emerging markets lender reported today an underlying pre-tax profit of US$4.17 billion in 2019, below a consensus estimate of US$4.33 billion from 13 analysts compiled by the bank.
On a net basis, the bank’s profit more than doubled to US$2.3 billion last year, compared with US$1.05 billion in 2018.  
 “These headwinds are expected to be transitory, but we now believe it will take longer to achieve our [return on tangible equity] target of 10 per cent than we previously envisaged,” the bank said in a stock exchange filing.
Last year, the bank said it was targeting a return on tangible equity above 10 per cent by 2021.
  Shares of Standard Chartered rose 1.7 per cent to HK$60.65 in Thursday’s morning session in Hong Kong ahead of the announcement. 
--Chad Bray


Standard Chartered misses estimates for 2019 underlying profit

Galaxy Entertainment (27 HK) posted a 3.4 per cent yearly drop in net profits to HK$13.04 billion in 2019, compared to the previous year. 
The casino operator’s net revenue last year declined 6 per cent year on year to HK$51.9 billion. 
Its share price tumbled 2.9  per cent to HK$52.15 in early afternoon trading after posting results over the lunch break.
The group said it has reaccelerated construction work for its projects in the hot Cotai strip area of Macau, after the government lifted the 15-day casino closure on February 20 to contain the spread of the coronavirus. 
Macau gaming stocks are tumbling today. 
Melco International (200 HK) plunged 4.4 per cent to HK$16.08. Sands China (1928 HK) slipped 2.7 per cent to HK$36.50. MGM China (2282 HK) declined 2 per cent to HK$10.76. Wynn Macau (1128 HK) fell 2.7 per cent to HK$15.90.
-- Kathleen Magramo


Galaxy Entertainment’s net profits drop 3.4 per cent in 2019

Vanguard’s investment strategy group estimates that the coronavirus outbreak will cut 0.5 percentage point of growth from China’s economy this year.
That represents roughly 534 billion yuan (US$76 billion)  in goods and services not produced, or at least delayed.
Economic activity may not return to normal until early in the second quarter as mass quarantines and business shutdowns continue amid the epidemic.
“In this scenario, we’d expect a meaningful decline in economic output from the fourth quarter of 2019 and a sharp, V-shaped recovery afterward. There would be moderate supply-chain disruptions around the globe,” Vanguard analysts said in a fresh note. 
The net effects of the epidemic’s economic consequences will not be clear for at least several months. Its impact will be driven by the reach and duration of the virus, fear of consumers and businesses, and government responses to the outbreak, they added. 
-- Kathleen Magramo


Coronavirus could cut 0.5 percentage points off China’s economic growth: Vanguard

Jefferies maintains “hold” on Galaxy Entertainment (27 HK) at a target price of HK$54.00.
They said its 4Q19 results were inline but near-term impact still remains unclear.
The casino operator was down nearly 3 per cent to HK$52.10 in afternoon trading.
Galaxy Entertainment’s 4Q19 adjusted EBITDA and normalised adjusted EBITDA fell 6 per cent and 9 per cent to HK$4.1billion and HK$3.9 billion, in line with Jefferies’ and consensus' HK$4.0 billion.
“Gaming revenue and visitation are tracking below our 1H20 forecasts and likely remain weak until travel and visa restrictions are relaxed,” Jefferies’ analysts said, “If Macau ADR [average daily revenue] was MOP [Macanese Pataca]100 million per day lower than our 2Q20 MOP554 per day estimate, this would translate 5.2 per cent and 8.9 per cent to 2020 HK$47.00 fair value and earnings,” they said.
-- Kathleen Magramo


Jefferies maintains ‘hold’ on Galaxy Entertainment

Lots of emotions in the pot out there in markets, says Alan Li, portfolio manager of Atta Capital.
“People in China tend to believe virus to be under control while people in other markets are afraid of further spread outside of China. Hong Kong is the middle of them, extremely bullish and bearish here,” Li said.
“A-share investors focus on stimulus policy and the beneficial sectors,” he said, referring to Chinese shares. “We still see very strong fund inflow to support the market. However, high valuation of such strong sectors like semiconductor and tech-related make long funds feel uncomfortable and [prompt them to] shift to safety choice like infrastructure and construction.”
The Hang Seng Index has narrowed losses and is down 0.1 per cent at 26,660 in late afternoon trading. The Shanghai Composite Index finished with a 0.1 per cent gain at 2,991.
-- Deb Price    


Wide range of feelings about coronavirus driving markets, says analyst Alan Li

Hong Kong’s benchmark is ahead 0.5 per cent to 26,824.


Hang Seng Index turns up

The Shanghai Composite Index added 0.1 per cent to 2,991.33 at the close.
The CSI 300 gauge of large cap stocks in Shanghai and Shenzhen gained 0.3 to 4,084.88.
Both indices bounced back after falling for the past three sessions.
The Shenzhen Component Index rose 0.3 per cent to 11,534.02.
The ChiNext Price Index jumped 0.7 per cent to  21,96.71.
The food industry led the gains, as the sector jumped nearly 4 per cent, according to a gauge compiled by data provider Xuangubao.
Liquor distiller Kweichow Moutai (600519) advanced 1.3 per cent to 1,087.39 yuan. Muyuan Foodstuff (002714 CH), China’s second-largest pork producer, was up 2.2 per cent to 118.60 yuan.
Three Squirrels (300783 CH), China’s largest nut snack producer, shot up 3.6 per cent to 66.50 yuan.
GoerTek (002241CH) slipped 3.2 per cent to 24.13 yuan, while Luxshare Precision (002475 CH) fell 1.8 per cent to 46.76 yuan. Both make Apple AirPods.
-- Kathleen Magramo


Mainland markets advance

The Hang Seng Index came from behind in the middle of the afternoon, leaving it with a gain of 0.3 per cent at 26,778.62, led by gains in the finance industry.
Out of its 50 constituents, 32 went up, 15 fell while 3 stayed flat.
The Industrial and Commercial Bank of China (1398 HK) advanced 2.3 per cent to HK$5.46
China Construction Bank (939 HK) gained 1.9 per cent to HK$6.44.
  Meanwhile, index heavyweight Tencent (700 HK) slipped 0.1 per cent to HK$399.2.
  Galaxy Entertainment (27 HK) fell 2.2 per cent to HK$52.5, after results that disappointed investors.
  Budweiser Brewery APAC (1876 HK) declined 1.2 per cent to HK$24.00. It also had results that disappointed investors.
-- Kathleen Magramo


Hong Kong, China stocks gain, even as new cases outside China top new cases inside

Budweiser Brewing APAC falls as investors give thumbs down to results Daiwa Capital Markets reiterates its 'buy' rating on the Hong Kong Stock Exchange

Budweiser Brewing APAC falls as investors give thumbs down to results

Daiwa Capital Markets reiterates its 'buy' rating on the Hong Kong Stock Exchange