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Zhang Shidong

Deb Price

Happy Thursday!
And welcome to the second day of the new South China Morning Post's Live Stocks Blog! 
Each trading day, we will provide investors with timely news and analysis about markets in mainland China and Hong Kong, including significant moves in benchmarks and individual shares as well snapshots of companies, sectors, trends and markets-impacting government policy. (Stock trading involves judgment calls and risks that the SCMP cannot be held responsible for.)
In Hong Kong today, it's all Tencent. The Internet giant reports its results tonight.
Your main markets guides today will be Zhang Shidong in Shanghai and Deb Price in Hong Kong. We'll be helped out by the rest of the markets team as well as other reporters on our Business desk.
 


Stocks Blog: Traders await Tencent's earnings after heaven-to-hell 2018 

Tencent seeks new growth in year of transition as consumer businesses mature

Business

Markets

Tencent Holdings founder, chairman and chief executive Pony Ma Huateng speaks at the opening ceremony of the fifth World Internet Conference in Wuzhen, Zhejiang province, on November 7. Photo: Reuters

Geely shares shoot up after reporting earnings
Crystal ball: UBS China stock picks


Crystal ball: Louis Tse Ming-kwong likes utility, real estate stocks


Stocks

Live

Here's what we are watching this morning:Overnight markets/ What futures foretell
Overnight in US markets, S&P 500 lost 0.3 per cent, Nasdaq gained 0.4 per cent, and the Dow Jones Industrial Average declined 0.6 per cent.
Hong Kong futures were up 0.3 per cent, while the China A50 futures were 0.4 per cent higher.
IPO debuts: nothing major
Economic statistics/Central Bank action: The Federal Reserve kept the benchmark interest rate unchanged and signalled no increase in borrowing costs this year, because economic growth slowed.
Corporate events: earnings, meetings, news conferences
Hong Kong developer Henderson Land Development posted a 1 per cent increase in annual profit for 2018, while K Wah International said profits increased 3.6 per cent, as home sales growth weakened in the city.
Earnings today: Big companies including Tencent Holdings, PetroChina, Geely Auto, China Mobile and Cnooc will report earnings.Great reads: Don't miss these stories on Tencent's turnaround from a roller-coaster -- and very painful -- 2018 and Lee Shau-kee, Hong Kong’s second-richest man, who will retire as chairman and managing director of Henderson Land Development.


Morning guidance 

New China Life Insurance had its rating upgraded to "buy" at Citic Securities, which cited an inflection point of the insurer’s profit sustainability.
In a Thursday note, Citic said New China Life should trade at a par with its embedded values, which implies a 25 per cent increase in its current stock price. The shares rose 3.3 per cent to 53.97 yuan in Shanghai in early Thursday trading. Last night, the insurer put out its full-year earnings report, saying net income increased 47 per cent from a year earlier in 2018.
--Zhang Shidong


New China Life Insurance upgraded to 'buy' by Citic

The Hong Kong Monetary Authority bought HK$3.54 billion (US$451 million) of US dollars on Wednesday to maintain the narrow trading range set for the city’s currency to the greenback. Over the past two weeks, the city’s de facto central bank spent a combined US$1.5 billion to defend the exchange rate. The HKMA must keep the local currency trading in a range of 7.75 to 7.85 to the US dollar. The HK dollar recently traded at 7.8476 against the greenback.
-- Zhang Shidong



Hong Kong Monetary Authority defends currency again

Tencent is holding a conference call with investors following its annual earnings release tonight.
It's likely going to be an exciting call, given the tumultuous 2018 the Internet giant had. Of analysts polled by Bloomberg, 55 called it a "buy" while none called it a "sell."
The conference call starts at 8pm Hong Kong Time, or 8am Eastern Time. Listen in by clicking here for the webcast, or dial in with the following numbers – US: 184 4760 0770, UK: +44 20371 35084, China (landline): 80087 00532, China (mobile): 40062 40407, International: +65 6713 5330, and HK: +852 3018 8307. The passcode is 4783217.
You can access the archived webcast with the link above if you miss the call.
-- Yujing Liu



Tencent: Tonight's earnings call-in information

The ongoing run-up on Chinese stocks looks a lot like the build-up to the bull markets in 2005 and 2015, according to Haitong Securities.
The rally at this stage is usually characterized by sector rotations and subsequent significant pull-backs, as it is more driven by liquidity than fundamentals, strategists led by Xun Yugen wrote in a note.
A full-blown bull market needs to see an improvement in economic fundamentals, which the Shanghai-based brokerage predicts will occur in the third quarter, based on China’s inventory cycles and the effect of policy loosening.
The Shanghai Composite Index rose 0.4 per cent to 3,103.23 in early morning trading, but it has yet to make a breakthrough that would push up the benchmark to a nine-month high.
-- Zhang Shidong 


What's ahead for China's bull run? 

Shares of Geely Automobile Holdings (175 HK) fell for the second consecutive day, in advance of its 2018 earnings to be released tonight.
H shares of the carmaker dropped 1.6 per cent to HK$13.88 in the morning, following a 2.4 per cent slump on Wednesday.
Geely, which owns Volvo Cars, reported earlier that its auto sales in December plunged 44 per cent from a year earlier while it missed its full-year sales target of 1.58 million units for 2018.
According to a Bloomberg survey of 26 analysts, Geely is expected to post an 18.5 per cent profit rise to 12.6 billion yuan (US$1.89 billion) for 2018 after the market close.
-- Daniel Ren


Geely shares slide before reporting 2018 earnings

Castor Pang Wai-sun, head of research at Core Pacific-Yamaichi, says Tencent should see a HK$370 cap this year. Shares of the Internet giant were last trading down a bit, at $HK369.60. It reports tonight.
He says the current hot sector is Chinese property due to promising growth.
He predicts the Hang Seng Index will end at around 30,000 by the end of the month. It is now trading at 29,384. He predicts the Shanghai Composite will be trading at over 3,100 then as well. It is currently at 3,093. 
-- Louise Moon
 


Crystal ball: Castor Pang Wai-sun weighs in on Tencent, offers his hot sector tip

UBS Group recommends buying Chinese stocks that are in line for foreign inflows as well as market laggards, such as food and beverage producers, construction companies and airport operators.
The investment bank says the consolidation pattern being seen in Chinese share prices will probably continue until investors see more clear fundamentals. 
Some value investors, including overseas buyers through the Hong Kong-mainland connect programmes, already have chosen to sell to take profits before the release of March economic data that may create uncertainty for the market, said Gao Ting, a strategist at the Swiss bank, in the new UBS report. Share-price gains also have slowed as government policy support materialised and stocks’ valuations returned to the five-year average, he said. 
-- Zhang Shidong 


Crystal ball: UBS China picks

Shares of CSPC Pharmaceutical Group (1093 HK), a major generic and innovative drugs maker based in China's northern Hebei province,  surged 4.3 per cent after positive news on a business spin-off. 
It said in a Hong Kong stock exchange filing this morning that it had raised 1.22 billion yuan by selling shares of its food additive and health supplement unit CSPC Innovation Pharmaceutical, which will be listed on Shenzhen's second board market called ChiNext on Friday.
CSPC on Monday posted a 3.74 billion yuan 2018 net profit that was 3 per cent ahead of the average estimate of 33 analysts polled by Bloomberg. They forecast CSPC to see its net profit grow to 4.52 billion yuan this year and 5.58 billion yuan next year.
The stock has rebounded around 50 per cent so far this year after losing half its value in last year's second half on worries about Beijing's November roll-out of an open-bidding hospital bulk generic drugs procurement system that has slashed prices sharply. CSPC last year derived 37.5 per cent of its drugs revenues from generic drugs and 62.5 per cent from what it considered innovative drugs.
-- Eric Ng


CSPC Pharmaceutical shares surge after news of business spin-off

Shares of China Railway Group, the engineers of the US$7 billion rail link between China and Laos, rose as much as 1.5 per cent in Hong Kong trading after the director of the Laotian railway said the project is almost half done, and is on schedule to commence operation in December 2021.
-- Eugene Tang


China Railway shares up on China-Laos rail link update

Louis Tse Ming-kwong, managing director of VC Asset Management, says the US Federal Reserve's overnight signal that it won't raise rates this year could bode well for utility stocks and real estate.
"Their yield will be more competitive in relation to bank interest rates. It is more stable when the economy is not doing well. I'm looking at those, including gas, rather than high growth stocks," he said. "High growth [stocks] have already gone up quite a lot from the beginning of this year, so they will most likely take a breather. If you look at Xiaomi, for example, its share price has gone down after the results [on Wednesday]."
He thinks the Hang Seng will continue to find resistance at the 30,000 level through the end of the month. It is now at 29,370.  He expects the Shanghai Composite Index, which is the world's best-performing major market this year, will be trading at about 3,100 at the end of the month, which is essentially where it is now.
-- Louise Moon


Crystal ball: Louis Tse Ming-kwong likes utility, real estate stocks

The results of a key shareholder vote on property tycoon Gordon Wu Ying-sheung’s plan to spend HK$21.2 billion (US$2.71 billion) to privatise Hopewell Holdings are expected to be revealed tonight. 
About 500 shareholders voted this morning, according to a company spokeswoman.
In December, the 83-year founding chairman and his family offered HK$38.8 per share to buy out the 63.07 per cent of shares owned by other shareholders and take the company private.  The company's second-largest shareholder, Southeastern Asset Management, which owns 7.99 per cent of the company, has signalled it supports the delisting plan.
The motion needs 75 per cent of shareholders to vote in support to pass, while 10 per cent voting to reject the deal would be enough to scuttle it. 
Shares of Hopewell closed at the midday break at HK$36.8, up 1.1 per cent, following the vote held at 11:30am.
-- Enoch Yiu 
 


Hopewell privatisation plan to be decided tonight 

Shares of Henderson Land Development (12 HK) rose 3 per cent to HK$47.50 as of noon after Lee Shau-kee, Hong Kong’s second-richest man, signalled he will retire as chairman and managing director of Henderson Land Development, handing over his property empire to his two sons.
Lee, 90 , is considering a plan to formally step down after Henderson Land’s annual general meeting on May 28, according to a company announcement released after the market closed on Wednesday.
Shareholders welcomed Lee Shau-kee's succession plan because his sons spent more than a decade each preparing for this. Son Peter has been in senior management for 26 years, while his brother Martin has spent 14 years on the board.
Its utility arm, Hong Kong and China Gas (3 HK), saw its shares up two per cent to HK$18.40.
--Peggy Sito


Henderson Land shares shoot up after 90-year-old leader signals handover to sons

Geely Automobile Holdings (175 HK) reported an 18 per cent profit jump in 2018, meeting analysts’ expectations.
The company that owns Volvo Cars said its net profits were valued at 12.6 billion yuan (US$1.9 billion) last year, compared to 10.6 billion yuan in 2017.
Revenue grew 14.9 per cent to 106.6 billion yuan.
H shares of the carmaker controlled by Chinese billionaire Li Shufu recovered from losses in morning trading after the market reopened in the afternoon. It shot up to HK$14.76 (US$1.88), 4.7 per cent higher than the close on Wednesday.
-- Daniel Ren


Geely shares surge after earnings report

Shaanxi Broadcast & TV Network Intermediary and other Chinese cable TV operators surged after state-owned China Broadcasting Network signed a strategic agreement today with Alibaba Group Holdings and Citic Group for network integration.
Shaanxi Broadcast, Beijing Gehua CATV Network and Shanghai Oriental Pearl Group all jumped by the 10 per cent daily limit in mainland trading. The three sides will co-operate in areas of network integration, and upgrade and turn the cable TV network into a national one of strategic resources. 
Alibaba owns the South China Morning Post.
-- Zhang Shidong 


Chinese cable TV operators surge over Alibaba, Citic agreement 

China’s stocks broke a two-day losing streak, ending slightly ahead though giving up most of intraday gains, as traders waited for more evidence that growth in the world’s second-largest economy and corporate earnings will pick up.
The Shanghai Composite Index added 0.4 per cent, or 10.82 points, to 3,101.46 at the close after rising as much as 1.1 per cent. Trading volumes on the Shanghai exchange were almost 6 per cent below the 10-day average, according to Bloomberg data.
The benchmark has been range-bound over the past two weeks, with share-price gains slowing, as some traders pulled out of equities to cash in on a 24 per cent rally in the gauge this year.
UBS Group said the pattern will probably persist until March economic data provides more clues for the fundamentals. Meanwhile, Haitong Securities argued the current scenario looks a lot like the build-up to the bull markets in 2005 and 2015, which were characterized by sector rotations that were followed by significant pull-backs.
Cable TV operators were in the limelight after state-owned China Broadcasting Network signed a strategic agreement today with Alibaba Group Holdings and Citic Group for network integration. The three sides will co-operate in areas of network integration, and upgrade and turn the cable TV network into a national one of strategic resources, according to a statement posted on the website of the National Radio and Television Administration.
Shaanxi Broadcast & TV Network Intermediary Group surged by the 10 per cent daily limit to 12.27 yuan. Beijing Gehua CATV Network and Shanghai Oriental Pearl Group also jumped by that much to 12.95 yuan and 13.65 yuan respectively.
Liquor distillers were among the day’s worst performers, providing a drag on the index. Shede Spirits shed 1.8 per cent to 29.77 yuan and Shanxi Xinghuacun Fen Wine Factory slid 1.5 per cent to 56.83 yuan.
-- Zhang Shidong


Shanghai Composite posts slight gains, breaking two-day losing streak 

In Hong Kong, the Hang Seng Index fell 0.9 per cent, or 249.41 points, to 29,071.56. The Hang Seng China Enterprises Index, retreated 0.9 per cent.
China Mobile slumped 4.8 per cent to HK$83.10, as the nation’s biggest mobile-phone carrier did not clarify its plan on the fifth-generation network in its annual report. Net income increased 3 per cent from a year earlier to 117.8 billion yuan (US$17.6 billion) in 2018, it said.
China Mobile was the worst performing blue chip on the city’s stock benchmark, accounting for about a third of the loss on the Hang Seng Index.
CSPC Pharmaceutical Group, a Chinese generic and innovative drug maker, surged 3.6 per cent to HK$15 as the biggest gainer on the Hang Seng Index. The company completed the first-time stock sales of its food additive and health supplement unit, which will start trading on Shenzhen’s ChiNext board on Friday.
Henderson Land Development rose 2.4 per cent to HK$47.20. Lee Shau-kee, Hong Kong’s second-richest man, signalled he will retire as chairman and managing director of the property developer and hand over his property empire to his two sons, each of whom has been in senior management for at least a decade.
-- Zhang Shidong


Hang Seng slides, weighed down by big loser China Mobile 