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Yujing Liu

Deb Price

Catch up on today's action below.
And remember, markets will be closed Friday in Hong Kong and mainland China, due to the Ching Ming Festival holiday.
We'll see you back on Monday. Please send questions you'd like answered to deb.price@scmp.com .
-- Yujing Liu and Deb Price


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The bull sculpture at Exchange Square in Hong Kong. Photo: David Wong


A Chinese man checks out stock prices at a brokerage in Beijing on February 21, 2019. Photo: Associated Press


Break up ‘unnatural and abnormal’ monopolies to sustain high growth, US-China business group head urges Beijing

The US is focused on the role of state-owned enterprises within the Chinese economy, US-China Business Council president Craig Allen said. Photo: Bloomberg

Craig Allen

Chinese national flag is hoisted near the branch office of Industrial & Commercial Bank of China (ICBC) Friday Oct. 27, 2006 at Shanghai Stock Exchange in Shanghai, China. ICBC's shares began trading Friday in Shanghai, part of a dual initial public offering with the Hong Kong Stock Exchange that raised a record US$21.9 billion (euro17.4 billion). (AP Photo/Eugene Hoshiko)

FILE PHOTO: A logo of the Agricultural Bank of China is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada October 19, 2017. REUTERS/Chris Helgren/File Photo GLOBAL BUSINESS WEEK AHEAD SEARCH GLOBAL BUSINESS 30 OCT FOR ALL IMAGES

Business

Markets

Crystal Ball: Airline stocks set to soar, analysts say
Crystal Ball: Gold to rise to US$1,400 this year, says BofAML


Crystal Ball: Airline stocks seen outperforming, analysts say


China markets

China economy

China stock market

Live

Here's what we are watching this morning:
Overnight markets/ What futures foretell
-- Overnight in US markets, S&P 500 rose 0.21 percent, Nasdaq gained 0.6 per cent, and the Dow Jones Industrial Average went up 0.15 per cent.
-- Hong Kong futures rose 0.2 per cent, while the China A50 futures were up 0.1 per cent.
IPO debuts:
--None major
Economic statistics/Central Bank action:
 
-- None major
Corporate events: earnings, meetings, news conferences
 
-- None to note.
Later: Vice Premier Liu He, China’s chief trade negotiator, continues meetings with US officials in Washington over the trade war.
Good Reads: Pearl Liu reports that Hong Kong developers will flood market with more than 9,000 homes in the second quarter amid improving sentiment. And Wendy Wu has an exclusive interview with Craig Allen, the president of the US-China Business Council, who urges Beijing to break up the state monopolies that dominate nearly half of the economy. Lots of rich numbers and details in this one.
 


Morning guidance 

China’s three largest airlines skyrocketed in Hong Kong at the open following a cut in government fees by half.
China Eastern (0670 HK) soared 20 per cent, China Southern (1055 HK) jumped 13 per cent and Air China (0753 HK) climbed 10 per cent.
On the mainland, the three airlines’ A-shares surged by the daily limit of 10 per cent, along with Hainan Airlines (600221 SH), Juneyao Airlines (603885 SH) and Spring Airlines (601021 SH).
-- Yujing Liu


Airline stocks take off at open 

The Hang Seng Index briefly breached the key 30,000 level in early trading, but failed to stay above it and was trading down 4.02 points at 29,984.34.
That was the first time the benchmark touched the 30,000 level in intraday trading since June 18, 2018.
-- Yujing Liu


Hang Seng  briefly tops 30,000 -- the first time since June 2018

The airline fee reduction “exceeded market expectations” and will boost travelling demand and lower airlines’ costs, analysts at Everbright Securities and Northeast Securities wrote in a report today.
Everbright estimates China Southern will see net profit rising by 1 billion yuan, which equals one third of its 2018 net profit, and Air China and China Eastern will enjoy a 700 million yuan jump.
Analysts at Guosheng Securities say airline stocks are likely to outperform based on a mix of factors. “The suspension of Boeing 737 MAX 8 planes has affected the supply but travelling demand is still robust, so ticket prices of core flights are likely to rise. The fee cut will directly expand airlines’ net profits, coupled with stable oil prices and currency rates. The valuation levels of the three largest airlines are relatively low,” they wrote in a report today.
The State Council said on Wednesday it would lower the fees it charges airlines and passengers for a government fund by half starting from July 1.
The current fees on airlines vary according to their flight and plane types. For passengers, the fees are 50 yuan per person for domestic flights and 90 yuan per person for international flights.
-- Yujing Liu


Crystal Ball: Airline stocks set to soar, analysts say

SF Holding (002352 SZ) falls 4 per cent after announcing four major shareholders plan to cut their stakes by no more than 7.91 per cent of the company's overall shares, according to an exchange filing.
The shareholders together owned 21 per cent of the company’s shares, and the stake reduction was based on their own funding needs, the filing said. Their shares will be sold by the end of October.
-- Yujing Liu


SF Holding tumbles after announcing four major shareholders cutting stake

Shares of Prada (1913), the Italian seller of luxury leather goods and fashion, fell as much as 0.9 per cent to an intraday low of HK$23.25 in Hong Kong, after AlphaValue downgraded its rating on the stock to "reduce."
Prada yesterday announced a 3 per cent cut in its prices -- along with rivals Gucci and Louis Vuitton -- in mainland China to reflect a lower value-added tax (VAT) , effective April 1.  
-- Eugene Tang


Prada falls on downgrade 

Shares of Honworld Group (2226.HK) soared after Bloomberg reported the Chinese soy sauce maker was working on a possible sale of more than 49 per cent. It was up 9 per cent to HK$4.38 in morning trading, its highest level since April 2017.
The firm, which sells products under the ‘Lao Heng He’ brand, has reached out to Shanghai-listed Foshan Haitian Flavouring & Food (603288.SS), and Hong Kong’s private company Lee Kum Kee, as potential buyers, according to Bloomberg.
Foshan Haitian Flavouring & Food was down 1.23 per cent to 84.25 yuan on Thursday morning, continuing this week’s downward trend after having boosted 15.5 per cent last week.
On Wednesday evening, Honworld said a financial adviser had been appointed to “identify potential investors or strategic partner” for the company’s long-term development, in a filing on the stock exchange.
-- Louise Moon


Soy-sauce maker Honworld soaring on report of possible sale of big stake 

China state-run oil major China National Offshore Oil Corp. was down 1.2 per cent at $HK14.46  in early trading, despite CCB International Securities initiating coverage with an "outperform" recommendation.
CCB gave Cnooc (883 HK) a price target of HK$17.50 -- or 21 per cent above its current level.
Of analysts surveyed by Bloomberg,  17 had buys, seven holds, and none had sells. The consensus target price is $HK16.02, well below that of CCB.
China’s dominant offshore oil and gas producer's relative strength index is 58.50, suggesting it is fairly priced between the extremes of 30 (oversold) and 70 (overbought).
-- Deb Price 
 


Analyst 'outperform' rating doesn't fuel up Cnooc's price

Chemical stocks soared following the third factory blast in China in two weeks. 
The market expects the latest blast at a chemical factory in Taixing city in the eastern province of Jiangsu will accelerate the authorities’ ongoing campaign to tighten scrutiny over factory safety and environmental practices.
Producers of glyphosate, a herbicide and crop desiccant, soared 5 per cent on average based on one gauge. Nantong Jiangshan Agrochemical (600389 SH) and Anhui Guangxin (603599 SH) jumped by the 10 per cent daily limit.
Previously, two deadly blasts in Jiangsu killed 78 people and seven people respectively on March 21 and 31. Wednesday's blast resulted in no injuries.
-- Yujing Liu 


Third China factory blast in two weeks sends chemical stocks soaring

Analysts at Sinolink Securities said the campaign led by the Jiangsu provincial government to improve safety and environmental practices at chemical factories was likely to benefit the industry, in a report released today.
The campaign and related inspections are likely to force out smaller factories and reduce the overall supply, which will push up prices and benefit companies located in other provinces, according to the report.
“In the long term, smaller companies will be gradually eliminated as large firms enjoy prominent advantages in safe and environmental production, technology and supply chain,” they wrote, adding that Jiangsu is the most concentrated, with small factories in the dye, pesticide and pigment industries.
Sinolink analysts recommended leading players as Zheijang Longsheng Group (600352 SH), Jiangsu Yangnong Chemical (600486 SH) and Lily Group (603823 SH).
-- Yujing Liu


Crystal Ball: Which chemical players most likely to benefit from safety crackdown after blasts?

The Shanghai Composite Index climbed as much as 1.1 per cent in morning trading before paring the gains to 0.6 per cent to 3234.41 heading into the noon close.
The benchmark is on track to extend its rallying to a fifth straight session, boosted today by big gains in airlines, chemicals, car makers, and stocks related to industrial hemp and the Shanghai free trade zone.
In Hong Kong, the Hang Seng Index retreated 0.5 per cent to 29,839.62, after testing and failing to stand above the 30,000 level in early trading.
-- Yujing Liu 


Shanghai gets boost by airlines, chemicals, hemp 

New stocks trading accounts opened in Shenzhen surged 109 per cent to 3 million in March from February, the largest monthly jump in a year, according to data released by the Shenzhen Stock Exchange.
The Shenzhen Component Index, which tracks 500 stocks listed in the city, has gained a whopping 43 per cent since the beginning of this year.
The population of A-share investors stood at 142 million by August, according to a survey by the China Securities Investor Protection Fund released last month.
Salary was the major source of income for 80 per cent of the investors, while the post-tax annual income of 90 per cent of them was below 500,000 yuan (US$74,463), the survey says.
-- Yujing Liu


Chinese mom-and-pop investors are rushing into markets

Despite a 25 per cent revenue run-up in 2018, China Oilfield Services (2883 HK/ 601808 CH) reported razor thin profit margins, HSBC Global Research points out in its latest ratings note on the stock.
It maintained both its buy rating on the Hong Kong shares, with a target price of HK$12.18, up from HK$10.49, and its hold rating of the mainland-traded shares, with a target prices of 10.54 yuan, up from 9.35 yuan.  
"The company continues to see significant challenges in the recovery of the (oilfield services and equipment) segment, but it is seeking to both expand its markets and promote the profitability development of the well services segment and overseas business," HSBC wrote.
"Our H-share Buy rating is supported by our expectation that fundamental improvements will likely continue, albeit at a gradual pace, but we think the stock price will continue to move faster than the fundamentals," it added.
The main driver is increased activity due to higher gas prices, as well as Beijing's push to boost domestical oil and gas production. The downside risks include lower oil prices and weaker margins, the HSBC analysts said.
Merrill Lynch, Citigroup and China Internal Capital have a buy on the H shares, while Goldman Sachs is neutral.
In Hong Kong, shares were down 2 per cent at HK$8.65, while its A shares were down 1.2 per cent, at 10.61 yuan.
-- Deb Price


Crystal Ball: China Oilfield Services not ready to pump up big profits, says HSBC

Foreign investors are snapping up commercial properties in China’s big cities at lightning speed.
In the latest example, Canada’s Brookfield Asset Management is planning to buy a Shanghai development project under construction for at least 2.8 billion yuan (US$417 million) from Greenland Hong Kong (0337 HK), a unit of the state-controlled developer Greenland Group.
The rise in foreign interest comes at a time when domestic developers have become too cash-strapped to bid for projects, thanks to Beijing’s deleveraging campaign.
Greenland Hong Kong jumped as much as 14 per cent after announcing the plan in an exchange filing. It was recently trading 8 per cent higher.
-- Yujing Liu
 


Greenland jumps on latest purchase by foreign investor in China commercial property

Wuliangye Yibin (000858 SZ), China’s second-largest liquor maker by market cap, surged 5 per cent to a historic high of 100.2 yuan on media reports that distributors planned to raise product prices by the end of April.
Led by Wuliangye, the baijiu sector surged 3 per cent, based on one gauge.
Investor sentiment was juiced up by the fact that the company is the latest to join the “100 yuan club” – only 20 stocks in China trade above 100 yuan apiece.
-- Yujing Liu


Liquor maker Wuliangye Yibin soars -- joins '100 yuan club'

Risk-on is back in in equity markets. Trade negotiations going on in Washington sound promising.  And China's economy appears to be stabilising.
But one thing hasn't changed: BofA Merrill Lynch still thinks gold will rise to US$1,400 an ounce by the end of the year.
That would be an 8.25 per cent rise from its recent trading price of US$1,293.
"We believe that many underlying issues in the global economy remain unresolved," it said in a new research note, making gold attractive as a safe haven alternative to riskier assets.
But it also pointed to central banks continuing to add gold to their reserves, partly driven by "de-dollarizing" under way in the global economy for economic and political reason.
"(C)entral bank gold holdings have been well above the levels our portfolio diversification models would imply," BofAML writes. "This suggests that other motives have also been at play.
"... Indeed, 76% of CBs said in a recent World Gold Council study that gold is attractive as a safe haven asset. We also believe that de-dollarization is an important factor behind the addition of gold to central bank gold reserves. ...
"... Against this backdrop, we note that around one-fifth of CBs globally are looking to further increase their gold holdings next year, according to the WGC, suggesting further support to gold from the official sector," it added.
Gold bottomed out in mid-August last year at about $1,174.
-- Deb Price


Crystal Ball: Gold to rise to US$1,400 this year, says BofAML

In its latest effort to boost the economy, the Chinese government has lowered the social security fees companies are required to pay for employees.
The pension fund is the biggest hit in social security fees for companies. The State Council said employers will need to contribute 16 per cent of each employee’s salary to the pension funds starting from May 1, down from 20 per cent.
Companies could save as much as 800 billion yuan based on one estimate, according to a report by the Securities Times.
-- Yujing Liu


Chinese companies to get boost from cut to social security fees

What a week it has been in Chinese markets.
The Shanghai Composite Index climbed 0.9 per cent to close at 3246.57, rallying for a fifth straight session to a fresh high since March 22, 2018.
The benchmark has gained 8 per cent over the past five trading sessions, and has advanced 30 per cent since the beginning of this year. It soared above 3,100 points effortlessly, which has been a key resistance and support level in the past.
The Shenzhen Component Index closed 0.7 per cent higher, bringing its gains this year to a staggering 44 per cent.
Trading volume in Shanghai and Shenzhen stood at 1 trillion yuan (US$149 billion) again for the third time this week.
Markets will be closed on Friday for the Ching Ming Festival holiday.
-- Yujing Liu 


Chinese markets have stellar (short) week 

In Hong Kong, the Hang Seng Index fell 0.2 per cent to 29,936.32, taking a breather from a seven-session rally.
The benchmark briefly breached the 30,000 level in morning trading, but was met with tremendous resistance and retreated.
Index heavyweight Tencent Holdings fell 0.5 per cent, after announcing it planned to issue bonds worth US$6 billion on April 11, the largest bond sale in Asia so far this year.
-- Yujing Liu


Hang Seng slips after seven-session rally

Stocks Blog: Shanghai rallies for fifth straight session

Crystal Ball: Airline stocks set to soar, analysts say Crystal Ball: Gold to rise to US$1,400 this year, says BofAML

Crystal Ball: Airline stocks set to soar, analysts say

Crystal Ball: Gold to rise to US$1,400 this year, says BofAML