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Zhang Shidong

Deb Price

The Shanghai Composite Index ended up at its highest level since March 22, 2018, while the Hang Seng slipped in Hong Kong.
Catch up on the action below. And send questions you'd like answered to deb.price@scmp.com .
-- Zhang Shidong in Shanghai and Deb Price in Hong Kong 
 


China’s Zhipu AI launches US$560 million share sale as Hong Kong’s IPO tech race heats up

Hong Kong stocks inch up on last full trading day of year as yuan eclipses 31-month high

Insilico Medicine leads 6 Hong Kong IPOs, capping banner year for fundraising

Slow trade drives Hong Kong stocks lower ahead of New Year holiday

Stocks

Stocks Blog: Shanghai rides up to highest level in more than a year 

A cowboy rides a bucking bull on February 27, 2010 in Apache Junction, Arizona. Photo: Shutterstock


Head of China’s biggest state firm in Hong Kong urges Beijing to deepen market reforms

Fu Yuning, chairman of China Resources Group, which owns US$160 billion worth of assets. Photo: Felix Wong

A labourer works at an assembly line in a factory of China Resources Snow Breweries Co., Ltd. in Lanzhou, Gansu province, in this August 25, 2010 file photo. China Resources Beer will pay $1.6 billion to buy out SABMiller Plc's stake in their China Resources Snow Breweries venture, a much lower price than expected and sending shares in the state-backed firm soaring by a quarter in value. REUTERS/Stringer/Files CHINA OUT. NO COMMERCIAL OR EDITORIAL SALES IN CHINA

Business

Markets

China's first quarter GDP is 6.4 per cent, beating estimates 
Kweichow Moutai has strong fan base among northbound Connect traders


Welcome to our live stocks blog. We cover the action as it unfolds in mainland and Hong Kong markets, and share with you what analysts think is ahead for companies and sectors.


China economy

China stock market

Hong Kong stock exchange

Live

Here's what we are watching this morning:
* Overnight markets/ What futures foretell
  -- Overnight in US markets, S&P 500 gained 0.1 per cent, while Nasdaq and Dow Industrials both added 0.3 per cent.
 -- Hong Kong futures rose 0.2 per cent, while the China A50 futures were 0.1 per cent lower
* IPO debuts: none
* Economic statistics/Central Bank action: China’s statistics bureau will release the data on first-quarter economic growth as well as fixed-asset investment, retail sales and industrial output this morning. The economy probably expanded by 6.3 per cent in the three-month period, according to the median estimate of 41 economists in a Bloomberg survey.
* Corporate events: earnings, meetings, news conferences
-- China Tower to release first-quarter earnings today and Alibaba Pictures Group to announce 2018 annual result
*Later this week: Hong Kong stock market is closed Friday for the Good Friday.
Good reads: The chairman of China Resources Group urges the Chinese government to encourage more competition, reports Laura He.


Morning guidance 

The China Securities Regulatory Commission started an investigation into a Hainan province-based company that was suspected of fraud linked to illegal margin trading businesses, the stock-market regulator said in a statement in the form of questions and answers on the website Tuesday night.
The company does not have a broking license and the police were already dealing with the case, it said. Investors should steer clear of over-the-counter margin trading as all the platforms running the business are unlicensed, according to the statement.
The CSRC issued a statement in February warning investors against the risk of participating in OTC margin trading.
-- Zhang Shidong 


China’s securities regulator once again clamps down on OTC margin trading

Weichai Power (2338 HK)  rose 1.1 per cent to HK$14.10 on news yacht-maker Ferretti Group wants to produce 27 new serial models by 2021. Weichai Power, which sells diesel engines for heavy duty trucks and engines for construction and farming, is its main shareholder.
Weichai Power was the top pick in the heavy duty truck sector by Huatai Research, which maintained its buy recommendation on the stock in a report dated April 15. 
Weichai Power's shares have been on a tear since January 3, rising 78 per cent as of its Tuesday close.
-- Deb Price 
 


Weichai Power climbs on yacht news

Guizhou Space gets buy recommendation from Northeast Securities
Guizhou Space Appliance (002025 CH) was trading down 0.5 per cent at 26.85 yuan, on the heels of Northeast Securities initiating coverage with a buy recommendation and a price target of 36.23 yuan. That price target is 34 per cent above its Tuesday close. 
The Chinese company develops and manufactures electronic components used in aviation, aerospace and high-speed trains.
The stock is up 26 per cent this year. Of analysts tracked by Bloomberg, 13 rate it a buy, none a hold or sell, and the consensus price target is 33.75 yuan.
-- Deb Price
 


Guizhou Space gets buy recommendation from Northeast Securities

China’s economy grew 6.4 per cent in the first quarter compared to a year earlier, the joint-slowest growth rate since quarterly growth records began to be published 27 years ago, according to official figures released on Wednesday, but beating analysts’ expectations.
This beat the median forecast of a Bloomberg survey of economists, which predicted gross domestic product (GDP) growth would slow to 6.3 per cent for the quarter.
However, it falls within the government’s growth target range of between 6.0 and 6.5 per cent for this year. Last year the economy grew at 6.6 per cent.
GDP growth matches the fourth quarter growth figure of 6.4 per cent, which matched the lowest growth rate since the Chinese government began publishing quarterly growth rates at the beginning of 1992.
Full story here.
-- Finbarr Bermingham 


China's economy grows 6.4 per cent in first quarter 

China's pork production fell 5.2 per cent in March, compared with last year, the National Bureau of Statistics said.
Shares of WH Group (288), the world's largest pork and meat-processing company, rose as much as 2.7 per cent to an intraday high of HK$9.04, on optimism that the shortage will cause pork prices to rise, which will bolster the company's bottom line.
Manufacturing output rose 9 per cent in March, while electricity output rose 5.4 per cent. Infrastructure investment rose 4.4 per cent in the first quarter while manufacturing investment rose 4.6 per cent. That means the Chinese economy had been spending its way out of the slump.
-- Eugene Tang


China pork production falls 5.2 per cent in March

The head of China’s largest and oldest state-owned company in Hong Kong -- China Resources Group -- says the government should let competitive forces play a bigger role in certain market-oriented industries, reports Laura He.
The government should continue to dominate industries monopolised by state entities, such as power distribution and transmission, whereas industries that are already populated by private enterprises or quasi-state companies should be allowed to compete, she reports.
“Let the fittest survive,” said chairman Fu Yuning.
Fu said the central government has changed its attitude towards uncompetitive state firms and will no longer save those losing out to private players or foreign rivals.
“Beijing’s attitude [towards state enterprises] is firm and clear: if you lose, we will just let you collapse and go bankrupt. Competition is necessary for state enterprises to reform themselves and become stronger on the global stage.”
Read full story here.
 


China Resources chairman urges more competition 

China’s central bank, which has been pumping funds into the nation’s fragile economy over recent months, has suggested it will not flood the market with excessive liquidity, in a quarterly monetary policy document, reports Orange Wang.
The People’s Bank of China (PBOC) summarised its first quarter monetary policy committee meeting, during which the PBOC said it would block the “general valve” of money supply, showing a preference for restraint and suggesting major moves towards easing are unlikely, Wang reports.
The PBOC said China’s economic situation was healthy, in a much more upbeat reading than the last edition, when it saw only “stable” growth in the world’s second biggest economy.
Read full story here. 
 


China's central bank suggests it won't flood market with excessive liquidity

The Shanghai Composite Index was struggling to find a direction this morning, even after first-quarter economic growth slightly exceeded analysts’ estimates.
While the National Bureau of Statistics said China’s economy expanded by 6.4 per cent against the consensus projection of a 6.3 per cent growth, the data failed to spur immediate buying interest, with the benchmark little changed.
Analysts argue the resilience of the economy might already have been priced in a 30 per cent gain in the Shanghai Composite so far this year and a further run-up probably requires the confirmation of an improvement in corporate earnings.
Liquor distillers including Luzhou Laojiao led the declines, while automakers gained.
-- Zhang Shidong

 


China’s stocks trade sideways after release of GDP data that beats estimates

China's stronger-than-expected economic growth in the first quarter "confirms that China’s economic growth is bottoming out and this momentum is likely to continue going into months ahead with recent surge in credit growth and a possible agreement between the U.S. and China on trade issues," said Tai Hui, Asia-Pacific chief market strategist at JPMorgan Asset Management.
"From Beijing’s perspective, this set of data should show that the policy reset in mid-2018 from de-leverage to growth support is starting to yield results. While the commitment to support growth will remain unchanged for the rest of this year, fresh stimulus could wait."
-- Eugene Tang


China policy reset 'starting to yield results,' JPMorgan strategist says

China's pork prices may rise by as much as 70 per cent in the second half of the year, Bloomberg reported, citing a government ministry in a briefing.
WH Group (288 HK) extended its gain by as much as 3.6 per cent to an intraday high of HK$9.12 in Hong Kong.
-- Eugene Tang


China pork prices may rise 70 percent in second half of year: Bloomberg

BYD’s underperformance among other publicly traded Chinese electric car makers this year may be temporary, as the company will stand out in the sector because of edges in technology reserve and products, analysts led by Chen Junbin at Citic Securities wrote in a note today.
BYD’s lagging performance this year was most attributable to the government’s scaling back of subsidies for new-energy car purchases, according to the note.
Investors’ expectations about the company may improve going forward, as more Chinese cities are expected to join Shenzhen in requiring all buses and ride-hailing cars to be pure electric ones, it said.
BYD’s Shenzhen-traded shares had gained 18 per cent this year through yesterday and the Hong Kong-listed stock 5.5 per cent, lagging a 30 per cent gain a Citic’s index tracking Chinese automakers. The stocks surged at least 4.8 per cent in the two markets today.
-- Zhang Shidong
 



Citic Securities sees catch-up in BYD shares

Chinese liquor giant Kweichow Moutai (600519 CH) continues to find favour with northbound traders on the Hong Kong-Shanghai Stock Connect. 
It was the the top stock in terms of trading value bought and sold Tuesday, with nearly 2.9 billion yuan in shares turning over, of which nearly 1.6 billion yuan of shares were bought, according to Hong Kong Exchanges and Clearing data.
It is also popular with analysts tracked by Bloomberg, with 38 rating it a buy, none a hold and one a sell, with a target price of 960.41 yuan. It is trading down by 0.5 per cent at 935 yuan.
Kweichow Moutai is probably the best known baijiu liquor in China, and is popular at banquets and as gifts.
Since October 30, when it was trading at 524 yuan, it has shot up 79 per cent, as of the Tuesday close.
Next in favour with northbound traders, by trading value, were Ping An Insurance (601318 CH), China Merchants Bank (600036 CH), Citic Securities (600030), and Jiangsu Hengrui Medicine (600276).
In March, Ping An beat Kweichow Moutai as the most actively traded stock by trading value among northbound traders. This year, its shares in China are up 54 per cent. Among analysts tracked by Bloomberg, 34 rate it a buy, one a hold, and none a sell, with a target price of 91.36 yuan. It is trading down 0.46 per cent at 84.62 yuan.
After Kweichow Moutai in second place,  the next three most popular shares in March were Citic Securities, China Merchants and Jiangsu, in that order.
-- Deb Price
 


Kweichow Moutai has strong fan base among northbound Connect traders

Just a third of the apartments on offer at Hong Kong developer Henderson Land’s Reach Summit project were snapped up on Tuesday, a reflection of buyers’ cautious outlook about the city’s property market and a rebound that has followed a five-month correction in prices, reports Eric Ng.
The developer put 101 units on sale. Of the 32 apartments sold, most were studios and one-bedroom units as they involved smaller sums. About 70 per cent were bought by users, according to agents, with the rest going to investors, Ng continues.
The apartments, ranging from 255 to 381 sq ft in area, were offered at an average discounted price of HK$16,088 per square foot (US$2,052), an increase of 1.3 per cent over the average price of HK$15,881 offered when the project was launched late last year. The selling prices of the latest batch ranged from HK$4.4 million to HK$6.5 million (US$561,000 to US$830,000) each, Ng writes.
“This sounds like a reasonable sales result. Although the overall sales were not high, most of the studios and one-bed flats have been sold,” said Sammy Po, chief executive at Midland Realty’s residential department. “I expect the market’s positive sentiment to continue this month and the next.”
Henderson Land Development (12 HK) is trading up 0.3 per cent at HK$49.90.
Read full story here.
 


Henderson Land's Reach Summit flat sales underscore buyer cautiousness

China’s overnight repurchase rate, a gauge of funding availability in the interbank market, jumped 10.6 basis points to 3 per cent at noon, set for the highest level since April 2015.
The surge in the borrowing costs came after China’s first-quarter economic growth topped analysts’ estimates and the central bank earlier added back the reference to keep control of liquidity floodgate after a quarterly monetary policy meeting.
-- Zhang Shidong



China’s overnight repurchase rate at four-year high

China’s benchmark seems to have found a direction after spending the whole morning session swinging between gains and losses, with the Shanghai Composite Index rising 0.4 per cent.
Better-than-expected data on first-quarter economic growth convinced traders that a recovery was in good footing, as investors look past surging borrowing costs on the interbank market following the central bank’s re-emphasis of liquidity management.
-- Zhang Shidong 


China stocks heading up as data confirms recovery

Traders from the mainland will probably snap up more Hong Kong stocks through the connect programme with Hong Kong, as Chinese shares traded at the most expensive level relative to equities in the city in a year, according to BNP Paribas.
A gauge compiled by Hang Seng Index Services to track the price discrepancy between the two markets rose to 127.12 on Tuesday, the highest since March 2018. Reading above 100 indicates the mainland’s stocks trade at a premium to Hong Kong shares. Southbound investors are expected to “selectively” accumulate relatively inexpensive H-shares, said Chris Yung and Jason Lui, analysts at the French bank, in a note dated today.
The most bought stock in the southbound channel since March was WH Group, a pork processor that stands to benefit from restrained supply amid African swine fever, the note said.
-- Zhang Shidong

 


Crystal Ball: BNP Paribas sees more mainland buying of Hong Kong stocks

HSBC says today's 6.4 per cent first quarter economic growth rate In China is "further evidence that growth has bottomed," leading it to expect further recovery in activity data in coming months and set the full year growth at 6.6 per cent. 
That is more optimistic than the estimate of the Chinese government, which in March set a growth target range of 6 per cent  to 6.5 per cent for 2019, partly due to the US-China trade war as well as high debt levels.
"The production method breakdown of GDP suggests that the secondary (ie, manufacturing) sector contributed the most to the stabilisation, while the service sector continues to grow at a strong 7% y-o-y. GDP deflator eased to 1.4% from 2.7%, which is consistent with CPI and PPI inflation trajectory," Julia Wang, Greater China economist for HSBC, wrote in a note, referring to the Consumer Price Index and the Producer Price Index.
"This should pick up a little bit in the coming months, as high frequency indicators point to rising prices in food, energy and broader industrial space, helping to support nominal GDP growth," she added.
Wang said household consumption "held up reasonably well." Urban household disposable income grew 7.9% year-on-year in nominal terms. Wage growth increased to 7.8% year-on-year. "Both point to a stable labour market that is helping to support consumption," she wrote. 
-- Deb Price 
 


Crystal Ball: China to hit 6.6 per cent growth in 2019, says HSBC 

Shares of Chinese car makers surged on speculation that the country’s economic planning agency would ease the restrictions for having driving licenses, raising hopes that the liberalisation would bolster demand in the world’s largest vehicle market.
A consultation paper by the National Development and Reform Commission (NDRC) mentions easing strict restrictions over licenses as well as measures to encourage citizens to purchase new-energy vehicles, Bloomberg reported, citing CIMB Securities analyst Danny Chen.
At least three car makers jumped by their daily 10 per cent price limit.
FAW Car (000800), the country’s oldest car maker and the local partner of Volkswagen and Toyota Motor, rose to a 52-week high of 12.35 yuan. Shares of its unit Tianjin FAW Xiali (000927) advanced to a three-day high of 6.60 yuan. Shares of Dongfeng Automobile (60006), which makes cars in China with Nissan Motors and PSA Peugeot-Citroen, rose to a 12-month high of 7.67 yuan.
SAIC Motor (600104), the largest Chinese car maker and the local partner of both General Motors and Volkswagen, rose by as much as 6.2 per cent to an intraday high of 30.30 yuan in Shanghai.
-- Eugene Tang
 


Chinese car makers surge on speculation restrictions on driving licenses will be eased

The Shanghai Composite Index rose 0.3 per cent to 3,263.12 at the close on Wednesday, finishing at the highest level since March 22, 2018, after the statistics bureau said China’s economy grew 6.4 per cent in the first quarter. That beat the consensus projection of 6.3 per cent growth.
Traders were convinced that a firm economy recovery was under way, looking past a jump in borrowing costs in the interbank market that sent the overnight repurchase rate to a four-year high. BYD, FAW Car and other automakers paced the gains on expectations that the government will unveil plans that will ease license controls and encourage purchase of new-energy vehicles.
 Northbound trading in the exchange link will be shut Thursday and reopen Tuesday, due to the Easter holiday observed in Hong Kong.
-- Zhang Shidong


China’s stocks close higher for second day as GDP data tops estimates

Mainland natural gas distributor stocks plunged across the board after a Citi research report today said regulator National Development and Reform Commission has issued a consultation paper with a proposal to cap return on operations to connect customers to distributors' pipeline network at 10 per cent above cost.
Since Hong Kong-listed mainland gas distributors source 30 per cent to 40 per cent of their operating profits from the collection of such "connection fees", Citi's analysts estimated their net profits could be cut by 4 per cent to 20 per cent if the fees per household is cut by 7 per cent to 26 per cent.
However, an investor relations executive at one of the distributors told the South China Morning Post that her firm's executives have not received such a paper, and the reported 10 per cent cap sounds "unreasonable" since it would be calculated based on the cost of providing the connection without incentives to minimise the cost, according to the Citi report.
"It is also uncertain how such cost, which has various components, will be defined," she added.
ENN Energy (2688 HK) fell 2.7 per cent to HK$74.30, while China Gas Holdings (384 HK) slumped 4.5 per cent to HK$24.40, China Resources Gas (1193) slid 2.8 per cent to HK$35.35 and Kunlun Energy (135 HK) lost 3.1 per cent to HK$8.35.  
-- Eric Ng 


Mainland gas distributors plunge over Citi report on fee cap proposal 

Foxconn Industrial Internet (601138) jumped by its daily 10 per cent limit before its chairman Terry Gou announced his plan to run in Taiwan's presidential election.
Foxconn's shares rose to 17.91 yuan in Shanghai, the highest since July 24 last year.
-- Eugene Tang


Foxconn Industrial Internet jumps by daily limit to high since July

The Hang Seng Index slipped less than 0.1 per cent, or 5.19 points, to 30,124.68. The Hang Seng China Enterprises Index, or the H-share gauge, added 0.2 per cent.
Chinese gas distributors topped the list of decliners after Citigroup said in a Wednesday report that the nation’s top planning body proposed to cap their returns on operations to connect customers to pipeline networks at 10 per cent above their  costs. Such move would cut gas distributors’ profits by as much as 20 per cent, according to the report.
-- Zhang Shidong


Hong Kong stocks slip as Chinese gas distributors lead decliners

Stocks Blog: Shanghai rides up to highest level in more than a year

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}China's first quarter GDP is 6.4 per cent, beating estimates Kweichow Moutai has strong fan base among northbound Connect traders

China's first quarter GDP is 6.4 per cent, beating estimates

Kweichow Moutai has strong fan base among northbound Connect traders