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Georgina Lee

Deb Price

Welcome.
Shanghai certainly offered some excitement today, breaking its losing streak this week with a mere 0.09 per cent gain. 
Catch up on the day's action below. 
See you tomorrow.
-- Georgina Lee and Deb Price in Hong Kong 
 
 


Nikkei smashes record as Takaichi’s landslide victory ignites ‘Japan is back’ trade

Hong Kong firms rush to issue convertibles – and trend could continue, bankers say

Hong Kong stocks start week strong on sentiment stabilisation, Japan election

Hong Kong needs more global listings, wider Stock Connect to strengthen hub role: FSDC

Stocks

Stocks Blog: Shanghai breaks week's losing streak -- with a teensy 0.09 per cent gain

A woman stands at a brokerage firm in Shenyang, China April 11, 2019. Photo: CNA


An investor checks out stock prices in Nanjing, capital of east China's Jiangsu Province, March 4, 2019. Photo: Xinhua 


A year after Hong Kong’s stock listing overhaul, city’s aim to be Asia’s biotech hub is still a work in progress

The amount raised in Hong Kong under the revamped rules paints a favourable picture, with nine biotech IPOs in the year to April 17 raising a combined US$3.8 billion. Photo: Bloomberg

Charles Li Xiaojia, Chief Executive Officer of Hong Kong Exchanges and Clearing Limited speaks during the Credit Suisse Asian Investment Conference at Conrad Hotel in Admiralty. 26MAR19 SCMP / Winson Wong

A snapshot of Hong Kong IPOs in the post reform era

Business

Markets

Crystal Ball: Shanghai not headed for big sell-off, says Alvin Cheung
Chicken stocks benefiting as pork prices shoot up


We cover the mainland and Hong Kong markets for you, explaining what is happening and why. Experts also offer you guidance on what's ahead.


China stock market

Live

Here's what we are watching this morning:
Overnight markets/ What futures foretell
-- Overnight in US markets, S&P 500 was up 0.88 per cent,  Nasdaq jumped 1.32 per cent, and the Dow Jones Industrial Average was up by 0.55 per cent.
 -- Hong Kong futures are up 0.42 per cent, while the China A50 futures are up 0.70 per cent.
IPO debuts:
None
Economic statistics/Central Bank action:
Trade data out of China
 
Corporate earnings:
Baoshan Steel (600019 CH)
China Galaxy Securities (6881 HK)
Hundsun Technologies (600570 CH)
Kweichow Moutai (600519 CH)
TCL (000100 CH)
Wens Foodstuff Group (300498 CH)
Zhejiang Supor (002032 CH)
Good reads: Mainland developer Jiayuan is stuck in a build-to-borrow cycle, reports Lam Ka-sing. And Enoch Yiu looks at how Hong Kong's IPO overhaul has worked.
 
 


Morning guidance 

The radical overhaul of the rules for listing on Hong Kong’s stock exchange last April had the goal of making the city a hub for technology and biotech firms looking to raise capital, reports Enoch Yiu.
A year on, it is debatable whether the reforms – the biggest in a quarter of a century – have met expectations.
Just nine companies have taken advantage of the new regime, which for the first time has allowed technology firms with weighted voting rights – commonly known as dual-class shares – and pre-revenue biotech companies to float their stock, she reports.
In comparison, 89 companies have already applied to list on the Shanghai Stock Exchange’s new tech board in the month since it began accepting listing documents.
Read full story here.
 


Has Hong Kong's IPO overhaul worked?

Mainland developer Jiayuan International was able to secure a credit line worth more than 43 billion yuan (HK$50 billion) to fund expansion, but industry players say the deal only highlights the predicament that forces China’s property firms to keep borrowing, reports Lam Ka-sing.
Jiayuan, which co-developed the nano-flat project T Plus in Hong Kong, was granted its line of credit from four institutions, ­Baoshang Bank, Daye Trust, ­Guotong Trust and AVIC Trust.
The financing includes private placement notes amounting to US$225 million that will exchange all previously issued senior notes by Jianyuan due in 2019.
Read full story here.
 


Mainland developer Jiayuan stuck in build-to-borrow cycle

Tsingtao Brewery (600600 CH) was trading up 0.1 per cent to 49.42 yuan after being upgraded to overweight from neutral by J.P. Morgan, with its price target raised to 62 yuan from 36.50 yuan.
The Chinese beer maker also had its Hong Kong shares (168 HK) raised to overweight by J.P. Morgan, with a price target of HK$61 from HK$43.97. Of analysts tracked by Bloomberg, nine call it a buy, five a hold and four a sell. The H shares were trading up 0.4 per cent at HK$48.05.
Its next earnings announcement is April 29. 
-- Deb Price 
 


Tsingtao Brewery upgraded to overweight by J.P Morgan

Hong Kong and Chinese leading benchmarks all opened higher, with the Hang Seng Index up a solid 148.95 points, or 0.5 per cent.

The CSI 300, which tracks blue chips listed in Shanghai and Shenzhen bourses, reclaimed some of its Tuesday losses and opened up 0.36 per cent, or 14.62 points at 4,033.63. The Shanghai Composite Index opened higher but then slipped to trade down 0.3 per cent.

Overnight, leading US benchmarks rose to record highs, with the S&P 500 gaining 0.88 per cent to its highest since September 2018. The Nasdaq Composite jumped 1.3 per cent to its highest level since August last year. The strong performance came amid more dovish stance from the US Federal Reserve, which signalled in March that there would be no further rate hikes for 2019.
The People’s Bank of China said in a statement that it would offer a targeted version of its Medium-term Lending Facility (MLF) to banks, totalling 267.4 billion yuan (US$39.8 billion). The one-year facility, which can be rolled over to three years if required, carries an interest rate of 3.15 per cent, lower than the 3.3 per cent it charges on regular MLF.
The monetary policy tool is intended to support banks’ lending to private small and micro-enterprises, which are an under-served segment of the economy that  have been suffering from high financing costs. The targeted MLF would provide banks with a longer term, stable funding source to support these small private businesses.
-- Georgina Lee


Hong Kong shares trading higher 

Cosco Shipping Energy Transportation (600026 CH) was trading down 1.5 per cent at 6.74 yuan, failing to get an early boost from its new buy rating at Haitong International.
Cosco transports oil, iron ores and coal.
Its Hong Kong-listed shares (1138 HK) were trading up 0.4 per cent to HK$5.20.
-- Deb Price 
 


Cosco Shipping Energy A shares rated a new buy a Haitong International

Shares of Fosun Tourism Group (1992 HK) advanced by as much as 0.8 per cent in Hong Kong, after the owner of the Club Med chain of holiday resorts announced an 11 per cent jump in first-quarter business volume to a record 4.8 billion yuan. Fosun's shares rose to an intraday high of HK$15.14.
Lee & Man Paper Manufacturing (2314 HK), Hong Kong's biggest producer of packing paper, rose 1.2 per cent to HK$6.52. The company's co-founder and chairman Raymond Lee Man Chun last week paid HK$1.45 billion for a residential property in Repulse Bay, marking the most expensive real estate transaction in the city this year.
-- Eugene Tang
 


Fosun Tourism Group climbs on jump in business volume  

Ping An Bank (000001 CH) was trading up 2.2 per cent to 14.39 yuan, despite having its shares cut to neutral from outperform at Credit Suisse, with a price target of 14.30 yuan.
Ping An Bank reported that its net profit for the quarter ended March 2019 was at 7.45 billion yuan, up 13 per cent from a year ago, while operating revenue was up 15.9 per cent at 32.48 billion yuan.

The Chinese commercial bank plans to sell up to 50 billion yuan of perpetual bonds, Bloomberg reported.
-- Deb Price 
 


Ping An Bank shares cut to neutral by Credit Suisse

China Mobile (941 HK) reported Tuesday after market close that its first quarter net profit was down 8.3 per cent from a year ago, to 23.7 billion yuan, while operating revenue remained flat, at 185 billion yuan.
For the first quarter, it added 6.32 million customers, totalling 931 million as of the end of March. Its average revenue per user per month -- an industry gauge often cited as ARPU -- improved to 50.3 yuan, from 45.4 yuan a year ago.The stock is down 0.8 per cent, at HK$74.85.

Its smaller rival, China Unicom (762 HK), also reported first quarter results Tuesday. Its net profit was up 22.3 per cent from a year ago to 3.68 billion yuan. Operating revenue was almost flat, at 66.8 billion yuan. For the first quarter, it added 8.1 million customers, totalling 323.14 million as at end of March. Its ARPU, however, declined to 41.2 yuan, from 47.9 yuan a year ago.
China Unicom share price was trading 2.1 per cent higher, at HK$9.77, above its 50-day moving average of HK$9.75.
-- Georgina Lee


China Mobile reports Q1 net profit fell 8.3 per cent

Property developer and resort operator Suncity Group (1383 HK) disclosed after market close Tuesday that it has raised its stake in main board-listed company Summit Ascent Holdings (102 HK), which operates hotel and gaming businesses in Russia, to 27.97 per cent from about 3.29 per cent, for HK$717.8 million in cash.
The price tag, at HK$1.94 per each share of Summit Ascent, represents about a 31.08 per cent premium to its last trading price on Tuesday.

“The company aims to increase its investment in tourism related property projects in regions other than China,” it said in the exchange announcement, adding that in 2017, nearly 1.8 million Chinese citizens travelled to Russia.

Investors seemed to cheer the news. Suncity Group shares rose to an eight-year high of  HK$2.61, up 9.2 per cent, but gave up some of the gains to 2.51 per cent. Summit Ascent stock rose 10.81 per cent, to HK$1.64.
-- Georgina Lee
 



Suncity rises to 8-year high on increased investment in Summit Ascent

Real estate is the one bright spot among sectors on the Hang Seng this morning.

China Overseas Land and Investment (688 HK) was the top gainer on the Hang Seng, up 1.4 per cent at HK$28.65.
China Resources (1109 HK) was behind it, up 1.3 per cent at HK$34.
Wharf Real Estate Investment (1997 HK) climbed 1.3 per cent to HK$59.10, Hang Lung Properties (101 HK) rose 1 per cent to HK$18.56, while Link REIT (823 HK) was up 0.4 at HK$90.70.
Country Garden Holdings was trading flat, at HK$12.56.
The Hang Seng was down 0.8 per cent. 
-- Deb Price 
 


Real estate stocks climb in falling Hang Seng 

Geely Automobile Holdings (HK175) fell 5.5 per cent to HK$16.86.
On April 16, the Hangzhou-based company's chairman Li Shu Fu sold 85 million shares of the company at an average price HK$17.028, according to a new shareholding disclosure on the stock exchange website.
His shareholding in the company was reduced from 45.52 per cent to 44.58 per cent, and he remains the largest shareholder.  The  deal is cash settlement of 85.22 million unlisted equity-linked derivatives jointly held by Li and his wife Wang Li, according to the note.
Geely, considered one of most successful car markers in China, owns Volvo Cars and has  a stake in German car maker Daimler.
-- Enoch Yiu


Geely Automobile falls 5.5 per cent

Chicken-related stocks continued to rally, as industry observers say the poultry farming industry will benefit from higher pork prices tied to the outbreak of African swine flu.
Shandong Xiantian (002746 CH) was up 5.92 per cent, at 28.8 yuan, while Wens Foodstuff (300498 CH) gained 2.74 per cent, at 41.98 yuan.
Guangdong Guanghong Holdings (000529 CH) gained 2.52 per cent at 8.55 yuan.
Their gains contrasted with the decline in the broader China market. The CSI 300, which tracks blue chips trading on the Shanghai and Shenzhen bourses, was down 0.9.
“Poultry would be one of the primary meats of choice to replace pork as the supplies dwindle,”  Arlan Suderman, chief commodities economist for INTL FCStone Financial, wrote in a recent report. He added lamb and beef prices will rise.
-- Georgina Lee


Chicken stocks benefiting as pork prices shoot up 

Two industry insiders believe official statistics on the African swine flu outbreak are being underreported, Yujing Liu and Orange Wang write.
The executives at a state-controlled pork producer and trader declined to be named as they are not allowed to speak about the swine fever.
Among the 129 cases reported by the Chinese government, all but six were at small farms that bred less than 1,000 pigs, according to a report published by brokerage Sinolink Securities last week.
“The [swine fever] situation at big pig farms is very serious, but the government is not fully reporting it,” said one of the sources. The source added that output at big pig farms could be reduced by 30 to 40 per cent.
China has already culled 1.02 million pigs since August, with a total of 129 cases discovered, Wang Junxun, a deputy chief of the veterinary bureau of the Ministry of Agriculture and Rural Affairs, said on Tuesday.
Read full story here. 


African swine flu cases in China likely underreported, sources tell SCMP

Beijing E-Hualu Information Tech rose by 4.4 per cent, to 35.39 yuan, after the intelligent transportation system technology provider reported a 92.5 per cent year-on-year increase in net profit attributable to shareholders, at 77.21 million yuan.
Operating revenue was up 22 per cent, at 655.51 million yuan.
Its relative strength index is currently at 73. An RSI of 70 or above indicates that the stock is becoming overbought and may be primed for a correction.
It was the second top percentage gainer in the ChiNext index, which was up a strong 1.24 per cent, at 1704.71, topping most Chinese benchmark indexes today.
-- Georgina Lee


Beijing E-Hualu Information jumps on big net profit increase

The bears and bulls have been fighting for control of the Shanghai Composite Index in afternoon trading. The index has bounced between small gains and small losses.
If the bears win, it would mark three straight days of losses. That would be only the second time this year, as negative sentiment has built this week over signals the government aims to roll back stimulus efforts.
Last month, the Shanghai fell on a Friday, March 22, and then the following Monday and Tuesday.
Sectors posting gains were information technology, consumer discretionary and utilities.
Meidu Energy (600175 CH), Hunan New Energy (600478) and Shaanxi Yanchang Petroleum (600248 CH) hit the 10 per cent daily limit. Oil prices have been rallying this year, and crude oil prices shot up to a six month high on Monday after the US said it would no longer give sanction waivers to buyers of Iranian oil.  
 
-- Deb Price 


 Shanghai struggling to break losing streak

Zhejiang Huahai Pharmaceutical (600521) fell by as much as 3.9 per cent in Shanghai to 14.75 yuan, the lowest intraday level since March 14, after it was named among 40 defendants in a class-action suit in the US for producing the drug valsartan.
The medicine, used for treating heart ailments and high blood pressure, was recalled last July globally after traces of the carcinogen NDMA were found. Huahai's shares have retreated by 45 per cent since the global recall last year.
-- Eugene Tang


Zhejiang Huahai Pharmaceutical falls after being named in US class-action lawsuit

China’s debt market looks poised to drop further.
Futures contracts on its 10-year government bonds fell 0.4 per cent to 95.97 yuan in afternoon trading, the lowest level since November.
The swoon came after a Politburo meeting on Friday signalled that top leaders acknowledged the resilience of the economic recovery and would probably trim the stimulus packages.
Bonds on the spot market also fell today, with the yield on the underlying debts rising 2.7 basis points to 3.422 per cent.
-- Zhang Shidong
 



Woes on China’s bonds set to continue as futures point to downside

Shares of S.F. Holding (002352 CH) rose 3.3 per cent at 34.95 yuan, after the express courier service provider reported first quarter net profit rose 27.9 per cent to 1.26 billion yuan. That was above the estimate of 1.17 billion yuan among analysts polled by Bloomberg.
It was the fifth-biggest gainer in index point terms in Shenzhen, helping to move the Shenzhen Composite Index higher, up by 1.1 per cent, at 10,236.27.
The company also announced its plan to raise up to 6.5 billion yuan through a convertible bond issue, for financing its investment in smart logistic information system, warehouse facilities, and buying of its own cargo aircrafts.
-- Georgina Lee


S.F. Holding's shares rise on strong Q1 results

The Shanghai Composite Index has struggled this week, but don't expect a wave of panic selling, says Alvin Cheung, an associate director at Prudential Brokerage.
He expects the benchmark will hover this week in a narrow band. He said even if there is a serious tumble, the index would find support at the 3,000 level. It closed today up a hair -- 0.09 per cent -- at 3,201.61. 
“The market did not immediate cheer the news that the central bank has used the targeted  medium-term Lending Facility (MLF) to support banks’ funding costs of their loans to small private enterprises. The market has interpreted this as the central bank’s shift away from the use of broader monetary easing measures, but this in fact should be interpreted as positive news,” said Cheung.
He said if the central bank refrains from making further cuts in reserve requirement ratios, as the market has speculated recently, it means that the central bank is more confident about the country's economic outlook, which is positive for Chinese listed companies.
“In the near term, other factors such as the quadrupling of A-share weighting in MSCI global benchmarks, means that buying from foreign investors will continue to support the Shanghai Composite Index,” he said. Some market observers have estimated that this will draw US$70 billion to US$80 billion inflow into Chinese equities.
 
-- Georgina Lee
 


Crystal Ball: Shanghai not headed for big sell-off, says Alvin Cheung

Chinese consumer companies are back on fund managers’ list of most favoured stocks, as they increased their holdings of the sector more than any other industry at the start of the bull market, reports Zhang Shidong.
Money managers of China-domiciled mutual funds bought the likes of liquor distiller Wuliangye Yibin and pig breeder Wens Foodstuffs Group in the first quarter, boosting their allocations to the sector by 3.5 per cent to 14.3 per cent in the first quarter, according to data compiled by Zhongtai Securities that tracks 1,083 equity funds that invest in Chinese stocks. The earlier high was 10.8 per cent for the previous three-month period.
Fund managers also increased buying of technology companies, while cutting the positions on utility, property and banking stocks, the data showed.
Consumer stocks accounted for 46.7 per cent of the allocations of China’s mutual funds as of the end of the first quarter, while technology companies made up 18.1 per cent, according to data from Chuancai Securities.
The bets have proved prescient. Consumer and technology stocks were the best-performing sectors on the CSI 300 Index of Chinese big-caps in the first three months, rising 46 per cent and 45 per cent, respectively.
Shares of Wuliangye, Kweichow Moutai and Wens Foodstuffs all rose to records. 
Read full story here.


Fund managers pile into Chinese consumer companies

After a big run-up in share prices of Chinese property companies, CMB Securities says it prefers mid cap developers. Its top picks are Agile Group Holdings (3383 HK) and KWG Group Holdings (1813 HK), both of which it deems buys.
These stocks are in a range they like -- with market caps of between HK$30 billion to HK$50 billion and contracted sales of around 100 billion yuan.
Other buy rated stocks include big developers China Vanke (2202 HK) and Country Garden (2007), CMB said in a research note this week.
The analysts pointed out that the rally in property shares has encouraged developers including Vanke to raise capital through shares placing. 
"Since property development business is a capital intensive industry, we do not rule out more equity financing acitivities coming out in the future, especially when its share price is close to 3-year high," the analysts wrote. "Based on our finding, share price of Sunac (1918 HK, NR) is most close to its 3-year high, at about 96%. Other stocks with share price at more than 90% of their 3-year high include Longfor (960 HK, HOLD), CR Land (1109 HK, HOLD), Logan (3380 HK, HOLD), COLI (688 HK, HOLD) and Shimao (813 HK, HOLD)."
Due to the China property market gaining momentum in March, CMB now expects property sales in 2019 will fall 5 per cent rather than its earlier forecast of a 12 per cent decline.
-- Deb Price 


Crystal Ball: Top China developer picks are mid-caps, says CMB International

Cui Jun, who controls 50 per cent of Shanghai Bao Yin Chuang Ying Investment Management,  is wanted by the police in a national hunt for alleged "professional embezzlement",  the company said in a statement. The second largest shareholder Cheng Jian is assisting the police investigation against others involved in the case.
Cui's fund became well-known in 2015 when it competed with retailing giant Wumart Holdings in a share tender offer for Yinchuan Xinhua Department Store, a Shanghai-listed retailer. The fight lasted for more than three years, until Wumart increased its stake to a controlling 40 per cent last year.
Cui himself is known as a "super bull" for the A share market.
He forecast last month that the Shanghai Composite Index would rise to 8,000 points, boosted by the opening up of China's equity market to foreign capital. He has often touted himself as a fan of Warren Buffett's investment principles and put Buffett's name in most of the firm's fund products.
-- Laura He


'Super bull' fund manager sought by police for alleged 'professional embezzlement'

The ChiNext index of technology stocks was the strongest performer in China, closing up 2.1 per cent, at 1,1718.85.
Beijing E-Hualu Information Tech (300212 CH) rose 6.08 per cent, at 35.96 yuan, after the intelligent transportation system technology provider reported a 92.5 per cent year-on-year increase in net profit attributable to shareholders, at 77.21 million yuan.
Elsewhere, The Shenzhen Component Index closed up 1.1 per cent, or 111.61 points at 10,236.27. Old economy stocks helped lead the index  higher. They included Wens Foodstuff (300498 CH), up 2.99 per cent at 42.08 yuan, and Ping An Bank (000001 CH), up 2.63 per cent to 14.44 yuan.
Those performances were much better than that of the Shanghai Composite Index, which gained a small 3 points, or 0.09 per cent, to close at 3,201.61.
-- Georgina Lee


ChiNext index shines in China trading

Well, it could have been worse.
The Hang Seng Index narrowed its morning losses to 157.41 points, or 0.5 per cent lower at 29,805.83. That was its lowest level since April 2.
Losses in Chinese financial stocks had at one point pulled the index down by almost 300 points. China Construction Bank (939 HK) ended down by 0.71 per cent at HK$6.96, and Ping An (2318 HK) lost 1.1 per cent to close at HK$94.15.
But gains in Chinese properties limited the day's losses. China Overseas Land & Investment (688 HK) closed up 2.65 per cent at HK$29, while China Resources Land (1109 HK) closed up 2.4 per cent at HK$34.35. They regained some of their Tuesday losses after Beijing warned against speculative behavior.
“But given recent moves by the Chinese central bank to only provide selective liquidity and support to the economy, there is still concern about whether the Chinese economy could sustain its growth momentum throughout this year,” said Francis Lun, chief executive of GEO Securities.
The market is interpreting the Chinese central bank’s move to provide targeted medium-term Lending Facility (MLF) to support banks’ funding costs of their loans to small private enterprises as an attempt to shift away from further stronger monetary measures.
Geely Auto (175 HK) lost 5.4 per cent to end at HK$16.88. It was the Hang Seng's biggest percentage loser. It was the fourth-highest stock in turnover, with HK$1.9 billion worth of its stocks changing hands.
-- Georgina Lee


Stocks Blog: Shanghai breaks week's losing streak -- with a teensy 0.09 per cent gain

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}Crystal Ball: Shanghai not headed for big sell-off, says Alvin Cheung Chicken stocks benefiting as pork prices shoot up

Crystal Ball: Shanghai not headed for big sell-off, says Alvin Cheung

Chicken stocks benefiting as pork prices shoot up