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Louise Moon

Deb Price

Hold onto your swimming trunks, traders. The tariff tsunami continues.
Catch up on the day's action below. And send any questions you have to deb.price@scmp.com .
-- Louise Moon and Deb Price in Hong Kong 
 


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Stocks

Stocks Blog: Hong Kong, mainland shares slide amid trade war uncertainty

US$1 trillion wiped out of global markets led by tech carnage after China vows tariffs on 5,000 US products in trade war escalation

Stocks tumbled on Monday morning, extending last week’s sell-off. Photo: Reuters

FILE - In this May 9, 2019, file photo a container ship is unloaded at the Virginia International Gateway terminal in Norfolk, Va. China has announced tariff hikes on $60 billion of U.S. goods in retaliation for President Donald Trump's escalation of a fight over technology and other trade disputes. The Finance Ministry said Monday, May 13, the penalty duties of 5% to 25% on hundreds of U.S. products including batteries, spinach and coffee take effect June 1. (AP Photo/Steve Helber, File)

Business

Markets

Pro tips: Trading wizard Alex Wong on learning from your battles
Crystal Ball: Hang Seng won't fall through 28,000 this week, says Castor Pang Wai-sun


Pro tips: Trading wizard Alex Wong on learning from your battles


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 shed 2.4 per cent,  Nasdaq lost 3.4 per cent, and the Dow Jones Industrial Average fell 2.38 per cent.
-- Hong Kong futures are down 2.58 per cent to 27,595, while the China A50 futures are down 1.60 per cent to 12,797.68.
IPO debuts:
None
Economic statistics/Central Bank action:
None to note.
Corporate events: earnings, meetings, news conferences
Xiaomi and Swire Properties’ annual general meetings.
Good reads: Daniel Ren explains how China's securities regulator is working to ensure the upcoming Technology Innovation Board is free of small players. The medical cannabis market in Asia could exceed US$5.8 billion by 2024 if it is legalised across the region, Chad Bray reports.
 
 


Morning guidance 

The Hang Seng Index dropped 2.08 per cent at the open, to 27,957.25. On the mainland, the Shanghai Composite fell 0.87 per cent to 2,878.27, and the CSI 300 of large caps dropped 0.79 per cent to 3,639.79.
Hong Kong's open was its lowest since February 11.  
-- Louise Moon


Hang Seng drops 2 per cent

China said tariffs on thousands of US products will rise to as high as 25 per cent, from the original 10 per cent, as the trade battle escalates between the world’s two biggest economies.
The highest highest tariffs will hit food products – including cooking oils, frozen vegetables, wine, beer and other beverages – industrial minerals and chemicals, textiles and clothing, jewellery, metal products, machinery parts, and consumer items ranging from home appliances to condoms, Nectar Gan and Laura Zhou report.

China’s new retaliatory tariffs on US$60 billion US products will be imposed at four different levels: 25 per cent tariffs on 2,493 items of goods, 20 per cent on 1,078 items, 10 per cent on 974 items and 5 per cent on 595 items.
Read full story here.
 


China targets US products with new tariffs

Smartphone component makers were hammered in morning trading, after smartphones and parts of telephone sets including microphones were included in the new list of goods to face tariffs of up to 25 per cent by the US.
Sunny Optical (2382 HK) fell 3.36 per cent to HK$87.65 and Apple supplier AAC Technologies (2018 HK) lost 4 per cent to HK$45.00, while handset component manufacturer BYD Electronic (0285 HK) dropped 5.41 per cent to HK$12.60, and camera module manufacturer Q Technology Group dropped 6 per cent to HK$7.21.
-- Louise Moon 


Smartphone component makers take a big hit 

Global index compiler MSCI has taken the first step to increase the representation of Chinese shares in its benchmark gauges as part of a plan to quadruple the stocks’ weighting by November, Zhang Shidong reports.
The weighting of mainland-traded shares in the MSCI Emerging Markets Index will double starting today, with the inclusion factor, or adjusted free-float market cap, lifted to 10 per cent from 5 per cent.
Meanwhile, a raft of big companies on the ChiNext board hosting growth stocks will be added to the gauge for the first time, it said.
MSCI said that it would add 26 new names to the China A Large Cap index and that there would be no deletions, bringing the number of constituent companies in the index to 264. The MSCI China A Mid-Cap index would have 29 additions and five deletions, bringing the index to 173 constituents.
Read full story here. 


Weighting of mainland-traded shares doubles in MSCI Emerging Markets Index 

Russian aluminium giant United Company Rusal (0486 HK) dropped 5.11 per cent to HK$2.97 -- its lowest level since January 24 -- following weak results for the three months ending March 31.
The company’s net profit fell 44 per cent, from US$531 million to US$300 million compared to last year, it said in a statement to the Hang Seng. The company cited lower aluminium prices by the London Metal Exchange during the period. Revenue also fell just less than 21 per cent to US$2.17 billion.
In the future, Rusal will “focus on restoring its market position, including the share of VAPs [value added products], which will be vital due to ongoing price uncertainty in the global aluminium market and continued US-China tensions,” said chief executive officer Evgenii Nikitin, in the statement.
-- Louise Moon 


Russia's Rusal plunges on weak Q1 results 

Casino giants are having a hard morning, losing their hands to hit the lowest share price levels since February or March.
Galaxy Entertainment (0027 HK), one of the worst performing stocks in morning trading on the Hang Seng Index, shed 4.97 per cent to HK$51.65.
Others followed suit. Sands China (1928 HK) fell 4.34 per cent to HK$39.60, Wynn Macau (1128 HK) dropped 6.5 per cent to HK$18.42, Melco International Development (0200 HK) dropped 4.37 per cent to HK$16.64, and MGM China Holdings (2282.HK) was down 4.06 per cent to HK$13.72.
-- Louise Moon


No luck for shares of casino giants amid flareup in trade war 

The Shenzhen Manufacturing Index, which tracks the performance of 1,421 manufacturers and industrial companies in China's technology hub of Shenzhen, led declines in the benchmark Composite Index.
As many as 904 stocks on the manufacturing  index fell.
ZTE (000063 CH), one of the world's largest producers of telecommunications equipment, fell by as much as 2 per cent to an intraday low of 29.61 yuan. The top three of the 10 biggest categories of Chinese products facing higher US tariffs comprise telecommunications equipment, printed circuit boards and computer processing units, valued at a combined US$37.2 billion, or 65 per cent of the total US$57.3 billion, according to a Bloomberg analysis.
-- Eugene Tang


Shenzhen Manufacturing Index sees broad declines

WH group, the world’s largest pork producer and owner of the US’ Smithfield Foods, is falling as the trade war escalates.
Hog skin is one of the items on Trump’s new list of goods to be hit with tariffs of 25 per cent. Last April, China slapped a 25 per cent import duty on US pork products.
WH Group (0288 HK) was down 3.9 per cent to HK$7.40. That was its lowest price in two months. The company had a hard year in 2018 as the trade war, African Swine Fever and rising meat production in the US hit business. Its share price lost 32 per cent and net profit fell 4 per cent.
The company called for an end to the trade war after announcing its 2018 results earlier in the year.
-- Louise Moon 


Pork producer WH Group's shares squeal on latest tariff battling

China markets shifted to gains, with the Shanghai Composite gaining 0.14 per cent to 2,907.79 and the CSI 300 of large caps gaining 0.32 per cent to 3,680.45.
-- Louise Moon 


China markets turning up 

The risk of a complete breakdown in the US-China trade talks has increased, adding to existing uncertainty around global trading, Moody's said in a sector commentary.
The tariffs will be a tax on US businesses and households, and will temporarily boost inflation, it said.
“We expect the rise in tensions between the US and China will contribute to a renewed slowdown in systemically important regions of the global economy, not only though the trade channel but also through the impact on sentiment and risk aversion,” it said.
-- Louise Moon 


Moody's sees risk of complete breakdown in US-China trade talks

“The tariff increase and potential for additional tariffs are significant setbacks in the protracted trade dispute between the world’s two largest economies,” said Moody’s Investors Service’s senior vice president of corporate finance Lina Choi and associate managing director Clement Wong.
“We expect uncertainties around trade will continue before the US and China reach some form of a deal. But the negative effects of the existing and potential tariffs will likely be widespread, given the many companies along supply chains. In China, few companies will be immune to the indirect negative impact. Consumption and investment will weaken, which will ultimately hurt economic growth.” 
-- Eugene Tang


Trade battle impact to be 'widespread,' analysts from Moody's say

The only sector holding up on the Hang Seng Index is utilities, up 1.1 per cent on a nasty day for Hong Kong traders' portfolios.

The consumer discretionary and consumer staples sectors are the top losers this morning, falling 3.8 per cent and 3.5 per cent respectively.

Information technology shares were down 2.6 per cent. Financials and communication services shares were off 1.7 per cent, while energy was down 1.7 per cent.
The Hang Seng is down 1.6 per cent overall. 
-- Deb Price 
 


Nearly all sectors on Hang Seng getting battered

The Hang Seng Index will continue to reel from the trade war this week but will stop at the support level of 28,000, helping short-term stabilisation, predicted Castor Pang Wai-sun, head of research for Core Pacific-Yamaichi. He does not expect it to rise this week.
It is trading at 28,094.21, down 1.6 per cent today.
If it were to break the 28,000 level, the next support would be around 26,700, he said.
-- Louise Moon 


Crystal Ball: Hang Seng won't fall through 28,000 this week, says Castor Pang Wai-sun

Hong Kong’s Hang Seng ended a very negative morning session down 1.6 per cent to 28,097.76. 
All sectors except for utilities were down by midday. The world’s largest pork producer, WH Group, and casino giant Sands China were the biggest losers on the index, with each down about 5.2 per cent.
On the mainland, the Shanghai Composite finished the morning with a loss of 0.36 per cent, to 2,893.35, after briefly swinging into gains at around 11am. All sectors were negative. Meanwhile the CSI 300 of large caps was also down, by 0.18 per cent to 3,662.05, with only the basic materials sector making gains.
-- Louise Moon 


Hang Seng, Shanghai end morning session with losses

Speculation that Beijing is sending in its so-called National Team of state-backed funds to prop up the Chinese markets is helping to soften losses today and shore up investor confidence.
“Traders don’t want the financial market being ruined by the trade war, that is the most important thing,” said Louis Tse Ming-kwong, managing director of VC Asset Management. "The National Team is coming into play."
The Shanghai Composite Index was down 0.4 per cent at the midday break, faring far better than Hong Kong's Hang Seng, which was down 1.6 per cent.
Meanwhile, Chinese traders have only weakly traded Hong Kong shares this morning through the connect programmes,  with individual and institutional investors reluctant to increase investments, said Castor Pang Wai-sun, head of research at Core Pacific-Yamaichi.
“According to the current behaviour of the investors, they believe China and the US still have a chance to improve on their relationship,” Pang said.

-- Louise Moon


Chinese traders trying to stay calm in tariff tornado

Macau casino stocks are not drawing any lucky cards in afternoon trading.
Wynn Macau (1128 HK) plunged 7.4 per cent, on track to close with its worst performance since November 8, when it plummeted 9.7 per cent. Macquarie downgraded Wynn Macau to neutral from outperform, and lowered its price target to HK$21 from HK$25.
The stock is a wild swinger, and fell 7.17 per cent on February 15.
Galaxy Entertainment and Sands China were down 5.2 per cent, as the Hang Seng Index continued to post losses in afternoon trading as the uncertain fate of a US-China trade deal roils markets.

-- Deb Price 


Wynn Macau shares plunge 

In 1997, Alex Wong was a young trader feeling very full of himself. And for good reason. In just 10 months, he'd turned HK$400,000 into $HK3 million in equity, and he had another $HK10 million on margin.
"I was carried away. I was invincible," Wong recalls.
But the bubble was ready to pop -- he was warned but too cocky to listen -- and he watched in shock as his HK$13 million in stock holdings started sliding off a cliff in one single day.
"My first feeling is I cannot finish the day in debt. I liquidated everything I had."
He ended the day with HK$400,000 left. If he had waited, not pulled the plug, he would have had HK$2 million the following day, when stocks rebounded.
Regrets? Absolutely none.
"It was the right move. If I hadn't done it, I would have still tried my luck and then gotten killed much worse."
Today Wong is a seasoned pro who manages HK$1.5 billion in assets as the founder of Ample Capital. He makes US$6 million trades regularly on his iPhone, and his public talks in Hong Kong have drawn audiences of 2,000 hungry for his stock tips.
And while he heard about stocks as a little boy from his entrepreneurial grandfather who immigrated to Hong Kong from Vietnam, Wong says there is nothing in a person's DNA that makes them a great trader. It comes from experience -- and learning from mistakes.
His advice? Don't overleverage. Some is OK, but know what you can lose. Start as young as possible. Trading takes time to learn. Have a core portfolio you stick with -- for him, about 70-80 per cent of his portfolio essentially stays the same. (He may switch things around. Last year, for example, he moved from a longtime hold of Facebook to Amazon.) Know a few sectors very well, rather than playing the field widely. (He avoids biopharmaceuticals, for example, because he doesn't have the expertise to really understand them.) And read widely, learning from interviews with leading businesspeople and articles about trends and global political developments.
He likes property landlords -- his favourite is Sun Hung Kai Properties (16 HK) -- and market leaders in very small consumer categories. He likes Chongqing Fuling Zhacai Group (002507 SZ), which makes very cheap pickled vegetables eaten with rice. "It is small, so if it becomes a national leader, then it would have two to three times at least upside." He also likes Zhangzhou Pientzehuang Pharmaceutical (600436 SH), which sells a popular liver supplement in China.
"You have to balance your portfolio with value and growth," he explained recently over a dinner of herb-crusted lamb chops and chicken tikka masala at the Mandarin Oriental's posh Chinnery bar in Hong Kong.
"Basically, I invest in three major themes. One is landlords -- which are getting rental income. Another is brand names. We like good brand names. And internet. ... I like property management stocks a lot. It's easy to understand, revenue stable, asset light."
Of hot sectors, he is very into cloud computing, with investments in Microsoft (MSFT US) as well Amazon (AMZN US). He favours Alibaba (BABA US) -- which is the owner of the South China Morning Post -- over Tencent (700 HK), but thinks Tencent is undervalued and that its gaming regulatory setbacks last year are largely behind it. Both could double in two to three years, as China moves more into cloud computing power, he says, based on the much higher valuations of Microsoft and Amazon.
To investors, he offers this as the key to success: "You have to go through a lot of battles to become resilient. When you have got enough experience, you will be OK."
 

-- Deb Price and Yujing Liu 


Pro tips: Trading wizard Alex Wong on learning from your battles

The trade war may have heated back up, but Wang Tao, head of Asia Economics for UBS Investment Bank, still expects a deal after longer negotiations. 
However, the risk of a full-on trade war "has materially increased," he writes in a note today. 
“We revised down our baseline GDP growth forecast to 6.2 per cent  for 2019 and (onshore yuan) forecast to 7 at end-2019. In the full-on trade war scenario, China’s GDP growth may fall below 6 per cent  in 2019 and (onshore yuan) may weaken to 7.2."
 
-- Peggy Sito 
 


Crystal Ball: Trade deal still likely this year, Wang Tao of UBS says

The Shanghai Composite ended down 0.62 per cent to 2,883.61. It posted slight gains during late morning trading and fell again to stay down the remainder of the day.
Losses were less than Monday’s 1.2 per cent drop. There was speculation the so-called “National Team” of state funds came in today and buoyed the market after US-China trade war heated back up.
The CSI 300 of stocks listed on the Shanghai and Shenzhen markets ended down 0.64 per cent to 3,645.15.
Losses across mainland markets were broad based across sectors. All of the CSI 300 sub-indexes were down, from the materials' 0.26 per cent loss to the healthcare's 0.97 per cent drop. Healthcare, industrial and consumer stocks saw the biggest declines.
When the National Team steps in, it usually buys big caps like PetroChina and ICBC to hold up a shaky market. These also fell. The Industrial and Commercial Bank of China (601398 SH) dropped 0.36 per cent, which was less than its 1.25 per cent loss on Monday. PetroChina (601857 SH) lost 0.28 per cent, also less than its 0.55 per cent drop the previous day.
The Shanghai Composite also had losses across the board, with only telecommunications seeing gains.
-- Louise Moon


Shanghai closes down -- but losses clipped 

Despite the news that MSCI announced to double Chinese stocks’ weightings in its global gauge by the end of the month, overseas traders sold 10.6 billion yuan (US$1.54 billion) worth of mainland-traded shares through the exchange links today.
That was the biggest single-day outflow since at least December 2016, when the stock connect programme between Shenzhen and Hong Kong started.
-- Zhang Shidong


Foreign investors sell most Chinese stocks since 2016

Hong Kong markets spent the day in negative territory as traders returned from a day’s holiday to feel the impact of the escalation of the US-China trade war. The Hang Seng reversed Friday’s gains and ended down 1.5 per cent to 28,122.02.
Among its four sub-indexes, only utilities made were up, by 1.46 per cent.
-- Louise Moon


Hang Seng closes down 1.5 per cent 

Stocks Blog: Hong Kong, mainland shares slide amid trade war uncertainty

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}Pro tips: Trading wizard Alex Wong on learning from your battles Crystal Ball: Hang Seng won't fall through 28,000 this week, says Castor Pang Wai-sun

Pro tips: Trading wizard Alex Wong on learning from your battles

Crystal Ball: Hang Seng won't fall through 28,000 this week, says Castor Pang Wai-sun