bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Louise Moon

Deb Price

Happy Friday, traders.
It was a tough day for mainland and Hong Kong markets. Check out the day's action below. And please send any questions to deb.price@scmp.com .
-- Louise Moon and Deb Price in Hong Kong 
 


CATL, CMOC Group, Laopu Gold join Hang Seng Index in latest quarterly review

Hong Kong stocks decline, taking cues from US rout on jitters about AI disruption

Hong Kong stocks slip as Beijing regulator summons tech firms on train-ticket complaints

Shenzhen-listed Unisplendour abandons year-long effort to raise funds in Hong Kong

Stocks

Stocks Blog: Shanghai posts fourth straight week of losses as investors take flight in escalating trade war

Bears are back out. Photo: Shutterstock

Chinese equity investors, unsure of a sustainable bull run, place wagers on defensive plays

Chinese investors react as they monitor stock prices at a brokerage house in Beijing. The market sentiment in China has cooled off a bit since the market peaked in April. Photo: AP Photo

Business

Markets

Economy

Markets hammered over 'long overdue correction,' says veteran trader Francis Lun
Foreign investors sell more Chinese stocks so far this month than in all of April


'Long overdue correction' hammered markets, says Francis Lun


China stock market

Hong Kong stock exchange

China economy

Live

Here's what we are watching this morning:

Overnight markets/ What futures foretell
-- Overnight in US markets, S&P 500 gained 0.89 per cent,  Nasdaq moved up 0.97 per cent, and the Dow Jones Industrial Average was up 0.84 per cent.
-- Hong Kong futures are up 0.84 per cent at 28,324, while the China A50 futures are up 0.19 per cent to 13,065.73.
IPO debuts:
--- Wuhan DR Laser Technology (300776 CH)
Economic statistics/Central Bank action:
Hong Kong first quarter GDP results, after market hours.
Corporate events: earnings, meetings, news conferences:
AAC Technologies (2018 HK) earnings after market hours.
AIA Group (1299 HK), Great Wall Motors (2333 HK), Meituan Dianping (3690 HK), Bank of China Hong Kong (3988 HK), Techtronic Industries (669 HK), Foxconn (601138 CH) annual general meetings.
Good Reads: Defensive bets in China's equity markets have turned out to be best this year, reports Zhang Shidong. The recent flareup in trade tensions between the US and China led to outflows of more than US$2.5 billion in Chinese equities last week, or around US$600 million a day, reports Laura He. Brazil's soybean farmers are struggling to meet China's demand amid the US-China trade war, reports Ren Wei.  
 


Morning guidance 

Cosmetics maker L'Occitane (973 HK) was upgraded to outperform from neutral by KGI Securities, with a price target of HK$16.20, boosted from HK$15.40. That would be a 16 per cent upside from its Thursday close of HK$14.
-- Deb Price 
 


L’Occitane upgraded to outperform by KGI Securities

 The recent flare up in trade tensions between the US and China led to outflows of more than US$2.5 billion in Chinese equities last week or around US$600 million a day, reports Laura He. 
According to Jeffries analysts, capital outflows were more significant from countries highly dependent on trade, while less trade-dependent markets outperformed peers.
Seven heavily trade dependent regions – Hong Kong, Singapore, Ireland, Taiwan, Netherlands, Malaysia, and Thailand – posted an average 2.4 per cent of net fund outflows as a percentage of the funds’ managed assets since April 3, 2018, when the 25 per cent tariffs on US$50 billion of Chinese goods were announced, according to an estimate by Jefferies.
Read full story here. 
 


Trade war flare-up leads to big outflows from Chinese equities

Defensive plays in China stock markets are turning out to be the best performers, reports Zhang Shidong. 
While Chinese stocks have technically been in bull market territory this year following a 20 per cent gain in the Shanghai Composite Index, safe bets have been leading the charge so far. A gauge of consumer staples companies, from liquor distillers to dairy and food seasoning makers, has climbed 60 per cent, outperforming all other sectors.
Consumer stocks have been immune to souring sentiment, trading close to their record highs. Earnings growth may explain the discrepancy in share prices. Major players in the sector, including Kweichow Moutai and Wuliangye Yibin, posted at least 30 per cent increases in first-quarter profits, compared with an average 13 per cent growth for all mainland-listed companies.
Read full story here. 
 


Defensive plays bringing biggest gains in China 

Hong Kong's Hang Seng Index rose 0.54 per cent to 28,428, following gains in the US overnight by the three main benchmarks as investors shifted their focus away from the trade war.
On the mainland, the Shanghai Composite inched up 0.002 per cent to 2,955.77 and the CSI 300 of large caps was up 0.03 per cent to 3,744.88.
-- Louise Moon 


Hang Seng, Shanghai open ahead 

Wuhan DR Laser Technology (300776 CH) soared in its trading debut on Friday, shooting up 20 per cent to 6.25 yuan in its first 10 minutes on the Shenzhen stock exchange.
The manufacturer produces laser equipment for products including solar cells. The vast majority of its business comes from within mainland China, but its overseas business is growing at a comparatively faster rate, according to 2018 figures.
-- Louise Moon 


Wuhan DR Laser Technology shoots up in China trading debut

Shares of Huawei’s mainland suppliers turned up after Thursday’s fall following the company being targeted for blacklisting by the US. The turnaround could be due to news that the Chinese smartphone giant had asked suppliers six months ago to stockpile 12 months worth of crucial components amid trade war uncertainties.
Luxshare Precision Industry (002475 CH) gained 0.9 per cent. Among others on the mainland, Shennan Circuits (002916 CH) was up 2.4 per cent, Shengyi Technology (600183 CH) rose 2.9 per cent, Shenzhen Sunway Communication (300136 CH) gainded 1.2 per cent and Accelink Technologies (002281 CH) was up 3.2 per cent.
Those in Hong Kong, however, stayed negative. Sunny Optical (2382 HK) slid 4.2 per cent to its lowest level since February 8, and AAC Technologies (2018 HK) slipped 0.1 per cent.
ZTE, China’s second-largest telecom equipment maker which could also be restricted from selling products in the US, followed the mainland suppliers, rising 0.7 per cent in Shenzhen (000063 CH) and 1.4 per cent in Hong Kong (0763 HK).
-- Louise Moon 


Huawei's mainland suppliers head up 

The Industrial and Commercial Bank of China (601398 CH) topped Forbes’ annual list of the world’s biggest listed companies, ranked by sales, profit, assets and market value.
ICBC, which has more than US$4 trillion in assets, was accompanied by the rest of China’s “top four” banks – China Construction Bank (601939 CH), Agricultural Bank of China (601288 CH) and Bank of China (601988 CH) – as well as Ping An Insurance (2318 HK), all in the top 10.
It is the 7th consecutive year ICBC has won the title.
-- Louise Moon 


 Industrial and Commercial Bank of China tops Forbes 'biggest' list 

The push to create a vaccine against African Swine Fever is proving to be difficult, said Chen Guanghua, deputy director of the Animal Husbandry and Veterinary Bureau of the Ministry of Agriculture and Rural Affairs, at the first day of the 6th Global Pig Forum and the 16th China Swine Industry Development Conference on Thursday.
The disease, fatal to pigs, has rocked the country’s US$128 billion pork industry since first reported in August.
Li Xirong, director of the China Animal Agriculture Association, said the economic impact of the disease on the industry will be “stunning”, reported Bloomberg.
China’s pig industry must focus on how to stop it spreading further, and identify alternative sources of meat, he said. The disease spreads mainly through transportation of pigs and the feeding of kitchen waste.
More than 1.1 million pigs have been killed, costing 630 million yuan. According to figures from the Ministry of Agriculture and Rural Affairs released on Wednesday, China’s stock of live pigs decreased 20.8 per cent year-on-year at the end of April, down 2.9 per cent compared to March. This was a steeper decrease than the 1.2 per cent drop between February and March.
Prices of hogs have, however, been stable. The average price in April was 15.04 yuan/kg, about 1 per cent higher than in March.
The world’s largest pork producer, WH Group (0288 HK), was down 1.28 per cent in early trading.

-- Louise Moon 


Vaccine for African Swine Fever proving difficult to create

Alibaba Health (0241 HK) rose 4.6 per cent to HK$8.65 in early morning trading, before slightly paring gains, after the pharmaceutical e-commerce platform services provider posted improved yearly results.
The company, backed by Alibaba which owns the South China Morning Post, reported revenue of 5.1 billion yuan for 2018, marking a 108.6 per cent year-on-year rise compared to the previous year, due to a rapid growth of its pharmaceutical and health-care businesses. 
The stock has risen 33.7 per cent so far this year. Its net loss for the year was 81.9 million yuan, compared to 107 million yuan in losses in 2017.
-- Louise Moon 


Alibaba Health shoots up 

Some pesticide and seed stocks in China are having another good day as concerns mount about the threat posed by the "fall armyworm" to corn and other crops. 
Chinese pesticide maker Jiangsu Huifeng Bio Agriculture (002496 CH) shot up 6.9 per cent to 3.88 yuan.
Grain seller Heilongjiang Agriculture (600598 CH)  was up 4.6 per cent to 11.81 yuan and  while Zhongnongfa Seed Industry (60013 CH) hit the daily limit of 10 per cent in gains, rising to 4.24 yuan.
Pesticide maker Jiangsu Changqing Agrochemical (002391 CH) bucked the trend, falling 4.8 per cent to 9.43 yuan. 
The pest, discovered in China January, and threatens China's corn, rice, wheat, sorghum, sugarcane, cotton, soybean and peanuts.
There is a " high probability that the pest will spread across all of China’s grain production area within the next 12 months," according to a bulletin from the United States Department of Agriculture Foreign Agricultural Service in Beijing.
Chinese authorities have put into motion an emergency action plan to try to defeat the fall army worm, which spreads rapidly.

-- Deb Price 
 


 Pesticide, seed stocks in China shoot up again over 'fall armyworm' threat

A sell-off is hammering mainland and Hong Kong markets. 
On the Shanghai Composite Index, down 1.5 per cent, 1,334 stocks had fallen, while only 156 were up and 19 unchanged.
A clutch of lucky stocks hit their 10 per cent limit in morning trading. But now with the big slide, all sectors are down, with the consumer discretionary sector doing the worst, down by 2.6 per cent, followed by communication services and materials, both down by 2.3 per cent.
The Hang Seng fell 0.7 per cent, with 47 stocks down, three up and none unchanged. Top losers are Sunny Optical (2382 HK), down 8.6 per cent, AAC Technologies (2018 HK), falling 9 per cent, WH Group (288 HK), declining 9.1 per cent and Sino Biopharmaceutical (1177 HK) sliding 2 per cent, after gaining some of its earlier steep losses. All sectors are down, with information technology stocks falling 6.9 per cent. 
-- Deb Price 
 


Sell-off hammering Hong Kong, mainland stocks 

Markets are falling after two days of gains in what is a “long overdue correction,” says Francis Lun, chief executive officer of Geo Securities.
“This is a full blown trade war that no one is winning. The telecoms sector is the most vulnerable and is showing the true effects,” Lun said.
By late morning, the Shanghai Composite was down 1.5 per cent to 2,911.36 and the CSI 300 shed 1.62 per cent to 3,679.92, despite starting the morning with gains. All sectors were negative.
In Hong Kong, the Hang Seng was trading down 1 per cent to 27,988.27. Lun expects the Hang Seng to slam down to 26,000 today, and for mainland markets to continue falling. No sectors will end the week positively, he predicted.
Earlier in the week Trump announced fresh restrictions on Huawei, barring it from acquiring components and technology from US firms without government approval. Overnight, US Commerce Secretary Wilbur Ross told Bloomberg the measures would become official on Friday Washington time.
This is causing suppliers across China to “fall like a rock,” said Lun. “All of the suppliers are pressing down.”
Luxshare Precision Industry (002475 CH) reversed earlier gains to drop 2.2 per cent. Among others on the mainland, Shennan Circuits (002916 CH) fell 1.44 per cent and Shenzhen Sunway Communication (300136 CH) lost 2 per cent.
In Hong Kong, Sunny Optical (2382 HK) plunged 8.76 per cent to its lowest level since February, and AAC Technologies (2018 HK) slid 4.3 per cent.
-- Louise Moon 


'Long overdue correction' pounding markets, says Francis Lun

Foreign investors have sold 4.3 billion yuan (US$622.5 million) of Chinese stocks so far this week, taking combined outflows to 35.1 billion yuan in May.
That has already surpassed the total net sales of 22 billion yuan for the whole previous month.
-- Zhang Shidong


Foreign investors sell more Chinese stocks so far this month than in all of April

AAC Technologies (2018 HK) posted a net profit of 432 million yuan for the first quarter, marking a 61.6 per cent slide year-on-year, but beating expectations of 369.25 million yuan by analysts polled by Bloomberg.
Revenue slid 19 per cent to 3.75 billion yuan, again beating expectations of 2.8 billion yuan.
The group said they expect shipments to gradually pick up from the second quarter.
Before the announcement, the supplier of miniaturised components for mobile devices plunged nearly 5 per cent in morning trading. It pared losses to break for midday down 3.9 per cent.
On February 25, AAC had warned first-quarter earnings could slide by 65 per cent to 75 per cent.
According to a previous report by Bloomberg Intelligence, AAC’s earnings could suffer due to one of its largest customers, Apple, seeing a 30 per cent decline in iPhone shipments in the first three months of the year.
Market loss share to competitors like Luxshare Prevision (002475:CH) was also expected to hit earnings.
Last year, the supplier lost 67.5 per cent of its share price through 2018 to HK$45.45. As of last close, it was down 2.08 per cent so far this year. Recommendations are spread across the board, with 11 analysts on Bloomberg saying “buy”, 14 “hold” and 13 “sell”.
AAC Technologies says it will hold an earnings call at 16:45 HK time, and investors can log in here.
-- Louise Moon


AAC Technologies net profit down but beats expectations

China would rather suspend further trade negotiations with the United States if Washington continues its tough gestures towards Beijing, reports Teddy Ng. 
A commentary published by Taoran Notes, a social media account affiliated with Economic Daily, said China would not give an “effective response” to the US if Washington did not show sincerity in resolving the two countries’ trade disputes.
“If there is no real concrete action by the United States, it will be meaningless for you to come and talk,” it said, referring to US Treasury Secretary Steven Mnuchin’s remarks on Wednesday saying that he would go to Beijing to continue talks.
“It is better to suspend the consultation completely and return to the normal working track.”
Full story here. 


China tells US to stop 'tricks' or cancel trade talks 

Shanghai is headed for its fourth straight week of losses, on track to lose more than 2 per cent this week.
Last week, the benchmark lost 5.7 per cent. Three weeks ago it slipped 0.3 per cent. The week of April 26, it plunged 6 per cent. 
As of the last close, the Shanghai Composite is up 18.3 per cent this year. Last year, it was the worst performing major benchmark globally, with a 24.7 per cent fall. It is down 
The mainland has been impacted heavily this week by flare-ups over the US-China trade war. At a press conference in Beijing on Friday, China’s National Development and Reform Commission (NDRC) said trade frictions with the US have had some impact on the country’s economy but that it is controllable. It said countermeasures would be rolled out when needed to “keep economic operation within reasonable range,” reported Reuters.
This comes after China posted weak growth in retail sales and industrial output for April earlier in the week. The figures have added pressure to Beijing to inject stimulus into the economy.
Hong Kong's Hang Seng Index, meanwhile, is headed for its second straight week of declines, on track to lose about 2 per cent. Now it is trading down 1 per cent.
-- Louise Moon 


Shanghai on track for fourth straight week of losses 

Biotech firm Mabpharm said it expects to list on the main board of the Hong Kong stock exchange on May 31, with the ticker 2181 HK.
The company, founded in 2015, focuses on the research, development and production of drugs for cancers and autoimmune diseases.
Its IPO price range will be HK$1.50 to HK$1.95 per share, with a base offering of 78.3 million shares.
China International Capital Corp. (CICC) is acting as the sole sponsor. Cornerstone investors include biotech company 3S Bio (1530 HK), which has invested US$25 million, representing 14.5 per cent of the base deal size, based on the mid-point price range. The lock-up of cornerstone shares will last for six months.
-- Deb Price 


Biotech firm Mabpharm to list in Hong Kong on May 31

Traders should note that first-quarter earnings will come out from healthcare firms Sino Biopharmaceutical (1177 HK) and CSPC Pharmaceutical (1093 HK) on Tuesday, May 21.
With a market cap of 102.34 billion, Sino Biopharmaceutical is the second top industry leader in the mainland and Hong Kong markets. It has risen 53.1 per cent so far this year. A poll of analysts by Bloomberg expect an 18 per cent year-on-year growth for net income in the first quarter, to 910 million yuan, and a 29.3 per cent growth in revenue to 6.01 billion yuan.
Of analysts tracked by Bloomberg, 25 recommend it as a “buy”, two as a “hold” and two as a “sell”. Their 12-month price target is 8.84 yuan, which would represent an 8.7 per cent increase from last closing price.
CSPC Pharmaceutical is the fourth largest company among industry peers in the Hong Kong and mainland markets, and has risen 23.9 per cent so far this year. Analysts predict a 27.5 per cent year-on-year rise in net income, to HK$1.16 billion, and a 17.9 per cent rise in revenue to HK$6.35 billion.
A total 33 analysts recommend it as a “buy”, two a “hold” and one a “sell”. Their 12-month price target is HK$17.90, which would represent a 25.5 per cent increase from the last closing price.
-- Louise Moon 


Sino Biopharmaceutical, CSPC Pharmaceutical to report earnings Tuesday

The Shanghai Composite closed down 2.5 per cent to 2,882.29, taking the benchmark into its fourth straight week of losses. All sectors were down.
This week, it lost 1.9 per cent, following on from a 5.7 per cent loss last week, and a 0.3 per cent slide before that. The week of April 22, it plunged 6 per cent. Still, the benchmark is up 15.5 per cent so far this year.
The CSI 300, meanwhile, fell 2.54 per cent to 3,648.76, marking its second straight week of losses.
State-run Xinhua News and Communist Party mouthpiece People’s Daily accused the US of playing “little tricks to disrupt the atmosphere”, making traders reassess hopes for a trade deal.
-- Louise Moon 


Shanghai closes down for fourth-straight week amid trade flare-up

Tencent Holdings (700 HK) got two new votes of confidence from analysts.
First Shanghai Securities maintained a buy rating on the Chinese Internet giant, boosting its target price to HK$442 from HK$432. That would be a 24 per cent increase from its current price.
KeyBanc Capital Markets maintained an overweight on Tencent, with a target price of H$426.
Of analysts covering Tencent and tracked by Bloomberg, 51 call it a buy, seven a hold and none a sell. The consensus target price for the next 12 months is HK$428.54.  
Tencent's earnings this week have drawn mixed responses. It posted its slowest pace of sales growth -- 16 per cent -- since going public in 2004, but beat estimates with its 17 per cent jump in first-quarter net income.
It closed down 2.4 per cent today, to HK$355.80
-- Deb Price  
 


Tencent gets two new votes of confidence

In Hong Kong, the Hang Seng closed down 1.2 per cent to 27,946.46, leading the city’s market to its second week of declines.
-- Louise Moon
 


Hang Seng posts second straight week of losses 

Luckin Coffee, the biggest rival of Starbucks in China, has priced its IPO at the top end of an indicative range at US$17 per share, raising US$561 million in the biggest Nasdaq listing by an Asian firm this year.
Luckin Coffee's listing comes as Chinese IPOs in the US slowed down sharply this year.
Including Luckin Coffee's US$561 million, Chinese issuers raised US$1.2 billion in the US in IPO proceeds year-to-date, down 68 per cent year on year, according to data by Refinitiv out today.
It also came as interests in the US IPO market cooled off, after the year's most anticipated listings disappointed investors.
Ride-hailing giant Uber dropped 8 per cent on its first day of trading earlier this month, after raising US$8.1 billion in the most highly anticipated debut this year.
Lyft, which raised US$2.4 billion in its IPO in March, has dropped 16 per cent below its IPO price.
Luckin Coffee, established in October 2017, was scheduled to debut on the Nasdaq market in the US Friday. The pricing will value it at US$4.2 billion, setting a record of the fastest IPO for a startup in the world.
Backed by Blackrock, Luckin Coffee is the second largest coffee chain in China with more than 2,300 stores. It plans to open an extra 2,500  in 2019 to overtake Starbucks as the country's largest coffee chain. Starbucks, which entered China in 1999, currently has more than 3,600 stores in the country.
To fund its expansion ambition and cover losses, the company had already raised US$550 million in three fundraising rounds before its IPO.
Last year, Luckin Coffee suffered a loss of 1.6 billion yuan, which its CEO Qian Zhiya referred to as "strategic losses" aiming to take as much as market share with customer subsidies.
In the first quarter, it continued to lose 552 million yuan.
In 2018, Luckin Coffee suffered a net loss of 1.6 billion yuan. In the first quarter, it lost 552 million yuan.
-- Laura He


Starbucks rival Luckin Coffee to raise US$561 million in US IPO tonight

Stocks Blog: Shanghai posts fourth straight week of losses as investors take flight in escalating trade war

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}Markets hammered over 'long overdue correction,' says veteran trader Francis Lun Foreign investors sell more Chinese stocks so far this month than in all of April

Markets hammered over 'long overdue correction,' says veteran trader Francis Lun

Foreign investors sell more Chinese stocks so far this month than in all of April