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Georgina Lee

Deb Price

Good day, traders.
Shanghai closed up 1.4 per cent today, but the Hang Seng fell.
Catch up on the action below.
And send questions and feedback to deb.price@scmp.com as we beef up our stocks coverage for you. We're delighted to see readers coming from around the globe, including from the US, Sweden, Ireland and Greece. We'd love to hear from you.
-- Georgina Lee and Deb Price in Hong Kong
 


Stocks Blog: Shanghai snaps streak of seven days of losses while Hong Kong falls amid US-China trade, tech turmoil 

A pedestrian walks past the Bund Bull statue in Shanghai on October 24, 2018. Photo: Bloomberg 


A trader checks stock prices at a securities brokerage in Beijing on May 6. Photo: EPA-EFE


Alamy 

Trade war-triggered turbulence in Chinese stocks presents opportunity for dip buyers

Business

Markets

Economy

China investors watch stock price moves at a stock brokerage house in Beijing on May 6, 2019. Photo: Simon Song

Crystal Ball: Watch out, warns Francis Lun. Hang Seng may drop below 27,000 this week
Get ready for more IPOs in Hong Kong this week


China stock market

Live

Here's what we are watching this morning:
Overnight markets/ What futures foretell
-- In US markets on Friday, S&P 500  rose 0.14 per cent,  Nasdaq was up 0.11 per cent, and the Dow Jones Industrial Average rose 0.37 per cent.
 -- Hong Kong futures are down 0.4 per cent, while the China A50 futures are down 0.1 per cent.
IPO debuts:
Mulsanne Group (1817 HK)
Annual general meetings:

CSPC Pharmaceutical Group (1093 HK), Geely Automobile (0175 HK), China Zheshang Bank (2016 HK), Industrial Bank Co. (601166 CH), Haidilao International (6862 HK)
 
Economic statistics:
China: April Industrial Profits
Hong Kong: April exports, imports, trade balance
Good reads: Eric Ng looks at whether the US can diversify its supply sources for rare earths, key to the making of everything from electric vehicles to smartphones and cameras. The trade war presents opportunities for dip buyers in finance, technology and new energy, as well as food and beverage, retail and agriculture, Zhang Shidong reports. And prospective homebuyers were picky for a second consecutive week, with this past weekend the worst for sales for developers since the city emerged from its five-month price correction in January, Daniel Ren and Lam Ka-sing report. 
 
 


Morning guidance 

PetroChina (857 HK) has been upgraded to buy from neutral at Citi. 
Last week, UBS maintained its buy rating on the oil and gas giant's H shares but lowered its 12-month target price to HK$7 from HK$7.6. And BNP Paribas kept it as a hold with a lowered price target of HK$4.95, or a 10 per cent gain from Friday's close.
Of analysts tracked by Bloomberg, 19 call it a buy, seven a hold and none a sell, with a target price of HK$6.21, or 38 per cent up from its Friday close.
-- Deb Price 
 


PetroChina gets some 'buy' fuel from Citi

Chinese casual fashion company Mulsanne Group Holding (1817 HK) rang the gong this morning at the Hong Kong Stock Exchange, with US$112 million raised on 200 million shares for their initial global offering.
The retail company includes menswear and children’s clothing brands under the GXG label as well as Australia-founded sportswear brand 2XU. The company is the first to take advantage of amendments to HKEX rules made last year, which allow for pricing flexibility, according to Bloomberg.
The company's shares rose 1.4 per cent when they began trading at HK$4.45, compared with their IPO price of HK$4.39
On May 22 before the debut, Mulsanne announced a reduction in their final offer price, placing it 6.2% below the bottom end of the indicative range, a company prospectus said. The price shift would reduce market capitalisation of shares to approximately US$531 million, a company prospectus said. The adjustment was made “in light of the volatile stock markets and the recent acceleration of US-China trade war”, a group bulletin said.
Mulsanne Group, a Chinese fashion company tapping into the country’s growing appetite for athletic wear, debuted its shares at the Hong Kong exchange today #ipo #hkex pic.twitter.com/CtvoxYPBjn
— Simone McCarthy (@simonelmc) May 27, 2019
-- Simone McCarthy


Clothing retailer Mulsanne bangs the gong on its new era on Hong Kong board 

Hong Kong stocks began the week lower, down 114.85 points or 0.42 per cent at 27,239.08.
In China, leading benchmarks opened mixed, with the CSI 300 down 0.04 per cent, or 1.31 points at 3,592.6. The Shenzhen Component Index was up, by 0.21 per cent or 18.37 points at 8,795.15. The Shanghai Composite Index was flat, at 2,854.51
Leading the Hang Seng Index lower were selective banks and financials, as Bank of China  (3988 HK) was down 0.3 per cent to HK$3.28; China Life Insurance (2628 HK) was down 0.99 per cent, at HK$18. China Construction Bank (939 HK) was down 0.64 per cent at HK$6.2; while HSBC (0005 HK) was down 0.23 per cent at HK$65.25.
In China, automobile stocks were pressured, after state news agency Xinhua said on Sunday that growth in automobile sales this year will lately remain flat from a year ago, at around 28.1 million units, citing a report jointly released by the China Association of Automobile Manufacturers. Of these, passenger cars will reach about 23.7 million units, also similar to that of last year.
Yangzhou Yaxing Motor Coach (600213 CH) was down 4.6 per cent, at 10.57 yuan; Chongqing Changan Automobile (000625 CH) was down 3.59 per cent at 6.72 yuan; while Anhui Jianghuai Automobile (600418 CH) was down 3.87 per cent at 5.22 yuan.
-- Georgina Lee 


Hang Seng starts week struggling, China markets mixed 

Several Shanghai and Shenzhen listed semiconductor stocks rose up to the daily limit as a gauge tracking 104 companies was up 4.04 per cent in early trading.
The sector is benefiting from news last week that integrated circuit makers and software companies will be exempt from paying corporate taxes for two years, starting in 2019, and their tax payments will be halved from the 25 per cent universal rate levied on Chinese companies in the following three years
Datang Telecom Technology (600198 CH)  was up 10.04 per cent, at 13.15 yuan.  Gl Tech (300480 CH) was up 10.03 per cent at 17.01 yuan.  Shenzhen Fine Made Electronics Group  (300671 CH)  was up 10.01 per cent at 25.27 yuan. Hangzhou Silan Microelectronics (600460 CH) was up 7.73 per cent at 17 yuan. Tech Semiconductors (300046 CH) was up 7.03 per cent, at 17.5 yuan.
In Hong Kong, SMIC (0981 HK) is up 6.06 per cent, at HK$8.93. The company said last week that it would delist its American Depository Shares voluntarily from the New York Stock Exchange, citing limited trading volume. Its last day of trading will be in mid-June.
-- Georgina Lee 


Semiconductor stocks in China jump

Analysts say dip buyers should look at Chinese sectors involved in finance, technology and new energy, as well as food and beverage, retail and agriculture, Zhang Shidong reports.
For example, liquor distillers like Kweichow Moutai and Wuliangye Yibin have held onto most of their gains this year, with stocks trading close to their record highs, while pig and chicken breeders like Muyuan Foods and Shandong Minhe Animal Husbandry may still rise on expectations about strained supply, analysts say.
“I am also cautiously optimistic that an agreement on trade will eventually be reached between the two nations. Therefore, this creates a buying opportunity both in the short and medium term," said Dai Ming, a Shanghai-based fund manager at Hengsheng Asset.
 
 

 


Trade war presents buying opportunities among battered stocks, analysts say

Pharmaceutical product maker Sanai Health Industry (1889 HK) plunged 85.9 per cent after disclosing trading of its shares will be suspended on June 5 due to failure to maintain a sufficient level of operations or tangible assets of sufficient value to warrant its continued listing.

In making the decision, the HK stock exchange cited that as of December 2018, its total assets were 365.7 million yuan, comprised mainly of trade and other receivables, finance lease receivables and deposits of acquisition of non-current assets.
 
“The stock exchange is concerned that the operation of such assets may not enable the company to carry out businesses with sufficient level of operations to justify the continual listing of the shares,” the exchange wrote.

The company also recorded “substantial net losses for years”. It has a remedial period of 18 months to comply with the listing rules. Otherwise, it will be delisted after 18 months, according to exchange rules. 

-- Georgina Lee 


Sanai Health Industry Group plummets after disclosing trading will be suspended

The Hang Seng Index is trading down 0.74 per cent, at 27,150.40, with all sectors down except for utilities and health care, which are up 0.22 per cent and 0.61 per cent respectively.
Leading the declines was the communication services sector, which was down 1.8 per cent.
Stocks falling the most were meat processor WH Group (288 HK), down 2.6 per cent at HK$7.21, snack food maker Want Want China Holdings (151 HK), down 2.7 per cent, at HK$5.66, optical glass maker Sunny Optical (2382 K), falling 2.8 per cent to HK$65.70 and telecoms giant China Mobile (941 HK), down 0.9 per cent at HK$71.35.  Social media and gaming giant Tencent (700 HK) was down 1.8 per cent to HK$319. 
Sino Biopharmaceutical (1177 HK) bucked the trend, with the medicine maker trading up 2.7 per cent at HK$7.56.
-- Deb Price 
 


Hang Seng pulled down by communication services sector 

A number of Chinese banks are trading down in Hong Kong, caught in some undertow from news on Friday that China's banking and insurance regulator has taken control of Inner Mongolia-based Baoshang Bank due to serious credit risks.
Ping An Securities, in a report today, applauded the regulator’s move but said it highlighted  credit and liquidity risks faced by Chinese banks. Those most at risk are those most exposed to the potential slowdown of the Chinese economy and facing unfavourable funding costs, it said.
In Hong Kong, Bank of Communications (3328 HK) was down down 0.5 at HK$6.14; Bank of China (3988 HK) slid 0.6 per cent at HK$3.27; Citic Bank (0267 HK) was down 0.37 per cent at HK$10.68, and China Construction Bank (0939 HK) fell 0.8 per cent, at HK$6.20.
The regulatory takeover of Baoshang Bank, which will last for one year, is part of the regulator’s effort to forestall systemic risks, and to protect the interests of its depositors and its other clients.
On its website last Friday, the China Banking and Insurance Regulatory Commission (CBIRC) said China Construction Bank has been entrusted to handle the business operations of the Baotou-based lender during the interim.
-- Georgina Lee 

 


Chinese banks down in Hong Kong after regulator takes over Baoshang Bank

The Hang Seng Index could trade below 27,000 by the end of the week, says Francis Lun, chief executive of Geo Securities. 
It was last down there January 17, when it was 26,755 and heading up, powered by a powerful tailwind that started blowing from the start of the year until the beginning of May, when US President Donald Trump stunned global markets by announcing that the US-China trade deal had hit a brick wall.
“Overall, given the US China trade war negotiations still mired under uncertainties, we don’t see a lot of new capital seeking to buy blue chips just yet," Lun said.
"After 11am the slight improvement in the Hang Seng Index performance was supported by investors short covering their positions,” he added.
He expects the Hang Seng will find downside support at 26,800. 
It was last trading down by 0.6 per cent, at 27,196.51. 
The Hang Seng started the year at 25,130.35. With its losses this month, it is now only ahead 5 per cent for the year.
-- Georgina Lee


Crystal Ball: Watch out, warns Francis Lun. Hang Seng may drop below 27,000 this week

Property development holding company Top Spring International (3688 HK) fell to more than a seven-year low, down 6.25 per cent to HK$1.8 around lunch break in Hong Kong. That was its lowest level since September of 2011. 
The fall came after the company said in a stock exchange filing this morning that its vice chairman and non-executive director, Xu Lei,  is the focus of a disciplinary inspection of the Communist Party of China's Yunnan Commission for Discipline Inspection and the Yunnan Provincial Supervisory Committee.
“The board confirms that... the absence of Mr. Xu does not and will not have any material adverse impact on the daily business operations and financial positions of the group,” the filing said.
-- Georgina Lee


 Top Spring International falls to 7-year low amid Chinese government probe of executive

EVE Energy (300014 CH) shares flew after it reported on the Shenzhen Stock Exchange today that it expects its 2019 first half net profit to rise by 185-215 per cent year-on-year, to 452.5 million yuan to 500.1 million yuan.
The Guangdong province-based maker of lithium batteries attributed the growth in part to improvement in its electric vehicle power systems business, and its new internet-of-things business.
EVE Energy rose 9 per cent to 25.34 yuan, to its highest level in four days. Gains in EVE Energy also helped drive up the ChiNext index, which rose the strongest among leading Chinese benchmarks, climbing 3.18 per cent or 46 points to 1,489.72. The stock is the third-top percentage gainer on the ChiNext index.
-- Georgina Lee


EVE Energy shoots up after reporting its 2019 first-half net profit growth will soar

A gauge tracking 110 software developers listed in Shanghai and Shenzhen was up 4.83 per cent, with shares of several software developers in Shanghai and Shenzhen reaching their daily up-limits.
Yunnan Nantian Electronics (000948 CH) shot up 10 per cent to 11.18 yuan; Hi-Target Navigation Tech (300177 CH) was up 10 per cent at 14.7 yuan; China National Software & Service (600536 CH) jumped 10 per cent to 64.11 yuan. Meanwhile, Hithink RoyalFlush Information Network (300033 CH) soared 9.07 per cent to 90.29 yuan.
Their gains came after vice minister for Industry and Information Technology Wang Zhijun reiterated the government’s supportive stance for tech firms amid rising protectionism from the US. Wang said the government would play a greater role in formulating strategy and increase subsidies for research and development, and offer better protection of their intellectual property.
-- Georgina Lee 


Software developers get boost from support voiced by vice minister for Industry and Information Technology

Tencent Holdings (700 HK), which since November has been digging itself out off a hole partly due to Beijing going into a period of freezing licenses for new games, is holding on to slight gains, and was last trading up 0.06 per cent at HK$325.
Today it fell to HK$316.80 intra-day, which was 21 per cent down from a recent intra-day high of HK$400.40 on April 11.  Bear territory is typically described as a 20 per cent fall from a recent high in a trend over at least two months. So, with its steep fall so recent, Tencent is technically in a correction.  
If it ends up today, it will be a break from seven straight days streak of losses. It closed at a recent high of HK$395.60 on April 17.  
While traders aren't confident in the stock, giving its latest earnings report a thumbs down, analysts feel differently. Of those tracked by Bloomberg, 50 have it as a buy, eight as a hold and none as a sell, with a consensus price target of HK$428.07. 
Bloomberg Intelligence wrote in a note today that Tencent's mobile-game business is poised for sustained recovery this year. 
"Despite macro-economic headwind, the company's advertising business should continue to outgrow the broader industry thanks to WeChat's 1.1 billion highly engaged users, and low utilization of its social-ad inventory," BI analysts say. 
"In the longer term, Tencent should be well placed to further monetize its social-network user base via a range of online products, including video and music, though heavy investment in payment, cloud computing AI, and retail businesses could lead to lower margins," it said.
 

-- Deb Price 
 


Tencent turns a bit up, as traders weigh whether recent big slide is buying opportunity 

All leading Chinese benchmarks ended higher, with the Shanghai Composite Index up 1.38 per cent, or 39.38 points at 2,892.38. The CSI 300, which tracks blue chips listed in both Shanghai and Shenzhen bourse, also rose 1.21 per cent, 43.29 points, at 3,637.2.
China’s industrial profit in April posted its biggest drop since December 2015, down 3.7 per cent. That underscored the challenge faced by policymakers to keep economic growth on track amid the sudden escalation of the US-China trade war.
Analysts said investors are pinning their hopes for the market on more economic growth stimulus measures, or subsidies and tax cut for the country’s tech sector.
“China’s economic growth slowing has been within the market expectation for a long time coming. As we go into June, before presidents Trump and President Xi Jinping meet potentially at the G20 summit in Japan,  investors are focusing on whether the US will exert more pressure on China to posture for more concessions from Beijing before the meeting actually happens,” said Alvin Cheung, associate director at Prudential Brokerage.
CSC  (601066 CH) led gains on the Shanghai benchmark, and was up 5.6 per cent to 23.76 yuan. China Life Insurance rose 1.42 per cent to 25.66 yuan, while internet and mobile security service provider 360 Security Tech (601360 CH) jumped 5.17 per cent to 21.96 yuan.
-- Georgina Lee 


China shares end higher, with financials and tech stocks boosting  the Shanghai benchmark

The Hong Kong IPO market is busy this week, with five medium-sized Chinese IPOs looking to raise between US$80 million and US$500 million.
Chinese alternative energy producer Xinyi Energy Holdings and Pujiang International Group, a Chinese infrastructure and construction materials company, will debut Tuesday.
Pujiang International Group Limited (02060 HK), which aims to raise HK$643 million (US$82.4 million), is an infrastructure material company, and one of China’s market leaders for long-span and super-long span bridge cables, according to a company filing. The company also deals in pre-stressed construction materials, including a rare-earth coated product line.

Xinyi Energy Holdings (3868 HK) is a private solar farm owner and operator that supplies electricity to China’s state grid via local subsidiaries, a company filing said. The group looks to raise HK$3.65 billion (US$465 million) on their initial public offering, after pricing their shares near the low end of the marketed range, Bloomberg reported last week.

This week’s remaining IPOs are two health-care companies: Frontage Holdings (1521 HK), a pharmaceutical research entity owned by Hangzhou Tigermed, and Mabpharm (2181 HK), a Chinese biopharmaceutical firm focusing on cancers and autoimmune diseases.
Meanwhile, Mulsanne Group Holding (1817 HK), which debuted this morning into rocky trading, was up to HK$4.50, up from its HK$4.45 opening.
-- Simone McCarthy 
 


Hong Kong busy with new IPO faces this week

Hong Kong shares ended lower, with China Mobile and banking, financial stocks leading the decline.
The Hang Seng Index narrowed its morning losses of more than 200 points to end down 0.24 per cent lower, or 65.84 points, at 2,7288.09.
to end 0.14 per cent lower, or 37.94 points, at 2,7315.99.
The lethargic buying interest was reflected in low main board turnover, which dropped to HK$73.88 billion, the lowest since May 2, when it was HK$71.45 billion.
Leading the losses was China Mobile (941 HK), down 0.57 per cent at HK$71.6, and China Construction Bank (939 HK), down 0.64 per cent at HK$6.21.
Selective Chinese financials also weighed down the blue chip index: Bank of China (3988 HK) was down  0.91 per cent at HK$3.26.
Analysts said short covering from investors emerged to cap losses on the Hang Seng . Selective high dividend yield stocks, such as HSBC (0005 HK), up 0.08 per cent at HK$65.45, were able to draw buying support as capital got shifted into these stocks from other sectors.
“From now up until June, even if the Hang Seng Index were to stage a rebound, I don’t think any rebound would be strong,” said Alvin Cheung, associate director at Prudential Brokerage, adding that uncertainties still hang over the market on how the US could pressure China for more concessions prior to presidents Xi Jinping and Donald Trump potentially meeting at the G20 Summit in June in Japan.
Outside blue chips, pharmaceutical product maker Sanai Health was the top percentage loser with highest trading volume. It was down 85.62 per cent at 4.1 HK cents, with a total of 1.66 billion shares changing hands. The Hong Kong stock exchange has decided to suspend its trading, effective June 5th,  citing its failure to maintain a sufficient level of operations and pointing out that it suffered from “substantial net losses for years”. It may face potential listing cancellation if it fails to meet listing rules after a remedial period.
-- Georgina Lee 


Hang Seng falls, with banking and financial stocks leading the decline