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Louise Moon

Deb Price

Welcome back, traders.
Shanghai couldn't hold onto early gains, and extended its losses to a fifth day. Hong Kong ended up — a bit.
Catch up on the latest action below. We'd love to hear from you -- email us at deb.price@scmp.com .
-- Louise Moon and Deb Price in Hong Kong  

 


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Stocks

Stocks Blog: Shanghai  ends down, extending losses for fifth consecutive trading day amid US-China trade feud 

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


Hong Kong’s housing market doomed to retreat as trade war deepens, says Credit Suisse

Concerns are mounting that the escalation in tensions between China and the US over trade will spillover to Hong Kong’s property market, derailing recent gains that have pushed the world’s least affordable property market even higher in April. Photo: Bloomberg

Selina Sia, Head of Greater China Equity Research, Credit Suisse Private Banking, Asia Pacific. HANDOUT PHOTO

Business

Markets

China Rare Earth shoots up in Hong Kong
Chinese drug-makers continue to fall on Beijing audit plans


Traders couldn't shake their jitters over the trade war, though some went out bargain hunting. 


China stock market

Live

Here's what we are watching this morning:
Overnight markets/ What futures foretell
-- US markets, S&P 500 gained 2.14 per cent,  Nasdaq rose 2.64 per cent, and the Dow Jones Industrial Average was up 2.06 per cent.
-- Hong Kong futures are up 1.06 per cent at 26,890, while the China A50 futures are down 0.87 to 12,664.62.
IPO debuts:
None.
Economic statistics/Central Bank action:
09:45am: China May Caixin PMI Composite
09:45am: China May Ciaxin PMI Services
Corporate events: earnings, meetings, news conferences:
Sino Biopharmaceutical (1177 HK), Wuxi Biologics Cayman (2269 HK), CITIC (0267 HK), Fosun International (0656 HK) and China Pacific Insurance Group (601601 CH) annual general meetings.
Good reads: The escalation of the US-China trade war could derail the recent upbeat outlook on Hong Kong real estate, with Credit Suisse predicting that all segments of the property market will see a decline in prices this year, Cheryl Arcibal and Lam Ka-sing report. Property transactions in Hong Kong in the first five months of the year rose to the highest level since 1997, but Sandi Li explains that the trade war could put the brakes on buying. 
 
 


Morning guidance 

Hong Kong’s private sector economy index weakened further in May, to its lowest in nearly three years, due to a decline in sales to mainland China, according to Nikkei.
The Nikkei Hong Kong Purchasing Managers’ Index (PMI) fell to 46.9 in May, from 48.4 in April, in its lowest reading level since June 2016. A reading below 50 indicates contraction.
The slip was due to new business from the mainland  decreasing for a thirteenth straight month during May, shrinking activity and leading firms to cut back on purchasing activity and stock holdings.
The PMI was compiled by information provider IHS Markit.
-- Louise Moon 


Hong Kong’s private sector economy index weakens more  

Hong Kong and China markets opened higher, following gains in the US market overnight.
The Hang Sang gained 1.28 per cent to 27,104.37. In China, the Shanghai Composite rose 0.91 per cent to 2,888.37, while the CSI 300 was up 0.96 per cent to 3,633.21.
Overnight in the US, markets rose on Federal Reserve chief Jerome Powell's comments that the central bank is “closely monitoring” the US-China tensions, and that officials may ease policy if the US economy is threatened.
-- Louise Moon 


Strong openings in Hong Kong, mainland markets 

The World Bank cut its 2019 global growth forecast over a slowdown in trade growth -- the weakest since the financial crisis -- and a drop in global investment.
It predicted the global economy will expand 2.6 per cent this year, compared with the 2.9 per cent forecast issued in January, and the 3 per cent estimate last year. The pace is due to pick up to 2.7 per cent next year, the bank said in a report overnight.
-- Louise Moon 


World Bank cuts 2019 global growth forecast to 2.6 per cent 

In the latest skirmish between the US and China, Beijing issued a travel warning to its citizens about "frequent" shootings, robbery and theft.
State television broadcaster CCTV cited the foreign ministry as saying law enforcement officers have repeatedly harassed Chinese citizens visiting the United States.
American luxury jewellery company Tiffany & Co.’s sales to Chinese tourists in the US fell by more than 25 per cent last quarter, highlighting the damage that can be done to luxury goods sellers when Chinese tourists don't show up.
-- Louise Moon .


Chinese travelers warned about 'frequent' shootings in US

China's services sector continues to expand, but at a slower pace in May, a new Caixin survey shows.
The Caixin China General Services Business Activity Index fell to 52.7 in May from a 15-month high of 54.5 in April. That reading was way below expectations of 54.0 in a Bloomberg poll of economists. A reading below 50 indicates contraction.
The survey is based on monthly questionnaires from over 400 private sector service companies.
A slower growth in services also pulled down the Caixin China Composite Output Index, which covers manufacturers and services. It dropped to 51.5 in May, from 52.7 in April.
"Today's Caixin Services PMI readings slightly differ from the official (NBS) non-manufacturing PMI for May, which remained unchanged at 54.3 from April," said HSBC's economist Chen Jingyang, in an emailed note.
"The divergence in two PMI readings reflects the fact that the two PMI surveys cover slightly different industries and sample size. But both PMI readings suggest that while business activity across the service sector remained expansionary, demand growth has slowed and business confidence has weakened in May," the economist continued. "Although we expect domestic demand growth to remain robust this year on the back of a series of stimulative fiscal and credit policies, the re-escalation of trade tensions between China and the US may have negatively affected business sentiment on the ground. We believe that Beijing is likely to stay on the course of fiscal stimulus and targeted credit easing in order to counter the external headwinds."
-- Louise Moon 


China's services sectors expands at slower pace in May, Caixin gauge finds

Real estate firm Evergrande (3333 HK) rose 2.22 per cent to HK$20.70 in morning trading, after reporting a rise in contract sales after market close on Tuesday.
The company posted a 28 per cent year-on-year rise in contract sales in May, totaling 53.53 billion yuan, it said in a filing to the stock exchange. The area of sales was approximately 4.9 million square metres, with an average selling price at 10,764 yuan per square metre.
-- Louise Moon 


Evergrande shoots up after reporting rise in contract sales

Chinese homegrown sportswear giant Xtep International (1368 HK) gained 3.12 per cent this morning, after an upgrade by investment bank Daiwa.
Daiwa Research raised its target price for Xtep to HK$5.80, from HK$5.50, and moved it from a “hold” to a “buy”, on a better long-term outlook with new business prospects that will deliver robust sales growth.
It said the company is investing nearly 2 billion yuan in an effort to grow its multi-brand strategy. New acquisitions have included E-Land Footwear USA Holdings, the owner of brands like K-Swiss and Palladium, as well as a previous joint venture with Wolverine Worldwide, which holds brands like Merrell and Saucony.
According to a poll of 17 analysts by Reuters, the average price target is HK$6, with 11 indicating to “buy”, four to “hold” and one to “sell”.
-- Louise Moon


Sportwear giant Xtep International rockets up 

Chinese drug-makers are falling again, weighed down by Beijing's plan to carry out a quality check on the accounting information of pharmaceutical companies during June and July.
According to a notice on Tuesday on China’s Ministry of Finance’s website, 77 pharmaceutical firms have been randomly selected for the check. The health-care sector on the Hang Seng and Shanghai benchmarks is leading losses. In Shanghai, it is down 1.8 per cent, and in Hong Kong, health-care stocks are down 5.3 per cent.
Sino Biopharmaceutical (1177 HK) shed the most on the Hang Seng, losing more than 6 per cent, while CSPC Pharmaceutical (1093 HK) fell 3.8 per cent. On the mainland Jiangsu Hengrui Medicine (600276 CH) fell over 3 per cent, and Shanghai Fosun Pharmaceutical (600196 CH) dropped 4.6 per cent.
-- Louise Moon 


Chinese drug-makers continue to fall on Beijing audit plans

Banking giant HSBC announced overnight it will appoint US investment bank Morgan Stanley as its new joint broker, replacing Goldman Sachs, reported Sky News.
The bank has used Goldman Sachs and Credit Suisse as joint corporate brokers since 2011. No information was given on Credit Suisse.  
In Hong Kong, HSBC (0005 HK) is up 0.78 per cent, to HK$64.20.
-- Louise Moon 


HSBC adds Morgan Stanley as new joint broker 

China’s market regulator has fined Michigan-headquartered Ford Motor’s main Chinese joint venture partner for antitrust violations. It's only the second such case involving an American carmaker since 2016.
Changan Automobile Group will be fined 162.8 million yuan (US$23.6 million) for restricting retailers’ sale prices in the southwestern city of Chongqing since 2013, depriving dealers of pricing autonomy, according to a statement on the State Administration for Market Regulation’s website. The fine amounts to 4 per cent of the company’s annual sales in the city.
Chongqing Changan (000625 CH) fell as much as 7.4 per cent in earlier trading. The stock is at its lowest level since January.
-- Louise Moon


Ford's main China JV partner fined over antitrust violations

Shanghai ended the morning session up 0.63 per cent at 2,880.18. All sectors were up except healthcare, which has fallen 1.7 per cent. Among losers were many pharmaceutical  firms after news of Beijing’s plans to carry out a quality check on the accounting information of the pharmaceuticals industry.
In Hong Kong, the Hang Seng ended the morning session up 0.7 per cent at 26,948. Healthcare similarly was the biggest loser by far, shedding 5.6 per cent. The leading loser was Sino Biopharmaceutical (1177 HK), which was down 6.7 per cent.
-- Louise Moon


Hang Seng, mainland markets will head into afternoon session with gains to protect

In Hong Kong, China Rare Earth (769 HK) shot up 6.8  per cent in intra-day trading, as the spotlight returned to the critical minerals used in making everything from i-Phones to guided missiles. 
China Rare Earth is becoming a well-known name among  traders. Last month, it soared as much as 132 per cent in recent intra-day trading after President Xi Jinping set off a frenzy in buying and selling of rare earth-linked stocks when he visited L Mag Rare Earth on May 20. The visit spotlighted the US' dependence on China for rare earths, which are used in everything from i-Phones to guided missiles. 
The trading day story is not dramatic for rare earths in China markets, where a number of stocks showed small gains and, in one case, fell.
China Minmetals (00831 CH) rose 0.3 per cent to 3.7 yuan, while China Northern Rare Earth Group High-Tech (600111 CH) climbed 0.48 per cent to 12.45 yuan, and Xiamen Tungsten (600549 CH) was up 0.8 per cent to 14.32 per cent.
But L Mag Rare-Earth (300748 CH), the company visited by Xi, bucked the overall up trend, falling 4 per cent to 61.47 yuan.
On Tuesday, China's top economic planner held a meeting about upgrading its rare-earth sector. China is the top supplier of rare earths to the US and the world.
"China's top economic regulator invited industry analysts to give clues about further strengthening rare-earth export controls, which, industry insiders said, is a major effort in making good use of the rare-earth card in containing the US amid an escalating trade war," the nationalist Global Times reported. 
Meanwhile, the US Department of Commerce overnight released a strategic report on the need to beef up the country's own critical minerals sector.  The report said that US dependency on foreign sources "creates a strategic vulnerability for both our economy and our military."

-- Deb Price 


China Rare Earth shoots up in Hong Kong 

The Shanghai Composite extended its losses to a fifth day, closing down 0.03 per cent to 2,861.42, falling at the end after an earlier positive trading session.
The CSI 300 of large caps in Shanghai and Shenzhen also ended down 0.038 per cent to 3,597.11, continuing Tuesday’s losses.
-- Louise Moon


Shanghai extends losses to fifth consecutive trading day

In Hong Kong, the Hang Seng ended up 0.5 per cent to 26,895.44, stopping its losing streak that had gone on for five consecutive trading days.
The Hang Seng, however, lost momentum from a 1.28 per cent gain at open, which took it briefly above the psychologically important threshold of 27,000.
Markets on the mainland and in Hong Kong had initially reacted very positively to news overnight from US Federal Reserve chief Jerome Powell that the central bank is “closely monitoring” US-China tensions, and officials may look at cutting interest rates if the US economy is threatened. He said the central bank was being “patient” in any rate decision and would respond to risks as appropriate. 
Meanwhile, Chinese President Xi Jinping said the country’s economy was stable, healthy and well placed to meet challenges, according to a transcript published by state-run Xinhua.
The health-care sector lost more than 7 per cent in Hong Kong  as Beijing launches an audit of major pharmaceutical companies.
-- Louise Moon 


Hang Seng ends up, ending streak of five straight trading days of losses 

The steam ran out of the rallies in China and Hong Kong today. And that came as no surprise to Louis Wong Kai-wit, director of Phillip Capital Management, who points to the trade uncertainties that continue to hang over markets.
China and Hong Kong markets opened strong, buoyed by the possibility of a rate cut in the US to bolster the world's largest economy. Shanghai ended down a bit, and the Hang Seng up 0.5 per cent, though after giving up earlier larger gains.
“They opened higher because of expectations of rate cuts by the Fed, but the uncertainties surrounding the trade war continue to dampen market sentiment. I was not surprised to see the rallies end in a drop-off,” Wong said. 
Wong expects the trend of selling during any rally to continue for the rest of the week and said only the G20 summit at the end of the month will bring certainty to both markets.
“In quiet or directionless markets, sometimes individual stocks with significant moves will draw the attention of the market,” he said.
GCL-Poly Energy Holdings (3800 HK), for example, gained 5.26 per cent, while GCL New Energy Holdings (0451 HK) rocketed up 18 per cent.
Among sectors, 5G concept stocks will continue to get some support from the market in the short term, said Wong, after rumours commercial 5G licenses could be issued as early as this week.
China Tower (0788 HK), for example, gained 3.68 per cent.
-- Louise Moon 
 


Crystal Ball: Expect rallies to end as duds amid trade uncertainties, says Louis Wong Kai-wit

Stocks Blog: Shanghai ends down, extending losses for fifth consecutive trading day amid US-China trade feud

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}China Rare Earth shoots up in Hong Kong Chinese drug-makers continue to fall on Beijing audit plans

China Rare Earth shoots up in Hong Kong

Chinese drug-makers continue to fall on Beijing audit plans