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Louise Moon

Deb Price

Good day, traders —
Hong Kong ended ahead but mainland China markets slipped.
Catch up on the latest action below.
Friendly reminder: Markets in Hong Kong and the mainland — and the stock connects — are closed on Friday to celebrate Dragon Boat Festival. Good luck to all the paddlers!
— Deb Price and Louise Moon in Hong Kong


Hong Kong’s IPO juggernaut projected to raise up to US$45 billion in 2026: KPMG

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Stocks

Stocks Blog: Shanghai ends down but Hong Kong ekes out small gain as energy stocks fall amid fear of oil glut 

Paddlers give it their all at the Sai Kung Dragon Boat Race Festival on June 18, 2018. Photo: Winson Wong   

Business

Markets

No trading Friday for Dragon Boat Festival holiday  
Oil stocks fall on fears of oil glut


Crystal Ball: J.P. Morgan turns 'outright bullish' on Macau casino stocks


China stock market

Live

Here's what we are watching this morning:
Overnight markets/ What futures foretell
-- Overnight in US markets, S&P 500 gained 0.8 per cent,  Nasdaq rose 0.6 per cent, and the Dow Jones Industrial Average was up 0.8 per cent.
-- Hong Kong futures are down 0.23 per cent at 26,750, while the China A50 futures are up 0.12 per cent to 12,679.34.
IPO debuts:
Guangdong Insight Brand Marketing (300781 CH) 

Economic statistics/Central Bank action:
 
9am-3pm: Hong Kong May Foreign Reserves
1pm: Hong Kong Bloomberg June Economic Survey
Corporate events: earnings, meetings, news conferences:
China Resources Land (1109 HK), BYD (1211 HK), Kunlun Energy (0135 HK), Mengniu Dairy (2319 HK), Evergrande Group (3333 HK), China Jinmao Holdings (0817 HK) annual general meetings
Good reads: The Shanghai Stock Exchange has granted approvals to the first three firms applying to raise funds on its new technology board, a major step towards the debut of mainland China’s own Nasdaq-style exchange, reports Ren Wei.  ESR Cayman, Asia-Pacific’s largest warehouse landlord, is set to raise up to US$1.2 billion in Hong Kong’s biggest IPO so far this year, reports Lam Ka-sing. 
 
 


Morning guidance 

Tsingtao Brewery (600600 CH) had its A shares upgraded to outperform from neutral at Credit Suisse.
Its price target was raised to 54.80 yuan, which would be a jump of 21 per cent from Wednesday's close. 
Of analysts tracked by Bloomberg, 17 rate it a buy, seven a hold and three a sell. Their consensus target price is 47.20 yuan. 
The Chinese brewery exports its beer around the world and its A shares trade through the Hong Kong-mainland stock connect.
-- Deb Price 
 


Tsingtao Brewery A shares say cheers to an 'outperform' upgrade at Credit Suisse

The Hang Seng is down 0.1 per cent at 26,861.39, while the Shanghai Composite is down 0.6 per cent at 2,844.
The Shanghai benchmark is trying to break a losing streak, with the last five trading sessions ending in losses. 
-- Deb Price


Hong Kong, Shanghai open a bit down

Airline stocks in China were mixed on news that Boeing is negotiating one of its largest-ever orders of wide-body jetliners with them, Bloomberg reports.
Discussions are ongoing for a deal of 100 planes, potentially worth more than US$30 billion before the usual discounts.
In early trading, Air China (0753 HK; 601111 CH) lost 1.54 per cent in Hong Kong and 0.11 per cent in China, China Southern Airlines (1055 HK; 600029 CH) dropped 0.59 per cent in Hong Kong but gained 0.28 per cent on the mainland, and China Eastern Airlines (0670 HK; 600115 CH) dropped 1.63 per cent in Hong Kong and fell 0.33 per cent in China.
-- Louise Moon 


Chinese airline stocks mostly losing altitude; Bloomberg reports talks on for huge jet order

State-backed China Association of Automobile Manufacturers has asked authorities to give stimulus to the industry by relaxing limits on license plates issued in some cities and lowering levies in rural areas for those buying cars, Bloomberg reported.
The car association represents about 2,700 members in the auto industry.
The world’s largest auto market saw 10 consecutive months of falling sales, as of April, against the backdrop of a slowing economy and the US-China trade war.
Just last month, the association asked for government aid to boost sales after inventory piled up and profit margins shrank.
Stocks of carmakers are mixed this morning.
BYD (1211 HK) gained 0.22 per cent, Geely Automobile (0175 HK) rose 0.8 per cent and Great Wall Motor (2333 HK) was up 0.5 per cent. Guangzhou Automobile Group (2238 HK), however, was down 0.13 per cent, and Dongfeng Motor Group (0489 HK) lost 0.79 per cent.
-- Louise Moon 


Chinese auto group asks Beijing for stimulus to boost car sales

China shouldn't feel alone.  "Tariff man" Donald Trump has expanded his spotlight onto Mexico.
The US president raised the likelihood that the US will follow through with tariffs on Mexico next week over the long-standing problem of border control.
Trump said “not nearly enough” progress was made in talks between US and Mexican officials at the White House on Wednesday to stem the inflow of undocumented migrants and illegal drugs.
“If no agreement is reached, tariffs at the 5 per cent level will begin on Monday, with monthly increases as per schedule,” Trump tweeted. “The higher the Tariffs go, the higher the number of companies that will move back to the USA!”
Imposing the tariffs on Mexico could end hopes for a trade deal between the US and China, Bloomberg reported a BNP Paribas economist as saying. Duties on Mexico would likely erode trust and tell China that there is “no point” in forging an agreement, Xingdong Chen, the bank’s Beijing-based chief China economist, told Bloomberg.
-- Louise Moon


Mexico joins China in Trump's tariff spotlight

Guangdong Insight Brand Marketing Group (300781 CH) shot up to the maximum 43.98 per cent in its trading debut in Shenzhen.
Based in the southeastern city of Guangzhou, the company offers advertising and brand marketing services. It was founded in 2002 and employs just under 500 people. Last year, it had a net profit of 65.67 million yuan, according to the Shenzhen Stock Exchange.
A total 21.1354 million IPO shares were offered at 16.53 yuan per share, according to the Shenzhen Stock Exchange. Its initial public offering was 3,753.65 times oversubscribed.
The stock opened at 19.84 yuan and shot up to 23.80 yuan before trading was stopped due to shares hitting the upside limit.
-- Louise Moon


Guangdong Insight Brand Marketing shoots up to limit in Shenzhen trading debut

Telecoms mostly rose while 5G-related firms fell as traders pocketed gains after news that China had granted licences to the country’s major carriers for commercial deployment.
According to state broadcaster CCTV, China’s industry ministry granted 5G licences to China Telecom (0728 HK), China Mobile (0941 HK), China Unicom (0762 HK) and China Broadcasting Network this morning.
 
China had granted licenses to three state-owned carriers at the end of last year, to conduct free trials, but this is the first time it has granted them for commercial deployment.
The ministry has said it will continue to welcome foreign enterprises to actively participate in China’s 5G market after license issuance.
China Telecom was up 0.77 per cent and China Mobile gained 0.43 per cent, but China Unicom dropped 0.36 per cent. In Hong Kong, telecommunications is the second-largest gaining sector, up 0.31 per cent.
Meanwhile related firms slid, making telecommunications the biggest losing sector in Shanghai so far, with a drop of 1.89 per cent.
ZTE  (0763 HK; 000063 CH) lost 4.5 per cent in Hong Kong and China, while China Tower (0788 HK) fell 3.52 per cent.
Sichuan Huiyuan Optical Communications (000586 CH), Shaanxi Broadcast & TV Network Intermediary Group (600831) and Suzhou Hengmingda Electronic Technology (002947 CH) all plunged by the maximum 10 per cent.
-- Louise Moon


5G-related stocks mixed as licenses handed out

After starting the morning slightly down, the Hang Seng is trading up 0.2 per cent. On the mainland, the Shanghai Composite is down 0.65 while the CSI  300 Index of 300 stocks traded on both the Shanghai and Shenzhen exchanges is down 0.5 per cent.
The Hang Seng had its first positive close after 5 consecutive days of losses on Wednesday. Shanghai seemed to play with the idea, as it spent most of Wednesday in positive territory, before ending the day with its fifth day of losses.
Meanwhile, all three benchmarks in the US rose overnight for a second day.
But as US-China trade tensions continue to escalate with no deal in sight, and tariffs extended into Mexico overnight, it is surprising markets seem to continue to underestimate Trump’s conviction under his “America First” agenda, said private bank Pimco’s head of public policy, Libby Cantrill, and US economist Tiffany Wilding.
"We think the markets discount President Trump’s threats on both trade and immigration issues at their own peril,” the two said in an emailed note.
"Although the estimated direct economic costs of the various tariff policies are still relatively modest in isolation, these policies are occurring when U.S. growth is already decelerating and the US manufacturing sector may be heading into a mini-recession, raising the risk of a more meaningful downturn," Cantrill and Wilding wrote.
"The recent decline in interest rates should provide the economy with some relief, but in order to continue that relief, the Federal Reserve would need to at least reinforce its willingness to cut its policy rate in the face of a darker outlook from trade or other shocks."
-- Louise Moon 


Hang Seng holding gains, while China markets are down

Shares of Hong Kong Exchanges & Clearing Limited (HKEX), the operator of Asia's second-largest stock market, rose for the second day, advancing by as much as 2.1 per cent to a five-day intraday high of HK$254, on optimism that a proposed bill in the US to put more Chinese companies under the scrutiny of US auditors could drive more Chinese companies to raise funds in Hong Kong.
-- Eugene Tang


HKEX shares up on hopes US bill will lead to more Hong Kong IPO interest

China has approved the first three companies to be listed on Shanghai’s new Science and Technology Innovation Board, from 117 applicants, according to a statement on the Shanghai Stock Exchange.
One is Shenzhen Chipscreen Biosciences, is a biotech company established in 2001 that develops small molecule therapeutics.
Another is Suzhou TZTEK Technology, set up in 2005. It designs and manufactures video measuring and machine vision instruments for precision manufacturing industries.
The other is Anji Microelectronics Technology (Shanghai). It was founded in 2006 and manufacturers semiconductor products.
The companies must now file a listing registration with the China Securities Regulatory Commission.
-- Louise Moon 


China approves first three companies for new tech board

Huawei suppliers are falling after Nikkei reported the Chinese technology giant had cut its order amid the US-China trade war and a blacklisting of the firm by Washington.
Huawei has reduced or cancelled orders to major suppliers of its smartphone components by as much as up to 30 per cent, according to Nikkei, which cited sources familiar with the matter.
Taiwan Semiconductor Manufacturing, the world’s largest contract chipmaker, confirmed orders from Huawei declined after the ban, it said. The Taiwan-listed stock lost 1.7 per cent.
Others in China were also hit. Suzhou Chunxing Precision Mechanical (002547 CH) fell 6.19 per cent, Shenzhen Goodix Technology (603160 CH) fell 2.41 per cent, Shenzhen Sunway Communication (300136 CH) lost 3.99 per cent, Shennan Circuits (002916 CH) dropped 5.38 per cent and Luxshare Precision Industry (002475 CH) was down 2.55 per cent.
In Hong Kong, Sunny Optical (2382 HK) dropped 2.12 per cent and AAC Technologies (2018 HK) lost 1.71 per cent.
In other Huawei-related news, Bloomberg reported that 10,000 of the tech giant’s employees are working three shifts a day in offices in Shanghai, Shenzhen and Xi’an, to try to get rid of a reliance on American software and circuitry.
-- Louise Moon


Huawei suppliers fall on news report of order cuts 

A trade deal is unlikely at the G20 meeting to be attended by presidents Xi Jinping and Donald Trump later this month, but “both leaders are expected to be optimistic about resuming trade talks," writes David Chao, global market strategist, Asia Pacific at investment services firm Invesco, in an emailed note.
“For the time being, the tit-for-tat retaliatory measures will continue in the near future, but ultimately cooler heads should prevail once the tariffs start to have negative impacts on global growth,” he adds. 
Near-term market volatility can be expected in China due to the economic impacts of the trade war, but longer-term economic growth drivers remain, said Chao. “Equities should outperform fixed income products in this low interest rate, benign interest rate environment,” he added.
Beijing, meanwhile, will continue to liberalise financial markets, making it easier for foreign players to invest.
— Louise Moon


Trade deal unlikely at G20 meetings, says Invesco strategist 

The People's Bank of China (PBOC) added 500 billion yuan (US$72 billion/HK$567 billion) today into the financial system through one-year medium-term lending facilities and seven-day reverse repos. It's the second-largest cash injection on record, according to Bloomberg, in a move that may help ease liquidity concerns after last week's nationalisation of Baoshang Bank caused jitters in the market.
— Eugene Tang


China's central bank pumps cash into financial system — second-biggest amount on record

Hong Kong’s Hang Seng was up 0.22 per cent to 26,953.88 by lunch break, on track to close the first week of June with a second day of gains.
The last consecutive days of gains were May 15 and 16. This could be the first positive week for Hong Kong’s bourse after four straight weeks of losses.
Mainland China markets remained down. The Shanghai Composite paused for lunch down 0.45 per cent at 2,848.34, while the CSI 300 of large caps had lost 0.2 per cent to 3,589.90.
If losses continue, Shanghai would reverse last week’s gains, which were the first after five straight weeks of declines. It would also extend the bourse into six consecutive days of falls.
— Louise Moon


Hong Kong to head into afternoon session with gains to hold

The Hang Seng slipped into negative territory in early afternoon trading, down 0.07 per cent to 26,877.59. Four out of nine sectors were down, led by energy, which had lost 1.31 per cent.
The biggest loser was CNOOC (0883 HK) which dropped 2.75 per cent, while the biggest gainer was Sino Land (0083 HK), which was up 2.22 per cent.
-- Louise Moon 


Hang Seng gives up earlier gains, weighed down by energy stocks

Oil stocks are suffering in Hong Kong and China markets as crude entered a bear market overnight and US inventories jumped the most since 1990.
According to Bloomberg, US crude shed 5.4 per cent to be 22 per cent lower than its peak in April, while Brent sank to its lowest level since January, below US$60. US government data also revealed total petroleum stockpiles grew by about 22 million barrels last week, marking the largest jump in data that extends back to 1990. Meanwhile, US crude production set a record, while imports climbed at the same time, reported Bloomberg.
This spilled east as energy pulled down Hong Kong markets into negative territory. The overall sector is down 1.26 per cent.
CNOOC (0883 HK) is currently the biggest loser on the bourse, with a 2.75 per cent intra-day fall to HK$12.06. Competitors PetroChina (0857 HK) dropped 0.7 per cent, China Petroleum & Chemical (0386 HK) fell 1.55 per cent and China Oilfield Services (2883 HK) lost 3.07 per cent.
In the mainland, Petrochina (601857 CH) lost 0.85 per cent and Sinopec (600028 CH) fell 0.18 per cent.
-- Louise Moon
 


Oil stocks falling on fears of oil glut 

Investors may want to look at Macau casino stocks when they place their next bets.
That's the message of a new ratings report from J.P. Morgan's Asia, gaming, lodging and leisure team of analysts. It sees a potential average annual return of around 30 per cent on battered Macau gaming stocks, saying they "offer an attractive opportunity for long-term investors on an 18+ month horizon." 
It added four new overweights. And its top picks are Galaxy Entertainment (27 HK) and Sands China (1928 HK), both of which it rates as overweights. 
In addition to Galaxy, stocks upgraded from neutral to overweight are MGM China (2282 HK), Wynn Macau (1128 HK) and Melco International (0200 HK).
It moved SJM Holdings (0080 HK) to neutral from overweight because of its "significant" outperformance year to date. 
The trade war uncertainty has been brutal on the stocks. But the analysts say, "we'd start building long positions and weather through the volatility."
It sees the mass market gamblers continuing to drive the action in Macau, not VIP high rollers. Sands really focuses on the mass market, which is one reason the analysts see it as a standout. It controls the majority of casino hotel rooms in Macau, they note, is "essentially VIP risk-free," and has two promising new projects coming in 2020 and 2021.
Galaxy is more exposed to VIP gamblers, but the analysts like its coming new expansions that will roughly double its footprint.
— Deb Price 
 


Crystal Ball: J.P. Morgan turns 'outright bullish' on Macau casino stocks

The Shanghai Composite Index ended down 1.17 per cent to 2,827.80, posting its sixth straight trading day of losses.
For the week, the Shanghai was down 2.45 per cent. It posted a weekly gain last week. Before that, it recorded five straight weeks of losses.
Today, all sectors were down. Telecommunications led the slide, falling by nearly 4 per cent. Nanjing Huamai Technology (603042 CH) and ZhongTongGuoMai Communication (603559 CH), which provide telecommunications equipment, and Jiangsu Lettall Electronics (603629 CH), which manufacturers electrical components, all plunged by over 9 per cent. 
The CSI 300 of large caps trading in Shanghai and Shenzhen shed 1.79 percent through the week, and ended down today by 0.9 per cent to 3,564.67.
-- Louise Moon 


Shanghai benchmarks post sixth straight trading day of losses 

Hong Kong's Hang Seng Index turned up at the end to eke out a 0.26 per cent gain, closing at 26,965.28. That marked the second straight day of gains. This week, the bourse has risen by 0.24 per cent, but still investors remain largely negative.
Turnover for the week was below average.
“Nothing is happening .... There is a long holiday coming and no good news is in sight,” said Francis Lun, chief executive officer of Geo Securities, referring to the Dragon Boat Festival in Hong Kong and China on Friday. “The market will continue to fall because the turnover is quite low. June will almost certainly be worse than May, because more bad news may come and things could go even more downhill.”
One of the big drivers of the day was news around 5G stocks. Beijing issued licenses to telecoms and embattled Huawei’s orders were reported to have fallen sharply. Traders were profit taking from 5G-related stocks, after they rose earlier in the week.
Energy stocks fell the most in the day, trailing oil entering a bear market overnight in the US and inventories jumping the most since 1990. CNOOC led the pack as the biggest company drop of the day, falling 1.78 per cent. It was followed by China Petroleum & Chemical Corp, down 0.97 per cent, and Petrochina which lost 0.23 per cent.
CNOOC led the pack as the biggest company drop of the day, falling 1.78 per cent. It was followed by China Petroleum & Chemical, down 0.97 per cent, and Petrochina, which lost 0.23 per cent.
-- Louise Moon 


Hang Seng posts second straight day of gains 

Stocks Blog: Shanghai ends down but Hong Kong ekes out small gain as energy stocks fall amid fear of oil glut

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}No trading Friday for Dragon Boat Festival holiday Oil stocks fall on fears of oil glut

No trading Friday for Dragon Boat Festival holiday

Oil stocks fall on fears of oil glut