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Zhang Shidong

Deb Price

Good day, traders —
Hong Kong had great day — up more than 2 per cent — and Shanghai's day was pretty darn good, too, as China posted better-than-expected exports in May and hopes are building that the US Fed will cut rates.
If you missed it, be sure to take a look at our story for traders on pig-breeding stocks, which have shot up. It's not too late to consider them, analysts say. And Cusson Leung of J.P. Morgan gave us his tips on Hong Kong property stocks in a studio interview.  
Catch up on the day's action below. Send us your questions to deb.price@scmp.com .
-- Zhang Shidong in Shanghai and Deb Price in Hong Kong   


Stocks Blog: Hong Kong, Shanghai climb on bigger-than-expected China exports,  growing hopes for Fed rate cut

Photo: Shutterstock

Business

Markets

Crystal Ball: Hong Kong property offers a shelter in a storm, says Cusson Leung of J.P. Morgan
Macau casino stocks go on a daily winning streak


Studio video interview: It's a good time to look at Hong Kong property stocks, Cusson Leung of J.P. Morgan tells the SCMP


Live

Overnight markets/ What futures foretell
  -- In US markets, S&P 500 gained 1.1 per cent, Nasdaq rose 1.7 per cent, and Dow Industrials added 1 per cent on Friday.
 -- Hong Kong futures were 0.8 per cent higher, while the China A50 futures rose 0.8 per cent
* IPO debuts: none
* Economic statistics/Central Bank action: The customs office is due to release May data on China’s imports and exports today. Earlier today, the People’s Bank of China said in a report that China’s foreign reserves rose to US$3.101 trillion to US$3.095 trillion a month earlier. That beat the median estimate of US$3.09 trillion in a Bloomberg poll.
* Corporate events: earnings, meetings, news conferences: nothing major.
*Later this week: The National Bureau of Statistics will release a raft of key May economic data, including industrial output, retail sales and inflation, and the central bank will put out the data on aggregate financing and new lending.
Good reads: Traders in China pork-breeding stocks have been feeling mighty piggy, fattening up their portfolios amid an outbreak of deadly African swine fever, reports Zhang Shidong. The SCMP tech team looks at how Shenzhen -- home to telecoms equipment and services provider Huawei, social media giant Tencent, telecoms maker ZTE and drone maker DJI -- is the "dragon's head" in the US-China tech battle. Lam Ka-sing looks at the state-sanctioned dismemberment of Tomorrow Group, which holds stakes in hundreds of Chinese listed companies via proxies, spanning energy, financial services, technology and real estate, among a myriad of industries.
 


Morning guidance 

China developer Central China Real Estate (832 HK) is a new outperform at CCB International Securities.
The newly covered stock's price target was set to HK$5, or a 51 per cent jump from Friday's close.
It had three buys, and zero holds and sells among analysts covering it and tracked by Bloomberg.
-- Deb Price 
 


Central China Real Estate new outperform at CCB International Securities

GCL-Poly Energy (3800 HK) got a jolt of energy from Daiwa Securities, which upgraded it to outperform from hold, with a price target of $HK0.52, or 6.1 per cent up from the close. 
It is China's biggest producer of polysilicon, which makes the photovoltaic cells that convert sunlight into electricity. It owns or has stakes in 20 power plants, a wind plant and a 20 MW solar farm in Jiangsu province, the largest solar farm in China, according to Hoover's Inc. 
It had five buys, 14 holds and three sells, among analysts covering the stock and tracked by Bloomberg.
-- Deb Price
 


GCL Energy gets a sunny 'outperform' upgrade from Daiwa

Traders in China pork-breeding stocks have been feeling mighty piggy, fattening up their portfolios amid an outbreak of deadly African swine fever, reports Zhang Shidong.
Shares of Muyuan Foodstuff and Jiangxi Zhengbang Technology have shot up to record levels, at least doubling over the past year.
Traders are betting the pig disease that has rapidly swept through China will continue to disrupt supply and keep boosting the share prices of breeders.
 

Read full story here.
 


Pork-breeding stocks have skyrocketed amid African swine fever outbreak

Overseas shipments rose 1.1 per cent from a year earlier in May in US dollar terms, according to the statistics from the customs office.
That topped the estimate of a 3.9 per cent decline in a Bloomberg survey. Imports dropped 8.5 per cent, falling short of the projection of a decrease of 3.5 per cent.
That left China’s trade surplus at US$41.7 billion last month, almost double the estimate.
-- Zhang Shidong


China's overseas shipments rise in May, topping estimates

Here are some ICYMI things from the weekend.
 
Tariffs: “If China does not want to move forward, then President Trump is perfectly happy to move forward with tariffs to rebalance the relationship," said US Treasury secretary Steven Mnuchin to CNBC at the end of the G20 Finance Ministers and Central Bank Governors Meeting In Japan.  He called his talk with People's Bank of China's Yi Gang constructive. Presidents Donald Trump and Xi Jinping will be at the G20 gathering in Osaka on June 28-29.
US 'law-of-the jungle' mentality: An article in state- run Xinhua accuses the US of using a "weaponized jurisdictional system" in a "law-of-the-jungle mentality," saying the US has "slapped sanctions on and posed threats to an increasing array of foreign entities under the pretext of infringements of its tailor-made rules and regulations concerning anticorruption, taxation, investment and arms exports, crafting a long-range weapon with its jurisdictional system, the very foundations undergirding a country's authority."
China tech: Nationalist Global Times, in an editorial about China's coming "technology security management list" aimed at managing tech exports and protecting its tech companies, says, "The world should now guard against the US, the country which has recklessly disrupted the global supply chain, rather than China, which now has to adopt strategic defenses and carry out some key counterattacks."
Taiwan step adds to pressure on Huawei: Taiwan’s telecoms regulator has banned cable television providers from sourcing components made by Chinese firms for use in digital set-top boxes, a move that adds to the woes of Huawei and its chip making arm, HiSilicon. 
US Fed rate cut coming?: Traders are increasingly expecting the US to cut rates as well as other central banks to flood economies with cheap loans.
US-Mexico: Trump called off Mexico tariffs over illegal immigration
 
 


Weekend catch-up 

Stock traders are back to the market today after the Dragon Boat Festival holiday, which was observed in both the Chinese mainland and Hong Kong on Friday.
They were heartened by some good news that just came out of the customs office. China’s exports were resilient in May, rising by better-than-estimated 1.1 per cent from a year ago in US dollar terms.
That has left the Shanghai Composite Index with a 0.3 per cent gain so far. Property developers and stocks linked to the 5G network led the pack of gainers. Hong Kong’s Hang Seng Index was up 1.3 per cent.
— Zhang Shidong


China’s stocks open higher as traders return from holiday

Foxconn Industrial Internet (601138 CH), a mainland-traded unit controlled by Taiwan billionaire Terry Gou Tai-Ming, plunged by the 10 per cent daily limit to 11.55 yuan in Shanghai today, heading for the lowest close since January.
Traders were jittery that a glut of supply of the company’s stocks would weigh on share prices.
Foxconn Industrial earlier said 490.9 million shares, or a 2.5 per cent stake in the company, can start trading today, with the expiry of the one-year lock-up period. These shares were held by 2,794 investors, including China Life Insurance and the asset-management unit of Central Huijin Investment. Shares of Foxconn Industrial are now 16 per cent down from its initial public offering price of 13.77 yuan.
 

-- Zhang Shidong 


Billionaire Terry Gou’s Foxconn Industrial tumbles on glut of stock supply

The recently battered Hang Seng Index is soaring, climbing nearly 2 per cent.
All sectors are up, with the biggest gains seen in information technology, climbing 4.4 per cent, and consumer discretionary, gaining 4.1 per cent.
Pork processor WH Group (288 HK) is up 5.2 per cent, Galaxy Entertainment Group (27 HK) has gained 5.8 per cent, while Sunny Optical (2382 HK) is up 5.3 per cent.
The Hang Seng has been sliding since early May, as stocks were clobbered by growing tensions over trade and then tech between the US and China.
On May 3, the index was at 30,081.55. It then posted four straight weeks of losses, including falling 5 per cent on the week ending May 10. It is now trading at 27,506.56.
 

— Deb Price  


Hang Seng soars nearly 2 per cent 

Traders probably should not expect too much of returns from Shanghai stocks in the post-Dragon Boast Festival period.
Historical data shows the Shanghai Composite Index fell in the week after the holiday in each of the nine years from 2010 to 2018, according to Sinolink Securities.
The gauge fell on seven out of the nine years in the two weeks after the festival, it said. Factors that put restraints on stocks in the period include a re-assessment of the momentum on new lending and a spike in insider selling, the brokerage said.

— Zhang Shidong


Post-festival stock performance may not be friendly to  Shanghai investors, Sinolink says

Chow Tai Fook Jewellery Group (1929 HK) surged 12 per cent to HK$7.54 in Hong Kong, heading for the biggest gain since July 2013.
The jewel retailer said after the market close on Thursday that full-year net income rose 12 per cent from a year earlier to HK$4.58 billion yuan (US$584 million), exceeding the estimate of HK$4.43 billion.
— Zhang Shidong


Chow Tai Fook on track for biggest gain in almost six years

China's foreign exchange reserves rose to US$3.1010 trillion at the end of May, higher than consensus estimates, after a dip in April.
"The May FX reserve data hinted at moderate capital outflow," said JPMorgan's economists Carol Wei Liao, Grace Ng, Zhu Haibin and Guo Shaoyu in an emailed commentary.
"Assuming a current account surplus (for goods and services) of US$14.1 billion in May (vs. US$2.3 billion deficit in April), as the May merchandise trade surplus came in at US$41.7 billion (vs US$13.8 billion in April), we estimate net capital outflow of US$2.7 billion in May (vs. modest inflow of US$0.6 billion in April)."
— Eugene Tang 


Chinese rising foreign exchange reserves in May beat estimates

Anxin Trust (600816 CH) tumbled 8.4 per cent to 4.38 yuan in Shanghai after the company revealed in a reply to an inquiry letter by the Shanghai Stock Exchange that it has defaulted on payments of 25 trust plans worth a total of 11.8 billion yuan (US$1.7 billion).
It posted a loss of 1.83 billion yuan last year, with revenues falling 96 per cent, as deleveraging caused a liquidity squeeze on small and medium-size enterprises.
 
— Zhang Shidong 


Anxin Trust plunges in mainland trading on US$1.7 billion in undue payments

Shares of Contemporary Amperex Technology (300750 CH), China's biggest maker of lithium batteries, jumped by as much as 5 per cent to a five-day intraday high of 70.27 yuan, after the company signed a contract to sell battery packs to Toyota Motor to help the carmaker produce more electric vehicles.
Shares of BYD, which is also part of Toyota's s battery supply chain, advanced in both Hong Kong and Shenzhen.The company, in which Berkshire Hathaway owns 24.6 per cent, advanced by as much as 1.4 per cent in Hong Kong (1211 HK) to HK$48.40. BYD's yuan-denominated A shares jumped 5 per cent in Shenzhen (002594 CH) to 51.91 yuan.
— Eugene Tang


Contemporary Amperex technology shares get a jolt from battery deal with Toyota

"The residential market is still going strong," says Cusson Leung, J.P. Morgan's lead property analyst for Hong Kong and China.
He is overweight on developers, but is cautious about property companies in the office and retail sectors.
His new overweights are Henderson Land Development (0012 HK) and Kerry Properties 0683 HK), both upgraded from neutral.   
The trade war has put pressure on some promising property shares, which is one reason Leung thinks it is a good time to look at them.
He also likes Sino Land (0083 HK), which he maintains as an overweight. Other overweights include CK Asset (1113 HK), New World (0017 HK), Wheelock & Co. (0020 HK), Wharf (0004 HK), Hang Lung Property (0101 HK), Hysan (0014 HK) and Link REIT (0823 HK).    
He sat down with the South China Morning Post to offer his insights on what's ahead.
Check out the video interview with Leung here.

— Deb Price 
 


Crystal Ball: Hong Kong property offers a shelter in a storm, says Cusson Leung of J.P. Morgan

Chinese brokerages trading on the mainland bucked the decline on the broader market, making the sector one of the worst performers.
A report from Shenwan Hongyuan Group today said combined profits for publicly traded securities firms fell 31 per cent from a month earlier in May and 18 per cent from a year earlier, because of poor sentiment on the equity market.
China Galaxy Securities was the sole big brokerage that posted earnings growth on a month-on-month and year-on-year basis, the report said.
CSC Financial sank 6.2 per cent to 21.33 yuan in Shanghai as the biggest decliner among the sector. Guoyuan Securities and Nanjing Securities lost at least 4 per cent.
— Zhang Shidong


Chinese brokerages drop as May earnings turn sour

Shares of rare earth miners and refiners declined, after customs data revealed that overseas shipments had declined in the first five months of the year, a sign that the government is deploying the option of restricting supplies of the element to the world's biggest customer — the United States — amid a worsening trade war.
JL Mag Rare Earth (300748 CH), a producer of permanent magnets in Jiangxi province that received a presidential visit from Xi Jinping weeks ago, fell by as much as 7.6 per cent  to 59.88 yuan. China Rare Earth Holdings (769 HK), a wholesaler and processor of the elements, dropped by as much as 1.6 per cent in Hong Kong trading to an intraday low of HK$0.61.
— Eugene Tang


Rare earths fall on data showing drop in overseas shipments amid trade war

Overseas investors have been quietly turning into dip-buyers from sellers of Chinese stocks.
After dumping a record 53.7 billion yuan (US$7.74 billion) of the mainland-traded stocks in May, they have been net buyers every day this month.
So far today, foreign traders have purchased 7.3 billion yuan of Chinese shares via the exchange link programme with Hong Kong, heading for the biggest daily inflow since March 29. That adds to the 9.6 billion yuan worth of Chinese stocks they bought over the past four days.
— Zhang Shidong


Foreign traders are dip-buyers of Chinese stocks as inflow bound for 10-week high

Chinese stocks edged higher today, with the Shanghai Composite Index rising 0.9 per cent to 2,852.13.
Investors had a sigh of relief from better-than-expected May data on overseas shipments, with foreign buying rising to a 10-week high of 7.9 billion yuan (US$1.14 billion) today. Electronics and insurance stocks were among the day’s best performers.
— Zhang Shidong


China stocks close higher for first time in seven days as export data boosts sentiment

Taiwan’s telecoms regulator has banned cable television providers from sourcing components made by Chinese firms for use in digital set-top boxes, a move that adds to the woes of Huawei and its chip making arm, HiSilicon.
A spokeswoman at the National Communications Commission (NCC) told the South China Morning Post that digital set-top boxes supplied by cable TV broadcasters in Taiwan can no longer use “chips and wafers of hybrid integrated circuits” that are made in China.
The ban, which applies to chips made by HiSilicon, is a further headache for the company which has struggled to maintain client relationships since the US formally banned Huawei from buying American parts and technologies without seeking approval. In May, UK-based chip designer ARM told employees to halt businesses with Huawei and its subsidiaries to comply with US trade restrictions. In Taiwan, digital set-top boxes for cable TV and broadband services have a 57.6 per cent penetration rate across its 8.75 million households, according to the NCC data.
The news did not appear to dampen trading sentiment today, as several companies that are suppliers or business partners of HiSilicon rose, with some rising to the daily 10-per cent up-limit. They included MeiG Smart Technology (002881 CH);  at 20.89 yuan, and Zhuzhou Hongda Electronics (300726 CH) at 22.57 yuan. ArcherMind Technology (Nanjing)  (300598 CH) rose 4.95 per cent to  30.54 yuan.
Read full story here. 
— Georgina Lee 
 


Taiwan regulator’s ban on China-made chips adds to woes faced by Huawei’s HiSilicon

Macau gaming stocks are on a hot streak today.
A Bloomberg gauge of gaming stocks rose the most since April 1 as several analysts put out upbeat reports forecasting a stronger outlook. The Bloomberg Macau Index was up 4.3 per cent, after a fall of 20 per cent last month. 
HSBC upgraded Sands China (1928 HK) to buy from hold, Bloomberg said. It was up 5.6 per cent to HK$36.90 in late afternoon trading, and on track to posting its biggest one-day jump since December 3. 
Wynn Macau (1128 HK) was last up 4 per cent to HK$16.30, Melco International Development (200 HK) rose 2.8 per cent to HK$15.92, MGM China Holdings (2282 HK) jumped 5.6 per cent to HK$12.18, Galaxy Entertainment (27 HK) soared 6.5 per cent to HK$49.85 — on track for its biggest one-day gain since December 3 — and SJM Holdings (880 HK) was up 3 per cent at HK$8.93.   

— Deb Price 
 


Macau gaming stocks on daily hot streak 

The Hang Seng Index rallied 2.3 per cent to 27,578.64 for its biggest gain since December 3. Casino operators led the gain on stocks trading in the city after several investment banks put out upbeat reports forecasting a brighter prospect of the industry.
— Zhang Shidong


Stocks Blog: Hong Kong, Shanghai climb on bigger-than-expected China exports, growing hopes for Fed rate cut

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}Crystal Ball: Hong Kong property offers a shelter in a storm, says Cusson Leung of J.P. Morgan

Crystal Ball: Hong Kong property offers a shelter in a storm, says Cusson Leung of J.P. Morgan