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Zhang Shidong

Deb Price

Good day, traders.
Hong Kong protests are ongoing, sending the Hang Seng down 1.7 per cent, in its biggest daily loss in five weeks. Meanwhile, the Shanghai Composite Index fell, as the latest data out of China showed the pace of inflation accelerated.
Catch up on the action below. If you have questions, please shoot them to deb.price@scmp.com .
— Zhang Shidong in Shanghai and Deb Price in Hong Kong


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Stocks

Stocks Blog: Hong Kong shares fall as fresh protests in city disrupt roads, businesses  

Some businesses shut down as demonstrators in Hong Kong protested a proposed extradition bill. Photo: Sam Tsang

Bull statues outside the Shenzhen Stock Exchange building in the Futian District, Shenzhen. Photo:  Roy Issa


Hong Kong developer walks away from HK$11.1 billion Kai Tak project, citing ‘social contradiction and economic instability’

Goldin Financial Holdings has forfeited its right to proceed with the purchase of the commercial site awarded at Kai Tak less than a month ago. Photo: Martin Chan

Pro-establishment lawmaker Abraham Razack (aka. Shek Lai-him) meets the media at the Legislative Council in Tamar. Adbraham Razack was voted to replace pro-democracy lawmaker James To Kun-sun presiding over the bill committee [Fugitive Offenders and Mutual Legal Assistance in Criminal Matters Legislation (Amendment) Bill 2019]. 06MAY19 SCMP / Dickson Lee

GOLD MOUNT's owner Pan Sutong draws the barrier 8 for the Hong Kong Derby Barrier Draw 2017 in Sha Tin racecourse parade ring. 16MAR17

Business

Markets

Protests, slowing global and China growth hit Hang Seng, says strategist Ken Chen Hao
 Rare earths soar — again


Hang Seng also weighed down by traders pocketing profits from recent run-up in stocks, says Castor Pang at Core Pacific-Yamaichi


China stock market

Live

* Overnight markets/ What futures foretell
-- Overnight in US markets, S&P 500 and Nasdaq were little changed, falling less than 0.1 per cent, and Dow Industrials dropped 0.1 per cent
-- Hong Kong futures were 0.3 per cent lower, while the China A50 futures slid by the same magnitude
* IPO debuts: China Tobacco International (6055 HK) and China East Education Holdings (667 HK) to start trading in Hong Kong today.
* Economic statistics/Central Bank action: China is due to release May data on consumer and producer inflation at 9:30am today. The data on new yuan lending and money supply also may be out as early as today.
* Corporate events: earnings, meetings, news conferences: China’s car sales fell 12.5 per cent from a year earlier last month, marking a 12th straight month of declines, the China Passenger Car Association said late yesterday.
*Later this week: The statistics bureau is due to put out figures on industrial production, retail sales and fixed-asset investment for May on Friday.
Good reads: The United States demanded “enormous, even hundreds” of changes to Chinese laws to protect intellectual property, according to a Chinese government adviser, who said it was a key factor in the collapse of trade talks, SCMP's Kristin Huang and Lee Jeong-ho report. US Commerce Secretary Wilbur Ross rules out ‘definitive’ trade deal at Xi-Trump G20 parley, reports Owen Churchill. 
 


Morning guidance 

Presidents Donald Trump and Xi Jinping will not strike a “definitive deal” to end the trade war between the US and China at an anticipated meeting late this month during the G20 summit in Japan, US Commerce Secretary Wilbur Ross said overnight, 
Owen Churchill reports that the face-to-face conference between the leaders, yet to be officially confirmed, would at most result in “some sort of agreement on a path forward”, Ross said in an interview televised by business outlet CNBC.
A meeting between Trump and Xi on December 1, after the G20 meetings in Argentina, resulted in a trade war ceasefire, though that truce has crumbled since talks broke down in early May and both sides returned to imposing tariffs.
“The G20 is not a place where anyone makes a definitive deal,” Ross said during the interview on CNBC’s Squawk Box. “The trade deal is going to be thousands of pages."
Read full story here.
 


US Commerce secretary: no 'definitive deal' will be struck on trade at G20 summit

The United States demanded “enormous, even hundreds” of changes to Chinese laws to protect intellectual property, according to a Chinese government adviser, who said it was a key factor in the collapse of the trade talks, SCMP's Kristin huang and Lee Jeong-ho report.
Shi Yinhong, a prominent international relations scholar from Renmin University, said the gap between the two sides was widening as Washington demanded a strong enforcement mechanism while Beijing wanted more leeway.
“From early May, China began to think that no deal might be better than a bad deal, and right now China and the US have fundamentally contradictory attitudes as to what would be a good deal."
Read full story here. 
 


China's thinking, according to insider: 'no deal might be better than a bad deal'

Consumer prices rose 2.7 per cent from a year earlier in May, the fastest pace since February 2018, the National Bureau of Statistics said this morning.
Producer prices gained 0.6 per cent, it said. Both figures matched the estimates of economists in a Bloomberg survey.
Faster inflation was led by higher pork prices, which rose 18.2 per cent from May 2018, while vegetable prices rose 13.3 per cent.
China's food and agricultural sectors are being blighted by an outbreak of African swine fever as well as the invasion of a pest called the fall armyworm,  which are wiping out the country's hog population and destroying crops.
— Zhang Shidong and Eugene Tang 


China’s inflation accelerates at fastest pace in more than year

Two new faces joined the Hong Kong Stock Exchange this morning: China East Education Holdings (667 HK), China's largest vocational training provider,  and China Tobacco International (6055 HK), a subsidiary of the world's largest cigarette producer.
The tobacco company debuted in a HK$734.9 million (US$93.7 million) initial public offering, from the first-time sales after selling the stock at the top of the price range of HK$4.88. 
The international unit procures overseas tobacco leaf from such countries as Brazil, Argentina and Canada for the state monopoly, deriving revenue mainly from a 6 per cent fixed mark-up on overseas tobacco leaves when selling them to domestic cigarette manufacturers, according to the company filing.
Meanwhile, the education provider targets students from culinary arts, information technology and auto services backgrounds. It runs a network of 139 schools in the mainland and Hong Kong, with the aim of bridging the supply and demand gap between employers and students, it says.
The company is expected to raise up to HK$5.34 billion ($680 million), in what Reuters said will be the world’s largest education initial public offering.
"Even if the deal is priced at the bottom end, it would raise $544 million, surpassing the $490 million float of U.S.-based Laureate Education on Nasdaq in 2017 that is the largest education-related IPO to date," Reuters reported, citing Refinitiv data.
"If the issue is price at the range’s top-end and a standard 15% 'greenshoe' or over-allotment option of the base offering is exercised, that would bring the deal size to $782 million," Reuters said.
China Tobacco, the country's dominant producer and seller of cigarettes, rose 1.8 per cent in its trading debut in Hong Kong, with shares opening at HK$4.97, compared with an initial public offering price of HK$4.88.  
China East Education flat at HK$10.66.  
China Tobacco International and China East Education Holdings rang the gong today @HKEXGroup pic.twitter.com/AlV63zYwoT
— Joy Pamnani (@joypamnani) June 12, 2019
 
— Daryl Choo and Joy Pamnani 
 


China Tobacco, China East Education bang the gong in Hong Kong IPOs

The planned exchange link programme between Shanghai and London took another step closer to its start, as Huatai Securities received approval from the UK financial regulator to sell its global depositary receipts.
The endorsement was obtained yesterday from the UK Financial Conduct Authority, Huatai said in an exchange statement. The depositary receipts will be sold to global investors through Friday and priced between US$20 and US$24.50, it said.
The stock dropped 0.7 per cent to 19.22 yuan in Shanghai (6016688 CH) and slid 2.2 per cent to HK$12.52 in Hong Kong (6886 HK).
— Zhang Shidong
 


Huatai Securities approved by UK regulator to sell global depositary receipts

Sunny Optical Technology Group (2382 HK) dropped 4.4 per cent to HK$70.35 in Hong Kong, heading for the biggest loss since May 23.
Its shipments of handset lens sets fell 5.8 per cent from a month earlier in May and shipments of microscopic instruments slid 1.6 per cent, according to an exchange statement.
— Zhang Shidong 


Sunny Optical falls most in almost three weeks on handset lens sets shipments

Another day, another run-up by rare earths.
JL Mag Rare-Earth (300748 CH), the company visited by President Xi Jinping on May 20, shot up to the 10 per cent daily limit, leaving it at 18.56 yuan.
Since its close on May 20, it has soared 188 per cent. The first week that Xi visited, it shot up 57 per cent, and then the week ending May 31, it skyrocketed 61 per cent. Last week, it posted a weekly gain of 8.6 per cent.  
Shares in the sector continue to draw speculators after Xi put them in the spotlight. Rare earths are used in everything from iPhones to missile systems.
Meanwhile, China Securities News reported that China has launched a broad survey of its rare earth resources.
Also hitting the daily upside limit was China Minmetals Rare Earths (000831 CH), rising to 18.56 yuan.
China Northern Rare Earth Group High-Tech (600111 CH) is up 6.4 per cent to 14.59 yuan in early trading.
Meanwhile, Xiamen Tungsten (600549 CH) is up 5.2 per cent at 16.49 yuan.
In Hong Kong, China Rare Earth (769 HK) shot up 6.7 per cent to HK$0.64.
— Deb Price
 


Rare earths soar — again

Shares of Goldin Financial Holdings (530 HK) rose by as much as 0.4 per cent amid a declining market to HK$2.32, after the company walked away from a HK$1.1 billion land purchase.
The developer had to forfeit a HK$25 million payment for reneging on its purchase of a land plot at the former Kai Tak airport runway.
— Eugene Tang 


Goldin Financial Holdings rises after walking away from land deal at old airport runway

Protests are continuing today over a controversial extradition bill that opponents fear will open the door to mainland China being able to grab people here without just cause.
Local and overseas businesses, including the American Chamber of Commerce, object to the bill.
Protests began Sunday, when crowds were estimated as large as 1 million people. 
They are kicking up again today. Some businesses have closed in the area where protesters have gathered, on Harcourt Road near the government headquarters.
The SCMP is doing a live blog, which you can read here.
#LIVE: Protesters are being asked to storm the Legco east entrance, and others are seen nearby gathering bricks from the ground in a scene reminiscent of the Mong Kok riot https://t.co/fpKl8rH1bn #ExtraditionBill pic.twitter.com/8bZECtVlad
— SCMP News (@SCMPNews) June 12, 2019
 
 
 
 


Businesses, bus routes disrupted in Hong Kong by fresh protests 

Standard Chartered Bank said that it temporarily suspended operations at two of its branches in the Admiralty area to ensure the safety of its staff and customers because of "severe traffic disruption" associated with the ongoing protests in Hong Kong over the proposed extradition law.
"Banking services in Admiralty district, including branch services, cheque deposit service, ATMs and cash and deposit machines, are temporarily suspended until further notice," the bank said. 
— Chad Bray 


Standard Chartered Bank shuts two branches over protests in Hong Kong 

China Citic Bank said it has temporarily shut its CITIC Tower branch due to the protests in Admiralty.
— Chad Bray


China Citic Bank closes branch at Hong Kong protest area

The Hang Seng Index lost 4.2 per cent in the 79 days when traffic in Admiralty, Central and Causeway Bay was disrupted by the Occupy Central protests between September and December of 2014.
The index fell to 22,670.50 on December 16, 2014, the day after protest leaders surrendered themselves to police. The Hang Seng China Enterprise Index, which tracks the performance of Chinese companies, or H shares traded in Hong Kong, rose 5.2 per cent in the same period.

 
— Eugene Tang 


Hang Seng dropped more than 4 per cent in 'Umbrella' protests of 2014

The Hang Seng will begin afternoon trading with all sectors down, as fresh protests against a proposed extradition bill weigh on sentiment. The index fell 1.6 per cent in the morning session. 
Information technology is leading declines, falling 5.8 per cent. It was followed by health care, consumer discretionary and real estate, all of which declined more than 2 per cent in the morning session. 
Sunny Optical (2382 HK) was the biggest loser, shedding 6.5 per cent to HK$68.85. AAC Technologies Holdings fell 4.7 per cent to HK$41.55. The next four biggest laggards, each falling more than 3 per cent, were Geely Automobile Holdings (175 HK), New World Development (17 HK), Wharf Real Estate Investment (1997 HK), and Sun Hung Kai Properties (16 HK). 

The Hang Seng Index dropped 4.2 per cent over the 77 days of "Umbrella Movement" protests in 2014.
-- Deb Price 
 


Hang Seng weighed down by city protests

Infrastructure-linked stocks soared in Shanghai, as traders continue to bet on government stimulus steps to counter a decline in growth.
Of the 12 companies that hit or nearly hit the daily upside 10 per cent limit by early afternoon, many were in construction.
They included CITIC Heavy Industries (01608 CH), which makes mining and construction equipment, Launzhou LS Heavy Equipment (603169 CH), which makes heavy machinery for industrial steel component production, Suzhou Architecture Research Institute Group (603183 CH), which provides engineering services, China Aluminum International Engineering (601068 CH), which also provides engineering services, and Huadian Heavy Industries (601226 CH), maker of heavy machinery products. 
As of early afternoon, the Shanghai Composite Index had seen a 0.6 per cent intra-day decline, with all sectors except materials trading down. 
— Deb Price 
 


Infrastructure-linked stocks shoot up in Shanghai 

As protests continued in the city today over a controversial extradition bill, we took a look back at how businesses were affected over the 77-day 2014 "Umbrella Movement" demonstrations.
The current protests began on Sunday, and there is no way to know how long they will go on. 
But in the 2014 protests, retail and hotels were hit hard. 
Many local and international brands reported a decline in sales during the protests between September and December of 2014.
The Hong Kong Retailers Association estimated a 15 per cent to 50 per cent drop in sales during the National Day and Golden Week, according to media reports at the time. Sellers of watches, jewelry, fashion, accessories and catering reported the largest drops. Some small businesses had an 80 per cent sales drop, the association said.
German luxury clothing brand Hugo Boss reported losses in its 2014 earnings statement saying the civil unrest had negatively affected global sales, specifically Hong Kong's "soft retail environment". In early October, when protesters crowded Causeway Bay, La Suisse Watch reported a 20 per cent to 30 per cent drop in sales.
Sa Sa reported a 3 per cent decrease in sales over holidays following the protests in 2014, the Financial Times reported at the time. The company commented it was "mainly attributable to a decrease in traffic as a result of the recent demonstrations".
Hotel occupancy rates suffered. By mid-November of 2014, Ritz Carlton said it had lost 10 percent of its business since the movement started, and advance bookings for November and December at hotels held by the group were "noticeably worse" than the previous year.
However, tour groups continued to come in. According to the Travel Industry Council, in the first three weeks of October 2014, an average of 380 groups visited the city per day — up 90 per cent from the same time in 2013.
— Joy Pamnani 
 


In 2014 protests, retailers and hotels were hit hard

The Hang Seng Index is down 1.9 per cent to 27,260.69 and on track for its worst daily performance in more than a month.
On May 9, amid building tensions between the US and China over trade, it fell 2.4 per cent.

 
 — Deb Price  


Hang Seng on track for worst day in more than a month

Protests and slowing global and China growth are behind today's steep fall in Hong Kong, says Ken Chen Hao, a Shanghai-based strategist at KGI Securities.
“The protest is of course one of the negative factors that are weighing on stocks by adding uncertainty, and it is still brewing up,” he said. “But concerns about slowing global growth and a slowdown in China’s economy are the main restraint on the market recently.”
The Hang Seng Index was last trading down 1.9 per cent at 27,256.70.
— Zhang Shidong 


Protests, slowing global and China growth weighing on Hang Seng, says strategist Ken Chen Hao

Sure, the protests aren't helping trading sentiment in Hong Kong. But traders also wanted to take profits on blue chips today, helping push down the Hang Seng Index, says Castor Pang, head of research at Core Pacific-Yamaichi.
The Hang Seng Index had moved up as of Tuesday's close more than 1,100 points from its recent low of 26,671.52 on June 4.
“It’s too early to say whether such selling will be persistent, and for now we don’t see the selling pressure spreading to longer-term institutional investors," he said.  
"This is too early to say whether the demonstration would sustain to the scale of the 'Umbrella Revolution' in 2014, ,” said Pang, referring to the Occupy Central movement that took place started in September 2014 and lasted for almost three months.
Pang said the Hang Seng could end up near the 10-day moving average, 27,100, or even lower.
The Hang Seng is down 1.9 per cent today, to 27,263.47.
— Georgina Lee 
 


Traders rush to take recent profits, putting pressure on Hang Seng, says Castor Pang at Core Pacific-Yamaichi

Goldin Financial Holdings — which yesterday walked away from a HK$11.1 billion (US$1.42 billion) winning bid for a plot of commercial land on the former Kai Tak Airport runway, forfeiting its HK$25 million deposit — was worried about social disharmony and the US-China trade war, Abraham Shek, an independent non-executive director of Goldin, told the South China Morning Post.
“The recent disharmony in society and the trade war are [among the] number of reasons that worries me,” Shek said. “If [property] prices fall by 10 to 15 per cent, what will happen? I am responsible for minority shareholders.”
Shek was able to persuade five other members of Goldin’s board to support his withdrawal from the deal, forming a majority of 6-to-2, even as the company’s chairman Pan Shutong owns 70 per cent of Goldin’s shares.
The developer would have had to invest an estimated HK$18 billion to develop the site into a shopping centre, including a hotel.
Goldin (530 HK) was trading flat at HK$2.31.
— Peggy Sito
 


Goldin walked away from old airport land over disharmony, trade war, says insider

Shares of Wheelock (20 HK) dropped by as much as 2.7 per cent to an intraday low of HK$52.95 amid a declining market, after the developer rescheduled a press conference to launch a sale at the end of June of its Grand Montara project in Lohas Park.
“We will have to wait for one or two days to see how things are going,” said Wheelock’s vice-chairman Stewart Leung Chi-kin, in a phone interview with the Post. “It does not make sense to launch the project right now.”
— Peggy Sito 


Wheelock, Sun Hung Kai shares drop over delay in decision on flat sale launch 

The Hang Seng has had three things going against it today, says Louis Tse Ming-kwong, managing director at VC Asset Management.
First, traders wanted to cash in on recent profits.
Second, sentiment was down over Goldin Financial Holdings backing out of a bid it had won at the former runway of the Kai Tak airport.
And the protests in Admiralty didn't help.
“We’ve seen protests before, but Hong Kong has stayed strong,” he said.
The market is correcting for the good performance over the last couple of days,  which saw “insufficient trading volume to warrant the price increase”, Tse said.
The Hang Seng Index had moved up as of Tuesday's close more than 1,100 points from its recent low of 26,671.52 on June 4.
But a fourth stubborn issue has been there, too, he added. 
“The main issue the market is facing is still the Sino-US trade tussle. We have not seen the end of that,” he said.
— Daryl Choo 
 


Profit-taking plus trade, Goldin backout, protests hit Hang Seng, says  Louis Tse of VC Asset Management

The Hang Seng fell 1.7 per cent to 27,308,46, in its worst day in five weeks.
Trading sentiment was weighed down by ongoing protests in the city over a controversial extradition bill. In addition, investors are concerned about escalating tensions between the US and China. Finally, analysts said, traders pocketed gains from a recent run-up in stock prices.
On May 9, amid building tensions between the US and China over trade, it fell 2.4 per cent.
Meanwhile, the Shanghai Composite Index fell 0.6 per cent to 2,909.
— Deb Price 
 


 Hang Seng falls sharply amid protests, trade war concerns

China’s aggregate financing, the broadest measure of credit growth, was 1.4 trillion yuan (US$202.5 billion) in May and new lending was 1.18 trillion yuan, the People’s Bank of China said in after the market close. That missed the estimates of 1.45 trillion yuan and 1.3 trillion yuan, respectively.
— Zhang Shidong 


China’s May aggregate financing, new lending trail estimates

HSBC said it has closed two branches in Queensway for now, as tens of thousands of protesters demonstrated against a controversial extradition bill.
The two branches — the Pacific Place Premier Centre, and the Pacific Place Day and Night Plus — will be closed until further notice “due to public events”, the bank said in a press release.
Other banks announcing closures near the downtown site of protests were Standard Chartered Bank, China Citic Bank and the Bank of East Asia.
In the morning, private cars were seen parked in the middle of Queensway, blocking traffic.
Later that day, protesters set up barriers on the eastbound lane of the road, while the westbound lane was obstructed after an accident outside Pacific Place, where the HSBC branches are located.
The bank advised customers of the Admiralty branches to visit their other branches or use the bank’s personal internet, mobile or phone banking instead.
“ We apologise for the inconvenience this special arrangement has caused to our customers,” HSBC said. “We will provide updates on the operation of our outlets as the situation progresses.”
— Daryl Choo
 


Stocks Blog: Hong Kong shares fall as fresh protests in city disrupt roads, businesses

Protests, slowing global and China growth hit Hang Seng, says strategist Ken Chen Hao Rare earths soar — again

Protests, slowing global and China growth hit Hang Seng, says strategist Ken Chen Hao

Rare earths soar — again