bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Louise Moon

Deb Price

Good day, traders —
Mainland markets rallied on news presidents Donald Trump and Xi Jinping agreed to a truce in the trade war over the weekend. Hong Kong's market was closed due to a holiday honoring the handover from Britain to China. Police and protesters clashed in the city during demonstrations against a proposal that would allow extraditions to mainland China.
Catch up on the latest action below. Shoot any questions you have to deb.price@scmp.com . 
— Deb Price and Louise Moon  


Inside Indonesia’s inner circle: Hashim Djojohadikusumo on his brother Prabowo’s vision

Dow breaks 50,000 for first time, as US stocks rally

UK, China boost financial ties, deepen London’s role as offshore yuan hub

Bargain hunting? Hong Kong retail investors snap up bitcoin amid crypto crash

Stocks

Stocks Blog: Shanghai closes at 9-week high on US-China trade war truce between Donald Trump and Xi Jinping

Presidents Trump and Xi shake hands on the sidelines of the G20 Summit in Osaka, Japan, on June 29, 2019. Photo: Agence France-Presse

China’s high-speed rail network has been low speed in adoption – but that’s set to change

The G7 Fuxing bullet train prepares to head for Shanghai at the Beijing South Railway Station on July 1, 2018. Photo: Xinhua

Business

Markets

Crystal Ball: Expect Hang Seng to shoot up Tuesday, says Louis Tse Ming-kwong of VC Asset Management
Kweichow Moutai closes above 1,000 per share — a first for any Chinese company 


Crystal Ball: Expect Hang Seng to shoot up Tuesday, says Louis Tse Ming-kwong of VC Asset Management
Kweichow Moutai closes above 1,000 yuan per share — a first for any Chinese company 


China stock market

Hong Kong stock exchange

Live

A move by Beijing to keep a sales tax break on environmentally friendly cars to help China's sputtering auto sector will boost the fortunes of top domestic EV manufacturers as well as the popular Tesla from the US over smaller players, analysts tell Daniel Ren.
Beijing had been widely expected to scrap the sales tax break, but the Ministry of Finance announced on Friday it is extending it. A change had been expected to go into effect Monday, but buyers of battery-powered and plug-in hybrid cars will still be exempt from the 10 per cent sales tax until the end of 2020.
Paul Gong, a UBS analyst, predicted that eight to 10 companies – including Geely Automobile Holdings (175 HK), SAIC Motor (600104 CH) and Guangzhou Auto (601238 CH)  – would benefit most from the extension of the tax break. 
Leading EV start-ups Xpeng Motors, and Nio (NIO US) will also get a boost, Ren reports.
The auto sector is one of China’s biggest economic engines and accounts for one of six jobs. But car sales have fallen off in the world’s largest auto market, partly due to weakened demand amid the US-China trade war.
Read full story here


Move to keep EV tax break to boost bigger players, including Geely and Tesla

China’s expensive and underused high-speed rail network is beginning to see the light at the end of the tunnel.
It can thank rapid urbanisation, growing wanderlust and rising incomes, which are combining to put success of the world’s largest high-speed rail network on track, experts told Louise Moon.
“In our view, urbanisation and changes in travel behaviour make it a necessity to have even more rail infrastructure in place,” Lesley Liu, infrastructure and industrial research analyst at HSBC, wrote in a recent report.
In just over a decade, China has created a high-speed network encompassing 29,100 kilometres (18,081 miles). By 2030, it plans to add another 16,000 kilometres.
Read full story here. 

 


China's high-speed rail network to get boost from urbanisation, wanderlust and rising incomes 

Here's what we are watching this morning:
Friday markets/ What futures foretell
 
-- On Friday in US markets, S&P 500 gained 0.57 per cent,  Nasdaq rose 0.48 per cent, and the Dow Jones Industrial Average was up 0.27 per cent.
-- The China A50 futures are down 0.18 per cent to 13,589.98.
IPO debuts:
 
None.
 
Economic statistics/Central Bank:
9:45am: June Caixin China PMI
Corporate events: earnings, meetings, news conferences:
9am-3pm: June Macau casino year-on-year revenue
Hong Kong is on public holiday.
Good Reads: A move by Beijing to keep a sales tax break on environmentally friendly cars to help China's sputtering auto sector will boost the fortunes of top domestic EV manufacturers as well as the popular Tesla from the US over smaller players, analysts tell Daniel Ren. China's high-speed rail network to get boost from urbanisation, wanderlust and rising incomes, Louise Moon reports.  


Morning guidance 

The Shanghai Composite rose 1.78 per cent to 3,031.88 at open, while the CSI 300 of large caps in Shenzhen and Shanghai gained 2.2 per cent to 3,910.02.
Hong Kong markets are closed today for the July 1 public holiday to mark the day it was handed back to mainland China from the United Kingdom in 1997.
— Louise Moon


Shanghai jumps on truce in trade war

It was an eventful weekend, as global leaders met at the G20 summit and Donald Trump becoming the first sitting US president to visit North Korea.
Trump crossed into the demilitarised zone that divides the Korean Peninsula on Sunday, in his third encounter with the North Korea’s Kim Jong Un.
Meanwhile, the US president said he was in no hurry to finish a deal that would end the ongoing trade war between the US and China. They paused the trade war and agreed to resume negotiations. Meanwhile, Trump has said he would hold off imposing an additional US$300 billion in tariffs, and will delay restrictions against Huawei, allowing US companies to sell components to the Chinese internet giant.
— Louise Moon 


ICYMI: Over the weekend

Hangzhou Hikvision Digital Technology (002415 CH) is up 4.6 per cent to 28.84 yuan and Zhejiang Dahua Technology  (002236 CH) shot up 6.5 per cent to 15.47 yuan after the Xi-Trump agreement to restart the trade talks and generally get relations back on track.
The Trump administration looked at restrictions on China's surveillance champions in May, according to media reports at the time, after the US president put Huawei on a US trade blacklist. Over the weekend, Trump said US companies can sell some products  to Huawei.
— Deb Price 
 


Chinese video surveillance champs jump on trade truce

Agreements reached over the weekend between presidents Donald Trump and Xi Jinping have not changed credit rating agency Moody’s outlook on the global economy.
“Although the agreement will likely partially relieve recent negative sentiment in the financial markets and support near-term growth, it stops short of removing existing tariffs,” said Michael Taylor, managing director and chief commercial officer APAC, credit strategy & standards, Moody’s Investors Services.
“We therefore maintain our baseline view that the tariffs implemented to date will shave 0.1 percentage point off US growth and about 0.2 percentage point off China’s growth this year through direct trade channels. “
Moody’s expects China to continue to ease policy in order to offset the impact of existing tariffs, said Taylor in a note.
"Major obstacles" still remain before the US and China will reach a long-term agreement,  he said, including differences on technology, intellectual property, industrial policies and the creation of a level playing field for overseas companies to operate in China.
“As such, the talks could still suffer setbacks and the risk of further tariffs has not been removed yet,” said Taylor.
— Louise Moon


Moody's sees 'major obstacles' ahead on any US-China trade pact 

Police equipped with shields and batons clashed with hundreds of protesters near the convention centre before an indoor ceremony began honoring the handover of sovereignty to mainland China.
Police used pepper spray to move back protesters, who wore yellow raincoats and helmets and hid behind a stretch of umbrellas they had unfurled. (Read full story here.) 
A series of protests in recent weeks against a proposal that would allow extraditions to mainland China have sporadically hurt trading sentiment in the Hong Kong stock market. The exchange is closed today in observance of the handover holiday.
In the 2014 Occupy Movement, the Hang Seng Index dropped by 4.2 per cent over the 79 days of protests. Shopping centres, banks, hotels and small businesses suffered then, as foot traffic dwindled amid blocked roads from the normally vibrant downtown area.
— Deb Price 
 


Protesters and police clash on handover day holiday 

China’s factory activity shrank unexpectedly in June to its lowest level since January. The result indicates a loss of steam in the world’s second-largest economy’s manufacturing sector, due to the ongoing US-China trade war.
The official Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) for June was 49.4, below estimates of 50.1 from analysts polled by Bloomberg. It was the worst reading since January, when it reached 48.3, and down from 50.2 in May.
A reading below the level of 50 indicates contraction.
On Sunday China’s official PMI was also 49.4 in June, unchanged from May, according to the National Bureau of Statistics.
In a note accompanying the data on Sunday, Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group said China’s economy had come under further pressure in June and that it was “crucial” for policymakers to “step up countercyclical policies,” reported Reuters.
— Louise Moon


Caixin/Markit PMI falls below estimates, showing contraction in manufacturing

Rare earth stocks are slumping in China as US-China relations warm up following a trade truce by the world’s two largest economies on Saturday in Osaka.
In May, Chinese President Xi Jinping visited a rare earth firm in southern China, sparking speculation that China could cut off supplies to the US as a bargaining chip in the trade war. That visit boosted linked stock prices. The US relies on China for 80 per cent of its rare earth minerals.
Chengdu Galaxy Magnets (300127 CH) slid 7.14 per cent, while JL MAG Rare-Earth (300748 CH) shed 6.03 per cent and Innuovo Technology (000795 CH) was down 5.97 per cent. China Northern Rare Earth Group High-Tech (600111 CH), China Minmetals Rare Earth (000831 CH) and Shenghe Resources Holding (600392 CH) lost almost 5 per cent each.
Xiamen Tungsten (600549 CH), Rising Nonferrous Metals Share (600259 CH), Yantai Zhenghai Magnetic Material (300224 CH) and Beijing Zhong Ke San Huan High-Tech (000970 CH) fell between 2 and 4 per cent.
These stocks are going against a broad rally in the market that is seeing the Shanghai Composite up almost 1.5 per cent in morning trading.
— Louise Moon 


Rare earths tumble on US-China trade progress 

Shares of companies linked to Huawei shot up after Trump paused restrictions on the world’s biggest telecom network gear maker. Technology and telecoms, more broadly, also followed suit.
The president has delayed restrictions against Huawei and will allowed US companies to sell some components to the giant. He said the US Commerce Department would study in the next few days whether to remove Huawei from a blacklist of companies unable to buy components and technology from the US.
Among stocks, DBG Technology Co (300735 CH), an electronics manufacturer service provider to Huawei, zoomed by the daily limit of 10 per cent. Luxshare Precision Industry (002475 CH) was up 9.44 per cent, and Shennan Circuits (002916 CH) and Shenzhen Sunway Communications (300136 CH) were up over 7 per cent, among others.
Wutong Holding Group (300292 CH), which sells radio frequency connection systems to Huawei, ArcherMind Technology (300598 CH), a software developer that has a long-term partnership with Huawei, and DongHua Testing Technology (300354 CH), which supplies mechanics performance test systems to Huawei, gained between 2 and 5 per cent.
Huawei’s domestic rival ZTE (000063 CH), which has also been caught up in worsening US-China trade relations, rose by 4.76 per cent in Shenzhen.
Technology was the biggest gainer in Shanghai in the morning, up almost 3.5 per cent, while telecommunication services gained 2.34 per cent.
— Louise Moon 


Huawei-linked shares zoom after Trump pauses restrictions

Of the 1,514 stocks on the Shanghai Composite, just 49 were down during morning trading. Seven had reached the daily limit of a 10 per cent gain.
Kweichow Moutai, the world's biggest distiller, breached 1,000 yuan for the second time in intra-day trading, and is currently up 3.76 per cent to 1,021 yuan.
All sectors are up, led by technology which has gained 3.73 so far this morning. The bourse rose over 2 per cent in earlier trading and is currently up 1.98 per cent to 3,037.76.
— Louise Moon 


Shanghai rally is broad; Kweichow Moutai is over 1,000 yuan for second time in intra-day trading

Agricultural-linked stocks plowed up some profits for traders in the morning session. 
Jiangxi Zhengbang Technology (002157) rose 4.26 per cent and Henan Shuanghui Investment & Development (000895 CH) gained 3.62 per cent.
Among others, Shandong Minhe Animal Husbandry rose 3.32 per cent, China Animal Husbandry was up 3.03 per cent, and Muyuan Foods (002714 CH) rose 2.33 per cent.
On Friday, the State Council laid out guidelines to revitalise the agricultural industry, including modernising agriculture and rural areas, promoting science and technology and improving the quality and efficiency of rural industries.
The Shanghai Composite Index was up about 1.9 per cent in the morning session.
— Louise Moon 


Agricultural stocks post solid gains in early trading 

Chinese markets are rallying after the weekend Xi-Trump meeting boosted investor sentiment.
The Shanghai Composite will head into the afternoon trading session with gains of 1.88 per cent to 3.034.79. All sectors were up. The CSI 300 of large caps, meanwhile, rose 2.47 per cent to 3,920.20, with all sectors also in positive territory.
— Louise Moon 


Trade progress boosts Shanghai, CSI 300

The price of hogs will hit new highs in the second half of the year, as the gap between supply and demand widens, according to a new report by brokerage CITIC Futures.
Live pigs in the second half of the year will continue to rise to hit a new high of more than 21 yuan per kilogram. In the fourth quarter of last year, prices were at 14 yuan/kg, according to cited data from the Ministry of Agriculture and Rural Areas.
The hike in prices comes as China has been hit with deadly African swine fever, which has killed hogs throughout the pork-loving country and slammed global supplies. Linked stocks rose. Jiangxi Zhengbang Technology (002157 CH) rose 3.66 per cent , while Muyuan Foods (002714 CH), a pig-farming company in central Henan province, gained 2.79 per cent, and Wens Foodstuffs Group (300498 CH) was up 2.48 per cent.

— Louise Moon


Hog prices set to soar,  boosting linked stocks 

Spot gold fell to US$1,385.99, down 1.7 per cent, as the Trump-Xi trade truce makes equities more attractive.
The yellow metal had been soaring. It was at US$1,279.78 on May 29 and shot up to US$1,423.44 on June 25 -- or a 11.2 per cent gain in four weeks.
China gold-linked companies such as miners saw a rally in their share prices.
But today, Zhongjin Gold (600489 CH) is down 1.5 per cent to 10.12 yuan, Gansu Gangtai Holding (600687 CH) has fallen 4.9 per cent to 2.14 yuan, YanTai Yuancheng Gold (600766 CH) dropped 4.8 per cent to 9.72 yuan, and Shandong Gold Mining (600547 CH) fell 3.6 per cent to 39.67 yuan. 
They bucked the trend of the Shanghai Composite Index, which is up 2 per cent, climbing to 3,041 in intra-day trading.
— Deb Price 
 


China gold-linked stocks lose their shine with investors on trade truce

Pesticide stocks are rising after the Agricultural and Rural Department vowed to control the spread of the fall armyworm, which snacks on corn and other crops.
It emphasised that provinces must be responsible for food security and curbing the outbreak of the insect, according to local media.
Further, the destructive insect has now been found in northern Shandong province, though it has not yet damaged crops, Beijing News reported on Monday. Shandong is the third-largest corn producer in the country, noted Reuters.
Pesticide-related stocks rose.
Jiangsu Huifeng Bio Agriculture (0024496 CH) rose 2.09 per cent, Heilongjiang Agriculture (600598 CH) rose 0.56 per cent and Jiangsu Changqing Agrochemical (002391 CH) was up  2.60 per cent.
First found in China in January, the fall armyworm threatens China’s corn, rice, wheat, sorghum, sugarcane, cotton, soybean and peanuts. The larvae are a major threat to corn in its seeding stage. It had spread across 19 provinces in China, as of last week, and hit 5 million mu of land, or about 333,000 hectares.
Beijing has previously said the insect is a serious threat to China’s food security and the situation is severe.

— Louise Moon 


Pesticide stocks get boost on government vow to fight fall armyworm

Kweichow Moutai (600519 CH) tossed back another milestone — closing above 1,000 yuan to become the first Chinese to do so.
Shares of the Guizhou province-based company, which produces the upmarket rice liquor under the "Maotai" brand, shot up 4.9 per cent to 1,031.86 yuan.
The stock, with the second-biggest weighting on the Shanghai Composite Index, has soared by as much as 74 per cent this year, outperforming the 22 per cent advance in the benchmark, as earnings have exceeded estimates amid increasing consumers’ spending.
Traders bought more of the stock – whose namesake baijiu is usually the toast at China's state banquets – after the presidents of the US and China called a truce to their year-long trade war following talks at the G20 meeting in Osaka over the weekend.
Most of the buying came from China’s domestic investors in the A share market, since investments in the stock via the Connect cross-border investment channel in Hong Kong are closed during the city’s July 1 public holiday.
Monday’s rally lifted Moutai’s market capitalisation to 1.3 trillion yuan (US$190.2 billion), almost double the value of London-listed Diageo Plc, the world’s second-most valuable vintner, according to Bloomberg data. (Read full story here.) 
 

— Zhang Shidong


Investors drink up more Kweichow Moutai stock, pushing it to close above 1,000 yuan — a first for a Chinese company 

Expect a " temporary respite to equities, "but eventually better macro data and dovish policy is required to sustain the rally," says Eastspring Investments in a note this afternoon. 
Trade issues aren't over, it says, the team of analysts says US growth may disappoint expectations, especially in the third quarter. 
"If the Fed underwhelms market rate cut expectations, we may see a pullback in equity markets after the positive trade news is priced in, and we would use such episodes as an opportunity to add to beta risk, as we still think the probability of a recession in the next 12 months is low," it said. 
"In the meantime, we maintain our broadly neutral equity position (with a preference for US over other regions).  We are overweight duration and credit given the dovish macro backdrop and gradual slowing of growth. We like idiosyncratic trades in emerging markets including Indian equities, Russian ruble, Indonesian rupiah, Argentinian $ bonds and Indonesian bonds. We are also long Asian HY (high yield) credit as it should perform under a benign global monetary policy environment."
Given slowing in manufacturing growth and a serious decline in business sentiment, Eastspring expects both the US and China policy to remain supportive of growth. 
"Specifically, we expect Fed to deliver a pre-emptive rate cut in July or September but remain data dependent thereafter. The deterioration in Chinese activity data seen last year has stabilised somewhat this year following policy support (Exhibit 3), and we expect both monetary and fiscal policy easing to continue over the next few months and cushion a sharp slowdown," it said.
— Deb Price 
 
 


More is needed than trade truce to keep equities happy, says Eastspring Investments

Expect Hong Kong's stock market to rally Tuesday, when it reopens after the handover holiday, says Louis Tse Ming-kwong, managing director of VC Asset Management.
The Hang Seng Index closed on Friday at 28,542.62 points, slipping a bit as traders nervously awaited the weekend trade talk between Xi Jinping and Donald Trump. Tse could see it jumping to 29,200 on Tuesday.
But Tse only expects China’s rally to last for about three days, as no long-term changes have been agreed.
“Then what is next? The US hasn’t reduced any existing sanctions against Chinese exports to the US,” he said.
In the short term “there is bound to be a strong rebound,” but “from there onwards we have to look at the interim results. What will these kinds of changes in policies mean for local investors, the Chinese economy and exporters, especially those hi-tech companies?”
 
Hong Hao, head of research and strategy at BOCOM International Securities, says today's rally in China markets was partly sparked by Donald Trump easing off Huawei, allowing it access to some US components.                
“Easing the ban on Huawei means that everything is on the table to negotiate, and the Huawei ban is more a trade issue than a national security issue,” Hong said. 
“Last time when Xi and Trump talked, the ban on ZTE was lifted. The market rallied for a few weeks,” he said. “This one on Huawei is much bigger.”
The progress over the weekend “gives a positive signal to the market that (Trump) is willing to do something he hasn’t so far in the past nine months,” he added.
— Louise Moon 


Crystal Ball: Expect Hang Seng to shoot up Tuesday, says Louis Tse Ming-kwong of VC Asset Management

China's Shanghai Composite ended up 2.2 per cent to 3,044.90, its highest level since April 30. The CSI 300 of large caps in Shenzhen and Shanghai, meanwhile, rose 2.9 per cent to 3,935.81, marking its highest since April 25.
Technology led both bourses, though all sectors were up.
The country's largest distiller, Kweichow Moutai, rallied 4.86 per cent to end at 1,031.86 yuan, which is the first time any Chinese stock has closed above the 1,000 yuan mark.
Louis Tse Ming-kwong, managing director of VC Asset Management, doesn't expect the alcohol maker to continue going on its rocket ride.
"It is bound to take a breather. We have seen these things before — it cannot go up continuously non-stop, according to fundamentals," Tse said.
Traders have been buying into Kweichow as a "safe haven" that is not affected by the trade war because of its strong sales inside the mainland, said Tse. But traders are likely to turn to stocks that have hit "rock bottom prices" due to the US-China tensions, and Kweichow will have a correction "very soon", said Tse, though he would not predict when.
— Louise Moon 


Shanghai ends at highest level in nine weeks

"Trump's position on HW could be volatile," tech analysts Edison Lee and Timothy Chau write in a note sent out this afternoon.
"In fact, his earlier comment that he would work with the [US Department of Commerce] next week to see if it might remove [Huawei] from the Entities List was contradicted by his later comment that he would leave the 'HW issue' until the end of the trade talks with China. 
Furthermore, Trump did say that he would be happy to continue to let HW buy US components 'that are not related to US national security.' Therefore, the US focus on HW's threat to national security does not yet seem to have given way to Trump's desire to have a deal with China."
The step by Trump over the weekend about Huawei is not a concession. The Department of Commerce had granted Huawei a 90-day reprieve that will expire in mid-August, they write. So what Trump said about allowing Huawei to buy some products is nothing new, they say.
"Only if he promised to ask the DoC to remove HW from the Entities List would it be a fundamental change (just as he did for ZTE in July 2018 as a personal favor to Xi). However, according to media reports in the US (eg, Washington Post and WSJ), Trump has not made any promise and no official decision has been made. In fact, Trump said during the press conference that he would leave the 'HW issue' until the end of the trade talks. 
"We believe Trump and his team understand very well that the 'HW issue' has significant leverage over China, and thus it does not make any sense from a bargaining perspective for the US to give up that leverage right now," they write.
The analysts expect a partial export ban on Huawei so it can buy only components that are not related to 5G.
"But that may still be unacceptable to China. A 90% complete deal may still mean no deal," they conclude.
 — Deb Price 
 


Exactly what did Trump say about Huawei? Jefferies analysts weigh in 

Stocks Blog: Shanghai closes at 9-week high on US-China trade war truce between Donald Trump and Xi Jinping

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}Crystal Ball: Expect Hang Seng to shoot up Tuesday, says Louis Tse Ming-kwong of VC Asset Management Kweichow Moutai closes above 1,000 per share — a first for any Chinese company

Crystal Ball: Expect Hang Seng to shoot up Tuesday, says Louis Tse Ming-kwong of VC Asset Management

Kweichow Moutai closes above 1,000 per share — a first for any Chinese company