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Good day, traders —
Shanghai and other Chinese benchmarks fell on worries about a resolution to the trade war. The Shanghai Composite Index is still up about 21 per cent for the year, and traders wanted to pocket profits.
Meanwhile, Hong Kong slipped as well.
Catch up on the day's action below. If you have any feedback or questions as we work to make our blog your must-read for local markets coverage, please reach out at deb.price@scmp.com . And welcome to our first reader from Cairo!

— Deb Price and Louise Moon in Hong Kong 
 


China’s tech self-sufficiency powers stock boom and helps it shake off economic malaise

Chinese power stocks surge on State Grid’s record US$574 billion investment plan

Hong Kong stocks slip on profit-taking after TSMC’s upbeat AI outlook

China pushes slow bull run with tightened margin financing rules to fight overheating

Stocks

Stocks Blog: Hong Kong, mainland China markets fall as traders fret about chances for quick resolution to US-China trade war  

A Chinese investor looks at a rare earth company's stock price in Beijing on June 13, 2019. Photo: EPA-EFE

Gold has shot back up over US$1,400, after falling on the positive tone out of the Xi-Trump trade meeting last weekend. Photo: Associated Press 

China Tobacco, buoyed by monopoly in world’s biggest population of smokers, sees stock rise 307 per cent in Hong Kong

A tobacco shop in Shanghai. China had 306 million smokers in 2018. Photo: AFP

The China Tobacco stock has been the best performer among 74 listings in Hong Kong this year. Photo: Imaginechina

Business

Markets

China Tobacco closes down 3.4 per cent, but that's only a flick of ash after more than 300 per cent gain in three weeks 
Future Land shares plummet on news of chairman's arrest


China Tobacco burns up a bit of stellar gains, ending down 3.4 per cent in a roller-coaster day.


China stock market

Hong Kong stock exchange

Live

Here's what we are watching this morning:
Overnight markets/ What futures foretell
-- On Tuesday US markets edged higher. The S&P 500 gained0.29 per cent,  Nasdaq rose 0.22 per cent, and the Dow Jones Industrial Average was up 0.25 per cent.
-- Hong Kong futures are just down 0.01 per cent to 28,929, while the China A50 futures are also down 0.015 per cent to 13,981.27.
IPO debuts:
None.
Economic statistics/Central Bank action:
9:45am: June Caixin PMI Composite
9:45am: June Caixin Services
Corporate events: earnings, meetings, news conferences:
None to note.
Good reads: Shares in China Tobacco International have risen by 307 per cent since their initial public offering in Hong Kong last month, making the stock the best performer among 74 listings in the city this year, Zhang Shidong reports. Chua Kong Ho, in his debut Inside China Tech column, looks at the Huawei-US tech wrangling. 
 


Morning guidance 

The Hang Seng opened trading down 0.38 per cent to 28,765.06, going against slight gains in the US.
In China, the Shanghai Composite opened down 0.39 per cent to 3,031.83, while the CSI 300 of large caps dropped 0.24 per cent to 3,927.44.
— Louise Moon 


Hang Seng, China benchmarks open down

China Tobacco International (6055 HK) is shooting up — again.
The stock is up 15.3 per cent in early trading to HK$22.90. It has jumped more than 300 per cent from its debut three weeks ago.
It's a unit of state-owned China National Tobacco Corp., and is the sole importer and exporter of tobacco leaves and cigarettes in the country with more than 300 million smokers.
— Deb Price 
 


China Tobacco continues to soar in Hong Kong 

White House trade adviser Peter Navarro said US trade talks with China are headed in the right direction, and any concessions over Huawei are a small element of a much larger deal.
“It’s complicated, as the president said, correctly, this will take time and we want to get it right. So let’s get it right,” Navarro said in an interview with CNBC.
He said the US policy on Huawei has not changed.
“Selling chips to Huawei, a small amount of chips – less that US$1 billion a year – in the short run is small in the scheme of things,” he said.
Meanwhile, Huawei founder Ren Zhengfei said that Trump’s move to relax the ban on Huawei will not have much impact on its business, as it adjusts to an era of American hostility, reported the Financial Times. He said Huawei is willing to continue buying products from US companies.
Related suppliers to smartphone makers were down or little moved across the board.
In Hong Kong, AAC Technologies (2018 HK) dropped 0.21 per cent and Sunny Optical (2382 HK) lost 0.57 per cent.
In China, Luxshare Precision Industry (002475 CH) fell 2.08 per cent, though Shenzhen Snuway Communication (300136 CH) eked out gains of 0.3 per cent.
— Louise Moon 


'It's complicated,' says Trump trade adviser on trade deal

Growth in China’s services sector continued to ease through June, coming in below expectations.
The China June Caixin services purchasing managers’ index (PMI) came in at 52.0, down from 52.7 in May to mark a four-month low. The reading was below expectations of 52.6 by a group of analysts polled by Bloomberg.
Weakness in China’s export market offset stronger business on the mainland, following supportive government policies.
This helped to drag down China’s June Caixin Composite PMI, which was also at a four-month low and missed expectations. It recorded 50.6, down from 51.5 in May, which analysts polled by Bloomberg expected to stay stable.
The measure is closing in on the 50 mark, which is the line between expansion and contraction.
— Louise Moon 


Growth in China services sector continues to ease, Caixin survey finds

Liquor king Kweichow Moutai (600519 CH) dropped 1.3 per cent in morning trading to 1,011.30 after announcing its chairman Li Baofang is no longer interim president.
The company has appointed board director Li Jingren as the new interim president, according to a filing on the Shanghai stock exchange after trading hours on Tuesday. No reason was given for the change.
On Monday, the stock became the first in China to close above the 1,000 yuan mark, and has rallied over 71 per cent so far this year.
 
— Louise Moon


Kweichow Moutai falls on news of changes at the top 

China’s experiment with a centralised government procurement of medicines has expanded to three more provinces, adding Hebei, Fujian and Qinghai, reported the Economic Information Daily.
The program is an effort to overhaul the health-care system by making governments purchase drugs in bulk. Governments had previously bought drugs separately, before companies were then invited by Beijing to bid for contracts in order to supply demand.
It began in December, and China’s drug makers plunged on the news by 52 per cent compared to a year earlier, according to Bloomberg.
Today, pharmaceutical companies in China fell. Kangmei Pharmaceutical (600518 CH) dropped 4.97 per cent to 3.63 yuan. Jiangsu Henrui Medicine (600276 CH) lost 2.08 per cent and Tasly Pharmaceutical Group (600535 CH) dropped 1.85 per cent.
Separately, Zhongzhu Healthcare (600568 CH) has fallen the most since May 6 after it said in a filing to the Shanghai stock exchange that it is being investigated for alleged information disclosure violations. It was recently down 7.62 per cent.
— Louise Moon 


China drug makers fall as Beijing's bulk-purchase programme expands  

Hong Kong-listed conglomerate Fosun International (0656 HK) has bought a majority stake in London-based boutique asset manager Tenax Capital, according to a filing on the Shanghai stock exchange after market close on Tuesday.
While terms were not disclosed, and the deal needs to be given the go-ahead by regulators, Fosun said it was part of a plan to grow its global asset management business. Deal completion is expected in the second half of the year.
Fosun was down 0.38 per cent in morning trading to 10.5 yuan. Tenax mainly serves European institutional investors, with around 1 billion euros assets under management.
— Louise Moon 


Fosun shares slip as it moves to buy majority stake in asset manager Tenax

Beijing-based China Railway Construction (601186 CH; 1186 HK) has signed a 28 billion yuan contract for a project on the Ivory Coast. It will finance a 50,000 housing unit in the New City of Port Bouet, Abidjan, Ivory Coast, and the cost represents 3.83 per cent of the operating revenue of China Railway Construction for 2018.
In Shanghai the stock was down 0.4 per cent, while in Hong Kong it was flat.
— Louise Moon 


China Railway Construction launching project on Ivory Coast

China remains confident that the trade war won’t result in a massive exodus of factories out of the world’s second largest economy, Premier Li Keqiang told the World Economic Forum’s summer meeting in northern Dalian on Tuesday.
The country is still competitive for investment, he said, despite many companies having shifted facilities and supply chain operations towards Southeast Asia, particularly Vietnam, as tensions between the US and China rise.
“The relocation of the global industrial chain is a natural trend during globalisation, and global industries will improve during the process,” said Li, according to Bloomberg. “As long as we can build the industrial chain according to commercial and market principles, China, with its complete industrial clusters and huge market, will be competitive.”
— Louise Moon 


China confident trade war won't lead to exodus of factories, says Premier Li Keqiang

Investors looking for safe havens in the ongoing US-China trade conflict are piling into China Tobacco International (6055 HK), one of the reasons it is proving to be so spectacularly attractive to traders, says Louis Tse Ming-kwong, managing director of VC Asset Management.
With its share price zooming up more than 300 per cent in just three weeks since its debut in Hong Kong, its chances of becoming available for mainland traders through the stock connect programme are increasing, adds Tse. That makes it more appealing as well.
And it also appeals to investors because of its unique position in the world's largest cigarette market. It is a unit of state-owned China National Tobacco Corp., and the sole importer and exporter of tobacco leaves and cigarettes in the country with more than 300 million smokers.
"First there’s a monopoly in this market, where this state company is a sole importer of tobacco from North and South America into China, Southeast Asia, Hong Kong and Taiwan. There is a great demand for tobacco in the Chinese market,” he says.
He wouldn't speculate on how high the share price might go.
It was last up 35 per cent to HK$26.85.
— Joy Pamnani


China Tobacco is safe  haven in trade war that could end up on stock connect, says Louis Tse Ming-kwong on its jaw-dropping gains

Some car makers are bucking the general downward trend in morning trading, as China said 66 out of 141 of car makers and importers met fuel consumption standards in 2018.
Geely Automobile Holdings (0175 HK) rose 1.61 per cent, BYD Co (1211 HK) gained 1.22 per cent, Guangzhou Automobile Group (2238 HK) was up 0.35 per cent and Zhengzhou Yutong Bus (600066 CH) added 0.22 per cent.
According to a statement by the Ministry of Industry and Information Technology, average fuel consumption for domestic cars was 5.7 litres per 100 kilometres in 2018.
— Louise Moon 
 
 


Shares of China car makers accelerating on news many are meeting fuel consumption standards

Beer-related stocks in China are rising.
Lanzhou Huanghe Enterprise (000929 CH) shot up by the daily limit of 10 per cent to 8.9 yuan in Shenzhen, marking its highest price since April 12.
Fujian Yanjing Huiquan Brewery (600573 CH) rose 3.76 per cent, Guangzhou Zhujiang Brewery (002461 CH) was up 3.05 per cent, Beijing Yanjing Beer Brewery (000729 CH) gained 2.18 per cent, and Chongqing Brewery (600132 CH) added 0.23 per cent.
Tsingtao Brewery (600600 CH; 168 HK) was trading up 0.8 on the mainland and 0.1 in Hong Kong.
The giddiness of shares follows news that Budweiser maker Anheuser-Busch InBev is seeking to list in Hong Kong, in what would be the biggest IPO of the year at as much as US$9.8 billion.
Consumer stocks are also proving popular to traders looking for safer sectors to pile into while the US and China work on their differences over trade. (Read full story here on hot consumer stocks in Hong Kong.)  
— Louise Moon


Beer stocks in China hopping up

Mainland markets were stuck in a rut this morning.
The Shanghai Composite Index slipped by 0.7 per cent in morning trading, with all sectors except real estate and utilities down. Financials and information technology shares were the biggest losers, with each sector each down 1.2 per cent.  
Kweichow Moutai (600519 CH), the liquor stock that is popular with northbound traders, was down 0.4 per cent to 1,020.45 yuan.  
The Shenzhen Composite Index was down 0.6, weighed down by information technology stocks. Real estate and consumer staples were the only sectors trending up.
The CSI 300 of large cap stocks trading in both Shanghai and Shenzhen was down 0.5 per cent.
Meanwhile, the Hang Seng Index is being held up by real estate, up 1.5 per cent, and health care, up 1 per cent. It's being weighed down by information technology stocks, down overall 1.9 per cent, and energy, down 1.6 per cent. 
PetroChina (857 HK) is the morning's biggest laggard, down 2.5 per cent. 
China Mengniu Dairy (2319 HK) shot up 4.6 per cent to HK$32.10 —  a record high — after selling a 51 per cent stake in Junlebao Diary to focus on its core and expand its premium products. It has been the morning's top gainer.
Daiwa Capital Markets raised its target for the dairy producer to HK$36.60 from HK$32.80 and reiterated its buy rating, Bloomberg reported.
Louis Tse Ming-kwong, managing director of VC Asset Management, blames sentiment swinging over the likelihood of any trade deal between the US and China.
 “Last weekend, the meeting in Japan improved a lot of sentiment, and Asia went up on Monday. But people think it takes time to resolve a trade problem [like this] and they might as well have sold their stocks to take gains.” he said.
— Deb Price and Joy Pamnani  
 


China, Hong Kong markets to start afternoon in the hole

Spot gold jumped to US$1,423.17, pushing up some gold-related stocks.
Traders are reassessing how long a trade deal might take, assuming one ever comes about.
SD gold (1787 HK) shot up 5.6 per cent to $HK15.72. Zhaojin Mining (1818 HK) was up 0.7 per cent to HK$8.71, but Zijing Mining (2899 HK) slipped 0.3 per cent to HK$3.14.
The Hang Seng Index is down 0.3 per cent.
In China, Zhongjin Gold (600489 CH) is up 1.9 per cent; Shandong Gold Mining (600547 CH) climbed 3.7 per cent, and  YanTai Yuancheng Gold (600766 CH) rose 1.9 per cent.
But Gansu Gangtai Holding (600687 CH) fell 1.8 per cent.
China markets continue to be down, with the Shanghai Composite Index falling about 1 per cent to 3,014.
— Deb Price  
 


Gold stocks shining as investors worry about trade resolution prospects 

Property developer China Vanke (2202 HK) (000002 CH) has hit a two-month high, climbing 2.33 per cent and 0.83 per cent in Hong Kong and Shenzhen, respectively.
The gains came after it posted strong sales growth for the first half of the year, with contract sales of 334 billion yuan (US$48.50) to mark a 9.6 per cent rise year-on-year. In June alone, contract sales were 66.39 billion yuan.
So far this year, the stock has risen more than 15 per cent in Hong Kong, and over 22 per cent on the mainland.
Earlier in the day, fellow developer China Aoyuan Group (3883 HK) rose to an all-time high of HK$12.14, also due to sales growth. It was recently up 1.36 per cent to HK$11.90, still on track to a new closing high. Prior to its sales growth announcement on Tuesday, it rose 6.92 per cent, and so far this year it has added 139.44 per cent.
The company, which listed in October 2007, posted accumulated unaudited contract sales of 53.63 billion yuan in the first six months of 2019, up 33 per cent from a year ago. Those for June were up 28 per cent year-on-year, to 15.3 billion yuan.
— Louise Moon 


China Vanke hits two-month high on strong first-half sales growth 

Electric components and equipment maker Shenzhen Centre Power Tech (002733 CH) fell 1.57 per cent, even as it made a filing to the Shenzhen stock exchange that it had repurchased 98.67 million shares, accounting for 0.28 per cent of the company’s total share capital. The shares cost a total 199.5 million yuan, with a range of 19.6 yuan to 20.69 each.
Similarly, home furnishings company Suofeiya Home Collection (002572 CH) dropped 1.39 per cent. It disclosed it has repurchased 108.82 million shares, accounting for 1.18 per cent of the company’s total share capital. They cost a total 202 million yuan, ranging from 15.57 yuan to 22.09 yuan each.
— Louise Moon


Shenzhen Centre Power Tech, Suofeiya Home Collection disclose buybacks

China’s largest alcohol maker Kweichow Moutai (600519 CH) is back below 1,000 yuan after becoming the first stock in the country to ever close above the price on Monday. The famed baijiu-making company has shed 3.12 per cent to 993 yuan.
The industry followed suit. Second and third-largest distillers Wuliangye Yibin (000858 CH) and Inner Mongolia Yili Industrial (600887 CH) dropped 3.14 per cent and 2.52 per cent, respectively.
Consumer stocks as a whole are plunging in line with the market, with the consumer non-cyclicals sector losing the most among sectors, at 2.58 per cent.
Xiangpiaopiao Food (603711 CH) led the pack, falling 6.38 per cent, followed by Jiangsu Hengshun Vinegar Industry (600305 CH) which lost 5.56 per cent and Fujian Anjoy Foods (603345 CH), which shed 5.13 per cent.
The sector has seen some huge gains, which jittery traders are now pocketing. 
— Louise Moon 


Kweichow Moutai on track to close below 1,000 yuan after reaching milestone this week

China Tobacco International (6055 HK) has suffered a steep fall after rising as much as 34 per cent in the day.  It was last trading down 7.3 per cent at HK$18.42.
It started off the morning at HK$21 — with a run-up of more than 300 per cent in about three weeks since its debut in Hong Kong — and then rose to HK$28.20 at 10:36.
That's when some rethinking about the financial health risks of this smoking hot stock started.
At 11:48, it was down to HK$25.80. Then, lunchtime jitters started, and selling took off and at 1:04, it was down to HK$15.20.  There was some buying again, pushing the share price up to HK$21.90 by 1:15. Then it began another fall. 
 — Deb Price 
 


China Tobacco falling as traders scramble to pocket huge — and quick — gains 

The Shanghai Composite continued Tuesday's losses to fall a further 0.9 per cent, ending the trading day down to 3,015.26. This is the benchmark's lowest point since June 14, when it fell 1.06 per cent.
The CSI 300 of large caps in Shanghai and Shenzhen, meanwhile, dropped 1.1 per cent to 3,893.53.
— Louise Moon 


China markets close down on trade concerns

Car maker Great Wall Motor (2333 HK) is on the rise.
It announced it has taken legal action against a Russian distributor, Irito Group, which Great Wall said had failed to pay US$48.44 million owed for cars.
In a filing to the Hong Kong stock exchange this afternoon, Great Wall said that Irito has been unable to pay since October 2014 due to the depreciation of the Russian ruble. Great Wall filed a lawsuit in October 2015. IMS LLC, under Irito, has filed for bankruptcy and the court dismissed some litigation claims made by Great Wall.
In July 2018, Great Wall appealed. It said the ongoing dispute will not cause an impact on business in Russia.
Great Wall was trading up 1.9 per cent at HK$5.99. So far this year, it has gained 33.85 per cent, having lost more than 50 per cent last year.
— Louise Moon 


Great Wall Motor shares get a boost 

Hong Kong's Hang Seng closed down 0.1 per cent to 28,855.14, reversing Tuesday's gains as investor confidence in trade war progress waned.
Smartphone supplier Sunny Optical was the biggest loser on the bourse, down 3.29 per cent, having had some of the highest gains on Tuesday. In similarity with Shanghai, consumer stocks led the losses, shedding 1.25 per cent.
— Louise Moon 


Hang Seng slips, pushed down by consumer stocks

Shares of Future Land Development Holdings (1030 HK) plunged 18.3 per cent shortly after 3 pm when news broke that the Shanghai Public Security Bureau, the local police, said the chairman, Wang Zhenhua, had been detained for allegedly molesting an underage girl.
It was unclear how to reach Wang or his attorney.
Wang is also the chairman of Shanghai-based property developer Seazen Holdings , the eighth largest Chinese developer in term of sale value. It is among property stocks added to the MSCI China A Big-Cap Index. 
With a net fortune of US$6.4 billion, the 57-year-old businessman is ranked as the 108th richest man in China by Fortune in 2019.
— Zheng Yangpeng


Future Land shares plummet on news of chairman's arrest 

China is expected to strengthen its position as the largest online grocery market in Asia, with sales reaching HK$1.6 trillion (US$205 billion), according to forecasts from international researcher IGD Asia.
Shirley Zhu, programme director at IGD Asia, believes online grocery shopping in Asia is set to grow 198 per cent to HK$2.3 trillion (US$295 billion) by 2023, with IGD's forecasts pointing towards the growth of China's online grocery market in terms of market share and scale, for multiple reasons.
"Ecommerce in China is aided by a rapidly growing middle class, high smartphone usage and strong internet connectivity," she said in a press release.
Zhu also adds that investments from e-commerce giants have benefited the online grocery market.
"Alibaba and JD.com are making big investments in infrastructure, logistics and last-mile delivery in lower-tier cities, where demand is rising," she said.
— Joy Pamnani 


Stocks Blog: Hong Kong, mainland China markets fall as traders fret about chances for quick resolution to US-China trade war

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}China Tobacco closes down 3.4 per cent, but that's only a flick of ash after more than 300 per cent gain in three weeks Future Land shares plummet on news of chairman's arrest

China Tobacco closes down 3.4 per cent, but that's only a flick of ash after more than 300 per cent gain in three weeks

Future Land shares plummet on news of chairman's arrest