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Louise Moon

Deb Price

Happy Friday, traders —
The Hang Seng had its fifth straight week of gains and the Shanghai Composite Index closed up with a weekly gain as well. That was thanks to bumps they both got over last weekend's US-China trade war truce.
Check out the latest action below. If you have any feedback or questions, please send them to deb.price@scmp.com . And welcome to our first reader from Jakarta!
— Deb Price and Louise Moon   


Stocks Blog: Hang Seng, Shanghai post weekly gains off of trade war truce

A trader checks out stock prices in China. Photo: Associated Press

Business

Markets

UBS wealth management unit sees 10 per cent upside in MSCI China Index in second half of year 
Future Land Development — whose billionaire chairman was dismissed after being detained by police — continues its slide


The Hang Seng had its fifth straight week of gains. 


Live

Here's what we are watching this morning:
Overnight markets/ What futures foretell
-- US markets were closed on Thursday for the July 4 holiday. On Wednesday, the S&P 500, Nasdaq and Dow Jones Industrial Average all ended higher, before traders took a break.
-- Hong Kong futures are down 0.2 per cent to 28,790, while the China A50 futures are also down 0.27 per cent to 13,785.02.
IPO debuts:
 
CITIC Press Corp (300788 CH) Trading Debut
Hongta Securities Co Ltd (601236 CH) Trading Debut
Economic statistics/Central Bank action:
 
9am-3pm: Hong Kong June Foreign Reserves.
Corporate events: earnings, meetings, news conferences:
None to note.
Good reads: Stock traders may get relief from the upcoming interim reports from Chinese publicly traded companies, reporter Zhang Shidong says. 


Morning guidance 

Hong Kong's Hang Seng slipped at the open by 0.01 per cent to 28,793.38.
On the mainland, the Shanghai Composite followed suit, also losing 0.01 per cent to reach 3,004.74.
But the CSI 300 of large caps traded in Shanghai and Shenzhen gained a slight 0.05 per cent to 3,875.37.
— Louise Moon 


Hang Seng, Shanghai slip at open 

China’s stocks should overcome trade tensions and post solid gains this quarter, according to a Bloomberg survey.
The July 1-3 survey of 22 analysts and fund managers showed the Shanghai Composite will reach 3,200 by the end of September, marking a 6.5 per cent gain from Thursday’s close. This would be the bourse’s second-best quarter since the end of 2015, Bloomberg said. This morning, it is at 3,000 points. 
The CSI 300 will rise to 4,100, it said, or a 6 per cent gain from Thursday's close. It is trading at 3,873.10. 
Technology, 5G and non-bank financing stocks are the most favourable in China, while natural resources, agriculture, utilities and banks are ones to avoid, the survey found.
In Hong Kong, the Hang Seng will run up to 30,000, according to the median estimates of five analysts. That would be a 4.2 per cent gain from Thursday's close. Investors are looking at consumer shares and Chinese developers. The Hang Seng is at 28,781.83. 
— Louise Moon 


Crystal Ball: Fund managers see Shanghai benchmark rising 6.5 per cent by end of September

The Ivory Coast government said it has not signed a US$4 billion deal with China Railway Construction Corp (601186 CH), which was announced by the state-owned company on Tuesday.
“The Ministry of Housing Construction and Urbanism want to make a firm denial of this information,” the government said in a statement on Thursday, according to Bloomberg. “Such a contract never existed.”
China Railway was down 0.2 per cent to 10.13 yuan in Shanghai.
In Hong Kong (1186 HK) it was up 0.53 per cent to HK$9.55.
— Louise Moon 


What deal? Ivory Coast said it didn't sign US$4 billion deal with China Railway 

 
Khoon Group banged the gong today @HKEXGroup pic.twitter.com/YBbX2RTvbX
— Joy Pamnani (@joypamnani) July 5, 2019
Khoon Group (924 HK) started trading on Hong Kong’s main board today. Its shares shot up and then fell in their trading debut on the Hong Kong stock exchange, with an opening price of HK$1 from an initial public offering price of HK$0.5, or a 100 per cent premium. But it was last trading down from the open, at HK$0.83.
The Singapore-based monitoring and evaluation service provider specializes in providing electrical engineering solutions. It said it plans to use proceeds to do such things as finance the acquisition of a Singapore-based ACMV contractor and property for operations, three lorries, additional machinery and equipment.
— Joy Pamnani
 


Khoon Group bangs the gong in its debut in Hong Kong 

Property developer Country Garden Holdings (2007 HK) is down 0.5 per cent to HK$11.92 after posting an 18.8 per cent decline in contracted sales to the Hong Kong stock exchange late on Thursday evening.
June contracted sales lost 18.84 per cent compared to a year earlier, totalling 60.39 yuan. The total space sold was 6.64 million square metres, marking a 17.94 per cent decrease year-on-year.
The stock has seen peaks and troughs in the year from June 2018 to June 2019. It reached a peak of HK$13.48 on July 25, 2018 before dipping to a low of HK$7.89 on October 15, 2018. It has broadly risen since then, with a brief dip through April and May this year.
— Louise Moon 


Country Garden slips on drop in contracted sales in June 

Shares of e-commerce group DTXS Silk Road Investment Holdings (0620 HK) rose as much as 3.3 per cent in morning trading to HK$5.90, its highest level since November 2007.
The gains came after the group said it expects to post a profit for the first half of the year, compared to a loss a year ago. The turnaround comes as business performance has improved and expenses have been more tightly controlled, it said in a filing to the stock exchange this morning. Results will be published by the end of August.
— Louise Moon 


DTXS Silk Road climbs 3.3 per cent on profit expectation

Turns out speculators hadn't kicked the China Tobacco International habit.
They are back in today, pushing up the stock (6055 HK) 10.7 per cent to HK$15.26.
The share had shot up as much as 478 per cent since its debut last month, recording an intraday high of HK$28.50 from its opening on June 12 at HK$4.93.
But it lost a combined 31.57 per cent on Wednesday and Thursday.
Traders are using newly floated stocks like these as a way to make money in a largely quiet market, according to Francis Lun, CEO of Geo Securities.
— Louise Moon 


Speculators light China Tobacco back up

Future Land Development Holdings (1030 HK) fell another 2 per cent in early trading, as the company tries to calm nervous investors after news that its billionaire chairman was detained by police in Shanghai for alleged molestation of an under-age girl. 
The news breaking on Wednesday afternoon caused a massive drop in the stock in Hong Kong. On Thursday, the board said Wang Zhenhua had been dismissed and replaced by his son, and that operations had not been affected.
The stock lost 23.86 per cent, wiping out HK$14.86 billion (US$1.9 billion) in market value, followed by another 10.57 per cent loss on Thursday.
The stock has been cut to neutral by investment bank Goldman Sachs, with a price target of HK$7. It was last trading at HK$7.05. 
Meanwhile, Shanghai-listed Seazen Holdings (601155 CH), also founded and chaired by Wang, had closed before the news circulated Wednesday. But it fell by the maximum 10 per cent daily limit on Thursday and today.
— Louise Moon 


What's the future of Future Land after scandal at the top?  Shareholders still bailing, Goldman cuts rating to neutral

Shanghai-listed China Shipbuilding Industry (601989 CH) fell 2 per cent to 6.32 yuan, after its former general manager, Sun Bo, was sentenced to 12 years in prison on Thursday for corruption.
According to state media, he was sentenced for taking bribes and abuse of power, and fined 800,000 yuan (US$116,000). In addition, confiscation was ordered of 8.4 million yuan in bribes and gifts accepted by Sun and his wife, state media said.
— Louise Moon


China Shipbuilding Industry falls after former senior executive sentenced to prison over bribes

S&P Global Ratings and Fitch Ratings put Future Land Development Holdings (1030 HK) on their negative CreditWatch lists, two days after its chairman was detained and accused by Shanghai police of molesting a nine-year-old girl.
S&P said the scandal, though highly personal, could have severe repercussions for the company's reputation and brand. Fitch cited possible deterioration in Future Land and its subsidiary Seazen Holding (601155 CH) in terms of pre-sales, land acquisition, and funding channels.
Future Land's board quickly dismissed and replaced the billionaire chairman Wang Zhenhua, issuing a statement that the incident wasn't affecting operations.
After plunging 34 per cent in two days, Future Land’s share price is down 1.8 per cent today to HK$7.06. Its Shanghai-listed Seazen Holdings fell by the maximum-allowed 10 per cent today for the second day, wiping out 18.4 billion yuan off its market capitalization.
— Zheng Yangpeng 
 


Future Land put on negative credit watch lists

Peru, the world’s largest producer of quinoa, will start exporting the seed to China for the first time, which would increase competition with Chinese grain producers. Officials signed an agreement last month, reported Bloomberg.
Grain-linked stocks were little changed on the news.
Shanghai-listed Gansu Yasheng Industrial (600108 CH) was up 0.29 per cent to 3.43 yuan.
But Gansu Dunhuang Seed (600354 CH) lost 0.65 per cent, and Jinjian Cereals Industry (600127 CH) which produces, processes and sells grain and oil products, dropped 1.23 per cent. Wanxiang Doneed (600371 CH) also fell 0.45 per cent.
Meanwhile, Zhongnongfa Seed Industry (600313 CH) slipped 0.27 per cent.
— Louise Moon 


Peru to export quinoa  to China, Bloomberg reports 

By lunch break, China’s Shanghai Composite Index was down 0.18 per cent to 2,999.92, dropping below the 3,000 level it breached on Monday. Eight out of 10 sectors were down. Real estate lost the most, falling 0.86 per cent, dragged by Seazen Holding (601155 CH) after news on Wednesday that its chairman had been arrested.
Consumer stocks gained, pulled by Harbin High-Tech Group (600095 CH), which reached the daily limit of 10 per cent.
The CSI 300 of large caps rose 0.1 per cent through the morning, to 3,877.03.
In Hong Kong, the Hang Seng rose a tiny 0.08 per cent to 28,819.40, with property stocks continuing to be among the top gainers. Electronic suppliers like AAC Technologies (2018 HK) and Sunny Optical (2382 HK) were among the bottom movers, likely due to the lack of news over US-China trade relations and what that could mean for Huawei.
— Louise Moon 


China markets down, Hang Seng holding teensy gain

Traders are back at the liquor stocks bar, buying popular Kweichow Moutai (600519 CH), Wuliangye Yibin (000858 CH), and Inner Mongolia Yili Industrial Group (600887 CH) after some profit taking earlier in the week. 
The world’s largest alcohol maker, Kweichow Moutai, gained 2.02 per cent after dropping the past three days, amid a broader drop of consumer stocks. The rise pushed it back above the 1,000 yuan mark, to 1,002 yuan.
Competitors Wuliangye Yibin gained 5.10 per cent, while Inner Mongolia Yili Industrial Group was up 0.27 per cent.
— Louise Moon 


Liquor stocks in China pour out some gains 

The Shanghai Composite ended up 0.2 per cent to 3,011.06.
It had dipped below the 3,000 mark last week after breaching it the week before for the first time since the end of April. The weekly gain was 1.08 per cent, and followed last week's weekly loss.
The CSI 300 of large caps also rose, ending up 0.5 per cent to 3,893.20. It rose 1.77 per cent for the week.
Consumer stocks rose today on both bourses, led by soybean processor Harbin High-Tech Group (600095 CH) and pig-feed producer Fujian Aonong Biological Technology Group (603363 CH), which both gained the maximum 10 per cent allowed daily.
Real estate, meanwhile, was a drag on the Shanghai, led by Seazen Holdings (601155 CH), which fell 10 per cent following the arrest of its billionaire chairman on Wednesday.
Meanwhile, the Hang Seng is on track to close with its fifth weekly gain. 
— Louise Moon 


Shanghai ends with weekly gain 

Two major sugar players gained today, with COFCO Tunhe Sugar (600737 CH) boosting 9.35 per cent and Nanning Sugar Industry (000911 CH) adding 4.98 per cent.
— Louise Moon


Sugar feeling the rush

Supportive policies from Beijing could turn into a 10 per cent gain in Chinese equities as captured by the MSCI China Index, said Eva Lee, head of Hong Kong equities at UBS Global Wealth Management Chief Investment Office.
But the MSCI Hong Kong index is likely to underperform, as companies in Hong Kong aren't benefiting from similar supportive stimulus from the local government to mitigate the direct impact of the US-China trade war, she said.
Policy support from the central government has included such steps as the lowering earlier this year of the value-added tax rate for manufacturers to 13 per cent from 16 per cent. The benefits will begin to show in the second half of the year, she said.
But “the impact from the tax cut would be different depending upon industry. Some would benefit from the tax cut more than others,” Lee said.
Lee’s favorite sectors include traditional Chinese medicine, materials and white good manufacturers.
Overall, the advice from the wealth management unit of the Swiss bank is for investors to remain overweight equities versus fixed income, gold and real estate. It is overweight Chinese equities and underweight Hong Kong stocks.
Read full story here.
— Georgina Lee


UBS wealth management unit sees 10 per cent upside in MSCI China Index in 2H 

Hong Kong’s Hang Seng ended with a 0.1 per cent loss to 28,774.83. But that didn’t stop it hitting a fifth straight week of gains. The bourse rose almost 1 per cent this week.
Property firms were among the top gainers, but the sector was dragged down by Future Land Development Holdings (1030 HK) which lost 6.68 per cent today following the scandal engulfing its billionaire chairman, who has since been removed.
The biggest loser today on the Hang Seng Index in percentage terms was Geely Automobile Holdings (0175 HK), which fell 6.35 per cent to HK$12.68 after Daiwa trimmed its target price from HK$22 to HK$18, on lower sales volume and gross-margin assumptions. It maintained a “buy” rating, however.
Meanwhile, China Tobacco International (6055 HK) closed up 20.9 per cent to HK$16.66. Speculators have piled in and out of the stock since it listed last month, sending it at one point to a nearly 500 per cent gain.
— Louise Moon 
 


Hang Seng posts fifth consecutive week of gains 

Stocks Blog: Hang Seng, Shanghai post weekly gains off of trade war truce

UBS wealth management unit sees 10 per cent upside in MSCI China Index in second half of year Future Land Development — whose billionaire chairman was dismissed after being detained by police — continues its slide

UBS wealth management unit sees 10 per cent upside in MSCI China Index in second half of year

Future Land Development — whose billionaire chairman was dismissed after being detained by police — continues its slide