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Georgina Lee

Deb Price

Good day, traders —
Check out the latest action below. Please send any questions or feedback to deb.price@scmp.com .
— Georgina Lee and Deb Price in Hong Kong.
  


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Stocks

Stocks Blog: Shanghai falls for third straight day on weight of US-China trade war, interest rate uncertainty

An investor walks past a stocks screen in Hangzhou in China's Zhejiang province on June 19, 2018. Photo: Agence France-Presse


Business

Markets

Crystal Ball: UBS AM is bullish on China A shares
'Worst is yet to come' for China's economy, Nomura warns


Hang Seng ekes out small gain, led by Tencent and health care stocks. 


China stock market

Hong Kong Stock Exchange

Live

Here's what we are watching this morning:
Overnight markets/ What futures foretell
— Overnight in US markets, S&P 500 was up 0.1 per cent,  Nasdaq rose 0.5 per cent, and the Dow Jones Industrial Average was down by 0.1 per cent.
— Hong Kong futures are up 0.31 per cent , while the China A50 futures up 0.29 per cent.
IPO debuts:
None
Economic statistics/Central Bank action:
China June aggregate financing, consumer price index and producer price index for June
June new yuan loans, and money supply M0, M1 and M2
Corporate events:
Ali Health (241 HK) annual general meeting
Good reads: Nomura analysts warn that “the worst is yet to come” for China's economy in the second half of this year, reports Sidney Leng. China’s DJI Technologies, the world’s largest manufacturer of drones, says high-security drone technology on two new models has won clearance from US regulators, Meng Jing reports.


Morning guidance 

Geely Automobile (175 HK) got a pair of downgrades after it warned Tuesday that it expects its first-half profits will be down 40 per cent.
CCB International downgraded it to neutral, with a price target of HK$12.
DBS Bank downgraded it to hold, with a price target of HK$12.30.
The stock fell hard Tuesday, but is trading today down 0.34 per cent at HK$11.66.
— Deb Price 
 


Geely Auto downgraded after profit warning 

Already bruised from the trade war with the United States and a series of sluggish data, Nomura analysts have warned that for China’s economy, “the worst is yet to come” in the second half of this year.
Headwinds continue to mount, including lingering uncertainties over trade tensions with the US, and the possibility of further US tariffs. Beijing’s scope for policy easing in response is limited, economists from the Japanese bank said at a press conference in Hong Kong on Tuesday.
The economists, led by Lu Ting, said that the better-than-expected 6.4 per cent growth in China’s economy in the first quarter, was a blip that “proved to be illusory”. They expect Chinese gross domestic product (GDP) to increase by 6.1 per cent in the second quarter and only 6.0 per cent over the second half of the year.
The January-to-March period was driven by record-high exports, in part because Chinese and American companies sought to “front-load” the shipment of goods to avoid higher tariffs threatened by the US.
Read full story by Sidney Leng here. 


'Worst is yet to come' for China's economy, Nomura warns 

Hong Kong shares opened 0.5 per cent higher, at 28245.09. The CSI 300 index of stocks traded in Shanghai and Shenzhen was up 0.4 per cent at 3,807.95.
Banks led the Hang Seng index higher in early trades, with China Construction Bank (939 HK) up 0.2 per cent at HK$6.15, and HSBC (5 HK) up 0.3 per cent HK$65.1. China social media giant Tencent was up 1.5 per cent at HK$356.
In China, the Shanghai Composite Index edged up 0.1 per cent at 2,929.89.
Meanwhile, the National Bureau of Statistics said June consumer price index was up 2.71 per cent, in line with market expectations and unchanged from the May figure.
Ping An (601318) was up 0.1 per cent at 87.62 yuan, while liquor distiller Kweichow Moutai (600519 CH) rose 0.3 per cent at 978.91 yuan.
— Georgina Lee 


Hong Kong, mainland markets open up 

Jinduicheng Molybdenum (601958 CH) said net profit  for the first half rose 83.4 per cent, to 272.4 million yuan, up from 148.5 million yuan a year ago.
The company said in an exchange filing today that revenue was up by a smaller 8.2 per cent, at 4.54 billion yuan, from 4.2 billion yuan.
The Shaanxi-based company, which is engaged in the mining, processing and trading of molybdenum metal — used to make steel stronger and more resistant to corrosion — and sells its products overseas, attributed the improvement to better selling prices and increased production output during the period.
Shares of Jinduicheng Molybdenum rose 1 per cent at 6.48 yuan, but it is still trading below its 50-day moving average, at 6.59 yuan.
— Georgina Lee 


Jinduicheng Molybdenum rises after first-half net profit improvement

China’s inflation figures revealed two separate headaches for Beijing today, with consumer prices continuing to rise, while the prices producers charged at factory gates in June threatened to dip into deflation.
The consumer price index (CPI) stayed at 2.7 per cent, the same as in May, which was the highest reading for 15 months. This indicates that prices are continuing to rise for Chinese consumers at a time when the economy is battling serious headwinds on a number of different fronts.
Meanwhile, the producer price index (PPI), the price charged to buyers from producers at the factory gates, is teetering on the brink of deflation, reporting at 0.0 per cent in June, down from 0.6 per cent in May and below a Bloomberg poll, the median forecast of which was 0.1 per cent.
Domestic consumption has been a concern of policymakers in Beijing for some time, and the fact that prices are rising, it will add to this anxiety since it makes it more difficult for consumers to buy more.
Read full story by Finbarr Bermingham and Amanda Lee here.


China consumer prices continue to rise 

 
ManpowerGroup Greater China banged the gong today @HKEXGroup pic.twitter.com/Wk8OvqVr7M
— Joy Pamnani (@joypamnani) July 10, 2019
ManpowerGroup Greater China (2180 HK) started trading on Hong Kong’s main board today.
Its shares rose at the opening of their trading debut on the Hong Kong stock exchange, with an opening price of HK$10.68 from an initial public offering price of HK$9.90, or a 7.8 per cent premium. But it later slipped and was last trading at HK$9.60.
It focuses on workforce solutions and HR services to corporate and government clients in Hong Kong, Macau, Taiwan and China.
ManpowerGroup, the company’s major shareholder, operates worldwide.
The Greater China unit will use proceeds for business expansion, research and development, among other things.
— Joy Pamnani 
 


Bang the Gong: ManpowerGroup debuts in Hong Kong 

Sunny Optical Technology (2382 HK) rose 2.8 per cent to HK$83.4, ending its previous five days of losses, after the company said after market close Tuesday that shipment volume of vehicle lens sets in June was up 35 per cent year-on-year, and up 6 per cent from May, to 4.16 million units.
For its optoelectronic products, its handset camera modules rose 22 per cent from a year ago, and 9 per cent from May, to 43.2 million units.
China’s leading manufacturer of smartphone camera modules, lenses and a supplier to Apple was the best performing blue chip in percentage terms in the blue chip index.
The Hang Seng Index was up 0.3 per cent to 28,201.51 in early trades.
— Georgina Lee 


Sunny Optical jumps 2.8 per cent on increase in shipments of lenses

Huawei-related stocks rose in China, as traders interpreted overnight news from the US about sales to the privately-held Chinese telecommunications giant as positive.
ArcherMind Technology  (300598 CH) rose to its daily 10 per cent up-limit at 32.23 yuan.  Zhuzhou Hongda Electronics (300726 CH) was up 5.2 per cent at 25.23 yuan. TKD Science and Technology (603738 CH) rose 4.7 per cent to 21.45 yuan, whileWuhan P&S Information Technology (300184 CH) rose 2.8 per cent to 8.95 yuan.
Overnight, Commerce Secretary Wilbur Ross said the US companies will be granted licenses to sell tech to Huawei, as long as there is no national security threat. However, Huawei remains on the US "entity list," which means that companies have to apply for permission before selling to the Chinese telecommunications giant. This was a position taken earlier by President Donald Trump.
The licensing procedure begins with a  “presumption of denial” – meaning that license applications often aren't granted.
But Chinese traders appeared to feel Ross' comments are favourable to Huawei going forward, and therefore to listed companies that do business with it.  
— Georgina Lee 


Huawei news out of US boosts related stocks in Chinese markets

Beseiged Camsing International (2662 HK) continued to plunge today, despite issuing a clarification to try to stop at least some of the bleeding.
The company, which has interests in animation and movies and runs theme parks, was last down nearly 20 per cent, to HK$0.53.
That was on top of its drop on Monday of about 80 per cent after its disclosure that its chief executive and founder Lo Ching had been detained by Shanghai police for reasons it said were unknown. 
Separately, a Chinese news website said that a company related to Camsing had falsified business contracts with Chinese leading e-commerce operator JD.com, using these contracts as collateral to raise funds from other investors.
"The board would like to clarify that Guangzhou Camsing as referred in the article is not a member of the group and there is no such contract between the group and JD.com as stated in the article,” it said.
This morning, the stock is the main board’s top percentage loser, and 332.9 million shares swapped hands by mid-morning, making it also the most traded stocks in volume terms.
— Georgina Lee 
 


Besieged Camsing International continues to plunge 

"June inflation data surprised on the downside," said HSBC's Greater China senior economist Julia Wang, in an e-mailed commentary. "These are signs that demand, particularly in the manufacturing sector is weak, and that bolder and more sustained policy easing and faster reforms are needed."


HSBC says China inflation data shows faster reform is needed 

The Hang Seng Index rose 0.3 per cent, at 28,205.41 at lunch break, led up by Tencent (700 HK) up 1.2 per cent at HK$355.
Capping the gains was index heavyweight, insurer AIA (1299 HK), which dropped 0.5 per cent, to HK$83.40.
Pharmaceutical stocks performed well, with CSPC Pharmaceutical (1093 HK) up a strong 3.6 per cent at HK$12.64, and Sino Biopharmaceutical (1177 HK) rising 4.4 per cent at HK$8.81. They were leading the top percentage gainers among blue chips.
Trading in both markets was muted, as investors await more clues from Federal Reserve Chairman Jerome Powell. He is to testify before the US Congress on the state of the US economy and the policy outlook on Wednesday and Thursday. Powell's comments will shape expectations for the Fed’s policy meeting at the end of the month. The market has been expecting a rate cut.
In China, the CSI 300 Index, which tracks blue chips listed on Shenzhen and Shanghai bourses, was up a small 0.1 per cent, at 3,797.85. The Shanghai Composite Index slipped a scant 0.02 per cent to 2,927.68.
China’s inflation figures revealed two separate headaches for Beijing on Wednesday, with consumer prices continuing to rise, while the prices producers charged at factory gates in June threatened to dip into deflation. The consumer price index (CPI) stayed at 2.7 per cent, the same as in May, while the producer price index (PPI) is teetering on the brink of deflation, reporting at 0.0 per cent in June year on year, down from 0.6 per cent in May and below a Bloomberg poll, the median forecast of which was 0.1 per cent.
Huawei-related stocks rose in China, with ArcherMind Technology (300598 CH) hitting its daily 10 per cent up limit, while Zhuzhou Hongda Electronics (300726 CH) jumped 4.71 per cent.
Traders interpreted overnight news from the US about sales to the privately-held Chinese telecommunications giant as positive, after Commerce Secretary Wilbur Ross said the US companies will be granted licenses to sell tech to Huawei, as long as there is no national security threat. But Huawei remains on the US "entity list," on national security concern, he added.
— Georgina Lee 


Pharmaceuticals pushing up Hang Seng 

Shares of Jiangsu Gian Tech (300709 CH) shot up 8 per cent, to 55.1 yuan, after it said in a filing mid-day that it expects to report a net profit for the first half of the year in a turnaround.
That put shares of the producer of metal and other parts for the auto and medical industries at a 14-month high.
It said it expects to have a profit of between 47 million yuan to 52 million yuan in the first half of this year. It had a net loss in the same period last year.
— Georgina Lee 
 


Jiangsu Gian Tech jumps to to 14-month high on turn to profits

Gian Plebani, portfolio manager of investment solutions at UBS AM, says this is a good time to buy China stocks. 
"I'm bullish on China assets over a six-to-twelve month time horizon because there has been an improvement in global liquidity as central banks across the world turned more dovish and because the Chinese government has put stimulus into the economy," Plebani said
"We see current market levels as a good buying opportunity and also suitable for investors that have taken profits from China equities but still want the China story in a strategy that has the potential to offer a more stable and risk aware growth path."
In its China strategy, it is overweight risk assets with a preference for equities over bonds. 
"We have a preference for A-shares because the domestic equity market is sensitive to fiscal stimulus and the easing stance of the monetary policy, we also favor high-yield bonds. On the fund level, we hedged out some of CNY (Chinese on-shore yuan) exposures to protect the portfolio from sharp currency depreciation should it pass the psychological USD/CNY level of 7."
— Deb Price  


Crystal Ball: UBS AM is bullish on China A shares

Hong Kong stocks may experience more volatility due to a protracted negotiation over trade differences by the US and China, says UBS's chief investment office (CIO).
The MSCI Hong Kong Index is trading at a forward price-to-earning multiple of 15.8 times, slightly above its five-year average. UBS CIO considers such valuation to be fair and well-supported by earnings growth, which it forecast at about 7 per cent in 2019.
“We believe a weak economic outlook and ongoing uncertainties over the Sino-US trade conflict will limit any re-rating potential for Hong Kong equities,” over the near term, it said.
The MSCI Hong Kong index is forecasted for a 10.5 per cent return-on-equity, which is lower than the rest of Asia.
It adds that under a lower rates environment, investors are attracted by the growing and resilient yields offered by real estate investment trusts (REITs) listed in Hong Kong and Hong Kong landlords. UBS CIO projects HK landlords and REITs to deliver core income growth of 7 per cent compound annual growth rate over 2019-21.
— Georgina Lee
 


Crystal Ball: Expect more volatility in Hong Kong stocks, says UBS

The Shanghai Composite Index closed down 0.44 to 2,915, posting its third straight day of losses.
It was led down by materials. Consumer staples, health care and utilities provided some relief.
Trading levels on the Shanghai benchmark have been fairly weak this week, as traders have awaited hints from the US on whether the Federal Reserve will lower rates at the end of the month. Fed Chairman Jerome Powell is scheduled to talk to Congress tonight and Asia's overnight Thursday.
Kweichow Moutai (600519 CH), popular with northbound traders, was up about  0.7 per cent to 982.52 yuan. It recently became the first Chinese stock to trade at 1,000 yuan, but it hasn't been able to stay above the milestone.
Seazen Holdings (601155 CH), which was engulfed in a scandal last week when news broke that billionaire real estate tycoon Wang Zenhua had been arrested for alleged molestation of a nine year old girl, lost 1 per cent. It was its fifth straight day of declines, although it can find some comfort that the fall was far less than it has been previously.
Wang controls a 71 per cent in Hong-Kong listed Future Land (1030 HK), which in turns own a 48.9 per cent stake in Seazen.  The scandal has put a spotlight on "key man risk" in China. 
The Shenzhen Composite Index closed down 0.46 per cent to 1,550.869. All sectors except health care ended with losses, with financials taking the biggest hit.
— Deb Price 
 


Shanghai closes down for third straight day

Internet giant Tencent (700 HK) rose 1.5 per cent to HK$356.2, getting a boost from a report from GameLook this week that it had successfully negotiated a more favourable revenue split with a number of Chinese android stores for its mobile game titles.
Under the new terms, the commission paid to Android stores has been cut to 30 per cent of the mobile title revenue, from 50 per cent previously. The report said Huawei and Xiaomi app stores have accepted the new revenue share model. Others, such as Vivo app stores, are still in talks with Tencent.
By weighting, Tencent was the top gainer on the benchmark.
The Hang Seng Index was up 0.3 per cent, narrowing from the morning gains, to 28,196.
— Georgina Lee 


Heavyweight Tencent rises 1.5 per cent on news of better revenue split on games

Traders should keep an eye out for two new stocks — ManpowerGroup Greater China (2180 HK) and Hansoh Pharmaceutical Group (3692 HK) — said Louis Tse Ming-kwong, managing director of VC Asset Management.
ManpowerGroup Greater China, which debuted this morning, is showing signs that it could catch a late rebound in the coming days, he said. It closed at HK$9.80, falling 8.2 per cent from its opening price of $10.68. It focuses on workforce solutions and HR services to corporate and government clients in Hong Kong, Macau, Taiwan and China.
Hansoh Pharmaceutical, which debuted on June 13, "has a big market cap, about HK$130 billion now. It could be an index stock ... institutional investors will come in to accumulate," he said.
"Its going to be a future star, mark my words."
The medicine maker closed down 1.7 per cent at HK$23.10 today, but has been on an uptrend since its debut. 
As traders wait on the sidelines for indications of a US interest rate cut, markets are moving sideways as turnover remained low in the markets today, Tse said.
With an upcoming heavyweight listing by the world's biggest brewer Anheuser-Busch InBev NV, "market liquidity is quite slim, a small buy or sell order can push the market either way", said Tse.
"[The Hong Kong and China] markets are waiting for half-year results for companies... We are also still watching the Sino-US trade talks, which have been not much as all."
Tse warned that is only room to fall for the Hong Kong market if US Federal Reserve chairman Jerome Powell signals a rate cut isn't coming.
At its current level, the Hong Kong market is already expecting a 0.25 per cent cut, meaning there is limited upside if that prediction turns out to be correct, he said.
But "if Powell tonight indicates no interest rate cut by (the end of) July, the Hang Seng Index could go below 28,000", he said.
Powell is due to testify before US Congress for two days.
Meanwhile, he expects a small correction to gold, which was trading down at US$1,393.83, but is up 8.66 per cent for the year. 
"It's no harm having a small percentage of your portfolio for gold, but not more than 25 per cent. I believe it might have a small correction. You can buy it at a lower price," Tse said. "Just bear in mind if you buy gold it won't pay interest or dividend."
— Daryl Choo 


Crystal Ball: Watch Manpower Group Greater China and Hansoh Pharmaceutical, says Louis Tse

Gains in Tencent (700 HK) led the Hang Seng Index higher. It closed up 0.31 per cent, at 28,204.69.
The Chinese social media giant, an index heavyweight, was up 1.7 per cent, at HK$356.8, on a report from GameLook this week that it had successfully negotiated a more favourable revenue split with a number of Chinese android stores for its mobile game titles. The commission paid to Android stores has been cut to 30 per cent of the mobile title revenue, from 50 per cent previously.
Elsewhere, pharmaceutical stocks led gains in percentage terms among all blue chips, with CSPC Pharmaceutical (1093 HK) up 4.1 per cent to HK$12.7, while Sino Biopharm (1177 HK) rose 3.3 per cent to HK$8.72.
Francis Lun, chief executive of Geo Securities, said the sector got a boost after Shanghai Fosun Pharmaceutical   (2196 HK) announced earlier this week that its Chongqing subsidiary will buy GlaxoSmithKline's Suzhou pharmaceutical factory in east China for up to 250 million yuan.
The deal will allow Fosun's Chongqing unit to acquire all production facilities and authorizations for the GSK plant's chronic hepatitis B drug lamivudine. Shanghai Fosun Pharma was up 4.7 per cent at HK$24.35.
Trading volume for the main board totaled just HK$64.3 billion at 4:39 pm, shaping up to be the lowest thus far this week, indicating investors’ weak appetite for making any aggressive bets.
“Overall, investors are sidelined and watchful for any further news from Federal Reserve Chairman Jerome Powell," Lun said. 
Powell is due to testify before the US Congress on the state of the US economy and policy  on Wednesday and Thursday, Washington time.
Powell’s comments will shape expectations for the Fed’s policy meeting at the end of this month, with markets expecting a rate cut. Lun said he expects the Hang Seng index to hover in narrow ranges at the 28,000 level this week.
— Georgina Lee 
 


Tencent, health care boost Hong Kong stocks

Stocks Blog: Shanghai falls for third straight day on weight of US-China trade war, interest rate uncertainty

Crystal Ball: UBS AM is bullish on China A shares 'Worst is yet to come' for China's economy, Nomura warns

Crystal Ball: UBS AM is bullish on China A shares

'Worst is yet to come' for China's economy, Nomura warns