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Georgina Lee

Deb Price

Happy Friday, traders —
Catch up on the day's action below. Please shoot any feedback to deb.price@scmp.com .
Have a great weekend!
— Georgina Lee and Deb Price in Hong Kong 


Distracted at Davos, leaders are ignoring one critical issue

China’s Fosun Pharma eyes spin-off listing of vaccine unit in hot Hong Kong IPO market

Hong Kong stocks rise to 1-week high on China easing hope, resilient US data

Hong Kong stocks hold up on claimed Greenland deal, rebound in Japanese bonds

Stocks

Stocks Blog: Shanghai, Hong Kong close higher, but slowdown and other worries hang over markets

A pedestrian walks past the Bund Bull statue in Shanghai on October 24, 2018. Photo: Bloomberg 


Budweiser’s mega IPO gets cool response from Hong Kong investors as high borrowing costs take the fizz out of demand

Budweiser Brewing, the Asian unit of beer giant Anheuser-Busch InBev, aims to raise up to US$9.8 billion with its Hong Kong listing. Photo: K. Y. Cheng

Budweiser Brewing, the Asian unit of beer giant Anheuser-Busch InBev, aims to raise up to US$9.8 billion with its Hong Kong listing. Photo: Bloomberg

Business

Markets

Corn-linked stocks fall as ministry cuts forecast amid African swine fever
Lenovo jumps on new data showing it tops global shipments


Uncertainties — about the trade war, about economic slowdown in China, about coming earnings — are keeping many traders on the sidelines.


China stock market

Hong Kong stock exchange

Live

Overnight markets/ What futures foretell
-- Overnight in US markets, S&P 500 was up 0.2 per cent,  Nasdaq slipped 0.1 per cent, and the Dow Jones Industrial Average was up by 0.9 per cent.
 -- Hong Kong futures are down 0.39 per cent, while the China A50 futures down 0.3 per cent.
IPO debuts
IVD Medical (1931 HK), Analogue Holdings (1977 HK), Hevol Services Group (6093 HK)
World Super Holdings (8612 HK)
Three Squirrels (300783 CH)
Economic statistics
 
Trade data out of China: June trade balance, June exports and imports
Corporate events: earnings, meetings, news conferences
None to note.
Good reads: Developers are set to unleash 817 flats in the biggest weekend sale since extradition protests rocked Hong Kong, reports Lam Ka-sing.
 


Morning guidance 

Chinese companies invested just US$12.3 billion in the advanced economies of Europe and North America in the first half of the year, the lowest amount since 2014 and almost a fifth less than last year, according to the law firm Baker McKenzie.
The decline has been almost entirely attributed to state-owned firms turning their backs on both regions, a research report the firm released on Thursday found. Private companies accounted for 94 per cent of the total spent in the first six months.
China’s overseas spending, once rampant, has been curbed drastically by the introduction of strict capital controls intended to stop money leaving the country.
At the same time Chinese companies have faced increasingly tough scrutiny abroad, particularly under US President Donald Trump’s administration, with many major deals being rejected on national security grounds.
Read full story by Xie Yu. 


China investment abroad drops to five-year low 

The Hang Seng Index slid 0.1 per cent, to 28,401.87, while the CSI 300, which tracks blue chips on Shanghai and Shenzhen bourses, slid 0.2 per cent to 3,778.74.
In Hong Kong, financials such as insurer AIA (1299 HK) led the blue chip index lower, with AIA falling 1 per cent to HK$83.5. Bank of Communications (3328 HK) was down 1 per cent at HK$5.91, while conglomerate Citic (267 HK) lost 1.1 per cent to HK$10.88.
In Shanghai, Central China Securities (601375 CH) was the second top loser in percentage terms, after it said two asset management products totalling 241 million yuan could face risk of defaulting. It said its internal investigation revealed that the borrower falsified documents. While it said its own capital is not involved in these two products, it said it had reported the case to the police. It shares lost 5.8 per cent, to 5.45 yuan.
Gold-related stocks in China reversed gains seen in on Thursday, with Shandong Humon Smelting (002237 CH) down 4 per cent at 16.78 yuan,  Shandong Gold Mining  (600547 CH) down 1.7 per cent at 40.68 yuan, and Zhongjin Gold (600489 CH) down 2.4 per cent at 9.46 yuan.
Trading remains directionless as investors are waiting for China June trade data, which is to be released later today.
— Georgina Lee 
 


Shanghai, Hang Seng struggling in early trading

IVD Medical Holdings, Analogue Holdings and Hevol Services Group ring the gong to mark their debut on the #HKEX main board pic.twitter.com/5ISliQDnnf
— Daryl Choo (@darylchooyq) July 12, 2019
Analogue Holdings (1977 HK), IVD Medical Holding (1931 HK), and Hevol Services Group (6093 HK) banged the gong in their debuts in Hong Kong.
Analogue's shares fell in their trading debut on the Hong Kong stock exchange, with an opening price of HK$1.15 from an initial public offering price of HK$1.20, or a 4.1 per cent discount. It was last trading at HK$1.33.
It is Hong Kong’s largest electrical and mechanical engineering company and is controlled by the husband of the city’s justice minister. It raised HK$336 million (US$43 million) in net proceeds in an initial public offering.
Otto Poon Lok-to, 78, is the husband of Hong Kong’s Secretary for Justice Teresa Cheng Yeuk-wah. The company is now the city’s top provider of services from air-conditioning system design to lift installation, occupying a 9 per cent market share.
Analogue Holdings plans to use its proceeds to support expansion and development of its building services segment as well as to enhance its environmental engineering, ICBT (Information, communication and building technology), and lifts and escalators segment.
Meanwhile, IVD Medical Holding saw its shares fall in their trading debut, with an opening price of HK$2.81 from an initial public offering price of HK$3.07, or a 8.4 per cent discount. It was last trading at HK$3.10.
The China-based in-vitro diagnostic distributor focuses on such products as analysers while also engaging in the research, development, manufacturing and sales of self-branded IVD products. In January 2019, IVD Medical acquired Vastec, the sole distributor of Sysmex in China, which focuses on haemostasis products, which deal with bleeding.
The company plans to use its proceeds to settle the outstanding balance of cash in the acquisition of Vastec, pay its shareholders, among other things.
Also debuting on the main board was Hevol Services Group, whose shares rose in their trading debut on the Hong Kong stock exchange, with an opening price of HK$1.82 from an initial public offering price of HK$1.28, or a 42 per cent premium. It was last trading at HK$2.06.
Hevol Services Group provides property management services, community-related services and property-developer-relatedservices in China. According to the China Index Academy, it ranked 44th among the China Top 100 Property Management Companies in terms of overall strength of property management in 2019.
The company hopes to use funds to expand its property management services in the Chinese market and its value-added services business segment. 
In addition to three companies on the trading board, World Super Holdings (8612 HK) listed on the GEM board, which is an avenue for small-to-medium sized enterprises to raise capital in Hong Kong.
— Joy Pamnani 


Banging the gong:  3 new faces on main board, one new face on GEM

Fosun Tourism (1992 HK) is trading down after announcing it wants to boost its stake in troubled Thomas Cook’s tour operating and airline business.
The owner of French holiday resort chain Club Med said in an announcement this morning that it and Thomas Cook’s creditor banks are considering a capital injection of 750 million euros, after which Fosun Tourism will own a “significant controlling stake” in Thomas Cook’s tour operator and a “significant minority interest” in Thomas Cook Airlines.
The deal would involve a certain amount of Thomas Cook’s outstanding bank debt and bond, which it did not specify, to be converted into equity. The proposal is still subject to further agreement with Fosun Tourism’s shareholders, bondholders and regulatory approvals. Fosun Tourism already owns 18 per cent of London-listed Thomas Cook, one of the oldest travel groups, which posted record-high before tax net loss of 1.5 billion pounds for the six months that ended in March.
Fosum Tourism, a spun-off unit of Chinese conglomerate Fosun International, is down 2.5 per cent, at HK$11.88.
— Georgina Lee 


Fosun Tourism falls after boosting stake in troubled Thomas Cook

In addition to US interest rates, oil and US dollar strength are also big drivers to watch in emerging market/Asia equities, says Invesco's Asia ex-Japan global market strategist David Chao.
“I don’t think there’s a clear-cut correlation between EM/ Asian equity performance and the US Fed interest rate,” Chao wrote in a morning note.
It is increasingly looking like a Fed rate cut is in store soon, based on signals this week from Fed chairman Jerome Powell. 
But Chao said a second driver for EM risk assets is the price of oil, as most emerging markets are net oil importers.
“Unless there is an unforeseen supply shock out of the Persian Gulf, I expect oil prices to continue falling to their historical levels – which is beneficial to EM,” Chao wrote.
The third driver is the strength of the US dollar, and traditionally a weaker dollar has been positive for EM.
“I expect the USD to remain strong as growth expectations favor the US over other major economies for second half of 2019,” he wrote. The dollar index, which tracks the greenback to a basket of currency, is down 0.1 per cent at 96.94 Friday.
Indeed, on Thursday, Powell’s comment on increased US economic uncertainties, and the risk of weak inflation did little to lift Chinese equity indexes. The CSI 300, which tracks large cap listed on Shenzhen and Shanghai, ended 0.1 per cent lower Thursday.  The CSI is now up 0.05 per cent, at 3,787,15.
— Georgina Lee 
 


US interest rates aren't the only big enchilada in Asia equity markets, says Invesco

Central China Securities (601375 CH) plunged 7.9 per cent — its biggest drop since May 6 — after it said in an exchange announcement that two of its asset management products totalling 241 million yuan could face the risk of defaulting.
It said its internal investigation revealed that the borrower falsified documents. While it said its own capital is not involved in these two products, it said it had reported the case to the police.
Mainland media reported that the borrower was a pharmaceutical company in Fujian province, which had transferred its trade receivables as the underlying collateral backing up such asset management products issued by Central China Securities.
Central China did not refer to the media reports in its announcement.
It shares in Shanghai were trading at 5.33 yuan. In Hong Kong, Central China Securities (1375 HK) was down 3.4 per cent to HK$1.71.

 
— Georgina Lee 


Central China Securities drops after disclosing default risk in two asset management products

Financials and real estate are helping prop up the Hang Seng Index this morning, while health care and consumer staples are a drag.
Sands China (1928 HK) was one of the top percentage gainer, up 1.4 per cent to HK$40.40. Aberdeen Emerging Markets Fund added Sands China to its investments in the period between April 30 to June 28, Bloomberg said, citing its own data analysis.
Property stocks that are among top gainers in early trading are Country Garden Holdings (2007 HK), up 1.2 per cent, Sino Land (83 HK), up 1.21 per cent, China Resources (1109 HK), up 2.2 per cent, and CK asset Holdings (113 HK), up 0.6 per cent.
CSPC Phamaceuticals (1093 HK) was the top loser, down 2.3 per cent, followed by Geely Automobile Holdings (175 HK), down 2 per cent.  
The index was last up by 0.5 per cent to 28,575.23.
— Deb Price 
 


Financials, real estate boosting Hang Seng in early trading

African swine fever — the deadly, highly contagious disease killing China's pigs — means less corn consumption in the 2019-2020 crop year.
China's agriculture ministry cuts its forecast for corn consumption for the period by two million tonnes, forecasting domestic feed demand at  280 million tonnes, amid the outbreak of African swine fever, Reuters reported. The Ministry has reported that the country’s sow herd declined by a record 23.9% in May from a year earlier.
Tech-Bank Food (002124 CH) dropped 8.6 per cent at 12.93 yuan, Fujian Aonong Biological Tech Group (603363 CH) was down 5.1  per cent at 22.07 yuan, Tangrenshen Group (002567 CH) fell 4.7 per cent to 11.69 yuan, and Tecon Biology (002100 CH) was down 3.3 per cent at 8.47 yuan.
— Georgina Lee 


Corn-linked stocks fall as ministry cuts forecast amid African swine fever

Shares of Lenovo Group (992 HK) jumped 3.5 per cent to HK6.15 after data showed it tops global PC shipments, with a quarter of the global market.
Global personal computer shipments in the second quarter rose 1.5 per cent from a year ago to 63 million units, according to data from Gartner. And China-based Lenovo Group held the top spot over US rivals HP and Dell Technologies.
The increase, which followed two quarters of decline, came as businesses sought upgrades to technology with the new Windows 10 software. Lenovo shipped 15.9 per cent more PCs from a year ago.
But Gartner also said the ongoing trade dispute between US and China — and potential imposition of tariffs — adds uncertainty to the near-term outlook for PC demand.
— Georgina Lee 


Lenovo jumps on new data showing it tops global shipments

Budweiser Brewing Company APAC, the largest beer brewer in Asia-Pacific by sales, has delayed the pricing of its Hong Kong initial public offering, as the company and bankers failed to reach a consensus in the face of lackluster investor demand.
The company is also likely to set the price towards the lower end of the marketed range of HK$40 to HK$47 apiece, according to people familiar with the IPO and a fund manager briefed by bookrunners of the deal.
Depending on the final price, Budweiser is raising US$8.3 billion to US$9.8 billion in capital, surpassing Uber, which raised US$8.1 billion in New York in May, to become the world’s largest IPO this year.
Even though global investors have subscribed for over US$10 billion worth of shares, implying an oversubscribed order book, 70 to 80 per cent of the investors are hedge funds that tend to offer lower prices and trade for short-term gains, according to the fund manager.
The rest of the investors are global long-only funds, while Chinese long-only funds are more interested China Resources Beer (291 HK), the homegrown brewer currently traded in Hong Kong.
Investors also worried that China’s crackdown on gangs and organised crime earlier this year could have affected the business of karaokes and late-night restaurants, which would in turn hurt beer sales.
— Yujing Liu


Budweiser delays pricing of IPO amid flat investor demand

Some market watchers expect China's central bank to resort to cutting the reserve requirement ratios — or the amount of cash that banks much hold as reserve — to stave off further slowing down of the economy amid the US-China trade war. Bank of America Merrill Lynch (BoAML) has a different idea.   
It thinks the People’s Bank of China (PBOC) will cut benchmark interest rates, especially after the US Federal Reserve lowers its  benchmark, if it does as its chairman has hinted this week.
The bank’s economists, Helen Qiao and Xiaojia Zhi, forecast that for the second half of the year, China’s growth will remain trapped in a downward trend, due largely to sluggish external demand and weak investment demand. The bank expects real GDP growth to soften to 6.0 per cent for second half, from 6.3 per cent during the first half.
BoAML expects the PBOC to cut 25 basis point each in September and again in December, after the US Fed starts a new rate cut cycle. Its US economists expects the Fed to cut rates three times this year, 25 basis point each time in July, September and December.
“The hurdle is low for an imminent open market operation rate cut,” the analysts wrote, referring to the PBOC seven-day reverse repo rate, which is at 2.55 per cent.
— Georgina Lee 
 


Bank of America Merill Lynch expects China central bank to cut benchmark lending rates

Sungrow Power Supply led gains among Chinese solar stocks today after the annual installation target set by the government surpassed consensus estimates. The National Energy Administration said Thursday that China aims to install 50 gigawatts of solar-power capacity this year, which UBS Group AG said beats the consensus estimates of below 40 GW.
Domestic demand for solar products was expected to pick up in the next few weeks and drive up prices of items from solar glass to polysilicon and wafers, said Alex Liu, an analyst at the Swiss bank.
Sungrow Power (300274 CH) jumped by the 10 per cent daily limit to 9.75 yuan. Shenzhen, Solareast Holdings (603366 CH) surged 8.6 per cent to 4.89 yuan and LONGi Green Energy Technology (601012 CH) added 6.3 per cent to 22.31 yuan.
— Zhang Shidong 


Chinese solar stocks surge as government target of installation exceeds estimates

The CSI 300, which tracks blue chips trading on the Shenzhen and Shanghai bourses, closed 0.6 per cent higher at 3,808.73.
The Shanghai Composite Index rose 0.4 per cent, to 2,930.55.
Banks and insurance stocks helped their gains.
China Life Insurance (601628 CH) rose 5 per cent to 30.67 yuan; Industrial and Commercial Bank of China (601398 CH) climbed 0.9 per cent to 5.62 yuan, Ping An Bank (00001 CH) jumped 4.3 per cent to 14.14 yuan, and China Pacific Insurance (601601 CH) shot up 4 per cent to 37.67 yuan.
Ben Kwong, a director at KGI Asia, investors remain watchful on economic data, after earlier this week China’s PPI inflation fell to zero per cent in June from a year ago, and 0.6 per cent in May, indicating weak domestic demand amid external uncertainties.
“Investors are still watchful on economic data, given how there has not been much breakthrough from the current US China trade truce,” said Kwong, adding that he does not expect any sustainable gains in banking and financial stocks, even they rose and helped the gains in the indexes. Analysts at Bank of America Merrill Lynch expect China’s real GDP growth for the second half to slow to 6 per cent, from 6.3 per cent in the first half 2019.
— Georgina Lee 


China stocks gain, given boost by banks and insurance sectors

Investors should look at Hong Kong property stocks as pending US Federal Reserve rate cuts could make loans cheaper for homebuyers, said Francis Lun, chief executive of Geo Securities.
"Lower interest rates means more money (to buy properties), which means property prices go up," Lun said.
Property stocks have been top gainers on the Hang Seng today. Strong demand will continue boosting property stocks in the short term, said Lun. The rest of the market, however, has been fairly inactive.
"It's a boring day today. Turnover is low because investors are waiting for progress on the US-China trade talks," he said.
"The Fed rate cuts at the end of the month will be a temporary boost in the market, but still the problem is there's no buying interest ... most shares are just (experiencing) range-bound trading."
The China and Hong Kong markets have more or less been dictated by the US-China trade war in recent months. No developments on the current truce between the two largest countries means little movement in the markets.
"It will be forever before there's news of a resolution," added Lun.
The US wants China to buy more American farm goods like "they said they would", President Donald Trump tweeted yesterday. But China is reluctant do so unless the US promises to lift all existing tariffs on Chinese exports.
— Daryl Choo 


Crystal Ball: Take a look at property stocks, advises Francis Lun 

China’s exports fell in June, as trade tariff increases from the United States came into effect, while imports continued to weaken amid declining domestic demand.
In June, exports fell by 1.3 per cent year-on-year, after tariffs on US$200 billion of Chinese goods were raised from 10 per cent to 25 per cent by Washington in May. This was down from 1.1 per cent growth in May.
Imports, meanwhile, continued to slump, falling 7.3 per cent in June, according to data published by General Administration of Customs in China on Friday. This followed an 8.5 per cent decline in May.
Exports performed slightly better than economists polled by Bloomberg, who had forecast a 1.7 per cent drop, while imports were lower, with the poll predicting a 4.6 per cent drop.
Read full story by Sidney Leng here. 


China's experts, imports fall in June 

Gains in the Hang Seng Index narrowed from the morning, closing up 0.1 per cent at 28,471.72.
The gains seen in the morning, which at one point rose 0.6 per cent intraday, mirrored the strong US equities performance overnight.
But investor remained concerned about China’s economic health, which capped its gain for the day.
For the week, the Hang Seng was down 1 per cent.
Insurer AIA (1299 HK) led gains, rising 1.3 per cent to HK$85.45. China Construction Bank (939 HK) climbed 0.6 per cent, to $6.25.
Insurers helped keep the Hang Seng China Enterprise Index afloat. It rose a mere 0.04 per cent to 10,788.34. It was helped by China Life Insurance (2628 HK), which rose 1.8 per cent to HK$20.2, and CPIC Insurance (2601 HK), which rose 3.6 per cent to HK$31.55.
Elsewhere, performance of main board debutantes was mixed. Electrical and mechanical engineering company Analogue Holdings (1977 HK) closed at HK$1.63, more than 35 per cent higher than its offering price at HK$1.20.
In-vitro diagnostic distributor IVD Medical Holding (1931 HK) closed flat, at HK$3.07.
Hevol Services Group (6093 HK), a property management services provider, closed at HK$1.72, 34 per cent higher than its initial offering price at HK$1.28.
— Georgina Lee 
 
 


Hang Seng ekes out small gain 

Stocks Blog: Shanghai, Hong Kong close higher, but slowdown and other worries hang over markets

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}Corn-linked stocks fall as ministry cuts forecast amid African swine fever Lenovo jumps on new data showing it tops global shipments

Corn-linked stocks fall as ministry cuts forecast amid African swine fever

Lenovo jumps on new data showing it tops global shipments