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Deb Price

Zhang Shidong

Good day, traders —
Catch up on the day's action below. If you have questions, please shoot them to deb.price@scmp.com .
— Deb Price in Hong Kong and Zhang Shidong  
 


Stocks Blog: China, Hong Kong shares fall amid US-China trade fight, other uncertainties 

An employee arranges gold bands at Chow Tai Fook Jewellery in Hong Kong. Photo: Bloomberg 

Business

Markets

Tencent, casino stocks among losers on Hang Seng
Billionaire says adding gold to portfolios would be 'risk-reducing and return-enhacing'


Innovent Biologics (1801 HK) soars after Jefferies rates it as new buy on drugs in pipeline


Live

* Overnight markets/ What futures foretell

-- Overnight in US markets, the S&P 500 dropped 0.7 per cent, the Nasdaq fell 0.5 per cent, and the Dow Industrials slipped 0.4 per cent
-- Hong Kong futures were 1.1 per cent lower, while the China A50 futures slid 0.6 per cent
* IPO debuts: Jinshang Bank (2558 HK) will start trading in Hong Kong, while
* Economic statistics/Central Bank action: nothing major
* Corporate events: earnings, meetings, news conferences
 
-- Chinese liquor juggernaut Kweichow Moutai (600519 CH) said last night that profit for the first six months rose 27 per cent from a year ago, in line with a forecast the company made last week. Second-quarter profit growth moderated to 20 per cent from 32 per cent for the previous three-month period.
*Later this week: Hangzhou Hikvision Digital Technology (002415 CH), China’s biggest maker of surveillance cameras, is expected to release the first-half result tomorrow. Second-quarter profit probably increased 13 per cent from a year earlier, according Bloomberg data.
* Good reads: China's internet giants are fighting for dominance in smart speakers as they target half a billion users not yet online, tech reporters Sarah Dai and Meng Jing report.  Jiayuan International Group may have sold micro-apartments at a loss just to clear them and avoid the possible vacancy tax, reports property reporter Lam Ka-sing. 


Morning guidance 

Gold is headed to US$1,500 this year, says Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.
Wen thinks gold will benefit from an expected interest cut by the US Federal Reserve as well as the ongoing US-China trade dispute, which he doesn't expect to end nicely.
Gold is trading at US$1,425.81, up more than 11 per cent for the year. He thinks it will back down, and provide a good buying opportunity at around US$1,370, before moving back up. 
"Holding gold in your portfolio is just like insurance. ... So I strongly recommend holding gold in your portfolio."
Wen thinks no more than 20 per cent of an investor's portfolio should be in gold.
Listen to Kenny Wen's tips on casino stocks in this studio interview.

— Deb Price 
 


Crystal Ball: Kenny Wen says gold to hit US$1,500 this year

 
Jinshang Bank, Premia MSCI Vietnam ETF and Premia US Treasury Floating Rate ETF banged the gong today @HKEXGroup pic.twitter.com/2ooWEm0Puk
— Joy Pamnani (@joypamnani) July 18, 2019
Jinshang Bank (2558 HK) started trading on Hong Kong’s main board today.
Its shares were up in their trading debut on the Hong Kong stock exchange, with an opening price of HK$3.95 from an initial public offering price of HK$3.82, or a 3.4 per cent premium. It was last trading at HK$3.87.
As the only provincial city commercial bank in Shanxi province, the company ranked 440th among the “Top 1,000 World Banks” in terms of tier-one capital as of December 31, 2017.
The company plans to use its proceeds to strengthen its capital base and support ongoing growth of the business.
One of the cornerstone investors is Shanxi Qinxin Energy Group, which engages in the development of resources including coal mining and processing, generation of electricity, heat energy generation and manufacturing of machinery. Another cornerstone investor is Taiyuan Industrial Park Investment Holdings, which focuses on investment in enterprises and consulting services. Each company owns a US$50 million stake. Another stake valued at US$22 million is owned by Chenxing Real Estate Development, which engages in the sales and development of properties in the Shanxi province.

— Joy Pamnani 


 Banging the Gong: Jinshang Bank joins Hong Kong's main board

Shares got off to a downbeat start in mainland and Hong Kong markets.
The benchmark Shanghai Composite Index fell 0.6 per cent right after open, tracking losses across the major markets in Asia.
In overnight trading, US stocks also retreated after Netflix surprisingly posted a loss of customers in the home market.
Liquor giant Kweichow Moutai (600519 CH) was struggling to find direction, sliding 0.4 per cent, after reporting slower growth in second-quarter profit.
Hong Kong’s Hang Seng Index lost 0.4 per cent.
— Zhang Shidong


Markets drift lower, taking cues from regional sell-off

Gold producers are one of the few bright spots in China’s stock market in early trading.
Henan Yuguang Gold & Lead (600531 CH) led gains among the producers of the precious metal as futures contracts on bullion rose to a six-year high in Chicago.
Henan Yuguang surged 5.4 per cent to 5.24 yuan in Shanghai, Chifeng Jilong Gold Mining (600988 CH) climbed 2.4 per cent to 5.55 yuan and Hunan Gold (002155 CH) added 2.2 per cent to 9.44 yuan.
Gold prices have been on a roll this year on optimism that the Federal Reserve will cut the benchmark interest rate as early as this month amid signs of slowing growth in the US.
 

— Zhang Shidong 


Gold stocks shine in down day

The Hang Seng is being pulled down by information technology, consumer discretionary and energy, all of which were down by more than 1.5 per cent. Consumer staples was the only sector up, and only by 0.24 per cent.
China oil and natural gas major CNOOC is leading losses, down by 2.6 per cent. It's on track for its third day of losses, as oil prices fell for a fourth day amid an increase in U.S. stockpiles.
Only six of the Hang Seng benchmark's 50 stocks were up. Leading gains is Chinese snack maker Want Want China (151 HK), which shot up 2.25 per cent. In a filing to the stock exchange, it rebutted a claim it has benefited from "extraneous financial subsidies" and branded such claims "false and malicious." It's on track to snap a two-day losing streak.
The Hang Seng is trading down 0.6 per cent at 28,418.39.
— Deb Price  
 


CNOOC leading losses on Hang Seng 

Shares of Kweichow Moutai (600519 CH), the world's most valuable distiller, dropped for the fourth consecutive day, declining by as much as 0.8 per cent to an intraday low of 956.22 yuan, after the producer of fiery baijiu posted its slowest quarterly sales growth in three quarters.
The Guizhou-based distiller yesterday reported that sales rose 17 per cent in second quarter, while net profit grew 20 percent.
"The numbers imply a slowdown in sales, as which we believe [the first quarter] is the high season for baijiu consumption," said Daiwa Capital Markets' analysts Jonathan Ho and Anson Chan in a report, keeping their "outperform" recommendation on the stock.  "We believe the uptrend for series wine will continue while maintaining the growth momentum from high-end Moutai."
The stock may advance to a high of 1,077 yuan within 12 months, they said.
— Eugene Tang 


Kweichow Moutai falls on slow quarterly sales growth

Shares of Canvest Environmental Protection Group (1381 HK) rose for the fourth consecutive day in Hong Kong, advancing by as much as 5.4 per cent to an intraday high of HK$4.12, after announcing that a subsidiary has been awarded a contract to operate a waste-to-energy incinerator plant in Shaoguan municipality in Guangdong province.
Canvest will own 99.4 per cent of the plant, with the balance held by Fujian Industrial Equipment Installation and China Urban Construction & Research Institute.
— Eugene Tang


Canvest Environmental Protection Group rises again on plant contract news

J.P. Morgan continues to bet on Macau casino stocks, which they call a "comfortable long" with all of them having "good potential upside" as we head into second quarter earnings season.
It expects upside returns of 20 per cent plus, and even more if VIP gambling recovers.
Its top pick is Melco International (200 HK), which remains an overweight and has the most upside return potential, at 25 per cent. Other overweights are Galaxy Entertainment (27 HK), Wynn Macau (1128 HK), Sands China (1928 CH), MGM China (2282 HK) and SJM Holdings (0080 HK). 
Sands China and Galaxy had been J.P. Morgan's top picks in an early June research note. Only SJM Holdings (0880) is not an overweight, with a ranking of neutral.
Their price targets are as follows: MGM at HK$17.5; Melco International at HK$25; Galaxy at HK$65; Wynn at HK$21.50; Sands at HK$45, and SJM at HK$10.30.
It thinks Melco and Wynn Macau have the best chances of a beat on earnings before interest, taxes, depreciation and amortization (EBITDA) and mass market share and margin. 
It says Sands China could disappoint on headline EBITDA and mass momentum, though primarily because of the casino operator's high first quarter numbers and upped estimates. It thinks Galaxy, SJM and MGM will come in at market expectation.
J.P. Morgan sticks with its prediction that gross gaming revenue will fall 1 per cent for the year compared to 2018, with VIP down 13 per cent and mass gaming up 12 per cent.  
Melco and MGM are cheap, which is "their best virtue."
Casino stocks are down today in intra-day trading in a down market in which the Hang Seng at the lunch break was down 0.5 per cent at 28,453.57.
Melco International fell 2.6 per cent, to HK$20.40; Galaxy fell 1.4 per cent to HK$56.30; Wynn Macau fell 2.4 per cent to HK$18.74; Sands China fell 1.6 per cent to HK$40.80; MGM China is down 3 per cent to HK$13.82; and SJM Holdings is down 1.6 per cent at HK9.37.
 
Macau, where too much is never enough. https://t.co/GC3AdYggdlhttps://t.co/Kuo3VVew9b
— Deb Price (@bydebprice) July 15, 2019
— Deb Price  
 


Crystal Ball: Macau casino stocks to rally  20 per cent this year, says J.P. Morgan

Chinese markets will climb if the US Federal Reserve cuts interest rates by 50 basis points instead of the expected 25 points, said Louis Tse Ming-kwong, managing director at VC Asset Management.
“The Hang Seng could reach 29,600 if the Fed cuts rates by half a per cent,” he said. “The question is, will the US interest rate cut happen by this month? If so, by how much?”
If rates are cut by 25 basis points, market reaction will likely be subdued, Tse said.
Traders are watching the Fed’s announcement keenly because in the short term, there aren't other big expected catalysts.
“We’re in the summer doldrums,” Tse said. “There is no incentive to go in (to the markets) at this time … whatever has been done has already been done.”
“Donald Trump himself said it is going to be a long and winding road to agree on anything on the US and China trade talks. The point is, we’re at a kind of stall in the negotiation. There’s nothing to look for.”
Despite recent slips in the Hang Seng and Shanghai Composite which Tse attributes to traders taking profits, he said the markets can still hold up and “can easily manage at this level”.
For investors who want to avoid risks of market activity over Fed cut news however, Tse advises, “Go to utilities stocks. They are generally more safe and with a more stable return.”
“We’re talking about power assets … or Chinese state banks like the China Construction Bank”, which usually posts dividends of around 5 per cent.
“Just bear in mind those are historical yields,” he added.
— Daryl Choo
 


Crystal Ball: Hang Seng could hit 29,600 on US rate cut, says Louis Tse

Ray Dalio, the co-chief investment officer and co-chairman of Bridgewater Associates, set off a lot of chatter today in a very long LinkedIn that — spoiler alert — ends by saying, it would be "both risk-reducing and return-enhancing to consider adding gold to one's portfolio." He teases that he will soon send out an explanation — likely just as long — on why gold is an effective diversifier. 
I believe that we are likely approaching a paradigm shift in the markets and recently explained the dynamic as I see it in this report. I thought you might find it interesting:https://t.co/mvjnKjSnHD
— Ray Dalio (@RayDalio) July 17, 2019
— Deb Price


Billionaire sets off buzz on gold

Shares of Innovent Biologics (1801 HK) are soaring today after Jefferies rated it as a new buy, with a price target of HK$34.70.
It was up 3.9 per cent to HK$25.20 in a declining market.
Jefferies analysts Cyrus Ng and Lois Zhou said the Chinese biopharmaceutical company has one of the strongest product portfolios among Chinese biotech companies. 
The therapy that has wowed them is called sintilimab, which fights classical Hodgkin's lymphoma. Innovent has developed the injection with US-drugmaker Eli Lilly. 
"With its competitive pricing and wide applications, we believe sintilimab will become one of the major players in the market," the analysts wrote in a note.
Innovent released an update on results of clinical trials on July 3, concluding, "In addition to high objective response and complete response rates, sintilimab also shows sustained efficacy and acceptable long-term safety during follow-up."
The disease sintilimab was created to fight is called Extranodal NK/T cell lymphoma (ENKTL), which has survival rates of only about six months, underscoring the potential for a treatment that is proven effecting. It is a rare tumor with a proclivity for East Asians, Innovent said in a news release. 
Innovent has three more promising drugs in the pipeline for next year and 2021, and six more beyond that, Jefferies noted in explaining its enthusiasm. 
Research and development costs will mean the company loses money for three years, but Jefferies sees it turning profitable in 2022.
"With its blockbuster sintilimab and three NDA filed biosimilar drug candidates, we believe Innovent has one of the strongest and most visible product portfolios among all biotech companies in China. The company has a well-balanced pipeline and we believe the revenue generated from sintilimab and biosimilars should be enough for future R&D developments." they wrote.
— Deb Price 


Innovent Biologics soars after Jefferies rates it as new buy over promising drugs in pipeline

CNOOC is having a very bad day, leading losses on the Hang Seng Index, with a 2.9 per cent fall to HK$12.80.
Daiwa downgraded the China oil major player to hold from outperform, and lowered its target price to HK$13.80 from HK$15.70.
The oil sector is having trouble with big US stockpiles, trade war tensions and declining oil prices.
But Daiwa is one of five new ratings on CNOOC out this week, and it is decidedly the most negative.
Goldman Sachs calls it a buy today, with a target price of HK$16.60. Macquarie has it as an outperform with a price target of HK$14.20. Jefferies calls it a buy at HK$16.50. And Bank of China International rates it a buy at HK$15.71.
— Deb Price
 


CNOOC falls as Daiwa downgrades it to hold

The Shanghai Composite Index fell 1 per cent to 2,901.18, dragged down by information technology stocks, though all sectors were down. 
It was its third straight day of losses for the benchmark.
The past two weeks, it has fallen three out of five days. Trading lacked conviction, as clear policy drivers, important to investing decisions in China, were absent and the trade war between the world's two biggest economies drags on.
Kweichow Moutai (600519 HK) ended down 1.66 per cent to 947.50 after it posted its slowest quarterly sales growth in three quarters. That was its biggest percentage drop since July 3, when the world's most valuable liquor company fell 3.62 per cent. 
The Shenzhen Composite Index fell 1.6 per cent to 1,548.64, led by losses in information technology and communication services. Eleven companies hit or nearly hit the 10 per cent upside limit, including Dalian Morningstar Network Technology (002447 CH), which sells fish, shrimp, sea cucumbers and crabs. Dalian last hit the 10 per cent limit on June 26, one of the four times it did that month.
Three of the benchmarks' heavyweights closed down. 
Wuliangye Yibin (000858 CH) fell 2.1 per cent to 121 yuan, Midea Group (000333 CH), which makes household electrical appliances, fell 0.06 per cent to 52.69 yuan, and Gree Electric Appliances (000651 CH) fell 0.24 per cent to 54.40 yuan.
Meanwhile Hangzhou Hikvision (002415CH), the Chinese video surveillance maker blacklisted by the US over national security concerns, was down 2.7 per cent to 26.17 yuan.     
— Deb Price
 


Kweichow Moutai among losers in Shanghai 

The operator of the Hong Kong stock exchange is trying to entice investors with new products.
Forty-five new so-called inline warrants started trading today, marking the first roll-out of a new structured product in 13 years.
These are derivative products linked to the Hang Seng Index and the share prices of the five most actively-traded stocks — Tencent Holdings (700 HK), China Construction Bank (939 HK), China Mobile (941 HK), AIA (1299 HK), and Ping An Insurance (2318 HK).
The issuance of these warrants marks one of the stock exchange operator's first steps in introducing more currencies, fixed-income products and other financial derivatives, as part of its three-year plan to be the go-to market during Asian trading hours.
A total of 83 new inline warrants will be listed by July 24.
"The market is going nowhere, this is the kind of product to capture, lure and entice those investors" waiting on the sidelines, said Louis Tse Ming-kwong, managing director at VC Asset Management.
These warrants allow investors to receive a pre-determined fixed payment, depending on whether the underlying stock's price falls within a set range at the product's expiry date.
The first batch of inline warrants have a lifespan of six months until maturity, though the Hong Kong Exchanges and Clearing (HKEX) rules allow expiry dates to be set up to five years later.
Investors can hold them to maturity or they can trade them on the stock exchange prior to their expiry. At expiry, settlement is made in cash only.
— Daryl Choo
 


Hong Kong tries to woo investors with new products 

Information technology and energy stocks pushed the Hang Seng Index down for the second straight day.
The benchmark closed down 0.5 per cent at 28,461.66.
Leading losers were CNOOC (833 HK), which fell 2.3 per cent to HK$12.88, and Sunny Optical (2382 (HK), which fell 2.3 per cent to HK$85.95.   
Index heavyweight Tencent Holdings (700 HK) fell 1.8 per cent to HK$356.60. 
Casino stocks were among losers. Sands China (1928 HK) fell 1.3 per cent to HK$40.90 while Galaxy Entertainment (27 HK) slid 1.1 per cent to HK56.45.
— Deb Price
 


Tencent, casino stocks among losers on Hang Seng 

Recent slips in the Hang Seng and Shanghai Composite are presenting foreign investors a chance to buy into the Chinese markets.
“It seems to be [a buying opportunity], particularly for foreign investors trying to bargain hunt, once Shanghai drops below 2,900,” said Castor Pang Wai-sun, head of research at Core Pacific-Yamaichi International Hong Kong.
The Shanghai Composite Index fell 1 per cent today to 2,901.18.
“China property stocks and cement stocks seems to be a good deal right now,” Pang said.
“[China’s] fiscal policy expansion will help the demand for cement in order to increase infrastructure and property and to maintain the GDP growth of 6.2 per cent for the whole year.”
Beijing said in May it would step up tax cuts and increase infrastructure spending to stabilise its sagging economy.
Corrections in the Hang Seng and Shanghai Composite, meanwhile, are showing no signs of abating.
Institutional investors are swapping into defensive stocks like utilities, REITs, and MTR Corporation (00066 HK), which is a mix of both, Pang said.
Risk-averse retail investors can benefit from such swaps but should stay away from gold, he said.
“Gold seems to be very risky instead of being a risk-free haven,” he said, as gold prices are sensitive to many external factors.
“If the (US) Fed cuts interest rates, it will help gold prices see upside potential. But if it's only a short-term interest rate cut, then gold prices will peak very soon.”
He added the Hang Seng still has a chance to pull back and test the 50-day moving average at 28,000 while the Shanghai Composite could drop as low as 2,850.
“Uncertainty about the US and China trade negotiations not resuming in the short term is why US markets were down last night, which dragged down China and Hong Kong’s stock markets,” he said.
“Investors are cautious right now. It seems like corrections will continue.”
— Daryl Choo


Crystal Ball: Buying opportunities presented as stock markets continue slipping, says Castor Pang

Stocks Blog: China, Hong Kong shares fall amid US-China trade fight, other uncertainties

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}Tencent, casino stocks among losers on Hang Seng Billionaire says adding gold to portfolios would be 'risk-reducing and return-enhacing'

Tencent, casino stocks among losers on Hang Seng

Billionaire says adding gold to portfolios would be 'risk-reducing and return-enhacing'