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Louise Moon

Azar Zaidi

Well, that did not last long. A cheer brought on by a delay in tariffs on about US$300 billion worth of Chinese goods has proved to be short-lived.
US equities tanked as much as 3 per cent overnight, spooking investors. And as chances of a recession build up, will Asia join the party?
China and Germany released weak economic data on Wednesday, while the world’s largest gaming company, Tencent Holdings, posted disappointing results. Meanwhile, protests continue in Hong Kong for a 11th consecutive week, slamming the city’s economy, while there seems to be no end in sight for the trade war between Washington and Beijing.
It is no surprise that gold, a safe haven asset, is surging.
Stay tuned as we, Louise Moon and Azar Zaidi, take you through what looks to be a tumultuous day in the Hong Kong and mainland markets


Stocks blog: Telecoms sector lifts Hong Kong, mainland China stocks into positive territory 

Business

Markets

Hang Seng Index closes up 0.8 per cent 
Shanghai Composite closes up 0.25 per cent and the CSI 300 index of large caps in Shenzhen and Shanghai is up 0.32 per cent


Telecoms led bourses in Hong Kong and mainland China into positive territory on Thursday. China Unicom, the biggest gainer in the city, lifted the gauges on news it was in talks with other mobile carriers to cooperate on building a 5G network. The company is the world's third-largest mobile services provider.


Stocks

China stock market

Hong Kong Stock Exchange

Live

Overnight markets/ What futures foretell:
– US markets all slammed down on Wednesday. The S&P 500 fell 2.9 per cent, while the Nasdaq and Dow Jones Industrial Average both lost 3 per cent.
– Hong Kong futures are down 1.8 per cent to 24,753, while the China A50 futures are up 0.38 per cent to 13,152.46.IPO debuts: None.Economic statistics/Central bank action:
9.30am: China July new home prices to be released.Corporate events, earnings, meetings, news conferences:
Lenovo (0992 HK), Ping An Insurance (2318 HK), Shaanxi Cola (601225 CH) and Tsingtao Brewery (600600 CH) to post earnings on Thursday.


Morning guidance

Hong Kong’s Hang Seng opened down 1.5 per cent at 24,913.27. On the mainland, the Shanghai Composite dropped 1.66 per cent to 2,762.34, while the CSI 300 of large caps lost 1.75 per cent to 3,618.01.
– Louise Moon


Hong Kong, mainland China gauges open in negative

An inversion in the yield curve of US government bonds, seen as a harbinger of an impending recession, is giving financial markets the jitters. “We shouldn’t ignore this historically reliable indicator of the economy telling us a recession may be looming,” JPMorgan Asset Management’s global market strategist Kerry Craig said in an emailed statement. “But markets have changed significantly in the last decade and yield curve inversion is not the harbinger it once was.”
“Yield curve inversion is flashing a warning sign – investors should check their portfolios are resilient,” Craig said. “But it’s not a reason to panic or to lean into the sell-off. Certainly bonds have already rallied a lot this year and are getting more expensive, but they remain an important part of portfolios. And the market corrections can also offer fresh opportunities to pick up equities at more reasonable valuations.”
– Eugene Tang


Yield curve inversion is not the harbinger it once was: JPMorgan Asset Management

Former US Federal Reserve chair Janet Yellen told Fox Business overnight: “I think that the US economy has enough strength to avoid [a recession]. But the odds have clearly risen and they are higher than I’m frankly comfortable with.”
The 30-year US Treasury bond dropped 14 basis points to 2.03 per cent on Wednesday, to its lowest ever level.
Meanwhile, after China posted poor economic data on Wednesday, Germany followed suit. Its economy shrank in the three months to June, as US-China trade tensions took their toll on the country’s export-heavy manufacturing sector. Output fell 0.1 per cent in the second quarter, compared with the first three months of the year.
– Louise Moon


US economy has enough strength to avoid recession, Janet Yellen says

US President Donald Trump weighed in on the Hong Kong protests overnight, tweeting that his Chinese counterpart, Xi Jinping, was “a great leader” and could “humanely solve the Hong Kong problem” if he wanted to, before suggesting a “personal meeting”.
In a series of tweets on Wednesday night Washington time, Trump also appeared to link the outlook for trade talks with China with a resolution of the Hong Kong protests, write Robert Delaney and John Carter.  
– Louise Moon
 
I know President Xi of China very well. He is a great leader who very much has the respect of his people. He is also a good man in a “tough business.” I have ZERO doubt that if President Xi wants to quickly and humanely solve the Hong Kong problem, he can do it. Personal meeting?
— Donald J. Trump (@realDonaldTrump) August 14, 2019


Trump weighs in on Hong Kong in tweet

The Hang Seng Index has hit its lowest level in intraday trading so far this year. It opened at 24,945, levels last seen in October 2018.
According to Bloomberg, more than US$600 billion in stock market value has been erased since early July, while the city’s gross domestic product  expanded just 0.6 per cent in the second quarter. As of last close, the stock market had lost more than 7 per cent since June 9, when a million people marched peacefully on the streets.
– Louise Moon


 Hang Seng Index sinks to lowest level for 2019

Cathay Pacific Airways (0293 HK) has risen in morning trading, up 3.67 per cent to HK$10.18 so far. After falling to a 10-year low this week, it has gained 6 per cent as of Thursday morning, touching a share price last reached in November 2018.
On Wednesday, the airline said it had let go two pilots over the Hong Kong protests. Its parent company, Swire Pacific (0019 HK), meanwhile, condemned the protests and vowed to follow China’s aviation regulations. Cathay has also waived rebooking and re-routing charges globally for flights to and from Hong Kong.
Swire was up 0.32 per cent to HK$78.50. Its share price previously fell to a low last reached in May 2018. As of Thursday morning trading, it has, however, gained 4 per cent over the past two days.
– Louise Moon


Cathay, parent Swire Pacific rise in morning trading

New World Department Store China (825 HK), a retail unit of Hong Kong property developer New World Development that operates department stores in mainland China, has appointed a new chief executive, Philip Cheung Fai-yet.
In a filing after trading hours, the company said Ivan Ho Kwok Leung had resigned his post effective August 15 to “pursue other personal commitments”. 
Chueng, 64, joined the company and its subsidiaries in 1993 and has been responsible for the overall management of the group. He has more than 40 years of experience in the retail industry and has wide experience of managing retailing stores in mainland China, Hong Kong and Taiwan. In his new capacity, Cheung will get HK$9.5 million a year in compensation and benefits.On Wednesday, the company’s shares closed unchanged at HK$1.27. 
A subsidiary of Grandshores Technology (1647 HK), the Hong Kong-listed blockchain investor backed by the government of Hangzhou municipality, is forming a HK$100 million joint with ESUN Technology (Shenzhen) to expand its e-cigarette business in overseas markets. 
Silver Fame Investment, a Grandshores Technology subsidiary, established the joint venture with ESUN to research, develop and sell cannabidiol and other types of cannabis electronic cigarettes in countries that allow so; to sell e-cigarettes in mainland China and overseas; and set up R&D centres and factories in North America and Southeast Asia. On Wednesday, Grandshores closed unchanged at HK$0.55. 
– Cheryl Arcibal
 


Overnight filings with the Hong Kong stock exchange

Telecoms company China Unicom (0762 HK) posted a 16.3 per cent increase in first-half net profit to 6.8 billion yuan (US$967.2 million), compared with last year. This came 1 per cent below an average forecast by analysts polled by Bloomberg. Its revenue fell 2.7 per cent to 144 billion yuan, according to a filing with the stock exchange after market close on Wednesday, which was 3.5 per cent below forecasts.
Credit Suisse, however, upgraded the company’s rating to “outperform” from “neutral”, without citing any reasons.
Chairman and chief executive Wang Xiaochu said on Wednesday the state-owned company was in talks with China Mobile and China Telecom on possible cooperation, with joint investment to start next year.
This could explain why, despite weaker-than-expected results, the stock rose 5.39 per cent to HK47.43 in morning trading.
– Louise Moon


China Unicom misses profit, revenue forecasts, but stock still rises 

Tencent Holdings (0700 HK), the world’s largest gaming company, hit a two-month low on Thursday, falling 2.47 per cent to HK$331.60 just before 11am. Although it posted a better-than-expected 35 per cent rise in quarterly profits after market close on Wednesday, it warned of a difficult economic environment ahead. The company reported a slowdown in online advertising revenue growth amid a slowing Chinese economy, the US-China trade war and competition with rivals such as ByteDance. The macro environment “will remain difficult for the rest of the year”, said James Mitchell, chief strategy officer, on an earnings call.
– Louise Moon


Tencent hits two-month low in morning trading

Lenovo Group (0992 HK), the world’s largest computer maker, sank to a two-month low on Thursday, losing 4.83 per cent to HK$5.70. It more than doubled its net profit for the first quarter, up 111 per cent to US$162 million, reported during morning trading. Its revenue also rose, by 5 per cent to US$12.5 billion, but the firm warned that outlook was uncertain due to the US-China trade war. 
Lenovo said retail prices for products such as computers and smartphones will increase if the US raises tariffs. A shift in production locations to other countries will also increase manufacturing costs, which will reflect in retail prices, it said, but added that it remained committed to China.
– Louise Moon


Lenovo sinks to two-month low on outlook despite doubling net profit

Shares of Cathay Pacific Airways (293 HK), Hong Kong’s hometown carrier, have jumped by 5.5 per cent to an intraday high of HK$5.50, recovering from a 10-year low after the Civil Aviation Authority of China (CAAC) confirmed at a Beijing press conference that the airline had complied with regulations and submitted information about crew members flying to and across Chinese airspace. Swire Pacific (19 HK), the airline’s parent company, whose chairman Merlin Swire has been in Beijing in recent days to meet the CAAC, has risen 1.7 per cent to HK$79.55.
– Eugene Tang


Cathay, Swire Pacific rise further after Beijing confirms compliance with crew rules

The Hang Seng is rising, lifted by a report in Chinese state newspaper Global Times that crew information submitted by Cathay had met the CAAC’s requirements. By 11.30am, the gauge had edged up 0.27 per cent to 25,371.52. 
– Louise Moon


Hang Seng edges up on confirmation of Cathay’s compliance with Beijing regulations

Standard Chartered (2888 HK) has lowered its forecast for growth in China’s gross domestic product for 2019 and 2020 to 6.2 per cent for both years, from 6.5 per cent and 6.3 per cent, respectively. The change is due to weaker-than-expected second quarter and July growth data, a moderating global economy and higher US tariffs since forecasts made in early May, as well as a contraction in PPI and industrial profits, which the bank said would probably weigh on investment activity in the second half of the year.
“The government has shown growing tolerance for slower economic growth amid leverage concerns, refraining from rolling out aggressive stimulus to boost short-term growth”, the bank’s economists said in a note. It expects China to roll out more measures to boost rural consumer spending and investing in old-town renovations, logistics and IT networks.
– Louise Moon
 


Standard Chartered lowers Chinese GDP forecast for 2019, 2020

The Hang Seng dipped back into negative territory by the midday break, down 0.17 per cent to 25,259.69. It began the day down, before briefly edging up in late morning. On the mainland, markets have stayed down through the morning. The Shanghai Composite broke for midday down 0.6 per cent to 2,791.60, while the CSI 300 of large caps in Shanghai and Shenzhen paused down 0.54 per cent to 3,662.38.
– Louise Moon


Hang Seng back in negative territory, mainland markets stay down 

Infant milk formula producer Ausnutria Dairy (1717 HK) shed 20.11 per cent to HK$9.73, its lowest level since March, after investment firm Blue Orca Capital said in a note that it was shorting the stock.Blue Orca said it believes the company “inflates revenues, hides costs, misleads Chinese consumers and secretly enriches executives through undisclosed related party transactions”. Ausnutria shares were suspended for over 2 years in 2012.Blue Orca valued the firm at HK$5.78 per share, a 53 per cent drop from its last closing price.
– Louise Moon


Ausnutria Dairy down 20 per cent after Blue Orca says it is shorting stock

Fundraising by financial technology companies globally took a hit in the first half this year, dropping 29 per cent as deal activity in China sharply declined, according to a new report by Accenture.
The value of investments in Chinese fintech companies fell to US$820 million in the six months ending June 30, compared with US$17.7 billion in the prior year period. Excluding a massive US$14 billion capital raising by Ant Financial last year, fundraising still fell 79 per cent in mainland China this year. The decline came as a trade war between the US and China has escalated and scrutiny of foreign investments in the US has intensified.
– Chad Bray


 Fintech investment tanked in first half of 2019, Accenture says

The Hang Seng turned up again in afternoon trading, adding 0.49 per cent to 25,425.30 by 2.45pm, after resting in negative territory over lunch.
“It responded to the sell off [in the US] overnight, but the fact it managed to rebound back from below 25,000 shows there is bottom fishing, bargain hunting,” said Louis Wong Wai-kit, director of fund-management company Philip Capital Management.
He expects traders to remain cautious before the weekend, with the market seeing a thin turnover. Wong forecast a resistance of 25,500 to 25,600 this week. “The current performance is more important” in reflecting sentiment and where the market is heading, he said. “According to historical statistics, after the inversion of the yield curve, actually the stock market tends to rise.”
Expectations of low interest rates in the US, because of the yield curve inversion, have helped boost local property stocks, he said.
– Louise Moon


 Hang Seng turns up in afternoon trading, adds 0.49 per cent

Mainland Chinese bourses have also returned to positive territory. The Shanghai Composite closed up 0.25 per cent at 2,815.80, and the CSI 300 index of large caps in Shenzhen and Shanghai was up 0.32 per cent at 3,694.00. Telecoms gained the most among the 10 sub indices – rising 4.79 per cent – led by China United Network Communications, which rose 5.9 per cent to 5.74 yuan. The company posted first-half net income of 3 billion yuan (US$385 million) after trading hours on Wednesday. 
On Thursday, China Unicom (0762 HK) said it was in talks with other mobile carriers to cooperate on building a 5G network. China United Network is the second-largest shareholder of the Hong Kong-listed telecoms company, with a 27.15 per cent stake.
Sentiment “remains on a soft note, but now they are paring the losses and is in positive territory, so it seems to show the market has hit a near-term low and rebounded”, said Louis Wong Wai-kit, director of Philip Capital Management. The Shanghai Composite will hover around 2,800 to end the week, with 2,820 to 2,830 serving as a resistance level, and 2,770 to 2,780 as a support level, he added.
– Louise Moon


Shanghai Composite, CSI 300 rise at the close 

Property developers have rallied in Hong Kong, with key players rising on expectations an inversion in the yield curve of US government bonds will lead to lower interest rates.
Just after 3pm, Sun Hung Kai Properties (0016 HK) rose by 3.32 per cent, CK Asset Holdings (1113 HK) by 1.79 per cent, Link Real Estate Investment (0823 HK) by 2.59 per cent and Henderson Land Development (0012 HK) by 3.19 per cent. Wharf Real Estate Investment (1997 HK), meanwhile, gained 3.24 per cent, New World Development (0017 HK) rose 6.27 per cent and Hang Lung Properties (0101 HK) was up 1.75 per cent.
Property, typically an indicator of sentiment in Hong Kong, has been performing poorly in recent weeks amid a downturn in the wider market amid escalating protests and the US-China trade war.
– Louise Moon


Hong Kong property big guns rise on hopes of lower interest rates

China’s frenzied housing market has cooled, as a government effort to cap prices is biting, while the impact of the year-long US-China trade war has percolated into the economy and caused the domestic output to grow at the slowest quarterly pace in three decades, writes Pearl Liu.


China home prices cooled down in July

The Hang Seng Index closed up 0.8 per cent at 25,495.46 on Thursday. Leading the gains – by far – was the telecoms sector, with China Unicom (0762 HK) rising 10.9 per cent to HK$7.82.
“Its interim results show the 5G capex is not as huge as expected, which is seen as a positive for telecoms operators,” said Louis Wong Wai-kit, director of fund-management company Philip Capital Management. China Unicom has said it is in talks with other mobile carriers to cooperate on building a 5G network.
– Louise Moon


 Hang Seng rises 0.8 per cent led by telecoms sector 

Singapore lender DBS has forecast China’s gross domestic product to slow to 6 per cent in the third quarter of 2019, driven by easing industrial production, loans and retail sales growth. “Most headline figures in July suggest persistent weakening of the economy … [and] reflects weak domestic demand and sluggish external trade,” the bank’s economist, Chris Leung, said in a note.
He expects the Chinese central bank to cut its benchmark interest rates and reserve requirement ratio to pre-empt the escalating risk of deflation.
On the fiscal front, Leung said: “Policy must be much more proactive with deep considerations for the long haul, emphasising on technological renovations and productivity enhancement. The aim is to generate sustainable new growth areas.”
– Daryl Choo


DBS forecasts China GDP to slow in third quarter of 2019

Hong Kong’s flag carrier Cathay Pacific Airways (0293 HK) extended gains for a second day on Thursday after falling to a 10-year low this week. The airline rose 5.7 per cent by the close to HK$10.30, after a 2.83 per cent gain on Wednesday. Its share price is now level with those from November last year.
Further gains came after the Civil Aviation Administration of China (CAAC) said Cathay had met its requirements vis-à-vis crew members.
“Cathay Pacific has submitted the report to the CAAC as required. We strictly abide by the rules and regulations of all regulators that have jurisdiction over us,” a spokeswoman said. The company did not detail what information had been submitted to CAAC.
– Louise Moon
