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Georgina Lee

Deb Price

Anthony Richardson

Well that wraps up another day --
It was a disappointing one for Hong Kong, where shares finished flat. 
But President Trump's sudden optimism about a trade deal at the G7 proved a tonic for Chinese shares, which finished higher today. They were also boosted by the fact they're about to get a higher weighting in MSCI indexes.
Join us tomorrow!
If you have any feedback about our live stocks blog, please contact Deb Price at deb.price@scmp.com
-- Georgina Lee, Anthony Richardson and Deb Price in Hong Kong  


Stocks Blog: Big gains by WH Group, Anta Sports fail to breathe life into Hong Kong markets; Chinese stocks gain

Flags outside the Hong Kong stock exchange. Photo: AFP

Business

Markets

Hong Kong's benchmark closes flat at 25,664.07
World's biggest pork producer WH Group jumps 4.6 per cent 


City's benchmark has struggled for direction all day even, weighed down by China Mobile and HKEX


Stocks

China stock market

Hong Kong Stock Exchange

ANTA Sports

WH Group

Live

Here's what we are watching this morning:

Overnight markets/ What futures foretell

--The S&P 500 rose 1.1 per cent, the Nasdaq rose 1.32 per cent and the Dow Jones Industrial Average climbed 1.05 per cent

-- Hong Kong futures are up 0.09 per cent, while the China A50 futures are up 0.45 per cent

IPO debuts: None to note

Economic statistics/Central Bank action:
-- China July industrial profits year-on-year

Corporate events: Nothing of note

Earnings: Chalco (2600 HK), Bank of Beijing (601169 CH), Bocom (3328 HK), Citic Bank (998 HK), China Galaxy (6881 HK), China Molybdenum (3993 HK), China Southern (1055 HK), Dali Foods (3799 HK), Everbright Securities (601788 CH), Fosun Int’l (656 HK), Gemdale (600383 CH), Huadong Medicine (000963 CH), Industrial Bank (601166 CH), BaoTou Steel (600010 CH), Kunlun Energy (135 HK), SF Holding (002352 CH), Shanghai Airport (600009 CH), Shimao Property (813 HK), ZTE (000063 CH)

Good reads: The trade war is pushing the global economy closer to tipping into a severe slowdown, reports Karen Yeung. Hong Kong-based shipping giant Orient Overseas International reported an interim net profit of US$138.9 million for the first half of 2019, swinging from a loss of US$10.3 million this time last year, reports Ryan Swift.


Morning Guidance

Hong Kong-based shipping giant Orient Overseas International on Monday reported an interim net profit of US$138.9 million for the first half of 2019, swinging from a loss of US$10.3 million this time last year. Overall revenue for the company rose 6 per cent to US$3.3 billion in the first half of this year from US$3.1 billion in the same period last year.
The result allayed some concerns about the US-China trade war, which has been disrupting trans-Pacific trade and industry since US President Donald Trump first levied tariffs on Chinese goods in February 2018.
The company said higher revenue from its container shipping and logistics division, which swung from a loss of US$3.1 million in the first half last year to a profit of US$152.7 million this year, helped its bottom line. Profit at its property division, however, stood at US$53.8 million this year, down from US$61.7 million in the first half of 2018.
Read the full story here
-- Ryan Swift


Hong Kong shipping giant Orient Overseas weathers trade war, steers to US$139 million profit

On Monday, Hong Kong’s protests reached the 79-day mark, the point at which Occupy Central ended.
The ongoing protests have clobbered Hong Kong’s economy – from its all-important property market and stock exchange to its shop owners and its banks – in a way the earlier pro-democracy effort did not five years ago.
There is no end in sight. But the deeper damage to business – potentially long-lasting in the international investment community – could not be any clearer.
Goldin Financial Holdings’ abandoned the HK$11.12 billion (US$1.4 billion) purchase of a commercial plot at the former runway of the Kai Tak airport on June 11, two days after the first major demonstration, citing “social conflict and economic instability”.
Overall property purchases – including homes, shops and industrial offices – registered with the Land Registry in June and July fell 24 per cent in the 79 days ended August 23 this year compared to Occupy Central.
Check out the full story here


Hong Kong protests 2019 vs Occupy Central: the cost to business

The company (2196 HK) said in on Monday night that net profit for the first half rose 4.7 per cent to 1.82 billion yuan, from 1.74 billion yuan a year ago.
Revenue rose 19.7 per cent to 14.1 billion yuan, from 11.8 billon yuan a year ago. During the period, however,  its impairment losses on financial assets more than doubled, to 21.92 million yuan, from 9.1 million yuan. Same as last year, it did not declare a half-year dividend.
Revenue from China rose 23.5 per cent to 10.8 billion yuan, accounting for 77 per cent of its total revenue.
 
-- Georgina Lee


Shanghai Fosun Pharmaceutical’s net profit rises 4.7 per cent

The company (863 HK) said first-half net losses widened ninefold to 131.8 million yuan, from 14.1 million yuan a year ago. Total revenue rose 29 per cent to 85 million yuan from 65.8 million yuan.
It booked 41.6 million yuan of revenue from its digital asset business, which began operating in August 2018 representing the provision of services in digital asset software and digital token trading.
-- Georgina Lee


BC Technology’s losses widen despite digital asset business coming good

The yuan will remain a tool for China to use to offset tariffs, says Bank of America Merrill Lynch Global Research analysts, who predict USD/CNY will weaken to 7.5 by the end of the year. That's up from their earlier forecast of 7.3.
"The proposed tariff escalation represents a hardened stance by policymakers in China,"  they wrote in a note emailed today.

"RMB depreciation is expected to remain a gradual process with occasional jump risk when tariff increases are confirmed or escalated," they wrote, using another name for the yuan.

The USD/CNY could weaken to 7.66, the currency team added.
-- Deb Price


Yuan to weaken to 7.5, says BoA-Merrill Lynch Global Research

Chinese online education platform Hexiaoxiang, which teaches Chinese to pupils aged between 5 and 12, has closed its Series B financing round, collecting 200 billion yuan (US$28 million), according to 36Kr.
Separately, 36kr reported that Beijing-based online education platform Huowa has closed its Series D equity financing round, collecting US$85 million from investors led by GGV and KKR.
Online education has become one of the hottest sectors in China’s technology industry, with market leaders like VipKID and Liulishuo delivering lessons via the internet or smartphone. Parents in China are willing to shell out top dollar for tutoring to prepare their children for the country’s gruelling national university entrance exam, called ﻿gaokao in Mandarin.

For full story, click here
-- KrASIA


Investors pour funds into China online education start-ups

The Hang Seng rebounded slightly at the opening from yeterday's losses, adding 0.1 per cent to  25,715.98.

WH Group (288 HK), the world’s biggest pork producer, was up 2.6 per cent at HK$6.3. Property companies also got off to a good start, with Country Garden (2007 HK) gaining 2.2 per cent to HK$9.92 and Link REIT (823 HK) rising 1.9 per cent to HK$91.5.

In China the CSI 300, which tracks blue chips listed in Shanghai and Shenzhen, rose 0.7 per cent to  3,791.46 and the Shanghai Composite Index was up 0.6 per cent to  2879.52. The Shenzhen Component Index climbed 0.7 per cent to 9,333.22.
-- Georgina Lee


Hang Seng opens slightly higher, China benchmarks edge up

Shares of China Merchants Bank (HK 3968) took a drubbing on Monday, with investors shying away from risky assets that could face further headwinds as the trade war between China and the United States escalates once again. 

The Shenzhen-based lender was in June held in contempt of court by a US judge for refusing to comply with subpoenas in an investigation into North Korean sanctions violations. The case could lead to the banks being cut off from the US financial system.

The stock fell by 6.5 per cent on Monday before recovering slightly to close 4.9 per cent lower at HK$35.9 in Hong Kong. The shares continued their recovery this morning, rising 0.84 per cent by 10am.

The company reported an interim result in line with expectations after the market close on Friday. Its net profit grew by 13.1 per cent year on year to 50.6 billion yuan (US$7.1 billion). Its gross non-performing loan formation ratio rose 28 basis points year on year to 1.2 per cent.
-- Xie Yu
 


China Merchants Bank tumbles amid fears escalating trade war could lead to US sanctions

Several pharmaceutical stocks soared by the daily 10 per cent limit, including North China Pharmaceutical (600812 CH), rising to 7.88 yuan; Northeast Pharmaceutical Group (000597 CH) to 12.88 yuan; Guanhao Biotech (300238 CH) to 21.35 yuan; Furen Group Pharmaceutical (600781 CH) to 7.04 yuan.

According to financial publication Caixin, the National Healthcare Security Administration has updated a catalog of medicines eligible for reimbursement under government –backed insurance plans with 148 drugs newly added to the list. According to the report, the adjustments could improve efficiency for  claimants using medical insurance funds.

-- Georgina Lee


Chinese pharmaceuticals rise, with more drugs eligible for insurance reimbursement 

Profits at China’s large industrial firms recovered in July, posting year-on-year growth of 2.6 per cent, following a decline of 3.1 per cent in June.

July’s growth was largely powered by the private sector, where industrial giants posted a 11.4 per cent rise in their profits. However, the broader picture shows that across the board, China’s industrial giants remain in relatively weak condition.

For the year-to-date to July, total industrial profits were down 1.7 per cent, largely due to a long-term slump in the profitability of state-owned enterprises (SOEs). In the January to July period, SOE profits stood at 1.09 trillion yuan (US$151.5 billion), a decrease of 8.1 per cent on the same period in 2018.

In a statement accompanying the July figures, the National Bureau of Statistics (NBS) pointed to a large increase in profits in the electrical machinery sector, which jumped 30.8 per cent.

-- Finbarr Bermingham


China’s industrial profits bounce back in July, but long term view still bleak

Shares of GigaDevice Semiconductor (603986 CH), which makes flash memory devices in Beijing, rose 9.5 per cent to a 12-month intraday high of 124.63 yuan, after Guotai Junan Securities initiated coverage of the company, with a "buy" recommendation and a price target of 191.91 yuan.
-- Eugene Tang


GigaDevice Semiconductor soars to 12-month intraday high

Three stocks linked to a Financial Times report that US senators have demanded a giant retirement fund halt its plans to invest in them have shown mixed performances so far today.

The politicians have urged the chairman of the Federal Retirement Thrift Investment Board (FRTIB), one of the largest retirement funds, managing US$578 billion in assets, to reverse a decision to allocate money into Chinese state-owned companies that support the country's military and security apparatus.

According to the FT report, FRTIB is set to shift one of its portfolios to track the MSCI All Country World ex-US Investment Market Index, whose constituents include Hong Kong-listed AviChina Industry and Technology, China Mobile, and Shenzhen listed Hangzhou Hikvision Digital Technology.

AviChina Industry and Tech (2357 HK) rose 5.2 per cent to HK$4.08, China Mobile (941 HK) dropped 1.5 per cent to HK$65.4, while Hangzhou Hikvision Digital (002415 CH) added 3.1 per cent at 31.6 yuan.
-- Georgina Lee
 


Stocks linked to US senators’ push to stop pension fund investing in Chinese firms mixed

The gold price, which has touched a six-year high, still has upside potential as a safe-haven asset amid heightened economic and geopolitical risk, said a report by ANZ on Tuesday. 

Its price is supported by supply and demand fundamentals, said its commodity strategists Daniel Hynes and Soni Kumari. They forecast global gold production to peak at nearly 3,400 tonnes this year and then decline at an average annual rate of 1-2 per cent from 2021 to 2025. 

Purchases by central banks, which account for around 10 per cent of global gold demand, are forecast to stay above 650 tonnes in the coming years after surging 74 per cent to a 47 year-high of 651.5 tonnes last year, they added. 

"In the current environment, where uncertainty in emerging market currencies is high, we see good reason for countries like Russia, Turkey, Kazakhstan and China to continue to diversify their portfolios by increasing their gold reserves," they wrote. 

Gold traded at US$1,528 an ounce at 9.25am after it reached a six-year high of US$1,554.56 on Monday, according to Reuters.
-- Eric Ng
 


Global risks will drive safe-haven gold even higher, says ANZ

Anta Sports (2020 HK) rose 7.2 per cent to HK$65.65, the highest since its 2007 listing, after Macquarie raised the target price to HK$82 from HK$69, the most optimistic view among the 25 analysts covering the stock as tracked by Bloomberg.

The sportswear maker, whose brands include Fila, Descente, Sprandi, on Monday reported that first-half net profit rose 27.7 per cent to 2.5 billion yuan, from 1.9 billion yuan a year ago.

Revenue at China’s largest sportwear brand by sales rose 40.3 per cent to 14.8 billion yuan, from 10.6 billion yuan a year earlier.
 
-- Georgina Lee
 


Anta Sports surges to record high after Macquarie raises target price 

Global index compiler MSCI will implement the second of three steps to raise the weighting of Chinese shares in its emerging markets indexes after the market closes today.

It will add eight Chinese stocks to the MSCI China Index, with an inclusion factor of 15 per cent. It will give China-listed shares a weighting of 7.79 per cent and 2.46 per cent in the MSCI China and MSCI Emerging Markets indexes respectively, according to a recent statement by MSCI.

After the third step slated for November, the inclusion factor of Chinese shares in the index will reach 20 per cent.

JPMorgan analyst Zhang He forecasts that step two will attract US$3.7 billion into Chinese stocks.

-- Georgina Lee
 


Higher weighting of Chinese shares in MSCI indexes could attract US$3.7 billion, says JPMorgan

The latest round of tariffs announced by the US and China on each other's imports will slow Asian corporate profit by 2.5 percentage points, say analysts at UBS CIO, a research unit within Swiss banking giant UBS' wealth management unit.

That would bring 2020 earnings growth down to 3.4 per cent from 5.9 per cent.

“Taiwan and Korea, two cyclical markets with heavy tech exposure, will likely be the largest contributors to the regional earnings downgrade,” said UBS CUI in a report titled “Asia Pacific Economy – the latest round of tariff escalation” released on Monday.

For China, UBS CIO forecasts a 2 percentage point decline in listed Chinese companies’ earnings growth, referring to constituents of the MSCI China index.

“If we include our revised forecast for the renminbi, at 7.4 per dollar, this would cut Chinese offshore equities earnings growth by mid-single digits for 2020,” it said, adding this would imply growth of 1 to 2 per cent instead of 5 per cent.
-- Georgina Lee
 


Latest US-China tariffs will slash Asian corporate profit growth next year, says UBS CIO

By lunch time, the CSI 300 index had gained 1.8 per cent to 3,834.99, while the benchmark Shanghai Composite Index was up by 1.7 per cent at 2,911.62. Both had widened their gains from earlier in the session.

In Shanghai, the top performing sectors in percentage terms were information technology and software, with Hundsun Technologies (600570 CH) up 5.9 per cent at 75.01 yuan, and China National Software & Service (600536 CH) 3.6 per cent higher at 60.59 yuan. China Satellite Communications (601698 CH)  rose 5.3 per cent to 9.72  yuan, and 360 Security Technology (601360 CH) surged 8.9 per cent at 20.26 yuan.

In Hong Kong, the Hang Seng Index rose just 0.1 per cent to 25,707.14.

Property companies supported the index, with Country Garden (2007 HK) up 4.6 per cent at HK$10.18, and Sun Hung Kai Properties (16 HK) rising 1.2 per cent to HK$113.2.

Elsewhere, Geely Auto (175 HK) rose 3.2 per cent at HK$12.18, while the world’s biggest pork maker WH Group (288 HK) added 3.1 per cent to HK$6.33.
-- Georgina Lee


Rise in China stocks picks up speed, while Hong Kong ekes out gains at lunch break

Kweichow Moutai (600519 CH) is on a roll, keeping itself above the 1,100 yuan mark it broke for the first time last Thursday. It is on track to close for the fourth session above that milestone.

The world's most valuable liquor maker slipped on Monday, falling 2.4 per cent to 1,102.95 yuan, amid the flare-up in the US-China trade war. That was its biggest drop since July 3, when it fell 3.6 per cent to 987.90 yuan.
Investors who have held onto the stock this year have been richly rewarded.  As of Monday's close, it was up nearly 90  per cent year-to-date.
 


Its 12-month target price among analysts covering the stock is 1,104.91 yuan, which it first crossed last Friday when it closed at 1,130.10 yuan.

It is trading up 1.4 per cent today, at 1,118.30 yuan.
-- Deb Price
 


Kweichow Moutai staying above its latest milestone -- 1,100 yuan

Meitu, a mobile app that allows users to edit selfies, saw its net losses almost triple to 371.2 million yuan in the first half from 130.4 million yuan a year earlier. Revenue dropped about 5 per cent to 464 million yuan.

Monthly active users remained flat at 308 million, though those in China dropped 1.4 per cent and accounted for 63 per cent of the total user base.

Meitu (1357 HK) shares dropped at one point in the morning to HK$1.96, the lowest since its December 2016 listing on the main board. After lunch it crept back up to HK$2, flat from Monday's close. Year-to-date the stock has lost 8.7 per cent.
-- Georgina Lee
 


Selfie-editing app Meitu drops after first-half losses widen from a year ago

Shares of Xinjiang Goldwind Science & Technology, China's largest wind turbines maker, surged as much as 13.5 per cent on Tuesday. 

A Citi research report on Monday said the company's profitability may rebound in the third quarter on the back of expansion in sales volume and profit margin. The company announced late on Friday a 23 per cent year-on-year fall in net profit to 1.19 billion yuan for the first six months.

Underlying net profit fell 61 per cent, according to Citi's Pierre Lau. Goldwind's management is targeting a gross profit margin of 13.7 per cent for the whole of this year. That's down from 18.7 per cent last year, implying a margin improvement in the second half, Daiwa Capital Markets' analysts said in a note on Monday. 

The stock had gained 11.8 per cent to HK$9.44 by 2.35pm today.
-- Eric Ng
 


Goldwin has the wind in its sails, surging after Citi forecasts profit rebound 

Shares of several vegan meat makers in China rose after lunch. A gauge tracking 20 of them gained 3.57 per cent, beating the broader CSI 300 index, which is up 1.6 per cent at 3,827.8.

They include Hunan Dakang International Food & Agriculture (002505 CH), which shot up by the 10 per cent daily limit to 2.1 yuan. Yantai Shuangta Food (002481 CH) rose 7.2 per cent to 8.39 yuan; Haixin Foods (002702 CH) climbed 3.6 per cent to 4.67 yuan; Baotou Dongbao Bio-tech (300239 CH) went up 5.7 per cent to 4.61 yuan.

Since  the 163 per cent surge achieved by Beyond Meat on its Nasdaq debut in May, vegan meat stocks have become a popular speculative bet in China's stock market.

Fast food chain Kentucky Fried Chicken, which operates in China, is testing plant-based chicken through a partnership with Beyond Meat at an Atlanta restaurant, it was reported on Monday. That could be a big boost for Chinese plant-based meat makers.
-- Georgina Lee
 


KFC's plan to test plant-based chicken cooks up a storm in vegan meat stocks

Having plunged almost 4 per cent in August and with no relief in sight, China's currency is on track for its biggest ever monthly loss.

The yuan has lost 3.9 per cent so far this month, the biggest drop since the modern exchange rate regime was implemented more than 25 years ago, according to Bloomberg.

Heightened trade tensions and fears of a slowing global economy have helped drag the currency below the critical level of 7 against the US dollar and to its lowest value since February 2008 this week.

With no sign of a concrete breakthrough in trade talks, the yuan may fall to 7.3 per dollar, according to an estimate by Credit Agricole's Dariusz Kowalczyk reported by Bloomberg.

-- Anthony Richardson

 


Chinese currency on course for worst month ever

Both the Shanghai Composite Index and the CSI 300, which tracks blue chips listed in Shenzhen and Shanghai, closed up 1.4 per cent, at 2,902.19 and 3,816.95 respectively.

In Shanghai, China Life Insurance (601628 CH) led the benchmark higher, climbing 2.9 per cent to 29.55 yuan, while 360 Securities (601360 CH) rose by the 10 per cent daily limit to 20.46 yuan.SAIC Motor (600104 CH) gained 3.9 per cent to 24.96 yuan, while Industrial and Commercial Bank of China (601398 CH) moved up 0.7 per cent to 5.42 yuan.

Kenny Tang Sing-hing, chief executive at Royton Securities, said the gains were boosted by index provider MSCI's plan to increase the weighting of China's shares in its global indexes today. It is due to implement the second of a three-step process to raise the weighting to after market close today.
A sudden burst of optimism at yesterday's G7 summit from Donald Trump about the possibility of reaching a trade deal with China is also likely to have pushed shares higher.

“The A-share weighting increase by MSCI is positive to the overall market today,” said Tang. He believes this support will be a one-off, however, and sees the Shanghai Composite Index hovering between 2,800 and 3,000 this week.

MSCI said it will add eight Chinese stocks to the MSCI China Index, with an inclusion factor of 15 per cent. It will give China-listed shares a weighting of 7.79 per cent and 2.46 per cent in the MSCI China and MSCI Emerging Markets indexes respectively, according to a recent statement by MSCI.

The Shenzhen Component Index closed up 1.9 per cent, at 9,443.18.

-- Georgina Lee


China stocks climb, with MSCI set to raise their weighting in its global indexes

The Hang Seng Index hovered in a thin range between positive and negative territory on Tuesday and finished almost flat at 25,664.07. Shares gave up small gains they had made at the start of the session.

Investors remained vigiliant after the index had at one point dropped over 3 per cent in Monday's session. The impact of higher trade tariffs on Chinese corporate profits are increasingly palpable as more research houses have issued gloomy forecasts for 2020.

Weighing on the index were China Mobile (941 HK), down 1.5 per cent at HK$65.4 and the city’s bourse operator HKEX (388 HK), down 0.8 per cent at HK$241.4.

Elsewhere, WH Group (288 HK), world’s biggest pork producer, was the top percentage gainer in the blue chip index, jumping 4.6 per cent to HK$6.42. It had suffered losses on Monday when it was sold off because it is likely to be in the latest batch of US China trade tariffs.

In the Hang Seng China Enterprises Index, the top gainer was Anta Sports (2020 HK), China’s biggest sportwear maker by sales. It rose 5.4 per cent to HK$64.55, a record high, after Macquarie raised the target price to HK$82 from HK$69.

Kenny Tang Sing-hing, chief executive at Royton Securities, expects the Hang Seng to continue to trade between 25,000-2,6000 level, given the cautious market sentiment.
-- Georgina Lee
