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Georgina Lee

Deb Price

Good day, traders --
Catch up on the day's action below. 
If you have questions or feedback, please send them to deb.price@scmp.com .
-- Georgina Lee and Deb Price  


Stocks Blog: Hang Seng extends losing streak to third day amid weak sentiment over trade war, protests

Photo: Alamy 

Business

Markets

Huaneng Renewables surges on 31.7 per cent profit jump
China liquor maker Wuliangye Yibin gets boost from Citic bullish share-price prediction


Financials push Shanghai Composite Index to close down, despite rally by some Chinese automakers.  But Fosun and Huaneng Renewables jumped in Hong Kong on strong earnings reports. 


Stocks

China stock market

Hong Kong Stock Exchange

Live

China Southern Airlines (600029 CH, 1055 HK), mainland China’s largest air carrier, reported a 20.9 per cent profit drop for the first half of this year amid a weaker Chinese yuan and volatile global oil prices.
The company said in a stock exchange filing on Tuesday evening that its profits for the six months ending on June 30 hit 1.69 billion yuan (US$236 million), compared to 2.14 billion yuan for the year-ago period.
Revenue grew 8 per cent to 72.9 billion yuan.
The company said its earnings were significantly affected by fluctuations in fuel prices, a major part of costs for an airline company.
-- Daniel Ren 
 


China Southern Airlines flies into trouble, reports 20.9 per cent profit drop

Bank of Communications (3328 HK, 601328 CH), the mainland’s fifth-largest lender, said its profits for the first half of 2019 grew 4.9 per cent from a year earlier, buoyed by a jump in interest income.
The Shanghai-based bank earned 42.75 billion yuan (US$6 billion) between January and June, it announced after the market close on Tuesday. The performance was in line with analysts’ expectations. 
BoCom’s interest income for the first six months was valued at 70 billion yuan, up 15.5 per cent from a year ago.
It was the first major mainland bank to unveil first-half earnings. The country’s Big Four lenders, including Industrial and Commercial Bank of China (1398 HK), China Construction Bank (939 HK, 601939 CH), Agricultural Bank of China (1288 HK, 601288 CH) and Bank of China (3988 HK) will publish their interim earnings later this week.
Here's an in-depth look at investing in China's banks. 
-- Daniel Ren 


Bank of Communications' profits up 4.9 per cent in 1H

Here's what we are watching this morning:
Overnight markets/ What futures foretell
--The S&P 500 slipped 0.32 per cent, the Nasdaq fell 0.34 per cent and the Dow Jones Industrial Average fell 0.47 per cent
-- Hong Kong futures are up 1.14 per cent, while the China A50 futures were up 0.15 per cent.
IPO debuts: 
-- Qingdao Richen Food (603755 CH) 
-- Chengdu Tangyuan Electrical (300789 CH) 
Economic statistics/Central Bank action: None to note
Corporate events:
Earnings: Air China (601111 CH), China Cinda (1359 HK), CCB (939 HK), Everbright Bank (601818 CH), Evergrande (3333 HK), China Jinmao (817 HK), Mengniu Dairy (2319 HK), Merchants Securities (600999 CH), China Re (1508 HK), China State Construction (601668 CH), China Taiping (966 HK), Daqin Railway (601006 CH), Fuyao Glass (600660 CH), Guangdong Invest (270 HK), Hongta Securities (601236 CH), Hundsun Tech (600570 CH), LONGi Green Energy (601012 CH), Luzhou Laojiao (000568 CH), New China Life (601336 CH), Power Construction (601669 CH), Qingdao Port (6198 HK), Mindray Bio- Medical (300760 CH), Sino Biopharm (1177 HK), Yonghui Superstores (601933 CH), Yunnan Baiyao (000538 CH) 
Good reads: Home sales jumped suddenly in Shenzhen, after Beijing announced it had picked the southern city as a new special economic zone to carry out wide-ranging reforms, Pearl Liu reports. Some owners of individual floors at The Center have cut rents by 5 per cent for the first time since they took over Hong Kong’s most expensive grade A office building, as anti-government protests have forced companies to hold back their expansion plans, Lam Ka-sing reports. 


Morning guidance 

The Hang Seng Index opened 0.4 per cent higher; at 25,767.8, while the Shanghai Composite Index was flat, at 2,904.2.
The CSI 300, which tracks blue chips listed on Shanghai and Shenzhen, rose 0.1 per cent, to 3,821.36.
US president Donald Trump said on Monday at the Group of Seven summit that Chinese officials had called the US asking for a resumption of negotiations. But Beijing refuted that. A China foreign ministry spokesman said he was unaware of such phone calls made by Beijing.
This confusion has some analysts doubting the prospect of a near-term resolution for the year-long US China trade war.
Selective properties helped keep the Hang Seng afloat, with China Overseas Land (688 HK) up 3 per cent at HK$25.35, Link REIT (823 HK) up 1.4 per cent at HK$90.8, and Sun Hung Kai Properties (16 HK) up 1.2 per cent at HK$113.9.
China Mobile (941 HK) rose 2.1 per cent to HK$66.8, while Geely Auto (175 HK) rose 2.5 per cent to HK$12.4.
In Shanghai, liquor distiller giant Kweichow Moutai (600519 CH) edged up 0.7 per cent to 1,116.24 yuan, while Ping An Insurance (601318 CH) inched up 0.01 per cent to 87.69 yuan.
-- Georgina Lee
 


Hong Kong stocks open higher, China indexes trading flat amid murky trade talks 

Bank of Communications (3328 HK, 601328 CH) is trading down 0.2 per cent in Hong Kong at HK$5.17 and on the mainland up 0.2 per cent to 5.47 yuan.  
The mainland’s fifth-largest lender said its profits for the first half of 2019 grew 4.9 per cent from a year earlier. It earned 42.75 billion yuan (US$6 billion) in the period. That was in line with analysts’ expectations.
-- Deb Price  
 


Bank of Communications gets mixed reviews on profit report

China Southern Airlines (600029 CH, 1055 HK) is trading down 1.5 per cent to 6.72 yuan on the mainland but up  0.87 per cent to HK$4.61 in Hong Kong after reporting a 20.9 per cent first-half profit drop on the back of a weaker yuan and volatile global oil prices.
Mainland China’s largest air carrier said in a filing Tuesday night that its profits for the six months ending on June 30 hit 1.69 billion yuan (US$236 million). That compared to 2.14 billion yuan for the year-ago period.
Jefferies maintained its buy rating on the Hong Kong shares, keeping its 112-month target price at HK$6.70.
Of analysts covering the stock and tracked by Bloomberg, 14 call it a buy, seven a hold, and none a sell, with a consensus target price of HK$6.29. 
 

-- Deb Price 
 


China Southern Airlines sees trading mixed after reporting profit drop

Zhaojin Mining (1818 HK) rose 2.4 per cent to HK$10.42, SD Gold (1787 HK) rose 1.7 per cent to HK$20.65, while China Gold International Resources (2099 HK) rose 2.1 per cent to HK$8.59, and Lingbao Gold (3330 HK) rose 1.3 per cent to HK$1.51.
The spot price of gold is US$1,538.73 per ounce, a six-year high, while COMEX gold futures are  quoted at US$1550.60 per ounce.
Gold’s rally since late June reflects the escalating US China trade dispute as well as recession concerns. 
Overnight, the yield of 10-year US treasuries fell below 1.5 per cent, below that of the two-year treasuries, quoted at 1.5264 per cent. Such yield-curve inversion, whereby the shorter-dated treasury yields are higher than longer-dated ones,  is often viewed by the market as a precursor to a recession.
Earlier this month, Citi revised up its six -12 month target for Comex gold futures to US$1,600 per ounce.
-- Georgina Lee 


Gold-related stocks jump in Hong Kong

Qingdao Richen Food (603755 CH), which makes food additives and seasonings, rose to the 44 per cent first day trading up-limit on Shanghai's main board, to 26.61 yuan. Its offer price was 15.7 yuan.
Chengdu Tangyuan Electrical (300789 CH), a rail transit operation and maintenance solution provider, also surged to 44 per cent on its Shenzhen debut, to 51.24 yuan, compared to its offer price of 35.58 yuan.
-- Georgina Lee 
 


 China debutantes Qingdao Richen Food, Chengdu Tangyuan Electrical hit first-day up limit

Geely Auto (175 HK) rose 1.3 per cent to HK$12.26, BYD (1211 HK) rose 1.1 per cent to HK$38.25,  Greatwall Motor (2333 HK) rose 2.6 per cent to HK$5.07, and Brilliance China  (1114 HK) rose 3.5 per cent to HK$8.
The state council, China’s cabinet, said in a statement Tuesday that as part of the government’s effort to boost domestic consumption and support economic growth, local governments that have restrictions on auto sales should look into gradually relaxing or removing them, and should also provide incentives to encourage purchasing of new energy vehicles.
It said used car sales across different provinces in China should also be helped along. A more robust used car market could encourage existing car owners to upgrade to newer models.
This is raising expectations for further consumption stimulus measures from Beijing, after overall car sales in July fell 4.3 per cent, which was a 13-straight month of decline, according to data from the China Association of Automobile Manufacturers.
-- Georgina Lee 

 


Auto makers climb in Hong Kong on policy support to boost sales

Shares of Kunlun Energy (135 HK), the natural gas distribution and logistics infrastructure unit of China's largest oil and gas producer PetroChina, gained as much as 3.5 per cent, despite reporting slightly disappointing interim results late on Tuesday.
Net profit for the year's first six months edged up 1.6 per cent to 3.14 billion yuan year-on-year. It was below expectation as it amounted to only 47 per cent of the full year earnings estimate by Daiwa Capital Markets' analysts and 49 per cent of the market's consensus estimate.
Like its rivals, the company saw a squeeze in profit margin for each per cubic metre sold to end users. That was due to lagging pass-through of higher gas procurement costs to customers over resistance by local governments to raise retail prices. A 17 per cent rise year-on-year in staff costs and a 13 per cent jump in sales and administration costs were also responsible for the flattish first-half profit, despite an 8 per cent rise in revenue.
The stock is trading 3.18 per cent higher at HK$6.81.
-- Eric Ng


Kunlun Energy shoots up despite reporting slightly disappointing earnings

Several auto makers hit the 10 per cent daily up limit minutes after market opened in Shanghai and Shenzhen. They include Lifan Industry (601777 CH), up to 4.33 yuan, Hualing Xingma Automobile (600375 CH), up to 5.46 yuan, and Tianjin Faw Xiali Automobile (000927 CH), up to 3.91 yuan.
Yangzhou Yaxing Motor Coach (600213 CH) rose 4.9 per cent to 10 yuan, FAW Car (000800 CH) rose 4.3 per cent to 9.49 yuan, and DongFeng Automobile (600006 CH) rose 3.8 per cent to 4.96 yuan.
Their gains came after the state council, China’s cabinet, called on local governments to take steps to boost sales, especially of new energy vehicles.
-- Georgina Lee
 


Car makers in China hit daily up-limit on Beijing's call to boost sales

China Foods (506 HK), which makes and distributes Coco-Cola products in China, said its first half net profit grew 15 per cent, or 290.3 million yuan, from 252.4 million yuan.
Revenue grew 10 per cent to 9.6 billion yuan, compared to 8.7 billion yuan a year ago.
The company currently distributes nine major types of beverages that span from sparkling drinks, juices, water, coffees, plant-based protein drinks and others, across 19 brands.
China Foods is up 7.5 per cent to HK$3.44, ending four straight days of declines since last Thursday.
-- Georgina Lee 


Coca-Cola China partner China Foods regains its fizz on solid first half net profit

Shares of China Mengniu Dairy (2319 HK), one of China’s leading maker of milk, yogurt and other dairy products, rose 3.8 per cent to HK$34.45, a record high. That made it the top percentage gainer on the Hong Kong blue chip index in the morning trading session.
The company is due to report its first half results today.
Analysis from Bloomberg Intelligence said the company could see first half revenue rise by 15 per cent from a year ago, as the company continued to boost sales of pricier UHT products, chilled yogurt and infant formula.
“We believe Mengniu is on track to meet this year's targets of more than 10 per cent sales growth and a 50 basis point operating-margin expansion,” analysts Catherine Lim and Kai Tung Pang wrote in a note.
In 2018, its net income rose a strong 49 per cent from a year ago to 3 billion yuan, while sales rose 15 per cent to 69 billion yuan.

 


Investors buy China Mengniu Dairy ahead of first half results

Shares of Chinese conglomerate Fosun International (0656 HK) climbed by as much as 5.8 per cent in morning trading, after the company reported record first-half revenue and its first interim dividend arrangement.
Fosun reported a 57 per cent year-on-year jump in revenue to a record high of 65.5 billion yuan (US$9.2 billion) on Tuesday after market close, beating the consensus estimate of 59.2 billion yuan in a Bloomberg poll.
The company plans to launch new products targeting families within two years, an executive said in a press conference today, without giving more details.
“We are seeing initial success with our strategy to focus on family consumption, from the aspects of happiness, health and wealth,” said billionaire Guo Guangchang, who co-founded the company.
Fosun, known for a slew of overseas assets it has acquired in recent years such as French fashion brand Lanvin and holiday resort operator Club Med, will also be interested in investing in unicorns -- or start-ups valued at over $1 billion -- that have leading technology, Guo said.
-- Yujing Liu 


Fosun shares shoot up after record first half

Wuliangye Yibin (000858 CH), China’s second most valuable fiery liquor distiller, rose to a record in Shenzhen trading after Citic Securities set the most bullish share-price estimate for the stocks.
Shares of Wuliangye, whose Chinese name means liquor distilled from five types of grains, climbed as much as 3.2 per cent to 136.55 yuan today, the highest intraday price since the Sichuan province-based company went public two decades ago. Wuliangye is valued at 515.9 billion yuan (US$72.1 billion), placing it behind brand leader Kweichow Moutai (600519 CH), with a market cap of 1.37 trillion yuan.
The gain came after Citic Securities, China’s biggest publicly traded brokerage, raised the price target of the stock by 25 per cent to 156 yuan, citing a management reshuffle that will sharpen its competitive edge.
Wuliangye Yibin is trading up 0.76 per cent at 133.38 yuan. 
Read full story here.
-- Zhang Shidong 


China liquor maker Wuliangye Yibin gets boost from Citic bullish share-price prediction

Analysts at Societe Generale (SG) said the renminbi depreciation has been mostly reactive and defensive, as Beijing has not allowed the yuan to weaken more than justified by tariffs.
Under this premise, analysts Wei Yao and Jason Daw said the yuan would likely weaken to 7.26 per dollar on October 1, and 7.51 per dollar on December 15, to offset the tariffs currently planned.
Last Friday, China retaliated against earlier batches of US tariffs by imposing new tariffs on US$75 billion of US goods, including soyabeans, automobiles and crude oil. They take effect on September 1 and December 15.
US president Donald Trump responded by raising tariffs on almost all Chinese imports, boosting tariffs to 30 per cent from 25 per cent on US$250 billion worth of Chinese imports as of October 1. On another US$300 billion Chinese goods, tariffs will increase to 15 per cent from 10 per cent, starting September 1.
SG said the currency would weaken further to 7.95 per dollar, to offset the tariffs, if the Trump administration were to impose 30 per cent tariff on all Chinese goods covered by all the announced lists so far, the analysts wrote in the report released today.
“For the USD/ CNY to turn around, tariffs would need to be rolled back, or global or China growth momentum would need to improve,” SG analysts said.
The People’s Bank of China set its reference rate at 7.0835 per dollar this morning.
-- Georgina Lee 


Yuan would likely weaken to 7.95 per dollar if Trump raises tariffs to 30 per cent on all Chinese goods, says SG

Shares of Huaneng Renewables (958 HK) surged as much as 9.1 per cent today after the renewable energy unit of the nation's largest power producer China Huaneng Group reported a 31.7 per cent jump in net profit to 3.1 billion yuan for the year's first six months.
The profit, reported late on Tuesday, was stronger than expected, amounting to 82 per cent of the full-year estimate by Daiwa Capital Markets' analysts and 83 per cent of analysts' consensus estimate.
They attributed the outperformance to better-than-expected cost control and higher-than-expected plant utilisation.
The company added 129.5 megawatts of newly installed wind farms, compared to a full-year target announced in March of 1,600 MW, implying most of the new capacity will be commissioned in the year's second half.
The stock is trading up 6.7 per cent to HK$2.23. It carries a dividend yield of 2.25 per cent based on last year's pay-out per share.
-- Eric Ng


Huaneng Renewables surges on 31.7 per cent profit jump  

Several pork-related producers listed in China surged to the 10 per cent daily up-limit.
They include: Luoniushan  (000735 CH), up to 9.79 yuan, Beijing Dabeinong Tech (002385 CH), up to 5.46 yuan, and Jiangxi Zhengbang Tech (002157 CH), up to 20.41 yuan.
Hunan Dakang International Food & Agriculture (002505 CH) rose 7.6 per cent to 2.26 yuan, Shandong Longda Meat Foodstuff (002726 CH) rose 7.5 per cent to 9.71 yuan, and Tech-Bank Food (002124 CH) rose 7.1 per cent to 13.02 yuan.
Over the past week, the price of lean meat white pork was 32.61 yuan per kilogram. That was up 30 per cent from the 24.99 yuan per kilogram average weekly price recorded for the month July, and up 74 per cent from a year ago, according to data from the Ministry of Agriculture and Rural Affairs.
Some market participants are betting that higher price levels could offset the impact from lower sales volume, as African Swine Fever is forecast to slash pork production by 25 per cent this year, according to Rabobank’s forecasts made in July.
-- Georgina Lee 


Some pork producers in China soar to 10 per cent daily upside limit 

Kweichow Moutai (600519 CH) added some drama to the day, cutting a teensy bit of its losses near the close to stay above the 1,100-yuan mark for the fifth consecutive session.
The world's largest liquor maker had traded down as low as 1,083.01, and was looking like it would break its streak at the milestone level. No Chinese stock has ever traded that high.
It finished at 1,100.11 yuan, with a 0.8 per cent slip that nonetheless kept it on its latest roll.
It first broke 1,000 yuan on July 1, but could only stay there one more day. It only got back up to that level again on August 12. It never looked back, riding up and breaking 1,100 on August 22. 
It is one of the most popular stocks traded on the Hong Kong-Shanghai Stock Connect.
 

-- Deb Price  


Kweichow Moutai extends streak above 1,100 yuan 

The CSI 300 index, which tracks blue chips listed in Shenzhen and Shanghai, lost 0.4 per cent, closing at 3,802.58, while the Shanghai Composite Index lost 0.3 per cent, finishing at 2,893.76.
The Industrial Bank (601166 CH) drove both indexes lower, closing down 5 per cent at 17.36 yuan.
Other banks and insurers also dropped. Ping An Insurance (601318 CH) closed down 0.9 per cent at 86.9 yuan, while China Life Insurance (601628 CH) finished down 1.8 per cent at 29.02 yuan.
Liquor distiller giant Kweichow Moutai (600519 CH) lost 0.9 per cent to close at 1,100.11 yuan.
Capping the losses were automotive stocks, after the State Council told local governments that have restrictions on auto sales to gradually relax or remove them. The State Council also said they should encourage purchases of new energy vehicles by providing “active support”.
Lifan Industry (601777 CH) rose to the daily 10 per cent up limit, finishing at 4.33 yuan, as did Hualing Xingma Automobile (600375 CH), closing at 5.46 yuan. Great Wall Motor (601633 CH) rose 2.3 per cent to close at 8.55 yuan. SAIC Motor (600104 CH)  rose 0.5 per cent, ending at 25.08 yuan.
“Investors are seeking out leading consumer names that either have shown steady earnings or are leading brands in their respective consumer sector to put their money in. They are switching out from banks and financial stocks, as their growth will likely be impaired under the current concerns of the global economy slowing down,” said Alex Wong, a director at Ample Finance Group.
-- Georgina Lee 


Financials weigh on China benchmarks, despite boost from Chinese autos

The Hang Seng Index seesawed between gains and losses during the day before closing down 0.2 per cent at 25,615.48. That was its third consecutive session to end with losses.
Share prices of many of the Hang Seng constituents whose businesses are focused primarily in Hong Kong have dropped by between 10 per cent and 20 per cent this month, noted Alex Wong, a director at Ample Finance Group. This makes their current valuations “too cheap,” he said.
Still, “there is not much direction either way for the Hang Seng Index, given the current economic uncertainties in Hong Kong. At the moment, I don’t think investors are interested in (aggressively) buying blue chips,”  Wong said.
These include Sun Hung Kai Properties (16 HK), which closed up 0.3 per cent at HK$112.8, Hang Seng Bank (11 HK), which ended down 1 per cent at HK$165.2, and Hong Kong & China Gas (3 HK), which finished down 0.2 per cent at HK$15.26.
Economic concerns continue to weigh on sentiment. 
Secretary for Commerce and Economic Development of Hong Kong Edward Yau said the city’s GDP in the third and fourth quarter could face pressure after a new wave of US tariffs on China goods, which take effect September 1 and October 1.  He described the US decision to levy tariff on all Chinese goods “a total war on commodity trade”.
Top losers were index heavyweight Tencent (700 HK), which lost 2.2 per cent to HK$319, and CSPC Pharmaceutical (1093 HK), which fell 4.9 per cent to HK$15.5.
Outside the blue chips, conglomerate Fosun International (0656 HK) rose 4 per cent to HK$9.95, after reporting a 57 per cent year-on-year jump in revenue to a record high of 65.5 billion yuan (US$9.2 billion) and a net profit increase of 11 per cent to 7.6 billion yuan.
-- Georgina Lee 
 
