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Zhang Shidong

Deb Price

Happy Friday, traders --

China’s banks lowered the 1-year loan prime rate to 4.20 per cent from 4.25 per cent, according to China Foreign Exchange Trade System.
Sentiment remains weak in Hong Kong, where stocks have fallen four straight days. Stocks of retailers have been hit hard.
As of Thursday's market close, Chow Sang Sang (116 HK) is down 24 percent, and Chow Tai Fook (1929 HK) is down 20.7 per cent, since July 19, when the demonstrations began taking a violent turn. 
We have you covered in mainland and Hong Kong markets.
If you would like to receive the Live Stocks Blog each morning via email, shoot Deb a message at deb.price@scmp.com. the link will update as new items are added.
-- Zhang Shidong in Shanghai and Deb Price in Hong Kong
 


Stocks Blog: Hang Seng ends as world's worst performing major benchmark of week as protests bite 

It can be a bit lonely these days as a retail clerk. Here, an employee stands at the door of a Chow Tai Fook Jewellery Group store in the Causeway Bay district of Hong Kong on August 29, 2019. Photo: Bloomberg

Business

Markets

'Mainlanders need to come back for retail to come back,' says Kenny Wen, wealth management strategist at Everbright Sun Hung Kai
Over past two months, Chow Sang Sang and Chow Tai Fook have tumbled more than 20 per cent
	 


'Mainlanders need to come back for retail to come back' in Hong Kong, says Kenny Wen, wealth management strategist at Everbright Sun Hung Kai


Stocks

China stock market

Hong Kong protests

Hong Kong MTR

Tencent

Hong Kong property

Cathay Pacific

Live

* Overnight markets/ What futures foretell
  -- Overnight in US markets, the S&P 500 was little changed, the Nasdaq rose 0.1 per cent, and the Dow Industrials slipped 0.2 per cent
 -- Hong Kong futures were 0.1 per cent higher, while the FTSE China A50 futures also climbed 0.1 per cent
* IPO debuts: Dongguan Yutong Optical Technology (300790 CH), an optical lens manufacturer, will start trading in Shenzhen today.
* Economic statistics/Central Bank action: China is due to release the monthly loan prime rate at 9:30am today. The 1-year borrowing cost will probably fall to 4.20 per cent from 4.25 per cent currently, according to a Bloomberg survey.
* Corporate events: earnings, meetings, news conferences
-- nothing major


Morning guidance 

Even once the protests end, it will take a long time to rebuild mainland tourism. And that means a long time of trouble for luxury retailers, like jewellery sellers, says Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.
"No one will buy retailers now, even though they are cheap," Wen says. "We don't see any specific factor driving the  stock price to go up significantly in the near future."
The protests have led to strongly negative feelings about Hong Kong and its residents on the mainland, Wen said.
"Mainland travelers drive luxury. It will take time for them to come to Hong Kong again. It's  not only the issue of safety. Many say they hate Hong Kong people," he said.
"Even if the protests settle down, I think it is a long lasting problem for the travellers to come back. The mainlanders need to come back for retail to come back. They are so important," he said.
In addition, as the city's economy weakens, Hongkongers themselves are going to be reluctant to splurge on luxury items. 
Hong Kong's tourism was down 40 per cent in August -- it's biggest downturn since the Sars outbreak in 2003. Some retailers are sending full-time employees on unpaid leave to reduce costs. 
Retail sales dropped 13 per cent in July from a year earlier. Meanwhile, the voice of retailers -- the Hong Kong Retail Management Association, has called on landlords to reduce rents by half for six months to help businesses survive.
Stocks of retailers have fallen sharply since mid July, when clashes became violent between protesters and police and Beijing backers. 
Since July 19,  well-known gold jewellery sellers have seen steep falls in their share prices. Chow Sang Sang (116 HK) is down 24 percent, Chow Tai Fook (1929 HK) is down 20.7 per cent, and Luk Fook Group (590 HK) is down 16.4 per cent since then.

 

-- Deb Price 


'Mainlanders need to come back for retail to come back,' says strategist Kenny Wen

The United States is set to ramp up the pressure on China if a trade deal is not agreed soon, a key White House adviser said, adding that Washington has so far imposed only “low level tariffs” on the Asian giant.
Described by US President Donald Trump as “the leading authority on China”, Michael Pillsbury said in an interview in Hong Kong on Thursday that Trump had been “remarkably restrained in the pressure he has brought to bear on China in the trade field”.
“Does the president have options to escalate the trade war? Yes, the tariffs can be raised higher. These are low level tariffs that could go to 50 per cent or 100 per cent,” he said, adding that Trump’s critics were wrong to assume the president was “just bluffing” when he threatened an all-out trade war.
Read full story by Finbarr Bermingham here. 


Trump ready to tighten the tariff screws if trade deal isn't reached soon, says his China adviser

The new chairman of Hong Kong’s embattled MTR (66 HK) has sought to quash accusations the rail giant kowtowed to Beijing by taking a harder line with anti-government protesters and admitted the challenges he faces are “unprecedented”.
Rex Auyeung Pak-kuen, 67, who stepped into the hot seat on July 1– the same day protesters stormed and vandalised the city’s legislature – said he would stay true to his mission of leading the MTR Corp and would avoid all political considerations.
“I am not interested in politics at all,” he said during an interview with the Post on Thursday.
“I have never given much thought to the political perspectives of others. I only seek to hold fast to our mission of providing transport for the Hong Kong public.
“I will not take action just because of comments made by certain media outlets or parties. That is not principled.”
Read full story by Cannix Yau here. 


MTR chairman denies bending to pressure from Beijing 

Shanghai has stepped up the process to launch IPOs of 14 government-owned companies after the city reported lacklustre economic growth in the first half.
Bai Tinghui, head of Shanghai State-owned Assets Supervision and Administration Commission, said on Thursday that a drastic reform to modify the share structure and management style of these companies was under way as the city embarks on an ambitious plan to building a world-class free-trade port at Lingang.
“We are making plans for each of the 14 companies,” he said. “We need to accelerate the pace [for stock market listing] and strengthen efforts to enforce mixed-ownership.”
The companies shortlisted for the initial public offerings include Bright Food Group, the mainland’s second-largest food conglomerate, semiconductor maker Huahong Group and tourism services operator Jin Jiang International Holding.
Bai said that some of the 14 companies had kicked off the IPO process, filing applications to the China Securities Regulatory Commission.
But he did not say whether Hong Kong stock exchange would be an optional listing venue for the Shanghai state-owned firms.
Read full story here by Daniel Ren. 


Shanghai speeds up IPO process for 14 government-owned companies

China’s banks lowered the 1-year loan prime rate to 4.20 per cent from 4.25 per cent, according to the China Foreign Exchange Trade System.
-- Zhang Shidong


Chinese banks cut loan prime rate

MTR (66 HK) is up 1.2 per cent to HK$46.35 in early trading, after its new chairman told the South China Morning Post on Thursday that he hasn't been bending to pressure from Beijing.
The MTR has been in the firing line of protesters, who have set fires at station entrances and vandalised outside and inside of stops. Damage is believed to have topped HK$50 million. These protesters accuse the subway provider of being in lockstep with the government and police.  
“The MTR is just a listed commercial entity. We are not running a political party or a government unit … If we flip-flop on certain issues, we’ll send a confusing message to investors," said Rex Auyeung Pak-kuen, the new MTR chairman. 
-- Deb Price   
 


MTR trading up as chairman says he is not bending to Beijing pressure 

Traders cheered the move by the Chinese banks to cut the loan prime rate, sending stocks higher at the open.
The Shanghai Composite Index gained 0.2 per cent, while Hong Kong’s Hang Seng Index also rose by that much.
Technology and liquor producers led the advance on the mainland, while developers were the best-performing sector in Hong Kong.
-- Zhang Shidong


China and Hong Kong stocks drift higher after banks cut borrowing costs

Protest-battered Chow Tai Fook (1929 HK) is having a positive morning, trading up 0.7 per cent to HK$6.88.
Other jewellery stores: Chow Sang Sang (116 HK) is down 0.2 per cent at HK$8.921, and Luk Fook Group (590 HK) is flat at HK$20.65.
 

-- Deb Price
 


Chow Tai Fook trading up, but still down 20 per cent over two months amid protests

Zhejiang Yonggui Electric Equipment (300351 CH) surged by the 10 per cent daily limit to 10.57 yuan in Shenzhen after the company said it has been chosen as a supplier of Huawei Technologies.
Zhejjiang Yonggui will mainly sell cables and cable components to the telecom equipment maker, it said in an exchange statement.
-- Zhang Shidong


Zhejiang Yonggui jumps by daily limit after being picked as Huawei supplier

Dongguan Yutong Optical Technology (300790 CH), an optical lens maker, surged by 44 per cent from its initial public offering price to 26.15 yuan in its debut in Shenzhen today.
The 44 per cent is the maximum gain allowed by the mainland’s exchanges for any new listing on the first day of trading.
-- Zhang Shidong


Dongguan Yutong jumps by 44 per cent daily cap in Shenzhen debut

Jinxi Axle (600495 CH), Xinjiang Communications Construction Group (002941 CH) and other Chinese infrastructure-linked companies helped the broader market to hold onto gains today, as the sector got a lift from a nation-wide plan to develop the transport system.
Jinxi Axle, Xinjiang Communications and China High-Speed Railway Technology (000008 CH) all soared by the 10 per cent daily limit in the mainland trading.
The development plan, which was released by the State Council after the market closed yesterday, outlines a blueprint for building a more comprehensive transport network across the country and developing more sophisticated means of public transports.
-- Zhang Shidong


Chinese infrastructure stocks rally on national transport plan

Inspur Electronic Information Industry (000977 CH) surged by the 10 per cent daily cap to 28.44 yuan in Shenzhen after The Paper reported that rival Huawei Technologies will pull out of the server market in due time.
Citic Securities expects Inspur to gain more market shares and sets a price target of 30.60 yuan for the stock.
-- Zhang Shidong


Inspur Electronics jumps by daily cap on report Huawei to exit server market

Stocks strategist Kenny Wen is very down on Hong Kong stocks, but says one that investors might want to look at is Henderson Land (12 HK).
Henderson, the city's second largest developer, has the largest amount of farmland -- 45 million square feet -- and could benefit if the government invokes the Lands Resumption Ordinance and pays to take back private land for public housing. 
Combined, the city's developers hold about 100 million square feet in farmland and would get a maximum of HK$5 billion (US$639.3 million) to HK$7 billion, according to a Bank of America Merrill Lynch report.
In a best-case scenario, a developer would work out a deal with the government to be able to put up public housing on part of a taken parcel, while getting a section of the plot to build private flats. 
"If the government buys the land, (Henderson) will have a valuation adjustment. So it will be very good for the balance sheet," Wen said.
Henderson has  a low P/E ratio of 7.78.
The stock is having a good morning, trading up 0.7 per cent at HK$38.25.

 
-- Deb Price 
 


Henderson Land is a standout in Hong Kong, says strategist Kenny Wen

At least US$5 billion of funds will make their way into the mainland-traded stocks before the markets close today to reflect weighting changes by FTSE Russell and S&P Dow Jones Indices, according to UBS Group.
FTSE Russell will triple the representation of Chinese stocks in the benchmarks, while S&P will add the stocks to its global gauges for the first time, with all the rebalance effective after the market close today.
UBS estimates a full-year inflow of US$20 billion from global passively-managed funds, while that from active funds may be around US$56 billion, depending on the progress on the China-US trade war.
-- Zhang Shidong


UBS says US$5 billion to flow to Chinese stocks before today’s close

The Hang Seng Index is being held back by consumer discretionary stocks in early trading, while health care, real estate and utilities are leading gains.
Chinese drugmaker CSPC Pharmaceutical Group (1093 HK) is up 1.8 per cent at HK15.74, after the US Food and Drug Administration designated one of its drug as an orphan treatment -- one given seven years of market exclusivity -- for the rare disease Osteosarcoma.
New World Development (17 HK) is up 1.6 per cent to HK$10.24, and electricity provider CLP Holdings (2 HK) is up 2 per cent to HK$81.45.
Morning big losers include textile maker Shenzhou International Group (2313 HK) is down 3.8 per cent at HK$104.1. Bloomberg reported two shareholders sold a combined 31.7 million shares at HK$102 each, or a 5.7 per cent discount to Thursday's close. Apple supplier AAC Technology (2018 HK) is down 2.9 per cent to HK$45.65. It shot up 10.2 percent on Wednesday and 5.9 per cent on Thursday on news reports that the new iPhone 11 may outsell earlier models.
The Hang Seng is up a hair -- 0.05 per cent -- to 26,483.26 in late morning trading.
-- Deb Price      
 


Health care, real estate leading gains on Hang Seng in early trading

Chinese liquor giant Kweichow Moutai (600519 CH) may set a record close again today.
The stock rose 1.2 per cent to 1,158.70 yuan in afternoon trading in Shanghai, on track to surpass Wednesday’s record close of 1,148.90.
Price targets set by global investment banks imply the run-up still has legs to go.
Morgan Stanley has a share-price estimate of 1,350 yuan for the stock, while Goldman Sachs expects it will rise to 1,349 yuan.
The pullback in Kweichow Moutai last week proved to a buying opportunity, as the stock fell 3.8 per cent for the week on rumors that some distributors who had earlier hoarded the alcohol were dumping the liquor at lower prices before the Mid-autumn Festival.

 
-- Zhang Shidong


Kweichow Moutai headed for record high  -- again

It has been a bleak week for Hong Kong stocks.
The Hang Seng Index is down 3.3 per cent so far for the week, delivering the worst performance among the world’s major benchmarks.
Concern lingers that more protests will be seen in the city, as China’s National Day that falls in October 1 draws nearer. Among the week’s biggest decliners are Techtronic Industries (669 HK), Shenzhou International Group Holdings (2313 HK) and Geely Automobile Holdings (175 HK), which are down at least 7 per cent this week.
-- Zhang Shidong


Hang Seng Index heads for worst performance globally this week

The Shanghai Composite Index rose 0.2 per cent to 3,006.45 at the close, paring its loss to 0.8 per cent for the week.
Sentiment got a lift after Chinese banks lowered the one-year loan prime rate by five basis points to 4.20 per cent.
Infrastructure-linked stocks such as Jinxi Axle (600495 CH) and China High-Speed Railway Technology (000008 CH) surged on a government’s plan to speed up the development of the nation’s transport networks.
-- Zhang Shidong


China’s benchmark gauge closes above 3,000 on loan prime rate cut

China trimmed its market reference rate for new short-term bank loans today, taking another step towards helping companies hit hardest by the trade war with the United States and the overall domestic economic slowdown.
The September loan prime rate, the average taken from 18 selected commercial banks, was set at 4.20 per cent for one-year maturities, down from the 4.25 per cent set in August, according to the National Interbank Funding Centre, a unit of the People’s Bank of China (PBOC).The five-year prime rate, generally used as a reference rate for new mortgage loans, was kept unchanged at 4.85 per cent, the centre said.
It follows the European Central Bank cutting its benchmark rates to minus 0.5 per cent last week while also restarting quantitative easing, and the US Federal Reserve announcing a cut of 25 basis points on Wednesday.
Read full story by Frank Tang here.
 


China trims short-term interest rates amid trade war pressures

The Hang Seng Index dropped 3.4 per cent for the week, delivering the steepest decline among the world’s major benchmarks.
It slipped 0.1 per cent to 26,435.67 today.
Traders cut their holdings in Asia’s third-largest stocks market, as the fallout of the city’s unrest has hammered corporate earnings.
Local retailers including Sa Sa International Holdings (178 HK) and Esprit Holdings (330 HK) this week issued warnings that the tumult was hurting their businesses.
Sa Sa ended down 1.7 per cent today to HK$1.7, while Esprit rose 1.3 per cent to HK$1.51.
-- Zhang Shidong
