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Yujing Liu

Azar Zaidi

It’s here. Bloomberg is reporting US President Donald Trump has signed a “Phase One” trade deal with China, which is bound to push up the Hong Kong and mainland China markets a day after they were boosted by the Federal Reserve’s decision to keep rates unchanged. Moreover, optimism around the trade deal pushed American equities to records overnight, and Asian stocks are expected to follow them and rise.
 
The deal also averts the introduction on Sunday of a new wave of tariffs on about US$160 billion of consumer goods from China, which will no doubt please top policymakers in Beijing, who have signalled a greater focus on maintaining economic stability in 2020. During a key economic planning meeting that concluded on Thursday, they called for contingency plans to offset growing global risks.
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– Yujing Liu and Azar Zaidi in Hong Kong
Note: Information in this blog is on an "as is" basis and not a solicitation or offer to buy or sell any securities or otherwise; and is not investment/professional advice or services in this regard.  It is subject to our T&C.  SCMP (as defined in T&C) shall not be liable for any loss, damage and costs relating to any investments in securities or otherwise in this connection.


Hang Seng Index records best week in nearly six months on trade deal reports

Business

Markets

The Hang Seng Index closed 2.5 per cent higher at 27,679.88 
The Shanghai Composite Index rises 1.8 per cent to 2,967.99 


It’s here. Bloomberg is reporting US President Donald Trump has signed a “Phase One” trade deal with China, which is bound to push up the Hong Kong and mainland China markets a day after they were boosted by the Federal Reserve’s decision to keep rates unchanged.


Stocks

China stock market

Hong Kong Stock Exchange

Live

Overnight markets/ What futures foretell:  – The US market surged to fresh records on Thursday, driven by reports of the US and China reaching a trade deal. The S&P 500 added 0.9 per cent, the Nasdaq Composite rose 0.7 per cent and the Dow Jones Industrial Average was 0.8 per cent higher.  – The Hang Seng Index Futures jumped 1.8 per cent, while the China A50 futures inched up by 1.1 per cent.IPO debuts:  – Trade in shares of private school operator Chen Lin Education Group Holdings Limited (1593), securities brokerage Suoxinda Holdings Limited (3680) and human resources services provider Renrui Human Resources Technology Holdings Limited (6919) will start on Hong Kong’s main board on Friday.Economic statistics/Central Bank action:  – None to note.Corporate events:  – None to note.


Morning Guidance

“The market is getting two Christmas presents early,” Tai Hui, Asia chief market strategist at JPMorgan Asset Management, said in a note on Friday.
  A Bloomberg report that Trump has signed off on the ‘Phase One’ trade deal with China indicates the next round of additional tariffs on US$156 billion of Chinese goods will not go ahead, Hui said. In addition, exit polls in the UK general elections show Boris Johnson winning comfortably, which would suggest a higher possibility of his Brexit deal going through.
  The news will benefit the Chinese yuan and pound sterling, as well as risk assets, Hui said. But he also said investors should not get carried away, as many uncertainties still remain. After the Phase One deal, “the future stages of negotiation is going to be much more challenging, when it starts to involve China’s industrial policy and technological development. The upcoming 2020 presidential elections in the US will also imply the discussion could enter a stasis phase”, he said.
– Yujing Liu


Markets in celebratory mood over trade deal, UK elections: JPMorgan Asset Management

The Hang Seng Index jumped as much as 2 per cent in opening trade and is trading 1.8 per cent higher at 27482.46. The Shanghai Composite Index climbed 0.8 per cent to 2,938.63, and the Shenzhen Component has risen 0.8 per cent.
– Yujing Liu


Hong Kong and China markets started the day with a bang

Tencent Holdings (700 HK) reached its highest intraday level in more than four months at HK$361.8 in early trading, and looks set for another day of strong gains.
  The Chinese gaming and social media giant is on track for its seventh straight session of gains, leading a strong advance among blue chips in Hong Kong, as market sentiment improves on reports of a US-China trade deal.
– Yujing Liu


Tencent touches four-month intraday high

The Chinese currency rallied rapidly on the heels of reports that Trump has signed off on an initial trade deal with China. The onshore yuan  strengthened by 0.5 per cent to 6.9663 yuan per US dollar in the latest trading. It reached its strongest intraday level since August of 6.9610 yuan per US dollar earlier.
– Yujing Liu


Onshore yuan rallies

Four companies, Chen Lin Education Group (1593 HK), Suoxinda (3680 HK), Renrui Human Resources Technology (6919 HK) and Maxicity (8216 HK), started trading in Hong Kong on Friday. Three companies are listed on the main board, while Maxicity is listed on the GEM board.
  The share price of Chen Lin Education Group rose to HK$2.23 at the open, from an IPO price of HK$2.2. Its shares were oversubscribed 0.79 times. The company operates a university in Jiangxi Province in China. It was ranked fourth among 31 private higher education institutions in Jiangxi in terms of student enrolment last year.
Suoxinda’s share price fell to HK$1.37 at the open, from an IPO price of HK$1.5. Its shares were oversubscribed 14.16 times. The Shenzhen-based big data player provides data services to financial institutions in China. In 2018, it was ranked the fifth-largest data solutions provider in Southern China by revenue earned from the financial industry, according to Frost & Sullivan.
  The share price of Renrui Human Resouces Technology opened at HK$26.6, same as its IPO price. The shares subscribed before its debut only account for 83 per cent of the offering.  Renrui is the largest human resource services provider in China by the number of flexible staffing employees and revenue generated from flexible staffing services in 2018, according to China Insights Industry Consultancy.
  Maxicity’s share price fell to HK$0.5 at the open, from an IPO price of HK$0.6. The shares were oversubscribed 23.4 times. The slope maintenance company generated all of its revenue last year in Hong Kong.
– Snow Xia
 



Four IPOs in Hong Kong

A wholly-owned subsidiary of BizConf Telecom (300578 SZ) was certified as a qualified supplier of Huawei Technologies, the listed company said in a statement to the Shenzhen exchange.  The unit will supply ultra-high-definition cameras, which were already in mass production, to support Huawei’s IT product lines linked to corporate communication and Cloudlink services.  The stock soared by 6.2 per cent to 26.58 yuan on Friday. 
BMW chose a wholly-owned auto part making unit of Zhejiang Sanhua Intelligent Controls (002050 SZ) to supply accessories for its new car models, the publicly traded company said in an exchange filing. Combined sales to BMW are estimated at 600 million yuan (US$85.3 million) and that will not have any impact on the company’s earnings this year, as mass production of these car models will not start until 2022, the statement said. The stock advanced by 6.8 per cent to 15.66 yuan on Friday.
– Zhang Shidong and Yujing Liu


Overnight filings

Macau casino stocks surged ahead of the 20th anniversary of the former Portuguese colony’s handover to China next Friday, and amid reports of a new stock exchange in the planning.
  MGM China Holdings (2282 HK) surged 7 per cent to HK$12.9, while Wynn Macau (1128 HK) jumped 6.4 per cent. Melco International Development (200 HK) gained 4.6 per cent. The advance comes after Reuters on Thursday reported President Xi Jinping will visit Macau next week to announce a raft of supportive policies for the city to help transform it into a financial centre.
  The policies, including establishing a new yuan-denominated stock exchange, are regarded by officials as a reward for Macau for having avoided the political crisis and anti-government protests that have roiled Hong Kong, the report said.
– Yujing Liu


Macau casinos gain, with city reportedly in favour in Beijing

“As China’s economy is slowing down and transforming, it is important for companies to improve management efficiency. Flexible employment can help enterprises improve efficiency and reduce costs. Companies want to maximise productivity by using shared labour forces. Sharing human resources will be a trend in the future,” said Zhang Jainguo, the chief executive of Renrui Human Resources Technology (6919 HK).
  The company’s revenue grew by 329.8 per cent to 1.6 billion yuan (US$229.3 million) in 2018, from 376 million yuan in 2016. As of March 2019, the company’s platform had about 135,000 monthly active users and more than 20,000 daily visits, according to China Insights Consultancy.
  Renrui has launched overseas operations in 2019, in Southeast Asia, especially India, meeting the demand of its unicorn clients that expand their business overseas.
  – Snow Xia
 



Flexible staffing to become common, says Renrui Human Resources

Chinese airline operators gained broadly, as investors hope the rallying yuan will help improve their business. China Eastern Airlines (670 HK) jumped 6.3 per cent to HK$4.24 in Hong Kong, while China Southern Airlines (1055 HK) gained 4.2 per cent and Air China (753 HK) added 4.6 per cent.
  A stronger yuan is beneficial to airlines because their incomes are mostly in the Chinese currency, but capital expenditure is usually US dollar-denominated.
– Yujing Liu


Aviation stocks advance on stronger yuan

“We provide academic and training education. We have additional value-added services for not only students at our schools, but also other graduating college students, with the goal of matching them with high-quality employers,” said Huang Yulin, chief executive of Chen Lin Education (1593 HK).
  Since 2014, the number of students at the school run by Chen Lin Education has increased by 50 per cent. Its net profit has increased by 61.6 per cent from 25.27 million yuan (US$3.6 million) in 2014 to 40.83 million yuan in 2018.
  – Snow Xia
 



Chen Lin Education dreaming big

China markets ended the morning session with strong gains. The Shanghai Composite Index rose 1.2 per cent to 2,951.73 by the lunch break. The benchmark was up by as much as 1.3 per cent at one point, making it the biggest intraday jump since October 14.
  The Shenzhen Component Index added 1.2 per cent, while the ChiNext Index of start-ups in Shenzhen gained 1.4 per cent.
  Home appliance makers and financial institutions led the advance. Gree Electric (000651 SZ) climbed 2.7 per cent, while Midea Group (000333 SZ) added 2.3 per cent. A gauge of 47 securities brokerages was 2.9 per cent higher, and CSC Financial (601066 SH) surged 9.2 per cent.
– Yujing Liu


Shanghai benchmark posts biggest intraday jump in two months

The Hang Seng Index rose by 2.1 per cent to 27,551.46 by the lunch break, posting its best intraday gain since October 11. Blue chips posted strong returns broadly. Insurer AIA Group (1299 HK) gained 3 per cent to HK$82.2, contributing the biggest lift to the benchmark. Gaming giant Tencent Holdings (700 HK) added 2.5 per cent to HK$357.6.
– Yujing Liu


Hong Kong stocks record best intraday gain in two months

China’s top economic planning conference, which ended on Thursday, signalled greater focus on fiscal policy to prevent further economic slowdown, Moody’s Investors Service said.
  “In recent years, measures around social and economic stability have increasingly underpinned the main policy objective coming out of China’s Economic Work Conference, with more emphasis on these measures this year than before,” Marie Diron, managing director of the sovereign risk group at Moody’s, said in a note on Friday.
  “The effectiveness of fiscal stimulus in supporting growth will be hindered by the rising risk aversion of banks, companies and households, in light of heightened uncertainty around the pace and composition of China’s economic growth.”
  Moody’s forecasts China’s gross domestic product growth will slow to 5.8 per cent in 2020.
– Yujing Liu


China to step up fiscal stimulus to ensure economic stability: Moody’s 

Citic Securities (6030 HK), the leading Chinese securities company, rose 3.6 per cent on Friday on revenue growth. In the first 11 months of this year, Citic Securities generated 21.58 billion yuan (US$3.09 billion), a 10 per cent year-on-year increase, and generated a net profit of 10.24 billion yuan, a 24.8 per cent year-on-year increase, according to latest data by financial data provider Wind. 
  – Snow Xia


Citic Securities rises on revenue growth 

Smartphone maker Xiaomi (1810 HK) rallied after being recommended by analysts. The stock jumped 4.9 per cent to HK$10.42 in the latest trading. It dipped 0.6 per cent on Thursday, after soaring by 8.5 per cent a day earlier on the launch of a new affordable 5G phone model.
  Analysts at China Merchants Securities raised their 12-month target price for Xiaomi by 30 per cent to HK$13, according to a report distributed on Friday. The new phone, the world’s first 5G phone sold at below 2,000 yuan (US$287), will give Xiaomi the edge to regain market share in smartphones starting from the first quarter next year, the report said.
  Citic Securities said on Friday “a turning point for Xiaomi’s earnings has come”. “Xiaomi’s smartphone business has bottomed out,” analysts led by Chen Junyun wrote. “The current forward price-to-earnings ratio is only 17 times, reflecting an overly pessimistic market view on the company.”
– Yujing Liu


Xiaomi recommended by analysts, rises

The Shanghai Composite Index rose 1.8 per cent to 2,967.99 on Friday for its best daily performance since August 19, while the Shenzhen Component Index rose 1.7 per cent to 10,004.62.
  Brokerages led with an overall increase of 4.7 per cent, rising on revenue growth between January and November, as well as China’s approval of options trading at the Shenzhen Stock Exchange earlier this month.   Nanjing Securities (601990 HK) shot up 10 per cent, China Securities (601066 HK) jumped 10 per cent, and China Great Wall Securities (002939 HK) rose 9.3 per cent.
Gold-linked stocks underperformed the market, with an overall decline of 0.5 per cent. Shandong Gold (600547 HK) dropped 1 per cent, Yintai Gold (000975 HK) fell 1.7 per cent and Zhongjin Gold (002721 HK) slipped 0.4 per cent.     – Snow Xia


Shanghai Composite posts best daily performance in four months

The Hang Seng Index closed 2.5 per cent higher at 27,679.88 on Friday, making it the third straight day of gains, with 48 of its constituents rising and only one declining.The index soared 4.5 per cent this week, recording its best weekly gains since June 21.
  Macau casino stocks outperformed the index in terms of price percentage change. Galaxy Entertainment (0027 HK) shot up 6.2 per cent and Sands China (1928 HK) jumped 5.3 per cent.     Property stocks also rallied. CK Infrastructure (1038 HK) climbed 4.3 per cent, Sun Hung Kai Properties (0016 HK) rose 2.7 per cent and Country Garden (2007 HK) advanced 1.9 per cent.     The leading heavily traded stocks were Tencent (0700 HK), which rose 3.1 per cent, China Construction Bank (0939 HK), which rose 1.6 per cent, and Ping An Insurance (2318 HK), which rose 1.9 per cent.     Other technology stocks also rallied. Alibaba Group Holding (9988 HK) climbed 0.5 per cent, Xiaomi (1810 HK) rose 4.7 per cent and Meituan Dianping (3690 HK) climbed 1.5 per cent. 
  The only stock that declined today was Shijiazhuang Pharma (1093 HK), which slipped 0.7 per cent. 
  – Snow Xia


Hang Seng posts best weekly figure in nearly six months 