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Deb Price

Daniel Ren

Whew, what a year for Hong Kong and mainland markets!
The Hang Seng Index gained 9.1 per cent in 2019. That's a lot less than the Shanghai Composite Index, which rose 22 per cent over the year.
Catch up on the final day's action below. And, remember, no trading on New Year's Day. We'll see you again on Thursday.
If you would like the Live Stocks Blog emailed to you each morning, click here. 
-- Daniel Ren in Shanghai and Deb Price 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 sees 9 per cent gain in 2019 after stellar performance in December

People take selfies in Lan Kwai Fong in Hong Kong before the countdown to welcome 2019. Photo: Sam Tsang

An investor checks out stock prices in Nanjing, capital of east China's Jiangsu Province, on March 4, 2019. Photo: Xinhua 


Business

Markets

Hang Seng Index rose 7 per cent in December -- its second-best month
Shanghai Composite sees yearly gain of more than 22 per cent 


Shanghai Composite Index posts a more than 22 per cent gain for the year. It weathered economic slowdown and the US-China trade war. Hong Kong stocks faced those as well,  plus nearly seven months of protests. 


Stocks

China stock market

Hang Seng Index

Kweichow Moutai

Live

Here’s what we are watching this morning:
Overnight US markets/ What futures foretell
--The S&P 500 fell 0.6 per cent, the Nasdaq dropped 0.7 per cent and the Dow Jones Industrial Average declined 0.6 per cent. 
-- Hong Kong futures fell 0.3 per cent, and the FTSE China A50 futures declined 0.2 per cent
IPO debuts: Senci Electric Machinery (603109 CH); Taizhou Water Group (1542 HK); Newborn Town (9911 HK)
Economic statistics/Central Bank action:  China December manufacturing and non-manufacturing PMI 
Earnings: No major earnings    


Morning guidance

Jefferies reiterated its “buy” rating on Budweiser Brewing APAC (1876 HK) but lowered its target price on the beer maker to HK$35 from HK$38.
In a fresh note, analysts led by Mark Yuan forecast that the Asia Pacific’s largest beer company will report a 1 per cent sales decline and 2 per cent EBITDA (earnings before interest, tax, depreciation and amortization) growth in the fourth quarter, largely due to weak night club sales in China and weak industry demand in South Korea. 
“We maintain Buy for its resilient growth in the long-term. Budweiser has built up a strong premium beer brand portfolio, strong distribution network and has a good track record in innovation. We expect Budweiser to lead China and Southeast Asia’s beer premiumization trend,” the analysts note. 
Budweiser closed Monday at HK$27.35, barely up from its HK$27 initial public offering price.
Of analysts tracked by Bloomberg, 10 rate it a buy, two a hold and none a sell, with a consensus target price of HK$33.67, or a gain of 23 per cent. 
Its listed rivals have soared this year. Tsingtao (168 HK) has gained 64 per cent, while China Resources Beer Holdings (291 HK) has advanced 57.4 per cent.
 

-- Deb Price   


Jefferies reiterates ‘buy’ rating on Budweiser Brewing APAC

The gauge of business sentiment in China’s manufacturing sector stayed flat in December, according to the National Bureau of Statistics.
The purchasing managers’ index (PMI) for manufacturing businesses was 50.2, the same as the reading in November.
A reading of above 50 points signals growth while one below 50 indicates a reduction.
It was above a poll of economists conducted by Bloomberg which had predicted 50.1.
The non-manufacturing PMI hit 53.5 in December, down from 54.2 in November.
It also missed analysts’ forecast of a reading of 54.2.
-- Daniel Ren


China manufacturing PMI unchanged in December

Zhejiang province-based battery maker Tianneng Power International (819 HK)’s application to separately list the bulk of its battery operations in Shanghai’s Science and Technology Innovation Board has been accepted by the Shanghai bourse, it said in a filing to Hong Kong’s stock exchange late on Monday. 
The application is being reviewed and processed. 
It aims to raise 3.6 billion yuan to fund a “green intelligent manufacturing” project, a “high energy power lithium battery” project and certain “high capacity and reliability start-stop batteries” projects, and to bolster working capital.
-- Eric Ng   


Tianneng Power International’s application to separately list battery operations on Star board is accepted

The Hang Seng Index opened down 0.2 per cent to 28,260.52.
The Hang Seng Properties Sub-Index fell 0.2 per cent, with Sun Hung Kai Properties (16 HK), Hong Kong’s largest property developer, slipping 0.3 per cent to HK$118.60.
Tencent (700 HK) fell 0.9 per cent to HK$379.80, while Mengniu Dairy (2319 HK) was flat at HK$31.65.
Meanwhile, Alibaba (9988 HK) declined 1.3 per cent to HK$207.80.
-- Deb Price    


Tencent, Alibaba fall in early trading; Hang Seng Index slips

Chinese water utilities company Taizhou Water Group (1542 HK) and Beijing-based AI mobile app developer Newborn Town Inc. (9911 HK) debuted on Hong Kong’s main board today. 
Newborn Town’s shares shot up nearly 80 per cent to 3.02, from an initial public offering price of HK$1.68 per share.
Taizhou Water Group fell 15.7 per cent to HK$4.22 in their trading debut, from an initial public offering price of HK $5.01 per share.
Two Chinese companies, Taizhou Water Group (1542 HK) and Newborn Town Inc. (9911 HK) started trading on the Hong Kong Stock Exchange on New Year’s Eve. @SCMPNews @scmpbusiness pic.twitter.com/YaWZcNh9HB
— Kathleen Magramo (@kathmaemagramo) December 31, 2019
-- Kathleen Magramo


Newborn Town soars nearly 80 per cent in trading debut

The Shanghai Composite Index edged down 0.1 per cent to 3,036.39 at the start of trading.
The Shenzhen Component Index opened at 1,712.52, nearly unchanged from Monday, and the ChiNext Index of start-ups also stayed flat when trading began with a reading of 1,790.9.
-- Daniel Ren


Shanghai starts morning with small decline

Shares of Senci Electric Machinery (603109 CH), a manufacturer of electricity generators and gasoline engines, jumped 44 per cent, the daily trading cap, in its debut on the Shanghai Stock Exchange.
Senci surged to 26.47 yuan in morning trade. The Shanghai exchange sets a 44 per cent upper limit for IPO debutants.
Chongqing-based Senci raised 674 million yuan by floating 36.67 million shares at 18.38 yuan apiece.
-- Daniel Ren


Senci Electric Machinery hits daily ceiling

CHART: S&P 500 leaves behind Hang Seng, Shanghai

Shares of Northeast Pharmaceutical Group (000597 CH) and North China Pharmaceutical (600812 CH) jumped in the morning after the Ministry of Industry and Information Technology approved the companies to set up new production bases for medicine that faces severe shortages.
Northeast Pharmaceutical climbed 9 per cent to 7.38 yuan and North China Pharmaceutical bounced up 6.25 per cent to 9.86 yuan.


Medicine makers rise on policy support

The Hang Seng Index is being weighed down by health care, consumer staples and communication services sectors, each of which has declined by more than 1 per cent in morning trading.
AAC Technology (2018 HK), a miniaturised components maker that derives nearly half of its revenue from Apple, rose  1.5 per cent to HK$67.80, making it the benchmark’s top percentage gainer. Investors have been upbeat about the stock due to strong iPhone 11 demand.
“Yet the company faces strong headwinds amid intensifying competition in the acoustics and haptics sector with rivals such as Luxshare Precision, and sluggish growth of its smartphone lens and camera module businesses, which launched in 2015,” Bloomberg Intelligence analyst Charles Shum wrote earlier this month. “The miniature-component manufacturer also needs to accelerate client diversification from Apple to alleviate concerns over iPhone shipment risks.”
Hengan International (1044 HK), China’s largest maker of sanitary napkins and diapers, fell 1.3 per cent to HK$55. The company is facing stiff competition in the China market from international rivals, including P&G and Kimberly-Clark. 
“Marketing expenditure will likely increase as Hengan launches more online ads to defend market share, particularly for diapers,” Bloomberg Intelligence analyst Catherine Lim wrote in an update on the stock on December 23. “The impact of such spending on the company’s profitability may be countered by falling pulp prices. Operating margin may rise if prices of overseas pulp drop by another 10% in 2020, we calculate.”
The Hang Seng Index is down 0.5 per cent to 28,169.53.
-- Deb Price    


AAC Technology advances in Hong Kong

The Hang Seng Index finished the morning session with a loss of 0.5 per cent at 28,188.50, with only 12 of its 50 members posting gains.
Tencent (700 HK) led losses among blue chips, falling 2.1 per cent to HK$375.
Meanwhile, Alibaba (9988 HK), the e-commerce giant that owns the South China Morning Post, shed 1.6 per cent to HK$207.20.
And debutant Newborn Town (9911 HK) finished the morning at HK$3.25, or more than 93 per cent higher than its IPO price of HK$1.68. It is a Beijing-based AI mobile app developer.
-- Deb Price    


Debutant Newborn Town soars 93 per cent from its IPO price; Hang Seng declines

The Hang Seng Index posted its second-best month of 2019 in December, rising 7 per cent to close out the year at 28,189.75. 
It was a roller-coaster year for the city’s hardy benchmark, which gained 9 per cent despite the US-China trade war, anti-government protests that roiled the city and depressed mainland tourism, and global economic concerns.
“It was a fruitful year amid uncertainty,” said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai. “A high single digit return for HSI is better than expected. Some bearish analysts expected the HSI might fall to 22000 in 2019.”
The best month of the year was January, when the benchmark rose 8.1 per cent. 
The worst month was May, when the US-China trade talks fell apart. The Hang Seng fell 9.4 per cent.
Wen’s advice for traders: “Buy on dips but don’t chase the rally is one of the evergreen investment strategy.”
The Hang Seng closed down 0.5 per cent at 28,189.75.
-- Deb Price      


Hang Seng ends 2019 with 9 per cent gain after stellar December performance

“2019 saw emotion triumph over fundamentals,”  said Brock Silvers, managing director at Adamas Asset Management.
“The biggest influences were the trade war and Hong Kong’s social unrest.  Especially with the former, the market seemed to over-react at every step.  When Liu He left a trade meeting and smiled, markets jumped.  When Trump tweeted, markets quaked.  And most of it had little to do with fundamentals,” Silvers said.
China’s economic slowdown also hammered the Hang Seng Index, where mainland-listed stocks make up more than half of the market value.
“In 2020, the China slowdown should continue, the Hong Kong unrest seems set on a very negative trajectory, and the trade war could return with a vengeance if the ‘phase one’ deal doesn’t deal with its underlying causes,” said Silvers.     

-- Deb Price    


Emotion triumphs over fundamentals in 2019, says analyst Brock Silvers

Mainland stocks recovered most of their lost ground in a drama-filled year.
For the year, the Shanghai Composite Index jumped 22.3 per cent. It finished the year today with a 0.33 per cent gain, closing at 3,050.12.
The stellar gain followed a 24.6 per cent fall in 2018, with the main gauge closing at 2,493.90.
Worries about the US-China trade war and a slowing domestic economy weighed on investor sentiment. 
But an influx of fresh capital and the establishment of Nasdaq-style Star Market along with liberalisation moves by regulators shook off the gloomy sentiment surrounding the US$7.2 trillion stock market.
“The low base of last year’s close made it easy for the market to post a big rise in 2019,” said Wang Feng, chairman of Shanghai-based financial services firm Ye Lang Capital.
“Overall, the market sentiment has been improving and investors are expecting a further rise in 2020.”
The A-share market shot up from this year’s lowest close of 2,464.36 on January 3 to 3,270.80 on April 19 as Beijing’s monetary easing shored up investors’ confidence in the market despite lingering concerns about an escalation of the US-China trade war.
But the key indicator since retreated after Beijing tightened monetary policies and fluctuated in volatile trading. 
Global index compiler MSCI lifted the weighting of A shares in its benchmark gauges for three times in 2019, directing an influx of foreign capital into the yuan-denominated share market.
China International Capital Corporation, one of the mainland’s leading investment banks, predicted that the last round of adjustment in MSCI gauges would result in overall inflows of up to US$40 billion from passive and active funds.
“Bold steps taken to drive market-based reforms have helped mainland investors regain confidence in the market,” said Ding Haifeng, a consultant with Shanghai-based financial advisory firm Integrity. “Now that the index trades above the 3,000-point level, it seems that investors are still bullish on the outlook.”
The Shanghai Stock Exchange launched the Technology Innovation board, the Star Market, on July 22, which for the first time adopted a registration-based initial public offering mechanism and allowed unprofitable firms to raise funds from the mainland’s equities market.
Consumer stocks were the top gainers on the mainland in 2019, with the CSI consumer index advancing 79 per cent.
-- Daniel Ren   


What a difference a year made for the Shanghai Composite Index