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Daniel Ren

Deb Price

Welcome to the first day of trading in 2020!
Hong Kong and mainland stocks started the new year with gains.
Catch up on the day's action below.
And 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.


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Hong Kong, China stocks rise in solid start for 2020 

People watch the "Symphony of Lights" show in Hong Kong as part of New Year's celebrations. Photo: Winson Wong 

Business

Markets

Kweichow Moutai plunges on weaker-than-expected 2019 earnings
Caixin manufacturing PMI falls for first time in five months


Stocks posted monthly gains in Hong Kong in four out of the five past Januaries.
 


China stock market

Hang Seng Index

Kweichow Moutai

Live

Gambling revenue in Macau fell in December by the most in nearly four years, as the Chinese city came under a security lockdown ahead of President Xi Jinping’s visit to celebrate the 20th anniversary of its handover from Portuguese rule.
Gross gaming revenue in the world’s biggest gambling hub dropped 13.7 per cent to 22.84 billion patacas (US$2.85 billion) from a year earlier, the steepest since March 2016, according to data published by the Gaming Inspection and Coordination Bureau.
It was a third straight month of declines, though smaller than the median estimate for a 15 per cent drop based on a Bloomberg poll of analysts.
For the full year, revenue was 3.4 per cent lower at 292.5 billion patacas, following two years of gains, amid tepid demand from high rollers amid the US-China trade war and protests in neighbouring Hong Kong.
Read full story here.


Macau gambling revenue plunges in December

China’s central bank has announced a move to unleash 800 billion yuan (US$115 billion) from the banking system to support the economy, sending a pro-growth message on the first day of 2020.
The People’s Bank of China (PBOC) will reduce the deposit reserve ratio in financial institutions by 0.5 percentage points from January 6, mainly to offer sufficient funding to the real economy, according to a notice published on the bank’s website.
The announcement on Wednesday came after growth continued to weaken while China and the United States prepared to sign an interim trade deal in mid-January.
The central bank said this round of funding was partially to offset cash withdrawals before the Lunar New Year, and would not change its stance on monetary policy.
Read full story by Sidney Leng here.    


China pumps US$115 billion into economy

Here’s what we are watching this morning:
Tuesday US markets/ What futures foretell
--The S&P 500 rose 0.3 per cent, the Nasdaq climbed 0.3 per cent and the Dow Jones Industrial Average also advanced 0.3 per cent.   -- Hong Kong futures gained 0.1 per cent, and the FTSE China A50 futures rose 0.8 per cent
IPO debuts: None to note
Economic statistics/Central Bank action: Caixin China Manufacturing PMI
Earnings: No major earnings    


Morning guidance

Mainland brokerages have a consensus prediction that the A-share market will maintain an upward momentum after trading starts today, spurred by the central bank’s cut in the deposit reserve ratio.
A raft of major securities companies said they expected a rally with strength in the coming weeks following a 22.3 per cent gain in the benchmark Shanghai Composite Index last year.
Guotai Junan Securities forecasts that the main gauge could rise to the 3,300-point soon, 8.2 per cent higher than the close of 3,050.12 in 2019.
On January 1, the People’s Bank of China announced it would unleash 800 billion yuan of fresh capital to bolster the economy as it decided to slash the RRR rate by 0.5 percentage points.
-- Daniel Ren


Brokerages expect mainland stocks to continue to rally

Since 2015, Hong Kong stocks have risen in four of five Januaries.
Last year, they ran up 8.1 per cent in the first month.
In 2018, they shot up 9.9 per cent.
In 2017, they gained 6.2 per cent.
In 2016, however, they fell 10.2 per cent.
In 2015, they rose 3.8 per cent.
-- Deb Price 


Januaries tend to be strong months for Hong Kong stocks

The Hang Seng started the new year with gains, and was last ahead by 0.5 per cent at 28,329.67.
HSBC (5 HK) slipped 0.2 per cent to HK$60.75 after at least five HSBC outlets were smashed or firebombed. 
“We strongly condemn the acts of vandalism and damage directed at our premises repeatedly in the last few days,” an HSBC spokesperson said. “We believe these are unjustified. Some of our ATMs and banking facilities have been suspended.” 
Sands China (1928 HK) climbed 0.7 per cent and Galaxy Entertainment (27 HK) rose 1.2 per cent, despite gambling revenue in Macau falling 13.7 per cent in December.
Index heavyweight Tencent (700 HK) rose 0.7 per cent to HK$378.40.
-- Deb Price    


Hang Seng starts 2020 with gains; HSBC falls after protest vandalism

The Shanghai Composite Index rose 0.5 per cent to 3,036.39 at the start of trading buoyed by the central bank’s move to unleash 800 billion yuan to the economy.
The Shenzhen Component Index opened at 1,734.63, up 0.7 per cent, and the ChiNext Index of start-ups also gained 0.7 per cent to 1,813.36.
-- Daniel Ren


China markets open higher to welcome in 2020

The China Securities Regulatory Commission will review three IPO applications on Monday following a fundraising spree in 2019.
The companies to go through IPO hearings include Anhui Sinomag Technology, Suzhou Cybrid Technologies and Shenzhen Everbest Machinery Industry.
In 2019, 201 companies raised 242 billion yuan via A-share IPOs.
The total value of proceeds hit a six-year high.
Beijing has pledged to further relax the IPO process to facilitate companies’ fundraising in 2020.
-- Daniel Ren


China securities regulator to review three IPOs

Macau’s December 13.7 per cent fall in gambling revenue was better than the 15 per cent fall predicted by analysts, Jefferies analysts point out in a new note this morning. 
“We believe the sector is close to an inflection point with positive drivers: China’s [reserve requirement ratio] cut and US-China Phase 1 deal almost signed. We prefer Wynn Resorts [US] and Sands China to play this theme.”
“Although the US$1.35 billion The Londoner conversion [by Sands China] is likely to reduce near-term earnings at Sands Cotai Central, this could be partly offset by opening of 290 Four Season and 370 The Londoner suites from early 2020 onwards that are focused on Premium mass segment. As well, WYNN is completing a $125M renovation of Wynn Macau that should drive upside,” analysts led by Andrew Lee wrote.
Sands China (1928 HK) gained 1.7 per cent to HK$42.35 in early trading while Wynn Macau (1128 HK) gained 2.4 per cent to HK$19.66.
-- Deb Price    


Jefferies sees positive drivers for beaten down Macau casino stocks

The Caixin manufacturing purchasing managers' index, a gauge of sentiment among smaller private-sector factories in China, fell for the first time in five months in December, data released today showed.
The PMI, based on a survey conducted by Caixin and IHS Markit, fell to 51.5 from 51.8 in November, lower than the consensus forecast of a group of economists polled by Bloomberg (51.6).
Anything above 50 shows that the sector remains in growth, and December's decline comes on the back of a three-year high in November and four consecutive months of growth.
Beijing policymakers may not be too concerned by a single-figure snapshot of operating conditions in the manufacturing economy, which remains in positive territory. But it showed that new order growth softened in the last month of the decade, despite the US and China phase one trade deal being announced on December 13, which may boost exporters' outlooks.
-- Finbarr Bermingham


Caixin manufacturing PMI falls for first time in five months in December

Shares of Kweichow Moutai (600519 CH) tumbled as the world's most valuable liquor distiller missed analysts’ forecast of full-year earnings in 2019.
Moutai lost 4.7 per cent to 1,127.12 yuan in morning trade.
The company said in an exchange filing this morning that it was expected to post net profits of 40.5 billion yuan in 2019, up 15 per cent on year.
Analysts had anticipated it to earn at least 43 billion yuan in 2019.
--Daniel Ren


Kweichow Moutai plunges on weaker-than-expected 2019 earnings

The past three Januaries have seen gains for the Shanghai Composite Index.
In January 2019, it ran up 6.6 per cent. In 2018, it gained 9.1 per cent, which was better than its 2.7 per cent gain in January 2017.
In January 2016, it plunged 23.3 per cent, after the market meltdown that began in the summer and carried on until early February.
In January 2015, the benchmark lost 1.5 per cent.
-- Deb Price    


Shanghai Composite has gained in the past three Januaries

Mainland securities companies raked in 79.7 billion yuan of brokerage fees last year amid a 22.3 per cent gain in the benchmark index, according to estimates by Securities Daily.
The estimated brokerage fee income represents a 32.8 per cent increase over 2018.
Brokerage stocks were among the top gainers in the A-share market recently buoyed by expectations that they would benefit from regulators’ new reform measures to further open up and liberalise the capital market.
-- Daniel Ren


Brokerage fee income estimated to have jumped 32.8 per cent

China’s move to cut the amount of cash banks must hold in reserve will benefit the property sector by leading to lower borrowing costs for developers and home buyers, Jefferies analysts Stephen Cheung and Calvin Leung said in a note.
“Although we don’t expect a strong boost on property sales, we believe the cut would help to stabilize the current relatively weak physical market, especially on ASP [average selling price],” they wrote.
“Although we see good near-term profit taking opportunity after the recent sector rally (+25% on average in 4Q19), we remain bullish on the sector on a 12-month horizon, and believe quality mid-cap developers will continue to outperform large-caps on sales and earnings growth,” they wrote. 
Jefferies top picks are KWG Group Holdings (1813 HK), CIFI Holdings (884 HK), Sunac China Holdings (1918 HK) and China SCE Group Holdings (1966 HKK).
KWG gained 1.5 per cent in early trading. CIFI jumped 4.2 per cent, while Sunac shot up 4.5 per cent and China SCE advanced 3.5 per cent.
-- Deb Price     


Jefferies bullish on quality mid-cap developers in China

The Shanghai Composite Index gained 1.2 per cent in early trading to 3,087.
The Shenzhen Composite Index rose 1.8 per cent to 1,753.30.
Stocks in China linked to mobile games rose 4 per cent, according to gauge tracking them, with Shenzhen traded Hangzhou Shjunwang Technology (300113 CH) among those hitting the 10 per cent daily limit.
-- Deb Price   


China stocks see strong performance in morning session

Some bank branches and automated teller machines are closed today following a violent New Year’s Day that saw radical protesters again target branches of HSBC and mainland lenders in the city, according to the Hong Kong Monetary Authority.
HSBC said that two branches in Kowloon were closed “until further notice” and seven express banking centres also were closed.
The city’s largest bank has become a target for demonstrators in recent weeks after a police crackdown on Spark Alliance, a major fundraising platform for protesters.
“We strongly condemn the acts of vandalism and damage directed at our premises repeatedly in the last few days. We believe these are unjustified,” the bank said in a statement issued late Wednesday. 
On its website, the Hong Kong Association of Banks only listed a handful of locations of HSBC as being temporarily suspended today.
The Hong Kong Monetary Authority, the city’s de-facto central bank, did not say how many branches closed, but it appeared to be much less than other times during the protests that have racked the city for months.
“The HKMA condemns the repeated acts of vandalism against the banking facilities in Hong Kong,” the regulator said. “The expression of opinions should be conducted in a peaceful manner, without affecting the public’s access to banking services.”
HSBC (5 HK) gained 0.1 per cent in morning trading to HK$60.90.
-- Chad Bray and Enoch Yiu


Some HSBC branches close after vandalism by hard-core protesters

The Hang Seng Index gained 1 per cent to 28,482.29 in morning trading.
Tencent (700 HK) gained nearly 2 per cent to HK$383.
-- Deb Price 


Hang Seng gains 1 per cent in morning session

Chinese finance leasing firm Zhongguancun Science-Tech (1601 HK) plans to  raise about HK$500 million (US$64.18 million) from the sale of 333.3 million shares at HK$1.52 to HK$1.72 per share in its Hong Kong stock listing.
The Beijing-based company makes 95 per cent of its revenue from leasing office spaces in science and industrial parks to tech companies in sectors including big data, smart manufacturing and healthcare. It has generated an aggregate principal amount of about RMB 15.6 billion (US$2.24 billion), serving 750 tenants between its establishment in 2012 and the first half of 2019. It hopes to use up to 70 per cent of IPO net proceeds to expand and attract lessees in technology sectors from the Beijing-Tianjin-Hebei economic zone and the Greater Bay Area.
“We are very confident to list on the Hong Kong Stock Exchange because of the high level of transparency in the market,”said Duan Hong-wei, chairman of the company in a media briefing today.  “As a company, we value transparency so that our shareholders can have a full picture of the start-ups and tech businesses we lease to.”
Of the IPO shares, about 300 million will be set aside for international offering and 33.34 million for Hong Kong investors. The two-week-long public offering takes place between December 31 and January 14. The stock is expected to start trading on January 21.
-- Kathleen Magramo 


Zhongguancun Science-Tech to raise about HK$500 million in Hong Kong listing

The Hang Seng Index gained 1 per cent to 28,478.21 in afternoon trading, with 34 of its 50 constituent stocks showing gains.
Tencent (700 HK) rose 1.8 per cent. 
Finance, utilities and property sectors rose.
-- Deb Price    


Tencent gains on advancing Hang Seng

Jefferies Equity Research reiterated its “buy” rating on Kweichow Moutai (600519 CH) but lowered its price target to 1,480 yuan from 1,540 yuan after the liquor giant’s 2019 net profit missed expectations. 
“Moutai reported 2019 result with in-line sales but 5% miss in net profit. Net profit in 4Q19 is 16% lower than our expectation,” analysts led by Mark Yuan wrote in a new note. 
“We think the profit miss is mainly due to weaker product mix in 4Q19, which leads to lower margin. Meanwhile, we think Moutai has increased its marketing expense in 4Q19 for better growth next year. This should contribute to resilient growth in 2020.”
The analysts said that Moutai’s recent price weakness offers a  “good entry opportunity.”
The stock fell 4.8 per cent in afternoon trading to 1,126.05 yuan.
-- Deb Price    


Jefferies reiterates ‘buy’ rating on Kweichow Moutai, says recent price weakness is ‘good entry opportunity’

China has temporarily suspended the planned the Shanghai-London Stock Connect because of its political tensions with the UK, Reuters reported, citing five sources.
Suspending the trading link between the Shanghai and London exchanges was due to politics, Reuters said, citing sources who included include public officials and people working on potential Shanghai-London deals.
Two sources pointed to Britain’s stance over the Hong Kong protests and one pointed to remarks about the detention of a now former staff member at its Hong Kong consulate, Reuters reported.   


China suspends Shanghai-London Stock Connect over political tensions, Reuters reports

Kweichow Moutai (600519 CH), the world's most valuable liquor distiller, saw daily turnover hit all-time high after it published estimated earnings for 2019.
Shares of Moutai shed 4.9 per cent to 1,124.8 yuan in afternoon trading.
Trading value topped 14.2 billion yuan as of 2pm, rewriting the record set on October 30, 2018.
The company said in an exchange filing this morning that it expected to post net profits of 40.5 billion yuan in 2019, up 15 per cent year on year.
But the earnings fell short of analysts’ expectations of at least 43 billion yuan.
-- Daniel Ren


Kweichow Moutai sees big daily turnover on earnings miss

Mainland stocks extended a winning streak into a third day, buoyed by the central bank’s move to pump additional cash into the national economy.
The Shanghai Composite Index rose 1.15 per cent to 3,085.20 on the first day of trading in 2020.
Over the past three days, it has gained a combined 2.7 per cent.
The Shenzhen Composite Index advanced 1.9 per cent to 1,756.16.
The ChiNext Index of start-ups climbed 1.9 per cent to 1,832.74.
“Market players are generally upbeat on this year’s outlook,” said Zhou Ling, a hedge fund manager with Shanghai Shiva Investment. “The central bank’s reduction in the deposit reserve ratio cemented their belief in a bull run.”
The People’s Bank of China reduced deposit reserve ratio by 0.5 percentage points on Wednesday, which would pump a fresh 800 billion yuan of capital to the national economy.
Kweichow Moutai (600519 CH), the world's most valuable liquor distiller, slumped 4.5 per cent to 1,130 yuan, after its announced preliminary earnings for 2019, which fell below analysts’ expectations.
Daily turnover of Moutai hit 16.7 billion yuan, an all-time high.
-- Daniel Ren


Mainland stocks rally on central bank’s move to pump cash into economy

Markets likely will be upbeat until at least the Lunar New Year holiday beginning January 25 due to the stimulative move by China’s central bank and optimism about the US-China partial trade deal, said Louis Tse Ming-kwong, managing director of VC Asset Management.
“Overall sentiment in the market is very buoyant,” Tse said.
“It’s a good sign that China relaxed it’s liquidity in the market, which can surely help small and medium-sized enterprises to obtain more loans before the Lunar New Year,” Tse said.
The People's Bank of China moved to cut the required cash reserve ratio for commercial lenders by 50 basis points, injecting  800 billion yuan (US$115 billion) of liquidity into the financial system.
“The US-China trade deal has been going on for sometime now, and we expect there to be a mini-deal to be signed,” Tse said, “That is considered a sure bet.”
-- Kathleen Magramo 


Markets to stay upbeat until at least Lunar New Year holiday, analyst Louis Tse says

The Hang Seng Index rose 1.3 per cent to 28,543.52, with 37 of its 50 constituent members advancing. 
Index heavyweight Tencent (700 HK) rose 1.8 per cent to HK$382.40.
Galaxy Entertainment (27 HK) led blue chip gains, rising 5.7 per cent to HK$60.70, as Jefferies put out a note saying the challenges Macau casino operators have faced have weakened. Macau’s 13.7 per cent fall in gambling revenue in December was better than the 15 per cent fall predicted by analysts, Jefferies analysts pointed out in their note.
Meanwhile, Alibaba (9988 HK), the e-commerce giant that owns the South China Morning Post, climbed 1.4 per cent to HK$210.
-- Deb Price    


Hong Kong, China stocks rise in solid start for 2020

Kweichow Moutai plunges on weaker-than-expected 2019 earnings Caixin manufacturing PMI falls for first time in five months

Kweichow Moutai plunges on weaker-than-expected 2019 earnings

Caixin manufacturing PMI falls for first time in five months