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Georgina Lee

Deb Price

Good day, traders.
Mainland and Hong Kong markets had a good day.
Catch up on the day's action below. We're happy to see global readership of our live stocks blog expanding, and extend a special welcome to those from the US, Greece, India, Japan, Ireland and Sweden. To all, please send any feedback or questions to deb.price@scmp.com as we strive to make our blog a must-read each trading day for you.
-- Georgina Lee and Deb Price
 


Stocks Blog: China, Hong Kong markets gain, ignoring latest gloomy trade comment by Trump

Photo: Shutterstock

Photo: Alamy 

Lee Shau-kee becomes Hong Kong’s wealthiest man on his retirement day, as he hands over Henderson’s reins to his two sons

Business

China Business

Economy

(From left) Henderson Land vice-chairman Martin Lee Ka-shing, chairman Lee Shau-kee and vice-chairman Peter Lee Ka-kit, attend the company’s annual general meeting on Tuesday, at the Mira Hong Kong, in Tsim Sha Tsui. Photo: Sam Tsang.

Lee Shau-kee, Hong Kong's second richest man, shares his life just before retiring as chairman of Henderson Land Development. Photo: Handout

(L-R) Henderson Land Vice-Chairman Peter Lee Ka-kit, Chairman Lee Shau-kee, and Vice-Chairman Martin Lee Ka-shing attend the Henderson Land AGM 2015 at Four Seasons Hotel in Central. Chairman Lee Shau-kee will resign in July. 02JUN15

Northbound Stock Connect net inflow is up after days of outflows
CICC says regulatory takeover of Baoshang Bank has limited impact on sector


Hard liquor stocks toast positive sales outlook


Stocks

China markets

Hong Kong Stock Exchange

China economy

Live

Here's what we are watching this morning:
Overnight markets/ What futures foretell
-- The US markets were closed on Monday for a public holiday
 -- Hong Kong futures are up 0.14 per cent, while the China A50 futures are down 0.64 per cent.
IPO debuts
Xinyi Energy (3868 HK)
Pujiang International Group (2060 HK)
Economic statistics/Central Bank action:
None
Corporate events:
Annual general meetings: Henderson Land Development (0012 HK), Shenzhou International Group (2313 HK), Sunny Optical Technology (2382 HK), WH Group (0288 HK), Hong Kong and China Gas (0003 HK), China Resources Pharmaceutical (3320 HK), China International Capital Corp (3908 HK), NARI Technology (600406 CH), Zhangzhou Pientzehuang Pharmaceutical (600436 CH), Haitong Securities (600837 CH), Orient Securities (600958 CH), 360 Security Technology (601360 CH), Power Construction Corp of China (601669 CH), Everbright Securities (601788 CH), China Galaxy Securities (6881 HK), Longfor Group (0960 HK)
Good reads: Hong Kong’s second-wealthiest man Lee Shau-kee will retire as chairman of Henderson Land Development after the company’s annual shareholders’ meeting on May 28, Yujing Liu reports. Tech reporter Li Tao profiles Teresa He, the president of HiSilicon, the wholly owned semiconductor company of Huawei. 


Morning guidance 

Two Chinese companies rang the gong at the Hong Kong exchange this morning.
Alternative energy company Xinyi Energy Holdings Limited (3868) looked to raise HK$3.65 billion (US$465 million) on their initial public offering after pricing their shares near the low end of the market range. Xinyi Energy is a private solar farm owner and operator that supplies electricity to China’s state grid via local subsidiaries, a company filing said.
The company cancelled an earlier plan to IPO at the exchange in December, citing ongoing stock market volatility.
Infrastructure material company Pujiang International Group Limited (02060) also debuted this morning, looking to raise HK$643 million or US$82 million. The company is one of China’s market leaders for long-span and super-long span bridge cables, according to a company filing. Pujiang International also deals in pre-stressed construction materials, including a rare earth coated product line, which made up nearly 80 percent of the company’s pre-stressed materials business last year.
Shares of Xinyi Energy rose to HK$1.95 when they began trading for the first time on the Hong Kong exchange, compared with their HK$1.94 initial public offering price. Pujiang International opened for trading unchanged at HK$2.68 from its IPO price in Hong Kong.
It's about solar farms and bridge cables at the #HKEX this morning as Chinese alternative energy company Xinyi Energy (left) and construction materials company Pujiang International both debut their shares, among five IPOs on the exchange this week pic.twitter.com/DUGT0CuNc2
— Simone McCarthy (@simonelmc) May 28, 2019
-- Simone McCarthy 


Gong welcomes two new companies to Hong Kong exchange 

Cosco Shipping Holdings (1919 HK), raised to a buy from underperform at Jefferies, is trading up 1 per cent to HK$2.97.
The price target on the Chinese container shipping giant was boosted to HK$4 from HK$2.60, or a 36 per cent increase from Monday's close.
Of analysts tracked by Bloomberg, three call it a buy, four a hold and two a sell, with a 12-month consensus price target of HK$3.93.  
In a note on May 24, Bloomberg Intelligence analysts said Cosco Shipping's earnings growth will decline this year due to container demand being weighed down by the unclear trade outlook and slowing economic growth.
"Industry capacity management will be essential to maintaining freight rates in 2019 while stable margins at its terminal business will continue to underpin profit," BI wrote.
BI also notes that Cosco Shipping's merger with Orient Overseas (316 HK) -- making it OOII's biggest shareholder -- means it could soon challenge Europe's dominance in the container shipping sector. With that deal, BI notes, Cosco is the third-biggest carrier by market share, versus the eighth a decade ago.
-- Deb Price
 


Cosco Shipping Holdings raised to buy at Jefferies 

Orient Overseas International Ltd. (316 HK) was upgraded to hold from underperform at Jefferies, with a price target of HK$50.
It was last trading flat, at HK$47.35, in a rising Hong Kong market.
Of analysts tracked by Bloomberg, none rate the Chinese container shipping and property investing company as a buy, five have it as a hold and one a sell.
Uncertainty around the US-China trade negotiations and weak global manufacturing will weigh on container demand, Bloomberg Intelligence notes.
"Yet, freight rates could get marginal support from a slower increase in industry capacity this year while lifting OOIL's vessel utilization," BI wrote in a note in March. "Lower oil prices should stave off further margin contraction while its merger with Cosco should keep yielding operating synergies."

-- Deb Price 
 


Orient Overseas International upgraded to hold by Jefferies

China and Hong Kong benchmarks are trading higher.
The Hang Seng is up 0.6 per cent higher, at 27,407.14.
The Shanghai Composite rose 0.4 per cent, at 2,909.52. 
The CSI 300, which tracks blue chips on both the Shenzhen and Shanghai bourses, rose 0.3 per cent.
In Hong Kong, Henderson Land (0012 HK) is up 0.4 per cent, at HK$49.10, while Sun Hung Kai Properties (0016 HK) was down 0.4 per cent at HK$134.70.
-- Georgina Lee 


China, Hong Kong markets headed up

Henderson Land (12 HK) is up 0.4 per cent to HK$49.10, after its chairman -- Hong Kong’s second-wealthiest man Lee Shau-kee -- announced his retirement.
Lee, who turned 90 in March, is departing “due to his advanced age”, the filing said. The tycoon will be succeeded by his two sons -- Peter Lee Ka-kit and Martin Lee Ka-shing. They will take over as joint chairmen and managing directors.
-- Deb Price 
 


Henderson Land trading up, as chairman announces retirement

Mainland property developer Agile Group (3383 HK) shares rose 3.8 per cent to HK$9.72, after saying in an exchange filing this morning it will issue US$600 million in senior perpetual capital securities, at a yield of 8.375 per cent per annum up to December 2023.
Thereafter, the interest rate will be reset every five years at the applicable treasury rate plus a margin.
The company said it would use the proceeds for refinancing existing debts. However, it also said it “may adjust the foregoing plans in response to changing market conditions and reallocate the use of the net proceeds”. Perpetual bonds have no maturity date, but Agile Group has the option to redeem the whole issue commencing the first reset date scheduled on December 4, 2023.
BOC International, CLSA, Guotai Junan International, HSBC, HeungKong Financial, Orient Securities (Hong Kong) and UBS are the joint lead managers, and have agreed to also be the initial subscribers of the securities.
-- Georgina Lee 


Agile Group up over plan to refinance debt

China Merchants Securities (6099 HK) is up 0.2 per cent to HK$9.32 in early trading, after being fined HK$27 million by Hong Kong's securities regulator for failure to do due diligence in the initial public offering application of delisted China Metal Recycling.
The sanction of the brokerage and security underwriter -- the Hong Kong subsidiary of one of China's largest brokerages --  follows the Securities and Futures Commission's action against the other joint sponsor, UBS. The Swiss investment bank was fined HK$375 million in March over three listings.
“The SFC’s investigation revealed that CMS and UBS had respectively failed in their due diligence as joint sponsors to address a number of unusual facts and findings on China Metal and its customers during the listing process,” the SFC said in a statement.
-- Deb Price
 


China Merchants turns up a bit, despite sanction by Hong Kong regulator

The Shanghai Stock Exchange is poised to approve the first three listings on the city’s upcoming Nasdaq-style Technology Innovation Board. Stocks linked to them soared today.
The initial public offering (IPO) applications of Shenzhen ChipScreen Biosciences, Anji Microelectronics (Shanghai) and Suzhou Tztek Technology are slated for hearing on June 5. 
The three IPO hopefuls are in the fields of semiconductors, biotechnology and artificial intelligence, key areas in which Beijing wants to create China’s own world-class players.
Suzhou New District Hi-Tech Industrial (600736 CH), which has equity investment in Suzhou Tztek Technology, rose to the daily up-limit of 10 per cent, at 8.31 yuan. Both Souyute Group (002503 CH), and Jiangsu Guoxin Corp (002608 CH), which also hold stakes in IPO hopeful Shenzhen ChipScreen Biosciences, also rose to 10 per cent, with Souyute at  2.85 yuan and Jiangsu Guoxin at 9.06 yuan.
-- Georgina Lee 
 


China stocks linked to three IPO hopefuls on new Shanghai Nasdaq-style board soar

Shares of China Transinfo Tech (002373 CH), which operates intelligent transportation systems and provides traffic data service, surged to the 10% daily up-limit, at 20.21 yuan in early morning, after it announced that Alibaba (China) Network will invest a 15 per cent stake in the company and will become its second-largest shareholder after completion.
The transaction price totalled 1.29 billion yuan, and the sale was from three shareholders including controlling holder Xia Shudong, who will still retain a 16 per cent stake in the company, it said in a Shenzhen exchange filing.
-- Georgina Lee 


China Transinfo Tech surges after Alibaba’s 15 per cent stake buy

Geely Automobile Holdings (175 HK) is leading the Hang Seng Index higher, with a 6.1 per cent gain in morning trading to HK$13.20, after news reports that Guangdong province is taking steps to boost consumption including making it easier to get a car license plate. 
Meanwhile, Sunny Optical Technology (2382 HK) jumped 3.6 per cent to HK$69.65, Sino Biopharmaceutical (1177 HK) climbed 3.7 per cent to HK$8.12, Galaxy Entertainment (27 HK) is up nearly 3 per cent to HK$48.25, and Country Garden Holdings (2007 HK) is up 2 per cent to HK$10.86.
Leading sectors are information technology, up 2.7 per cent, consumer discretionary, up 2.5 percent, and health care up 2.5 per cent.  
The Hang Seng was up 0.49 at 27,422.98 at the lunch break.
-- Deb Price 
 


Hang Seng rises, with boosts from information technology, consumer discretionary, health care sectors

Heavy northbound Stock Connect trading today could end days of net outflows, as MSCI's A share weight increase gets ready to kick in.
Data from mainland media websites shows that the Hong Kong stock connect’s northbound net inflow into Shanghai-listed stocks totaled 3.37 billion yuan. Net inflow to Shenzhen stocks totalled 426 million yuan.
Net inflow is the amount that total buying turnover exceeds that of selling.
As the break, the Shanghai Composite Index was up 0.9 per cent, at 2,918. The Shenzhen Composite Index -- up 22 per cent this year -- was up 0.9 per cent, at 1,547.52.
Starting today at the close, MSCI is implementing the first step of its weight increase of China A shares in the MSCI Emerging Markets Indexes, in which 26 China A-shares will be added to the MSCI China Index. MSCI will implement the next two steps of its weight increase in August and November.
If the net inflow continues through the day, it would reverse the previous seven days of net outflow recorded in Shanghai, and eight-straight days of net outflow seen in Shenzhen connect.


Northbound Stock Connect net inflow is up after days of outflows 

It's been a good day for investors in China's promising hemp sector, where companies are busily making and developing medicines and other products. 
Shanghai Shunho New Materials (002565 CH) shot up 8.1 per cent to 15.46 yuan. It holds a licence to grow hemp in Yunnan province – located in the far southwest of China bordering Myanmar, Laos and Vietnam – which was the first province to allow hemp cultivation in China.
Galaxy Biomedical Investment (000806 CH) rose 2.3 per cent to 3.62 yuan. Tian Jin Global Magnetic Card (600800 CH) gained 4.6 per cent to 6.80  yuan. Kunming Longjin Pharmaceutical (002750 CH) shot up 6.1 per cent to 15.14 yuan.
In Hong Kong, Meilleure Health International Industry Group (2327 HK) jumped 4.1 per cent to HK$0.75.
Jiling Zixin Pharmaceutical (000919) bucked the trend and was trading flat.
It wasn't immediately clear what set off the investor rush into the sector today.
China has turned to industrial hemp -- used to make medicines, clothing and paper -- to help boost the old rust-belt economy of its northeast. 
Jilin and Heilongjiang provinces in the northeast have been given the green light to cultivate hemp, in addition to Yunnan province.
Growing and smoking marijuana is illegal in China, but pharmaceutical companies in particular are seeing huge potential for hemp, which has trace amounts of the psychoactive component THC. Hemp flowers and leaves can be used to make cannabinoids, which offer pain relief and have anti-inflammatory properties.
China accounts for about half of the world’s legal hemp cultivation, and is the biggest exporter of hemp paper and textiles, according to official figures.
-- Deb Price 

 


Hemp-linked stocks on a high 

The Chinese financial regulator’s seizure of Baoshang Bank last Friday to deal with its “serious credit risks” is indicative of the general vulnerabilities among the country’s smaller banks, although the decision to address Baoshang Bank’s financial problems publicly is positive in terms of transparency and disclosure, Fitch rating said in a note today.
Fitch said it believes that underreporting of asset quality problems is most significant at smaller banks, and they have higher loan concentration risks from single or related-party borrowers.
A stress test conducted by China’s central bank in 2018 revealed that capital positions across much of the country’s banking system would be vulnerable. Fitch estimates that  most of China’s 4,000 small city and rural banks would fall under the minimum thresholds of capital positions required, or 20-25 per cent of banking system assets if policy banks were excluded.
Blue chip China Construction Bank, which fell yesterday on news that it was mandated to handle the business operations of the Baoshang Bank during the interim, gained 0.32 per cent today to HK$6.23. However, it is down 10 per cent in May.
-- Georgina Lee 


Regulatory takeover of Baoshang Bank highlights small banks’ risk, Fitch says 

The recent takeover of Baoshang Bank by the Chinese financial regulators will have a limited direct impact on banking stocks, given the regional lender’s low market share, according to China International Capital Corp.
Baoshang Bank, which the central bank and the banking regulator took control of last Friday, has a market share of 0.23 per cent in terms of total assets and 0.18 per cent in outstanding loans, the investment bank said. CICC recommends buying large banks with low valuations after the recent sell-off on the broader market. A gauge of 33 Chinese listed banks added 0.4 per cent today, extending a 0.1 per cent gain a day earlier.
-- Zhang Shidong


CICC says regulatory takeover of Baoshang Bank has limited impact on sector

Liquor stocks in Shanghai and Shenzhen celebrated a new report by China International Capital Corp. saying revenues of liquor companies will shoot up.
CICC said in a note that revenues and profits of  Wuliangye Yibin (000858 CH) and Kweichow Moutai (600519 CH)  may grow more than ten times in the next decade. Analysts Xing Tingzhi and Chen Wenkai  cited their higher product prices and strong sales growth, in a note dated Monday cited by  Bloomberg.
Wuliangye Yibin climbed 0.83 per cent to 102.85 yuan while Kweichow Moutai rose 2.13 per ent to 897.70 yuan.
CICC also recommends Luzhou Laojiao (000568 CH), recently up 1.44 per cent at 73.35 yuan, Jiangsu King’s Luck Brewery (603369 CH), up 0.56 per cent at 25.23 yuan,  Anhui Gujing Distillery (200596 CH), up 1.61 per cent at 57.7 yuan, Anhui Kouzi Distillery (603589 CH), up 1.7 per cent at 59,84 yuan and Sichuan Swellfun (600779 CH), down 0.17 per cent at 47.93 yuan.

-- Georgina Lee


Hard liquor stocks toast positive sales outlook

All leading China benchmarks ended higher, with help from pig and liquor stocks. 
The Shanghai Composite Index up 0.61 per cent, or 17.53 points at 2909.91, its highest level since May 16.
The CSI 300, which tracks blue chips listed on both Shanghai and Shenzhen bourses, was up 0.96 per cent at 3672.26. Consumer-related stocks --  Kweichow Moutai (600519 CH) and Foshan Haitian Flavouring (603288 CH) -- were among the top gainers in both indexes. Kweichow Moutai was up 1 per cent at 888 yuan, while Foshan Haitan Flavouring was up 5.33 per cent at 98.78 yuan.
The gains in Kweichow Moutai came after investment bank CICC said in a note that it expects the liquor maker’s net profit and revenue may grow more than 10 times over the next decade.
Across sectors, pig-related stocks also performed well.  Fujian Aonong Biological (603363 CH) rose to the 10 per cent daily up-limit at 22.83 yuan, while Hunan New Wellful  (600975 CH) was up 8.51 per cent to 11.73 yuan.
-- Georgina Lee 


Pig, liquor stocks help push up China benchmarks

The People’s Bank of China is acting to increase the supply of short-term funding to banks after the seizure of a regional lender rattled domestic markets, Bloomberg reports.
China’s central bank injected a net amount of 150 billion yuan (US$21.7 billion) through open-market operations on Monday and Tuesday, the most since the week ended March 8.
Regulators announced last Friday that they will take control of Baoshang Bank, citing “serious” credit risks, fuelling worries of failures elsewhere and driving up funding costs.
Read full story here.
 


China's central bank adds liquidity after Baoshang Bank takeover 

Chinese developers are eyeing Hong Kong’s industrial property market, which has been traditionally dominated by local investors, as they gauge the value created by the conversion and redevelopment of aged structures in the world’s least affordable housing market, erports Lam Ka-sing.
The value of industrial properties sold to mainland developers or investors totalled HK$2.32 billion (US$295.56 million) in 2018, reflecting a rise of 44.3 per cent from a year earlier, excluding revitalised buildings which underwent complete conversion, according to data from CBRE.
Mainland developers that have publicly expressed interest in the city’s industrial property include Vanke Property (1036 HK), KWG Group Holdings (1813 HK) and Longfor Group (960 HK).
Read full story here. 
 


Chinese developers looking at Hong Kong's industrial property market

Hong Kong stocks ended higher, with traders in the automobile sector netting some solid gains.
The Hang Seng Index took a breather from Monday's drop and ended up 0.38 per cent, or 102.72 points higher, at 27,390.81.
Leading the index higher were financials:  AIA (1299 HK) gained 2.31 per cent to HK$77.50, while Ping On Insurance (2318 HK)  gained 1.54 per cent at HK$85.70.
Hong Kong Exchanges & Clearing (388 HK), the city’s bourse operator, closed up 2.17 per cent at HK$254.60, after Bloomberg reported Alibaba Group Holding is considering a second listing in Hong Kong through a US$20 billion floatation, second after its New York listing in 2014.
The automobile sector was super hot.  Geely Automobile (175 HK) closed as the top percentage gainer among blue chips, up 4.66 per cent at HK$13.02. The sector was the second top gaining industry, as Yongda Automobiles Services (3669 HK) rose 10.83 per cent to  HK$6.45, Guangzhou Automobile Group (2238 HK) rose 6.42 per cent at HK$7.63, and Brilliance China (1114 HK) also rose 5.21 per cent at HK$7.47. The gains came after news reports that Guangdong province is taking steps to boost consumption including making it easier to get a car license plate.
-- Georgina Lee 


Auto stocks hit the accelerator, helping drive up Hang Seng