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Georgina Lee

Deb Price

Welcome traders to a fresh month --
Catch up below on the latest in mainland and Hong Kong markets.
We're happy to see that many of you are loyal followers of our blog. If you like us, kindly consider sharing a link to us on social media to help us get out to more traders. And if you have feedback for the stocks team, please reach out to deb.price@scmp.com .
— Georgina Lee and Deb Price in Hong Kong


Hong Kong stocks hit 3-month low, erasing most of 26% Beijing stimulus rally

Hong Kong braces for an IPO revival after ringing in necessary changes

WH Group’s US pork-processing unit Smithfield files for Nasdaq listing

Chinese tech stocks suffer fresh hit as US drags Tencent, CATL into military sphere

Stocks

Stocks Blog: Hong Kong property stocks tumble as GDP data underscores weakness in city's economy

A view from Tsim Sha Tsui, as the city awakes from a tropical storm that shut the stock exchange down early on Wednesday.  Photo: May Tse

Business

Markets

Hong Kong Monetary Authority cuts its base lending rate by 25 basis points
Investor confidence declines in Asia, survey finds  


Shanghai Composite starts the new month with a 0.8 per cent loss, pushed down by consumption and financial stocks. The Hang Seng ends down for second straight day. 


China markets

Hong Kong Stock Exchange

Live

Cheung Kong Infrastructure Holdings (1038 HK), the infrastructure unit of tycoon Li Ka-shing's conglomerate CK Hutchison, posted a net profit of HK$5.94 billion for the year's first six months, flat from the same period last year. 
Excluding the negative impact from weaker currencies in key markets such as Britain and Australia, the profit would have risen 6 per cent, it said in a stock exchange filing on Wednesday.
An interim dividend of 6.8 HK cents was declared, the same as last year. The profit was lower than Daiwa Capital Markets analysts’ estimate on July 12 of HK$6.47 billion. 
Power Assets Holdings (6 HK), the key energy unit controlled by CKI, separately reported a net profit of HK$3.79 billion for the first half, down 8 per cent year-on-year. That was in line with Daiwa’s HK$3.76 billion estimate. 
Power Assets blamed the fall on weak foreign exchange rates, lower contributions from its UK assets and lower regulated return of its Hong Kong electricity business.  An interim dividend of 77 HK cents per share was declared, the same as last year.
 
— Eric Ng
 


CK Infrastructure Holdings posts flat net profit  

Yanzhou Coal Mining (1171 HK) said its biggest shareholder Yankuang Group completed the plan to buy 97 million Hong Kong-listed shares, or a 1.97 percent stake, of the company as of July 30, according to a filing to the city’s exchange. 
The purchase was done over-the-counter through Yankuang’s Hong Kong unit, the statement said. Yankuang and its concert parties now have combined 53.79 per cent interest in Yanzhou Coal, and have no plan to further increase their shareholding in the company, it said.
— Zhang Shidong
 


Yanzhou Coal Mining says biggest shareholder completes share purchase

Juneyao Airlines (603885 CH) received approval from the Chinese securities regulator to sell 169.1 million new shares in a private placement, according to an exchange statement.
The approval will be valid for six months, it said.
— Zhang Shidong
 


Juneyao Airlines approved to float new shares

Alibaba Group Holding signed a pact with the controllers of Sto Express (002468 CH), which gives the e-commerce giant the option to buy control of the Shenzhen-listed courier service firm within three years starting December 28.
Should the option be exercised in the certified time frame, Alibaba will buy the stakes in two units that have combined 53.76 per cent of Sto for 9.98 billion yuan (US$1.5 billion), Sto said in a statement to the bourse.
The move will help upgrade the main business of the listed company and boost the profitability in the long run, according to the statement.
Alibaba is the owner of the South China Morning Post.
— Zhang Shidong
 


Alibaba may buy control of publicly traded parcel delivery firm Sto Express

Shanghai International Port Group, the operator of the world’s busiest port, said profit for the first six months rose 29 per cent from a year ago to 4.37 billion yuan (US$635.4 million).
Container throughput— a measure of the number of contrainers handled over a period of time — increased 5 per cent to 21.5 million twenty-feet equivalent units, the company said in an exchange filing.
— Zhang Shidong
 


Operator of world’s busiest port says profit rose 29 per cent

First-half net income for China International Travel Service (601888 CH) jumped 71 per cent from a year earlier to 3.28 billion yuan (US$476.6 million), the company said in a preliminary earnings statement. 
Profit for the period rose 31 per cent excluding a one-time investment gain of 1.36 billion yuan for the sales of a stake in a wholly-owned travel agency, the statement said. 
The official interim result is due August 31.
— Zhang Shidong
 


China International Travel says first-half profit surges 71 per cent

Here's what we are watching this morning:
US Friday markets/ What futures foretell
--The S&P 500 fell 1.09 per  cent, the Nasdaq dropped 1.19 per cent and the Dow Jones Industrial Average dropped 1.23 per cent.
-- Hong Kong futures are down 0.85 per cent, while the China A50 futures are down 0.94 per cent to 13,499.0 
IPO debuts: None of note
 
Economic statistics/Central Bank action: 
9am-3pm: (MU) July Macau Casino Revenue YoY, prior 5.9%
9:45am: (CH) July Caixin China PMI Mfg, est. 49.5, prior 49.4
4:30pm: (HK) June Retail Sales Value YoY, est. -1.85%, prior -1.3%
4:30pm: (HK) June Retail Sales Volume YoY, est. -2.0%, prior -1.7%
Corporate events: earnings, meetings, news conferences:
Earnings: CK Asset (1113 HK), CK Hutchison (1 HK), Prada (1913 HK), Standard Chartered (STAN LN) 
Good reads:  Hong Kong’s monetary authority cut the city’s base lending rate for the first time in more than a decade, reducing the cost of money in a slowing economy, reports Enoch Yiu. 5G could stimulate US$500 billion in China tech growth over the next five years, Jane Zhang reports. 


Morning guidance 

The roll-out of 5G services across China is predicted to spur new growth in the country’s technology sector amid trade tensions with the United States, as industries meet the challenge of adopting advanced applications for the next-generation mobile infrastructure.
At the Global Mobile Internet Conference held in the southern coastal city of Guangzhou on Saturday, a representative from the China Academy of Information and Communications Technology (CAICT) forecast that 5G will stimulate growth in the country’s information technology industry by 3.3 trillion yuan (US$479 billion) over the next five years.
That development is expected to rev up digitisation across traditional industries, which would yield more than 10 trillion yuan in growth over the same period.
“4G has changed people’s lives,” said Chen Jinqiao, deputy chief engineer at the academy, which is under the Ministry of Industry and Information Technology (MIIT), during his presentation on China’s 5G development in the conference. But he indicated that 5G has the potential “to change society”, as different industries adopt the technology to their various requirements.
Read full story here by Jane Zhang.


5G could stimulate nearly US$500 billion in new IT growth in China

Hong Kong’s monetary authority cut the city’s base lending rate for the first time in more than a decade, reducing the cost of money in a slowing economy that had been squeezed by a year-long US-China trade war.
The city’s de facto central bank reduced the base rate by 25 basis points to 2.5 per cent effective August 1, in lockstep with a widely expected cut of the same amount by the US Federal Reserve, the first reduction since the 2008 Global Financial Crisis.
“A lower interest rate will definitely be positive for the economy of Hong Kong, as well as the US, as it helps ease the burden for borrowers,” said Sonny Hsu, vice-president and senior credit officer of Moody's Investors Service, adding that the financial markets are expecting three rate cuts in 2019 for a total of 75 basis points.
The rate cut is a much-needed spur to kick-start Hong Kong’s economy, which contracted 0.3 per cent in the three months ended June from the first quarter, while the annual growth pace was stuck at 0.6 per cent from a year ago. The city’s economy, a vital transshipment and re-export hub for the gigantic economic hinterland of mainland China with the rest of the world, had been squeezed by the year-long US-China trade war as the conflict kicked into high gear in early May.
Read full story here by Enoch Yiu.


Hong Kong follows US Fed in cutting interest rate 

The Hang Seng Index opened 0.7 per cent lower, at 27,582.21, while the Shanghai Composite Index edged down 0.4 per cent, at 2,920.85.
Overnight, the outcome of the size of the US Federal Reserve cut and signals about what's ahead disappointed investors. Investors had been widely expecting the 25 basis point cut that came. But Fed chairman’s Jerome Powell’s statement that the cut was a “mid-cycle adjustment to policy”, rather than the start of a more aggressive monetary easing cycle, dampened spirits. The target rate of the Fed funds rate was cut to 2 per cent-2.25 per cent.
Powell said he doesn’t see the cut as the beginning of a lengthy cutting cycle. The S&P closed down 1.1 per cent Wednesday.
In Hong Kong, selective property stocks fell, with Swire Pacific (19 HK) down 4 per cent at HK$86.15 and China Resources Land (1009 HK) falling 2.2 per cent to HK$33. The sector was the worst performing one at the open in the Hang Seng Index. The properties sub-index was down 1.3 per cent.
In China, trading was mixed, but gold-related stocks fell. Shandong Gold Mining (600547 CH) fell 5 per cent at 40.01 yuan, Universal Scientific Industrial (Shanghai) (601231 CH) was down 4.3 per cent at 13.19 yuan, and Western Region Gold (601069 CH) fell 3.1 per cent to 13.88 yuan. Their falls came amid a 0.3 per cent decline in spot gold, which stood at US$1,410.26.
Selective financials fell. An Insurance (601318 CH) was down 0.4 per cent to 87.78 yuan, and Industrial Bank (601166 CH) fell 0.7 per cent to 19 yuan.
The CSI 300, which tracks blue chips listed in Shenzhen and Shanghai, lost 0.3 per cent to 3,824.17.
— Georgina Lee 


China, Hong Kong markets open lower  

"Consumption remains strong in the US, and the central bank’s insurance cuts are mainly to pre-empt risks coming from the global economy, such as trade tension between China and the US," said JPMorgan Asset Management's Asia-Pacific Chief Market Strategist Tai Hui, in an e-mailed comment. "This implies the Fed could deliver one more cut before the end of the year, but is likely to fall short of futures market’s expectations of more reductions in 2020."
— Eugene Tang 


Expect one more cut by end of year, says JPMorgan's Tai Hui  

"Given that consumer spending, employment and wages in the US have largely stayed healthy, it should not be surprising that the Fed has opted for an insurance cut of 25 basis points as opposed to the 50-point cut that some market participants predicted," said T. Rowe Price's Asia-Pacific head of multi-asset solutions Thomas Poullaouec, in an e-mailed commentary. "Cutting rates by as sharply as 50 basis points would have been a sign that the Fed is seeing very weak economic data and is not optimistic about the future rate of growth, as well as being seen as a desperate cut in response to softer than expected economic data."
"The Fed is unlikely to be too aggressive in its easing cycle, especially if the labor market continues to tighten. If inflation was to remain particularly weak towards the end of this year, then an extra 25 basis point cut certainly can’t be ruled out," Poullaouec said.
— Eugene Tang


Fed 'unlikely to be too aggressive' in easing cycle, says T. Rowe Price's Thomas Poullaouec

“The Fed’s decision to cut policy rates by just 25 basis points meets market expectations. But it’s perhaps a bit of an anti-climax compared to last week’s ECB meeting where Draghi set the stage for a comprehensive easing package including rate cuts, a tiered reserve system and further asset purchases," said Seema Shah, senior global investment strategist at Principal Global Investors in an email statement.
"Equities haven’t responded to the Fed’s action too positively, but it’s the currency market, via a stronger U.S. dollar, where much of the disappointment will be played out. We may be witnessing the early signals of a future covert currency war.
“A more proactive currency policy may be coming back to the forefront for investors, and the net beneficiary of a covert currency war between the US and Europe will ultimately be emerging market assets. If Europe and the US compete to lower the value of their currencies, emerging markets and Asian countries, which tend to borrow in dollars, will benefit in the longer term," Shah said.
“For the U.S, however, the most pressing issue is the trade war. After all, U.S. tariffs are weakening their target countries, putting downward pressure on their currencies and upward pressure on the U.S. dollar. If President Trump wants a cheaper dollar, ending the trade war may be his best bet.”
— Enoch Yiu


Covert currency war may get under way, says Principal Global Investors' Seema Shah

....As usual, Powell let us down, but at least he is ending quantitative tightening, which shouldn’t have started in the first place - no inflation. We are winning anyway, but I am certainly not getting much help from the Federal Reserve!
— Donald J. Trump (@realDonaldTrump) July 31, 2019


Trump: 'As usual, Powell let us down'

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI), a gauge of sentiment among the country’s factory operators, came in at 49.9 for July, an increase on last month’s 49.4 reading, and above analysts’ expectations.
In line with yesterday’s official PMI survey, this independent gauge of factory activity showed a slight improvement, but remained in negative territory, indicating that China’s manufacturers continue to face a challenging time.
The month of July was the second full month since the United States increased tariffs on US$200 billion of Chinese goods from 10 per cent to 25 per cent. It was also the first month since the G20 Summit in Osaka, where Presidents Xi Jinping and Donald Trump announced that tariff increases would be put on hold.
The Bloomberg median forecast was 49.5.
— Finbarr Bermingham 


Caixin/Markit manufacturing PMI at 49.9 for July, above expectations

Investor confidence declined worldwide in July, with Asia seeing the largest drop, according to State Street Global Exchange’s investor confidence index released today.
Global investor confidence decreased to 84.9 in July, down 2.4 points from June.
While confidence in all regions declined, Asia saw the largest drop, from 95.9 to 91.9.
North America fell from 81.6 to 80.6, and Europe dropped from 103.3 to 99.3.
All three regions came in below 100, the neutral level where investors are neither increasing nor decreasing their long-term allocations to risky assets.
The index is measured on trades, not opinions.
“Investors may not be bound by the same supply chain linkages that global manufacturing is, but the risk of contagion remains,” said Michael Metcalfe, senior managing director and head of global macro strategy, State Street Global Markets, in a note.
“The fact that confidence fell the furthest in the APAC region is perhaps testimony to questions of how much stimulus will be forthcoming from policymakers in the region.”
— Louise Moon


Investor confidence declines in Asia, survey finds 

Alvin Cheung doesn't expect much reaction in the Hong Kong stock market to the overnight Fed rate cut.
The associate director at Prudential Brokerage doesn't expect the Hong Kong Interbank Offered Rate — the rate of interest offered on Hong Kong dollar loans by banks in the interbank market — will react much to the US rate cut. Even if they do fall today, it would be knee-jerk reaction and they will trend back up shortly, he said.
Overnight, the Hibor went up to 1.747 per cent, up 13.5 basis points and at its highest this week. The one month Hibor fell 5 basis points.
“Federal Reserve chairman Powell has already stated that the cut overnight cannot be viewed as the start of more aggressive monetary easing cycle. This has thrown further rate  cut for the rest of this year into more doubts,” said Cheung.
Property stocks are trading down, pressured by the city's weak GDP figure for the second quarter, which shrank 0.3 per cent from the first quarter, and was worse than the expected 0.9 per cent growth.
Sun Hung Kai Properties (16 HK) down 2 per cent at HK$124.4; CK Asset (1113 HK) down 2.1 per cent at HK$58.1; Sino Land (83 HK) down 1.9 per cent at HK$12.52.
Cheung said protests that have gone on for two months are weighing on property stocks.
The Hang Seng is trading down 0.56 per cent to 27,621.21.
— Georgina Lee


Weak economic data for Hong Kong pushing down property stocks

Shares of China Zhongwang Holdings (1333 HK) plunged by as much as 21 per cent to HK$3.17 in Hong Kong, the lowest intraday level in almost four years, after US prosecutors charged the aluminium firm's founder with evading US$1.8 billion in anti-dumping tariffs.
Liu Zhongtian, the former president and chairman of Zhongwang, Asia’s largest aluminum extrusion company, lied to US customs agents to avoid 2011 duties on Chinese aluminium exports to the US, according to US Attorney Nicola Hanna in Los Angeles. 
Between 2011 and 2014, the main board-listed maker of aluminum extrusion and Liu sold aluminum extrusions to US-based companies but made them appear as function pallets instead, which would be considered finished goods that aren't taxable, according to the indictment cited by the Wall Street Journal.
If indicted, Liu could face imprisonment while the company would face “substantial monetary penalties”, prosecutors quoted by the paper said.
Update: The company announced in a filing today that it had already made clarifications about "certain related allegations," had nothing to add, and that Liu and the company had not received any notice about the legal proceedings. It also said it has always respected the laws of China and "has developed overseas markets under the principle of fair and orderly competition." 
— Eugene Tang and Georgina Lee
 


 China Zhongwang Holdings shares plunge in Hong Kong after US charges firm's founder 

The chief of the Chinese military garrison in Hong Kong has warned that violent clashes in the city will not be tolerated and said the army is determined to protect China’s sovereignty.
Chen Daoxiang, the commander of the People’s Liberation Army’s (PLA’s) Hong Kong garrison, made the warning at a reception in Hong Kong celebrating the 92nd anniversary of the Chinese military on Wednesday, when the garrison also released a promotional video that stated that troops stationed in the city were able to protect its long-term stability.
One of the scenes in the video features a soldier shouting in Cantonese during an anti-riot drill: “All consequences are at your own risk.”
Chen’s comments marked the first time he had commented on Hong Kong since protests erupted in early June against the city’s controversial extradition bill.


Read full story here by Teddy Ng. 


Chinese army’s Hong Kong chief says troops are ready to protect China’s sovereignty

The ongoing trade war between the United States and China is increasingly weighing on the bottom lines of both mainland and Hong Kong companies.
More than two dozen Hong Kong-listed firms have specifically cited the effects of tariffs on demand for their products or a weakening global macroeconomic outlook because of rising protectionism in issuing profit warnings since the end of June, according to regulatory filings.
Escalating trade tensions over the past year between the world’s two biggest economies have hurt sentiment and caused companies to curtail future investment, according to economists and investment analysts.
Now, companies from cosmetics retailer Bonjour Holdings to Singamas Container Holdings, the world’s second-largest maker of shipping containers, are warning the conflict is cutting into demand as consumers hold off on purchases and corporate customers rethink the size of future orders.
Read full story here by Chad Bray.


Profits of Hong Kong-listed firms at risk as US-China trade war rages

Selective producers of pork rose in China, after the Ministry of Agriculture and Rural Affairs said pork prices during the week of July 22-26 rose to 25.34 yuan per kilogram, up 43 per cent from a year ago and the highest since 2013, according to media reports citing the ministry.
Jiangxi Zhengbang Tech (002157 CH) rose 5.6 per cent to 20.21 yuan, Wens Foodstuff (300498 CH) climbed 3.5 per cent to 41.89 yuan, Tecon Biology (002100 CH) rose 2.6 per cent at 10.7 yuan, and  New Hope Liuhe (000876 CH) was up 2.1 per cent to 19.76 yuan.

— Georgina Lee


Pork-related stocks rose as pork prices rose in late July to six-year high

The Hong Kong market will continue to take a beating as investors don't have much to be hopeful for in the coming month, said Stanley Chan, director of research at Emperor Securities.
"The market had already discounted the [quarter of a per cent] rate cut from the US Federal Reserve. And the trade talks — not very exciting news. The market today is following the weak pattern in the past few days," he said.
The Hang Seng index has declined more than 900 points, or more than 3 per cent, since Thursday.  It is trading at 27,602.74.
Chan said it is likely for the market fall through its current 27,500 support level to test the next support at 27,000 points, in the coming days.
With nothing to look forward to, investors should consolidate their holdings and stay updated on the earnings of major players like HSBC (0005 HK) and Tencent (0700 HK), which are set to announce their interim results soon, he said.
"The market focus is on the Hong Kong economy, which will slow down quite a lot in the second half of this year. The other worry is the global macro economic environment is not very strong, and Sino-US trade talks still have a long way to go."
Companies that have put their expansion plans on hold due to the global economic uncertainty will likely continue to adopt a cautious expansion approach, further exacerbating the slowdown in the economy, said Chan.
"The market will consolidate at this level, with weak momentum to go up, as we need to further discount the current situation in the perspective of economic and political developments. Most investors will remain cautious and wait-and-see."
— Daryl Choo
 


Crystal Ball: With nothing to look forward to, Hang Seng could fall below 27,000, says Stanley Chan

"Both the Caixin manufacturing PMI and the official manufacturing PMI released yesterday suggest better growth momentum in the manufacturing sector in July," Goldman Sachs Economics Research writes in a note circulated today. 
"However, uncertainties related to trade negotiations and drags on export growth due to higher tariffs on exports to the US could continue to weigh on growth. We continue to expect incrementally more policy support to economic growth in 2H of this year."
Caixin's manufacturing PMI was 49.9 in July. That was above market expectations and higher than June's reading.
— Deb Price


Goldman Sachs continues to expect 'incrementally more policy support' in China

Tencent bucked the downward trend on the Hang Seng, with the index heavyweight one of the handful of gainers in the 50-constituent Hang Seng Index.
Earlier this week, Tencent said it would collaborate with US chip giant Qualcomm to bring 5G and other new technologies to gaming devices.
China’s social media and game giant and Qualcomm will work together to optimise mobile gaming devices running on Qualcomm’s Snapdragon Elite gaming chip, develop 5G gaming use cases, and explore new technologies such as virtual and augmented reality, according to a statement issued by Qualcomm’s China subsidiary and Tencent Games, the Chinese internet giant’s gaming arm.
Tencent will release its second quarter and interim results on August 14 .
The stock was up 0.5 per cent at HK$370, and was the biggest gainer in the Hang Seng China Enterprises Index, which is trading down 0.6 per cent at 10,614.78.
— Georgina Lee


Tencent one of few morning gainers on Hang Seng

Hong Kong Monetary Authority chief executive Norman Chan Tak-lam said the US interest rate cut will benefit the global economy and investment markets.
"The US rate cut showed the Fed has reversed the interest rate normalisation process started in December 2015. If the US will continue to gradually reduce the interest rate in the future, it will be positive to the global currency markets," Chan said in a media briefing after HKMA followed the US rate cut.
While the HKMA has cut the base rate for banks, he said the commercial banks may not immediately cut their lending rate to customers as lenders will decide on other domestic factors such as loan demands and liquidity.
Chan rejects the concern that the rate cut could  result in another property bubble. The 2008 rate cut cycle cut interest rates down to nearly zero for almost a decade, leading to cheap funding flooding into Hong Kong stock and property markets.This has led Hong Kong to become the world's most expensive property market.
"I do not think the 25 basis point rate cut will have a big impact to the Hong Kong property market. The mortgage rate is only one factor affecting property prices. There are others such as supply and market sentiment," he said.
Hong Kong investment sentiment has been rattled due to ongoing protests that began June 9 over an extradition bill before spreading into issues like affordability of housing and wages.
"Despite the protests in the past two months, we have not found evidence of capital outflow. The deposit of US dollar and Hong Kong dollar in June remained stable. The Hong Kong dollar exchange rate to the US dollar has strengthened. This reflects the peg and the financial system in Hong Kong remain resilient," Chan said.
"It will need a stable environment for Hong Kong to act as an international financial centre. Let's hope all can resolve the disputes in a peaceful and rational manner," Chan said.
"Although the rate cut will help improve the economy, investors should continue to be vigilant about risk management, as there are challenges of a possible worsening of the US and China trade war, a hard Brexit as well as other geopolitical tensions," Chan added.
— Enoch Yiu


US rate cut not to have big impact on Hong Kong property market, says HKMA's Chan 

Overnight, US Federal Reserve chairman Jerome Powell said the quarter-percentage point cut overnight, though the first in a decade, should not be viewed as the start of more aggressive monetary easing cycle. Some experts expect only one more rate cut this year, or perhaps even none.
Gold and precious metal-related stocks fell, as investors who buy gold-related stocks as a proxy to gold saw Powell's comments as putting some brakes on how much gold prices can go up this year. 
Shandong Gold Mining (600547 CH) fell 3.8 per cent to 40.52 yuan, Western Region Gold (601069 CH) dropped 2.7 per cent to 13.94 yuan. Yintai Resources (000975 CH) was down 5.5 per cent at 14.33 yuan, and Baiyin Nonferrous Group (601212 CH) declined 2.7 per cent.
Spot gold fell 0.3 per cent to US$1,410.26.
— Georgina Lee


Gold-linked stocks fall as Fed signals it isn't moving into big rate cutting cycle 

The China-based online insurance company said based on preliminary review of unaudited management accounts, it expects to turn around to profitability for the first half ended June this year, from net loss of 655.8 million yuan a year ago. It did not specify any estimated profit figures.
The company attributed the improvement to a steady increase in gross written premiums and the good A share market perform during the period, which lift its investment income.
Shares of ZhongAn Online P&C Insurance (6060 HK) were up 12.2 per cent, at HK$19.88, its highest share price since July 12.
— Georgina Lee 


ZhongAn Online P&C surges on positive profit alert

Protest chart     

Chinese manufacturers of electric and hybrid vehicles are bracing for a downbeat second half after consumers flocked to showrooms across the country before the government scaled back its subsidy programme designed to promote green vehicles.
While the sales figures for July have yet to be released, automotive analysts said anecdotal evidence points to a downturn in the new-energy vehicle (NEV) segment, which has bucked the annual decline in sales weighing on the broader automotive sector.
“Sales are set to slow in the remaining year because those customers keen on owning a NEV car have already bought,” said Shen Wei, an auto analyst with UBS. “The industry had been overly optimistic about the NEV segment earlier.”
She added that fewer buyers were seen visiting electric car dealerships last month, following the government’s decision to roll back subsidies in the sector in late June.
Beijing announced in March it would slash subsides on NEVs by up to 60 per cent as part of a policy to improve technological standards in the green car market.
Read full story here by Daniel Ren. 


China’s electric vehicle showrooms send ominous signal about sales outlook 

Chicken production in China for 2019 will grow by at least 12 per cent this year, reaching 8.51 million tonnes, according to an official from the Ministry of Agriculture and Rural Affairs cited by an Economic Daily report.
The official said the growth in white-feathered chickens has been encouraging, reaching 400 million chickens for the month of June, which is the highest in almost three years. The Ministry official expects for that monthly output to continue through the year.
The wholesale price of chicken rose in July to 20.11 yuan per kilogram, up 11 per cent from a year ago, according to China Good Agri-products Development & Service Association.
As African swine fever has made pork more pricey and squeezed pig herds, poultry breeders are seen as potential beneficiaries.
Wens Foodstuff  (300498 CH) rose 3.6 per cent to 41.92 yuan. Fujian Summer Development (002299 CH) rose 2.9 per cent to 28.71 yuan. Shandong Minhe Animcal Husbandry (002234 CH) rose 2.4 per cent to 36.89 yuan. Shandong Xiantan (002746 CH) was up 1.7 per cent to 17.59 yuan.
— Georgina Lee 


Poultry-related stocks get a boost from higher production forecast

The Shanghai Composite Index closed down 0.8 per cent, at 2908.77, led down by consumption and financial stocks. It was the benchmark's second straight day of losses.
The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI), a gauge of sentiment among the country’s factory operators, came in at 49.9 for July. It followed the Wednesday release of the National Statistics Bureau's official  purchasing managers’ index (PMI), which slightly rose from June to 49.7 in July. A reading of below 50 indicates that manufacturing output is contracting.
“Investors are sidelined and want more directions," said Louis Tse, managing director of VC Asset Management. "But I am not entirely pessimistic on the outlook of the US-China trade negotiations. The fact that they could quickly schedule another round of talks in September and the talks ended Wednesday earlier than scheduled could indicate that some rough framework of resolution has been hammered out,”
Liquor distiller giant Kweichow Moutai (600519 CH)  fell 1.4 per cent to 959.30, while Foshan Haitian Flavouring and Food (603288 CH) fell 3 per cent to 96.9 yuan.
Industrial and Commercial Bank of China (601398 CH) slipped 0.5 per cent to 5.61 yuan, while China Merchant Bank (600036 CH) fell 1 per cent to 36,2 yuan.
The CSI 300, which tracks blue chips on Shenzhen and Shanghai, was down 0.8 per cent to 3,803.47. In Shenzhen, liquor distiller Wuliangye Yibi (000858 CH) also dropped 1.4 per cent to 119.03 yuan.
Tse expects the Shanghai Composite to continue to hover between the 2850-2900 level.
— Georgina Lee 


Consumption, financial stocks push Shanghai into a loss on first day of new month

The Hang Seng Index posted its second straight day of losses, closing down 0.8 per cent at 27,565.7, its lowest since June 18.
The market shrugged off the expected 25 basis point cut from the US. The bigger concern was the less dovish hint from the US Federal Reserve chairman Jerome Powell that the cut was a “mid-cycle adjustment to policy”. It reined back market expectations of another three cuts to come over the next 12 months.
“Federal Reserve chairman Powell has already stated that the cut overnight cannot be viewed as the start of more aggressive monetary easing cycle. This has thrown further rate cuts for the rest of this year into more doubts,” said Alvin Cheung, associate director at Prudential Brokerage.
HSBC announced that it won’t change its best lending rate, keeping it at 5.125 per cent.
Property stocks were the biggest losers.
Sun Hung Kai lost 4.1 per cent at HK$121.7, CK Asset was down 3.6 per cent at HK$57.2, and CK Hutchison Holdings declined 1.6 per cent to HK$72.5.
Weekly transactions involving used homes fell to their lowest level this year on Sunday, according to one of the city’s largest real-estate agencies, while a dozen buyers this month decided against completing contracts for new homes worth more than HK$70 million (US$8.9 million), forfeiting more than HK$3.5 million in deposits and other fees rather than making purchases.
Protests that are nearly two months long are hurting the city’s real estate market, adding to the economic concerns as Hong Kong GDP growth in the second quarter shrank 0.3 per cent from the first quarter, worse than the expected 0.9 per cent growth.
Elsewhere, financials also fell, with insurer AIA (1299 HK) down 1.5 per cent at HK$79.7; HSBC (5 HK) down 0.5 per cent at HK$63.05; and the Industrial and Commercial Bank of China (1398 HK) down 0.9 per cent at HK$5.25.
Given ongoing economic concerns compounded by the protests, the Hang Seng Index might further drop to the 27,000 level over the short term, if it doesn't rise back up to the 250-day moving average, which is at 27,600, said Louis Tse, managing director of VC Asset Management.
— Georgina Lee 
 


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