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Louise Moon

Azar Zaidi

It is not every day that US President Donald Trump lightens the mood. But amid the gloom that has descended on Hong Kong amid an escalation in protests, a delay in tariffs on some items until December 15 announced overnight could be welcomed – even embraced – by some sections of the markets.
It should not come as a surprise that US markets all closed higher overnight. The S&P 500 rose 1.48 per cent, the Nasdaq was up 1.95 per cent and the Dow Jones Industrial Average gained 1.48 per cent.
The delay in tariffs of about US$300 billion of Chinese consumer goods will allow US retailers to stockpile products they need for the back-to-school and holiday shopping seasons. Also, when imposed, the tariffs may mean more job cuts and store closings for US retailers during this holiday season, US correspondent Jodi Xu Klein writes.
Stay with us, Louise Moon and Azar Zaidi in Hong Kong, as we keep track of bourses in the city and mainland China on what could be another interesting day for stocks.


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Hong Kong stocks stage largest rally in 5 weeks; hopes rise for new stimulus from Beijing

Stocks

Stocks blog: Hang Seng ekes out gains on ‘not very strong confidence’, China stocks edge up

Business

Markets

Tariff delays not enough to reverse bearish sentiment in Hong Kong: Core Pacific-Yamaichi
Shanghai Composite, CSI 300 edge up at Wednesday close


Twenty of the Hang Seng's 50 constituent stocks ended higher compared with only one on Tuesday. The gains were led by Sunny Optical Technology Group, which rose on strong earnings.


China stock market

Hong Kong Stock Exchange

Live

State-owned Shandong Gold Mining (1787 HK), one of China’s largest miners of the precious metal, is seeking to raise 10 billion yuan (US$1.42 billion) through a bond offering to repay debt and strengthen working capital. In an after trading hours filing to the Hong Kong stock exchange, the company said the term for the “ultra short-term financing bonds” shall not be more than 270 days, and will target institutional investors in the interbank bond market of mainland China. Other details of the bond issuance were still to be determined. Shandong Gold closed about 12 per cent higher at HK$19.8 per share on Tuesday. 
Shenzhen-listed Henan Shuanghui Investment & Development (000895 CH), one of China’s largest meat processors, said its profit was flat for the first half amid widespread swine flu. According to an after trading hours filing by WH Group (288 HK), which owns a controlling 73.25 per cent stake in Shuanghui Development, the meat processor reported its net profit from January to June amounted to 2.48 billion yuan (US$351 million), up 0.82 per cent from 2.46 billion yuan in the same period last year. 
“For the six months ended June 30, 2019, Shuanghui Development processed 8.58 million hogs, representing an increase of 3.67 per cent from the comparable period of 2018,” said Wan Long, chairman and chief executive of WH Group. “External sales volume of meat products was 1.53 million metric tonnes, representing a decrease of 1.47 per cent from the comparable period of 2018.”
On Tuesday, WH Group’s shares retreated 2.04 per cent to HK$6.72.
Sunny Optical Technology (2382 HK), mainland China’s largest manufacturer of smartphone camera modules, reported that its net profit for the year’s first half rose by more than a fifth, to about 1.43 billion yuan on the back of higher revenue. “For the six months ended June 30, 2019, the group’s revenue was around [15.6 billion yuan] (US$2.21 billion), representing an increase of around 30 per cent or around [3.6 billion yuan] as compared with the corresponding period of last year,” said Ye Liaoning, Sunny Optical’s chairman and executive director. “The increase in revenue was mainly benefited from the group’s further development in smartphone-related businesses and rapid growth in the vehicle imaging and sensing fields.” Sunny Optical rose 0.47 per cent on Tuesday at HK$86.4. 
– Cheryl Arcibal


Overnight filings with the Hong Kong stock exchange

Overnight markets/ What futures foretell:
– US markets all closed higher on Tuesday. The S&P 500 rose 1.48 per cent, Nasdaq was up 1.95 per cent and Dow Jones Industrial Average gained 1.48 per cent.
– Hong Kong futures are up 2.25 per cent to 25,777, while the China A50 futures are down 1.03 per cent to 13,102.16.IPO debuts: None.Economic statistics/Central bank action:
10am: China July industrial production year on year and year-to-date data
10am: China July retail sales year on year and year-to-date data
10am: China July property investment year on year and year-to-date dataCorporate events: earnings, meetings, news conferences:
China Resources Power (0836 HK), China Unicom (0762 HK), HKEX (0388 HK), Techtronic Industries (0669 HK), Tencent (0700 HK), Haitian Flavouring (603288 CH) and China United Network (600050 CH) are all reporting earnings on Wednesday.


Morning guidance

In Hong Kong the Hang Seng Index gained 1.7 per cent to 25,711.10, following broad rallies overnight in the US and around Asia. In mainland China, the Shanghai Composite also rose 0.97 per cent to 2,824.49, while the CSI 300 index of large caps gained 1.26 per cent to 3,712.07.
The markets are reacting to US President Donald Trump’s decision to delay 10 per cent tariffs on some Chinese consumer goods – including some laptops, mobile phones, toys and clothing – until mid-December.
The announcement was made after China’s commerce ministry said Vice-Premier Liu He spoke to US Trade Representative Robert Lighthizer and US Secretary of the Treasury Steven Mnuchin on the phone on Tuesday, and agreed to more talks in two weeks.
But it seems the news has not been reported by Chinese media, which perhaps explains why the increase in mainland markets has not been more pronounced.
– Louise Moon
 


Hong Kong, mainland China stocks rise on tariffs delay

Cathay Pacific Airways (0293 HK) rose 7.43 to HK$10.26 in morning trading, after its top shareholder – Swire Pacific (0019 HK) – condemned the protests in Hong Kong and vowed to follow China’s aviation regulations.
“We condemn all illegal activities and violent behaviour, which seriously undermine the fundamental principle of ‘One Country, Two Systems’ as enshrined in the Basic Law,” Swire said in a statement on Tuesday. It added its support for the city’s government, Chief Executive Carrie Lam and police.
The carrier has banned staff from taking part in the protests and suspended two pilots amid mounting pressure from Beijing.
Both Cathay and Swire have tumbled. Between Monday and Tuesday, the airline’s share price lost 5 per cent, falling to a 10-year low, while its parent dropped 5.8 per cent to hit levels last seen in May 2018.
Industrial and Commercial Bank of China, the country’s biggest bank, cut Cathay’s rating to a “strong sell”, saying it believed the Civil Aviation Administration of China safety alert and poor crisis management will cause irreversible damage to the airline’s brand perception as a premium quality carrier, which will drive down its valuation compared with peers.
– Louise Moon


Cathay Pacific rises in morning trading 

China’s industrial production, which includes the output of sectors such as manufacturing, mining and utilities, grew by 4.8 per cent in July from a year earlier. It was, however, below the 6.3 per cent rise in June, which had spiked up from May’s 5.0 per cent growth rate. July’s reading is the lowest since February 2002, according to official data released on Wednesday morning.
It is also well below a poll of economists conducted by Bloomberg, which had forecast 6.0 per cent growth.
Meanwhile, retail sales, a key metric of consumption in the world’s most populous country, grew by 7.6 per cent in July, down from 9.8 per cent growth in June and well short of economists’ forecast of 8.6 per cent growth.
The National Bureau of Statistics also released data for fixed-asset investment, spending on physical assets such as real estate, infrastructure and machinery, which grew by 5.7 per cent in the first seven months of the year. This was down from 5.8 per cent in the January-June period, as well as against the Bloomberg poll, which had forecast no change.
The broader picture is one of an economy struggling on several fronts. Despite 12 rounds of face-to-face negotiations, the trade war with the United States appears no closer to a conclusion. Prospects of a deal remain gloomy, with both parties reported to be entrenched in their positions. Further talks are planned for September, but expectations for an outcome remain low.
– Louise Moon and Finbarr Bermingham 


Key China industry, retail and investment data below expectations

Smartphone components maker Sunny Optical Technology Group (2382 HK) rose 10.3 per cent to HK$95.30 in morning trading after it reported a 21 per cent increase in first-half net income, when compared with the same period last year. This was above market expectations of an 8 per cent to 9 per cent rise.
In a filing with the stock exchange after trading closed on Tuesday, the firm said its profit rose to 1.43 billion yuan, from 1.18 billion yuan in the same period in 2018. its revenue gained 30 per cent to 15.5 billion yuan.
Credit Suisse raised its rating to “outperform” and investment bank Jefferies upgraded it to a “buy”. Daiwa Capital Markets, meanwhile, said in a note on Tuesday evening that it was “one of our top picks in the Greater China smartphone sector”.
– Louise Moon


 Sunny Optical rises on better-than-expected net income

Shares of WH Group (0288 HK), the world’s largest pork producer, fell 1.64 per cent to HK46.60 after the company reported a 16.9 per cent fall in first-half net profit year on year to US$463 million, in a filing with the stock exchange after trading hours on Tuesday. Higher cost of raw materials took its toll on the company, which has been hit by the outbreak of African Swine Fever in mainland China.
WH Group has introduced some measures for cost saving, including product structure adjustment, cost control and internal control, according to Ma Xiangjie, the president of its China unit.
Meanwhile, Henan Shuanghui Investment & Development (000895 CH), which operates in the slaughtering and meat-processing sector, said its net profit was down 0.16 per cent year on year to 2.381 million yuan. WH Group is a majority shareholder in the firm and owns 73.25 per cent.
– Louise Moon


 WH Group shares fall on 16.9 per cent decline in first-half net profit

Investment holding company Zhong An Group (0672 HK) rose 10.88 per cent to HK$0.26 after posting a positive profit alert to the stock exchange on Tuesday evening. The company, which mainly works in the property sector, said it expects to record an increase of more than 500 per cent year on year in net profit for the first half through June 30. The jump is mainly down to due to an increase in floor area delivered by its real estate business.
– Louise Moon


Zhong An Group shares up after firm says it may post 500 per cent net profit rise

Traders were flocking to China’s government bonds as they sought havens after all the key July economic data trailed estimates. The yield on the 10-year bond dropped by 1.2 basis points to 2.995 per cent on Wednesday, breaching the 3 per cent mark for the first time since December 2016. The yield on sovereign bonds maturing in one year fell by 0.3 basis points to 2.511 per cent.
– Zhang Shidong
 


China’s 10-year bond yield breaches 3 per cent after economic data miss

Kweichow Moutai (600519 CH), the world’s largest distiller, climbed 2.36 per cent to an all-time high of 1,042.02 yuan, making the company worth 1.3 trillion yuan (US$184.9 billion). Its previous record was 1,035.6 on July 1. The stock has risen 66.88 per cent this year, to its last close. A rally in the stock has been led by upbeat first-half earnings, which were posted on July 17. It says net profit gained 16.56 per cent year on year to 19.95 billion yuan (US$2.9 billion). Since then, until the close on Tuesday, the stock has gained 5.65 per cent.
Adding to positive sentiment was a rise in retail sales in July. Although weaker than expected, retail sales rose 7.6 per cent in July year on year, compared with 9.8 per cent in June and lower than analysts’ predictions of 8.6 per cent.
It did, however, add to expectations Beijing will further boost domestic consumption to boost growth, which would benefit Kweichow Moutai.
– Louise Moon


Kweichow Moutai rises to new high of 1,042.02 yuan

Shares of Sunny Optical Technology Group (2382 HK), which makes smartphone cameras, jumped by as much as 13.4 per cent to HK$98, its highest intraday level in more than three months. The company led gains among electronic component makers. Investors cheered the Trump administration’s move to delay some of the US tariffs on Chinese exports, which are viewed as benefiting sales of smartphones, electronics, toys and other Christmas products. Lens Technology (300433 CH), which makes lasers and other optical products, rose by its 10 per cent daily limit to 8.04 yuan on the Shenzhen exchange. Wuhan Guild Infrared (002414 CH), which makes infrared cameras and thermal imaging systems, rose 3.1 per cent to 18.08 yuan in Shenzhen.
– Eugene Tang


  Chinese electronic component makers rise on delay in Trump tariffs … 

Chinese rare earths stocks are falling as tensions between the US and China were tamed overnight by Donald Trump. The US president delayed 10 per cent tariffs on some goods, in anticipation of rising costs for US consumers over the Christmas holidays.
JL MAG Rare-Earth (300748 CH), the company Chinese president Xi Jinping visited in May, fell 6.22 per cent to 57.86 yuan. So far this year it has gained 166.51 per cent, as a trade war between the world’s two largest economies escalates.China Northern Rare Earth Group High-Tech (600111 CH) dropped by 1.49 per cent, China Minmetals Rare Earth (000831 CH) by 4.09 per cent, Rising Nonferrous Metals Share (600259 CH) by 2.66 per cent and Shenghe Resources Holding (600392 CH) by 1.65 per cent.
The stocks have been sensitive to developments in US-China relations, with rare earths viewed as a potential bargaining chip for China, which produces more than 80 per cent of the world’s minerals and is the US’s largest source.
– Louise Moon


… But rare earths decline on lull in trade war tensions 

Property stocks were the biggest decliners in Wednesday’s rebounding market, with the Hang Seng Properties Index dropping by as much as 0.6 per cent amid concerns the downbeat mood in the city was forcing more developers to postpone sales launches, which will erode earnings. CK Asset Holdings (1113 HK) fell by as much as 3 per cent to a 12-month intraday low of HK$49.90, after the flagship developer of tycoon Li Ka-shing postponed the launch of a premium apartment complex with a sales value estimated at HK$14 billion (US$1.8 billion) in the Mid-Levels area. Earlier this week, Sun Hung Kai Properties (16 HK) postponed the launch of its 1,172-unit Cullinan West III complex atop the Nam Cheong subway station, bowing to a downbeat market. Sun Hung Kai shares have fallen 3.3 per cent this week, rising 1.9 per cent in today’s rebound.
– Eugene Tang


Property stocks decline amid launch delays at Hong Kong developers

The Hang Seng rose 0.5 per cent to 25,408.70 by the midday break, bucking three consecutive days of declines. Sunny Optical Technology (2382 HK) was the top gainer after posting strong first-half results, ending up 12.15 per cent at the break. The technology sector, led by Sunny Optical, reported the biggest gains, rising 2.4 per cent.
WH Group (0288 HK) declined the most in Hong Kong, falling 3.87 per cent after weak results in the first six months this year.
In China, the Shanghai Composite rose 0.78 per cent to 2,819.05. Three stocks breached the daily increase limit of 10 per cent. The CSI 300, meanwhile, gained 0.84 per cent to 3,696.55.
– Louise Moon


 Hong Kong, mainland China stocks maintain momentum at lunch break

Bourse operator Hong Kong Exchanges and Clearing (0388 HK) rose 0.6 per cent to HK$235.40 after reporting a rise in net profit and revenue for the first half of the year compared with 2018. Net profit was up 3 per cent to HK$5.2 billion (US$662.8 million), while revenue gained 5 per cent to HK$8.58 billion. 
“Markets continued to be sensitive to uncertainties in the US interest rate outlook, a potential no-deal Brexit, heightened geopolitical tensions, especially in the Middle East, and the recent social unrest in Hong Kong”, causing the average daily turnover in Hong Kong’s securities market to drop 23 per cent to HK$97.9 billion, chairwoman Laura Cha said in a filing to the stock exchange.
IPO funds raised, however, were up 39 per cent year on year to HK$71.8 billion, despite a fall in the number of new listing applications and an increase in withdrawn cases.
There has also been strong growth in northbound trading through the Stock Connects, because of increased weighting of Chinese stocks in the MSCI and FTSE Russell indexes.
– Louise Moon
 


HKEX shares rise after bourse operator reports increase in net profit, revenue 

Consumer electronics manufacturer TCL Electronics Holdings (1070 HK) rose 9.06 per cent to HK$3.5 after posting a positive profit alert to the Hong Kong stock exchange during the afternoon. It said it expects to record a “significant increase” in consolidated profits for the first half of the year ending June 30.
This comes as sales volumes and revenue from televisions in overseas markets have increased, particularly in North America. TCL said its well-established overseas supply chain layout is sufficient to meet shipment demands in the US, helping it mitigate potential risks that may arise from the US-China trade war. The stock has risen 16 per cent so far this year, as of afternoon trading on Wednesday.
– Louise Moon


TCL expects ‘significant increase’ in first-half profit, shares rise 

Utility China Resources Power (0836 HK) dropped 0.55 per cent to HK$10.80, after posting a 35.8 per cent year-on-year increase in net profit to HK$4 billion for the first half of 2019.
The increase was offset by a decrease in turnover, down 16.3 per cent to HK$32.9 billion. This was due to a disposal of coal assets at the end of last year, depreciation in the yuan and a decrease in the net generation volume of subsidiary power plants. Also impacting business was a decrease in profit contribution from its coal business, compared with the same period in 2018. A decrease in fuel costs contributed to the increase in its net profit, according to a filing with the stock exchange.
A dividend of 20 HK cents per share will be paid, representing a 60 per cent increase when compared with the same period last year, the company said.
– Louise Moon


China Resources Power declines despite increase in net profit

Cai Chongxin, a co-founder of Chinese internet giant Alibaba Group Holding, which owns the South China Morning Post, is close to agreeing to buy the remaining shares in NBA team Brooklyn Nets for US$2.35 billion from Russian billionaire Mikhail Prokhorov, according to the New York Post. Cai already owns 49 per cent of the franchise, and the deal will take his shareholding up to 100 per cent.
The deal is set to be announced this week, according to the report. 
– Louise Moon


Alibaba co-founder to assume 100 per cent control of Brooklyn Nets

Chinese medical technology platform WuXi AppTech (603259 CH) rose 2.86 per cent to 70.83 yuan, after falling more than 4 per cent in morning trading. On Tuesday evening, the Shanghai-listed company said seven shareholders planned to offload up to a combined 10.7 per cent stake between September 4 and November 16, without further information.
– Louise Moon


Medical tech firm WuXi AppTech reverses decline to rise 2.86 per cent

Hainan Airlines Holding (600221 CH), provider of passenger transport and air cargo services, dropped 1.05 per cent to 1.88 yuan after shareholder Haikou Meilan International Airport said it planned to cut up to a 1 per cent stake in the company within 90 days to repay loans. Haikou Meilian is Hainan Airlines’ second-largest shareholder, with a 5.25 per cent stake.
– Louise Moon


Hainan Airlines Holding drops after shareholder reveals divestment plan

Mainland China markets edged up at the close on Wednesday. The Shanghai Composite rose 0.42 per cent to 2,808.91, reversing Tuesday’s losses. All sectors but telecommunications ended in the positive.
The CSI 300 index of large caps in Shenzhen and Shanghai, meanwhile, ended up 0.45 per cent at 3,682.40.
– Louise Moon


Shanghai Composite, CSI 300 edge up at Wednesday close

The inability of the Hang Seng Index to hold onto its morning gains shows just how bearish investors are vis-à-vis Hong Kong, said Castor Pang Wai-sun, head of research at brokerage Core Pacific-Yamaichi. “There is not very strong confidence in the Hong Kong stock market, particularly right now, even though Trump is trying to elevate the situation by delaying some goods,” he said.
The US on Tuesday said it would delay or remove some tariffs on about US$300 billion of Chinese consumer goods, sparking a short-lived rally on the Hang Seng Index, which gained 1.7 per cent to 25,711.10, minutes after markets opened. It is now trading at 25,376.06 points.
“We’re seeing investors sell their holdings once markets rebound,” he said. “This is not just because of the protests [in Hong Kong], but also the downturn in the US, China and Hong Kong economies.”
Pang forecast the Hang Seng Index will find short reprieve if it falls to a previous low of 24,540 points, which happened in October 2018. “It should rebound but not for long, unless there is positive news on the US-China trade negotiations. If that is not the case, then the Hang Seng will continue to break the support and see a huge downside in the future,” Pang said. “For [mainland] China, it is difficult to guess,” he added.
 
China on Wednesday released weaker industrial, retail and investment growth figures, effectively cementing expectations it is wrestling with an economic slowdown sparked by the US-China trade war. Despite this, the Shanghai Composite edged up at the close on Wednesday.
“Chinese investors still seem optimistic. Even though they see [weaker] economic figures, they still hold onto their stock and believe the government will be able to do something to support the stock market,” Pang said. 
– Daryl Choo


Tariff delays not enough to reverse bearish sentiment in Hong Kong: Core Pacific-Yamaichi

Shanghai-listed Liuzhou Iron and Steel (601003 CH) reported a 38 per cent drop in net profit to 1.3 billion yuan (US$185.44 million) for the first half of the year, when compared with 2018. The result was posted after markets closed in China and its share price was not affected. The stock has lost 28.46 per cent as of the last close, and is at its lowest level since July 2017. It closed up 0.21 per cent at 4.7 yuan on Wednesday.
– Louise Moon


Liuzhou Iron and Steel reports 38 per cent drop in net profit 

The Hang Seng Index edged up 0.08 per cent to 25,302.28 at the close on Wednesday. Twenty of the gauge’s 50 constituent stocks ended higher compared with only one on Tuesday. The gains were led by Sunny Optical Technology Group (2382 HK), which rose on strong earnings. It pulled technology up 1.99 per cent, making it the sector with the biggest gains on the gauge.
Meanwhile, 28 constituent stocks were down, led by WH Group (0288 HK), which posted poor earnings on Tuesday evening.
– Louise Moon


Hang Seng edges up on Wednesday led by Sunny Optical

Shanghai-listed food-processing company Foshan Haitian Flavouring and Food (603288 CH) posted a 23.3 per cent rise in year-on-year net profit for the fast half of 2019 to 2.8 billion yuan (US$399.45 million). The result came after market close, but the stock dropped 0.56 per cent to 98.85 yuan on Wednesday.
– Louise Moon


Stocks blog: Hang Seng ekes out gains on ‘not very strong confidence’, China stocks edge up

Tariff delays not enough to reverse bearish sentiment in Hong Kong: Core Pacific-Yamaichi Shanghai Composite, CSI 300 edge up at Wednesday close

Tariff delays not enough to reverse bearish sentiment in Hong Kong: Core Pacific-Yamaichi

Shanghai Composite, CSI 300 edge up at Wednesday close