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Xie Yu

Deb Price

Good day, traders --
What a day in Hong Kong! Catch up on the day's action below, including the biggest jump in the Hang Seng in 10 months after the SCMP reported chief executive Carrie Lam will formally withdraw the extradition bill that turned this town upside down.  
If you have any questions or feedback on our live stocks blog, shoot them to deb.price@scmp.com. We want to make our blog your must-read each day.
-- Xie Yu and Deb Price in Hong Kong
 


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Stocks

Stocks Blog: Hang Seng posts biggest gain in 10 months on news Hong Kong leader Carrie Lam to withdraw extradition bill

Protesters gather at the starting point at Victoria Park, Causeway Bay, before the march to the government's headquarters in Admiralty on June 9 -- the first major demonstration against a proposed extradition bill. Photo: Winson Wong


Business

Markets

MTR, property companies, luxury retailers among day's big winners


MTR, property companies and luxury retailers among day's huge winners


China stock market

Hang Seng Index

Hong Kong Stock Exchange

Tencent

Kweichow Moutai

Hong Kong property

Hong Kong protests

Live

We are doing very well in our negotiations with China. While I am sure they would love to be dealing with a new administration so they could continue their practice of “ripoff USA”($600 B/year),16 months PLUS is a long time to be hemorrhaging jobs and companies on a long-shot....
— Donald J. Trump (@realDonaldTrump) September 3, 2019

....And then, think what happens to China when I win. Deal would get MUCH TOUGHER! In the meantime, China’s Supply Chain will crumble and businesses, jobs and money will be gone!
— Donald J. Trump (@realDonaldTrump) September 3, 2019


Trump pressures China for trade deal in tweets  

Xiaomi (1810 HK) plans to spend up to HK$12 billion (US$1.53 billion) on its own shares in what would be the biggest buy-back of the year by Hong Kong-listed companies at a time when the city’s stock market is being rattled by the most serious civic upheaval in more than two decades.
The biggest maker of smartphones in China said it will buy back no more than 10 per cent of the company’s stake in the secondary market, in a statement filed to the bourse on Tuesday.
So far in 2019, CK Asset Holdings (1113 HK), Tencent Holdings (700 HK) and other companies trading in the city have spent at least HK$478 million buying back their own shares amid sell-offs that have sent the Hang Seng Index down by 1.2 per cent since the start of the year. The Hang Seng gauge is the cheapest among the world’s major equity markets, trading at 10.2 times earnings.
Read full story by Zhang Shidong here.
 


Hong Kong's battered stock prices set off buyback flurry 

Here's what we are watching this morning:
Overnight markets/ What futures foretell
--The S&P 500 fell 0.69 per cent, the Nasdaq dropped 1.11 per cent and the Dow Jones Industrial Average fell 1.08 per cent. 
-- Hong Kong futures are down 0.07 per cent. FTSE China A50 is flat at 13603.04.
IPO debuts: None to note
Economic statistics/Central Bank action: 
-- August Caixin China PMI Composite 
-- August Caixin China PMI Services
Good reads: China sees fuel-cell vehicles as the next growth engine in the world’s largest automobile market, Eric Ng reports, and is jump-starting it with subsidies.The latest official figures out of Hong Kong show that home sales have halved since the start of protests, Sandy Li and Cheryl Arcibal report. 
 


Morning guidance 

Beijing has called on all Hong Kong institutions with public authority, including the judiciary, to fight “violent criminals” with no mercy to put an end to more than 13 weeks of anti-government protests and violence.
“The Hong Kong government, including the executive, legislative and judiciary branches, as well as all sectors of society must take ‘bridling turmoil and curbing violence’ as the city’s most pressing task and the overwhelming priority,” Hong Kong and Macau Affairs Office (HKMAO) spokesman Yang Guang said on Tuesday.
“Especially to those key violent criminals and their backstage masterminds, organisers and agitators, [we] must show no mercy and pursue till the end.”
The protests are rocking the city's business community, hammering its stocks and raising questions about its long-term future as a financial hub. Here's a story showing why these protests are so much harder on the city than the Occupy Central.
The full story about Beijing's latest call to end protests can be read here.
 


Beijing calls on Hong Kong institutions to fight 'violent criminals' to end protests

China's margin-trading balance of 926 billion yuan at the end of August was 2 per cent higher than in July, suggesting improved sentiment by investors to do leveraged investment, according to Bloomberg data.
Net interest income accounted for 13 per cent of Chinese securities firms' first half earnings.
-- Xie Yu


China margin trading balance up, signalling improved trader sentiment

The IHS Markit Hong Kong Purchasing Managers’ Index (PMI) sank to 40.8 in August from 43.8 in July, signalling the steepest deterioration in the private sector since February 2009.
“The latest PMI data reveal a Hong Kong economy flirting with recession in the third quarter as business activity is increasingly aggravated by protest-related paralysis,” said Bernard Aw, Principal Economist at IHS Markit.
-- Xie Yu


 IHS Markit Hong Kong Purchasing Managers’ Index sinks, as economy is 'flirting with recession'

The Hang Seng Index opened 1.1 per cent higher at 25,817.9.
The Shanghai Composite Index opened 0.08 per cent lower at 2927.8.
The Shenzhen Component opened 0.27 per cent lower at 9607.5. ChiNext is also lower by 0.36 per cent to 1654.5.
-- Xie Yu
 
 


Hang Seng off to strong start, while China stocks struggle 

The Ministry of Finance and the Ministry of Agriculture in China issued a joint notice today, emphasizing the need to stabilize the supply of pigs.
The notice asked government authorities to implement subsidies for culling of pigs due to African swine fever. It also stressed the need to improve assistance for building and expanding pig farms, on top of improving the insurance for raising pigs via fiscal spending allocations.
 
-- Xie Yu
 


Beijing tells local governments to provide more help to pig farmers

Semiconductor makers and supply chain players, and metals including silver and copper manufacturers are supporting the Shanghai market, which has climbed into positive territory.
Huawei announced more cooperation with China Southern Power Grid.
Jiangsu Nata Opto-electronic Material (300346CH) surged by daily limit up of 10 per cent to 13.2 yuan.
The Shanghai Composite Index is up 0.4 per cent at 2,942.
-- Xie Yu


Semiconductors, metals boost Shanghai into positive territory

Caixin's service PMI came in at 52.1 for August, marking a three-month high, and signalling expansion.
The strong reading reflects a vibrant growth in new contracts. The survey found entrepreneurs were seeing growth in potential demand. New orders for exports saw growth subdued, but remained in expansion territory, Caixin said.
-- Xie Yu


Caixin's service PMI comes in at 52.1 for August

MTR (66 HK) is trading up 1.2 per cent at HK$45.05, putting it on track for a second straight day of gains after weekend vandalism at subway stations.
The owner and operator of the city's world-class subway system has seen its shares drop 20 per cent since a high of HK$55.70 on July 18, as protests have grown more violent. It plunged 3 per cent on Monday after some protesters vandalized dozens of stations. 
On Tuesday, Nomura reiterated its buy recommendation on the stock, and maintained its price target of HK$56.60. Of analysts tracked by Bloomberg, five rate it a buy, four a hold and two a sell, with a consensus 12-month target price of HK$52.56.
 

-- Deb Price 
 
 


MTR rises, but still down 20 per cent over six weeks amid escalation in protest violence

The STAR board, China's newly launched stock board for tech startups, is trading lower in early morning.
Twenty two companies on the STAR board are trading lower, leaving only six companies in positive ground. 
The launch of the board in July set off a trading frenzy in July. But turnover and stock price movement have calmed down, and the valuation of STAR stocks will also find a more "rational level", analysts with Zhongtai Securities said in a research report issued Tuesday.
On the other hand, China’s securities regulator turned down a proposed share listing on Friday night, triggering investors' questions about whether the regulator is once again playing a heavy hand after introducing a "registration-based" initial public offering system on the STAR board.
The China Securities Regulatory Commission (CSRC) said they rejected the IPO application by Eversec Technology, because the latter revealed “weakness in basic accounting work and inadequate internal controls.”
-- Xie Yu
 


Most STAR board companies trading lower 

Consumer discretionary, communication services and real estate are among sectors pushing up the Hang Seng Index. 
Index heavyweight Tencent (700 HK) is gaining this morning, rising 1.9 per cent to HK$335.60, as the company engages in a flurry of buybacks of its shares.
Galaxy Entertainment (27 HK) is leading gains among Macau casino operators, rising 3.2 per cent to HK$50.55. Of analysts tracked by Bloomberg 25 rate it a buy, three a hold and none a sell. (Here is a feature on Macau casino stocks for investors.)
Pork processor WH Group (288 HK) is the top percentage gainer in morning trading on the Hang Seng.
It is up 4.9 per cent to HK$6.63. As of its close at HK$6.32 on Tuesday, it is down 34 per cent since its high on April 23 of HK$9.60. It has struggled amid tariffs China has on US pork exports and the African swine fever outbreak on the mainland, which has cut down on the supply of pigs.
The Hang Seng Index is up 1.3 per cent to 25,870.24, putting it on track to break a two-day losing streak.  

 
-- Deb Price 
 


WH Group rallying as Hang Seng is on track to snap two-day losing streak

Bosideng International Holdings (3998 HK) is trading 7.4 per cent higher in Hong Kong at HK$2.9.
The down coat maker has rebounded by more than 70 per cent from a recent low on June 25, after short seller Bonitas Research accused Bosideng’s chairman and chief executive Gao Dekang and his “conspirators” of fabricating profits in its reported financial statements.
Bosideng denied the claims.
-- Xie Yu


Bosideng International shoots up 

Shanghai closed the morning trading session higher as the Shanghai Composite Index added 0.2 per cent to 2936.7.
Banks, brokerage companies and semiconductor makers led the rise.
The Shenzhen Component Index shed 0.24 per cent to 9,610.2, while the ChiNext Index lost 0.44 per cent to 1653.1.
-- Xie Yu


Shanghai ends morning session with small gains

Things are looking up for two of China's top builders after they cut prices to try to boost a falloff in home sales.
China Evergrande (3333 HK) reported its August contracted sales were up 18.2 per cent to 47.82 billion yuan. That is its first monthly increase since April.
Country Garden (2007 HK), China’s largest developer, also reported a 10 per cent increase in monthly sales to 46.83 billion in August. It suffered a 30 per cent plunge in July.
On August 20, Evergrande became the first builder to launch a nationwide campaign to cut prices, offering discounts of up to 22 per cent at its 532 projects. It has seen its monthly sales fall three months in a row.
Meanwhile, officials at Country Garden said price adjustments will be offered by local offices.
Country Garden cut the prices of homes in its The Clouds project in Guangzhou by about 10 per cent in a new round of sales in August.
China Vanke (2202 HK) is the only developer insisting that it will try not lower prices. It continued to book monthly sales drops. Its August sales dropped 8.4 per cent to 44.13 billion yuan, after a 27 per cent decline in July.
China Evergrande is trading up 0.2 per cent at HK$16.46. Country Garden is up 3 per cent at HK$10.10. And China Vanke is up 0.7 per cent to HK$27.05.

<![CDATA[// ><!]]>
 

-- Pearl Liu

Price slashing boosts home sales for two of China's top builders

The Hang Seng Index closed by 1.2 per cent higher at 25830.2.
-- Xie Yu


Hang Seng ends morning session up 1.2 per cent

The Hang Seng Index is trading higher by 1.3 per cent, or 25,863.88.
The Shenzhen Component Index is down by 0.2 per cent at 9615.4. The ChiNext Index down by 0.4 per cent at 1654.2.
-- Xie Yu
 


Hang Seng trading up after break, while China benchmarks are down

Tianli Education International Holdings (1773 HK) added 4.9 per cent to close at HK$ 3 by lunch break. The company plunged by more than 20 per cent in late afternoon trading on Wednesday.
Hong Kong Wisdom Education International Holdings (6068 HK) rebounded by 8.7 per cent to HK$3.4. The company also lost 19 per cent value on Wednesday afternoon.
The panic sell-off on Wednesday afternoon was triggered by investor concern that China might ban private run schools from going public under what is known as a variable-interest entity (VIE) structure. Such a move would force some listed education companies to spin off businesses.
The concern was triggered by an article published Wednesday by Liu Wei, president of Beijing Renmin University, who is also a political adviser to the Communist Party. He said VIE structures should be banned from schools because China needs to safeguard its sovereignty in education and uphold its ideology. VIE structures essentially allow foreign investors to indirectly control business in sensitive industries like the Internet and education.
-- Xie Yu


 Education stocks jump in Hong Kong after panic sell-off on Wednesday

Property managers are rising in Hong Kong.
China Overseas Property Holdings (2669 HK) rose by 3.5 per cent to HK$4.1. Ever Sunshine Lifestyle Services Group (1995 HK) rose by 2.7 per cent to HK$3.9. Colour Life Services Group (1778 HK) added 1.5 per cent to HK$4.1.
-- Xie Yu


Property managers rising in Hong Kong

Hong Kong’s railway operator has paid a steep price for incurring the wrath of anti-government protesters – many of whom accuse the public transport provider of being in lockstep with the government and police.
Francis Lun Sheung-nim, the chief executive of Geo Securities, on Tuesday said he would put a “sell” rating on MTR (66 HK) stock.
“The vandalism is quite substantial. It must be in the tens of millions because the machines are quite expensive,” Lun said. “I would say in the past few weeks, MTR has suffered damages of HK$50 million."
In recent weeks, the MTR has had its services disrupted, stations vandalised and its corporate image tarnished. Over the weekend, 39 railway stations – amounting to more than 40 per cent of the heavy rail stations in Hong Kong – were severely damaged.
Radical protesters now see the MTR Corp as an enemy in league with the same police force they have battled in the streets for months. Critics have said the government-owned rail operator only started to get tough  on the protest movement because of pressure from Beijing.
The destruction included CCTV cameras, ticketing machines, glass doors, turnstiles and station control rooms. Protesters were accused of looting fire extinguishers and defacing stations.
MTR is trading up 3 per cent today to HK$45.85.
Read the full story above by Cannix Yau by clicking here. 
 
 
 


Protesters see MTR as an enemy in league with police

Income from July and August for Chinese brokerage firms has reached 3.2 billion yuan, surpassing the total of the first half at 3 billion yuan, according to calculation by Securities Times.
A research note by Tianfeng Securities issued today said the second half will see income of securities firms increase.
“When the overall liquidity is loose and the bond market interest rate returns to a low level, it is expected that the domestic bond market financing scale will maintain high growth in the second half of the year, which is expected to boost the bond underwriting business. In addition, leading securities firms are expected to reap additional initial public offering business from China's new STAR board in the second half," the note said.
Citic Securities (6030 HK) rose 4.5 per cent to HK$14.9 in Hong Kong. Its Shanghai listed shares (600030CH) rose 1.4 per cent in Shanghai to 23.3 yuan. China International Capital (3908 HK) rose 4.8 per cent to HK$14. GF Securities (1776 HK) rallied 7.6 per cent to HK$8.6. Its Shanghai shares added 1.3 per cent to 13.9 yuan.
-- Xie Yu


Chinese brokerage firms rally on bright earnings outlook

Embattled Hong Kong leader Carrie Lam Cheng Yuet-ngor is set to formally withdraw on Wednesday afternoon the much-despised extradition bill that sparked the nearly three-month long protest crisis now roiling the city, sources have told the Post.
The decision will mean that the government is finally acceding to one of the five demands of the protesters, who have taken to the streets over the past 13 weeks to voice not just their opposition to the legislation, but the overall governance of the city in demonstrations that have become increasingly violent.
Lam had earlier already suspended the bill, which would have allowed for the extradition of criminals to jurisdictions with which the city lacked a treaty, including the mainland, but critics have not been satisfied.
They argued that for as long as the bill remained on the legislative agenda, there was every chance it could be resuscitated within the Legislative Council’s current term which ends next year.
The Hang Seng Index surged on the news, and is now up 3.2 per cent at 26,331.77. 
Read full story here. 


Hong Kong leader to withdraw extradition bill, sources tell SCMP; Hang Seng surges  

MTR (66 HK) is surging on news Hong Kong leader Carrie Lam will formally withdraw the extradition bill that sparked a protest movement in early June. 
It is now up 5 per cent at HK$46.75. As of Tuesday's close, the stock had fallen 20 per cent over the past six weeks. 
It has been targeted by some protesters, who think it is in lockstep with the government and the police.  
-- Deb Price


MTR surges on SCMP report that Hong Kong leader will formally withdraw extradition bill 

Blue chips, led by property heavyweights, are rallying on Hong Kong chief executive Carrie Lam's concession to one of the demands by protesters -- formally withdraw the extradition bill.
Wharf Real Estate Investment (1997 HK) soared by 8.4 per cent to HK$44.8. New World Development  (17 HK) jumped 8 per cent to HK$10.4. Sun Hung Kai Properties (16 HK) rose 7.6 per cent to HK$116. Sino Land (83 HK) rose 8.2 per cent to HK$11.7.
The Hang Seng is on track for its biggest one-day percentage gain in 10 months. On November 2, 2018, it rose 4.2 per cent. After the SCMP report, the Hang Seng shot up as much as 3.9 per cent. It is now up 3.4 per cent at 26,383.42.
-- Xie Yu and Deb Price


Property developers surge on city leader's concession

Hong Kong retailers are bouncing back strongly on the news the extradition bill will be withdrawn.
Sa Sa International (178 HK) soared by 16 per cent to HK$1.88. Chow Tai Fook (1929 HK) shot up 9.7 per cent up to HK$7.21.
Retailers have been hard hit by protests, which have depressed tourism and overall sales.
-- Xie Yu
 


Sa Sa International, Chow Tai Fook surging 

The gains we are seeing this afternoon on news Hong Kong's city leader will withdraw the extradition bill won't carry forward, predicts Alan Li, portfolio manager at Atta Capital. 
"If she had withdrawn the bill before July, none of the tragedies would have happened," he said.
"This is only one of the (protesters') demands, and the least important one. It won't calm people down... Not much change on fundamentals (of stocks). This overshoot of market gives short-term opportunities," he said.
-- Deb Price
 


Short-term opportunities, but don't expect this to be market turning point, predicts stocks expert Alan Li 

Investors are being too optimistic off today's news that Carrie Lam will formally withdraw the extradition bill, says Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.
"I think investors are too optimistic. Protesters have five demands, and withdrawing the bill is only one of them."
He said it is unlikely that all demands will be met.
"And there are other negative factors affecting Hong Kong, including the trade war and depreciation of RMB," he said. "Frankly we don’t know what will Carrie Lam deliver finally."
The Hang Seng is up 3.7 per cent at 26,479.86.
-- Deb Price 


Investors being too optimistic on extradition-bill news, says stocks strategist Kenny Wen

Chart: Hang Seng Index surges by most in 10 months 

Hong Kong Wisdom Education International Holdings (6068 HK) rebounded by 13.3 per cent to HK$3.5.
The company lost 19 per cent value on Wednesday afternoon.
Tianli Education International Holdings (1773 HK) added 5.6 per cent to close at HK$ 3. The company plunged by more than 20 per cent in late afternoon trading on Wednesday.
Hope Education Group (1765 HK) rose 7.7 per cent to HK$1.4, after falling 7.1 per cent on Wednesday.
The education stocks plunged on Wednesday afternoon because of an article put up by a political adviser in China that suggested the country safeguard its sovereignty in education and its ideology by banning so-called variable-interest entity structures that allow foreign investors to indirectly control business in sensitive industries.
Mariana Kou, an analyst with CLSA, said she believes the market had overreacted.
"The implementation rules for the private education law has yet to be finalized. The second draft came out in August 2018. We view the comment more as one of the many different suggestions for the sector's regulatory design," she said.
"The market is sensitive around regulations for this space. Yet we believe that the core operations remain solid and the sector should be one of the few very resilient sectors amid the global macro volatility we are facing," she said.
-- Xie Yu


Education stocks close up after panic on Wednesday

John Slosar has resigned as chairman of Cathay Pacific Airways (293 HK), the company announced in a filing to the Hong Kong stock exchange today, capping a tumultuous period of management changes at the company.
Patrick Healy, 53, also a Swire Group executive, will replace Slosar once the company concludes its board meeting on November 6.
Slosar ends a 39-year career with the group, which included appointments as CEO of Hong Kong’s flagship airline from 2011 to 2014 and then its chairman from 2014, holding a dual role also at Cathay’s controlling shareholder Swire Pacific until 2018.
The 62-year-old leaves Cathay Pacific at one of its weakest moments as the far-reaching turmoil of the anti-government protests in Hong Kong and a subsequent safety intervention by the Civil Aviation Administration of China has crippled the airline.
Rupert Hogg resigned as CEO and his deputy Paul Loo Kar-pui also exited following pressure from the CAAC in August.
Read full story by Danny Lee here. 
