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Zhang Shidong

Anthony Richardson

Deb Price

Another trading day draws to a close --
If you'd like to receive the live blog each day via email, shoot Deb an email. You'll get a link each day that will automatically load new items when you click on it.
-- Zhang Shidong, Deb Price and Anthony Richardson
 


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Stocks

Stocks Blog: Liquor giant Kweichow Moutai closes at record high as China benchmark rebounds; Hang Seng slips

The fiery liquor distiller set a new record closing price on Wednesday. Photo: Simon Song

Business

Markets

Kweichow surges 5 per cent to 1,148.90 yuan, a record for any Chinese stock
Chinese oil giants drag Hang Seng down


Shanghai Composite climbs 0.3 per cent after Tuesday's big losses


China stock market

Hang Seng Index

Hong Kong Stock Exchange

Hong Kong protests

MTR Corporation

Tencent

Cathay Pacific

Live

Hong Kong’s role as the primary gateway for long-term international investors to transfer money into China has remained largely intact despite the city being hit by increasingly violent anti-government protests, according to data released by the Chinese government.
According to the figures from China’s Ministry of Commerce, Hong Kong remained the dominant source of foreign direct investment entering China in June, July and August when the city grabbed global headlines for the protests triggered by an extradition bill that has since been withdrawn.
China received US$62.9 billion in foreign direct investment via Hong Kong in the first eight months of this year, accounting for 70 per cent of total inflows, according to the figures released on Tuesday.
Read full story by Zhou Xin and Orange Wang here. 
 


Hong Kong still primary gateway for investors to transfer money into China

One in every 10 shops in Causeway Bay now stands empty, as three months of protest rallies have deterred visitors from the world’s most expensive shopping district, adding to the woes of a retail industry that is already suffering from a weakening yuan and mainland China’s abolition of luxury tax.
As many as 102 shops stood empty out of 1,087 in August in the district, or a vacancy rate of 9.4 per cent, according to data by the real estate agency Midland IC&I, which noted that the tenant-free rate may rise to 11 per cent next year, as “sentiment is worsening quickly” in the city.
“The prospect is quite critical. In my many years of dealing [with] shops, this is even worse than the Sars [outbreak] because the scale of the retail industry was not as large” during the 2003 outbreak of the severe acute respiratory syndrome, said Midland IC&I’s director Tony Lo.
More than 600 shops may empty out by next year, according to Lo’s forecast, putting hundreds of staff out of work in an economy that US bank Morgan Stanley said could contract in 2019, after tourist arrivals to Hong Kong shrank 40 per cent in August. That prospect could drive retail rental charges down by 30 per cent.
 
Read full story by Lam Ka-sing and Holly Chik here.
 


One in 10 shops in Causeway Bay empty

A steep decline in home sales during China’s three-day Mid-Autumn Festival holiday, a period when such transactions usually peak, suggests the mainland property industry might miss a traditional high season altogether this year.
Only four new homes were sold in Beijing during the first two days of the festival, down from 180 units sold last year, according to brokerage Centaline Property Agency, in an indication the deteriorating economy was weighing on the sector.
In the financial centre of Shanghai, 136 new homes were sold during this period, a decline of 32 per cent year on year. In the technology hub of Shenzhen, across the border from Hong Kong, new home sales dropped by about half to 76 units.
“The usual September pick up in activity in the housing market no longer exists, for sure,” said Zhang Dawei, chief analyst at Centaline. “Market sentiment has cooled, and it is very difficult to see a sudden turnaround even in October.”
September and October host two major holidays in China, the Mid-Autumn Festival and National Day, and traditionally witness spikes in consumption, including home buying. And as developers struggle to maintain sales momentum, it is feared September’s declines might leak into October as well.
Read full story by Pearl Liu here.
 


Sharp decline seen in China homes sales during Mid-Autumn Festival 

China is moving forward rapidly its plans for a controversial social credit rating system that will include 33 million companies, raising fears of reprisals among foreign firms as Beijing seeks to extend its control over the business environment in the country.
The National Development and Reform Commission (NDRC) is pushing ahead with social credit-based supervision of all commercial entities from large firms to small, independently owned and operated business, prompting complaints over corporate privacy and heavy handed government intervention.
The social credit rating will include court rulings, tax records, environmental protection issues, government licensing, product quality, work safety and administrative punishments by market regulators.
Advocates argue that it will help create better corporate citizens, but critics say that it will give greater latitude to local officials to target certain firms.
Read full story by Frank Tang here.
 


China moves ahead on rating system on 33 million companies

Short sellers have been taking positions against Hong Kong, betting that the city’s stocks and currency peg to the US dollar would crumble as its worst political crisis in decades plunges its financial markets into chaos.
As many as 113,960 open positions held by the top 10 brokers on the city’s derivatives exchange were short as of the end of September 13, representing 82 per cent of all open short positions, according to data by Hong Kong Exchanges and Clearing (HKEX).
The brokers built up their position in August, when the Hang Seng was down 7.4 per cent, while the yuan’s deterioration past 7 per US dollar raised hopes the city’s equity and currency markets would decline further.
The index, however, rose 6.24 per cent in the first two weeks of September, while the Hong Kong dollar mostly stayed within its trading band against the US currency, much to the chagrin of stock market and currency bears such as Kyle Bass, Thomas Roderick and Kevin Smith, who have been talking down the markets since last month.
Read full story by Enoch Yu here. 
 


Short sellers on the wrong side of rising Hang Seng 

Overnight markets/ What futures foretell
-- Overnight in US markets, the S&P 500 gained 0.3 per cent, the Nasdaq rose 0.4 per cent, and the Dow Industrials added 0.1 per cent
-- Hong Kong futures were 0.4 per cent higher, while the FTSE China A50 futures climbed 0.5 per cent
IPO debuts: none
Economic statistics/Central Bank action: The Federal Reserve will announce its decision on the interest rate Thursday. The Fed will probably cut the borrowing costs by 25 basis points, according to a Bloomberg survey.
Corporate events: earnings, meetings, news conferences
-- China will unleash 10,000 tons of pork to the market tomorrow to rein in prices of the meat, China Merchandise Reserve Management Centre said Tuesday.
Later this week: China will publish the monthly loan prime rate on Friday.
 


Morning guidance 

Fulum Group, a local Chinese restaurant chain, is expected to record a year-on-year loss from April to September.
The group said revenue from April to July dropped about 13 per cent from a year ago. Gross profit margin also fell while the rental and salary to revenue ratio increased during the same period.
Fulum said it has seen "more cautious spending of the general public affected by the continuous weak economic environment and sentiment of the society" in a profit warning published yesterday.
The group made about HK$15.9 million (US$2 million) in revenue from April to September last year.
Its shares last traded at HK$0.3.
-- Holly Chik


Restaurant chain Fulum sees profits falling

Turbulence on China’s stock market has not changed the bullish call by Citic Securities. 
China’s biggest publicly traded brokerage said in a note that the rebound on stocks remains intact, as policy loosening is still in place and it is a matter of time before China’s central bank cuts interest rates. 
The Shanghai Composite Index dropped 1.7 per cent yesterday, the most in 10 weeks, after the central bank disappointed investors by refrain from cutting the rate on the medium-term lending facility. 
The People’s Bank of China may lower the borrowing costs after a rate meeting by the Federal Reserve tomorrow, Citic said.
-- Zhang Shidong


China stocks’ decline creates buying opportunity, Citic says

Stocks in China and Hong Kong opened higher in the aftermath of Tuesday’s sell-offs, though the gains were not solid. 
The Shanghai Composite Index rose 0.3 per cent to 2,985.51 after falling by the most in 10 weeks on Tuesday with a 1.7 per cent decline, while the Hang Seng Index added 0.2 per cent to 26,829.83. 
Shanxi Xinghuachun Fen Wine Factory and other liquor stocks led the pack of gaining stocks in the mainland, and AAC Technologies Holdings was the best performer on the Hang Seng.
-- Zhang Shidong


China and Hong Kong stocks edge higher at opening

Kweichow Moutai (600519 CH) shot up in early trading, jumping 4.5 per cent to 1,143.72 yuan.
The stock has spent the last four trading sessions below 1,100 yuan, a milestone it crossed on August 22.
The stock is highly popular with northbound Stock Connect traders.

 
Of analysts tracked by Bloomberg, 40 rate it a buy, one a hold and one a sell.
-- Deb Price
 


Traders pile into liquor maker Kweichow Moutai

Better-than-expected US economic data including industrial production, capacity utilisation and housing sentiment does not provide a strong case for the Federal Reserve to cut interest rates in the meeting  tomorrow, according to Fisher Investments, a US money manager with US$112 billion under management.
The data “certainly doesn’t suggest a looming recession or the need for the Fed to cut rates,” said Aaron Anderson, senior vice president at Fisher. “The Fed can’t legitimately claim it’s ‘data dependent’ if it cuts rates against this backdrop. Reigniting QE would be an even bigger mistake.” 
There is an 81 per cent probability that the Fed will lower the benchmark borrowing rate by between 17.5 and 20 basis points at tomorrow’s meeting, according to Bloomberg data.
-- Zhang Shidong
 


US economic data does not support rate cut, Fisher Investment says

The bets on oil stocks after a drone strike on a major facility in Saudi Arabia quickly faded today.
Saudi said it had already restored 41 per cent of the capacity at the oil-processing complex that was attacked on Monday, sending crude futures plunging by 5.7 per cent in New York. 
Tong Petrotech (300164 CH), an oil-drilling equipment maker, plunged 7.4 per cent to 5.86 yuan in Shenzhen, and Offshore Oil Engineering (600583 CH) sank 3 per cent to 5.48 yuan in Shanghai. 
Sinopec (386 HK), China’s biggest oil refiner, retreated 2.3 per cent to HK$4.75 in Hong Kong.

 
-- Zhang Shidong
 


Chinese oil-linked stocks slide as attacked Saudi facility resumes output

Cosmetics chain Sa Sa International (178 HK) is down 22.5 per cent in two months, the point at which protests turned violent. Jewellery seller Chow Tai Fook (1929) has fallen 20.2 percent.
Here's a quick look at how the protests are affecting five Hong Kong stocks.
-- Deb Price

 


Chart: These stocks are in the line of protest fire

Sou Yu Te Group (002503 CH) surged by the 10 per cent daily limit to 2.62 yuan in Shenzhen trading after the Chinese apparel maker said it had agreed to set up a supply-chain unit with an investment arm of the Guangzhou municipal government. 
Sou Yue Te will hold a 40 per cent stake in the 80 million-yuan (US$11.3 million) joint venture, according to an exchange statement.
-- Zhang Shidong
 


Chinese clothes maker Sou Yu Te surges by daily limit on supply chain investment

MTR (66 HK) gained in morning trading in Hong Kong, moving up 0.32 per cent to HK$46.35. 
It lost 1.3 per cent to HK$46.20 on Tuesday after a derailment resulted in five passengers being taken to hospital and forced the operator to suspend some trains running on the East Rail Line. 
The derailment added to MTR’s woes, as the operator had been the target of vandalism during Hong Kong’s violent street protests, where some radical protesters had vandalised dozens of stations in MTR’s network.
Services on the damaged line were returning this morning.
-- Anthony Richardson
 


MTR recovers some ground after train derailment 

Information technology stocks are the big gainers on the Hang Seng Index in early trading, rising 3 per cent. Energy companies were the big losers, with the sector falling 2 per cent in the wake of the drone attack at a Saudi Arabia oil facility that hit supplies.
AAC Technology (2018 HK) surged 10.3 per cent to HK$44.45, making it the top gainer. The Apple supplier shot up over analysts' reports that Apple's new iPhones were outselling older models, Dow Jones Newswires reported.
Hengan International (1044 HK) climbed 1.8  per cent to HK$52.80, putting the China sanitary napkin and diaper maker on track to snap a two-day streak of losses.
Galaxy Entertainment (27 HK) is leading gains among Macau casino operators, rising 0.9 per cent to HK$52.25.
Leading losses were China oil majors, which are feeling the impact of the drone attack at a Saudi Arabia oil facility: PetroChina (857 HK) is down 2 per cent to HK$4.22.  China Petroleum and Chemical (386 HK) is down 2.3 per cent to HK4.75.
Overall, property stocks are down, led by Swire Pacific (19 HK), which is down 1.4 per cent to HK$75.80.
-- Deb Price
 


Tech firms lead Hong Kong gains, while oil majors reel from drone attack

Xu Xiaoyong has returned 54 per cent for investors during his fund’s first year by hunting for stocks that can thrive despite the challenges facing China’s economy.
That means buying liquor firms supported by resilient consumers or betting that domestic tech suppliers will see more demand from larger companies as a result of the trade war, encouraging innovation, said Xu, investment director of Changan Fund Management.
Xu started his Changan Yulong Flexible Allocation Mixed Fund in September last year, a few months before China’s equity market began recovering from a sell-off. While it’s still early days, it is beating 99 per cent of more than 2,500 peers tracked by Bloomberg.
Xu’s top 10 holdings at the end of June included liquor makers Kweichow Moutai (600519 CH) and Wuliangye Yibin (858 CH) as well as telecom equipment manufacturer ZTE (763 HK) and WUS Printed Circuit (2463 CH), according to the fund’s quarterly report. Those four companies have jumped more than 75 per cent this year.
See full story here.
-- Bloomberg


New China fund manager returns 54 per cent in first year. Here's how

Anta Sports (2020 HK) surged 4.2 per cent, Xtep International (1368 HK) jumped 3.7 per cent and Li Nin (2331 HK) climbed 3.6 per cent.
Anta, which makes sports footwear and clothing, has been on a tear over the past 12 months, running up 92 per cent. Rival Xtep is up 7.9 per cent in the same period. But the winner of the trio is Li Nin -- up a mouth-watering 234 per cent over 12 months.
-- Deb Price
 


Sports retailers among the winners in Hong Kong today

Investors’ enthusiasm for China’s new technology board has been waning. 
The daily trading value on the Science and Technology Innovation Board, or Star Market, dropped this week to the lowest level since trading began in July, with shares worth 4.73 billion yuan (US$66.8 million) changing hands yesterday. 
That was a fraction of the record daily turnover of 48.6 billion yuan on July 22, the first day of trading on the board. The valuation was still lofty, with the 29 constituents trading at an average multiple of 83 times earnings, according to data from the Shanghai Stock Exchange.
 

-- Zhang Shidong


China’s Star Board fever is cooling as turnover falls to record low

Beijing HualuBaina Film & TV (300291 CH) surged by the 10 per cent daily limit to 6.37 yuan in Shenzhen after the filmmaker said its biggest shareholder had increased its stake. 
Infore Investment Holdings Group bought 8.17 million shares, or a 1 per cent stake, of Hualubaina from July 22 through to September 17, the company said in an exchange statement. Prior to the purchase, Infore had a 17.5 per cent stake in the company.
-- Zhang Shidong
 
 


Filmmaker Beijing Hualubaina skyrockets as biggest shareholder raises stake

The Shanghai Composite Index rose 0.3 per cent to 2,985.66 at the close today, rebounding from its biggest decline in 10 weeks, as traders waited for an interest rate decision by the Federal Reserve. 
Liquor firms led the gain, with Kweichow Moutai (600519 CH) and Wuliangye Yibin (858 CH) both rallying at least 3 per cent.
-- Zhang Shidong
 


China’s stocks end higher for the first time in three days

Fiery liquor distiller Kweichow Moutai (600519 CH) surged 5 per cent today, closing at a record high for itself and any Chinese stock.
Here's a look at how it has done this year.
-- Deb Price

 


Chart: Kweichow Moutai closes at record high -- 1,148.90 yuan

Hong Kong’s Hang Seng Index slipped 0.1 per cent to 26,754.12. Energy producers including China Shenhua Energy (1088 HK), Sinopec (386 HK) and PetroChina (857) led the declines, as crude oil futures slumped after Saudi Arabia said a facility that was attacked by a drone had already resumed 41 per cent of its output.
-- Zhang Shidong
 


Hong Kong’s stocks fall for third day as energy producers drag

Liquor maker Kweichow Moutai (600519 HK), which hit a new record high today, could see a 10 to 15 per cent increase in its share price before China's National Day on October 1, according to Ken Lo Chi-ming, a former analyst with Grand Finance Group.
He was far less optimistic about Hong Kong's troubled carrier Cathay Pacific (293 HK) blaming protests for the drop in passenger and cargo traffic at the airline.
“I don’t think Cathay stock will perform well in the short term unless both external and internal pressures could be resolved,” said the analyst.
MTR (66 HK) could be hard hit if property prices drop, since real estate development and management is a major part of its business, said Lo. But he said it is unlikely property prices will fall markedly in the short term because of low interest rates.
Investors would not be "suddenly excited" because of the Federal Reserve interest rate cut, as the market has been expecting it since six months ago, said the analyst.
-- Holly Chik
 


Kweichou Moutai may rise up to 15 per cent by October 1, says analyst Ken Lo

Stocks Blog: Liquor giant Kweichow Moutai closes at record high as China benchmark rebounds; Hang Seng slips

Kweichow surges 5 per cent to 1,148.90 yuan, a record for any Chinese stock Chinese oil giants drag Hang Seng down

Kweichow surges 5 per cent to 1,148.90 yuan, a record for any Chinese stock

Chinese oil giants drag Hang Seng down