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Zhang Shidong

Deb Price

Anthony Richardson

Good day traders --
A rate increase in Hong Kong was not enough to lift the Hang Seng today. A flurry of late-afternoon buying drove Chinese stocks higher at the close.
Join us tomorrow for more action from the trading floor.
If you would like to receive the blog each morning via email, shoot Deb a message at deb.price@scmp.com.
-- Zhang Shidong in Shanghai and Deb Price in Hong Kong 


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Stocks

Stocks Blog: Rate cut fails to lift Hang Seng, protests hit Bossini revenue, Sa Sa falls on profit warning

Sa Sa cosmetics chain issued a profit warning as sales have fallen due to protests and a drop in mainland tourists. Photo: Nora Tam

Business

Markets

Chinese stocks get a late boost to finish 0.5 per cent higher
Mainland tourists won't return to Hong Kong any time soon, warns VC Asset's Tse


Mainland tourists won't return to Hong Kong any time soon, warns VC Asset's Tse


Sa Sa International Holdings

Esprit Holdings

MTR Corporation

Cathay Pacific

Hong Kong protests

Trade war

China stock market

Tencent

Kweichow Moutai

Live

 Overnight markets/ What futures foretell
 -- Overnight in US markets, the S&P 500 gained less than 0.1 per cent, the Nasdaq fell 0.1 per cent, and the Dow Industrials added 0.1 per cent
 -- Hong Kong futures were 0.1 per cent higher, while the FTSE China A50 futures climbed 0.2 per cent
IPO debuts: S&T Holdings (3928 HK), a Singapore-based construction service company, will start trading in Hong Kong today.
Economic statistics/Central Bank action: 
The Federal Reserve cut the benchmark interest rate by a quarter percentage point for a second time this year. Still, Fed Chairman Jerome Powell held off on signalling deep rate cuts. Hong Kong’s monetary authority immediately followed the Fed’s move by lowering the base rate by 25 basis points.
Corporate events: earnings, meetings, news conferences
-- nothing major
Later this week: China will release its monthly loan prime rate on Friday. The 1-year rate will probably fall by five basis points to 4.20, according to a Bloomberg survey.


Morning guidance 

Sa Sa International (178 HK) issued a profit warning after market close Wednesday, citing the protests in Hong Kong. 
"The sales performance was hit by the decline of visitor arrivals from mainland China to Hong Kong, as well as weaker consumer sentiment, caused by continuous social incidents in Hong Kong, increasing tension of Sino-US trade war and the Renminbi depreciation," it said in a stock exchange filing.
For the five months ended 31 August, turnover declined approximately by 15 per cent to around HK$3 billion as compared to the same period last year, it said. The Hong Kong and Macau markets also dropped by 17 per cent.
Sales performance was weakest in August,  down by 28% year-on-year, while that of Hong Kong and Macau markets also declined by 32 per cent. "The decline in sales gave rise to losses in the Hong Kong and Macau markets as well as that of the Group for the month of August, and also for the first five months for the Group," it said. 
Sales performance continued to be week from September 1 to September 15, dropping approximately by 14 per cent on a monthly basis, and 29 per cent on a year-on-year basis, it said. In the previous financial year, it noted it reported a profit of HK$202.9 million for the six months ended 30 September.
"At present, the Group has sufficient cash on hand to meet current business needs. Yet facing the  current challenges, the Group adopts a prudent finance management approach with proactive implementation of a number of cost control initiatives, including negotiating for rental reduction with landlords, reducing operational expenses such as staff costs, selling, general and administration costs, etc. The Group has also been launching more promotional campaigns with attractive discounts to boost sales and lower the inventory level to reduce holding costs and preserve cash."
-- Deb Price 
 


 Sa Sa International issues profit warning, citing 'social incidents' in Hong Kong

The Federal Reserve will continue to lower borrowing costs for the rest of the year as part of an  “insurance cut,” as the China-US trade war dampens business sentiment, said Tai Hui, chief strategist for Asian markets at JPMorgan Asset Management.
“The progress of the US-China trade negotiation remains slow and this will continue to weigh on business sentiment,” he said. “One important question is whether this cautious mood would eventually spill over into hiring decisions or slowdown wage growth.”
Hui recommends investors stay overweight on stocks with high dividend yield in Asian markets.
-- Zhang Shidong
 


Fed may add to rate cuts this year, JPMorgan Asset says

Sa Sa International (178 HK) falls 1.8 per cent after warning it suffered a severe drop in sales in August and this month due to the protests, drop in mainland tourism, the trade war and weakness in the yuan.
It is trading at HK$1.68.
-- Deb Price
 


Sa Sa International falls after profit warning

Investors in the mainland and Hong Kong did not seem to be cheering the move by the Federal Reserve to cut the benchmark rate by a quarter percentage point. 
The Shanghai Composite Index drifted 0.1 per cent higher at the open, while the Hang Seng Index slipped 0.2 per cent. Traders may be worried that there will be no more rate cuts this year, as Fed Chairman Jerome Powell turned dovish, saying that “moderate” policy would be enough for economic growth.
-- Zhang Shidong
 


China and Hong Kong stocks unmoved by Fed rate cut at open

Esprit Holdings (330 HK) said on Wednesday that customer traffic at its shops in Hong Kong had dropped 40 per cent because of the protests.
“What we are seeing in Hong Kong is abnormal,” said Anders Kristiansen, chief executive of the Hong Kong and Germany-based fashion house. “You don’t see a reduction in traffic anywhere in the world of 40 per cent. This is massive and, clearly, it is linked to what is happening here.”
Esprit posted better-than-expected results for the year ending June 30. Its net loss stood at HK$2.14 billion (US$273.3 million), 16 per cent less than the last financial year, while revenue stood at HK$12.9 billion, down 12.9 per cent but above estimates by analysts polled by Bloomberg.
The company has already shut many shops in Hong Kong.
Its shares are trading flat in Hong Kong.
-- Anthony Richardson
 


Esprit says protests to blame for 40 per cent drop in customer traffic

Singaporean construction company S&T Holdings (3928 HK) started trading on Hong Kong’s main board today.
Its shares shot up at the open to HK$1.34 from an initial public offering price of HK$1.05 to 1.15 before settling back to trade flat.
The company provides civil engineering and industrial building services in Singapore.  
It also operates a property investment business which rents out eight properties for residential and industrial purposes.
Listing in Hong Kong may open up a new channel of financing for the Singaporean company, the directors said, because Hong Kong brings greater exposure to international financial markets and the investment community.
Singaporean construction service provider S&T Holdings (3928 HK) started trading on Hong Kong’s main board today.@HKEXGroup @SCMPNews pic.twitter.com/r6lWKeKDFH
— Holly Chik (@hollycwchik) September 19, 2019
 
- Holly Chik
 


Singaporean construction firm S&T trades flat on debut in Hong Kong

Kweichow Moutai (600519 CH) is down 0.44 per cent to 1,143.88 yuan, after shooting up 5 per cent on Wednesday to its highest level ever -- 1,148.90 yuan.
Blog readers will remember the prediction in Wednesday's blog by analyst Ken Lo that it could go up 15 per cent by October 1, when the 70th anniversary of the People's Republic of China will be celebrated.
We'll be watching ...
-- Deb Price
 


Kweichow Moutai gives up some of Wednesday's huge gains

Hong Kong's benchmark Hang Seng index fell even after the monetary authority cut the base interest rate by 25 basis points in line with an overnight cut by the US Fed, moves that offered "no drama" because they've been widely anticipated, said HSBC's head of US FX strategy Daragh Maher, in an e-mailed commentary. 
"The announcement of a 25bp rate cut was in line with the consensus forecast and market pricing ahead of the meeting. Expectations for the scale of easing had been pared back in recent weeks on the back of some Fed rhetoric which had downplayed the need for anything more aggressive. Indeed, there were two dissenting hawkish votes against the easing announced (alongside one dovish dissent for a 50bp cut)."
-- Eugene Tang
 


Rate cut fails to lift Hong Kong's benchmark

The quality of listed companies, fickle regulatory policies, the lack of short-selling and stretched valuations of small-caps are the main reasons bull runs on China’s stock market did not last long historically, said Xiao Gang, former chairman of the China Securities Regulatory Commission, at a conference yesterday. 
Xiao, currently a member of the government’s policy advisory body, also said the performances of regulatory officials should not be measured on the rise or fall of the stock market. Xiao quit as chief of the stock market regulator in 2016 after a meltdown that erased US$5 trillion in market capitalisation in 2015 as a stock bubble fuelled by margin trading burst.
-- Zhang Shidong
 


Former chief regulator explains why China’s bull market is always short

This is a great time to hold cash and gold -- and wait for the Hang Seng Index to fall, says Kenny Wen, wealth management strategist at Everbright Sun Hung Kai. And the fall that's coming could be very hard, he adds.
The benchmark index finished Wednesday at 26,754.12. The critical support level will be 25,000, Wen said.
If it breaks through that, it could fall to 22,000. That'd be a nearly 18 per cent fall from Wednesday's close, and that could happen within six months, he says.
The last time the Hang Seng was below 22,000 was on December 29, 2016, when it was at 21,790.91.
"Stay out now and wait," he advises. "Buy gold and wait for the market to fall."
He expects gold to rise to US$1,600 an ounce by the end of the year. It is now at US$1,491.88, having run up a mouth-watering 16.3 per cent this year.

 
-- Deb Price
 


'Buy gold and wait for the market to fall,' advises strategist Kenny Wen

Companies whose major shareholders have announced plans to cut their stakes bore the brunt of sell-offs on mainland China’s markets today. 
Wuhan Fingu Electronic Technology (002194 CH) was the biggest decliner among the 3,000-plus listed companies with a drop of 9.5 per cent after PT Huaye Value Investment Partner, the third biggest shareholder, said it plans to sell up to a 2 per cent stake in the company in the next  six months. 
Shenzhen SEG (058 CH) lost 9.3 per cent and Kyland Technology (300353 CH) slumped 9 per cent on plans by big shareholders to sell their stakes.
-- Zhang Shidong
 


Chinese companies with insider selling plans top list of worst performers

Tianjin Printronics Circuit (002134 CH) jumped by the 10 per cent daily limit to 12.71 yuan in Shenzhen trading after its parent company started a mixed ownership reform. 
Tianjin Zhonghuan Electronic and Information Group, which has a 25 per cent stake in the listed company, began the process for asset checks, auditing and evaluation, Tianjin Printronics said in an exchange statement.
-- Zhang Shidong


Tianjin Printronics soars by daily limit on parent’s ownership reform

The Hang Seng is being weighed down by industrials and financials, with technology the only sector showing gains.
Apple supplier AAC (2018 HK) is having another great day, posting a 5.4 per cent jump to HK$46.80, following a Dow Jones news report that new iPhone sales are stronger than earlier models. It ran up 10.17 per cent on Wednesday. Sunny Optical (2382 HK) is up 2 per cent to HK$119.30.
Losers include PetroChina (857 HK), down 2.8 per cent to HK$4.1, and AIA Group (1299 HK), down nearly 3 per cent at HK$76.55.
Casino stocks are down, with Sands China (1928 HK) leading losses in the sector, falling 1.9 per cent to HK$37.1.
At the lunch break, the Hang Seng is down 1.2 per cent to 26,421.91.
-- Deb Price
 


PetroChina, AIA among biggest losers as Hang Seng falls

Clothing retailer Bossini International (592 HK) is trading down 0.5 per cent at 20 HK cents, after reporting a 16 per cent drop in revenue for the year ending June 30.
The "be happy" retailer reported revenue of HK$1.64 billion versus HK$1.96 billion in the same period a year before.
Meanwhile, its gross profit decreased by 18 per cent to HK$846 million, versus HK$1.03 billion in the same period in 2018, it said in a stock exchange filing after market close on Wednesday.
Loss attributable to owners was HK$139 million, versus HK$29 million in the year-before period, it said.
"The retail market in Hong Kong saw a glooming picture at the backdrop of social unrest combined with the United States-mainland China trade war," it said in the filing.
"Retail sales growth in Hong Kong has slowed down significantly since July 2018. Meanwhile, the devaluation of [yuan] and the downward trend of the property and investment markets in Hong Kong had continued to weigh on the consumer sentiment, bringing a reduction in in-store consumption and hence affecting our sales for Hong Kong and Macau segment, which accounted for 65 per cent of the Group’s consolidated revenue," it said.
Bossini has a presence in 31 countries and regions around the world, with 1,061 stores, although the core markets are Hong Kong and Macau.
It said it "remains cautious and watchful," due to such uncertainties as the trade war and the weakening Hong Kong economy.
-- Deb Price
 


Bossini falls as Hong Kong protests, trade war hit revenues

Financial assets held by Chinese households dropped last year for the first time since the turn of the century, as a result of the US-China trade war and a slowing economy, German financial services company Allianz said in a report on Wednesday.
Mainland China last year dropped three places to 34th in a global ranking of the richest countries by financial assets per capita compiled by Allianz. Singapore, in third place, ranked as Asia’s richest country for the first time, replacing Japan, while the United States came in at the top, because of a strong dollar.
China was one of the biggest losers. Declining assets and rising liabilities led to a 10.2 per cent decline in the country’s net financial assets. The gross financial assets of Chinese households dropped by 3.4 per cent in 2018, for their first decline since 2000.
It should only be a temporary setback, said Michaela Grimm, senior economist at Allianz and a co-author of the report.
"Given the backlog demand and the need of China’s ageing population for private provision, China will remain one of the countries with the highest growth of private households’ financial assets worldwide,” she said.
For full story, click here.
-- Martin Choi


Chinese households' financial assets drop for first time since 2000, Allianz says

Nearly two-thirds of private equity and venture capital executives in Asia expect to receive salary increases in the next 12 months despite potential “rougher seas” in the industry because of the US-China trade war and a slowing global economy, according to a new survey by Heidrick & Struggles.
Only 1 per cent of those surveyed in the region expect to see pay cuts in the coming year, according to the executive search and consulting firm.
Hiring also remains robust by private equity and venture capital firms in Asia-Pacific, and there is increasing demand for investment professionals by new funds, as well as pensions, sovereign wealth funds and family offices, Heidrick & Struggles said.
See the full story here.
-- Chad Bray


Private equity salaries expected to rise despite trade war, slower growth

China’s spending on railways, a key driver of growth in the last decade, tumbled in August – in part because all major towns are now covered by the country’s extensive railway network.
China’s economic planning agency said on Wednesday that railway fixed-asset investment was 449.6 billion yuan (US$63 billion) in the first eight months of this year, which marked a modest 2.5 per cent fall from the same period last year.
However, August alone marked a steep fall of 27.1 per cent compared to the same month in 2018, according to calculations by the Post, based on the official data.
Full story here.
-- Zhou Xin


China’s railway spending plummets as Beijing struggles to keep growth on track

The declines in the Hang Seng Index deepened in the afternoon session, with the benchmark gauge falling 1.4 per cent. Angst about more pretests in the run-up to China’s National Day that falls on October 1 was spurring selling, according to Ken Chen Hao, a strategist at KGI Securities in Shanghai.
“The internal systemic risk facing the Hong Kong market is still there,” he said. “The market seems to be beginning to price in the political risk of more uprisings ahead of the National Day holiday.”
On top of that, investors were also selling after the Federal Reserve cut the benchmark interest rate, having previously priced it in, Chen said.
-- Zhang Shidong
 


Hong Kong stocks extend declines on fears of further protests

S&T Holdings (3928 HK), a Singaporean construction company which made its trading debut in Hong Kong today, saw its share price shoot up by 12.15 per cent to HK$1.20 after the lunch break.
It peaked at HK$1.36 this morning, up from the initial public offering price of HK$1.05 to 1.15.
-- Holly Chik


S&T Holdings jumps 12 per cent on trading debut

The Shanghai Composite Index maintained gains in afternoon trading, as traders look to the prime rate on loans for signals of further policy easing. 
The rate, which is now released on a monthly basis after an overhaul by the central bank last month, is due on Friday. The 1-year charge on the borrowing cost will probably fall by five basis points to 4.20, according to a Bloomberg survey. 
Electronics companies including Changsha Jingjia Microelectronics (300474 CH) are leading the gains. The Shanghai Composite is trading 0.4 per cent higher at 2,996.32.
-- Zhang Shidong


China stocks hold onto gains as traders focus on prime loan rate

Mainland Chinese travellers will not regain the confidence to visit Hong Kong any time soon, meaning lean times ahead for retailers, said Louis Tse Ming-kwong, managing director of VC Asset Management. 
“It would take time to recover even after the protests ended, but we still can't see any light at the end of the tunnel,” said Tse.
The share price of cosmetics chain store Sa Sa International Holdings (0178 HK) dropped 0.58 per cent to HK$1.70 after the market reopened in the afternoon. Its highest point today was HK$1.71.
-- Holly Chik
 


Mainland tourists won't return to Hong Kong any time soon, says VC Asset's Tse

Late-afternoon buying drove Chinese stocks higher at the close today, with the Shanghai Composite Index rising 0.5 per cent to 2,999.28. 
Hopes of further policy loosening seemed to gain traction, as traders anticipate a cut in the prime loan rate, a monthly gauge of corporate borrowing costs that is due tomorrow. With the risk appetite recovering, small-caps such as technology and phone stocks led the gains today.
-- Zhang Shidong
 


Late rally sends Shanghai Composite rising for second day

The Hang Seng Index dropped 1.1 per cent to 26,468.95 at the close today. The four-day decline was the longest since a stretch of five losing days that ended on August 6. 
Insurer AIA Group (1299 HK) and Hang Seng Bank (011 HK) were the worst performers, falling at least 2.4 per cent.
-- Zhang Shidong
 


Stocks Blog: Rate cut fails to lift Hang Seng, protests hit Bossini revenue, Sa Sa falls on profit warning

Chinese stocks get a late boost to finish 0.5 per cent higher Mainland tourists won't return to Hong Kong any time soon, warns VC Asset's Tse

Chinese stocks get a late boost to finish 0.5 per cent higher

Mainland tourists won't return to Hong Kong any time soon, warns VC Asset's Tse