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Xie Yu

Azar Zaidi

Stay with us, Xie Yu and Azar Zaidi in Hong Kong, as we follow the day’s developments in markets in the special administrative region and the mainland. 
If you would like to get the stocks blog via email each morning, shoot Deb Price a message at deb.price@scmp.com


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Stocks

Stocks Blog: Hang Seng hits one-month low, mainland indices close lower

Business

Markets

The Hang Seng Index closes 1.28 per cent lower for its biggest daily drop since August 26
Telecoms, electronics lead declines on mainland Chinese indices 


The Hang Seng Index closed 1.28 per cent lower at 25,945.35, while telecoms, electronics and equipment makers led declines on mainland Chinese indices.  


China stock market

Hong Kong Stock Exchange

Live

Joyce Boutique Group (647 HK) said losses will double year on year for the six months ending September 30 because of the ongoing social unrest in Hong Kong. The fashion brand said on Tuesday revenue for the period will drop more than 15 per cent. “This unfavourable performance was caused by a sharp downturn in market conditions after June. It is quite possible that market conditions may stay bad before they start to get better,” the company said.
Hong Kong Airlines, backed by the debt-laden HNA Group, confirmed on Tuesday night that it had cut management salaries by 20 per cent from September to December to save on operation costs, due to a fall in passenger number.
The company has also advised staff to support and join the company’s unpaid leave plan from October to December. It said that different arrangements will be introduced depending on positions and departments. Those at the manager level and above are advised to take four-day leaves a month while those at assistant manager level and below are advised to take two days.
It has also reduced the number of flights as demand has declined recently, confirming a report by the South China Morning Post.
– Pearl Liu


Overnight filings with the Hong Kong stock exchange

Overnight markets/ What futures foretell
– Overnight in US markets, the S&P 500 lost 0.8 per cent, the Nasdaq dropped 1.46 per cent and the Dow Industrials eased 0.5 per cent.
– Hong Kong futures were 0.6 per cent lower, while the FTSE China A50 futures climbed 0.4 per centIPO debuts
– Shenzhen Transsion (688036 CH) sets Shanghai IPO price at 35.15 yuan, Fosun Pharma (600196 CH), Shanghai Henlius falls before Hong Kong debutEquity to watch
– Cathay Pacific (293 HK): Cathay Dragon fires two employees after oxygen bottle probe
– Changyuan Group (600525 CH): Gree becomes top holder of Changyuan Group after boosting stake
– Chow Tai Fook (1929 HK): Everledger raises US$20m in funding led by Tencent Holdings
– CICC (3908 HK): CICC, Tencent unit agree to set up technological joint venture
– China Everbright Bank (601818 CH): China Everbright Bank gets CBIRC approval on wealth management subsidiary


Morning guidance

Chinese biopharmaceutical company Shanghai Henlius Biotech (2696 HK) started trading on Hong Kong’s main board on Wednesday. Its shares opened lower, at HK$47.45, than its initial public offering price of HK$49.6 to HK$57.8.
This is the city’s first sizeable IPO since July, raising up to US$477 million for the drug developer and manufacturer. The company has commercially launched one product since it was founded in 2010, a biosimilar for the treatment of non-Hodgkin’s lymphoma, while two other products are under review.
The listing is a spin-off from US$11 billion Chinese conglomerate Fosun International (0656 HK).
The company has reported 494 million yuan (US$70 million) and 271 million yuan in losses attributable to Fosun over the past two years.
The company said “clinical development involves a lengthy and expensive process with no assured outcome” in its prospectus.
– Holly Chik
Chinese biopharmaceutical company Shanghai Henlius Biotech (2696 HK) started trading on Hong Kong’s main board today.@SCMPNews @HKEXGroup pic.twitter.com/vpNb8SzxEy
— Holly Chik (@hollycwchik) September 25, 2019


Biopharma firm Shanghai Henlius starts trading in Hong Kong

In Hong Kong, the benchmark Hang Seng Index is down 0.8 per cent, or 216.3 points, to 26,064.7. On the mainland, the Shanghai Composite Index eased 0.4 per cent to 2971.2. The Shenzhen Component Index is 0.7 per cent lower at 9745.6.
– Xie Yu


Benchmarks are down in early morning trade

Japanese investment bank Daiwa said in a note on Wednesday it saw an increasing possibility of Hong Kong International Airport lowering aeronautical charges – as it did during the Sars epidemic in 2003 – after the city’s airlines approached it for relief measures amid a decline in inbound and outbound passengers because of the ongoing anti-government protests. Coupled with cost-savings from a capacity cut in the fourth quarter, this could mean Cathay Pacific Airways’ (293 HK) 2019 potential earnings per share could be one-time higher than its existing estimate. Cathay was trading 0.8 per cent lower at HK$9.9.
– Xie Yu


Daiwa reiterates buy rating for Cathay Pacific 

Major Asian indices are down in morning trading, weighed by news of an impeachment hearing that could unseat Trump. The Nikkei 225 is 0.5 per cent lower at 21,985.5, the South Korean Kospi Index is down by 0.6 per cent at 2,089.1, Taiwan’s Taiex Index is 0.6 per cent lower at 10,849.4, while Australia’s AOI index has lost 0.6 per cent to 6,815.8.
– Xie Yu


Major Asian indices down on Trump impeachment news

Jiangsu Cnano Technology (688116 CH), a producer of carbon nanotubes and graphene, more than doubled on its trading debut on the Shanghai Stock Exchange, opening at 46.05 yuan, from its IPO price of 16 yuan. Guangdong Sirio Pharma (300791 CH), a producer of special pharmaceuticals, rose 20 per cent on its debut to 65.68 yuan, from an IPO price of 54.73 yuan.
– Eugene Tang


Mainland Chinese firms rise on debut

“Chinese companies will increasingly develop into competitors both on the domestic market and internationally,” Moody’s Investor Service said in an emailed commentary. “Although this will take some time, we expect global competition in biotech drugs to intensify as a consequence of China’s increased focus on biotechnology. Already the world’s second-largest pharmaceutical market by revenue, we expect the Chinese market to be among the world’s fastest growing over the next five years. We expect companies with a significant presence in China, such as the Upjohn division of Pfizer, AstraZeneca, Sanofi, Bayer, Novo Nordisk, Novartis and Roche to benefit the most because they have experience navigating the complexities of this market and have established sales channels. For most companies the credit positive effects will initially be limited.”
– Eugene Tang


Global competition in biotech drugs to intensify because of China’s increased focus: Moody’s

“The [Trump] impeachment hearing certainly brings a negative flow of news headlines. But we do not expect it to introduce a fundamental change to the Hong Kong market, as far as the trade talks and the protests [are concerned],” said Kevin Leung, executive director of investment strategy at Haitong International Securities. Leung said profit taking had continued for around two weeks after the Hang Seng Index hit the 27,000 level, and suggested investors avoid sectors more closely related to the trade talks, like technology and manufacturing. Defensive sectors included health care, mainland consumption and education.
“If there can be any uptick catalyst to push the market higher, it could be consumer data related to the mainland October Golden Week,” he said.
– Xie Yu


Trump impeachment news won’t introduce a fundamental change to Hong Kong market 

Nine Dragons Paper Holdings Limited (2689 HK), China’s biggest maker of containerboard and paper products, fell by as much as 7.2 per cent to an intraday low of HK$6.23 in Hong Kong, after its full-year earnings missed estimates. The company’s income rose to 54.65 billion yuan (US$7.7 billion), short of the 55.18 billion yuan expected in a Bloomberg survey. Its net income rose to 3.86 billion yuan, missing the 4.07 billion yuan expected.
– Eugene Tang


 China’s biggest maker of containerboard and paper products misses income forecast, stock falls

Technology firms are on a losing streak in Hong Kong. Xiaomi (1810 HK) has lost 4.4 per cent to HK$8.9, after a lukewarm response to its newly released 5G smartphone. AAC Technology (2018 HK) is down 3.5 per cent to HK$41.8 and Tencent Holdings (700 HK) is trading 1.7 per cent lower at HK$330. Health care stocks are also trading lower. CSPC Pharmaceutical Group (1093 HK) is down by 3.4 per cent to HK$15.7 and Sino Biopharmaceutical Limited (1177 HK) is down by 2.7 per cent to HK$10.2.
– Xie Yu


Tech, health care stocks trade lower in Hong Kong

The Shanghai Composite Index closed 0.6 per cent lower at 2,968.3 at the lunch break. The Shenzhen Component Index lost 1.2 per cent to 9,696.3 and the technology-heavy ChiNext index fell by 1 per cent to 1,678. The morning session’s top losers include electronics, equipment and telecommunications. Banking stocks remained resilient, however, even when most other sectors traded lower in the morning.
– Xie Yu


Mainland Chinese indices lower at lunch break

In Hong Kong, the Hang Seng index closed the morning session 1 per cent lower, at 26,031.9.
– Xie Yu


Hang Seng index ends morning session 1 per cent lower

Drug makers are trading lower in the A and H markets, after analysts from Bernstein and Jefferies said the government’s plan for drug procurement would lead to more aggressive price cuts than they had estimated. Analysts from the two investment banks said drug makers could be engaged in a price war more intense than expected, as China pushes forward with a reform of bulk buying of drugs, in a bid to cut procurement prices, according to Bloomberg.Shenzhen Salubris (2294 CH) plunged by 7.9 per cent to 20.3 yuan and Shanghai Fosun Pharmaceutical (600196 CH) dropped 4.2 per cent to 25.8 yuan.
– Xie Yu


Drug makers trade lower as analysts expect steeper price cuts

The Hang Seng Index declined further, after the lunch break, and was trading down by 1.22 per cent at 25959.5. In mainland China, the Shanghai Composite fell to 2965.6, down by 0.7 per cent, the Shenzhen Composite Index was down by 1.1 per cent to 9705.1 and the ChiNext Index, which clawed its way back up slightly to 1681.1, was down by 0.8 per cent.
The Hang Seng could be heading for its biggest daily drop since August 26, when it fell 1.9 per cent.
– Xie Yu


Hang Seng could be heading for its biggest daily drop in a month

Continued expansion of health care coverage will significantly boost volume growth, as drugs become eligible for a much larger market, Moody’s Investors Service said on Wednesday. A growing number of drugs are being included in China’s National Drug Reimbursement List. The rating agency said it expected companies such as Novo Nordisk and Novartis, which have strong positions in chronic disease medication, to benefit as well, since older products will continue to drive large sales growth in the near term.
However, inclusion in the list implies heavy discounting. Pharmaceutical companies are likely to have to continue accepting steep price cuts as a concession for inclusion in the list. These price cuts could exceed the 50 per cent cuts of previous Chinese list prices, so profit margins will be lower. But the impact on profits will depend on the volume uplift for each product.
– Xie Yu


Foreign drug firms can expect sales growth following inclusion in China purchase list

“The immediate market reaction to news last night that House Speaker [Nancy] Pelosi is to launch a formal impeachment inquiry into [US President Donald Trump] was to sell risk and to sell US dollars, but in large part the moves have reversed [US dollar to Japanese yen rate moved back to 107.40 after dipping to 107.00],” RBC Capital Markets said in a note on Wednesday. “We would note that this is only a small step on the road to impeachment, which would ultimately require a 2/3 majority in the Republican-controlled senate and that it is not clear yet whether the House will vote to endorse the inquiry, so leading to charges against Trump.
“Betfair’s probability of Trump leaving before the end of his first term jumped to 22 per cent from 14 per cent, but it still far below levels that prevailed in the early part of his presidency.”
– Xie Yu


Small step in Trump impeachment triggers selling of risk assets, US dollars: RBC Capital Markets

The Shanghai Composite Index closed 1 per cent down at 2955.4 on Wednesday. The Shenzhen Component Index dropped by 1.4 per cent to 9671.1 and the technology-heavy ChiNext fell1.3 per cent to 1672.7. The banking sector held out above water, while telecommunications, electronics and equipment makers led the declines.
– Xie Yu


Telecoms, electronics lead declines as mainland indices close lower

Penny stock China Art Financial Holding (1572 HK) shed 75 per cent in around half an hour after 2pm, and is still down by 63.3 per cent at HK$0.33. Hang Seng heavyweight Sino Biopharmaceutical Limited (1177 HK) has declined further – its stock price has tumbled by 5.2 per cent to HK$9.9.
– Xie Yu


China Art Financial Holding, Sino Biopharmaceutical drop further in Hong Kong

In Hong Kong, the Hang Seng Index closed 1.28 per cent lower at 25,945.35 on Wednesday, its biggest daily drop since August 26.
– Xie Yu


Hang Seng hits one-month low, closes 1.28 per cent lower

Stocks Blog: Hang Seng hits one-month low, mainland indices close lower

The Hang Seng Index closes 1.28 per cent lower for its biggest daily drop since August 26 Telecoms, electronics lead declines on mainland Chinese indices

The Hang Seng Index closes 1.28 per cent lower for its biggest daily drop since August 26

Telecoms, electronics lead declines on mainland Chinese indices