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Zhang Shidong

Deb Price

Good day, traders --
Alibaba finished its second day of trading with a gain of nearly 3 per cent. The Hang Seng Index finished with small gains, while the Shanghai Composite slid.
Catch up on the day's action below.
Please help us improve our blog by taking this quick -- under 2 minutes! -- survey. Your feedback will really help us make the blog better for you!
Also, if you would like the Live Stocks Blog emailed to you each morning, click here. 
-- Zhang Shidong in Shanghai and Deb Price in Hong Kong
Note: Information in this blog is on an "as is" basis and not a solicitation or offer to buy or sell any securities or otherwise; and is not investment/professional advice or services in this regard.  It is subject to our T&C.  SCMP (as defined in T&C) shall not be liable for any loss, damage and costs relating to any investments in securities or otherwise in this connection.


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Stocks

Hang Seng Index ekes out small gain; Alibaba, MTR, Meituan Dianping among day's gainers in Hong Kong

High-flier Meituan Dianping, whose drivers are pictured here in Shanghai, has gotten a boost since it was added to the Stock Connect, making it available to mainland traders. Photo: Reuters

Bull sculpture in Shanghai. Photo: Bloomberg

Business

Markets

Liquor and Apple AirPods on the minds of northbound traders
Mediocre returns predicted for Chinese stocks in 2020
	 


Alibaba finishes second day of trading with a nearly 3 per cent gain. MTR sees biggest gain since city leader Carrie Lam withdrew extradition bill that sparked ongoing protests.
 


Hang Seng Index

China stock market

Tencent

Alibaba

Kweichow Moutai

Hong Kong protests

MTR Corporation

China Mengniu Dairy

Hong Kong property

Live

Chinese drugmaker Sino Biopharmaceutical (1177 HK) posted a slight 2.5 per cent rise in net profit for the first nine months of this year to 2.3 billion yuan from the same period last year.
Revenue climbed 23 per cent to 19.3 billion yuan, the company said in a stock exchange filing on Tuesday evening.
China’s drugmaking industry went through a turbulent time over the first three quarters as a result of changing policies on drug procurement, Sino Biopharmaceutical said in the filing.
“For the pharmaceutical industry, the centralized drug procurement program continued, and sales of drugs covered saw obvious growth. However, prices of the drugs dropped sharply, thus profit growth slowed,” it said.
“For industry leading enterprises though, their high value new drugs enjoyed fast growth. The phenomenon indicated that drug enterprises have become more and more polarized.”
-- Yujing Liu 


Sino Biopharmaceutical posts slight gain in net profit over first nine months

One of the largest providers of global stock indices has again boosted the weight of Chinese shares in its emerging-market benchmarks despite strong headwinds from US lawmakers who are urging limited investment exposure to China.
MSCI, the New York-based index provider, on Tuesday added 204 China A shares to bring the China country weight to 33.7 per cent, or a third, in the emerging market index, data from JP Morgan shows.
“The benchmark is being skewed with one country weighing an unprecedented one third,” said Steven Schoenfeld, chief investment officer of BlueStar Indexes. “Never before in history was there a single country that counts so high.”
The increase, the third and final planned step-up this year, will compel US pension funds, mutual funds and other institutional investors that track the benchmarks to add billions of dollars more to yuan-denominated shares of Chinese companies.
From the November increase alone, China A shares are expected to see US$7 billion in passive capital inflows, JP Morgan data shows.
Combined with inflows of US$4 billion and US$3.3 billion from previous rounds of increases in May and August, China A shares will see an additional US$14.3 billion this year as a result of the changes.
Read full story by Jodi Xu Klein here.   


MSCI boosts weight of China shares

Investors should be prepared to accept a poorer return from Chinese stocks next year because economic growth remains sluggish and the prospects of fresh portfolio inflows are unclear, according to an analyst who correctly predicted the swings on China’s market this year.
Property investments and exports, which have contributed more than 40 per cent of China’s growth this year, are likely to face challenges, Chen Li, chief economist at Soochow Securities, said at a conference in Shanghai on Tuesday. Foreign investors who helped fuel this year’s advance may be holding back because MSCI has yet to announce if it will continue to raise mainland-traded stocks in its global gauges in 2020, he said.
“We are cautious about stocks next year and do not expect returns to be high,” Chen said. “If you are able to make a 10 per cent gain from stocks next year, that would probably put you among the top-performing investors.”
Read fulls story by Zhang Shidong here.


Mediocre returns predicted for Chinese stocks in 2020

The results of Hong Kong’s district council elections on Sunday were worse than expected for Beijing, and it should start considering how the outcome will affect the 2022 race for the city’s chief executive, mainland specialists on Hong Kong affairs have warned.
“Beijing was psychologically prepared, but it did not expect [that the pro-establishment camp] would suffer such a severe defeat,” Wuhan University law professor Qin Qianhong said.
A central government official agreed that Beijing was surprised by the landslide win for the pan-democrats.
“We know it was going to be a tough fight as some pro-establishment candidates said they faced verbal abuse when they walked the district, but the number of seats [the pro-establishment camp] won was below our expectation,” he said.
Read full story here.    


What’s Beijing thinking after Sunday’s elections?

* Overnight markets/ What futures foretell
-- Overnight in US markets, the S&P 500, the Nasdaq and the Dow Industrials all rose 0.2 per cent to close at record highs on optimism that a trade deal between China and the US will be struck.
-- Hong Kong futures were 0.2 per cent higher, while the FTSE China A50 futures climbed 0.1 per cent
*IPO debuts: none
* Economic statistics/Central Bank action: The statistics bureau is due to release the October data on industrial companies’ profit at 9:30am today.
* Corporate events: nothing major
*Later this week: The statistics bureau will release the purchasing managers’ index of the manufacturing industry for this month on Saturday.


Morning guidance 

The Hang Seng Index was trading near flat, down a teensy 0.03 per cent to 26,907.09.
For the last five trading sessions, the Hang Seng Index failed to close above 27,000. 
In the spotlight in Hong Kong, Alibaba (9988 HK) rose 1.2 per cent to HK$189.800, after its solid debut Tuesday. It isn’t expected to be added to the Hang Seng Index or Stock Connect for months, which could give it a boost. 
Tencent (700 HK) rose 0.4 per cent to HK$337.
Property stocks gained. On Monday, they gained on later-dashed hopes the government and protesters could reach some accommodation after Sunday’s election rout.
Wharf REIC (1997 HK) rose 1 per cent to HK$44.25, while CK Asset Holdings  (1113 HK) rose 0.9 per cent to HK$52.90 and New World Development (17 HK) rose 0.6 per cent to HK$10.42. 

 
-- Deb Price    


Alibaba, Tencent gain in early trading

Chinese drugmaker Sino Biopharmaceutical (1177 HK) fell 3.2 per cent to HK$10.84 after posting a slight 2.5 per cent rise in net profit for the first nine months of the year to 2.3 billion yuan from the same period last year.
-- Deb Price    


Sino Biopharmaceutical sinks on weak net profit results 

China’s stocks opened lower, even as all major US stock gauges closed at record highs in overnight trading.
Sentiment weakened on the mainland, as there appeared to be no short-term catalyst for stocks.
Foreign inflows reached an all-time high of 21.4 billion yuan (US$3.05 billion) Tuesday as a third rebalance of Chinese stocks by global index compiler MSCI took effect after Monday’s market close.
But MSCI said it has no timetable of when to raise the weighting of Chinese stocks further.
The Shanghai Composite Index slipped 0.4 per cent to 2,894.33 today, with technology stocks leading the declines.
-- Zhang Shidong


China stocks set for decline for the day on lack of catalyst

Profits for Chinese industrial companies fell 9.9 per cent from a year earlier in October, the National Bureau of Statistics said this morning.
That was the biggest monthly year-on-year decline since the agency began to compile the data in October 2011.
 

-- Zhang Shidong


Chinese industrial profits fall most on record

Most mainland investors can still only watch gains in Alibaba Group Holding (9988 HK), as China’s most valuable technology company jumped in its first trading day in Hong Kong.
Fund mangers say the shares will be a must-have once they are included into the city’s stock trading links with the mainland, timing of which remains uncertain. The industry is unfazed the company’s US-listed equity has nearly tripled in price since its September 2014’s initial public offering, predicting that Chinese investors’ familiarity with the e-commerce firm will push Alibaba’s market valuation higher still.
“It’s a unique and rare asset, like Tencent and Meituan, that can’t be found in mainland-listed stocks,” said Qu Shaohua, managing director at Acroguardian Investment. “Though we don’t own Alibaba shares yet, I think it’s important that we do once it becomes available through the stock connect – at the right price.”
The stock is eligible to join the Hang Seng Composite Index, of which many components can be traded through Chinese exchanges’ trading links with Hong Kong’s. But due to Alibaba’s unequal voting rights structure, its shares must trade for some seven months in Hong Kong and meet other requirements in areas like trading volume to qualify for stock connect, according to rules published by the Shanghai and Shenzhen stock exchanges.
(Alibaba owns the South China Morning Post.)
Read full story here.


Alibaba’s Hong Kong listed shares are high on the shopping list of Chinese investors

China’s financial regulators will need to address four major concerns facing global investors before MSCI plans to further lift the representation of the mainland-traded stocks its benchmarks.
It must address access to hedging and derivative tools, short settlement cycle for Chinese stocks, difference in holidays between the mainland and Hong Kong and the availability of an omnibus trading mechanism, MSCI said in a press release after conducting its third rebalance of Chinese equities this year Tuesday.
For now, China’s yuan-traded stocks account for 4 per cent of the weighting of the MSCI Emerging Markets Index.
-- Zhang Shidong


What China needs to do for MSCI to further raise stock weighting

MTR (66 HK), the operator of Hong Kong’s subway system, shot up 2.5 per cent to HK$44.45, after Goldman Sachs raised it to buy from neutral and boosted its target price to HK$54.
MTR is on track for its biggest percentage gain in six weeks, when on October 16 it rose 2.86 per cent. Goldman Sachs sees the protests that have weighed heavily on the stock abating, according to a Bloomberg report.
MTR is down about 20 per cent since mid-July, when protesters began targeting the heavily used subway, setting exits on fire, vandalising machines and forcing station closings. Protesters saw the MTR as siding with police in the unrest gripping the city.
Of analysts tracked by Bloomberg, five rate it a buy, three a hold, and two a sell, with a consensus target price of HK$51.57. 
 

-- Deb Price   


MTR on track for biggest jump in six weeks, after Goldman Sachs raises it to ‘buy’

Alibaba (9988 HK) has shot up 3.8 per cent to HK$194.80. 
The Chinese e-commerce giant began trading Tuesday, gaining 6.6 per cent.
(Alibaba is the owner of the South China Morning Post.)
-- Deb Price    


Alibaba shoots up 3.8 per cent 

The idea of risk-free Chinese initial public offerings that are deemed to generate guaranteed returns is falling apart nowadays.
China Zheshang Bank (601916 CH) is almost sure to finish below its offer price on its second day of trading in Shanghai today.
The stock dropped 3.6 per cent to 4.80 yuan in morning trading, against the offer price of 4.94 yuan.
The shares already traded below the offer price in intraday trading yesterday before struggling to claw back some losses and close slightly above the offer price at 4.97 yuan.
Pricing the IPO shares too expensively might largely explain why the performance of Zheshang Bank has been so weak after listing. The bank was sold for 9.4 times earnings in the primary market, compared with the industry average of the multiple of 6.9 times.
-- Zhang Shidong


China IPO risks are back as Zheshang Bank set to breach offer price

Liquor maker Wuliangye Yibin (000858 HK) and Apple AirPod assembler Luxshare Precision Industry (002475 HK) lately have been two of the hottest China-listed companies on the trading link between Hong Kong and Shenzhen.
For the past seven sessions, both have been on the top 10 list of most heavily traded stocks, with Luxshare, a major assembler and supplier of Apple AirPods, seeing mostly buying and Wuliangye Yibin, China’s second most valuable fiery liquor distiller behind Shanghai-traded Kweichow Moutai (600519 CH), seeing a mix, based on Hong Kong Exchanges and Clearing data. The liquor maker has been the top most heavily traded stock for the past five sessions.
On Tuesday, Wuliangye Yibin saw 1.08 billion yuan worth of buying and 520.6 million yuan of selling. 
On Tuesday, Luxshare Precision, which was the eighth most heavily traded stock, saw buying that totaled 490.2 million yuan and selling of 262,2 million yuan.
Wuliangye has rewarded  investors with a nearly 160 per cent gain this year. Of analysts tracked by Bloomberg, 35 rate it a buy, five a hold and two a sell.
Meanwhile, Luxshare has soared more than 200 per cent this year. Of analysts tracked by Bloomberg, 36 rate it a buy, one a hold, and one a sell.
Wuliangye Yibin rose 0.7 per cent to 131.61 yuan in the morning session, while Luxshare climbed 1.3 per cent to 33.73 yuan.
Here’s a feature for investors on China’s growing headset sector -- including Luxshare -- by stocks reporter Yujing Liu. 
 

-- Deb Price    


Liquor and Apple AirPods on the minds of northbound traders

China First Capital Group (1269 HK), which runs businesses from financial service and K-12 education to auto-part making, has been halted from trading in Hong Kong since 11:12am after tumbling 75 per cent to 45 Hong Kong cents.
Virscend Education (1565 HK), in which China First Capital holds a 12.4 per cent stake as the second-biggest shareholder, slumped 37 per cent to HK$1.35.
ArtGo Holdings (3313 HK), in which China First Capital also hold a 1.5 per cent interest, slid 3.9 per cent to 50 Hong Kong cents.
Shares of ArtGo tumbled 98 per cent last week after more than 500 million shares of the company were forced to be sold on the market by brokerages because of margin financing arrangements.
-- Zhang Shidong 


China First Capital suspended from trading after stock plunges

Xinjiang Talimu Agriculture Development (600359 CH), Jiangsu Provincial Agricultural Reclamation and Development (601952 CH) and other agricultural stocks shot up after Beijing said it was committed to the basic policy of contracting lands to farmers in the long run.
Xinjiang Talimu surged by the 10 per cent daily cap to 5.36 yuan, Jiangsu Provincial Agricultural gained 7.5 per cent to 7.05 yuan and Sino-Agri Leading Biosciences (603970 CH) added 4.8 per cent to 12.47 yuan.
-- Zhang Shidong


Chinese agricultural stocks rally on government commitment to arable land policy

Meituan Dianping (3690 HK) shot up 3.9 per cent to HK$104.70, with its turnover the third highest in Hong Kong, behind number one Alibaba (9988 HK) and Tencent (700 HK).
The online ticketing-to-food-delivery-service provider became available to mainland traders through the Stock Connect on October 28. In those four weeks, it gained 11.3 per cent as of Tuesday’s close. 
The stock has proven to be a hit on the Stock Connect with mainland traders. Many Chinese companies choose to list abroad, making homegrown superstars like Hong Kong-listed Meituan Dianping out of reach except through inclusion on the trading link.
Meituan Dianping is up nearly 140 per cent this year.
Of analysts tracked by Bloomberg 34 rate it a buy, four a hold and none a sell, with a 12-month target price of HK$109.47.
 

-- Deb Price    


Meituan Dianping shoots up

Industry leaders in China are likely to outperform small rivals next year, as they stand to benefit from the government’s renewed efforts to further open up markets and deepen reforms in state-owned enterprises and the financial sector, UBS Group said in a research report.
The Swiss bank also expects cuts in the loan prime rate by between 10 and 15 basis point next year.
China’s CSI 300 Index may end the year of 2020 at 4,400, while the Hang Seng Index is expected to finish at 28,700, according to the forecast by the banks.
That represents 13 per cent and 6.6 per cent gains from the two gauges’ Tuesday closes, respectively.
-- Zhang Shidong


Big Chinese companies may stand out for stock investment in 2020, UBS says

Shares of solar farms developer Kong Sun Holdings (295 HK) jumped as much as 126 per cent after it announced a deal to sell 10 solar farms with combined capacity of 250.5 mega-watts for 1.17 billion yuan to CNNP Shandong Energy, a unit of Shanghai-listed state-backed China National Nuclear Power (601985 CH).
The sale price was based on an 18 per cent discount to the unaudited net asset value of the projects on June 30.
Kong Sun will book a loss of 215 million yuan from the sale.
It will save the firm at least 80 million yuan of annual finance costs. Kong Sun will continue to provide operation and maintenance services to the projects' new owner and earn annual fees of 17.5 million yuan.
After the sale, it will have 35 solar plants with capacity of 1,378 MWs. It is the second private sector solar farms developer to unveil assets sale to state-owned energy firm, following Shunfeng International Clean Energy's announcement on Tuesday to sell solar farms to Zhonghe Shandong Energy -- also a subsidiary of CNNP -- for 641.4 million yuan.
Both cited the need to cut debt and finance cost in the capital-intensive industry beset by long delays in state subsidy payments.
Kong Sun is trading 28 per cent higher at HK$0.096.
-- Eric Ng


Kong Sun Holdings shoots up on deal to sell 10 solar farms

Get used to the Hang Seng Index struggling for direction in the near term, says Kenny Tang, chief executive at Royston Securities.
“The Hang Seng is likely to seesaw in the near-term because (traders) are still waiting for developments in the US-China trade deal and also the China economic data is not very good,” Tang said. “So market sentiment remains cautious,” he said. 
China’s industrial profits plunged 9.9 per cent in October, marking the biggest fall in eight years, data released this morning shows. The fall was much worse than analysts’ expectations. It was the third consecutive month of decline, data from the National Bureau of Statistics shows, and signals the ongoing headwinds China faces with slowing growth amid the trade war with the US.
The Hang Seng Index is now down about 0.1 per cent, at 26,888.46, but it has seesawed between small gains and losses today. 
On Alibaba (9988 HK), Tang says the outlook remains good for the Chinese e-commerce giant’s secondary listing.  
“The market hopes there will be more investors from the US market coming to trade Alibaba in Hong Kong, so the turnover is still very strong. Also the market expects some funds to shift from Tencent to Alibaba. So I think outlook for Alibaba remains quite good,” he said.
Alibaba has gained 3.9 per cent in trading today to HK$195. That is on top of its 6.6 per cent gain on its debut Tuesday.
Rival Tencent (700 HK), China’s social media and gaming titan, has slipped 0.4 per cent to HK$334.40.
-- Deb Price    


Hang Seng weighed down by worse-than-expected China industrial profits data, says analyst Kenny Tang

Postal Savings Bank of China (1658 HK) will start to accept subscription to its shares on offer slated for mainland investors Thursday.
The lender, which owns the biggest branch network among the state-owned rivals, plans to raise as much as 32.7 billion yuan (US$4.65 billion) in what would be the world’s third-largest stock offering this year.
Its offer price of 5.5 yuan apiece calls into question the interest among local investors in the stocks, as that is more than a third more expensive than the industry average on the price-to-earnings basis.
China’s Zheshang Bank’s (601916 CH) breaching of the offer price on its second day of trading may also cast a shadow.
Postal Saving Bank raised HK$59.2 billion from an initial public offering in Hong Kong in 2016.
Its shares added 0.4 per cent to HK$5.16 today, eking out an 8.4 per cent gain since its debut.
-- Zhang Shidong


Postal Saving Bank to accept subscription to mainland offerings Thursday

Mainland’s Shanghai Composite Index dropped 0.1 per cent to 2,903.20 at the close, snapping a two-day gain.
A record 9.9 per cent decline in industrial companies’ profits in October added to shaky sentiment, reinforcing the view that a slowdown in the economy has already bitten into corporate earnings.
A gauge tracking industrial companies on the CSI 300 Index lost 0.8 per cent as one of the worst-performing sectors.
-- Zhang Shidong


China stocks drop first time this week on record fall in industrial profits

MTR (66 HK), the operator of Hong Kong’s subway, is on track to post its highest percentage gain since city leader Carrie Lam formally withdrew the extradition bill 12 weeks ago that had sparked ongoing unrests.
Shares in late afternoon trading had gained 3.6 per cent to HK$44.90.
On September 4, when Lam formally withdrew a proposal that would have allowed extradition of criminal suspects to mainland China, MTR rallied 6.4 per cent. On September 11, it rose 3.37 per cent.
MTR had fallen about 20 per cent since mid-July to Tuesday’s close, as protesters targeted it with acts of vandalism, including arson, and led to closings of stations, accusing it of being in league with the government and the police.
The stock got a boost today when Goldman Sachs raised it to buy from neutral and lifted its target price to HK$54. Goldman Sachs said it expects MTR, which also owns property, to recover quickly once protests are over, Bloomberg reported.
-- Deb Price    


MTR looking at biggest percentage gain since Carrie Lam formally withdrew extradition bill

The Hang Seng Index seesawed today because Hong Kong leader Carrie Lam “missed the best timing” to end protests that are now in their sixth month, says Alan Li, portfolio manager at Atta Capital.
“The Hong Kong government missed the best timing to end the conflict,” Li said. “In short, the market needs more time to regain confidence.”
The benchmark will gradually move up if the generally quiet environment seen in the city since Sunday’s elections with a sweep of anti-government candidates continues.
On Alibaba (9988 HK), which added about a 3 per cent gain on top of its 6.6 per cent jump in its debut Tuesday, Li said it is overbought.
Meituan Dianping (3690 HK), which gained 3.4 per cent to HK$104.20 today, got a boost after analysts have revised up its earnings forecast in coming years, Li said.
-- Deb Price    


Market needs to regain confidence about end to protests, says analyst Alan Li 

The Hang Seng Index eked out a small 0.2 per cent gain after see-sawing through the trading day. It ended at 26,954 points, failing for a sixth straight session to close above 27,000 points.
Of the 50 constituent stocks on the benchmark, 27 gained, 16 lost and seven were unchanged. Property stocks gained, though lost momentum, as did finance and utilities sectors.
Meituan Dianping (3690 HK) rose 3.4 per cent to HK$104.20. Subway operator MTR (66 HK) shot up 3.8 per cent to HK$45 -- its best percentage gain since city leader Carrie Lam formally withdrew the extradition bill on September 4 that had sparked the ongoing unrest.
Tencent (700 HK) slipped 0.2 per cent to HK$335, with the third most turnover.
Meanwhile,  Alibaba (9988 HK) rose nearly 3 per cent to HK$193.20 in its second day of trading. HSBC Global Research reiterated a buy on the US listed BABA, seeing an upside of 32 per cent in the coming 12 months.
 “Valuation is very attractive, as the company has and should continue to deliver faster earnings growth while trading at a discount to peers,” HSBC analysts said.  They like Alibaba’s new initiatives, monetization of new advertising formats, Tmall strategy to attract more up-and-coming new merchants, among other things.
-- Deb Price 


Hang Seng Index ekes out small gain; Alibaba, MTR, Meituan Dianping among day's gainers in Hong Kong

Liquor and Apple AirPods on the minds of northbound traders Mediocre returns predicted for Chinese stocks in 2020

Liquor and Apple AirPods on the minds of northbound traders

Mediocre returns predicted for Chinese stocks in 2020