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Yujing Liu

Azar Zaidi

As we move closer to a deadline for new US tariffs on Chinese goods, it promises to be another day of wait-and-see in the Hong Kong and China markets. Even though Bloomberg has reported US Agriculture Secretary Sonny Perdue as saying Washington was unlikely to impose extra tariffs on another US$160 billion of Chinese goods on December 15, the prevailing sentiment of caution is not expected to lift any time soon.
 
On the domestic front, all eyes will be on the trading debut of Postal Savings Bank of China, whose shares start trading in Shanghai after the lender raised 28.45 billion yuan in a secondary listing. Also, worth keeping a tab on is China’s automobiles sector, which looks like it will contract for a second year in a row, after car sales fell 10.2 per cent for the first 11 months of the year.
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. 
– Yujing Liu and Azar Zaidi 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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Business

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China consumer inflation accelerated in November on rising pork prices
China Zheshang Bank included in Stock Connect


As we move closer to a deadline for new US tariffs on Chinese goods, it promises to be another day of wait-and-see in the Hong Kong and China markets.


China stock market

Hong Kong Stock Exchange

Live

Overnight markets/ What futures foretell:  – The US markets fell on Monday, ending a three-day winning streak on caution over trade talks. The S&P 500 lost 0.3 per cent, the Nasdaq Composite fell 0.4 per cent and the Dow Jones Industrial Average was 0.4 per cent lower.  – The Hang Seng Index Futures declined 0.2 per cent, while the China A50 futures lost 0.4 per cent.IPO debuts:  – The Postal Savings Bank of China (601658 SH), the country’s fifth-largest lender by asset, will start trading on Shanghai’s main board. In Hong Kong, China Merchants Commercial Real Estate Investment Trust (1503 HK), the first REIT to list in the city in five years, and Venus Medtech (Hangzhou) Inc (2500 HK), a Chinese medical device manufacturer, will begin trading on its stock exchange.Economic statistics/Central Bank action:  – China will release November consumer price index and producer price index data at 9.30am.Corporate events:  – None to note.


Morning guidance

Tunghsu Optoelectronic (000413 CH), which has defaulted on three debt repayments over the past month, plans to buy 743 patents and rights of patent applications from its parent, Tunghsu Group, the maker of optoelectronic products, it said in an exchange statement. The purchases will be funded by the sale of private stock held by the listed company to its parent, with the offer price set at 4.75 yuan apiece. The value of assets up for grabs has not been decided, the company said. Shares of Tunghsu, which have been suspended since November 18, will resume trading on Tuesday, it said. The company failed to repay a debt of 1.7 billion yuan (US$241.5 million) this month, after defaulting on two notes totalling 3 billion yuan in November.
Vehicle sales at Great Wall Motors (601633 CH) fell 13 per cent from a year earlier to 115,162 units in November, and sales of SUVs slumped 20 per cent last month, according to an exchange statement. For the first 11 months, its sales increased 3.8 per cent from the year-ago period, it said. Its vehicle output decreased 12 per cent last month and production rose 4.9 per cent in the January to November period, the company said.
China Railway Group (390 HK) has won bids for building two motorway projects worth a combined 46.5 billion yuan (US$6.6 billion), the company said in a statement to the Hong Kong exchange. The two projects, which will be funded through a public-private partnership, will have construction periods of four and five years, respectively, the statement said.
– Zhang Shidong 


Overnight filings

The Hong Kong-listed shares of China Zheshang Bank (2016 HK; 601916 SH) have been included in the Stock Connect that will allow mainland Chinese investors to trade them starting from Tuesday.
  The lender was in the spotlight last month after its Shanghai-listed shares plunged below their initial public offering price on their second day of trading, making it the biggest listing flop since a new share subscription system took effect in 2016.
  The Stock Connect inclusion is based on the stable price of its Hong Kong-listed shares and the fact that its A shares have been traded for more than 10 days, the Shenzhen Stock Exchange said in an exchange filing.
– Yujing Liu 


China Zheshang Bank included in Stock Connect

China Merchants Commercial Real Estate Investment Trust (1503 HK) and Hangzhou Venus Medtech (2500 HK) started trading on the Hong Kong exchange’s main board on Tuesday.
  The share price of China Merchants Commercial REIT opened at HK$3.19, down from its offering price of HK$3.42. The Reit, sponsored by its Shenzhen-listed parent company, China Merchants Shekou Industrial Zone, operates a cruise business, industrial estates and communities and has a rentable area of 262,379 square metres in China, with a total value of 39.8 billion yuan (US$5.6 billion).The Reit is the first trust to list in Hong Kong after Spring Real Estate Investment Fund was listed in 2013.
  The share price of Hangzhou Venus Medtech rose to HK$40 at the opening, from its IPO price of HK$33. Its shares were oversubscribed by 311.42 times.  – Snow Xia
China Merchants Commercial Real Estate Investment Trust (1503 HK)  and Hangzhou Venus Medtech (2500 HK) started trading on Hong Kong stock exchange today. @scmpbusiness @SCMPNews pic.twitter.com/o8pNdPMFmP
— Snow Xia (@SnowXia05) December 10, 2019


Two IPOs in Hong Kong

The Shanghai Composite Index has dropped 0.2 per cent to 2,907.8, while the Shenzhen Component Index has shed 0.3 per cent, and the ChiNext Index of start-ups has declined by 0.4 per cent.
  In Hong Kong, the Hang Seng Index has dropped 0.4 per cent to 26,400.92.
– Yujing Liu 


China, Hong Kong stocks drop in early trading

Chinese electronics maker Tunghsu Optoelectronic (000413 SZ) plunged by the daily limit of 10 per cent to 4.32 yuan at the market open, after revealing plans to buy patents from its parent by issuing private shares to it at 4.75 yuan apiece. The company has defaulted on three bond repayments totaling nearly 5 billion yuan (US$710.2 million) over the past month amid a liquidity crunch.
– Yujing Liu 


Debt-strapped Tunghsu plunges on stock-for-asset swap plan

China’s consumer inflation accelerated in November as pork prices more than doubled from a year ago. Its consumer price index rose 4.5 per cent last month from a year earlier, hitting a seven-year high, following a 3.8 per cent gain in October, the National Bureau of Statistics said on Tuesday. The median forecast was for a 4.3 per cent increase. The producer price index declined 1.4 per cent on year, slower than the 1.6 per cent drop in October.
– Eugene Tang 


China consumer inflation accelerated in November on rising pork prices

Shanghai debutant Postal Savings Bank (601658 SH) rose 1.6 per cent to 5.59 yuan from its initial public offering price of 5.5 yuan in early trading. The stock rose by as much as 2.7 per cent before paring some of its gains. China’s fifth-largest lender could choose to exercise a so-called greenshoe option to sell extra shares to underwriters within 30 days of the listing to stabilise its share price, potentially lifting the total funds it raises to 32.8 billion yuan (US$4.7 billion).
There is some concern the stock could drop below its IPO price after the 30-day period, following a dismal showing by the likes of China Zheshang Bank (601916 SH).
The lender has made a tepid trading debut, as investors collectively shun the banking industry, Daniel Ren writes.
 
– Yujing Liu 


Postal Savings Bank makes small gains in early trading

The trading volume of Postal Savings Bank (601658 SH) shares has reached 5.8 billion yuan (US$823.9 million), equivalent to a tenth of the total turnover of Shanghai’s main board. The lender is now valued at 482 billion yuan in market capitalisation.
– Yujing Liu 


Frenzied trading in Postal Savings bank

The Hong Kong-listed shares of Alibaba Group Holding (9988 HK) are on track to record a second day of losses, following their inclusion in the Hang Seng Composite Index on Monday. The stock fell by as much as 1.5 per cent in early trading before paring some of its losses to 0.3 per cent at HK$196.1. The shares declined 0.5 per cent on Monday.
  The Hang Seng Composite Index is a comprehensive market benchmark that covers the top 95th percentile of the total market capitalisation of companies listed on Hong Kong’s main board. The index is traded flat. Alibaba owns the South China Morning Post.
  – Yujing Liu 


Alibaba drops on second day of index inclusion

China Merchants Commercial Real Estate Investment Trust (1503 HK) will include more assets in future, said Huang Junlong, the trust’s head.
  The trust has an investment portfolio consisting of five commercial properties in Shekou, Shenzhen, and will benefit from China’s policy of building Shenzhen into a technology hub.
  “Some of our properties are newly opened, so they need to be rented, and the rents need to be at a certain level for adequate returns, before these assets are included in the trust.”
  China Merchants Commercial REIT’s share price opened 6.7 per cent lower than its IPO price on Tuesday, but Huang said he was not worried. “The shares’ initial rise and fall cannot represent their true intrinsic value. I have full confidence in the intrinsic value of our real estate investment trust,” he said.
  “The global economic environment is under pressure. But from a business perspective, we should look at our business differentiation. All the businesses held by China Merchants Shekou have very high-quality structures, including geographical location and business plans. Our logic is to invest, finance, build, manage and retire, and let the capital flow. Behind the capital flow is the value of assets, the art of operation and the advantage of location. So, when the environment is bad, how to beat the big market and peers is key. That’s our strength,” Xu Yongjun, board director of China Merchants Shekou Industrial Zone, the trust’s parent company, said.
– Snow Xia



Executives talk up China Merchants Commercial REIT 

Pork stocks declined broadly after a surge in pork prices accelerated China’s consumer inflation in November. Muyuan Foodstuff (002714 SZ), one of the largest pork producers in China, fell by 5.8 per cent to 83.57 yuan, as investors took profits on a strong rally this year amid worries over its future output. An outbreak of African swine flu has swept across China and sent pork prices soaring. The company’s shares have gained 191 per cent so far this year.
  Other pig farmers dropped too. Wens Foodstuff Group (300498 SZ), the industry’s largest player, dropped 4.7 per cent, while Tangrenshen Group (002567 SZ) fell 4 per cent.
– Yujing Liu 


Pig farmers drop on November pork price surge

The Shanghai Composite Index pared some of its earlier declines to end the morning session 0.2 per cent, or 5.89 points, lower at 2,908.59. The Shenzhen Component Index dipped 0.1 per cent, and the ChiNext Index of start-ups added 0.1 per cent.     Pork stocks led the declines, while firms on Shanghai’s Star Market surged. Suzhou HYC Technology (688001 SH), a display device maker and the first company to acquire another firm listed on the Star Market, surged by the daily limit of 20 per cent.
– Yujing Liu 


China markets record small loss at lunch break

The Hang Seng Index narrowed its early losses and traded 0.1 per cent lower at 26,471.58 at the lunch break. The benchmark has returned a dismal 2.3 per cent so far this year.
  The biggest drag on the index was clothes manufacturer Shenzhou International Group Holdings (2313 HK), which declined 2.6 per cent to HK$105.6. Meanwhile, HSBC Holdings (5 HK) added 0.3 per cent, contributing the biggest gain to the benchmark.
– Yujing Liu 


Hong Kong market narrows losses

Hong Kong-listed Chinese sportswear makers declined broadly on Tuesday. Li Ning (2331 HK) fell by 5.3 per cent, Anta Sports (2020 HK) dropped 3.7 per cent and Xtep International Holdings (1368 HK) weakened by 1.8 per cent.
The downward trend is likely to be a result of investors taking profits at year-end, Jefferies analysts led by John Chou said in a report on Tuesday. Retail sales at a selection of shopping malls across China reflect strong momentum this month, continuing from November.
The sector has enjoyed outstanding returns this year as consumers increasingly grow fond of domestic brands. Anta has soared by 92 per cent this year, while Li Ning has grown by a jaw-dropping 189 per cent.
– Yujing Liu 



Year-end profit taking drags down sportswear stocks

Food delivery platform Meituan Dianping (3690 HK) has been rated as “buy” by Bocom International (3329 HK), the Hong Kong-listed unit of Chinese lender Bank of Communications. Bocom International has also set a target price of HK$110.5 for the stock. In a report last week, the bank estimated Meituan’s net profit will increase to 4.1 billion yuan and that its delivery business will grow 23 per cent to 474.3 billion yuan (US$67.4 billion) in 2020, with a market share of 68 per cent and about 420 million users. Its current share price is HK$101, which is 10.6 per cent higher than a year ago. 
  – Snow Xia


Bocom International rates Meituan Dianping as ‘buy’

Chinese carmakers have weakened after November sales data showed a fourth consecutive month of downward trends in China’s automobiles market.  A gauge of 29 carmakers listed in Shanghai and Shenzhen fell 0.2 per cent. In Hong Kong, Great Wall Motors (2333 HK) dropped 2.6 per cent and BAIC Motor (1958 HK) shed 2.5 per cent.
  The country’s once buoyant car market, which reported an annual sales decline last year for the first time since 1992, is set for a second straight yearly drop.  Read the full story here.
  – Yujing Liu 


Carmakers dip on weak November sales data 

HSBC has set bullish end-of-year targets for major Chinese benchmarks in 2020, forecasting an 18 per cent to 20 per cent gain in the indices.
  It expects the Shanghai Composite Index to rise to 3,400 points, the CSI 300 Index to reach 4,600 and the Shenzhen Component Index to touch 11,500 by the end of 2020, according to a new report.
  It also forecasts earnings growth of 9 to 12 per cent for the A-share market, taking into account factors such as tariffs, tax cuts and monetary easing.
  “Our call is supported by the news that, for the first time in 18 months, consensus Asia earnings numbers are being raised, rather than cut,” analysts led by Steven Sun wrote in the report. “Three factors underpin earnings growth – the rise of new economy sectors, inflation not being all bad news for earnings and the property sector bottoming out, which could help with downstream earnings.”
– Yujing Liu 


HSBC sees 20 per cent gain in China stocks

A slight improvement in earnings growth in 2020 will reduce room for valuation expansion, creating few investment opportunities in China’s onshore stocks, Shenwan Hongyuan Group, a Shanghai-based brokerage, said in its 2020 strategy report on Tuesday.
Profit for companies excluding banks and petrochemical firms might increase 9.7 per cent next year, compared with 9.4 per cent in 2019, as aggregate demand is set to pick up slightly, analysts led by Wang Sheng at the brokerage said in the report.
Technology and manufacturing companies will probably be one of the few industries that will have strong sentiment and investors should heed low-valuation stocks, companies with high dividend yields or share prices below book values, which will have a chance for valuation recovery, the report said.
– Zhang Shidong 


China stocks to offer limited investment opportunities next year, brokerage says

“Pretty much everyone is in observation mode right now,” said Kevin Leung, executive director of investment strategy at Haitong International Securities.     If the US pulls back scheduled tariffs on Chinese imports on Sunday, the Hang Seng Index stands a chance of rising above the 27,000-point level by the end of this year, he said. “The market has priced in all the negatives, but at the same time I can’t see anything substantially positive that could support a rebound,” he added.
– Yujing Liu 


Hong Kong market in ‘observation mode’, analyst says

China markets reversed early losses and eked out small gains by the close on Tuesday. The Shanghai Composite Index ended 0.1 per cent, or 2.84 points, higher at 2,917.32. The Shenzhen Component Index added 0.4 per cent, while the ChiNext Index rose 0.8 per cent.
  Electronics makers led the advance, as a rally in Star Market’s technology start-ups spilled over to the main board. A gauge tracking 247 electronics stocks in Shanghai and Shenzhen compiled by Citic Securities rose 2 per cent. Ningbo Ronbay New Energy (688005 SH), a maker of lithium battery materials, jumped 19 per cent to 29.2.
  Meanwhile, pork and chicken stocks declined broadly on news China’s consumer inflation had accelerated in November. Muyuan Foodstuff (002714 SZ), one of the largest pork producers in China, fell by 5.3 per cent to 84 yuan.
– Yujing Liu 


Electronics rise in China, while pork stocks plunge

Postal Savings Bank of China (601658 SH), the country’s biggest initial public offering since 2010, closed with a slight gain of 2 per cent at 5.61 yuan. While new stocks typically soar on their first day of trading in China, investors have been more cautious of late. Moreover, the listing has been met with suspicion about its valuation levels, and growing distrust in China’s banking industry, which has been hit by several unexpected bailouts.
– Yujing Liu 


Postal Savings Bank ekes out 2 per cent gain

The Hang Seng Index dropped 0.2 per cent to 26,436.62, with sportswear makers recording big losses. Li Ning (2331 HK) declined by 6.3 per cent, while clothes manufacturer Shenzhou International Group Holdings (2313 HK) dropped 3.5 per cent, making it the biggest drag on the benchmark.
– Yujing Liu 


Hong Kong, China stocks mixed while country's biggest IPO in years records small gain

China consumer inflation accelerated in November on rising pork prices China Zheshang Bank included in Stock Connect

China consumer inflation accelerated in November on rising pork prices

China Zheshang Bank included in Stock Connect