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Zhang Shidong

Azar Zaidi

Simmering tensions in the Middle East seem to have slipped off radars in Hong Kong and China, with traders’ focus shifting to a trade deal between Washington and Beijing being signed as early as next week. But after Iran launched missiles on a US airbase in Iraq, don’t expect them to be out of sight for long.
The markets in mainland China and Hong Kong  are expected to open mixed after US stocks fell overnight, and Wednesday is likely to see-saw between optimism about the trade deal and caution over tensions between the US and Iran.
And if you would like the Live Stocks Blog emailed to you each morning, click here. 
– Zhang Shidong in Shanghai 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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Stocks

 Hong Kong, China stocks decline as Iran missile launch escalates Middle East crisis 

Business

Markets

Hong Kong stocks post steepest declines in five weeks
Chinese stocks fall most in two weeks


The Hang Seng Index dropped 0.8 per cent at the close on Wednesday, posting its biggest loss since December 4. The Shanghai Composite Index dropped 1.2 per cent for its biggest loss since December 23.


China stock market

Hong Kong Stock Exchange

Live

Overnight markets/ what futures foretell:  – Overnight in US markets, the S&P 500 index dropped 0.3 per cent, the Nasdaq fell less than 0.1 per cent and the Dow declined by 0.4 per cent  – Hong Kong futures are 2.1 per cent lower, while the FTSE China A50 futures have fallen 0.6 per centIPO debuts: Construction contractor Kwan Yong Holdings (9998 HK) will start trading in Hong Kong today.Economic statistics/central bank action: nothing majorCorporate events, earnings, meetings, news conferences: nothing major scheduledLater this week: The statistics bureau will reveal the December data on inflation on Thursday.


Morning Guidance

Chinese cement maker and property developer BBMG Corporation (2009 HK) expects net profit for 2019 to increase by 7 per cent to 20 per cent from the year before, it said in an exchange filing on Tuesday night. Its net profit could stand at between 3.5 billion yuan and 3.9 billion yuan, it said. Cement prices have risen as a result of supply-side reform in the industry over the past year, and demand has increased in its core regions, according to the filing.
Film producer Universe Entertainment and Culture Group Company (1046 HK) forecast a significant improvement in its second-half earnings in 2019 in an exchange filing on Tuesday night. The company is likely to record a net profit for the second half of 2019, against a net loss in the same period in 2018, thanks to buoyant box office performances by White Storm 2: Drug Lords, a film it released, the company said.
BYD (1211 HK), China’s top new energy vehicle maker, reported a 11.4 per cent year-on-year plunge in 2019 sales to 461,399 units, in a stock exchange filing on Tuesday night. In December, it sold 13,099 units of new energy vehicles, plummeting by 72 per cent from the same period in 2018.
Chinese property developer Longfor Group Holdings (960 HK) reported a 21 per cent jump in 2019 contracted sales to 242.5 billion yuan from a year before, in an exchange filing on Tuesday night. This means the company has beaten its 2019 sales target – set at 220 billion yuan at the beginning of last year.
– Yujing Liu


Overnight filings

China’s Financial Stability and Development Committee, which comes under the State Council, on Tuesday vowed to roll out measures to relieve financing pressures on the country’s small businesses. The committee, headed by Vice-Premier Liu He, is a super financial regulator created on President Xi Jinping’s orders in 2017 to tackle financial risk. Small businesses play an essential role in creating jobs and stabilising economic growth, and the country needs to continue supporting them, the committee said, according to an official statement.
– Yujing Liu


Beijing vows – once again – to ease funding for small businesses

The highly-anticipated initial public offering of Beijing-Shanghai High-Speed Railway has attracted 21 cornerstone investors, including a number of state-owned funds and corporations, as well as a subsidiary of Singapore’s Temasek, according to an exchange filing on Tuesday night.
  The cornerstone investors have subscribed to 48.9 per cent of all new shares issued by the operator of the high-speed railway linking China’s two biggest cities by GDP.
  The company’s IPO shares were 127 times oversubscribed, with about 2.34 billion shares sold to public investors and 868 million shares slated for institutional buyers. The retail investors who won a lottery to subscribe to the shares will have to pay for the shares by the end of Wednesday.
  Priced at 4.88 yuan apiece, the IPO size could reach 30.7 billion yuan (US$4.4 billion), the highest since 2015.
– Yujing Liu


21 cornerstone investors bet on high-speed rail operator’s mega IPO

Recent production progress and a stock rally in US electric vehicle maker Tesla has lifted Chinese electric vehicle-related stocks. On Tuesday, enthusiasm over Tesla climbed to a new level, with China’s state television trumpeting its new Shanghai factory in a prime-time show.
  Xinwen Lianbo, the CCTV’s most important evening news programme, ran a report of Tesla’s Shanghai factory delivering its first cars built outside the US to the public. Elon Musk, founder of Tesla, attended a ceremony at the factory, where he also launched the production of its Model Y electric sports utility vehicle. A clip of Musk showing off his dance moves on stage at the event went viral on Chinese social media.
Chinese suppliers to Tesla and electric vehicle makers have seen a rapid run-up recently. The country’s leading lithium battery maker, Contemporary Amperex Technology (300750 SZ), has gained 17 per cent since December 20.  Two Chinese car parts makers have, in fact, warned investors of risks following a recent craze over Tesla. Tianjin Motor Dies (002510 SZ) said Tesla is only one of the company’s customers and is no different from its other clients, which include Mercedes-Benz and BMW, in an exchange filing on Tuesday night. There are risks in the company’s partnership with Tesla, the company said, after its shares jumped by the 10 per cent daily limit for two trading sessions in a row.
Olympic Circuit Technology (603920 SH), a producer of printed circuit boards, on the other hand, said it had confirmed that Tesla was not a customer, and rumours that it was a major circuit board supplier to Tesla are false. The company supplies directly to auto parts makers, it said. Its shares also surged by 10 per cent in a fourth straight trading session on Tuesday. They have advanced by 46 per cent so far this year.
– Yujing Liu


Tesla lifts Chinese electric vehicle-related stocks

Singaporean construction company Kwan Yong Holdings (09998 HK) starts trading in Hong Kong. 
– Kathleen Magramo
 
Singaporean construction company Kwan Yong Holdings (09998 HK) becomes first to list on the Hong Kong stock exchange in 2020.@SCMPNews @scmpbusiness pic.twitter.com/YKGdkg5ouI
— Kathleen Magramo (@kathmaemagramo) January 8, 2020


Kwan Yong Holdings makes Hong Kong trading debut

The markets are back in risk-off mode, with benchmarks in mainland China and Hong Kong opening lower on Wednesday. The Shanghai Composite Index fell 0.5 per cent to 3,088.46 and the Hang Seng Index sank 1.2 per cent to 27,974.14, tracking declines in other markets in Asia, after Iran launched rockets against a US airbase in Iraq in retaliation for the killing of a top military general. Gold futures rose 1.8 per cent for an 11th straight day of gains, while crude oil jumped 3.4 per cent.
– Zhang Shidong


China, Hong Kong stocks decline on Iran attack on US airbase in Iraq

Kwan Yong Holdings (9998 HK) sank by as much as 15 per cent during morning trade on Wednesday, its first day of trading in Hong Kong. The stock recently traded at 59 Hong Kong cents, down 9.2 per cent from its IPO price.
– Zhang Shidong


Construction contractor Kwan Yong tumbles on Hong Kong debut

The chairman and two other executives of Guangxi Mingli Innovation Industrial have been fined 1.76 billion yuan (US$253 million) by the China Securities Regulatory Commission for manipulating the company’s share price. Lin Jun, Mingli’s chairman, was found to have sold and bought the stock through 32 accounts controlled by him and two subordinates from April 2015 to December 2016, pumping up the stock price and creating false demand to draw attention from other investors before selling to them, the CSRC said in a statement. The three persons made 293.4 million yuan from the manipulation, it said. Guangxi Mingli, which is listed on the over-the-counter market, manufactures chemical products and also runs a warehouse business.
– Zhang Shidong


Three executives of chemical products makers fined US$253 million by CSRC

The supply of pork in China will rise as the number of breeding sows and hogs has rebounded, the agricultural ministry has said. The stock of breeding sows, the underlying gauge of potential pork supply, rose 2.2 per cent from a month earlier in December, for its third consecutive month-on-month increase, while the number of hogs jumped 14 per cent on a month-on-month basis, Kang Zhen, the country’s vice agricultural minister, said in Beijing on Wednesday.
 Pig-breeding stocks fell on the news. Wens Foodstuff Group (300498 CH) dropped 0.9 per cent to 37.88 yuan and Jiangxi Zhengbang Technology (002157 CH) lost 1.6 per cent to 16.72 yuan.
– Zhang Shidong


China says pork supply to rise

China Renaissance said in its inaugural equity research report this week that it remained positive about a full-year rally by the MSCI China index, and forecast a 12 per cent upside by the end of 2020. It based its forecast on expectations of 11.6 per cent growth in earnings per share and a 13.7 times 12-month forward price-to-earnings multiple for the index.     Such a rally will be driven in part by reduced US-China trade tensions and better-than-expected 2019 and first-quarter 2020 earnings, to be announced during the results season starting March.
  The mainland Chinese investment bank remained overweight on e-commerce, online games, technology hardware, food and beverage, health care, logistics and lodging.   It rated 10 US, Hong Kong, Taiwan and China-listed stocks as its top picks, each with a buy rating.These include Alibaba Group Holding (BABA US), Gree Electric (000651 CH), NetEase (NTES US), WH Group (288 HK), AAC Technologies (2018 HK), Silergy (6415 TT), TSMC (2330 TT), Zai Lab (ZLAB US), Lexin Fintech (LX US) and Ausnutria Dairy (1717 HK).
– Georgina Lee


China Renaissance expects 12 per cent upside for MSCI China index in 2020

The Shanghai Stock Exchange has asked education services provider Shanghai Xinnanyang Only Education & Technology (600661 CH) to explain a management reshuffle that led to the appointment of a new head.
The company’s board approved a proposal by chairman Zhou Chuanyou to name himself as president and remove former president Lin Tao from the post on Monday, with three directors   voting against the appointment because of a conflict of interest and the short notice given.The exchange asked Only Education to reveal more details about the board meeting and the implications of the appointment in an inquiry letter.
Shares of Only Education have fallen 23 per cent over the past 12 months, partly on concerns that a fight for control over the company will affect its operations. China Capital Investment Group and its concerted parties, where Zhou comes from, have a 23 per cent stake in the company, and are the biggest stakeholders. Only Education competes with US-listed New Oriental Education and Technology Group and TAL Education Group in areas of K12 education and language training.
– Zhang Shidong


Shanghai exchange questions management shake-up at education provider

Oil-linked stocks will be boosted by the tensions between Iran and US forces in Iraq only temporarily, said Louis Tse Ming-kwong, managing director of VC Asset Management. “I think oil stocks are taking the opportunity to take profits,” he said. The tensions will not lead to sustained growth in their value, he added.
 Tse did not think oil prices would shoot up tremendously, adding that Chinese oil companies had already started drilling in Southeast Asia and the East China Sea. “The situation in the Middle East does not directly affect the drilling of Chinese oil companies elsewhere, which means that the supply is still there and there won’t be a big disruption in oil supply,” he said.
– Kathleen Magramo


Middle East tensions to boost oil stocks only temporarily

Airline stocks fell on the Hong Kong and Chinese stock markets, amid concern that their profitability will be further eroded by higher jet fuel prices. Cathay Pacific Airways (293 HK), Hong Kong’s hometown carrier, fell by as much as 2.7 per cent in a declining market to HK$10.64. Air China (753 HK), the country’s flag carrier, fell by as much as 4.7 per cent in Hong Kong to HK$7.37, while its A shares (601111 CH) fell 3.1 per cent in Shanghai to 9.01 yuan. China Southern Airlines (1055 HK), which operates the country’s largest aircraft fleet, fell 4.3 per cent in Hong Kong to HK$4.91, while the Guangzhou-based carrier’s A shares dropped 2.6 per cent on the Shanghai exchange to 6.87 yuan.
  – Eugene Tang 


Hong Kong, China airlines decline on rising fuel prices

Oil extractors rose, as higher crude oil prices are a boon for their bottom lines. PetroChina (857 HK), the largest Chinese state-owned crude producer, rose by as much as 2.4 per cent in a declining market to an intraday high of HK$4.23 in Hong Kong, while its A shares (601857 CH) advanced by as much as 3.1 per cent to 6.30 yuan in Shanghai. CNOOC (883 HK), the largest Chinese offshore oil explorer, advanced by as much as 2.9 per cent to HK$14.04. Sinopec (386 HK), the largest oil refiner and operator of service stations, advanced by as much as 0.6 per cent to HK$4.81 in Hong Kong while its A shares (600028 CH) rose by as much as 1.9 per cent to 5.35 yuan in Shanghai. 
– Eugene Tang 



Chinese oil extractors rise on higher crude oil prices

The decline in mainland China stocks accelerated in the afternoon session, with the Shanghai Composite Index extending losses to 0.9 per cent. Apart from the uncertainty arising from the missile attacks by Iran on US airbases in Iraq, traders will also be keeping an eye on China’s inflation number, which is expected to be released on Thursday. In Hong Kong, the Hang Seng Index shed 0.9 per cent.
  “Global Equities are being hit, and the need for defensive strategies is paramount,” said Stephen Innes, strategist at AxiTrader. “There is no denying the enormity of long-term geopolitical repercussions of the latest events as oil, bond and gold defensive strategy flows are providing the lead-in for local cash.”
– Zhang Shidong


Sell-off in China stocks deepens on mounting geopolitical tensions

China Mengniu Dairy (2319 HK) had its profit forecasts lowered by Citic Securities, which cited rising costs of raw milk. A projection for its per share earnings in 2019 was cut by 8.5 per cent to 0.97 yuan, and for this year by 9.9 per cent to 1.09 yuan, the brokerage said on Wednesday. Mengniu’s shares dropped 0.5 per cent to HK$31.40 in Hong Kong.
– Zhang Shidong


China Mengniu Dairy’s earnings forecast cut by Citic Securities

Yusys Technologies (300674 CH) jumped by the 10 per cent daily limit to 33.43 yuan in Shenzhen after Baidu’s China unit bought a 5.7 per cent stake in the developer of software for internet finance. Baidu bought the stocks for 600 million yuan (US$86.4 million) from two shareholders that are backed by state-owned China Everbright, Yusys said in an exchange statement.
– Zhang Shidong


Chinese software developer Yusys jumps after Baidu buys stake

The Shanghai Composite Index dropped 1.2 per cent, or 38.91 points, to 3,066.89 at the close on Wednesday, posting its biggest loss since December 23, as geopolitical tensions resurfaced in the Middle East. Brokerages, technology and agricultural stocks topped the list of worst performers.
– Zhang Shidong


Chinese stocks fall most in two weeks

The Hang Seng Index dropped 0.8 per cent to 28,087.92 at the close, posting its biggest loss since December 4. AIA Group (1299 HK) and China Life Insurance (2628 HK) were among its biggest decliners, falling by at least 1.8 per cent.
Shares of IPO debutant Kwan Yong Holdings (09998 HK) declined by 7.69 per cent to HK$0.60 a share from their IPO price of HK$0.65.
– Zhang Shidong and Kathleen Magramo


Hong Kong, China stocks decline as Iran missile launch escalates Middle East crisis

Hong Kong stocks post steepest declines in five weeks Chinese stocks fall most in two weeks

Hong Kong stocks post steepest declines in five weeks

Chinese stocks fall most in two weeks