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Georgina Lee

Srinivasan Iyer

Good day traders,
The first day of trading in the Year of the Rat was disappointing to say the least, as fears over the deadly Wuhan virus gripped investors.
Hong Kong shares closed the day 2.82 per cent lower. Here's how the day's trading unfolded. 
 If you would like the Live Stocks Blog emailed to you each morning, click here. 
– Georgina Lee and Srinivasan Iyer 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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Hong Kong Stock Exchange

Hang Seng Index ends the first trading session of the Year of Rat with steep losses     

Flags are raised outside the Hong Kong Exchange Square building. Investors are geared up for trading in the Year of the Rat on Wednesday. Photo: AP Photo

Business

Markets


Index heavyweight Tencent, the only blue chip up at the lunch break, finally ended the day 0.7 per cent lower
All components of the Hang Seng Index and Hang Seng China Enterprises Index close with losses 



Hong Kong shares closed the first trading session of the Year of the Rat with a loss of 2.82 per cent amid fears over the Wuhan virus 


HKEX

Investing

Coronavirus pandemic

Live

Overnight markets/what futures foretell  -- Overnight in US markets, the S&P 500 rose 1 per cent, Nasdaq gained 1.4 per cent, and the Dow Jones Industrial Average advanced 0.7 per cent.   -- Hong Kong futures are down 3.3 per cent 
IPO debuts: None
Good reads: Georgina Lee and Eric Ng look at sectors that stand to gain and lose from the ongoing Wuhan coronavirus outbreak. Click here for the full article.


Morning guidance

Haidilao (6862 HK), China’s biggest hotpot restaurant chain, has temporarily closed all its restaurants in the mainland until Friday.
In an overnight filing with the Hong Kong Stock Exchange, the restaurant majority-owned by Zhang Yong, Singapore’s wealthiest man, said all its branches in the mainland were shut from January 26 and would remain so until January 31. Its restaurants in Hong Kong, Macau, and Taiwan are open.
The temporary closure was part of the company’s efforts to prevent the further spread of the deadly coronavirus that was first detected in Wuhan.
Should the suspension of mainland operations be extended, the company said it would make further announcements.
On Friday, just before the bourse took a two-day break for Lunar New Year holidays, Haidilao’s shares closed at HK$29.70.
-- Cheryl Arcibal


Overnight filing

Chi Lo, a senior economist at the French asset management firm, said that the coronavirus outbreak is likely to trigger an aggressive policy response from the Chinese authorities.
As domestic consumption and the services sectors account for a much bigger share of China’s economy, the damage would be much larger today than during the 2003 Sars epidemic. This means a bigger downside risk in sequential growth, not necessarily in overall growth this year.
Retail, tourism, hotel and catering, transport and leisure sectors are likely to be hit hard, especially in the first and second quarters this year.
-- Georgina Lee


Bad news for GDP growth, good news for Chinese stocks, says BNP Paribas Asset Management

The Hang Seng Index plunged 3 per cent to 27,101.54, as trading resumed for the first time in the Year of the Rat. 
The declines were almost across the board among the 50 blue chips.
The drop came after the Hang Seng Index shed 3.8 per cent last week, halting seven consecutive weeks of gains, as it was weighed down by the deteriorating Wuhan virus outbreak.
As of this morning, there were more than 5,000 reported cases in China and more than 130 deaths. 
While there have been no fatalities in Hong Kong, the city has already confirmed eight cases of infection.  
During the 2003 Sars epidemic, Hong Kong narrowly avoided a recession, with only the second quarter GDP dropping by 0.5 per cent. 
The government has requested all civil servants to work from home, a move which has been mirrored by many businesses across the city.
-- Georgina Lee


Hong Kong stocks plunge 3 per cent at the open

China Southern Airlines (1055 HK) fell 5.6 per cent to HK$4.4 and China Eastern Airlines (670 HK) lost 4.7 per cent to HK$3.61 amid the worsening Wuhan virus outbreak.
Hong Kong’s Chief Executive Carrie Lam Cheng Yuet-ngor on Tuesday announced a raft of measures to cut cross-border contact between the city and mainland China, including the closure of six checkpoints, cut in the number of flights and bus services to contain the spread of the virus in the city.
Macau casino operators also took a hit from the Wuhan coronavirus outbreak, as the enclave reported seven cases. Mainland tourist numbers to Macau were 75.1 per cent lower over the first four days of the Lunar New Year holiday, data from the government shows.
Sands China (1928 HK) dropped 5.1 per cent to HK$39.2, Galaxy Entertainment (27 HK) lost 6.3 per cent to HK$52.5 and SJM Holdings (880 HK) shed 8.1 per cent to HK$8.44.
You can read more here
Georgina Lee


Travel-related stocks get hit again

Using the Sars epidemic as the worse-case scenario, Jefferies noted that while restaurant sales in Hong Kong plunged almost 20 per cent during the second quarter of 2003, the drop in fast food sales was less serious, falling about 10 per cent during the period.
For Hong Kong’s leading chain Café de Coral (341 HK), the brokerage has maintained a target price of HK$24.57, which implies 38 times and 32 times price-to-earnings multiples for 2020 and 2021, respectively, and an enterprise value-to-ebitda (earnings before interests, taxes, depreciation and amortization) ratios of 16 times and 14 times, respectively.
Downside risks for the stock include slower than expected performance for its China business and another round of minimum wage increase in Hong Kong, which the management might not be able to pass on. The Hong Kong government raised the minimum wage to HK$37.5 per hour from HK$34.5 in May last year.
-- Georgina Lee


Fast food chain little affected by Wuhan virus, but share price to still take hit

Chinese online education course provider Koolearn Technology Holding (1797 HK) surged more than 11 per cent in early trading before trimming gains to 3.16 per cent. The shares were at HK$26.15 in the latest trading.
China Ministry of Education announced on Monday that spring semesters will be postponed because of the Wuhan coronavirus outbreak.
-- Iris Ouyang


Online education provider’s roller coaster ride

China Resources Beer (291 HK) was the only gainer in the Hang Seng China Enterprises index, which was 3 per cent lower at 10,643.17.
Last week, the brewery said in an exchange announcement that it expects profit attributable to shareholders for the year ended December 2019 to rise at least 30 per cent. It partly attributed the improvement to contribution from its acquisition of Heineken China, which was completed last April.
The shares were last trading 0.5 per cent higher at HK$38.45.
-- Georgina Lee


China Resources Beer only one left standing amid H-share index decline

Apple on Tuesday projected a revenue forecast of between US$63 billion and US$67 billion for its first quarter, a gain of 9 to 15 per cent, after it reported a record-high quarterly profit of US$22.2 billion for its fourth quarter. The profit surpassed analysts’ expectations, as demand was strong for its iPhone 11 and iPhone 11 Pro.
But the Financial Times reported, citing chief financial officer Luca Maestri as saying that the company had to give an “unusually wide” range for its current forecast as it needs to account for the potential impact across the supply chain from the effects of the coronavirus outbreak in China.
Stocks of camera module and lens producer Sunny Optical (2382 HK) dropped 3.5 per cent to HK$136. AAC Technologies (2018 HK), an audio components supplier lost 4.8 per cent to HK$59.5 while smart phone camera module maker Q Technology (1478 HK) eased 4.1 per cent to HK$12.56.
-- Georgina Lee


Apple’s China suppliers fall on Wuhan virus fears

Genscript Biotech, a developer of therapy for a type of blood cancer known as multiple myeloma, has reached a fourth milestone in the clinical development of a therapy in cooperation with Janssen, a unit of US pharmaceutical giant Johnson & Johnson.
Legend Biotech USA, wholly-owned by Genscript, is entitled to a US$30 million payment from Janssen according to a cooperation agreement, Genscript said in a filing to Hong Kong's bourse late on Tuesday.
A total of US$80 million has previously been paid to Legend for the first three milestones.
Genscript shares fell 0.7 per cent to HK$17.48 in early trading.
-- Eric Ng


Cancer therapy maker reaches another milestone

China Resources Land (1109 HK) lost 3.5 per cent to HK$33 and China Overseas (688 HK) fell 3.3 per cent to HK$26.05, with both sinking to their lowest in more than two months.
Country Garden’s (2007 HK) losses were sharper, as it shed 4.8 per cent to HK$10.42 - its lowest in more than three months.
Regular tours of cities covered by Beijing’s Greater Bay Area development plan by Hong Kong homebuyers will be delayed because of the spread of the Wuhan coronavirus, with analysts expecting a drop in transaction volumes in this area by up to 15 per cent from a year ago.
In light of the Wuhan coronavirus epidemic, Hong Kong-based agent Midland Realty said it will postpone property tours to cities in the bay area for potential home buyers until further notice.  You can read more here 
-- Georgina Lee


Chinese developers sink, property agent suspends tours to Greater Bay Area for potential buyers

Shares of Hong Kong’s dominant free-to-air broadcaster slid 3.2 per cent to HK$11.98.
Last Friday, a new buyer emerged for TVB (511 HK). Kenneth Hsu Kin disclosed to the stock exchange that he has bought a controlling stake in the entity which in turn owns a 26 per cent stake in Television Broadcasts Ltd (TVB) from outgoing chairman Charles Chan Kwok-Keung. 
Very little is known about Hsu, except that he is an engineer, according to local Chinese media reports. 
The stake sale, which will give Hsu a substantial stake in TVB, is now awaiting regulatory approval.
-- Georgina Lee


TVB falls as new substantial shareholder is identified

Shares of Chinese banking and finance firms dropped broadly in Hong Kong.
Insurance majors China Taiping (966 HK) declined 5.1 per cent to HK$17.2, China Pacific Insurance (2601 HK) fell 4.6 per cent to HK$27.3 and Ping An Insurance shed 3.2 per cent to HK$91.85.
Securities firms also sank. China International Capital Corporation (3908 HK) lost close to 5 per cent to HK$14.18. Citic Securities (6030 HK) fell 3.8 per cent to HK$16.08.
Banks were not spared either, with China Everbright (0165 HK) easing nearly 6 per cent to HK$12.36. Industrial and Commercial Bank of China (1398 HK), Agricultural Bank of China (1288 HK) and China Construction Bank (0939 HK) lost more than 3 per cent each.
-- Iris Ouyang


Mainland-based banking and finance firms take a beating

Cathay Pacific (293 HK), Hong Kong’s de facto flag carrier, said it will halve the number of flights to mainland China flights to comply with a government directive aimed at slowing the spread of the Wuhan virus.
The airline said it would cut flights to China from January 30 until March 31.
Cathay Pacific has already seen demand for mainland flights drop by 20 per cent drop for five consecutive months amid the more than seven-month long Hong Kong protests.
The shares fell 2.1 per cent to HK$9.9, taking the losses over the past 12 months to around 28 per cent.
You can read more here 
-- Georgina Lee


Cathay Pacific falls on Hong Kong government’s directive to halve flights to China

Pharmaceutical and health care related stocks continued their upward trend from last week, as investors bid up these stocks amid the Wuhan virus outbreak. The number of reported Wuhan virus cases in China has crossed 6,000 and the death toll has gone past 130.
Shares of hospital clinical research and medical service provider China Health Group (8225 HK) tripled to HK$0.35, making it the top percentage gainer.
Ascletis Pharma (1672 HK), which focuses on cancer drugs, fatty liver disease and anti-viral products, surged 42.28 per cent to HK$4.24 and medical device maker Vincent Medical (1612 HK) jumped 28.3 per cent to HK$0.77.
-- Georgina Lee


Pharma firms, medical device makers thrive amid health scare

Tencent (700 HK) reversed early losses, rising 0.7 per cent to HK$388.4 in the latest trading despite no major news related to the index heavyweight.
But with China extending its Lunar New Year holiday by three days to February 2 to contain the Wuhan virus outbreak, there is a theory that some companies which provide online gaming and streaming might benefit from the extended break, as Chinese residents spend more time at home to avoid catching the infection.
The Hang Seng Index narrowed its losses to 2.4 per cent from 3 per cent at the open. It is currently at 27,890.59.
-- Georgina Lee


Tencent defies decline, limits losses in Hang Seng Index

The offshore yuan strengthened by 0.1 per cent to 6.9551 per US dollar from its previous close of 6.9678.
Amid the worsening of the Wuhan coronavirus outbreak, the USD/CNH cross had at one point on Monday dropped to a more than four-week low of 6.9866, the lowest since December 27.
-- Georgina Lee


Offshore yuan recoups losses

The Hang Seng Index narrowed losses in the first trading session of the Year of the Rat, thanks largely to index heavyweight Tencent (700 HK). It was the only gainer in the benchmark, rising 0.5 per cent to HK$387.6.
Property stocks weighed on the index, with Hang Lung Properties (101 HK) falling 5.8 per cent to HK$16.94. Country Garden (2007 HK) dropped 5.3 per cent to HK$10.36 and Wharf REIC (1997 HK) lost 4 per cent to HK$42.85.
Their decline came amid the worsening Wuhan coronavirus outbreak, which has led China to delay the opening of the mainland’s stock exchanges to next week. The markets were scheduled to open on Friday after the long Lunar New Year holiday.
The novel virus has led to reduced flights to China and cut tourist arrivals to Macau, dampening Macau casinos. Sands China (1928 HK) lost 5.6 per cent to HK$39 and Galaxy Entertainment (27 HK) eased 4.6 per cent to HK$53.45.
-- Georgina Lee


Hong Kong stocks narrow losses by lunch break

Melco International (200 HK) fell 5 per cent to HK$17.6 after Reuters reported that the casino operator was cooperating with Japanese prosecutors in a widening bribery investigation of a senior Japanese ruling party lawmaker.
“Tokyo prosecutors sent Melco a letter and visited the office on Jan 17 after receiving no reply,” the source told Reuters. 
Melco declined to comment on whether it is under investigation. 
-- Georgina Lee


Melco falls on bribery investigation in Japan

Bitcoin, the oldest cryptocurrency, continued from where it left off overnight. It rose 3.3 per cent to US$9,337.48 today, having climbed 5 per cent on Tuesday and regaining the US$9,000 level for the first time since November 10.
Bitcoin’s fortunes contrast those of the Hang Seng Index, which has fallen more than 2 per cent today after the Hong Kong market resumed trading following the Lunar New Year holiday.
The renewed strength in the crypto asset comes amid heightened global health risks stemming from the deteriorating Wuhan coronavirus, reigniting speculation that investors are switching money into bitcoin. The asset’s performance hardly has any correlation to the state of the world economy.
-- Georgina Lee


Bitcoin rises to 12-week high as stock markets take a plunge

Trading in China Health Group (8255 HK) was halted after the stock rocketed more than 300 per cent in intraday trading.
The suspension, however, came when the gains were cut to 280 per cent. It was last traded at HK$0.43.
The company announced last week that it had formed a research team led by experts to find an effective cure for the Wuhan coronavirus and conduct related research.
-- Iris Ouyang


China Health Group shares suspended after rising 280 per cent

Haidilao (6862 HK) rose 4 per cent to HK$30.9 after lunch, on robust trading turnover of HK$463.4 million.
China’s largest hotpot chain said it would suspend operations at its restaurants in the mainland until Friday, while keeping business as usual in Hong Kong, Macau and Taiwan.
As of June-end, Haidilao operated 550 restaurants in 116 cities in mainland China.
-- Georgina Lee


Steady gains in hot pot chain Haidilao

ETFs tracking Chinese stock indexes fell in Hong Kong, underlining investors’ fear about the Wuhan virus spreading and its impact on China’s economy.
The number of confirmed cases of the rapidly spreading coronavirus infection on the mainland has reached 5,974, health authorities said on Wednesday. The total has now surpassed that of the 2002-03 Sars epidemic that killed almost 800 people worldwide. The Wuhan virus has so far claimed 132 lives in China.
CSOP A50 ETF (2822 HK) fell 4.9 per cent to HK$14.02, iShares A50 ETF (2823 HK) dropped 4.9 per cent to HK$14.12, iShares Core CSI 300 Index ETF (2846 HK) lost 4.6 per cent to HK$27.75, Harvest MSCI China A Index ETF (3118 HK) declined 5.1 per cent to HK$14.44 and China AMC CSI 300 Index ETF (3188 HK) shed 4.7 per cent to HK$43.75.
-- Georgina Lee


ETFs tracking China stock indices fall

Bank of America Merrill Lynch said that it expects the US Federal Reserve to keep its interest rate unchanged tonight after it concludes its January meeting today.
The investment bank forecast that the fed funds rate will remain unchanged at 1.5-1.75 per cent.
The bank said that Fed chairman Jerome Powell was likely to be asked about the coronavirus and its impact on global financial markets.  
“We suspect he would say they are monitoring the situation closely and would only act if the fallout meaningfully alters the economic outlook,” analysts including Michelle Meyer and Mark Cabana wrote in a note.
-- Georgina Lee


Fed likely to stay put on rates, says Bank of America Merrill Lynch

The China Banking and Insurance Regulatory Commission said in a notice on its website this week that banks should make adjustments in their internal credit risk policies and give “appropriate repayment extension” to mortgage and other retail loan borrowers who have lost their income sources because of the Wuhan virus, which has spread across the entire country at speed much faster than the Sars epidemic in 2003.
The watchdog has asked insurers to prioritise claims of policy holders afflicted by the coronavirus.
Banks too have been urged to adjust their existing loans to sectors affected by the virus, particularly retail and wholesale businesses, logistics and transport, catering and hospitality, tourism and cultural sectors.
“Banks should not blindly withdraw loans [to these corporates]. Instead, banks should lower interest rates [and other terms] to help companies overcome challenges brought on by the virus,” it said.
Chinese banks fell along with the broader market. ICBC (1398 HK) dropped 4.3 per cent to HK$5.38, Minsheng Bank (1988 HK) shed 4.3 per cent to HK$5.57 and Bank of Communications (3328 HK) erased 3.8 per cent to HK$5.08.
-- Georgina Lee


China’s regulator orders banks, insurers to support borrowers

The chief global markets strategist at US asset manager, Invesco, said that the Wuhan virus outbreak’s effect on market confidence could far exceed its actual impact, and that stock prices in China and other Asian markets would continue to fall.
“The most recent revelation of new infections in China and elsewhere suggests that the market will be faced with further downside risks,” Kristina Hooper wrote in a note on Wednesday.
Invesco expects lower oil prices, higher gold prices, and a likely appreciation of the Japanese yen against the US dollar. She, however, did not cite reasons for such expectations.
-- Georgina Lee


Invesco sees higher gold prices, stronger yen

Short sellers are targeting smartphone giant Xiaomi (1810 HK). It was the third most shorted stock in terms of volume - 35.56 million - during the morning session, with short-selling turnover at HK$460 million.
In a short sell, an investor sell shares he does not own by borrowing them from a broker, and buys them when the stock price declines further.
Xiaomi fell 5.7 per cent to HK$12.58. The other two top most shorted securities were ETFs tracking Chinese stock indices - iShares A50 ETF (2823 HK) and CSOP A50 ETF (2822 HK).
-- Georgina Lee


Short sellers target Xiaomi

The Hang Seng Index fell 2.82 per cent to 27,160.63 - its biggest one-day decline since August 5.
The loss came amid the worsening Wuhan virus, stoking fear among investors about the potential impact it could have on the economies of China and Hong Kong. The number of reported cases approached 6,000 and  deaths crossed 130 deaths on the mainland, health authorities said on Wednesday. The 2002-03 Sars epidemic in contrast killed almost 800 people worldwide.
Property developers and casino operators were the biggest losers. Hang Lung Properties (101 HK) fell 6.7 per cent to HK$16.78 and Country Garden (2007 HK) lost 5.9 per cent to HK$10.3.  Macau gaming firms Sands China (1928 HK) eased 5.6 per cent to HK$39 and Galaxy Entertainment (27 HK) shed 5.2 per cent to HK$53.15, after mainland tourist numbers to the city were 75.1 per cent lower over the first four days of the Lunar New Year holiday, data from the government showed.
At one point, social media giant Tencent (700 HK) bucked the trend and limited the benchmark index’s losses. The index heavyweight, however, closed the day with a loss of 0.7 per cent at HK$383.2.
-- Georgina Lee


Hang Seng Index ends the first trading session of the Year of Rat with steep losses

Index heavyweight Tencent, the only blue chip up at the lunch break, finally ended the day 0.7 per cent lower All components of the Hang Seng Index and Hang Seng China Enterprises Index close with losses

Index heavyweight Tencent, the only blue chip up at the lunch break, finally ended the day 0.7 per cent lower

All components of the Hang Seng Index and Hang Seng China Enterprises Index close with losses