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Georgina Lee

Srinivasan Iyer

Good day, traders
The Wuhan coronavirus once again dominated market proceedings as expected. There was no respite for Hong Kong shares and they continued to trend downwards throughout the day, eventually ending 2.6 per cent lower. 
Scroll through the blog to catch up on all the action.
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 market

Hong Kong stocks widen losses as sell-off sparked by China coronavirus continues for a second day 

A man wearing a mask stands before the city skyline. World health authorities will meet today to decide whether to declare the rapidly spreading Wuhan coronavirus as a threat to global public health. Photo: AFP

Business

Markets


Financial heavyweights AIA and China Construction Bank weighed heavily on the index 
Health care related companies such as China Health Group and Universal Health buck the trend    



Fears over the novel coronavirus dominated proceedings for a second consecutive day, as investors expect a big impact on China's economy.


Live

Overnight markets/what futures foretell  -- Overnight in US markets, S&P 500 fell 0.1 per cent, while the Nasdaq and the Dow Jones Industrial Average rose by less than 0.1 per cent.   -- Hong Kong futures are down 0.46 per cent.
IPO debuts: None
Economic statistics: Hong Kong December export, import, trade balance
Corporate events: HPC Holdings (1742) final results
Good reads: An article by Simone McCarthy on how the disease control policies in China amid the worsening coronavirus virus that originated from Wuhan could hurt its economy


Morning guidance

As the number of cases of the Wuhan coronavirus rose to more than 7,700 and the death toll increased to 170, Plenum, a China-focused research group, forecast that the disease-control measures could drag China’s first quarter GDP by 4 percentage points.
Additionally, the lockdowns within Hubei province, where 14 cities including Wuhan – the capital and epicentre of the virus – could pull down national GDP another 1.5 percentage points.
These measures would also impact tourism, transport, retail and restaurants across the country, accounting for another 0.4 per cent dent to the economy, the group said.
China’s GDP grew at 6 per cent in the fourth quarter last year, while full-year GDP stood at 6.1 per cent, the slowest growth in 29 years, as the impact from the US-China trade war weighed on the world’s second largest economy.
You can read more here
-- Georgina Lee


Wuhan virus could trim China’s first quarter GPD by 4 percentage points 

The Hang Seng Index lost 0.5 per cent to 27,030.61 at the market open.
The Wuhan coronavirus continues to weigh on the index, as the number of cases on the mainland continues to rise to more than 7,700 and the death toll reaching 170.
Index heavyweight China Mobile (941 HK) dropped 3 per cent to HK$65.6. Oil stocks also opened lower, with CNOOC (883 HK) losing 1.1 per cent to HK$12.32, PetroChina (857 HK) fell 1.1 per cent to HK$3.55.
But casino operators, which were hit on Wednesday, saw some return of buying interest. Galaxy Entertainment (27 HK) gained 0.9 per cent to HK$53.65, while Sands China (1928 HK) added 1 per cent to HK$39.4.
-- Georgina Lee


China Mobile weighs on Hong Kong stocks at the open

Lippo (226 HK) and Lippo China Resources (156 HK) are delaying the postage of dividend warrants for the interim dividends to their shareholders.
In a late filing to the Hong Kong Exchange, the companies said the delay in postage was owing to the suspension of services of Hong Kong Post from January 29 to February 2.
Lippo originally intended to pay the HK$0.4 per share interim dividend on January 31, while Lippo China Resources had said it would pay the HK$0.2 per share dividend on January 30.
Instead the payments will be made on or around February 3. These delays are the latest in a string of closures and suspension of business operations in mainland China and Hong Kong as governments try to contain a deadly virus that was first detected in Wuhan.
-- Cheryl Arcibal


Dividend payments delayed

China NT Pharma Group (01011 HK) extended gains for a second day.
The gains came after it said in an exchange announcement on Wednesday night that it was ready to cooperate with the mainland government for the mass production of ambroxol, more popularly known as Mucosolvan, as a potential treatment for the deadly Wuhan coronavirus.
The group said its unit Suzhuo First Pharmaceutical possesses an ambroxol medicine called Zhuo’Ao.
“Upon confirmation of ambroxol as an effective treatment for the new coronavirus infections, the company’s production department will fully cooperate with the PRC government in the mass production of Zhuo’Ao... medicine, so as to satisfy the market demand and fight against the epidemic with the country and people together,” the company said.
NT Pharma’s shares surged 48.3 per cent to HK$0.43. Over the past two days its share price has more than doubled.
-- Cheryl Arcibal and Georgina Lee


NT Pharma surges on disclosure about drug that could potentially treat coronavirus

As expected by the markets, the US Federal Reserve kept its benchmark fed funds rate unchanged at 1.5-1.75 per cent overnight.
Tai Hui, Asia chief market strategist for JPMorgan Asset Management, said Fed chairman Jerome Powell’s comment reinforced his view that the Fed is likely to stay put for the rest of 2020.
“Chairman Powell also noted the limited room to deal with the next downturn. This implies the threshold for any policy change, either tightening or loosening, would be high,” he wrote in a note.
The Fed’s tone on consumer spending has become a bit more dovish, describing spending as moderate instead of strong.
After Powell’s comment, 10-year US treasury yield fell 2.8 basis points to 1.613 per cent, while the two-year US treasury yield fell 1.4 basis point to 1.443 per cent. 
-- Georgina Lee


JPMorgan Asset Management sees little rate change as Fed holds fire

Alibaba Group Holding co-founder Jack Ma has become the latest technology industry figure offering to help fight the coronavirus outbreak.
Bloomberg reported that China’s richest man will donate 100 million yuan (US$14.5 million) through his charitable foundation, joining Bill and Melinda Gates in pledging assistance. That’s on top of an offer by Alibaba to establish a 1 billion yuan fund and share its artificial intelligence expertise with researchers. Alibaba owns the South China Morning Post.
“We know that the battle between humanity and disease is a long journey,” the foundation said in a post on its Twitter-like Weibo account. “This money will help various medical research efforts and help disease prevention.”
Alibaba’s Hong Kong-listed shares were trading 1.73 per cent lower at HK$203.8 compared to the Hang Seng Index’s 1.41 per cent decline.


Jack Ma pledges US$14.5 million to help fight coronavirus

Spot gold continued its ascent, trading 1.6 per cent higher at US$1,578.41 per ounce.
Overnight, the US Federal Reserve kept its fed funds rate unchanged at 1.5-1.70 per cent, adding that their plan to leave the policy rate where it is through the end of this year remains unchanged.
Analysts said a cut in the fed funds rate will send real yield of US treasuries lower. This will provide further upside support for gold, because as short term real interest rate declines, the opportunity costs of holding gold also drops. 
Selective gold-mining related shares rose, with Zhaojin Mining (1818 HK) adding 2.7 per cent to HK$8.9, SD Gold (1787 HK) rising 3.8 per cent to HK$19.2 and Zijing Mining (2899 HK) edging up 0.8 per cent to HK$3.62.
-- Georgina Lee


Gold shines brighter after Fed stays put on rates

Leading Chinese insurers fell, pulling the H-share index 1.3 per cent lower to 10,479.71.
The China Banking and Insurance Regulatory Commission earlier this week called on insurers to prioritise compensation and claims of clients affected by the coronavirus, which continues to spread on the mainland.
New China Life Insurance (1336 HK) dropped 1.1 per cent to HK$30.6, PICC Group (1339 HK) lost 1.7 per cent to HK$2.9, Ping An Insurance (2318 HK) slid 0.5 per cent to HK$91.2.  China Life (2628 HK) fell 1.8 per cent to HK$19.5, heading for its fourth straight day of losses.
-- Georgina Lee


China insurers under pressure from Wuhan virus

The broadening virus crisis is raising risks that many Hong Kong-listed companies won’t be able to get their earnings reports done in time, lining them up for a suspension in trading if they run afoul of exchange rules, Bloomberg reported.
Auditors in the city are concerned that companies whose financial year ended in December might not be able to meet a March 31 deadline for filing their accounts. Travel restrictions to and from China, as well as difficult working conditions in Hong Kong are delaying efforts.
At most risk are companies based in mainland China, where the Lunar New Year holiday has been extended as authorities struggle to contain a virus outbreak that has killed more than a 150 people and infected thousands.
“Even the companies’ onshore internal financial staff are out of touch,” said Roy Lo, a practice auditor and the deputy president of the Hong Kong Independent Non-Executive Director Association. It will be a “grave challenge to complete auditing tasks in due course,” he said.
More than 1,200 mainland Chinese companies are listed in Hong Kong. With a December 31 year-end, auditors have three months to review and audit their accounts. Companies that fail to announce results in three months after the end of the result period are suspended from trading.


Wuhan virus crisis risks delaying Hong Kong-listed firms’ earnings reports

Ascletis Pharma (1672 HK) plunged more than 15 per cent to HK$ 3.34, after the Hangzhou-based biotech company issued a statement to the Hong Kong stock exchange yesterday that it had not participated in scientific research using its products, Ritonavir and ASC09 fixed-dose combination, that media reports said could be used to cure the Wuhan coronavirus.
Ascletis said it has not received confirmation from authorities regarding the drugs’ use to treat the penumonia-like illness.
-- Iris Ouyang


Ascletis Pharma falls after clarification

In its just released research titled “Stress-testing portfolios for coronavirus risk”, Societe Generale said the overall equity market could face a 10 per cent correction if the Wuhan coronavirus were to escalate further.
While the report did not give specific equity markets forecasts, SocGen said it expects stocks whose valuations are highly linked to China to remain vulnerable until there is more certainty about the situation coming under control.
Given China’s 18 per cent weight in the global economy, SocGen said if the outbreak worsens in China, it “would have an overwhelmingly negative effect on the rest of the global economy”.    That would almost wipe out the entire upside that the French bank had initially expected for the Chinese and Hong Kong markets.
Earlier this month, Frank Benzimra, SocGen’s head of Asia equity strategy, had forecast the Shanghai Composite Index would see an upside of 11 per cent for 2020, while the Hang Seng might gain 10 per cent from last year.
-- Georgina Lee


SocGen sees 10 per cent correction in global equities if Wuhan virus escalates

Sands China (1928 HK) wiped out gains made in the morning, with its shares now trading 2.7 per cent lower at HK$37.95.
The company’s parent, New York-listed Las Vegas Sands, filed the group’s earnings report for the fourth quarter ended December early this morning, and accordingly Sands China filed the information to the Hong Kong bourse.
Sands China’s quarterly net profit rose 10 per cent year on year to US$513 million from US$465 million. Revenue for the period was flat at US$2.24 billion from US$2.25 billion last year. For the full-year net profit rose 7 per cent to US$2.04 billion from US$1.9 billion, and revenue rose 1.6 per cent to US$8.81 billion from US$8.67 billion.
-- Georgina Lee


Sands China falls even after fourth quarter net income rises 10 per cent

About half of Hong Kong-listed companies may miss the deadline in reporting their latest financial results as auditors face travel restrictions in mainland China following the outbreak of Wuhan coronavirus.
This has prompted the Hong Kong stock exchange operator and an industry representing the accounting profession to call for an urgent meeting on Thursday to tackle the looming problem, according to people familiar with the situation. 
There were 1,241 mainland companies listed in Hong Kong at the end of 2019, making up half of the 2,449 members on the bourse, according to exchange data. They accounted for 73 per cent of the exchange’s market capitalisation and 83 per cent of the average daily turnover, reflecting their dominance and importance over the years in Asia’s third largest capital market.
Read full story here


HKEX, accountants to meet as China lockdown may affect reporting deadline

Following the US Federal Reserve’s announcement to keep its benchmark fed funds rate unchanged, the Hong Kong Monetary Authority said in a statement that it would continue to closely monitor the impact of the Wuhan virus on the Hong Kong dollar’s exchange rate.
Hong Kong’s de facto central bank said that while the city’s financial markets saw some volatility recently, the local currency exchange rate and interbank interest rates have remained largely stable.
“The HKMA will continue to closely monitor market developments, including any possible impact of the spread of the novel coronavirus, and maintain HKD exchange rate stability in accordance with the Linked Exchange Rate System,” the statement said.
The HK dollar was quoted at 7.7709 per US dollar, firming up slightly from 7.7728 yesterday.
-- Georgina Lee


HKMA to closely monitor impact of Wuhan virus on Hong Kong dollar

The Hang Seng Index fell 1.7 per cent to 26,693.06 by lunch. All the 50 constituents declined, with industrial and tech stocks weighing on the index with the biggest percentage losses, as more forecasts have emerged from analysts on China’s economy should the Wuhan coronavirus outbreak deteriorate.
AAC Tech (2018 HK) dropped 6.5 per cent to HK$56, Sunny Optical (2382 HK) shed 6.1 per cent to HK$130.1, Mengniu Dairy (2319 HK) lost 4.7 per cent to HK$29.6 and WH Group (288 HK) eased 4.4 per cent to HK$7.44.
Index heavyweights Tencent (700 HK) fell 0.9 per cent to HK$379.8, while AIA (1299 HK) slipped 1.2 per cent to HK$79.8.
-- Georgina Lee


Hong Kong stocks’ losses widen by lunch break

Moody’s said it expects the China coronavirus outbreak to have a temporary impact on the country’s economy, as its expects annual GDP growth to remain in line with their forecast of 5.8 per cent in 2020.
The virus is likely to affect the revenue of companies in travel, transport, hotels, restaurants, retail and services sectors, it said.
However, the impact on offline retail sales could be smaller compared with the weakness following the Sars (severe acute respiratory syndrome) outbreak in 2003 because of the rapid shift to online sales in China over the past decade.
The ratings agency noted the outbreak will also potentially have a disruptive effect on global supply chains. Global companies operating in the affected area may face output losses as a result of the evacuation of workers.
It also noted that other Asia-Pacific economies are vulnerable to a drop in Chinese tourists.
The fear of contagion could dampen consumer demand and affect tourism, travel, trade, and services in Hong Kong, Macau, Thailand, Japan, Vietnam and Singapore, which have been the top destinations of Chinese tourists in recent years, it said.  
-- Georgina Lee


Moody’s maintains China GDP growth forecast, but notes Wuhan virus’ spillover effect on global companies

Morgan Stanley and JPMorgan Chase’s application to take a Chinese biotechnology company public was rejected by the Hong Kong stock exchange, Bloomberg reported.
The announcement about Akeso’s listing, made late on Wednesday, puts the Wall Street banks on a list that bankers have dubbed “name and shame” because it discloses the financial institutions and companies involved in any failed application.
Bourse operator Hong Kong Exchanges & Clearing said in its statement that the IPO application had been returned on December 5. It did not provide a reason.
In a policy put in place in October 2013, IPO applications that are incomplete will be returned by HKEX. There is no tangible punishment for banks, but the company has to wait at least eight weeks to re-submit an IPO application.
Spokespersons at Morgan Stanley, JPMorgan and HKEX all declined to comment.


HKEX rejects Morgan Stanley, JPMorgan’s IPO deal filing

One of the many companies involved in the health care benefiting from the ongoing Wuhan virus is Universal Health International (2211 HK). The shares of the retailer and distributor of pharmaceutical products surged 72.3 per cent to HK$0.081 today, and have doubled over the past two sessions.
Trading volume in the counter tripled today, with some 443.2 million shares swapping hands after the lunch break.
Alibaba Health Information Technology (241 HK), a health care information and content provider, which surged 10 per cent yesterday, lost 4 per cent to HK$11.32 in the latest trading.
Hong Kong residents have been queuing up outside drug stores to buy masks to protect themselves against the worsening Wuhan virus outbreak.
-- Georgina Lee


Health care services firm make rapid gains

Cosmetics retailer Bonjour Holdings (653 HK) jumped 22 per cent to HK$0.122 following the resumption of trading today.
Trading was suspended last Friday after it disclosed to the stock exchange that substantial shareholder and executive director, Chen Jianwen, has been discussing with several other shareholders about buying their combined 40.4 per cent stake in the company.
“The negotiation may or may not lead to an agreement or a transaction… and the discussions may or may not lead to a general offer,” the company said on Wednesday.
Chen already owns 19.5 per cent of Bonjour, and if the stake purchase proceeds, it could trigger a mandatory general offer for Chen to buy all the other shares of the company not already owned by him, as per Hong Kong’s securities laws.
-- Georgina Lee


Bonjour Holdings surges 22 per cent after trading resumes

The China coronavirus outbreak has highlighted the risk of operational disruption across Apple’s supply chain in the country, as authorities have extended the Lunar New Year holiday in a bid to contain the outbreak. Workers will now return to work on Monday, as the death toll from the pneumonia-like illness continues to climb to more 170 and the number of confirmed cases nears 8,000 across the mainland. 
IPhones are made in China primarily by Foxconn Technology Group, the world’s largest contract electronics maker, at its production base in Zhengzhou.  Such fears may have caused investors to sell. AAC Technology (2018 HK), an audio components supplier to Apple, lost 6.8 per cent to HK$55.85, while camera module and lens maker Sunny Optical (2382 HK) shed 6.6 per cent to HK$129.4.
FIH Mobile (2038 HK), a subsidiary of Foxconn, declined 3.1 per cent to HK$1.24 and smartphone camera module maker Q Technology (1478 HK) sank 11 per cent to HK$11.18.
-- Georgina Lee


Fear of disruption to Apple supply chain sinks suppliers’ stocks

China Health Group (8225 HK) surged 440 per cent to HK$2.32 after it said in a voluntary announcement to the Hong Kong GEM board that an antiretroviral drug widely used to treat HIV, Ritonavir, is effective in fighting the novel coronavirus.
It said a “related company of the group” is the only domestic enterprise that has the raw material approval, and has applied for relevant patents for the production of Ritonavir.
Three Beijing hospitals have started treating patients with the anti-HIV drugs Lopinavir and Ritonavir. The two drugs, which block the ability of HIV to bind with healthy cells and reproduce, are often used in combination to treat the illness.
-- Georgina Lee


China Health Group rockets as its anti-HIV drug shows promise against coronavirus

An across-the-board sell-off in Hong Kong stocks continued for a second day, with the benchmark Hang Seng Index closing 2.6 per cent lower at 26,449.13.
The biggest losers were in the commerce and industrial sectors, as investors feared the China coronvirus’ impact on the economy and global suppliers based in the country would be significant.
The Hang Seng Index has lost 9 per cent since reaching a high of 29,056.42 in the middle of this month.
While analysts said the sell-off over the past two days was driven by fear, they also see the losses in the Hang Seng bottoming out soon.
Leading the declines were AAC Technology (2018 HK), which plunged 7.5 per cent to HK$55.4 and Sunny Optical (2382 HK), which shed 7.4 per cent to HK$128.2.
Financial heavyweights also weighed heavily on the index. Insurer AIA (1299 HK) fell 3.1 per cent to HK$78.3 and China Construction Bank (939 HK) lost 3.1 per cent to HK$6.


Hong Kong stocks widen losses as sell-off sparked by China coronavirus continues for a second day

Financial heavyweights AIA and China Construction Bank weighed heavily on the index Health care related companies such as China Health Group and Universal Health buck the trend

Financial heavyweights AIA and China Construction Bank weighed heavily on the index

Health care related companies such as China Health Group and Universal Health buck the trend