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Georgina Lee

Deb Price

Happy Friday, traders.
May was a heart-breaker. The Hang Sang ended with its first monthly loss of the year. The Shanghai Composite saw back-to-back monthly losses. 
Catch up on the day's action below. We're always happy to hear from you at deb.price@scmp.com .
-- Georgina Lee and Deb Price in Hong Kong  
 


Stocks Blog:  Hong Kong, China benchmarks end May with losses as trade, tech battling bites

Photo: Alamy

A Chinese man monitors stock prices at a brokerage in Beijing on February  21, 2019. Photo: Associated Press


Business

Markets

HSBC shares fall after Bloomberg report on 500 job cuts
Mabpharm bangs the gong as it joins the Hong Kong exchange


Rare earth stocks surge as Beijing accuses Trump administration of 'economic terrorism'


Stocks

China stock market

Hong Kong Stock Exchange

China economy

Live

Here's what we are watching this morning:
Overnight markets/ What futures foretell
-- Overnight in US markets, S&P 500 was up 0.21, Nasdaq rose 0.27 per cent, and the Dow Jones Industrial Average climbed 0.17 per cent.
 -- Hong Kong futures are down  0.17 per cent , while the China A50 futures are down 1.1 per cent.
IPO debuts:
Mabpharm  (2181 HK)
Sichuan Dawn Precision Technology (300780 CH) 
Economic statistics/Central Bank action:
 
China May Composite PMI
China May Manufacturing PMI
China May Non-manufacturing PMI
Corporate events:
Annual general meetings:
Guangzhou Automobile Group (2238 HK), China Taiping Insurance Holdings
Good reads: Foreign investors increasing their exposure to A shares through MSCI indexes will want to learn more about China's property market and big players. Our Beijing-based reporter Zheng Yangpeng tells you what you need to know. China having to become more self-reliant amid its trade war with the United States will present attractive buying opportunities for private-equity and venture capital investment, Louise Moon and Georgina Lee report. 


Morning guidance 

China’s manufacturing purchasing managers’ index fell further in May, suggesting the economy is continuing to slow amid the escalating trade war with the United States, Finbarr Bermingham and John Carter report.
The manufacturing purchasing managers’ index (PMI), a gauge of sentiment among factory operators, fell to 49.4 in May, a decrease on April's performance of 50.1, and well below the median expectations of a poll of Bloomberg analysts, which had predicted a drop to 49.9. A reading of below 50 means that the activity in the sector is contracting.
The 49.4 reading was the lowest reading since February’s 49.2.
Read full story here. 
 
 


China manufacturing index crashes into negative territory in May 

Chinese natural gas distributor ENN Energy Holdings (2688 HK) was upgraded to a buy from hold at Jefferies, with its price target lowered to HK$80.75 from HK$82, or a 17 per cent jump from last close.
Previously, of analysts tracked by Bloomberg, 22 rate it a buy, five a hold and two a sell, with a consensus price target of HK$86.20.
-- Deb Price 
 


ENN Energy upgraded to buy at Jefferies 

Gree Electric Appliances (000651) is a new buy at Haitong International, which sees it rising to 65 yuan in the next 12 months, or a 23 per cent jump from its last close.
Of analysts following the Chinese air-conditioner maker, 16 call it a buy, six a hold and six a sell.
It has been expanding beyond air conditioners into consumer appliances, mobile phones, industrial automation, semiconductors and new energy batteries, which Bloomberg Intelligence warned in a note could continue to be a drag on its operating margins. 
-- Deb Price 
 


Air-conditioner maker Gree Electric seen as a cool buy at Haitong International 

Kweichow Moutai (600519 CH) has another fan: Fidelity Series Emerging Markets Fund has added the liquor giant, according to Bloomberg.
It bought 378,700 of Kweichow Moutai's A shares valued at US$54.8 million, Bloomberg said.
Its new buys included China Tower, with 85 million shares valued at US$23 million.
Meanwhile, it exited its position in beleaguered China Literature in April, which was 3.61 million shares valued at US$16.9 million, Bloomberg said it found in analyzing data.
China Literature has been hammered by China's growing crackdown on online content. 
-- Deb Price  
 


Kweichow Moutai added to Fidelity EM fund

ANTA Sports (2020 HK) said in a stock exchange announcement today that its board “vigorously denies” claims in short seller Blue Orca's report cited by the media Thursday, saying the report  “contained certain factual error, misleading statements and unfounded speculations”.
The stock closed down 5.53 per cent per cent on Thursday, at HK$46.95, after Blue Orca questioned the firm’s accounting and corporate governance in a public speech.
Soren Aandahl, founder of Blue Orca, said at the 2019 Sohn Conference in Hong Kong that the stock may fall as much as 34 per cent, sending the stock down as much as 12 per cent at one point.
“It is important for shareholders to be aware that the relevant allegations are the opinions of a short seller whose interests may not be aligned with those of shareholders in general, and that it may be intended specifically to undermine confidence in the Company and its management, and to harm its reputation,” adding that it reserves the right to take legal action against Blue Orca.
In a separate announcement, ANTA Sports announced also that it has agreed to issue 15.8 million new shares, or 0.59 per cent stake of the ANTA Sports, to Anamered Investments, controlled by a substantial shareholder of its subsidiary and thus a connected person, at HK$49.11 per share, a discount of 0.89 per cent of the averaging closing price of HK$49.55 for the last five consecutive trading days. The new share sale is estimated to gross proceeds of about HK$778 million, which it said would be used for working capital.
Shares of ANTA Sports rebounded 3.6 per cent in early trading, to HK$48.65.
-- Georgina Lee 


ANTA  Sports 'vigorously denies' claims by short seller Blue Orca 

Biopharmaceutical company Mabpharm (2181 HK) debuted their nearly HK$1.18 billion (US$150 million) IPO on the Hong Kong exchange this morning. The China-based company focuses on the development and production of new drugs and biosimilars for cancers and autoimmune diseases.
Mabpharm currently has nine drugs in the pipeline and plans to commercialize approved treatments using an in-house team, according to a company filing. They are the second Chinese-owned pharmaceutical research company to debut on the exchange this week, following Frontage Holdings’ IPO Thursday.
Both global offerings come as China’s pharmaceutical industry and its capabilities are in a period of concerted growth, following broad-reaching regulatory reform and the inclusion of drug innovation in China’s Made in China 2025 strategy.
Mabpharm was trading flat at HK$1.27. 
Biopharma company Mabpharm debuts a US$150 million IPO at the #HKEX this morning, with its sights on China’s growing demand for cancer treatments pic.twitter.com/1yoVXCAfhR
— Simone McCarthy (@simonelmc) May 31, 2019
 
-- Simone McCarthy 


Mabpharm bangs the gong as it joins the Hong Kong exchange

The Hang Seng is having a bouncy morning, opening 11.9 points lower, down 0.41 per cent at 27,002.96, turning up, and last down 0.06 per cent.
Chinese benchmarks are trending up.
The CSI 300 that tracks blue chips listed on Shanghai and Shenzhen bourses, was down 1.9 points, or 0.05 per cent at 3639.28. The Shanghai Composite Index opened down 1.67 points, or 0.06 per cent at 2904.14, but has since turned up a bit.
Leading the Hang Seng Index lower were property stocks, with Sun Hung Kai Properties (0016 HK) down 1.46 per cent, at HK$127.8; New World Development (0017 HK) down 1.35 per cent, at HK$11.68; Henderson Land (0012 HK) down 0.71 per cent at HK$4.7.
Insurer AIA is down 1.27 per cent, at HK$74.1.
Weighing on the Shanghai index were Chinese insurance stocks, with China Life Insurance (601628 CH) down 2.15 per cent at 26.37 yuan; Ping An Insurance (601318 CH) down 0.86 per cent at 79.09 yuan; and China Pacific Insurance (601601 CH) down 2.4 per cent at 34.95 yuan.
-- Georgina Lee

 


Shanghai up while Hang Seng searches for direction 

Bloomberg reported overnight that the banking behemoth HSBC would cull at least 500 jobs within its global banking and markets division, although formal numbers have not been communicated. It cited people who asked not to be named.  The latest job cut is part of the bank’s move to cut costs and would start as soon as mid-June, and is expected to take place over the year, Bloomberg said.
Shares in HSBC (0005 HK) were down 0.31 per cent at HK$64.35. Its previous low was HK$63.90 on March 29. Its London-listed shares closed down 0.29 per cent, at 653.6 pounds on Thursday.
-- Georgina Lee 


HSBC shares down to two-month low after Bloomberg report on 500 job cuts

Christopher Wood is the new global head of equity strategy at Jefferies.
He had been at Asian securities house CLSA. Jefferies said Wood "has been ranked the top equity strategist in almost all major broker polls in Asia during the last two decades."
Wood will continue to produce his well-known weekly note, "GREED & fear."
“With a string of appointments on the Asian platform in recent weeks, now capped by the launch today of Chris Wood’s 'GREED & fear,' we hope to firmly establish the next leg of growth in our commitment and expansion across Asia,” said Peter Forlenza, Jefferies’ global head of equities.
Earlier, Wood was a financial journalist, with stints at the Hong Kong-based Far Eastern Economic Review and The Economist, where he served as the New York and Tokyo bureau chief. He's also been a busy book author, penning “Boom and Bust: The Rise and Fall of the World's Financial Markets” published in 1989; “The Bubble Economy: Japan's Extraordinary Speculative Boom of the '80s and the Dramatic Bust of the '90s” published in 1992; and “The End of Japan Inc.: And How the New Japan Will Look,” published in 1994.
-- Deb Price 
 


Comings and Goings: Christopher Wood is new global head of equity strategy at Jefferies

ENN Energy Holdings (2688 HK) jumped 1.7 per cent to HK$70.30, following an upgrade to buy at Jefferies.
Jefferies lowered the price target of the Chinese natural gas distributor to HK$80.75, from HK$82.
"We believe ENN will benefit from long-term coal-to-gas conversion and downstream consolidation," Jefferies analysts Aaron Xiao and Laban Yu wrote in a note sent out today.
That's despite the stock's recent underperformance tied to weak gas demand, dollar margin squeeze, and connection fee cuts. 
"Our adjusted EPS estimates decrease by 7%/12% to HK$4.95/5.39 for 2019/2020, mainly due to the price-in of potential connection fee cut in 2019/2020," the authors wrote. "However, we maintain the 15.0x forward P/E multiple due to: 1) recurring earnings from gas sales grow at a (compound annual growth rate) of 15% and 2) key risk of gas connection fee is eliminated. After rolling over to FY2020 EPS, we arrive at a new (price target) of HK$80.75, which is the third lowest on the street but still implies 17% upside."
-- Deb Price 


ENN Energy jumps after upgrade to buy at Jefferies

A gauge tracking 15 stocks that are customers or partners of HiSilicon -- which is Huawei Telecom’s chip subsidiary -- rose 2.8 per cent, with Wuhan P&S Information Technology (300184 CH) surging to a 41-month high, hitting the 10 per cent daily up-limit to 11 yuan minutes after the market opened in Shenzhen.
On Thursday, Malaysia prime minister Mahathir Mohamad dismissed the prospect of his country joining the US and its allies – including Japan – in banning government purchases of the Shenzhen-based company’s telecommunications products.
In a forceful defence of the embattled Huawei, he said that while US President Donald Trump’s administration might have grounds for “condemning” Huawei over security concerns, banning it was “not the way to go”.
Shares of Wutong Holding (300292 CH), shot up 7.17 per cent to 7.62 yuan, while ArcherMing Technology (Nanjing) soared 5.44 per cent to 36.45 yuan.
-- Georgina Lee 


Stocks linked to Huawei’s chip arm, HiSilicon, shoot up as investors cheer Kuala Lumpur’s support

A gauge tracking over 100 solar firms rose in Shenzhen and Shanghai, and was up 2.59 per cent mid-morning.
On Thursday, Reuters reported the National Energy Administration saying that Beijing will allocate 3 billion yuan in subsidies for new solar projects this year, which will be split between rooftop power projects with a combined capacity of 3.5 gigawatts, and solar stations.
Several solar firms rose to the 10 per cent daily-limit, with Ningxia Jiaze Renewable Corp  (601619 CH) at 4.91 yuan, Jiangsu New Energy Development  (603693 CH) at 13.71, Clenergy (Xiamen) Tech (603628 CH) at 9.11 yuan, and Ningbo Ginlong Technologies (300763 CH) at 49.39 yuan.  Zhejiang Jingsheng Mechanical & Electrical (300316 CH) was up 7 per cent to 12.55 yuan.
-- Georgina Lee 
 


Solar firms and new energy stocks soar on latest government subsidies

Rare earth stocks took off again, on the heels of tough comments by Chinese officials and state media in the face of growing tensions with the US. 
“We oppose a trade war but are not afraid of a trade war," said Chinese vice-foreign minister Zhang Hanhui. "This kind of deliberately provoking trade disputes is naked economic terrorism, economic homicide, economic bullying,” Zhang said when asked about the trade war.
Such comments generated further excitement on the minerals, after the Communist Party’s mouthpiece publication People’s Daily had an editorial on Thursday headlined, “The US shouldn’t underestimate China’s ability to retaliate.”  The US is “highly dependent” on China’s rare earths resources, and China could very well use it as a weapon to retaliate, it said.
Rare earth elements emerged as a point of leverage that China could deploy against the US after Chinese President Xi Jinping recently visited a production facility.
In China, JL Mag Rare-Earth (300748 CH) surged to the daily 10-per cent up limit, at 59.7 yuan, its historical high. Northern Rare Earth (600111 CH) up 4.55 per cent, at 13.55 yuan as sixth biggest index point gainer on the Shanghai Composite Index; Beijing Zhong Ke San Huan Hight Tech (000970 CH) rose also to 10 per cent to 12.95 yuan.
In Hong Kong, Universal Star (2346 HK) is up 9.26 per cent, at HK$1.77; China Rare Earth (0769 HK) up 4.68 per cent at 67 HK cents.

 
-- Georgina Lee


Rare earth stocks surge as Beijing accuses Trump administration of 'economic terrorism'

China’s quirky property market is suddenly becoming more important for foreign investors to know about, after global index compiler MSCI this week gave 14 mainland developers more weight in their indexes, Zheng Yangpeng reports.
Three of the developers -- Greenland Holdings, Seazen Holdings and China Fortune Land -- have shot up this year, outpacing gains on the Shanghai Composite benchmark. The property market on the mainland is changing, with consolidation under way and moves to diversify into rentals, as well as robotics, electric vehicles and agriculture. 
 

Here's what you need to know. 


What foreign investors need to know about China's quirky property market

Hong Kong’s pre-owned home prices rose at the fastest pace in more than six years, stretching a four-month rally, but analysts expect the uptrend to taper off as buying interest has been adversely hit by the escalating US-China trade war, Lam Ka-sing reports.
The price index of used homes rose 3.2 per cent to 390.5 in April, faster than the 3 per cent growth in March, according to data released by the Rating and Valuation Department on Friday.
The growth is the fastest for 74 months since February 2013, when a 3.23 per cent rise was recorded, said Derek Chan, head of research at Ricacorp Properties.
“The figure reflects the market before trade war escalated, when market sentiment was good,” said Chan. “Buyers entered the market enthusiastically so there was a large growth.”
Read full story here.


Hong Kong home prices rise at fastest clip in more than six years

Customers can pre-order the Model 3 assembled in China after Tesla announced that it would be priced 13 per cent lower than the US imports, boosting the electric carmaker's prospects in the world’s largest EV market, Daniel Ren reports.
The standard range plus Model 3 car that Tesla (TSLA US) plans to assemble at the Gigafactory 3 in Lingang, Shanghai, will be priced at 328,000 yuan (US$47,529), 49,000 yuan cheaper than the same model currently imported from the US.
Tesla’s US-built cars are now subject to a 25 per cent import duty in China. The best-selling US electric carmaker plans to start deliveries in the next six to 10 months.
“If a Chinese customer can buy a Tesla car for less than 300,000 yuan, many of them will make a decision on the spur of the moment since it is viewed as the best EV in the world,” said Tian Maowei, a sales manager at Shanghai-based Yiyou Auto Service.
Read full story here.
 


Tesla sends a signal in China with lower-priced Model 3s

Sichuan Dawn Precision Technology (300780 CH) shot up to the first trading day price gain cap of 44 per cent.
The maker of mechanical transmission parts was quoted at 16.68 yuan, up from its offering price at 11.58 yuan. The company raised a total of 3.92 billion yuan in its initial public offering.
A total of 34,547 shares worth 0.57 million yuan changed hands today. The Shanghai Stock Exchange and Shenzhen Stock Exchange put in place such first-trading day price controls for all listing debutantes to try to maintain market order.
-- Georgina Lee


Sichuan Dawn Precision Technology shoots up to 44 per cent limit in debut 

The Hang Seng dropped below the key psychological threshold of 27,000 in afternoon trading.
After the lunch break, losses in the blue chip index widened, with it falling 0.5 per cent, or 134.56 points, to 26,980.32. The last time the index dropped below the 27,000 level was January 17, when it closed at 26,755.63.
Ben Kwong, a director at KGI Asia, said globally investors’ sentiment has become more defensive, as the yield of the 10-year US Treasury fell below three-month yield, a phenomenon of the so-called yield curve inversion usually interpreted as warning sign signalling a looming recession. There is further downside pressure for the Hang Seng Index over the short term, he said.
“The protracted US China trade war means that the economic outlook remains hazy, and the global equity market is currently in a mode for further correction,” said Kwong.
He sees further downside for the Hang Seng Index at 26,700, which if broken, could test further lower to 26,000.
Most property stocks are down, with Sun Hung Kai Properties (0016 HK) down 3.24 per cent, at HK$125.50, and Link REIT (0823 HK) down 2 per cent at HK$93.4.
-- Georgina Lee


Hang Seng drops below 27,000 -- the first time since mid-January

CSI 300, the benchmark that tracks blue chips listed in Shenzhen and Shanghai was down 0.31 per cent, or 11.39 points, to  3,629.79. For May, it fell 7.24 per cent.
The Shanghai Composite Index was down 0.25 per cent, at 7.11 points, to 2898.7. That marked its second-straight monthly loss.
The declines came as China's manufacturing purchasing managers’ index (PMI) -- a gauge of sentiment among factory operators -- fell to 49.4 in May, after April’s 50.1, and below the median expectations of a poll of Bloomberg analysts. A reading of below 50 means activity is contracting.
“The May PMI is only one snapshot of how existing tariffs that have been implemented had affected China. The increase in US tariff on US$200 billion Chinese imports, which went up to 25 per cent from 10 per cent in May, the extent of that impact would still need some time to be fully reflected,” said Ben Kwong, a director of KGI Asia.
Leading the decline in Shanghai were banks, with Industrial and Commercial Bank of China (601398 CH) down 1.06 per cent, at 5.61 yuan, and Agricultural Bank of China (601288 CH) down 0.81 per cent, at 3.68 yuan. The top decliner was Kweichow Moutai (600519 CH), down 1.69 per cent at 890 yuan.
In Shenzhen, another liquor distiller, Wuliangye Yibin (000858 CH), led the Shenzhen Component Index down, falling 1.82 per cent to 101.25 yuan. Hangzhou Hikvision Digital (002415 CH) was down 1.39 per cent at 24.84 yuan.
-- Georgina Lee
 


China's CSI 300 wraps up May with first monthly loss of 2019 

The loss in the Hang Seng index widened in the afternoon, ending down 0.79 per cent or 213.79 points, at 26,901.09. That was the lowest since mid-January. An analyst said now that the blue chip index has broken through the 27,000-level, further downside is in store next week.
Ben Kwong, a director at KGI Asia, sees further downside for the Hang Seng Index at 26,700, which if broken, could mean a further fall to 26,000.
Leading the decliners were properties. Wharf Real Estate Investment (1997 HK) was down 4.55 per cent at HK$53.55; Sun Hung Kai Properties slid 4.3 per cent to HK$124.10; Henderson Land was down 3.6 per cent at $40.55. Meanwhile, insurer AIA led the drop in index point terms,  and ended down 2 per cent at HK$73.50.
IPO debutant biopharmaceutical company Mabpharm (2181 HK) closed lower than its HK$1.5 offer price, finishing at HK$1.21.
The monthly loss of the Hang Seng is 9.41 per cent.
-- Georgina Lee 
