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Zhang Shidong

Deb Price

Stocks Blog: China's yuan weakens to 11-year low, Hang Seng plunges on strikes

Protesters block doors on MTR using their bodies. Photo: Felix Wong 

A Chinese trader watches stock prices. Photo: EPA-EFE

Business

Markets

Yuan breaking 7 is ‘remarkable change,’ says Alan Li of Atta Capital. This is not the time to buy Hong Kong stocks, he says.
Crystal Ball: Don't panic, says stocks strategist Kenny Wen


Stocks

China stock market

Hong Kong Stock Exchange

Live

* Overnight markets/ What futures foretell
   -- Overnight in US markets, the S&P 500 dropped 0.7 per cent, the Nasdaq fell 1.3 per cent, and the Dow Industrials slipped 0.4 per cent
  -- Hong Kong futures were 1.9 per cent lower, while the China A50 futures slid 0.6 per cent
 
* IPO debuts: Power equipment maker Jiangsu Shemar Electric (603530 CH) will begin trading on the Shanghai Stock Exchange today.
 
* Economic statistics/Central Bank action: Caixin China Purchasing Managers’ Index is due at 9:45am today.
 
* Corporate events: earnings, meetings, news conferences
-- HSBC Holdings (5 HK) and Hang Seng Bank (11 HK) will release interim results today.
 
*Later this week: China will release the July data on foreign trade and inflation on Thursday and Friday respectively.


Morning guidance

HSBC chief executive John Flint abruptly stepped down, less than two years after he succeeded Stuart Gulliver as the bank's top executive.
No reason was given by the bank, which released its results early on Monday morning. A statement said that he stepped down by mutual agreement.
“I have agreed with the board that today’s good interim results indicate that this is the right time for change, both for me and the bank," Flint said. "After almost 30 years with HSBC, I will be sad to leave but I do so looking forward to a new personal challenge, and confident that our people will continue to serve the Bank’s stakeholders in the best possible way.”
Noel Quinn, who has headed global commercial banking since December 2015, will serve as CEO on an interim basis.
 


HSBC chief abruptly resigns 

Ownership changes at 3 Chinese companies

1.      Shanghai Runda Medical Technology (603108 CH) said its major shareholders will sell 20 per cent share in the company, which distributes medical instruments and diagnostics equipment.
2.      Cosco Shipping Specialised Carriers (600428 CH) said a shareholder will offload a 3 per cent stake in the company between August 26 and November 23.
3.      Jiangsu Jiuding New Material Company (002201 CH), which specialises in production and sales of glass fibre yarn and fabrics, said its controlling shareholder will sell 19.6 per cent stake in the company for 1.2 billion yuan (US$172.94 million), decreasing its holding from from 27.9 per cent to 8.3 per cent.
-- Louise Moon 
 


Ownership changes at 3 Chinese companies

Zhao Ning, chairman of Shanghai-listed Eastern Gold Jade (600086 CH) has resigned over health reasons, according to a filing on Sunday by the jewellery company, without giving more detailed information. It said he would continue in his position until a replacement is found, and after that will not remain in any role in the company.
Earlier in February, the company announced Zhao Ning was resigning after it expected to post losses for 2018. In March it announced he would resume his position, to ensure operations continued as normal.
 
-- Louise Moon


Eastern Gold Jade chairman resigns

Hong Kong’s stocks opened significantly lower in morning trading, with the Hang Seng Index tumbling 2.3 per cent, as protestors blocked the city’s main commute and disrupted flights with a general strike.
Cathay Pacific Airways has cancelled more than 140 flights and Hong Kong Airlines scrapped thirty. Mainland’s Shanghai Composite Index also headed lower, falling 1 per cent as traders continue to digest the abrupt imposition of new tariffs by the White House. 
-- Zhang Shidong


Hang Seng tumbles

Jiangsu Shemar Electric (603530 CH), a power equipment maker, jumped 44 per cent -- the maximum gain allowed for mainland’s initial public offering share -- from the offer price to 8.55 yuan in Shanghai on the first day of trading. The company sold 40 million new shares for 5.94 yuan apiece. 
-- Zhang Shidong 


Jiangsu Shemar surges 44 per cent in Shanghai debut 

The yuan fell below the 7 gateway against the US dollar on both onshore and offshore markets.
The onshore Chinese currency slid 1.1 per cent to 7.0188 against the greenback, while it dropped 1.3 per cent to 7.0680, heading for a record low, on the offshore market.
The yuan is under pressure after US President Donald Trump said he will levy new tariffs on US$300 billion worth of Chinese imports. 

-- Zhang Shidong 


China’s yuan breaches 7 against US dollar amid trade war woes 

The purchasing managers’ index of China’s service industry compiled by Caixin slid to 51.6 in July from 52 from a month earlier, the index compiler said today.
The July reading also missed the estimate of 52 in a Bloomberg survey.
The composite PMI rose to 50.9 from 50.6. 
 

-- Zhang Shidong 


Caixin China Services PMI slipped in July  

The Shanghai Stock Exchange said it dealt with four abnormal transactions linked to the Science and Technology Innovation Board, or the Star Market, last week.
 The four cases involved inflating stock prices and spoofing in the call auction stage, and the Shanghai exchange took disciplinary actions such as written warnings against violators, it said on its website.


Shanghai exchange punishes abnormal trading linked to Star board

Jiangsu King’s Luck Brewery Joint-Stock (603369 CH) dropped 2.4 per cent to 106.91 yuan, on track for the lowest close since February.
The liquor distiller said its second-biggest shareholder Shanghai Mingda Industrial plans to sell up to 31.4 million shares, or a 2.5 per cent of the stake, in the liquor distiller in the following six months starting August 27, according to an exchange statement.
Shanghai Mingda holds a 7.1 per cent stake in the company.
-- Zhang Shidong


Liquor distiller Jiangsu King drops to five-month low as shareholder plans to cut stake

Chongqing Changan Automobile (200625 CH) said its controlling shareholder and concert parties completed the plan to buy a combined 47 million Class B shares, or 0.98 per cent stake, in the company as of August 1, according to an exchange statement.
After the purchase, the controlling shareholder and the concert parties have 44 per cent of the automaker, it said.
China’s Class B shares are traded in Hong Kong dollars in Shenzhen and open to all foreign investors, while Class A shares are denominated in yuan and available to qualified overseas traders. Changan’s B shares lost 0.6 per cent to HK$3.20 and the A shares fell 0.4 per cent to 7.48 yuan
-- Zhang Shidong 


Changan Auto completes purchases of Class B shares 

 
Shares of MTR (66 HK), Hong Kong's government-owned subway operator, fell by as much as 3 per cent to HK$48.90, the lowest intraday level in eight weeks, after its service was disrupted at multiple stations by an ongoing spate of civic unrest.
Protesters opposing Hong Kong's controversial extradition law -- which had been declared "dead" but not withdrawn from the legislature -- had blocked the exits of carriages, preventing the trains from moving. The service disruption had turned many commuters to alternative transport, and crimped retail sales at stations operated by MTR.
-- Eugene Tang


MTR shares plunge

Don't panic -- yet -- says Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.
The Hang Seng has fallen below 26,671, a key support level, as protests, the trade war and the less dovish comment from the US Fed combine to bring a big hit.
"I don't think traders are in a panic. Many retail investors entered the market last Friday. Now the situation is getting worse, and they may take wait and see approach. But some of them targeting to buy at 26,000 level."
He thinks the first support will be 26,000, "I worry that HSI may drop below this level later but not today."
The Hang Seng is now at 26,088.84, having fallen 3.08 per cent.
-- Deb Price 
 


Crystal Ball: Don't panic, says strategist Kenny Wen

The Hang Seng Index dropped 2.9 per cent at the midday break, as a city-wide strike hammered the former British colony, disrupting public commute and forcing the cancellation of flights.
All the 10 industry groups on the Hang Seng Index, which tracks a wider array of stocks trading in the city, headed south, with a gauge of consumer service companies sliding 3.8 per cent as the biggest decliner.
Chief Executive Carrie Lam said at a press conference today that the unrest was pushing Hong Kong to the verge of a “very dangerous situation.”

 
-- Zhang Shidong
 


Hang Seng Index falls nearly 3 per cent as strikes go on 

How bad is it?
This is the ninth day in a row that the MSCI Hong Kong Index has fallen.
The last time it did that was in March 1997, a few months before the handover and the Asian Financial Crisis.
US futures are all down following the yuan's slide past the psychological threshold of 7 to the US dollar. Just after 12 midday Hong Kong time, the S&P had dropped 1.14 per cent, the Nasdaq had fallen 1.48 per cent and the Dow Jones dropped 1.06 per cent.

— Louise Moon


How bad is it?

“The drop in onshore and offshore renminbi today reflects both economic and policy considerations," said JPMorgan Asset Management's Asia-Pacific chief market strategist Tai Hui. "The recent resurgence in the US dollar meant the [yuan] needs to weaken against the [US dollar] in order to maintain stability against its currency basket. Investors will be more focused on the policy implications following a new round of tariffs threatened by President Trump on Chinese exports. This can be interpreted as a strong signal from Beijing to pressure Washington on trade negotiation. A weaker yuan would have also pressured other emerging market currencies," the analyst said.
"The uncertainties from renewed trade tension and ongoing softening of global economic data have created a backdrop of risk aversion, impacting Asian markets," Hui said in an e-mailed commentary.
"This could continue in the near term until we see stabilization in either US-China trade negotiation or global growth momentum. Investors perhaps need to be patient. Meanwhile a well-diversified portfolio of fixed income and high dividend equities should provide investors with the ability to better manage volatility while generating steady income from fixed income coupons or dividends.”
-- Eugene Tang
 


How to manage volatility -- tips from JPMorgan Asset Management

The yuan weakness is a "remarkable change," says Alan Li of Atta Capital.
The portfolio manager at the Hong Kong-based investment firm advises traders to not buy today.
He sees the Hang Seng Index falling to 25,000 within two weeks.
The Hang Seng is trading down 2.69 per cent intraday, at 26,194.78.
“The trade war has moved to a forex war,” he said.
The protest situation will not be solved soon, he predicts.
— Deb Price


Yuan breaking 7 is ‘remarkable change,’ says Alan Li of Atta Capital

Airlines' shares plunged as a strike by flight crew and pilots forced dozens of flights to be cancelled or rescheduled in one of Asia's busiest transport hubs.
Cathay Pacific Airways (293 HK) declined by 4 per cent in its biggest intraday percentage drop to HK$10.42, after Hong Kong's largest carrier scrapped more than 70 flights leaving the city, including one Paris-bound service.
Air China (753 HK), the mainland's flag carrier, fell 5.4 per cent in Hong Kong to HK$6.84 while its A shares (601111 CH) dropped 3.5 per cent to 8.20 yuan in Shanghai.
The Beijing-based airline cancelled at least 10 flights to and from the Chinese capital.
Other Hong Kong-listed Chinese carriers were similarly affected, amid concern that declining tourist numbers from mainland China would crimp their revenue.
China Southern Airlines (1055 HK), operator of the  country's biggest fleet, fell as much as 5.3 per cent to an intraday low of HK$4.63, while Shanghai-based China Eastern Airlines (670 HK) fell 5.3 per cent to HK$3.91.
-- Eugene Tang


Airline stocks plunge 

 
Wonders Information (300168 CH) tumbled by the 10 per cent daily limit to 9.48 yuan in Shenzhen trading after the company said a combined 18.8 per cent stake held by the biggest shareholder Shanghai Wanhao Investment and its concert party was frozen by the court.
The shareholder was not aware of the matter or why the 206.1 million shares were frozen, Wonders said in an exchange statement. 
-- Zhang Shidong 
 


Wonders plunges by daily limit after big shareholder’s stock is frozen

The government’s inability to provide a solution to the ongoing protests and the yuan breaching 7 to the US dollar are causing the slump today, according to Louis Tse, managing director for VC Asset Management.
“We have gotten used to the protests now, but we don’t see any government indication of how to resolve this problem. That is what is driving the market down, plus the renminbi,” said Tse. “This morning, we hoped Carrie Lam would present something to make the situation turn around in the near term.”
But the chief executive’s press conference was a “non event”, he said.
“I would say the consensus in the industry is that they are very disappointed with what she has said,” said Tse, who was working from home after not being able to reach the office on public transport this morning. “It is better not to say anything than things that are not helpful.”
A strong rebound in the near term is “out of the question”, he said.

Meanwhile, the second half of the year “is not optimistic at all” for the Hang Seng, he said.
-- Louise Moon 


Strong rebound soon 'out of the question,' says Louis Tse of VC Asset Management

Mark Tucker, the HSBC chairman, said the discussions on whether chief executive John Flint should step down had been “going on for a while” and the decision was not taken lightly.
“In the increasingly complex and challenging global environment in which the bank operates, the board agrees that a change is needed -- and John agrees -- to make the most of the significant opportunities ahead of us,” Tucker said on a conference call with journalists. “This is a decision about the future.”
Tucker said that he would look to Noel Quinn, who has been named interim CEO, to bring a new perspective on areas of growth in the bank, resource allocation and execution. Tucker noted that Quinn brings “pace, ambition and decisiveness” to the position.
Ewen Stevenson, the HSBC chief financial officer, said that civil unrest in Hong Kong has had a limited effect on the bank’s business, so far. Tucker said the protests were beginning to have an effect on the Hong Kong economy, particularly in the retail sector.
Shares of HSBC (5 HK) were down 1.45 per cent at HK$61.25 in afternoon trading in Hong Kong, paring back some of the stock’s earlier losses.
-- Chad Bray


HSBC chairman says talks of ouster of CEO had been 'going on for a while'

Chart: Protests slugging Hang Seng

The US-China trade war hammered mainland stocks today.
The Shanghai Composite Index dropped 1.6 per cent to 2,821.50 at the close.
That was its lowest close since February.
Meanwhile, the yuan broke the psychologically significant 7 level against the US dollar on both the onshore and the offshore markets.
Technology stocks were the worst-performing sector for the day, sinking 2.5 per cent. 
-- Zhang Shidong
 


Chinese stocks close at five-month low as yuan weakens  

The Hang Seng dropped 2.9 per cent to 26,151.32 for a ninth straight day of declines. The last time when such a run happened was back in March 1997, a few months before the handover of the former British colony and before the Asian financial crisis.
Operators of transport services from the MTR to Cathay Pacific led the decline as demonstrators targeted the rail lines and air crew joined the protest by striking. 
-- Zhang Shidong
