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Xie Yu

Azar Zaidi

The narrative of an impending global slowdown amid poor US data, as well as the fallout from National Day violence in Hong Kong, are expected to dominate the markets on Thursday.
US equities fell overnight after American employment data – coming a day after poor factory data – too fell below expectations. Monthly jobs data coming out on Friday could set the tone as far as rate cut expectations are concerned.
Mainland Chinese markets remain shut for “golden week” and will resume trading on October 8. In Hong Kong, the anti-government protests are weighing on home prices and have set the tone for the de facto central bank’s new chief executive. The protests, in their fourth month, have already made an impact on retail, rents and tourism. 
Join us, Xie Yu and Azar Zaidi in Hong Kong, as we track developments in the special administrative region’s stock market. If you would like to receive the blog each trading day via email, shoot a message to Deb Price (deb.price@scmp.com) and she will add you to the list.


Stocks Blog: Hang Seng Index closes higher amid face mask ban talk

Business

Markets

Benchmark closes 0.3 per cent higher at 26,220.3
MTR stock boosted by proposed face mask ban


Rebounding MTR shares, mainland Chinese health care and consumer stocks, as well as the Macau casinos lifted the Hang Seng Index into positive territory at the close on Thursday. The benchmark closed 0.3 per cent higher at 26,220.3.


Stocks

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Hong Kong Stock Exchange

Live

Overnight markets/ What futures foretell:  – On Wednesday in US markets, the S&P 500 fell 1.8 per cent to 2,887.6, the Nasdaq shed 1.6 per cent to 7,785.3 and the Dow Industrials lost 1.9 per cent to 26,078.6  – Hong Kong’s Hang Seng Futures were down by 0.6 per cent to 25,793. The FTSE A50 was down by 0.7 per cent.IPO debuts: None.Economic statistics/Central Bank action: Nothing majorCorporate events, earnings, meetings, news conferences: Nothing major


Morning guidance

Budweiser Brewing Company APAC (1876 HK), the regional arm of the world’s largest brewer, said on Thursday that the overallotment of shares in its initial public offering had been fully exercised, with the company raising US$5.75 billion in gross proceeds from the listing.
  The company’s shares have risen 10 per cent since they began trading this week, closing on Wednesday at HK$29.70. Following the overallotment, Anheuser-Busch InBev, its parent, will continue to own 87.22 per cent of the company.
  Budweiser priced its offering at HK$27 a share last week, at the bottom of an expected pricing range of HK$27 to HK$30. Anheuser-Busch InBev will use the proceeds to pay down debt after its debt ballooned to more than US$100 billion following its acquisition of SABMiller three years ago.
  – Chad Bray


Budweiser overallotment fully exercised, company says

Private exporters sold 464,000 tonnes of US soybeans to China for shipment in the 2019-20 marketing year that began September 1, the US Department of Agriculture (USDA) said overnight on Wednesday. A USDA announcement was expected after Reuters reported on Monday that Chinese buyers had booked up to 600,000 tonnes in purchases for shipment from November to January as part of a tariff-free quota awarded to some importers.  – Xie Yu


China buys 464,000 tonnes of US soybeans 

HSBC (0005 HK) announced a third interim dividend of 10 HK cents to the Hong Kong stock exchange after market close on Wednesday. The dividend will be payable on November 20, to holders of record on October 11.  – Louise Moon


HSBC announces third interim dividend 

The Hang Seng Index opened 0.7 per cent lower, at 25.857.57, on Thursday. Property giants Sun Hung Kai Properties (16 HK) and CK Hutchison Holdings (1 HK) also opened lower, down 2.2 per cent to HK$111.4 and 2 per cent to HK$68.1, respectively.  – Xie Yu


Hang Seng, property firms open lower

Japanese investment bank Daiwa has slashed its rating for Chinese crude oil and natural gas producer CNOOC (883 HK), it said on Thursday, downgraded the company from buy to hold. It also cut its target price for CNOOC to HK$12.5 from HK$14.7. Explaining the downgrade, Dennis Ip, analyst with the bank, said it was mainly because oil price weakness would be prolonged. “The market was anticipating a prolonged production disruption after a missile and drone attack [in Saudi Arabia] on 14 September. However, the faster-than-expected production resumption restored the temporary oil supply deficit to a balance, and we anticipate weak oil prices amid the slowing global economy,” he said. CNOOC was trading down by 1.5 per cent at HK$11.7.
  – Xie Yu


Daiwa anticipates oil price weakness, slashes rating for CNOOC 

TCL Electronics Holding (1070 HK) said on Thursday it had received an acquisition offer from its parent company, TCL Industries Holdings. The latter offered to acquire all issued shares of TCL Electronics at HK$3.23 a share. Another listed subsidiary of TCL Industries, Tonly Electronics (1249 HK), announced on Wednesday it too had received a takeover offer from TCL Industries, of HK$5.89 per share.
  The offer price for TCL Electronics is lower than its closing price on Wednesday of HK$3.95 a share by 18 per cent. The company was trading 2.3 per cent lower on Thursday, at HK$3.86. The offer price for Tonly Electronics was higher than its Wednesday closing price of HK$5.69 by 3.3 per cent. The company was up by 3.3 per cent at HK$5.88.
  – Xie Yu


  TCL Electronics, Tonly Electronics receive buyout offers from parent firm

Avic International Holdings (161 HK), a Shenzhen-based manufacturer of electronic components, has shot up by 20.7 per cent to HK$8.4. The company resumed trading on Thursday, after announcing a takeover offer by Avic International Holding Corporation, its parent firm. The latter has offered to take over the listed entity at HK$9 a share, according to a filing with the Hong Kong stock exchange last night. Avic International Holdings had applied for trading suspension on September 27 to make the announcement.The deal values the company at about HK$3 billion – its current market value is about HK$2.8 billion.
  – Xie Yu


Shenzhen electronic components maker Avic rises by more than 20 per cent

Hang Seng Index is down by 0.6 per cent to 25,887.3. The downward room for the Hong Kong market is limited, although sentiment is still weighed by the protests that are rocking the city, in addition to disappointing US economic data, said Kevin Leung, executive director of investment strategy at Hong Kong-based brokerage Haitong International.
  “The downward adjustment of H shares will be less volatile, if compared with the US market, because valuation here is already cheap and reasonable,” Leung said, noting that the Hang Seng Index was likely to move roughly between about 25,000 and 27,000.
  He also said people who were interested in local property developers could start building positions. “Rental income is weighed, of course, but the income from residential property development is not affected much. The low-interest environment is expected to continue, which is friendly to the property business,” he said.
  – Xie Yu


‘Downward room for the Hong Kong market is limited’

Shares of IRC (1029 HK), an East Siberia-based iron ore miner serving mainly the northeast China market, jumped as much as 18.3 per cent after it said on Thursday in a stock exchange filing it had achieved 95 per cent capacity utilisation at its mainstay K&S mine last month, up from an 80 per cent average in the year’s first-half. Production returned to normal last month, after it was hampered in August by “exceptionally” heavy rain that saw the local government declare a state of emergency.
The price of iron ore was hovering at about US$100 a tonne on Thursday, a bit higher than market expectations, after falling to US$89 from US$136 in August amid slowing global economic growth and uncertainties arising from the protracted US-China trade war, IRC said. Its stock was trading 12.2 per cent higher at 12.9 cents in the morning.
– Eric Ng


Iron ore miner IRC says capacity back up, shares rise 

CNOOC, MTR, Hong Kong property developers are dragging on the Hang Seng Index. CNOOC (883HK) is leading the declines among heavyweights, trading down by 1.9 per cent at HK$11.6. MTR was down 1.6 per cent at HK$42.8. Hong Kong developer Wharf REIC (1997 HK) shed 1.7 per cent to HK$43 and New World Development (17 HK) was down by 1.3 per cent to HK$10.3.
  – Xie Yu


Heavyweights weigh down Hang Seng Index


Hong Kong trains operator MTR (66 HK) declined 1.4 per cent to HK$42.9 on Thursday morning, continuing a losing streak that has now lasted for 10 trading days. Its stock is at its lowest level since January 28. 
  The company’s profit risk might rise amid the Hong Kong protests, according to a research note by Bloomberg Intelligence released on Wednesday. “Yet dividend is likely to be maintained, underpinned by cash flow from its core business and a strong property project completion pipeline,” the note said.
  MTR had to shut down up to 47 – or half of its stations – and suspended numerous services on October 1, which might hurt its transport revenue, as well as station retail and shopping centre rental income, according to the note. 
– Xie Yu


Protests might derail MTR revenue 

Bank of America Merrill Lynch said on Thursday a turnaround in Hong Kong retail sales was unlikely any time soon. Retail had taken a blow from the ongoing protests, as inbound tourist arrivals declined by 39.1 per cent year on year in August. The number of tourists from mainland China, in particular, fell by 42.3 per cent year on year in August, after an initial decline of 5.5 per cent in July. This trend was hardly reversed in September, the bank said in a note.
  “Looking ahead, we do not expect a turnaround in retail sales before the end of 2019, as tourist arrivals are likely to remain weak for a prolonged period. A weaker yuan and slower economic growth in mainland China may act as additional headwinds for the retail sector. In addition, we are concerned about local consumer confidence loss and higher unemployment, given various media reports on store closures and employees being forced to take unpaid leave in recent months,” the bank said.
  – Xie Yu


 No turnaround in Hong Kong retail any time soon: Bank of America Merrill Lynch 

The Hang Seng Index closed 0.5 per cent lower at 25,918.5 at the lunch break. Property, energy and financial companies all declined broadly. HSBC Holdings (6 HK) lost 1.4 per cent to HK$58.8 and Industrial and Commercial Bank of China (1398 HK) eased 1 per cent to HK$5.2. 
  Mainland China-based sports brands shot up, however. Anta Sports (2020 HK) gained 3.4 per cent to HK$67, while Li Ning (2331 HK) rose 6.5 per cent to HK$23.6.
  – Xie Yu


Hang Seng 0.5 per cent lower at lunch break

Chinese laptop and smartphone maker Lenovo Group (992 HK) rose another 3.7 per cent to HK$5.6 on Thursday, after rising 3.3 per cent the day before. A research report issued by Bank of America Merrill Lynch on Thursday reiterated a buy rating for the stock, saying the firm had a cheaper valuation than peers in the computer industry. The bank also said it expected Lenovo to expand its market share among small and medium enterprises.   – Xie Yu


Lenovo rises 3.7 per cent, stock is rated buy by BofA Merrill Lynch


Shares of Budweiser Brewing (1876HK) have risen for a third day, and were 0.8 per cent higher at HK$29.95 on Thursday afternoon. A research note by Bloomberg Intelligence said its China gross profit margins could widen further as consumption shifts towards premium beer. “We believe China accounts for almost 70 per cent of Budweiser Asia’s profit and is the largest country by sales volume,” the research note said.
  – Xie Yu


Budweiser to benefit from shift to premium beer in China: Bloomberg Intelligence

Macau gaming stocks are trading higher, after the city’s tourism bureau announced on Thursday visitors to the city had increased by 9.6 per cent year on year during the first two days of golden week. MGM China (2282 HK) was up by 2.5 per cent to HK$12.9, Wynn Macau (1128 HK) is up by 2.2 per cent to HK$15.6, and Sands China (1928 HK) was up by 1.4 per cent to HK$36.2.
  – Xie Yu


Macau says golden week visitors rose about 10 per cent, casino stocks rise

The Hong Kong government is studying the possibility of introducing a curfew to calm the city down amid escalating violence, the Singtao Daily is reporting. Hong Kong media reported on Wednesday that police had urged the city to impose curfew and invoke other powers under the city’s emergency laws to bring the unrest under control.
  – Xie Yu


 Hong Kong government considering curfew to calm violent protests

Shares of mainland Chinese food delivery platform Meituan Dianping (369 HK) hit a historical high of HK$82.55 after rose 1.3 per cent On Thursday afternoon.
  Its market cap is now close to HK$47.8 billion (US$6.1 billion), while its share price is about 20 per cent higher than its initial public offering price of HK$69 last September.     Bloomberg Intelligence analysts said Meituan was benefiting from rising operating efficiency in the food delivery segment, and narrowing losses related to new initiatives. Also, Meituan’s competitor, South China Morning Post parent Alibaba Group Holding, had shifted its focus to service differentiation rather than a price war, when it came to capturing market share, which had eased the pressure on Meituan to be profitable, the analysts said.  – Xie Yu


Meituan shares hit historic high, value firm at US$6.1 billion

The Hang Seng is back in positive territory, having risen 0.17 per cent to 26,087.2. Mainland China-based health care and consumer heavyweights, as well as Macau casinos are supporting the benchmark.   CSPC Pharmaceutical (1093 HK) was up by 1.9 per cent to HK$15.9, consumer conglomerate Heng’an International (1044 HK) was up by 1.3 per cent to HK$50.9, and Mengniu Diary (2319 HK) was up by 1.2 per cent to HK$30.1.
  – Xie Yu


Mainland Chinese heavyweights, Macau casinos lift Hang Seng Index

A ban on face masks by the Hong Kong government will boost the market. Alex Au, managing director of Alphalex Capital Management, said the proposal could be a positive. “It sounds useful to some extent … police might be able to arrest people even before they start destroying things,” he said. 
  “At least, this might squeeze out the short sellers,” he added.     Meanwhile, trains operator MTR (66HK) was trading 1.5 per cent stronger at HK$44.2.
  – Xie Yu


Face mask ban ‘might squeeze out’ short sellers, analyst says 

Rebounding MTR shares, mainland Chinese health care and consumer stocks, as well as the Macau casinos lifted the Hang Seng Index into positive territory at the close on Thursday. The benchmark closed 0.3 per cent higher at 26,220.3.
  Property developers, on the other hand, broadly fell.     – Xie Yu


Hang Seng Index closes Thursday trading in positive territory

Kevin Leung, executive director of investment strategy at Hong Kong-based brokerage Haitong International, said the impact of a face mask ban – if passed – would be “neutral”.
  “A big question would be – how are they going to enforce [the ban]?,” he asked, noting that confrontations between protesters and police were already intense.
  – Xie Yu
