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Louise Moon

Deb Price

Good day traders.
After a rough morning, Shanghai eked out a bit of gains near the close while Hong Kong's Hang Seng lost a bit of ground but remains at a 10-month high.
Check out the day's action below.
Please send questions you'd like answered to deb.price@scmp.com .
-- Louise Moon and Deb Price 
 


Stocks blog: Hang Seng loses ground, while Shanghai shakes off its blues

Investors monitor stock information at a brokerage house in Fuyang, Anhui province, China February 25, 2019. Photo: Reuters 

Standard Chartered to pay US$1.1 billion to resolve Iran sanctions investigations

Business

Markets

Standard Chartered agreed to pay US$1.1 billion to settle long-running investigations. Photo: Reuters

JPG for ONLINE

Standard Chartered agreed to pay US$1.1 billion to settle long-running investigations. Photo: Bloomberg

Hopu Investment may be looking at stake in Gree, Chinese media report
Hong Kong trounces Japan as Asia’s second-largest stock market


Hopu Investment may be looking at stake in Gree, Chinese media report


Stocks

China markets

China economy

Live

Here's what we are watching this morning:
Overnight markets/ What futures foretell
 -- Overnight in US markets, S&P 500 slipped 0.61 per cent,  Nasdaq was down 0.56 per cent, and the Dow Jones Industrial Average slipped 0.72 per cent.
 -- Hong Kong futures are down 0.12 per cent to 30,167, while the China A50 futures were up 0.81 per cent to 13,760.21.
 
IPO debuts: 
None
Economic statistics/Central Bank action: 
China new yuan loans for March.
Corporate events: earnings, meetings, news conferences 
None to note.

Later: Thursday, China Consumer Price Index and Producer Price Index, both for March. Friday, China export and import data.  

Good reads: Chad Bray reports on Standard Chartered agreement to pay US$1.1 billion to resolve the US-UK Iran sanctions investigations. Laura He looks at Dalian Wanda's efforts to cut its debt. Enoch Yiu and Sandy Li report on investors and developers weighing conversion of old industrial buildings after a change in Hong Kong government policy.  
 


Morning guidance 

Markets are off to a negative start across the board, taking heed from the US which ended the longest winning streak in 18 months overnight, amid fresh worries over global growth and escalating trade tensions.
Hong Kong's Hang Seng opened down 0.42 per cent, or 126.81 points, to 30,030.68.
In the mainland, the Shanghai Composite lost 0.46 per cent, or 15.01 points, to 4,062.44, while the CSI 300 of large caps shed 0.32 per cent, or 12.99 points, to 4,062.44.
-- Louise Moon


Markets open down amid global growth, trade worries 

Standard Chartered (2888 HK ) fell 1.3 percent to HK$65.80 after announcing overnight that it agreed to pay US$1.1 billion to settle investigations by the US and UK into its handling of transactions by those with links to Iran.
“We are pleased to have resolved these matters and to put these historical issues behind us,” said Bill Winters, Standard Chartered's chief executive. “The circumstances that led to today's resolutions are completely unacceptable and not representative of the Standard Chartered I am proud to lead today. Fighting financial crime is central to what we do and who we are; we do not tolerate misconduct or lax controls and we will continue to root out any issues that threaten the trust we have built over more than 160 years.”
-- Deb Price


Standard Chartered falls on US$1.1 billion resolution to Iran investigation

Sino-Ocean Group (3377 HK) fell 0.7 per cent to HK$4.05 in early trading, on the heels of a downgrade to neutral from outperform by Credit Suisse.
The price target for the Chinese real estate developer was raised to HK$4.30 from HK$4.10. Of analysts tracked by Bloomberg, five have a buy on the stock, 10 have a hold, and four have a sell. The consensus 12-month target price is HK$3.57.
"Sinco-Ocean's revenue will likely stay weak following a 10% slide in 2018," Bloomberg Intelligence analysts wrote on March 21. 
"... The adjustment plan set out by management, following poor results, will take time to pay off. It seeks to cut exposure to northern China while expand in Yangtze River Delta, Greater Bay Area and tier-2 cities," the analysts added.
-- Deb Price
 


Sino-Ocean Group drops on heels of downgrade

Foxconn Industrial Internet (601138 CH) fell 2.8  per cent to 15.76 yuan in early trading, following HSBC initiating coverage with a hold rating.
HSBC set a price target of 15.40 yuan.
On March 29, the Shenzhen-based communications network equipment developer reported earnings that were better than expectations, but its sales were below estimates.
The stock was riding high on June 13 at 25.72 yuan, then fell through January to 11.50 yuan, before starting a climb back up. 
Of analysts tracked by Bloomberg, eight have it as a buy, two as a hold, and none as a sell. 
-- Deb Price


Foxconn Industrial Internet falls 2.8 per cent 

The majority of major car makers were down in early morning trading in reaction to a fall in China’s March retail passenger car sales, which was announced after trading on Tuesday.
According to the Passenger Car Association, sales fell 12 per cent to 1.78 million vehicles, in a 10th consecutive month of declines.
BYD  (1211HK) lost 0.96 per cent to HK$51.45, and Geely Automobile Holdings (0175 HK) was down 2.19 per cent to HK$16.94. Both have closed up for seven consecutive sessions.
BAIC Motor (1958 HK) shed 4.63 per cent to HK$5.97.
-- Louise Moon


Car makers down after March sales in China fell 12 per cent 

American Depository receipts of Tencent Holdings (700 HK) are recommended as an outperform by Oppenheimer & Co., which initiated coverage. Oppenheimer's price target is US$55.
Oppenheimer expects the Internet giant to maintain its lead in gaming, Bloomberg said, and sees "ample runway" for advertising.
Of analysts tracked by Bloomberg covering the Hong Kong-listed stock, 54 rate Tencent as a buy, six as a hold and none as a sell. The consensus target price is HK$413.12. It was last trading down 0.9 per cent at HK$380.
In the US, it trades as TCEHY. Of analysts covering it, four call it a buy and none either a hold or sell. The consensus target price is US$57.67, up nearly 19 per cent from the Tuesday close at US$48.64.
-- Deb Price


Tencent ADRs get 'outperform' recommendation

China’s second largest e-commerce giant JD.com will cut up to 8 per cent of its workforce, technology news website The Information reported overnight. This will affect over 12,000 jobs of Beijing headquarters, delivery and warehouse staff.
The news comes as worries over a slowdown in China and across the globe intensifies.
Listed as JD on the Nasdaq, the company reported a 22.4 per cent jump in quarterly sales in February. But that marked the company’s slowest revenue growth rate since its initial public offering in 2015.
Backed by China’s Tencent (0700.HK), it has announced it plans to focus on offline expansion in smaller Chinese cities.
-- Louise Moon 


JD.com to cut jobs 

One of China’s largest entertainment companies, Huayi Brothers (300027.SZ), fell 2.98 per cent to 5.87 yuan in morning trading, on the heels of reporting expected net losses of 86.7 million to 91.7 million yuan for the first quarter after markets closed on Tuesday.
-- Louise Moon 


Huayi Brothers falls nearly 3 per cent on reporting of net losses 

SAIC Motor (600104.SS) was down 1.61 per cent to 28.12 yuan, having reported vehicle sales fell 14 per cent when compared to a year ago.
-- Louise Moon


SAIC drops after reporting car sales fell 14 per cent 

Wynn Macau (1128 HK) shed 2.56 per cent to HK$20.95 following Nasdaq-listed parent company, Wynn Resorts, which fell 3.85 per cent overnight.
Las Vegas-based parent Wynn has terminated discussions on taking over Australia’s Crown Resorts after news broke of preliminary talks between the two gambling companies, it said in a statement.
Melbourne-based Crown had confirmed reports, pushing its own stock up 19.7 per cent higher. But on Wednesday morning it had slumped down 8.61 per cent to HK$12.84.
-- Louise Moon 


Wynn Macau falls over end of talks on taking over Melbourne's Crown Resorts

The Hang Seng Index is likely to continue its slow-paced steady rise in the near future, supported by a fervour in 5G stocks, Alex Wong, director of asset management at Ample Capital, said before market open.
Stocks such as China Tower (788 HK) that are related to the next generation of telecom networks are “the hottest concept that will continue holding up the market” in the short term, Wong said.
Investors are pumped up by the recent launch of commercial 5G services in South Korea and the US, he said. They are also expecting lower interest rates in China to benefit China Tower as the state-owned telecom tower giant has a strong financing need. China Tower jumped 8 per cent yesterday but is down 3.2 per cent today.
-- Yujing Liu 


Crystal Ball: Hot 5G sector to boost Hang Seng, says Alex Wong 

New African swine fever cases in China are slowing, state media Xinhua reported on Tuesday evening. Production of live pigs and pork supply is generally stable, it said, but China still faces a "grave situation" in preventing and controlling the disease.
Pork companies were mostly down on the news. WH Group (0288.HK), owner of US’ Smithfield Foods and the world’s largest pork producer, was down 1.25 per cent to HK$8.72 in morning trading. Its net profit for 2018 fell 4 per cent on the outbreak of African swine and rising meat production in the US.
Jiangxi Zhengbang Technology (002157.SZ) lost 1.83 per cent to 19.27 yuan, and Tech-bank Food (002124.SZ) fell 0.9 per cent to 18.63 yuan.
But Muyuan Foods (002714.SZ), the number two producer, gained 0.27 per cent to 66.86 yuan, reversing two days of closing down, to continue its upward streak.
-- Louise Moon


China pork companies down after Xinhua report of African swine fever 'grave situation'

The International Monetary Fund cuts its forecast for global growth this year to 3.3 per cent.
That was down from 3.5 per cent it had forecast for 2019 in January. It also marks a slowdown from the 3.6 per cent rate in 2018, though the IMF said it expects global growth to return to that level next year.
"The projected pickup in the second half of 2019 is predicated on an ongoing buildup of policy stimulus in China, recent improvements in global financial market sentiment, the waning of some temporary drags on growth in the euro area, and a gradual stabilization of conditions in stressed emerging market economies, including Argentina and Turkey," the IMF World Economic Outlook said.
The IMF warned of escalation of trade conflicts  and a no-deal Brexit.
"The potential remains for sharp deterioration in market sentiment, which would imply portfolio reallocations away from risk assets, wider spreads over safe haven securities, and generally tighter financial conditions, especially for vulnerable economies," it wrote.
China's growth forecast was raised to 6.3 per cent from 6.2 per cent. 
-- Deb Price


IMF cuts 2019 global growth forecast to 3.3 per cent 

The EU and China have made a “breakthrough” in relations, as proclaimed by European Council president Donald Tusk in Brussels overnight.
Chinese premier Li Keqiang has agreed to try and reach a deal next year with the EU to open its markets to foreign investors. In meetings with senior EU officials, China also agreed to discuss concerns about forced technology transfers by EU companies operating in its country.
A target date of 2020 was also set to agree on an investment treaty. Negotiations for this began in 2013 but have made minimal progress.
-- Louise Moon 


EU and China achieve 'breakthrough' for trade deal next year, says European official 

ChiNext’s best-performing stock slumps by daily limit as major holders plan to cut stakes.
Hithink RoyalFlush Information Network, the best performer on the ChiNext index this year, tumbled by the 10 per cent daily limit to 115.02 yuan in morning trading.
Four major shareholders plan to sell combined 41.7 million shares -- a 7.8 per cent stake -- in the financial data provider through the stock exchange in the following six months, Hithink said in a statement. The stock had surged 235 per cent this year through yesterday.
-- Zhang Shidong 



ChiNext superstar Hithink plunges on news of stake sale by major shareholders

Shares of car-makers declined, after China's manufacturers' guild yesterday reported after trading hours that March car sales numbers had fallen for the 10th consecutive month.
BAIC Motor, which assembles cars in Beijing with Hyundai Motors of South Korea, fell by almost 5 per cent in Hong Kong to HK$5.95. Guangzhou Automobile Group, the Chinese venture partner of Toyota Motor and Honda Motor, fell as much as 3.5 per cent to HK$9.26. Brilliance China Automotive, which makes BMW luxury sedans in northeastern China, fell 4 per cent to HK$8.32.
-- Eugene Tang


More car-makers fall on poor sales in China 

Securities brokerage Guotai Junan Securities (2611.HK) fell 6.58 per cent to HK$16.48 on news it plans to sell HK$13.17 billion in new shares to support business development and provide fresh capital.
It will issue 194 million H shares to third-party investors at a price of HK$16.34. The stock hit its lowest level since the end of January. In Shanghai (601211.SS), Guotai lost 1.75 per cent to 20.21 yuan.
-- Louise Moon


Guotai Junan Securities plunges on plan to sell new shares

The Hang Seng Index paused for a midday break down 0.42 per cent to 30,031.55.
On the mainland, markets also remained in negative territory through the morning. The Shanghai Composite fell 0.39 per cent to 3,226.93, while the CSI 300 of large caps lost 0.36 per cent to 4,060.85.
-- Louise Moon


Hang Seng, Shanghai, CSI down at midday break

China’s largest liquor maker Kweichow Moutai (600519.SS) hit a record high for the third time this week during morning trading. The stock shot up 4.80 per cent to 948.48 yuan.
As of last close, the world’s largest distiller with a market cap of 1.14 trillion yuan, has risen 53 per cent this year. Just this week, it has risen almost 9 per cent as of midday, and its 14-day relative strength index is at 80. A reading above 70 marks overbought and below 30, oversold.
On Monday Guizhou-based Moutai climbed to close up 4.09 per cent at 900.20 yuan, after the distiller’s preliminary first quarter profits were stronger than expected.
-- Louise Moon 



Chinese liquor maker Kweichow Moutai hits fresh high 

Hong Kong has just unseated Japan as the second-most valuable stock market in Asia.
The combined market cap of stocks trading on the city totalled US$5.78 trillion yesterday, eclipsing that of US$5.76 trillion for Japan, according to data compiled by Bloomberg.
The city’s benchmark Hang Seng Index, which entered bull-market territory last week, has risen 16 per cent this year, almost double the gain on the Nikkei 225 gauge. The last time Hong Kong surpassed Japan was in 2015 and it failed to hold on to the title for long.
China is currently the biggest equity market in Asia, with a market cap of US$7.6 trillion, and the world’s second-largest after the US.
-- Zhang Shidong

 


Hong Kong trounces Japan as Asia’s second-largest stock market

Hebei-based China-focused private equity firm Hopu Investment is considering forming a consortium, including with a Macau financial investment company, to buy a 15 per cent stake in Gree Electric (000651.SHE), according to Caixin's Chinese website and other Chinese media.
The firm is led by former Goldman Sachs China partner, Fang Fenglei.
On Tuesday Gree, China’s biggest maker of air conditioners, announced in an exchange filing that state-owned parent Zhuhai Gree Group, which owns 18.2 per cent of the company, plans to sell a 15 per cent stake. It did not identify buyers, and surged by the daily limit.
The deal would be worth at least 41.3 billion yuan (US$6.2 billion), as stakes would be sold for no less than the average stock price over the past 30 trading days, according to the filing.
Hopu declined to comment.
Gree was up 9.57 yuan to 56.90 yuan in afternoon trading.
-- Louise Moon


Hopu Investment may be looking at stake in Gree, Chinese media report

The turnover of Gree Electric has hit a record high at 17.5 billion yuan on reports of it selling a 15 per cent stake and that Hopu Investment could be the buyer.
The previous record was 17.1 billion yuan, set on April 26, 2018.
Gree’s share price rise gains hit the daily limit of 10 per cent on the sale news on Tuesday, but turnover remained at a much smaller 563.1 million yuan.
-- Louise Moon


Gree Electric hits record turnover over stake sale

China markets edged higher in the last hour of trading.
Leading the gains were liquor makers, boosted by foreign investors, and automakers, which rose on speculation over government support plans.
The Shanghai Composite ended up 0.07 per cent to 3,241.93, while the CSI 300 of large caps gained 0.26 per cent to 4,085.85.
-- Louise Moon 


Shanghai bulls chase away bears at end of trading 

Volkswagen may purchase a big stake in Chinese electric vehicle joint venture partner JAC Motors, reported Reuters.
JAC’s parent company, Anhui Jianghuai Automobile Group, jumped by the daily limit of 10 per cent to 6.69 yuan on the news.
The state-owned parent holds a 24 per cent stake.
German Volkswagen is the largest foreign automaker in China, and may use Goldman Sachs as an adviser on the plan, according to Reuters.
-- Louise Moon


Volkswagen looking at buying stake in JAC Motors: Reuters 

Fresh housing policies out of Beijing -- especially the easing of housing registration in smaller cities and city cluster development  -- "will be positive to local property markets in cities with industry support in the long term, and to support overall stock market sentiment in the short term as well," writes Huatai Research.
Its analysts think the companies with reasonable valuations now that will benefit most are CIFI Holdings (884 HK), Longfor Group Holdings (960 HK) and China Resources Land (1109 HK), each of which it rates a buy.
It said that it expects 69 cities will retain rural migrants through unrestricted hukou registration that supports local property sales. The three have the highest gross asset value exposure to these cities, it said.
"... We believe the government’s welcoming attitude towards private investment in city-cluster construction and operation is also worth noting. Developers with a proven track record of running investment properties and industry towns are advantageously positioned, in our view: 1) when they enter new cities/regions to acquire land bank; and 2) to benefit from recurring cash flows from matured commercial properties, offices and related businesses. Longfor and CRL are two leading players under this theme, thanks to their solid experience in investment properties, in our view," it said.
-- Deb Price


Crystal Ball: CIFI, Longfor, China Resources Land top picks on policy change

The Hang Seng Index ended down 0.13 per cent at 30,119.56, reversing the two consecutive days of gains. Hong Kong's bourse still remains at a 10-month high, since June 15, 2018.
-- Louise Moon 


Hang Seng gives up ground but still at 10-month high

The former chairman of Shenzhen-listed Sunflower Pharmaceutical, Guan Yanbin, was arrested by police for suspected murder, according to The Beijing News.
Guan still holds more than 11.4 per cent of a stake in the company, according to its annual report. The stock dropped 5.3 per cent to close at 18.2 yuan.
The Shenzhen stock exchange has issued a regulatory letter to the company, asking it to explain the impact of the case on the company as soon as possible.
The Beijing News cited unnamed sources as saying the victim is Guan’s wife, and they had been fighting each other over the division of money.
-- Louise Moon and Xie Yu 
