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Yujing Liu

Deb Price

Good day, traders.
Catch up below on a busy day in Hong Kong and mainland markets. If you have questions, please send them to deb.price@scmp.com . And welcome to our first reader from Portugal.
— Yujing Liu and Deb Price


Stocks Blog: Traders in 'wait and see' mode ahead of US Fed rate decision, G20 gathering 

A man smokes in Shanghai. Today, China has more than 300 million smokers. Photo: Reuters 

Photo: Alamy

Business

Markets

'Monster stock' in China has been on big high —  but company denies it has received hemp license 
Chinese drug maker soars on malaria treatment hype even as it warns against risk


Hang Seng closes ahead 1 percent, while Shanghai ekes out a teensy gain. 


Stocks

China stock market

Hong Kong Stock Exchange

Live

Morning guidance
* Overnight markets/ What futures foretell
 -- US stocks rose overnight, boosted by expectations that a Federal Reserve meeting concluding on Wednesday will signal an interest rate cut this year. The Nasdaq Composite gained 0.6 per cent. The S&P 500 edged up 0.1 per cent, and the Dow Jones Industrial Average also added 0.1 per cent.
  -- Hong Kong futures were 0.04 per cent higher, while the China A50 futures rose 0.1 per cent.
* IPO debuts: Chinese private vocational school and college operator JH Educational Technology Inc (1935 HK) will start trading on Hong Kong’s main board today. Developer of radio frequency chips Maxscend Microelectronics Company (300782 SZ) will trade for the first time in Shenzhen.
* Economic statistics/Central Bank action: China will announce home price changes in 70 major cities in May at 9:30am.
* Corporate events: earnings, meetings, news conferences
-- Rice cake and flavoured milk maker Want Want China Holdings (151 HK) will announce annual results after market close.
Good read: Ren Zhengfei, founder and chief executive of Huawei Technologies, said he had not expected such a ferocious US attack on the company and that the move to add the world’s largest telecommunications equipment vendor to a US trade blacklist was expected to wipe out US$30 billion of sales growth, reports Li Tao. Some Shanghai residents were willing to pay a 2,000 per cent premium for White Rabbit milk tea in support for local brands amid trade war, Daniel Ren reports.
 


Morning guidance 

JH Educational Technology (1935) debuted in a HK$571.3 million (US$72.96 million) initial public offering, with the offer price at the lower end of the price range: HK$1.5 (US$0.19) per offer share.
JH Educational Technology  is a provider of private formal higher education in China's Zhejiang province. According to a report by Frost & Sullivan, the company ranked as the largest private provider of junior college education and the fourth-largest private provider of formal higher education in Zhejiang province, with a total student enrollment of 10,874 at the end of 2017.
The company aims to use the proceeds to expand its school network by acquiring undergraduate colleges and junior colleges in Central, Eastern and Southern China. The funds will also be used to expand its current colleges, specifically by establishing a new campus of the College of Information and Business in Kaifeng, Henan province, and a new campus of Changzheng College in Hangzhou, Zhejiang province. 
JH Educational Technology is at HK$1.51 in early trading.
 
JH Educational Technology banged the gong today @HKEXGroup pic.twitter.com/ugcPMPi8gN
— Joy Pamnani (@joypamnani) June 18, 2019
— Joy Pamnani


JH Educational Technology bangs the gong in Hong Kong debut

A magnitude 6.0 earthquake that hit Yibin, a city in southwestern Sichuan province late last night has killed 11 people and injured 122, according to local newspaper Sichuan Daily.
A handful of listed companies based in Yibin reported that their operations remained normal.
Wuliangye Yibin (000858 SZ), the second-largest maker of Chinese liquor baijiu, said the earthquake did not affect the company, Chinese newspaper Securities Times reported. Its smaller rival Luzhou Laojiao (000568 SZ) based in the neighboring city Luzhou also said operations were unaffected.
Other Yibin-based companies that reported no impact include chemicals producer Yibin Tianyuan Group (002386 SZ), packaging paper maker Yibin Paper Industry (600793 SZ), and underwear producer Sichuan Langsha Holding (600137 SH).
Shares of the company mostly declined. Wuliangye fell 0.5 per cent, and Luzhou Laojiao tumbled 1.2 per cent in the latest trading. Yibin Tianyuan retreated 2.6 per cent, and Langsha shed 0.1 per cent.
— Liu Yujing 


Sichuan-based companies report no impact from earthquake amid pressure on stock price

L’Occitane International (973 HK) shot up 9.1 per cent to HK$15.06 after reporting full-year net income that beat the highest estimate.
Daiwai raised the stock of the global cosmetics maker to buy from outperform.

-- Deb Price 


L'Occitane shoots up on strong full-year results

Hype around artemisinin, the compound in a traditional Chinese herb that has saved millions of lives in Africa from malaria, has sent a drug maker soaring for a second day, even though the firm warned investors against risks.
Chinese drug maker KPC Pharmaceuticals (600422 SH) jumped by the daily limit of 10 per cent for a second day, after media reported yesterday that Chinese scientist and Nobel laureate Tu Youyou has made a breakthrough in solving the problem of artemisinin resistance to treat malaria.
KPC Pharmaceuticals said in a stock exchange filing last night that artemisinin-based malaria drugs only accounted for 1 per cent of its annual revenue in 2018. A new drug to treat lupus, an autoimmune disease, with artemisinin it started to develop in 2016 is still in early stage and faces significant risks of failure, the company said.
“Development of the new drug is a long-term work that faces many uncertainties and great risk of failure. Investors please be mindful of the investment risks,” the company said in the filing.
-- Yujing Liu 


Chinese drug maker soars on malaria treatment hype even as it warns against risk

Chinese optical telecommunication network products maker Hengtong Optic-Electric (600487 SH) shot up by as much as 10 per cent, after it announced on Monday that it would purchase a 51 per cent stake in Huawei Marine Systems, the undersea telecom cable business of Huawei.
Huawei Marine has participated in 90 projects that involve over 50,361 kilometers of cables, according to its official website. Hengtong did not disclose a price for the purchase in a stock exchange filing.
Hengtong trimmed some of its gains to 7.6 per cent in the latest trading.
-- Yujing Liu 


First asset sale by embattled Huawei Technologies since US ban boosts buyer’s shares

Hong Kong traders have a lot on their minds: The US-China trade war. What the US Federal Reserve might signal about rate cuts on Wednesday. Questions around what will happen next after huge protests in the city over a proposed extradition bill. The weakening of the yuan.
“They are waiting for clearer skies,” said Louis Tse Ming-kwong, managing director of VC Asset Management. “It’s a 'wait and see' game.”
Many investors are waiting at the sidelines at this level, as evident from the relatively low volume in the last couple of days, he said.
“The volume is not enough to push the market to a higher level,” he said.
Asked about the US Federal Reserve's statement on Wednesday, he said he expects the US is more likely to cut interest rates later, in September.
The Group of 20 summit in Japan on June 28-29 is also on traders' minds.
“Mainly for Far East investors, we want to see what happens to President Xi Jinping’s reaction to the US [after the G20 summit meeting].”
— Daryl Choo 
 


Traders are in a 'wait and see' mode, says Louis Tse Ming-kwong of VC Asset Management

China's vaccine producer Changsheng Bio-tenhnology (002680) was fined 7.2 billion yuan (US$1.04 billion) by local food and drug administration authorities over ineffective vaccines given to hundreds of thousands of babies all around China.
The state drug regulator also said it uncovered data forgery in Changsheng's production of 113,000 rabies vaccines, prompting it to revoke the company's license to produce such vaccines.
The scandal last July shook parents' faith in China's public health system. The company was suspended from trading by the Shenzhen Stock Exchange on March 15.
Changsheng reportedly made about 252,600 ineffective vaccines for diphtheria, whooping cough and tetanus that were given to hundreds of thousands of babies. 

— Yu Xie 


Changsheng fined US$1 billion over ineffective vaccines 

A cornerstone investor bailed out on a promised stake purchase in Shenwan Hongyuan (6806 HK; 000166 SZ), China’s oldest brokerage firm, which launched the biggest initial public offering in Hong Kong so far this year.
The firm said in a stock exchange filing last night that China Saite Group(0153 HK), a steel maker and construction solution provider, failed to pay for Shenwan Hongyuan’s 64.2 million H shares — valued at US$30 million — that it had agreed to buy, according to a cornerstone investment agreement.
Shenwan Hongyuan has terminated the agreement and reserves all of its rights, including taking legal action against China Saite, it said.
China Saite was one of the 13 cornerstone investors that together bought 71.5 per cent of the new shares issued by Shenwan Hongyuan in April. It raised US$1.2 billion in the listing.
Shares of China Saite fell by as much as 2.6 per cent before turning back up to gain 1.7 per cent. Shenwan Hongyuan rose 1 per cent in Hong Kong.
— Yujing Liu


Cornerstone investor bails out on Hong Kong's largest IPO this year

Shares of Maxscend Microelectronics (300782 CH), a Jiangsu-based producer of radio frequency switches, began trading at 42.35 yuan, a 20 per cent premium to their 35.29 yuan initial public offering price.
It was last trading at 50.82 yuan, surging by the daily limit for IPOs of 44 per cent. 
— Eugene Tang 


Maxscend Microelectronics  shoots up to daily limit in debut

China Tobacco International (HK) (6055), the international unit of a state-run tobacco monopoly, surged by as much as 15 per cent in morning trading, extending a powerful rally of nearly 70 per cent from its initial public offering on last Wednesday.
The company, which trades tobacco leaf and sells China-made cigarettes to overseas markets, raised HK$735 million its IPO last week. The retail tranche of the offering was oversubscribed by 102 times.
Investors piled into the stock based on the solid foundation of its parent company’s business – China has over 300 million smokers. Many also jumped in on rumours that the company could soon be included in a list of stocks that mainland Chinese investors can trade through the Stock Connect programme.
Shares of China Tobacco rose 12.2 per cent to HK$8.17 in the latest trading.
— Yujing Liu


Tobacco monopoly the smoking hot stock in Hong Kong now

Chinese drug maker Shanghai Fudan Forward S&T (600624 SH) said it does not have a license to grow industrial hemp, as a rumour circulating suggested.
It's considered a "monster stock," a Chinese stock that keeps soaring despite no apparent fundamental catalyst. 
Shares of the company soared by 182 per cent from the beginning of February to a March high, as it became one of speculative investors’ favourites amid hype around the liberalisation of hemp cultivation in China.
A number of companies that saw a dramatic increase in their share prices have clarified on the progress of their hemp business to warn against speculation.
Shares of Fudan Forward fell 0.8 per cent in morning trading.

 
— Yujing Liu 


'Monster stock' has been on big high -- but company denies it has received hemp license  

The Shanghai Composite Index is getting a boost today — albeit a small gain in morning trading — from information technology, financials and communication services sectors.
Weaker sectors are utilities, consumer discretionary and materials.
Nine socks hit or nearly hit the 10 per cent upside limit in morning trading. 
Traders continued to pile into infrastructure stocks. Those at or near the 10 per cent upside limit include First Tractor (601038 CH), which hit the 10 per cent limit Monday as well, Jilin Expressway (601518 CH), which builds and operates tolls roads, and Longjian Road (600853 CH), which builds and highways and bridges. 
The benchmark is up nearly 16 per cent for the year. Today, it is trading up nearly 0.1 per cent.    
— Deb Price 
 


Shanghai boosted by information technology, financials 

China’s new home prices rose at an accelerated pace in May, bolstered by robust gains in lower-tier cities, while Shanghai and other top-tier cities recorded modest to flat growth amid indicators that pointed to slowing investment and sales by volume on year, Zheng Yangpeng reports.
The average cost of a new home increased by 0.71 per cent in May from April, the fastest gain since November, and an acceleration from 0.62 per cent in April on month, according to Bloomberg calculations based on National Bureau of Statistics data released this morning.
Read full story here. 
 
 


China new home prices accelerate 

Hong Kong rose for a second day as tensions lessened over a controversial extradition proposal.
The Hang Seng Index rose 0.7 per cent to 27,427.26, breaching the 20-day moving average of 27,258.74, seen by technical analysts as a key resistance level. The Hang Seng China Enterprise Index, which tracks Chinese companies listed in the city, rose 0.6 per cent.
China Tobacco International (HK) (6055) led the advance with a 14 per cent jump to HK$8.3. Index heavyweight Tencent Holding (700 HK) gained 1.4 per cent, and Hong Kong Exchanges and Clearing (388 HK) rose 1.9 per cent.
 

— Yujing Liu 


Hang Seng moves above 20-day average as tensions over extradition bill calm down

Rice cracker and flavoured milk maker Want Want China Holdings (151 HK) reported a 11.6 per cent jump in net profit to 3.48 billion yuan (US$502 million) for the financial year ended on March 31, beating analyst estimate of 3.41 billion according to a Bloomberg poll.
Revenue expanded by 2.8 per cent to 20.7 billion yuan, according to the company’s annual report.
Shares of Want Want rose 3 per cent to HK$5.94 by lunch break before the announcement.
— Yujing Liu 


Want Want beats estimate with full-year results

The US Federal Reserve’s policy meeting to conclude on Wednesday could be a pivotal moment for markets, as investors are eager to search for clearer signals on the possibility of interest rate cuts from chairman Jerome Powell’s remarks.
“If market expectations for cuts are not met, we could see a jump in market volatility,” César Pérez Ruiz, head of investments and chief investment officer at Swiss private bank Pictet Wealth Management, wrote in a note today.
The market has largely priced in two rate cuts for the year — with the first in July. But Pictet expects the first Fed rate cut to come no earlier than September, unless US-China trade talks “completely derail”.
“The Fed is now confronted with a dilemma,” Ruiz wrote. The economic data is not soft enough to merit rate cuts, but inflation expectations have reached new lows to add pressure on the Fed to cut, he wrote.
Pictet is underweight equities, because of the rate cut uncertainty and expected downward earnings revisions by companies hit by the trade war, according to the note.
— Yujing Liu


Crystal Ball: No rate cut by Fed before September, says Pictet Wealth Management

Wuliangye Yibin (000858 SZ), China’s second-largest liquor maker, will donate 20 million yuan (US$2.9 million) to help Yibin — the city in Sichuan province hit by a magnitude 6.0 earthquake last night — recover and reconstruct, Chinese newspaper Securities Times reported.
Wuliangye, which is based in Yibin, said earlier today that the earthquake did not affect its baijiu production. The death toll from the earthquake has risen to 12, with 125 injured, according to local officials. 
— Yujing Liu 


No. 2 baijiu maker donates to Sichuan earthquake post-disaster relief

Hong Kong’s chief executive Carrie Lam Cheng Yuet-ngor will meet with the press at the government headquarters at 4pm today.
 
This will be Lam’s first public appearance since Saturday, when she suspended the work to push forward a controversial new law that would allow extraditions to mainland China.
 
On Sunday, around two million people took to the streets to call for the withdrawal of the bill. Many also called for Lam to step down. She apologized in a written statement on Sunday night for the disappointment and grief among citizens in Hong Kong caused by the proposed legislation.
— Yujing Liu 


Top leader of Hong Kong to meet press after historic march

Chinese stocks inched higher by market close today, amid cautious trading ahead of a Federal Reserve policy meeting to conclude on Wednesday that could signal rate cuts this year.
The Shanghai Composite Index added 0.1 per cent, or 2.54 points, to 2,890.16. The Shenzhen Component Index rose 0.3 per cent, and the ChiNext Index of small companies gained 0.9 per cent.
Turnover in Shenzhen and Shanghai was 321.7 billion yuan, the lowest level in four months.
Online game developers surged, after the government of Shanghai city released new guidelines to promote it to become the “world’s capital of e-sports”.
A gauge tracking 95 stocks related to online gaming rose 1.4 per cent, with six of them jumping by the daily 10 per cent limit, including Baofeng Group (300431 SZ) and Hangzhou Electronic Soul Network Technology (603258 SH).
— Yujing Liu 


Stocks in China edge up ahead of Fed meeting

The Hang Seng Index climbed 1 per cent to 27,498.77 by close, lifted by hopes that a press conference by Hong Kong’s chief executive Carrie Lam Cheng Yuet-ngor would help relieve tensions in the city over a controversial extradition bill.
Blue chip stocks led the advance. Hong Kong Exchanges and Clearing (388 HK) rose 2.7 per cent to HK$271, as recent media reports of a planned IPO by Chinese internet giant Alibaba Group in Hong Kong – which owns the South China Morning Post – prompted expectations of better earnings for the bourse operator.
Internet and entertainment giant Tencent Holdings (700 HK) rose 1.6 per cent to HK$334.2, after the Shanghai government released new guidelines to promote the city’s status as the “world’s e-sports capital”, signaling support for online gaming.
Property developers also rose on speculation of a greater likelihood of interest rate cuts by the US Federal Reserve this year, which would lead to lower rates in Hong Kong to benefit property transactions. Sun Hung Kai Properties (0016 HK) advanced 2.5 per cent, and Henderson Land (0012 HK) gained 0.7 per cent.
— Yujing Liu
