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Good day, traders —
Markets in the mainland and Hong Kong closed up, as positive sentiment continued on the trade front.
Catch up on the day's action below. If you'd like to reach us, please shoot an email to deb.price@scmp.com .
— Yujing Liu and Deb Price


Stocks Blog: China, Hong Kong markets gain on positive sentiment about trade talks next week

The bull sculpture at Exchange Square in Hong Kong. Photo: David Wong


Business

Markets

Hong Kong property stocks weaken as protests hurt investment sentiment
China Tobacco International falls rapidly, giving up most of day's big run-up 


Stocks

China markets

China stock market

Hong Kong Stock Exchange

Live

Overnight markets/ What futures foretell
-- The US market advanced for a third day to record highs overnight, helped by a bright prospect of global semiconductor demand in the rest of this year. The S&P 500 rose 0.5 per cent to finish at a fresh record, and the Nasdaq Composite jumped 0.9 per cent to a new high as well. The Dow Jones Industrial Average fell 0.3 per cent.
-- The Hang Seng Index Futures rose 0.1 per cent, while the China A50 futures were little changed.
IPO debuts:
 
-- Trading of cosmetics manufacturer Guandong Marubi Biotechnology (603983 SH) will start in Shanghai today.
 
Economic statistics/Central Bank action:
None to note.
Corporate events:
-- Chinese carmaker and BMW’s partner Brilliance China Automotive (1114 HK) will release special dividend arrangement today. Property developer Mingfa Group (846 HK) will announce first-half result.
Good reads: China’s choice of Shanghai for US trade talks emphasizes commercial rather than political focus according to analysts, Zhou Xin and Sidney Leng report. Hong Kong’s government will promote a veteran insider to succeed the departing chief executive of its de facto central bank, reports Enoch Yiu.


Morning guidance 

Changmao Biochemical Engineering (0954 HK) said it is likely to record a net profit of 38 million yuan to 45 million yuan for the first six months of the year, compared to 14.2 million yuan in the same period last year.
It posted the announcement — called a positive profit warning — to the Hong Kong stock exchange after trading on Wednesday.
The chemicals company attributed the boost to transformations of a production line, which controlled costs, as well as work in energy conservation and emission reduction, increasing efficiency.
— Louise Moon
 


Changmao expects big profit rise in 1H

Hung Hing Printing Group (0450 HK) expects to turn profitable in the first six months of the year, from a net loss of HK$33 million over the same period in 2018, it said in a filing to the Hong Kong stock exchange on Wednesday evening.
The shift is due to favourable currency exchange movements on operating costs, control of labour costs, improvements on efficiency and downward pressure on pricing of papers compared to hikes in 2018, it said.
— Louise Moon 
 


Hung Hing Printing expects to turn profitable in 1H

Telecommunication equipment company Comba Telecom Systems (2342 HK) expects company profits to rally no less than 200 per cent in the first six months of this year, compared to the same time frame in 2018.
The jump in profits is mainly due to an increase in revenue from telecoms operators in mainland China, the firm said in a filing to the Hong Kong stock exchange on Wednesday evening, despite some offset from an increase in research and development costs to prepare for the launch of 5G network.
Results will be published around mid-August.
— Louise Moon 
 


Comba Telecom Systems expects profits to rally in 1H

Investment holding company Citic Resources (1205 HK) expects a decrease in profits for the first half of the year, according to its filing to the Hong Kong stock exchange late on Wednesday.
The group predicted a 30 per cent drop in profit, compared to the first six months of 2018, and a 15 per cent decline in revenue. This was due to a drop in average selling price and sales volumes of crude and commodities sold by Citic, which sells natural resources, it said.
— Louise Moon 
 


Citic Resources sees profits declining in 1H

Melco International Development (0200 HK) posted second quarter results of its US-listed subsidiary, Melco Resorts, to the Hong Kong stock exchange late on Wednesday.
For the three months through June, Nasdaq-listed Melco Resorts reported a net income of US$100.3 million, up 75 per cent from US$57.2 million in the same period in 2018.
— Louise Moon 
 


Melco International posts results of US subsidiary, whose net income shot up

Macau casino operator Sands China (1928 HK), a subsidiary of Las Vegas Sands Group (LVS NYSE), recorded a 19.7 per cent jump in net profit for the second quarter of this year to US$511 million from the same period last year, according to a filing to the exchange this morning.
But revenue rose 1.4 per cent to US$2.14 billion, slower than the 5.9 per cent growth expected by analysts, according to a Bloomberg poll.
Its Las Vegas parent dropped 2.9 per cent in after-hours trading in New York, after the company also posted softer revenue growth than expected.
— Yujing Liu


Sands China posts much slower Q2 revenue growth than expected

Chinese property developer Seazen Holdings (601155 SH), at the centre of a storm triggered by its founder’s arrest over child molestation allegations, has transferred stakes in 10 projects to other companies for 415 billion yuan (US$60 million) in cash.
The transaction value equaled 14 per cent of Seazen’s net assets in 2018, the company said in a stock exchange filing today.
Shares of Seazen opened 0.7 per cent higher at 27.16 yuan. The stock has had more than half of its value wiped out since the arrest of Wang Zhenhua, its former chairman and founder, in early July.
— Yujing Liu 


Seazen sells 10 projects after founder's arrest

Bank of Communications (601328 SH), China’s fifth-largest bank, dropped 0.4 per cent to 5.77 yuan in Shanghai, after saying its third-biggest shareholder will cut its stake by 1 per cent.
The National Council for Social Security Fund, which owns 14.7 per cent of BoCom’s overall shares, plans to shed over 742 million of the shares over the next three months, the company said in a stock exchange filing yesterday.
The selling price will be decided based on market prices, the company said.
— Yujing Liu


BoCom falls on shareholder stake cut plant

China Literature (772 HK), China’s largest online publishing website owned by internet giant Tencent Holding (700 HK), plummeted by 11 per cent to HK$33.50, following a media report of its big shareholder’s stake cut plan.
Carlyle Group, an early investor in China Literature that owned 4.9 per cent of the company’s shares, offered 28 million shares at HK$35.5 to HK$36 apiece through its investment vehicle Luxun Investment, Bloomberg reported yesterday.
The deal, arranged by Morgan Stanley, represents about 2.7 per cent of the company’s total shares outstanding.
Turnover in the stock surged to a fresh record of 33.5 million shares today, more than 10 times of its usual volume.
— Yujing Liu


Online publishing site China Literature plunges on Carlyle Group's stake cut report

Stocks listed on the new STAR board jumped on the fourth day of trading on the new bourse.
All but two of the 25 stocks listed on Shanghai’s new technology innovation board climbed. Beijing Tianyishangjia New Material Corp (688033 SH), a railway brake maker, surged 23.1 per cent to 48 yuan, leading the rally.
Fujian Forecam Optics (688010 SH), which specializes in cameras and optic components, declined by 7.3 per cent to 75.5 yuan, after recording a 49 per cent gain yesterday, the largest among the stocks.
Different rules apply on the new board that allow stocks to essentially trade without brakes for the first five days. Friday will be the end of that period. 
Stocks on the STAR board currently can't be bought through the Stock Connect programme, but some are expected to be added for northbound traders later.
— Yujing Liu


STAR stocks jump on fourth day of trading

China’s A-share market recovered early losses and traded higher by lunch break, boosted by electronic and telecommunication stocks.
The Shanghai Composite Index added 0.3 per cent to 2,931.9, and the Shenzhen Component Index rose 0.6 per cent. The ChiNext Index of start-ups advanced 0.8 per cent.
Electronics stocks continued surging for a second day, as investors had higher hopes for the upcoming US-China trade talks in Shanghai next week and the Trump administration’s softening stance on Huawei Technologies’ blacklisting.
Electronic component makers surged 2.5 per cent, the most among all subindices, according to a gauge compiled by brokerage Citic Securities that tracks 261 stocks. As many as nine companies jumped by the daily limit of 10 per cent, such as copper-clad laminate maker Goldenmax International Technology (002636 SH). Telecommunication stocks also gained 1.5 per cent.
Miners and manufacturers and precious metal and gold led the decline, as investors’ risk appetite increased with the latest confirmation that the US and Chinese negotiators will meet next Tuesday. A gauge of stocks related to precious metal led the decline with a 1.6 per cent loss, according to Wind data.
— Yujing Liu
 


Electronics and telecom stocks boost China shares

China Tobacco International (6055 HK) is on track for its fifth consecutive day of gains, shooting up 7.6 per cent to HK$24.75 in early afternoon trading.
The stock's IPO share price was HK$4.88 on June 11. At this intra-day price, it is up more than 400 per cent. 
The company is the international arm of state monopoly China National Tobacco, explaining its fan base. Some of its fans are also betting the stock will eventually be available to southbound traders on the Stock Connect, with mainland investors wanting to buy into the only listed China tobacco  company.
But Kenny Wen, a wealth management strategist at Everbright Sun Hung Kai, calls the stock's run-up "very dangerous and purely speculation," saying its valuation is sky high based on expectations rather than fundamentals.
"I strongly believe normal retail investors should not chase the rally," Wen said.
China has 308 million smokers, making it the world's largest tobacco market.

 
— Deb Price 
 


China Tobacco lights up more gains 

Hong Kong property developers trended lower, triggered by worsening sentiment amid ongoing protests sparked by a controversial extradition bill and the year-long US-China trade war.
The intraday declines came as the city’s government sold the biggest plot of residential land at the former Kai Tak airport at a discount to valuations Wednesday.
A new report by Bloomberg Intelligence said that the results showed that developers have "turned more cautious on the housing market outlook," adding that residential market sentiment is likely to soften in the short term. 
The analysts said the city's office and retail property investment could slump more in the second half of the year due to the protests, which are "likely to prompt investors to shift their focus into other Asian markets, such as Singapore." Already, investment in Hong Kong property has been down because of curbs by Beijing on capital outflow, the analysts noted.
Sun Hung Kai Properties (0016 HK), Hong Kong’s largest developer by market value, dropped 1.4 per cent to HK$128.8 in the latest trading.
Some anti-government protesters have criticised the company for allowing riot police to enter its shopping mall located in Sha Tin to disperse demonstrators, resulting in a violent clash earlier this month. The developer said it did not call police and was unaware of the dispersal operation at the New Town Plaza shopping centre in advance.
New World Development Company (0017 HK) shed 1.2 per cent to HK$11.92. Wharf Holdings (4 HK), declined 0.7 per cent to HK$20.2.
— Yujing Liu 
 


Hong Kong property stocks weaken as protests hurt investment sentiment

Now is the best time for investors to increase their holdings of gold-related stocks, according to brokerage Zhongtai Securities.
The percentage of stocks in the non-ferrous sector in Chinese funds’ portfolios declined steadily to a low of 0.9 per cent in the first quarter from 3.8 per cent in the beginning of 2018, according to a report by Zhongtai Securities today.
As the upward momentum in gold price continues, institutional investors are set to raise their holdings of gold-related stocks going forward, according to the report.
“The allocation in gold stocks is lower than 1 per cent now, reflecting huge room for improvements in comparison with historical highs. The gold sector is far from overheating in investment,” analysts led by Xie Honghe wrote in the report.
“With the real returns of US treasuries falling back, gold price is just in the initial stage of a long rally. Now is the best time to allocate in gold.”
The spot price for gold is US$1,425.64, and it is up 11.16 per cent for the year. 


Gold miners to rise as funds expected to pile in, Zhongtai Securities says

CSPC Pharmaceutical Group (1093 HK) is the top gainer intraday on the Hang Seng, shooting up 6.1 per cent to HK$14.16, on the heels of an upgrade to buy from hold by UOB Kay Hian.  
The manufacturer of antibiotics, vitamin C and common generics is on track for its third consecutive day of gains. The Singapore-based investment bank lifted its price target for the stock to HK$16 from HK$15. 
— Deb Price
 


CSPC Pharmaceutical shoots up on heels of upgrade to 'buy' at UOB Kay Hian

US and Chinese trade negotiators will conduct the latest round of talks in Shanghai next Tuesday and Wednesday, according to China’s Commerce department.
The talks will be carried out on the basis of equity and mutual respect, Commerce department spokesman Gao Feng said during a press conference, confirming the White House’s announcement Wednesday and media reports earlier this week.
China’s choice of Shanghai for the trade talks, instead of the capital Beijing as in the past rounds of negotiations, indicates that the country’s top leadership is trying to play down the political aspect of the talks and emphasise the commercial element, according to analysts.
Gao said it is "completely normal" to hold the talks in different cities, and that Shanghai has "good conditions" for trade negotiations, according to Chinese media reports.
— Yujing Liu


China confirms trade talks in Shanghai next week

Bank of Jinzhou (416 HK), a city commercial bank based in the northeastern province of Liaoning, said its board of directors and major shareholders are in talks with institutions for a possible strategic investment, according to a statement posted on its official website.
The bank has delayed the release of its 2018 annual report twice since March, while its former auditor EY resigned in May over disagreements with the company on the usage of some of the loans granted to institutional customers.
The mysterious postponement has led to mounting worries over liquidity conditions of the bank and the broader banking system in China.
Officials from the central bank and other regulators met with financial institutions in Liaoning province to discuss measures to handle the liquidity problems at the bank, Reuters reported, citing anonymous sources.
— Yujing Liu 


Troubled Bank of Jinzhou in talks for strategic investment after eerie delay in annual report

China Tobacco International (6055 HK) has given up most of its spectacular gains of the day.
The stock shot up to HK$25.95 at 2:50, or a 12.8 per cent gain from Wednesday's close. Then it began a huge slide, apparently as speculators bailed out. It was last trading 0.87 per cent up for the day, at HK$23.20.
The company is the international arm of state monopoly China National Tobacco. 
 

— Deb Price 
 


China Tobacco stubs out its day's big run-up 

Hong Kong and China markets advanced for the third straight day, as technology shares continued a rally prompted by positive developments in the US-China trade talks and waivers for US companies wanting to do business with Huawei Technologies.
The Shanghai Composite Index rose 0.5 per cent to 2,937.36. The Shenzhen Component Index surged 0.9 per cent, and the ChiNext Index of start-ups gained 0.8 per cent.
Electronic component makers surged 2.5 per cent, according to a gauge compiled by Citic Securities, with eight of the 262 stocks jumping by the 10 per cent daily limit.
All but two of the 25 stocks listed on the newly launched STAR technology board in Shanghai continued to rise. Suzhou TZTEK Technology (688003 SH), a developer of automated warehouse and logistics systems, led the advance with a 15 per cent gain to 50.5 yuan.
Turnover in the STAR stocks reached 29 billion yuan (US$4.2 billion), up from the 23 billion recorded Wednesday.
The Hang Seng Index rose 0.3 per cent to 28,594.3. Turnover reached HK$68 billion, lower than the daily average of HK$82 billion achieved in June.
— Yujing Liu 


Markets rise for a third day, helped by technology shares

Charles Li, the chief executive of the operator of the Hong Kong stock exchange, said today that Hong Kong and China share the same dream of "one country, two systems" principle, saying, they "want the same thing" and "neither want it to change."
At a securities group luncheon,  Li said "very few people" want to challenge this principle.
He spoke at a time Hong Kong is dealing with deep emotions about its relationship with the mainland after demonstrations erupted over a proposal to allow extraditions to China. The protests have morphed into a broader expression of fears and discontent, including about quality of life, wages and expensive housing. 
He said China wants Hong Kong to keep its status as a "tremendously important" financial centre.
"But it's very hard to ignore the elephant in the room now, because all this requires one very valuable commodity — confidence. People with money are not going to put their money at risk ...  when confidence is lacking. And today, confidence is under a lot of challenge in Hong Kong."
Despite the same dream of two systems, Li feels society has recently become obsessed about potential change because of fear, as the HK people and Central government have two different fears. “We share one dream but we have two different fears,” he says. pic.twitter.com/KC7JrGQpNf
— Joy Pamnani (@joypamnani) July 25, 2019

— Joy Pamnani 
 
