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Yujing Liu

Deb Price

Good day, traders.
Mainland stocks ended down while Hong Kong held on to skimpy gains. 
As for those rare-earth stocks, well, a lot of traders bagged their profits and ran.
Catch up on the action below. Please send any questions about markets to deb.price@scmp.com .
-- Yujing Liu and Deb Price in Hong Kong
   
 


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China stock market

Stocks Blog: China stocks end down over fears US-China trade war is escalating

A woman stands at a brokerage firm in Shenyang, China on April 11, 2019. Photo: CNA


Photo: Shutterstock

Shanghai to give tax incentives and funds to nurture home-grown chips industry as China enters next battlefront over technology

A 12-inch wafer plant owned by Semiconductor Manufacturing International Corporation (SMIC) in Beijing on 27 August 2012. Photo: ImagineChina

Business

Markets

Economy

Rare-earth frenzy fizzles out -- but some sharp-eyed traders bagged some big quick profits
Kweichow Moutai ex-chairman expelled from party for allegedly trading power for personal gain and sex


Rare-earth frenzy fizzles out -- but some sharp-eyed traders bagged some big quick profits


Stocks

Hong Kong Stock Exchange

China economy

Live

Here's what we are watching this morning:
Overnight markets/ What futures foretell
 
-- US stocks rose overnight. The S&P 500 was up 0.9 per cent. The Nasdaq Composite advanced 1.1 per cent, and the Dow Jones Industrial Average was 0.8 per cent higher.
-- Hong Kong futures edged up 0.1 per cent at 27,573, while the China A50 futures increased 0.1 per cent.
IPO debuts:
--Trading of Nanjing Chervon Auto Precision Technology (603982 SH), a producer of automotive components, will start today.
-- Qingdao Huicheng Environmental Technology (300779 SZ), a chemical products maker, will trade for the first time in Shenzhen.
Economic statistics/Central Bank action:
Nothing major.
Corporate events: earnings, meetings, news conferences:
Nothing major.

Good reads: Shanghai’s government will offer tax incentives and funding to nurture China’s home-grown industry of producing semiconductor chips, reports Daniel Ren. Nationalist sentiment at home could play to Huawei’s favour and hurt Apple’s sales in China, reporters on the SCMP tech team report. And two investment bankers from China International Capital Corp. have received a warning from the securities watchdog after making changes to the sales prospectus of a company they were advising on its listing on the new technology board, reports Zhang Shidong.
 


Morning guidance 

China Pacific Insurance (601601 CH) had its A shares raised to outperform from neutral by Macquarie.
The price target for the large China life and property insurer was raised to 39 yuan from 35 yuan -- a 16 per cent boost from Tuesday's close.
Of analysts tracked by Bloomberg, 24 call it a buy, 10 a hold and two a sell, with a consensus price target of 36.81 yuan.
-- Deb Price 
 


China Pacific Insurance A shares raised to outperform by Macquarie

CSPC Pharmaceutical Group (1093 HK) was upgraded to neutral from underperform by Credit Suisse, with a price target of HK$14.45, up from HK$11.40. Its shares closed Tuesday at HK$13.84, up 22 per cent this year, far better than the performance of the Hang Seng Index, which is up 7 per cent in 2019.
The Chinese drugmaker focuses on manufacturing and developing antibiotics, generics and innovative medicines. 
Of analysts tracked by Bloomberg, 30 call the drugmaker a buy, four a hold and none a sell. The consensus target price is HK$17.90, or 29 per cent up from Tuesday's close.
-- Deb Price 
 


CSPC Pharmaceutical upgraded to neutral by Credit Suisse 

The Trump administration is considering blacklisting Hangzhou Hikvision Digital Technology (002415 SZ), the world’s largest maker of video surveillance products, the New York Times reported, citing anonymous sources.
The measure would be similar to the US ban on Huawei, which is to place it on an “entity list” that requires American firm to get government approvals before doing business with the company, according to the report.
The company imports chips from American companies including Intel, Nvidia and Ambarella, the Financial Times reported last year.
Hikvision and two smaller domestic rivals, Dahua Technology (002236 SZ) and Zhejiang Uniview Technologies, account for about 30 per cent of global video surveillance revenue.
Shares of Hikvision rose 2.3 per cent yesterday before the report was released.
-- Yujing Liu 


Video surveillance giant Hikvision could be banned by the US next, New York Times reports

Kunlun Energy (135 HK) was rated a new buy at Industrial Securities, with a price target of HK$9.66, or 29 per cent up from its close.
Of analysts tracked by Bloomberg, 18 says the China oil and natural gas producer is a buy, three say a hold and one a sell. The consensus target price is HK$10.21.
-- Deb Price 
 


Kunlun Energy (135 HK) rated new buy at Industrial Securities

Mainland rare earth stocks are surging again.
JL Mag Rare-Earth is up at the 10 percent limit for a third day.
Hong Kong-traded China Rare Earth (0769 HK) is down 6.5%.
The Hang Seng Index is up 0.3%.
The Shanghai Composite Index is down 0.3 per cent and the Shenzhen Component is down 0.5 per cent.
-- Yujing Liu 


Mainland rare earth stocks surging again; Hong Kong-listed China Rare Earth falling

Hikvision Digital Technology (002415 SZ) plunged by as much as 10 per cent in early trading, on the back of a New York Times report that the Trump administration is considering blacklisting the surveillance camera giant.
The stock trimmed some of the losses and was trading 7.1 per cent lower at 25.68 yuan.
Here's a look at three of China's biggest surveillance camera makers.  
-- Yujing Liu 


Hikvision plunges on report of possible US ban

China markets opened lower, as a media report suggesting a potential US ban on Chinese surveillance camera giant Hikvision (002415 SZ) triggered worries that the trade war is escalating.
The Shanghai Composite Index fell 0.4 per cent to 2893.66 in the latest trading. The Shenzhen Component Index fell 0.2 per cent. The CSI 300 Index of large companies declined 0.6 per cent.
In Hong Kong, stocks opened higher but pared most of the gains quickly, dragged down by China stocks. The Hang Seng Index was little changed at 27,668.62 the latest.
-- Yujing Liu 


Markets slide as worries over media report of Hikvision ban mount

China Rare Earth (0769 HK), which produces and sells rare earth oxides, plunged by as much as 30 per cent to HK$0.54, after the stock shot up by an astonishing 108 per cent Tuesday.
The stock’s rapid ascent followed a visit by President Xi Jinping to a rare-earth magnetic materials producer in the southeastern province of Jiangxi on Monday. Investors speculated that China may retaliate in the trade war with the US by limiting its rare earth exports, which account for 90 per cent of global consumption.
Some mainland Chinese stocks related to rare earths are slipping, after rallying for two sessions straight. A gauge tracking 38 relevant stocks fell 0.4 per cent in the latest trading.
A dozen shares still held up the momentum. Taiyuan Twin Tower Aluminum Oxide (000795 SZ) surged by the maximum 10 per cent limit, while JL Mag Rare-Earth (300748 SZ), the company visited by Xi, rose 7.5 per cent.
-- Yujing Liu 


Sudden passion for rare earth stocks fading

Developers of computer operating systems surged, on the back of media reports that Huawei Technologies may launch its original operating system as soon as this fall, and no later than spring next year.
Yu Chengdong, the head of Huawei’s consumer business group, was reported by Chinese media to have said in a WeChat group chat that Huawei’s original operating system will be compatible with all Andriod apps and cover smartphones, computers, tablets, TVs and cars.
Ren Zhengfei, the founder of the telecom giant targeted by the US government with an export ban, said yesterday that Huawei was already developing its own operating system. His remarks came after Google blocked Huawei’s access to Android updates as required by the US restrictions.
A gauge tracking 29 companies related to operating systems jumped 4.1 per cent. Five stocks surged by the maximum 10 per cent limit, including Hengbao Co (002104 SZ) and QiMing Information Technology (002232 SZ).
-- Yujing Liu 


Operating system developers surge on report that Huawei will launch its own system in fall

Goldman Sachs has revised the bank's 2019 China growth forecast to 6.2 per cent, reversing its earlier decision to raise the forecast to 6.5 per cent from 6.3 per cent.
"This downward revision reflects our estimate of the direct impact on Chinese growth from lower exports to the US (following the tariff step-up) and indirect impacts (such as lower business sentiment and activity) somewhat offset by measures taken by Chinese policymakers to stabilize growth," Goldman's researchers said in their April 2019 Global Fixed Income Outlook.
-- Eugene Tang 
 


Goldman Sachs lowers China growth forecast to 6.2 per cent amid trade war flareup

Hikvision Digital Technology (002415 SZ) said it did not receive any official notice on a reported potential US export ban, and it won’t be affected even if American companies stop supplying it chips, according to a Chinese media report.
Chinese financial media outlet 21jingji.com cited Hikvision’s investor relations director as saying that the majority of the companies’ chip suppliers are from China, while some are from Southeast Asia and the US.
Hikvision shares narrowed some of its losses and were trading 3.3 per cent lower, after plunging by as much as 10 per cent in early trading.
-- Yujing Liu 


Hikvision says ‘no impact’ even if the US cuts chip supply

The fall armyworm has already affected farms in southern China, and could hit the country’s crop-growing heartlands in the north and northeast as temperatures rise, increasing the risks to crop production as Chinese tariffs restrict the country’s ability to purchase American crops as replacements, reports Elaine Chan.
The armyworm could now spread to the north and northeastern regions of the country as early as July, according to Hu Gao, professor of Entomology at the Nanjing Agricultural University, vastly expanding the damage that has been inflicted so far on 13 provinces and regions south of the Yangtze River, including Yunnan, Sichuan, Chongqing, Guangxi, Guizhou, Guangdong, Jiangxi, Hubei, Hunan, Zhejiang, Fujian and Hainan.
“At present, the scale of the fall armyworm’s infestation has been huge, its spread has been rapid, its destruction severe, and monitoring and prevention are very difficult,” the National Agricultural Technology Extension Service Centre said.
Read full story here. 



Fall armyworm pest attacking China agriculture

A US technology export ban on Chinese surveillance camera giant Hikvision (002415 SZ) would be less disruptive than what the market expects, analysts at Jefferies wrote in a report today.
Most of Hikvision’s AI surveillance projects are sold in China, and its revenue exposure to the US is just around 5% of its total sales, analysts led by Rex Wu wrote in the report.
The company can replace its GPU chip suppliers in the US such as Ambarella and Nvidia with local Chinese firms like Huawei’s Hisilicon, according to the report.
“In a worst-case scenario, without any GPU access, Hikvision could 'train' its algorithms using China's National Super Computing Centers,” they wrote.
Hikvision fell 4.4 per cent to 26.39 in the latest trading, narrowing the losses from 10 per cent earlier in the morning.
-- Yujing Liu 


Jefferies sees Hikvision suffering less impact than what market fears if blacklisted by the US

The Shanghai Composite Index swung between gains and losses in morning trading, and was traded just 0.02 per cent lower at 2905.4 by the lunch break. The Shenzhen Component Index edged down 0.1 per cent.
Gains in the operating system developers were offset by losses in rare-earth stocks, which took a breather from two consecutive days of huge rallying.
In Hong Kong, the Hang Seng Index inched up by 0.3 per cent to 27,739.95.
-- Yujing Liu 


China, Hong Kong stocks seesaw to end morning session little changed

Hong Kong IPO market is showing signs of warming up this month after listing activity cooled off in the first quarter amid uncertainties surrounding the US-China trade war.
Three Chinese pharmaceutical firms plan to list in Hong Kong in the next few weeks.
Jiangsu Hansoh Pharmaceutical, the country's leading psychotropic drug maker, passed the exchange's listing hearing over the weekend and could launch an IPO as soon as in the next few days. The firm is controlled by Sun Huijuan, wife of the chairman of China's largest listed pharma Jiangsu Hengrui Medicine.
Frontage Holdings, a CRO (contract research organisation) unit of Shenzhen-listed Hangzhou Tigermed, is already scheduled to debut on the main board on Thursday. The firm plans to collect as much as HK$1.61 billion (US$200 million).
Biosimilar maker Mabpharm, which mainly produces monoclonal antibodies for cancer treatment, will start trading on the main board on Friday. The firm hopes to gather as much as HK$1.53 billion (US$190 million).
There will also be three other listings on the main board next week.
Chinese mens-wear brand Mulsanne Group, which is seeking to raise as much as HK$1.176 billion (US$150 million), will start trading on Monday.
Chinese solar power firm Xinyi Energy Holdings and construction material manufacturer Pujiang International Group will both debut on Tuesday. Xinyi Energy will raise HK$3.65 billion (US$470 million) after pricing its IPO at HK$1.94 per share, near the bottom of an indicative range of HK$1.89 and HK$2.35 per share.
Pujiang International, which plans to issue 240 million shares between HK$2.56 and HK$3.55 per share, aims to raise up to HK$850 million.
The other two listings are from the healthcare sector.
In the first quarter, IPO volume and value both dropped sharply on the Hong Kong market. Thirty-seven listings raised a combined HK$20.4 billion, down 42 per cent and 16 per cent respectively from the same period a year earlier.
The biggest IPO so far this year is Shenwan Hongyuan, China's oldest brokerage firm, which raised US$1.16 billion last month, and it is also the biggest stock market float in Asia this year.
-- Laura He 


Hong Kong IPO market perking up 

Nanjing Chervon Auto Precision Technology (603982 SH), a producer of automotive components that traded today for the first time, soared by the maximum 44 per cent to 14.1 yuan from its initial public offering price of 9.79 yuan.
Shares of Qingdao Huicheng Environmental Technology (300779 SZ), a chemical products maker, also surged 44 per cent to 19.57 yuan from its IPO price of 13.59 yuan.
-- Yujing Liu 


Two Chinese stocks soar on trading debut

Stocks related to horse racing and the southern island of Hainan soared, on the back of a media report saying the local government is preparing an official document to guide the development of horse racing industry.
Hainan province’s tourism and culture department drafted the document, which is now pending approval from the provincial government, the state financial newspaper Securities Times reported.
Investors have high hopes for the legalisation of horse racing in Hainan, since China announced in April 2018 it planned to turn the entire island into a free trade zone. It could potentially open a door to betting and gambling, which is outlawed in China.
A gauge tracking 27 stocks related to Hainan jumped 4.21 per cent, with five of them soaring by the daily limit of 10 per cent.
Horse racing-related stocks also climbed 3.8 per cent, according to a subindex tracking 16 relevant stocks, with four of them surging by 10 per cent. Hainan Ruize New Building (002596 SZ), which has invested 3 billion yuan in building a horse riding-themed tourism project, is one of those that jumped 10 per cent.
-- Yujing Liu 


Report of new official document on horse racing in Hainan pushes up related stocks

The prices of so-called heavy rare earths, which are used in batteries for electric vehicles and in defence applications, have risen 30 per cent this year, said Helen Lau, senior analyst and head of metals and mining research at Argonaut in Hong Kong.
“I think it is a little bit reckless, from my point of view, for China to ban the export of rare earths to the US directly,” Lau said. “There’s always some way to have a similar impact … Maybe we want to reduce exports to everyone. That is a likely scenario.”
Lau told Chad Bray she believes China, regardless of the trade war, will ultimately move to reduce exports of rare earths to meet its own domestic demand.
“Everyone knows that China needs rare earths for its electric-vehicle industry,” Lau said. “Electric-vehicle production is very strong – every single month it is growing in high double digits, and this year it has doubled from last year. The demand for rare earths is very strong.”
A key time to watch will be June, when China is expected to set its mining quota for rare earths for the second half of the year. The first half quota was 60,000 tonnes, the same as last year, she said.
Rare earth-linked stocks soared after Chinese President Xi Jinping and his top trade negotiator were photographed at a rare earth mining and processing plant in China’s eastern Jiangxi province, a key region for mining rare earths used in electric vehicles.
Full story here.


Will China use rare earths as a Trump card in trade war?  

What goes up, must ... Well, the adage is certainly playing out with rare-earth stocks.
After two days of frenzied buying, investors are taking a step back to bag profits and look again at the largely unchanged fundamentals of the stocks.
China Rare Earth (0769 HK), which soared as much as 132 per cent at one point yesterday from Monday's close, plunged 25 per cent to HK$0.58 in the latest trading.
A lucky and attentive trader who got in at the start of the frenzy Tuesday and bought HK$10,000 of China Rare Earth -- and sold at the highest point at 2:50 in the afternoon -- would have walked away with profits of HK$10,476 (minus broker and other fees).
All but three of the 38 mainland Chinese stocks related to rare-earth magnets fell today, with a gauge tracking them ending 3.3 per cent lower.
JL Mag Rare-Earth (300748 SZ), which was visited by President Xi Jinping on Monday, is one of the three that still held up. Shares of the company rose 7.3 per cent to 30.63 yuan, its highest level since November 2, 2018.
-- Yujing Liu 


Rare-earth frenzy fizzles out -- but, wow, traders bagged some big quick profits 

The market has been guessing whether something went wrong when Yuan Renguo, the former chairman of China’s state-owned liquor king, Kweichow Moutai (600519 SH), stepped down last May without announcing his new appointment.
Now the mystery has finally been solved.
Yuan has been expelled from the Communist Party and dismissed from his positions at the Guizhou government for engaging in large-scale corruption during his time at Moutai, the Party’s corruption watchdog said in a statement.
He is accused of trading power for personal gains and sex, and offered convenience to shady distributors of Moutai that damaged the sales environment of Moutai, according to the statement. Because the amount of the alleged bribes involved was huge, Yuan’s suspected criminal corruption case has been transferred to the prosecutor, the statement said.
Yuan started working at Moutai in 1990 and became the general manager in 1998, later ascending to the chairmanship in 2011.
During his tenure as Moutai’s chief, Moutai expanded rapidly to become dominant in the Chinese liquor industry.
Rumours of Yuan’s troubles circulated in the market when he was moved from his seat in the national political advisory body earlier this month. Prior to that, a handful of senior officials at the Guizhou province and Moutai managers had been charged with bribery.
The stock fell 0.8 per cent to 888 yuan.
-- Yujing Liu 


Kweichow Moutai ex-chairman expelled from party for allegedly trading power for personal gains and sex

Just how long can Kweichow Moutai's unbelievable run go on?
The stock, despite a slide this month, is up 50 per cent this year.
It seems that northbound traders are settling on an answer -- it's a good time to take profits and toast one's good fortune.
Kweichow Moutai (600519 SH), China's baijiu king and a longtime favourite of northbound traders, saw 1.4 billion yuan worth of sell orders Tuesday, versus 693 million yuan in buy orders, according to the most recently available data on the Hong Kong stock exchange operator. It had the highest turnover of the day.
The three most actively traded stocks by northbound traders on the Hong Kong-Shanghai stock connect all saw more selling than buying. That was true overall of the stocks traded, with 10.9 billion yuan in sell orders and 8.87 billion yuan in buys. China markets have been seeing big outflows in the latest trade war tornado.
Meanwhile, Ping An Insurance (601318 SH) saw sell trades totalling 574 million yuan and buy orders at 445 million yuan.
The Industrial Bank (601166 SH) had triple the value of sell over buy orders -- 367 million yuan versus 118 million yuan.
The stock with the fourth largest turnover was Anhui Conch Cement, which had 197 million yuan in sell orders versus 273 million yuan in buys.
-- Deb Price


Northbound  traders chug down profits from liquor king Kweichow Moutai

Integrated circuit designers and software developers will be exempted from enterprise income tax for this year and in 2020, China’s ministry of finance said in a statement.
The companies will be charged just 25 per cent of the normal enterprise income tax in the three years after, according to the statement,
The move came after the US threatened Chinese technology firms’ chip supply with export bans on Huawei Technologies and ZTE.
-- Yujing  Liu 


Stocks Blog: China stocks end down over fears US-China trade war is escalating

Rare-earth frenzy fizzles out -- but some sharp-eyed traders bagged some big quick profits Kweichow Moutai ex-chairman expelled from party for allegedly trading power for personal gain and sex

Rare-earth frenzy fizzles out -- but some sharp-eyed traders bagged some big quick profits

Kweichow Moutai ex-chairman expelled from party for allegedly trading power for personal gain and sex