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Zhang Shidong

Deb Price

Good day, traders.
Chinese shares were on fire, and Hong Kong posted another day of gains.
Catch up on the latest action below. Please send any questions you have for us to deb.price@scmp.com .
— Zhang Shidong in Shanghai and Deb Price in Hong Kong 


In Hong Kong vs Trump 2.0, global CEOs see new hopes, old threats

New World Development loses blue-chip status in ejection from Hang Seng Index

China’s tech giants PDD Holdings, Xiaomi, Alibaba, Tencent defy economic woes: 6 latest earning reports

China’s largest brokerage formed by Guotai Junan and Haitong’s US$14.5 billion merger

Stocks

Stocks Blog: Chinese shares post biggest gain in a month as Beijing ramps up fiscal stimulus to boost growth

Chinese tourists check out the famous Charging Bull in New York. Photo: Yujing Liu 

Inside Huawei’s secretive plans to develop an operating system to rival Google’s Android

After the US ramped up pressure on Huawei, the company has finally had to acknowledge its long-secret plans for an alternative OS.

Guests hold umbrellas with Huawei logos in the rain at Songshan Lake New Campus in Dongguan, Guangdong province, China May 31, 2019. REUTERS/Jason Lee

Business

Markets

Rare earths dig up another stellar day in China
Maoyan Entertainment (1896 HK) is a new buy at Jefferies


Investors should remain cautious about China stocks, UBS says


China stock market

Hong Kong Stock Exchange

Live

* Overnight markets/ What futures foretell
  -- Overnight in US markets, S&P 500 gained 0.5 per cent, Nasdaq rose 1.1 per cent, and Dow Industrials added 0.3 per cent
  -- Hong Kong futures were 0.2 per cent higher, while the China A50 futures climbed 0.4 per cent
* IPO debuts: none
* Economic statistics/Central Bank action: The People’s Bank of China may release May data on aggregate financing and money supply as early as today. The National Bureau of Statistics is due to put out the numbers on consumer and producer inflation Wednesday, and those on industrial output, retail sales and investment on Friday.
* Corporate events: earnings, meetings, news conferences: nothing major
Good Reads: The SCMP's tech reporters look inside Huawei's secretive plans to develop an operating system to rival Google's Android. China shuts down popular finance news app wallstreetcn.com, reports Xie Yu. Beijing is likely to loosen its grip on the housing market as exports cool, Pearl Liu reports. 
 


Morning guidance 

Retail investors ordered 102 times the initial public offering shares on offer by China Tobacco International (6055 HK), prompting the company to raise the trance for the public by almost five fold to 83.3 million shares, according to a statement to the Hong Kong exchange.
China Tobacco will raise HK$734.9 million (US$93.7 million) from the first-time sales after selling the stock at the top of the price range of HK$4.88. The company will start trading in Hong Kong Wednesday.
— Zhang Shidong


Investors rush to subscribe to China Tobacco IPO shares

Jefferies analysts see Maoyan Entertainment (1896 HK) taking on a starring role in China's rapidly evolving  entertainment industry.
Its equity analysts Summer Wang and Don Lau initiated coverage with a buy recommendation, with a price target of HK$19.00. The stock jumped 3.6 per cent in Monday's galloping Hong Kong market to HK$11.46, so that price target would mean a gain of 66 per cent.  
"Maoyan has transformed from an online movie ticketing leader to a favored partner to content creators, cinemas, advertisers, and consumers in China’s entertainment industry," the analysts say in a new note. 
They expect it to become profitable this year, relying less on ticket subsidies and thus expanding margins. Meanwhile, they are bullish on China's movie industry, with more demand for top content and increasing supply of domestic blockbusters.
"Maoyan, ranking #1 in ticketing and #3 in lead production and lead distribution in 2018, represents a good play on China's movie consumption, which is a mainstream, low-ticket sized, and high-frequency entertainment," the Jefferies analysts write.
"... Compared with Ali Pictures, its most similar competitor, Maoyan is a front-runner in movie online ticketing (60%+), lead production (16% of box office in 5M19, vs 3% in 2016), and lead distribution roles (13%, vs 3%). "
The authors point out  Maoyan shares have lost about a fourth of their value since the company's IPO in February, largely due to concerns about China's box office growth.
"In our opinion, the risk of an implicit ban on Hollywood movies appears remote given the fickle nature of US-China trade talks and we see a potential box office beat in the summer holidays given the pipeline. Further, Maoyan has guided to a 20% decline in its ticket subsidies this year, supporting our estimate that it will turn profitable in 2019," they write. 
"Time to bottom fish," they say.

— Deb Price 
 


Maoyan Entertainment is a new buy at Jefferies

Beijing may begin to unwind restrictions designed to keep property prices in check as it battles to prop up economic momentum amid the escalating trade war, reports Pearl Liu.
The property sector and related industries, which account for more than 25 per cent of China's gross domestic product according to CLSA, could be used to help offset the deteriorating trade outlook. The policy approach may be winning hearts and minds in Beijing as data showed exports contracted 2.7 per cent in April.
“When one of the three-horse carriages [of the economy] is not performing well, the rest will get more room,” said Mai Fan, chief executive officer of Kaisa Group. “We should take a more active role to contribute more now. After all, bringing in talent and infrastructure, all involve real estate.”
The three pillars of China’s economy are commonly referred to as exports, consumption and investment. Real estate is seen as an important component of investment, with housing sales totalling 13.37 trillion yuan (US$1.93 trillion) in 2017, equivalent to 16.4 per cent of GDP, according to The Handbook of China’s Financial System.
Read full story here.

 


Beijing may unwind property restrictions in escalating trade war

Beijing on Monday ordered the closure of popular finance news app wallstreetcn.com, better known as “Wall Street News”, saying it was in breach of cybersecurity laws, reports Xi Yu.
“Wallstreetcn.com has severely violated rules under Chinese cybersecurity law. Please cut off internet access to the app and report related feedback after it takes effect,” said a government order dated June 10 that was sent to the bureau responsible for information communication under the ministry of industry and information technology.
Wallstreetcn.com issued a statement confirming the closure at 11pm, and said the company will carefully implement self correction, improve its management and staff quality comprehensively and try to resume services as soon as possible.
Read full story here.
 


Popular financial news app wallstreetcn.com shut down  

President Donald Trump had a lot to say about China tariffs overnight.
He told media outlet CNBC that additional tariffs will be levied immediately if president Xi Jinping doesn't attend the G20 meeting in Japan on June 28-29.  He added that he expects Xi to attend, and called him "an incredible guy" and said they have a "great relationship."
China will make a deal with the US "because they're going to have to."
“The China deal is going to work out. You know why? Because of tariffs,” Trump said on the show "Squawk Box." “Right now, China is getting absolutely decimated by companies that are leaving China, going to other countries, including our own, because they don’t want to pay the tariffs.”
Trump is threatening to place tariffs on US$300 billion in currently untaxed Chinese products, ranging from artificial flowers to hair brushes. 
— Deb Price 
 


Trump warns China, but says it will make a deal because 'they're going to have to'

Chinese internet giant Alibaba Group has picked China International Capital Corp. and Credit Suisse Group to lead a planned Hong Kong share sale, people familiar with the matter told Bloomberg.
The online retailer is in discussions with other investment banks seeking a role on the offering, according to the people, who asked not to be identified because the information is private. Alibaba plans to file a formal listing application with the Hong Kong stock exchange as soon as the next few weeks, the people told Bloomberg. 
Alibaba is the owner of the South China Morning Post.
The offering could raise as much as US$20 billion, though Alibaba has not finalised a precise fundraising target, the people said. A deal that size would be Hong Kong’s largest share sale since 2010, according to data compiled by Bloomberg.
The transaction could bolster the city’s status as a destination for Chinese tech listings and boost Alibaba’s cash pile as it wages a costly war of subsidies with Meituan Dianping in food delivery and travel.
Read full story here.
 


Alibaba picks CICC, Credit Suisse Group for planned Hong Kong IPO: Bloomberg

Shanghai Kindly Medical Instruments filed a document to the Hong Kong exchange to seek a listing in the city’s bourse, according to an exchange statement.
Sales at the medical device maker increased 47 per cent from a year earlier to 203.1 million yuan (US$29.4 million) last year, it said.
— Zhang Shidong


Shanghai Kindly Medical applies for HK IPO

Live stocks blog reporter Yujing Liu is visiting the US and of course went to see the Charging Bull, the famous 11 foot-tall bronze sculpture in the Financial District in Manhattan.
She wasn't alone. An army of Chinese tourists was already there, snapping photos.

 
  


Chinese tourists know a bull market when they see one

Infrastructure-linked stocks got a boost from policy support.
A statement put out on the website of the finance ministry late yesterday said special bonds sold by local governments will be allowed to fund key infrastructure projects.
Citic Securities said in a report today that infrastructure investment will pick up starting the third quarter and the growth rate will rise above 8 per cent by the year end.
Beijing Orient Landscape & Environment (002310 CH) jumped by the 10 per cent daily limit to 5.80 yuan and China Railway Construction (601186 CH) gained 5.5 per cent to 10.05 yuan. Power Construction Corp. of China (601669 CH) rose 4.5 per cent to 5.12 yuan.
— Zhang Shidong


China infrastructure stocks rally on policy support

Investors should take a defensive stance on Chinese stocks in the short term, as economic data may have been weak in May and uncertainty around the China-US trade conflict persists, UBS Group said in a report today.
The Swiss bank recommends cutting holdings of internet, financial and auto stocks trading on the offshore markets and sticking to defensive sectors, such as utilities, environment protection and construction.
— Zhang Shidong
 


Investors should remain cautious about China stocks, UBS says

Sluggish economic growth in the second half and muted inflation pressure will probably spur gains on China’s sovereign debts, sending the yield on its bond maturing in 10 years below 3 per cent, Haitong Securities said.
Rising pork prices will have a limited impact on consumer inflation as the weighting of the meat in inflation drops to 2.5 per cent from 3 per cent previously, Jiang Chao and Zhou Xia, analysts at the brokerage, wrote in a report today. Gains in consumer prices may reach 2.4 per cent for the full year, they said. The yield on the 10-year debt recently traded at 3.25 per cent.
 

— Zhang Shidong
 


China’s 10-year government bond yield may fall below 3 per cent, Haitong says

Chinese stocks are heading for the biggest gain since May 15, with the Shanghai Composite Index rising 1.9 per cent towards the end of the morning session.
Sentiment turned rosy as policymakers ratcheted up efforts to arrest a decline in economic growth by allowing special bonds by local governments to fund key infrastructure projects.
“It seems that the government is quite keen on propping up growth and such a move can be seen as a stimulus,” said Wu Kan, an investment manager at Soochow Securities in Shanghai. “And also the 'National Team' might be buying to boost sentiment.” He referred to intervention by state-backed funds.

 
— Zhang Shidong


China’s stocks on track for biggest gain in four weeks on fiscal stimulus, possible state buying

China Literature, in which Tencent Holdings has a controlling stake, surged 8.4 per cent to HK$33.70 in Hong Kong trading, heading for its biggest single-day gain since August.
Shareholders of the e-book seller approved a plan to spend as much as HK$500 million (US$63.8 million) buying back no more than a 10 per cent stake in the following six months, according to an exchange filing.
— Zhang Shidong 


Tencent-backed China Literature rises most in nine months on share buyback plan

It was a good day to have had some China rare earth shares in your portfolio.
They continue to draw speculation after a frenzy set off by President Xi Jinping, who put them — and China's dominance over them — in the global spotlight last month.  Rare earths are used in everything from i-Phones to missile systems.
JL Mag Rare-Earth (300748 CH), the company visited by Xi on May 20 , shot up to the 10 per cent daily limit. Since its close on May 20, it has soared 162 per cent. The first week that Xi visited, it shot up 57 per cent, and then the week ending May 31, it skyrocketed 61 per cent. Last week, it posted a weekly gain of 8.6 per cent.  
Today, other big movers today have been China Minmetals Rare Earths (000831 CH), up 9.97 per cent and China Northern Rare Earth Group High-Tech (600111 CH), up 7.7 per cent.
Meanwhile, Xiamen Tungsten (600549 CH) rose 3.8 per cent. 
Bucking the day's trend was Hong Kong-listed China Rare Earth (769 HK), which is trading down 1.6 per cent.

 
— Deb Price  
 


Rare earths dig up another stellar day in China

China’s stocks climbed the most in a month on signs policymakers were ramping up fiscal tools to hold in check a decline in growth just before the release of key economic data.
The Shanghai Composite Index rallied 2.6 per cent to 2,925.72 at the close today. Infrastructure-linked stocks and liquor distillers topped the list of gainers.
— Zhang Shidong 


Chinese stocks post biggest gain in month on fiscal stimulus to shore up growth

The Hang Seng Index rose 0.8 per cent to 27,789.34 at the close today, with 36 out of the 50 constituents on the gauge finishing higher.
Hong Kong Exchanges & Clearing was the biggest gainer, with a 2.6 per cent rise on speculation it will benefit from a possible plan by Alibaba Group Holding to list in the city.
— Zhang Shidong


Hong Kong’s stocks rise for fourth straight day

Stocks Blog: Chinese shares post biggest gain in a month as Beijing ramps up fiscal stimulus to boost growth

Rare earths dig up another stellar day in China Maoyan Entertainment (1896 HK) is a new buy at Jefferies

Rare earths dig up another stellar day in China

Maoyan Entertainment (1896 HK) is a new buy at Jefferies