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Zhang Shidong

Deb Price

Happy Friday, traders.
The last trading day of a drama-filled November was, well, dramatic.
Catch up on the action below.
Please help us improve our blog by taking this quick -- under 2 minutes! -- survey. Your feedback will really help us make the blog better for you!
Also, if you would like the Live Stocks Blog emailed to you each morning, click here. 
-- Zhang Shidong in Shanghai and Deb Price in Hong Kong
Note: Information in this blog is on an "as is" basis and not a solicitation or offer to buy or sell any securities or otherwise; and is not investment/professional advice or services in this regard.  It is subject to our T&C.  SCMP (as defined in T&C) shall not be liable for any loss, damage and costs relating to any investments in securities or otherwise in this connection.


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More growth ahead as cross-border Connect turns 10

Alibaba raises US$5 billion from dual-currency bond issue, boosting Hong Kong’s hub status

Stocks

Hang Seng Index tumbles on investor jitters that new US-China tensions could undermine partial trade deal 

A Chinese investor studies stocks at a brokerage in Beijing. Photo: EPA-EFE

Business

Markets

Best Mart 360 (2360 HK) looking to expand away from 'war zone' Hong Kong
Young Hongkongers see protests lasting another six months, survey finds


Alibaba (9988 HK) falls for first time since it started trading in Hong Kong on Tuesday.
 


China stock market

Hang Seng Index

Kweichow Moutai

Alibaba

Tencent

Xiaomi

Hong Kong protests

Trade war

US-China trade war

Live

* Overnight markets/ What futures foretell
  -- The US markets were closed overnight for the Thanksgiving Day holiday. Europe’s Euro Stoxx 50 index dropped 0.2 per cent.
-- Hong Kong futures were less than 0.1 per cent higher, while the FTSE China A50 futures climbed 0.2 per cent.
* IPO debuts: WMCH Global Investment (8208 HK) will start trading in the Growth Enterprise Market in Hong Kong today, while Guangdong DP (300808 CH), a manufacturer of light-emitting diode products, will debut in Shenzhen’s ChiNext board.
* Economic statistics/Central Bank action: nothing major
* Corporate events: earnings, meetings, news conferences:
-- Hong Kong Jewelry retailer Chow Tai Fook ( 1929 HK) posted a 21 per cent drop in first-half net income and executive director Hamilton Cheng said the company will seek to cut costs to bolster profits.
*Later this week: The purchasing managers’ index of China’s manufacturing industry for this month is due Saturday morning. The gauge will probably rise to 49.5 from 49.3 the previous month, according to a Bloomberg survey.


Morning guidance 

Best Mart 360 (2360 HK), which has had 75 of its 102 shops trashed or firebombed by hardcore protesters in the last six months, said it will expand to mainland China to reduce its reliance on the Hong Kong market and called on the government to launch an independent inquiry into the social unrest devastating the city.
The popular snack-shop chain is establishing a business entity to bring the expansion plan to fruition, with the first store in mainland China expected to open in the coming financial year.
“We are still studying the locations,” Lin Tsz-fung, chairman and founder of the beleaguered food vendor, told the Post. He declined to elaborate.
Lin said the company plans to open 15 to 20 stores in Macau in the next two years, in a separate interview with Bloomberg. Lin expressed his frustration with the vandalism that has dogged his business and others perceived to have links with mainland China or an allegiance to Beijing.
“I’ve never seen anything like this. Hong Kong now feels unfamiliar to me. I don’t know why Hong Kong has become like this, like a war zone,” Lin said. “Now that we’ve reached this stage, I think the government should set up an independent inquiry to look into the whole issue and to give seven million Hongkongers an explanation.”
Read full story here by property reporter Lam Ka-sing.   


Best Mart 360 looking to expand away from ‘war zone’ Hong Kong

The strongly negative cumulative impact the trade war is having on the Chinese economy was highlighted in industrial profits figures released this week, but behind the record drop, the data also suggested the potential for recovery if US tariffs are rolled back significantly as part of a “phase one” trade deal.
Chinese industrial firms in trade-related industries saw their profits fall sharply in October as a direct consequence of the trade war, Chinese government data revealed when it was released on Wednesday.
However, companies involved in infrastructure construction in some way were seen to be doing quite well thanks to strong government support for such projects in an effort to offset the impact of the trade war with the United States.
The deal to cool the trade tensions between the world’s two largest economies could be close, with one senior US official telling POLITICO on Wednesday that only “millimetres” separated the two sides from reaching an agreement.

  Read full story here by SCMP reporters.


Winners and losers in China’s plummeting industrial profits

Chow Tai Fook Jewellery Group (1929 HK), the world’s largest listed jeweller by market value, reported that its first half year profits were down 20.8 per cent due to the dire retail environment in the city roiled by social unrest and the trade war. 
The Hong Kong-listed jewellery chain said its profit to shareholders declined to HK$1.53 billion for the six months ended September 30.
Total revenue  inched down by 0.6 per cent to HK$29.5 billion, thanks to a 12.2 per cent revenue growth in mainland China.
In Hong Kong, Macau and other markets, revenue dropped 20.3 per cent, due largely to “weakened consumer sentiment.” Its same store sales in Hong Kong and Macau plunged 27.5 per cent.
The jewellery chain had to close some of its stores early at times in protest-hit areas. For example, all of its stores in Hong Kong, except ones in Disneyland and the airport, shut down for the whole day on November 13. 
The jewellery chain will pay an interim dividend of 12 HK cents per share, down from 15 HK cents per share in the same period last year.
-- Pearl Liu   


Chow Tai Fook reports first half profits fall 20.8 per cent 

Bosideng International Holdings (3998 HK) one of the world’s biggest makers of down jackets, reported a 36.4 per cent surge of its first half profit on back of a “premium outerwear brand” strategy. 
The Chinese down jacket maker said its profit to shareholders increased 36.4 per cent to HK$342.7 million yuan for the six months ended September 30.
Its revenue rose 28.8 per cent to 4.4 billion yuan over the comparable period last year. 
“In the year to date, economic conditions at home and abroad have been complicated and severe. The mounting pressure exerted by a decline in economy and the Sino-US trade disputes have posed big challenges to enterprises’ development. However, we press on with our strategy of ‘focusing on our principal business and key brands,’” said Gao Dekang, chairman and CEO of the company. 
Bosideng began to reposition its brand in 2018 amid fierce competition in China from overseas high-end luxury winter outerwear fashion labels, such as Canada Goose.
Supermodel Kendall Jenner opened the Bosideng show at Milan Fashion Week in October. 
The company will deliver an interim dividend of 3 HK cents per share, up from 2 HK cents per share in the same period last year.
-- Pearl Liu    


Down jacket maker Bosideng reports surge in first half profits

The Hang Seng Index declined 1.2 per cent to 26,582.96, as China’s threats to the US over two new laws supporting Hong Kong protesters raised concerns about the mini trade deal being negotiated.
Alibaba (9988 HK) saw its first fall since its debut Tuesday, declining 1.6 per cent to HK$202.80. In started trading on Tuesday, and in the first three trading days it gained nearly 16 per cent.
Xiaomi (1810 HK) fell 0.7 per cent to HK$8.83. It had advanced 1.8 per cent to HK$8.89 on Thursday on third quarter results that Daiwa Capital Markets said suggest the worst may be behind for the Chinese smartphone maker.
Best Mart 360 (2360 HK), a popular snack chain store whose Hong Kong stores have been targeted protesters, fell 2.2 per cent to HK2.21, after reporting its revenue increased 14.7 per cent in the first six months of the year while profits decreased 6 per cent. It says it is expanding to mainland China to avoid the Hong Kong “war zone.“ 
Chow Tai Fook Jewellery Group (1929 HK), the world’s largest listed jeweller by market value, jumped 5.3 per cent to HK7.17. It reported that its first half year profits were down 20.8 per cent due to the dire retail environment in the city roiled by social unrest and the trade war. 
Bosideng International Holdings (3998 HK), one of the world’s biggest makers of down jackets, shot up 7.6 per cent after reporting a 36.4 per cent surge of its first half profit on back of a “premium outerwear brand” strategy. 
-- Deb Price 


Hang Seng Index tumbles; Alibaba sees first decline

Chinese stocks drifted lower as some of the best-performing stocks gave up some of the gain amid profit taking pressure.
The Shanghai Composite Index dropped 0.2 per cent to 2,882.69 at the open today.
Liquor distillers including Kweichow Moutai (600519 CH) and pig breeders such as Muyuan Foodstuff (002714 CH) dragged the benchmark lower.
-- Zhang Shidong


China’s stocks fall for third day, erasing weekly gain

WMCH Global Investment (8208 HK) shot up in its debut on the GEM of the Hong Kong Stock Exchange today.
Its shares rose 20 per cent to 0.48 at the open, from the offering price of HK$ 0.4. The shares were oversubscribed by 29.3 times.
WMCH Global Investment provides civil and structural engineering consulting services in Singapore and Vietnam.
In 2018, it was ranked, by revenue, as the tenth largets of all players in the civil and structural engineering consulting services market in Singapore, with a market share of 2.3 per cent, according to the Industry Consultant’s Report. It ranked the fifth largest in Vietnam, with a market share of 2.4 per cent in the same year.
--Snow Xia   


WMCH Global Investment shoots up in debut

Guangdong DP (300808 CH), a manufacturer of light-emitting diode products, surged by 44 per cent to 15.90 yuan in Shenzhen’s ChiNext board today.
The 44 per cent gain is the maximum new shares can rise on the first day of trading on the mainland’s exchanges.
-- Zhang Shidong


IPO debutant Guangdong DP jumps by daily limit

Daiwa Capital Markets reiterates its buy rating on Chow Tai Fook Jewellery (1929 HK), but lowered its target price to HK$7.9 from HK$8.5. 
The jewellery chain reported its revenue dropped 0.6 per cent in the first half of the year compared to the same period in 2018 and that its net profit tumbled 20.8 per cent.
“The decline in its net profit was mainly due to unrealised losses from mark-to-market revaluation of its gold loans (HKD917m), in line with its profit warning, as well as challenges in Hong Kong,” its analysts said.
“...  We believe CTF’s accelerated development of its Mainland China business will partially offset near-term challenges” in Hong Kong and Macau.
It said risks are problems in executing its expansion plans and fluctuations in the yuan.
Chow Tai Fook has gained 7.9 per cent to HK$7.35 in morning trading.
-- Deb Price     


Chow Tai Fook soars; Daiwa Capital reiterates ‘buy’ rating but lowers price target

Losses on the Hang Seng Index have deepened. It has declined 1.8 per cent to 26,409.89, putting it on track to close below 27,000 for the eighth straight session and falling below a significant psychological 26,500-point threshold.
All 50 constituent stocks on the index are down, led by CSPC Pharmaceutical Group (1093 HK), a mainland manufacturer and distributor of antibiotics, generic drugs, among other products. CSPC Pharmaceutical plunged 10.3 per cent to HK$17.70.
China food-delivery giant Meituan Dianping (3690 HK) fell 3 per cent to HK$103.20.
Meanwhile, Alibaba (9988 HK) is seeing its first profit taking. It was last down 1.6 per cent to HK$200.80.
“Investors may be worried about the trade deal and the Hong Kong (protest) situation during weekend,” said Alan Li, portfolio manager at Atta Capital.
Risk off sentiment is building ahead of the weekend, he said.
-- Deb Price    


Hang Seng losses deepen; CSPC Pharmaceutical plunges more than 10 per cent

Enthusiasm for new shares of Postal Savings Bank of China (601658 CH), the biggest domestic offering in the mainland for year, seems to be unaffected by a slew of recent sour performances of initial public offering stocks.
Traders placed orders 79 times the online tranche of the yuan-denominated stock on offer, the lender said in an exchange statement.
The bank allocated 2.59 billion shares to investors who subscribed to the online part, while the offline part of 1.29 billion shares was sold to institutional traders, the statement said.
Its Hong Kong-traded shares dropped 1.2 per cent to HK$5.08 today.
-- Zhang Shidong


Postal Savings Bank’s mainland flotation 79 times oversubscribed

Selling pressure on some of the best-performing Chinese stocks is building up.
Kweichow Moutai (600519 CH), which had more than doubled this year with its shares heavily held by fund managers, tumbled 3.9 per cent to 1,131 yuan in Shanghai today.
That put the stock on track for its steepest decline since September 11 and left it down by 7.8 per cent from a record high set last week.
The number of Kweichow Moutai’s shares that have changed hands so far today was almost three times the 30-day average for this time of the day.
Its industry peers also dropped, with Wuliangye Yibin (000858 CH) and Luzhou Laojiao (000568 CH) shedding at least 2 per cent.
Chen Li, chief economist at Soochow Securities, which correctly called the rally on Chinese stocks this year, is cautious about Chinese consumer companies next year, as elevated valuations make the stocks vulnerable to earnings swings.

 
-- Zhang Shidong


Kweichow Moutai heads for biggest drop in two months as volumes spike

The decision of Alibaba (9988 HK) to do a secondary listing in Hong Kong “bodes well for the prospect of the HK stock market becoming a more important market for global investors in technology and Internet stocks,” Daiwa Capital Markets analyst Jonas Kan writes in a new note.  
As a result, Daiwa Capital reiterated its “buy” rating on the Hong Kong Exchanges and Clearing (388 HK), the owner and operator of the Hong Kong exchange and kept its target price at HK$307.80.
Kan expects to see more secondary-market  and new listings in Hong Kong. The combined market cap of Alibaba, Internet titan Tencent (700 HK), smartphone maker Xioami (1810 HK) and Meituan Dianping (3690 HK) is US$8 trillion, “which should notably enhance the importance of the HK market for global investors in new economy stocks,” he writes. 
Having a greater “critical mass” of established giants and promising companies will help attract global investors, he points out. 
HKEX has declined 0.9 per cent to HK$248.40 this morning in a falling market. 
  -- Deb Price 


Others to follow Alibaba, boosting Hong Kong exchange in eyes of global investors, says Daiwa Capital 

The Hang Seng Index has further fallen, and is now down  2 per cent to 26,346.91.
“Frankly I can’t find specific reason for the sharp correction. But given this type of abnormal situation, investors better play safe,” said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.
CSPC Pharmaceutical Group (1093 HK) has fallen 11.8 per cent to HK$17.42 on news that big pharmaceutical companies will have to make large price cuts to get on a national reimbursement list in China.It is the top blue chip percentage loser.
Meanwhile, Alibaba (9988 HK) has slid further. It is down 2.1 per cent to HK$199.70. It began trading in Hong Kong Tuesday in a secondary listing. Excitement over the availability of the e-commerce giant sent its shares soaring nearly 16 per cent in three days.
-- Deb Price    


Hang Seng falls 2 per cent in sharp correction

Losses on China’s stocks accelerated in morning trading as traders unwound their positions in some of the year’s biggest gainers.
The Shanghai Composite Index retreated 0.6 per cent to 2,871.08 at the break, heading for a 0.5 per cent loss this week.
That will be a third consecutive loss for the five-day period, should sentiment not improve in the afternoon session.
A gauge of 21 liquor distillers, including some of the year’s hottest stocks such as Kweichow Moutai (600519 CH) and Luzhou Laojiao (000568 CH) sank 3.4 per cent as the worst-performing sector. Jiangsu Hengrui Medicine (600276 CH) led pharmaceutical companies lower after the government said procurement prices of some new medicines that will join the government’s medical insurance coverage fell by an average 61 per cent.


China’s stocks set for third straight week of losses as liquor distillers and pharmaceuticals weigh

Chinese pharmaceutical stocks declined today after the National Healthcare Security Administration unveiled results of drug price negotiations with manufacturers on Thursday.
Deals on some 97 drugs were struck, out of 150 that underwent negotiations -- the largest among a total of four rounds of annual talks that have been held by the central government in the past four years. 
The average price cut was 51.2 per cent for drugs that have successfully been added to the drugs reimbursement list for national health insurance coverage, of which newly launched products saw average price reduction of 60.7 per cent, according to the tally by Lianxun Securities analyst Li Zhixin. 
Their inclusion will be effective on January 1, lasting two years. Some of the biggest price declines were seen in hepatitis drugs -- averaging around 85 per cent -- while oncology and diabetes drugs prices were slashed by some 65 per cent, according to a CICC research note. 
Shares of Sino Biopharmaceutical (1177 HK), whose Tomudex drug for late-stage colon cancer was included in the list with a 55 per cent price cut, fell 4.3 per cent to HK$10.16. 
Innovent Biologics (1801 HK), whose Sintilimab drug for relapsed classical Hodgkin’s lymphoma was included for a 64 per cent price cut, sank 3.2 per cent to HK$27.50. 
Meanwhile, CSPC Pharmaceutical Group (1093 HK) plunged 11.6 per cent to HK$17.46 on expectation that its Keaili breast cancer drug will undergo government bulk procurement price negotiations in the first half of next year.  Investors are concerned about uncertainties on the potential price cut and procurement volume of this drug, which has previously been projected to achieve sales of 1.5 billion yuan this year and 2.5 billion yuan next year, said Bocom International analyst Kelvin Chen. 
The 51.2 per cent average price cut in this round of negotiation is in line with reductions ranging from 44 per cent to 58.6 per cent in the three previous rounds, Lianxun’s Li noted.
-- Eric Ng   


Chinese drug makers plummet after government unveils negotiated price cuts

Interesting survey out by think tank MWYO on what Hongkongers are thinking.
The poll was conducted between November 6 and 9, before Sunday’s stunning elections that were a pro-democracy camp sweep. So it gives a sense of voter mood heading into the polls. 
Here are some of the most interesting findings:
* 63.8 per cent of the 701 respondents said the government should form a commission of inquiry into the use of police force on protesters before holding future talks with residents. 
* 76.2 per cent said city leader Carrie Lam’s first and only public dialogue was “ineffective” or “very ineffective” in easing social tensions.
*Two in five respondents said community dialogue would only be successful if the government addresses all five demands by protesters, including universal suffrage.
*  Two in three respondents expect the protests will continue for another three months, while younger respondents believe the unrest will go on for another six months.  
Concern about the protests and their impact on Hong Kong economy and potentially its future as one of Asia’s top financial hubs has weighed on trading sentiment, analysts say.
Today, the Hang Seng Index has fallen 2 per cent to 26,334.29. 
Read the full story here on the survey by Kathleen Magramo.


Young Hongkongers see protests lasting another six months, survey finds

While some traders are scratching their heads about what triggered today’s pullback in China and Hong Kong stocks today, KGI Securities says the markets are probably re-assessing the repercussion of the signing by US President Donald Trump of an act supporting the anti-government protests in the former British colony.
“After the initial assessment, the market has probably figured out that the impact of the bill would be far-reaching in the fronts of both the economy and politics,” said Chen Hao, a strategist at the brokerage in Shanghai. “A trade deal has now become a wild card. Alongside with weak economic data, the only direction the market can choose now is to resume declines.”
-- Zhang Shidong


Angst about rising China-US tension rattles stocks, KGI says

This year’s hottest stocks in China from liquor makers and pig breeders to pharmaceuticals are declining across the board today, as institutional traders rush to pare their bets to lock in profits.
Fund managers need to forestall each other by selling stocks with outsized gains this year earlier to earn them better position in the annual performance ranking, causing “stampede” in the stocks.
Still, the sell-off may be a one-off towards the year end, as that is only short-term trading behaviors by some institutional players, said Li Lifeng, a strategist at Sinolink Securities.
—Zhang Shidong 


China’s best-performing stocks fall in ‘stampede’

The group of the best-performing stocks this year turned into the biggest driver that sent the market down today.
The Shanghai Composite Index shed 0.6 per cent to 2,871.98 at the close today, the lowest since August 26.
Gauges tracking liquor distillers and healthcare companies fell at least 1.8 per cent as the worst-performing sectors. While big investors unwound their bets on the stocks with outsize gains, pharmaceutical companies were also whipsawed by the news that the result of price negotiations between the government and manufacturers showed more than 50 per cent drops in prices of drugs that will join the national medical insurance coverage.
-- Zhang Shidong


China’s stocks drop to three-month low amid sell-off stampede on market darlings

The Hang Seng Index fell 2 per cent, while the Shanghai Composite Index dropped 0.6 per cent and the Shenzhen Composite Index fell 0.4 per cent.
“We suspected the sell-off today is more because of the expiry of November Hang Seng Index futures yesterday. Yesterday was the last trading day of the November index futures. So, normally between the turn of the month and the beginning of the month after the expiry, you see some volatility on the market,” said Louis Wong Wai-kit, director of Philip Capital Management.
Another factor that adds pressure on Hang Seng is China’s release of a list of procurement drugs, where the prices were negotiated to be cut to benefit Chinese patients.
“That gives investors a very good chance to lock in the gain of those pharmaceutical companies because they’ve gone up quite a lot for the last month or so,” said Louis Tse Ming-kwong, managing director of VC Asset Management.
But the procurement program can hurt the profits for some innovative drugmakers, said Wong of Philip Capital Management.
“The market expects good earnings from those innovative drugs. Now, the worry is that some of the innovative drugs may be included in the list of procurement. And that will cause the price to drop quite substantially. And that will erode the profit margins of these pharma companies,” said Wong.
Tse added the fall of Hang Seng today is not surprising because “towards the end of the year, the money is getting tighter. One of the reasons A-shares fell is because of the repatriation of money back to banks. In Hong Kong as well, there’s money from the north, they want to sell in Hong Kong to repatriate the money back.”
Both analysts said Hang Seng Index will not fall below 26,200 points, which is the technical support level, in the near term.
-- Snow Xia   


Hang Seng driven down by profit-taking, expiration of index futures, analysts say

The Hang Seng Index declined 2 per cent to 26,346.49, its worst fall in nearly three weeks.
Pharmaceuticals were top losers, led by CSPC Pharmaceutical Group (1093 HK), which plunged 9.7 per cent to HK$17.82. The government unveiled results of drug price negotiations with manufacturers in which, on average, prices of drugs eligible for reimbursement were cut by 50 per cent. 
On November 11, the Hang Seng fell 2.6 per cent.
Meanwhile, Alibaba (9988 HK) saw its first decline since it began trading Tuesday. It fell 2.7 per cent to HK$198.40.   
-- Deb Price     


Hang Seng Index tumbles on investor jitters that new US-China tensions could undermine partial trade deal

Best Mart 360 (2360 HK) looking to expand away from 'war zone' Hong Kong Young Hongkongers see protests lasting another six months, survey finds

Best Mart 360 (2360 HK) looking to expand away from 'war zone' Hong Kong

Young Hongkongers see protests lasting another six months, survey finds