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Xie Yu

Deb Price

Good day, traders --
Catch up on the day's action below.
If you have questions or feedback, please shoot them to deb.price@scmp.com. 
-- Xie Yu and Deb Price in Hong Kong  
 


Stocks Blog:  MTR gains while Cathay slips, as Hong Kong market continues to be punched by protests

An employee arranges gold bangles at a Chow Tai Fook Jewellery Group store in Hong Kong. Luxury purchases are way down as protests depress tourism.  Photo: Bloomberg

Business

Markets

Protests could be 'catastrophic' for Hong Kong's economy, says chief of China Travel
MTR, Cathay shares will continue to feel weight of protests, says stocks strategist Kenny Wen


Protests could be 'catastrophic' for Hong Kong's economy, says chief of China Travel


Stocks

China stock market

Hang Seng Index

Hong Kong Stock Exchange

Live

Watch the stock price of Gree Electric Appliances (000651CH) of Zhuhai.
Consortiums led by private equity giants Hillhouse Capital and Hopu Investment have submitted their bidding and deposits for the minority stake under China's white goods giant Gree Electric from its government-owned parent, the filing by Gree to the Shenzhen stock exchange on Monday night said.
The deposit is worth 6.3 billion yuan.
The equity under bidding is a 15 per cent stake of the listed Gree Electric, valued more than 39.9 billion yuan.
-- Xie Yu 


Watch stock price of Gree Electric Appliances of Zhuhai 

Morning guidance

Here's what we are watching this morning:
Overnight markets/ What futures foretell
--US markets closed for holiday.
-- The Hang Seng Index futures are down 217 points, or 0.85 per cent at 25,288.
--  The FTSE China A50 opens 0.8 per cent higher at 13,603.2.
IPO debuts:
None 
Economic statistics/Central Bank action:
Nothing major 
Earnings:
No major earnings
Good reads: China needs five to 10 years to catch up in semiconductors, Peking University professor and industry veteran Zhou Zhiping told Jane Zhang. Hotel and leisure operator China Travel warns protests could be "catastrophic" for Hong Kong's economy as tourists stay away, Martin Choi reports.
 


Morning guidance 

If you live in Beijing and Shenzhen, robots and drones may soon be delivering your takeaway lunch orders.
Meituan (03690 HK), China’s largest food delivery service platform, is currently testing indoor robot delivery in 10 office buildings and hotels in Beijing and Shenzhen, and already delivered thousand of orders, Xia Huaxia, chief scientist of Meituan, said on the sideline of the World Artificial Intelligence Conference held in Shanghai last Thursday.
Xia also said that robots and humans would be working together in delivering orders in the foreseeable future, according to the Paper.
Read full story here. 
 


Meituan testing deliveries by robots, drones

The effects of the anti-government protests are reverberating across Hong Kong’s travel industry and could be “catastrophic” for the entire economy if it persists, according to a leading hotel and leisure operator.
“In the second half of the year, our operations in Hong Kong have indeed been affected by the complicated circumstances in the city,” said Fu Zhuoyang, chairman and executive director of China Travel International Investment Hong Kong, during a press conference on Monday where he announced an 11 per cent jump in first-half profit.
Hong Kong-listed China Travel (308 HK) operates hotels, resorts, ticketing and transport services and theme parks in the mainland.
“If the situation continues in the long-term, the results will be catastrophic, not only for [our company] but the whole of the Hong Kong economy.”
Read full story here by Martin Choi.
 


Protests could be 'catastrophic' for Hong Kong's economy, says chief of China Travel

The family trust set up by the chairwoman of Longfor Group (960 HK) bought more shares at slight discount.
The property developer said its substantial shareholder, Charm Talent International, has bought 4.3 million shares in the open market at an average price of about HK$27.86 between August 28 to 30. The price was at a slight discount to the actual average price of HK$27.96 based on the closing prices on those three days.
After the purchase, Charm Talent International’s shareholding in the company increased to 43.99 per cent, from 43.92 per cent. Charm Talent International was wholly owned by Silver Sea Assets. HSBC Trustee wholly owns Silver Sea Assets in its capacity as the trustee of a family trust set up by Wu Yajun, chairwoman  and executive director of the company, for her daughter.
-- Georgina Lee 
 


Family trust of Longfor Group buys more shares 

Chinese smartphone maker Xiaomi (1810 HK) announced it will "from time to time" repurchase shares, after a shareholder resolution gave company directors a general mandate on doing so.
The company will repurchase shares in the open market, when appropriate, at a maximum aggregate price of HK$12 billion, the filing to the Hong Kong stock exchange said.
The repurchase size will not exceeding 10 per cent of the total number of the issued shares as of May 14, 2019.
"The Board believes that a share repurchase in the present conditions will demonstrate the Company’s confidence in its own business outlook and prospects and would, ultimately, benefit the Company and create value to the Shareholders. The Board believes that the current financial resources of the Company would enable it to implement the share repurchase while maintaining a solid financial position," it said in the filing.
-- Xie Yu


Xiaomi announces details on plan for repurchasing shares 'from time to time'

The Hang Seng Index opens 0.1 per cent lower at 25,593.7.
The Shanghai Composite Index opens 0.02 per cent higher at 2,925.9.
The Shenzhen Component Index opened 0.2 per cent higher at 9591.4.
-- Xie Yu


Hang Seng opens slightly down, while Shanghai is a bit up 

Xiaomi (1810 HK) is trading higher after its repurchase announcement.
The stock is trading 5.3 per cent higher at HK$8.8 in Hong Kong now.
-- Xie Yu


Xiaomi soars on repurchase announcement

Hunan Zhenghong Science and Technology Develop  (000702 CH), a company specializing in animal feed, hit the daily limit up of 10 per cent, ending at 6.9 yuan.
Tech-bank Food (002124 CH ) is up by 5.3 per cent, to 18.5 yuan. Shandong Longda Meat (002726 CH) is up by 4.5 per cent to 10 yuan.
-- Xie Yu


Pork-related stocks trading high in China

MTR (66 HK) is seeing some bargain hunting this morning.
Its shares are up 1.6 per cent to HK$44.7, after being pummeled by ongoing protests.
Shares of the owner and operator of the city's subway system closed down over the past three consecutive trading sessions, including a 3 per cent drop on Monday. The stock is down 21 per cent from a high on July 18 of HK$55.70. 
But, in a new note, Bloomberg Intelligence analysts warn of risks ahead for MTR.
"MTR's profit faces serious risks amid escalating protests in Hong Kong," they wrote. "Extended station closures, rail line suspension, and facilities damage, as happened during protests over the weekend, dissuade passengers and hamper access to in-station shops and adjacent shopping malls. Damage repair and potential spending on safety measure could also elevate costs."
The analysts earlier said that the MTR may get only a modest boost in passenger traffic due to protest-related road blockages, because the major events happen on the weekend. In the 2014 Umbrella Movement, when roads in central business and retail districts were blocked for two and a half months, MTR's traffic grew 8.8 per cent in the fourth quarter, versus a 10-year annual average of 3.3 per cent, the BI analysts wrote.
 

-- Deb Price 
 


Bargain hunters boost MTR shares 

5G tech-related stocks are seeing gains in China.
Eoptolink Technology (300502 CH) is up by 9.5 per cent to 34.5 yuan. Datang Telecom Technology (600198CH) hit the daily 10 per cent limit, ending up at 11.7 yuan.
-- Xie Yu


5G stocks gaining in China

Nuclear power plant related stocks are trading higher in China.
Harbin Zhongfei New Technology (300489 CH) is trading 5.7 per cent higher at 20.3 yuan in Shenzhen. Shenzhen Woer Heat-Shrinkable Material (002130CH) is up by 2.1 per cent to 4.9 yuan.
China released the first white paper on nuclear safety today. It said China was dedicated to strengthen nuclear safety through government guidance, industry implementation and extensive public participation.
-- Xie Yu


Nuclear stocks trading up in China on new report of Beijing's dedication

Beijing Enlight Media (300251CH) shed 3.3 per cent to 8.8 yuan in Shenzhen.
Its second largest shareholder, Hangzhou Ali Venture Capital, will sell up to 58.7 million shares in the next half year of its Enlight Media stake, Enlight media said in a Shenzhen stock exchange filing.
Ali Venture is affiliated with Alibaba Group, which owns the South China Morning Post. It held 8.8 per cent stake of Enlight Media as of Monday.
As of Monday's close, the share price of Enlight had surged by more than 11 per cent since late July, after an animated blockbuster Ne Zha produced by the company hit the Chinese movie market.
-- Xie Yu


Beijing Enlight Media falls on announcement of possible stake sale by big shareholder

The Shanghai Composite Index closed 0.05 per cent lower at 2,922.5 at the lunch break.
The Shenzhen Component Index added 0.4 per cent to 9,603.8.
-- Xie Yu


China benchmarks mixed at lunch break 

Jiangsu Yanghe Brewery (002304 CH) — maker of premium baijiu that it pitches as being more mellow than its rivals — is undervalued and has an attractive long-term story for investors, says Allen Cheng, an analyst of Chinese consumer staples at Morningstar.
The liquor maker is located in Jiangsu province, where baijiu has been made from the local waters for 1,300 years. It has been expanding its turf outside of the province, and it is this effort that Cheng says will pay off.
“The growth out of Jiangsu province — what they call the ‘new Jiangsu market' —   will continue to increase, and with a much better product mix outside of Jiangsu. They can actually grow their business outside of Jiangsu with their premium products,” he said in an interview.
These include the Blue Classic series products, such as super premium Blue of Dream and premium Blue of Sky. In its annual report for 2018 released in April, the company said its Blue Classic series accounted for 70 to 75 per cent of sales last year. It’s one of the biggest liquor companies in China, with 8,000 distributors, and Morningstar gives it a top “wide moat” rating, which means the global research and ratings service considers it to have competitive advantages that will last more than 20 years.
On Friday, Jiangsu Yanghe posted worse than expected results in the first half of the year. Revenue growth was 10 per cent lower that the company's 12 per cent guidance, with second quarter sales growth slowing to 2.1 per cent from 14.2 per cent in the first quarter. 
In a new note, Cheng calls this "a temporary headwind" due to inventory destocking  in its home province since May, "as the company optimized its product porfolios to respond to the growing demand for premium liquors." 
Sales in Jiangsu province grew only 2 per cent year-on-year in the first half, but outside grew 18 per cent. That means in the first half, the non-Jiangsu market made up 49.5 per cent of the company's total, versus 46 per cent a year ago, Cheng notes.
"On the positive side, gross margin improved in the second quarter, up 2.8 percentage points compared with a year ago, on the back of better price/mix. High-end Dream Blue liquor had strong sales growth of more than 20%, particularly in non-Jiangsu markets (Henan, Shandong, Anhui, and Zhejiang)."
The stock was trading at 133.58 yuan per share on July 2, but it has steeply fallen since, with bears warning that it could be hurt by China’s economic slowdown and the fierce competition for premium drinkers in the baijiu market.
The stock’s fair value is 140 yuan per share, says Cheng, who has a “buy” rating on it.
It closed Monday at 111.98 yuan. At the lunch break, it was down by 0.44 per cent, at 108.91 yuan. 
Of analysts tracked by Bloomberg, 25 call it a buy, two a hold and one a sell, with a consensus price target of 136.52 yuan.
“The market is looking too much at local sales rather than outside the province,” says Cheng, who is well-known in analyst circles because he is the only analyst tracking Kweichow Moutai (600519 CH) with a sell recommendation.
As the US-China trade war drags on, analysts are pointing to Chinese consumer staples as an important sector for investors to look at because they market primarily to Chinese consumers. However, for buyers on the Stock Connect, where Jiangsu Yanghe trades, the weakening yuan — which now many analysts predict will weaken further — can bite into profits in currency conversion.
According to China’s National Bureau of Statistic, the total output of liquor enterprises in 2018 was 8,712 thousand litres, up by 3.14 per cent year on year. The accumulated sales revenue reached 536.3 billion yuan, up 12.86 year on year. The cumulative profit of the liquor industry reached 125 billion yuan, up 29.98 percent year on year.


-- Deb Price


Jiangsu Yanghe Brewery is undervalued and has 20 per cent upside, says Allen Cheng of Morningstar

Meitu (1357 HK), a Chinese app specializing in photo editing, has sunk to a record low in Hong Kong, after posting a poor interim report last Friday.
The company is trading 4.7 per cent lower at HK$1.82, down by about 78 per cent from its IPO price at HK$8.5.
Credit Suisse last week cut the target price of the company to HK$2 from HK$4.1, after the company reported losses of 258 million yuan for the first six months.
-- Xie Yu


Photo editing app maker Meitu sinks to record low  

The Hang Seng index closed for the lunch break at 25,601,7, lower by 0.1 per cent.
-- Xie Yu


Hang Seng Index closes down by 0.1 per cent

Hang Seng Index stays flat as afternoon trading resumes.
It is now at 25,594.5, down 0.1 per cent.
-- Xie Yu


Hang Seng trading down a bit after break

Hong Kong-focused investors looking for guidance from Forbes’ top-performing listed companies in the Asia-Pacific region may wish to think again.
Of the 21 Hong Kong-listed companies singled out by the financial publication as top performers, just five managed share price gains over the past year.
The inaugural “Best Over a Billion” list, released on Thursday, consists of the region’s top 200 companies with revenues of over US$1 billion.
After eliminating companies from the initial shortlist of 3,200 that had endured falls in revenue or profit, large debts, and “those with glaring governance or legal problems”, Forbes then ranked them with a series of metrics that included operating income growth, return on capital and five-year sales averages.
Hong Kong’s stock market has endured a rough year, with the US-China trade war worries and violent protests in the city spooking markets. Yet, the average loss for the 21 Hong Kong companies in the list was 12.68 per cent in the 12 months to August 29, against the Hang Seng Index decline of 7.17 per cent over the same period.
The two worst performing shares on the list from Hong Kong were Johnson Electric Holdings (179 HK), which has seen its shares drop nearly 43 per cent in the past year, and Lee and Man Paper Manufacturing (2314 HK), which shed nearly 44 per cent.
Read full story by Ryan Swift here. 


Top Hong Kong-listed companies on Forbes list doing worse than Hang Seng

Li & Fung (494 HK) tumbled by 3.37 per cent to 86 HK cents, touching its lowest level in 14 years.
The stock price has plunged by 30.9 year to date, weighed down by bleak export trade business amid the trade war and Hong Kong's social unrest.
-- Xie Yu


Li & Fung tumbles 3.37 per cent -- touching lowest level in 14 years

The Hang Seng Index is being weighed down by consumer staples, while information technology stocks are rallying.
Sunny Optical Technology Group (2382 HK) is the top gainer in the afternoon, up 3.3 per cent to HK$112.80, while AAC Technologies Holdings (2018 HK), the maker of miniaturized components like speakers and microphones, is up 0.6 per cent at HK$34.20.
Sands China (1928 HK) leads among Macau casino stocks, gaining 1.6 per cent gain to HK$35.40. 
Gambling revenue fell 8.6 per cent in Macau in August, which was the biggest monthly drop this year, according to the city's gaming bureau.  That was the second month of declines, and Monday, when the data was released, casino stocks fell.
Analysts blame the US-China trade war, a fall-off among "big whale" gamblers, and the Hong Kong protests for the decline. (Here's a feature for investors on Macau casino stocks.)
Of analysts tracked by Bloomberg, 20 rate Sands China a buy, seven a hold, and none a sell.
Others of note, MTR (66 HK) is trading up 0.8 per cent at HK$44.35, putting it on track to snap three consecutive sessions of losses.
The afternoon's top loser is China Mengniu Dairy (2319 HK), which is down 3.2 per cent to HK$30.25. It is up 25 per cent year to date.
The Hang Seng is trading down 0.32 per cent at 25,545.65.
 

 
-- Deb Price 
 


Hang Seng weighed down by consumer staples, while IT, Sands China see gains

Distillers, airlines and airport operators are weighing down the Shanghai Composite Index.
Anhui Kouzi Distillery (603589 CH) is trading lower by 4.5 per cent lower at 63.59 yuan. Kweichow Moutai (600519 CH) is trading 0.5 per cent lower at 1,132.88 yuan.
Juneyao Airlines (603885 CH), a Shanghai based budget carrier, is trading 2.5 per cent at 12.3 yuan.
The Shanghai Composite Index is down 0.1 per cent, at 2,921.
-- Xie Yu


Distillers, airlines weighing on Shanghai Composite 

State-owned financial chips are weighing on the Hang Seng Index in the afternoon session.
China Life (2628 HK) is trading 0.6 per cent lower at HK$18.06. Bank of China (3988 HK) is lower by 0.7 per cent at HK$2.98. ICBC (1398 HK) is lower by 0.2 per cent at HK$4.94. Bank of China Hong Kong (2388HK) is down 1.2 per cent to HK$25.6. China Construction Bank (939 HK) is trading lower by 0.7 per cent at HK$5.77.
-- Xie Yu


State-owned financial chips trading down

The Chinese A share market closed higher, supported by strong performance by telecommunications, electronics and nuclear energy stocks.
The Shanghai Composite Index added 0.2 per cent to close at 2,930.2.
The Shenzhen Component Index edged up by 0.7 per cent to close at 9,633.7. And the ChiNext Index rose 0.5 per cent to 1660.4.
-- Xie Yu


China stocks get boost from telecom, electronics, nuclear stocks 

Cathay Pacific (293 HK) is trading down 0.6 per cent at HK$10.12, as HKET news outlet reported new CEO Augustus Tang Kin-wing said in an internal letter that income in August had been hit hard.
Tang said the booking of tickets had been weaker than previous "shoulder" seasons between peak and off peak, and the airline would take steps to balance its capacity, return rate and flight carrying rate, HKET reported.
Hong Kong's flag carrier got sucked into the protest storm after demonstrators disrupted air travel on August 12-13. It found itself between China’s aviation regulator and its unionised crew, and it saw its brand hurt among  all-important mainland Chinese travellers.
Separately, it has had to deal with new bad press after it found flights with depleted oxygen bottles, which are used by crew in the event of emergency depressurisation. Dozens of cabin crew have been suspended during an investigation over the security issue.

 
-- Deb Price and Xie Yu


Cathay stock slips as CEO says in internal memo that August income was hard hit

The Hang Seng Index closed 0.4 per cent lower at 25,527.85. Consumer staples and China financials weighed on the benchmark in the afternoon.
MTR (66 HK) gained 1.1 per cent to HK$44.5.
"MTR is attractive for long-term investors, but the share price is being driven by sentiment in the short term as it is still in the centre of recent conflicts," said Alan Li, portfolio manager at Atta Capital.
Cathay Pacific (293 HK) ended down 0.2 per cent to HK$10.16.
"Cathay Pacific is being blamed by both sides and sees no sign of a turnaround in September. It's not a good entry time, even though 0.6 times Price to Book ratio is quite attractive," Li said.
"The trade war and (interest) rate policy are still the main drivers of the market," he added.
He said investors should look at pharmaceuticals and real estate management. Education stocks "give a good bottom fishing opportunity."
-- Xie Yu and Deb Price
 


MTR gains, while Cathay Pacific slips

MTR (66 HK) is definitely cheap right now but expect it to be volatile, said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.
"MTR is cheap now, given its sharp correction. Frankly, it has stable income from Hong Kong transport operations. And in the coming two to three years, there will be billions of USD of revenue from property development that can be booked into account.
"However, as investors continue to be concerned about the Hong Kong economy and political issues, MTR stock price will remain volatile," he said.
Meanwhile, Wen said Cathay (293 HK) was weighed down by the CEO's internal comment that August bookings were very down.
"I believe the worst is over (for Cathay). But just like MTR, it is one of the victims of Hong Kong political unrest," he said.
"I worry that the Hang Seng Index may break through 25,000 or even 24,000 in coming months as analysts may start to trim down their earnings forecasts," he said.
The Hang Seng's recent high was 30,157.49 on April 9. It would enter a bear market if it drops to 24,125.992, which would be a 20 per cent drop from then. 
The Hang Seng closed down 0.39 per cent today to 25,527.85. The Hang Seng would need to lose another 5.5 per cent to get there.
-- Deb Price
 
