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Deb Price

Snow Xia

Good day, traders --
Hong Kong stocks slipped on growing concerns the trade deal may be delayed over US-China tensions. Meanwhile, China stocks gained.
Check out the day's 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. 
-- Deb Price and Snow Xia 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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Stocks

Hang Seng Index falls on worries about US-China trade deal 

Sa Sa, Hong Kong's largest cosmetics chain, is closing all of its stores in Singapore and cutting 170 jobs as it reels from the anti-government protests and the US-China trade war. Photo: Dickson Lee

Business

Markets

CSPC Pharmaceutical continues to fall
Want Want China rises on positive earnings 


Alibaba (9988 HK) fell again, posting its third straight day of losses. Sa Sa International (178 HK), Hong Kong’s biggest cosmetics retailer, declined after announcing cost cutting measures as it reels from protests, trade war.
 


Hang Seng Index

China stock market

Alibaba

Tencent

Hong Kong protests

Trade war

Sa Sa International Holdings

Kweichow Moutai

Live

Here’s what we are watching this morning:
Friday US markets/ What futures foretell
--The S&P 500 fell 0.9 per cent, the Nasdaq declined 1.1 per cent and the Dow Jones Industrial Average dropped nearly 1 per cent. 
-- Hong Kong futures fell 0.6 per cent, and the FTSE China A50 futures fell 0.1 per cent
IPO debuts: Maider Medical Industry Equipment (688310 CH), Chongqing New Dazheng Property Group (002968 CH), Chison Medical Technologies (688358 CH) 
Economic statistics/Central Bank action:  Nothing major scheduled 
Earnings: No major earnings    


Morning guidance 

Sa Sa International (178 HK), Hong Kong’s biggest cosmetics retailer, will close all its 22 stores in Singapore and cut 170 jobs to save costs as it struggles to stem six years of losses amid months of anti-government protests and US-China trade war.
Attempts to boost sales in recent years by restructuring the local management team and enhancing store display and product mix have been “far from satisfactory,” chairman and chief executive Simon Kwok Siu-ming said in a filing to the stock exchange on Monday. The terminated employees will be compensated according to local employment laws, he added.
Sales in Singapore fell 4.6 per cent to HK$99.4 million (US$12.7 million) in the six months to September 30, the company said, representing 2.8 per cent of the group turnover. At the group level, Sa Sa incurred a HK$36.53 million loss in the period.
The decision to withdraw from the Southeast Asian city suggests the cosmetics chain is conserving its resources for tougher times at home as months of anti-government protests triggered a slump in tourist arrivals from mainland China, a lifeblood of local retailing industry.
Hong Kong’s retail sales plummeted 24.3 per cent in October, the biggest monthly decline on record, the government said on Monday.
Read full story by Lam Ka-sing here.   


Sa Sa to exit Singapore market

Television Broadcasts Limited (0511 HK) has appointed Felix Fong Wo and Belinda Wong Ching Ying as independent non-executive directors, with effect from December 3.
According to a note to the exchange after trading on Monday, Wo is a practicing solicitor in Hong Kong, and consultant and founding partner of Hong Kong law firm King & Wood Mallesons. He is also a non-executive director of other listed companies including Greenland Holdings and Evergreen International Holdings.
Wong sits as chairman and chief executive officer of Starbucks, China.
Meanwhile, include Raymond Or Ching Fai has resigned as non-executive director with effective from January 1, 2020, due to other heavy business commitments, and Cheong Shin Keong will retire from his current role as general manager.
-- Louise Moon    


Changes in TVB’s non-executive directors

Snack producer Want Want China (151 HK) posted positive earnings for the six months ending September 30, in a notice to the stock exchange after trading on Monday.
Net profit rose 18 per cent when compared to the same period last year, to 1.6 billion yuan (HK$1.78 billion), while revenue rose 0.6 per cent to 9.3 billion yuan (HK$10.3 billion).
According to the filing, the company benefited from a decreased in cost of raw materials, and new digital marketing which strengthened the brand image, as well as targeted promotion events relating to the 70th anniversary of China’s National Day.
-- Louise Moon 
   


Want Want China posts positive interim results

Zhang Min, executive director of Investment Holding company Value Convergence (0821 HK) has resigned with effect from December 3.
According to a filing to the Hong Kong stock exchange on Monday evening, there was no disagreement between the board and Zhang, who is resigning due to another “personal commitment”.
-- Louise Moon 


Value Convergence executive director resigns

US President Donald Trump said Monday that a new law authorising the US to sanction Chinese officials over human rights abuses in Hong Kong could complicate his administration’s efforts to secure a trade deal with Beijing.
“It doesn’t make it better,” Trump acknowledged when asked if the Hong Kong Human Rights and Democracy Act – which he signed into law last week – would make a deal with China harder to achieve.
The law requires the US Secretary of State to make an annual certification that the city enjoys sufficient autonomy from the mainland to warrant maintaining the special trade status it enjoys in Washington.
Trump dodged a question on Monday about whether that “phase-one deal” would happen before the end of the year.
“The Chinese are always negotiating,” Trump said. “I’m very happy where we are … But the Chinese want to make a deal. We’ll see what happens.”
Read full story by Owen Churchill here.    


Trump says US support for protesters could complicate trade talks

Hong Kong recorded its biggest retail slump on record in October, it was revealed on Monday, as the city’s finance chief said months of social unrest had caused economic losses of about 2 per cent of GDP.
The government also revealed it was on course for its first budget deficit in 15 years.
The Census and Statistics Department disclosed that retail sales plunged 24.3 per cent to HK$30.1 billion (US$3.86 billion) in October, year on year. For the first 10 months, the decline was 9 per cent against the same period last year.
A government spokesman said it was the largest year-on-year decline for a single month on record, saying the protests had soured consumer sentiment and severely disrupted tourism.
“Ending the violence in the local social incidents and restoring social order are crucial to the creation of an environment for the retail business to recover,” he said.
Read full story by Cannix Yau here.    


Hong Kong recorded its biggest retail slump on record in October

Tunghsu Optoelectronic Technology has failed to make good on a bond – its third in less than a month – as the struggles point to poor corporate governance among Chinese companies.
The maker of electronic display panels, which reported ample cash holdings of more than 18 billion yuan as of September, missed an interest payment on its 1.7 billion yuan (US$241 million) onshore bond due on Monday, according to an exchange filing.
The latest default has cast doubt on whether Tunghsu could meet its obligations on a US$44 million bond maturing in June 2020, after it defaulted two notes totalling 3 billion yuan on November 18.
Read full story by Yujing Liu here.    


Third bond default by Chinese electronics firm within a month points to wider corporate governance issues

The Hang Seng Index fell 1.4 per cent to 26,081.83, as traders worry about whether the US and China can come up with even a partial trade deal.
CSPC Pharmaceutical Group (1093 HK), which plunged 9.7 per cent on Friday, continued to fall this morning, declining 2.1 per cent to HK$17.46. The stock has been hammered over the Chinese government’s negotiated drug prices in which, on average, prices of drugs eligible for reimbursement were cut by 50 per cent. 
Subway operator MTR (66 HK) fell 1.5 per cent to HK$43.25.
Tencent (700 HK) fell 1.4 per cent to HK$328.20.
Meanwhile, Alibaba (9988 HK) fell 2.1 per cent to HK$191.30, putting it on track for its third straight day of losses.
Snack producer Want Want China (151 HK) rose 1.3 per cent to HK$6.79 on positive earnings for the six months ending September 30.
Sa Sa International (178 HK), Hong Kong’s biggest cosmetics retailer, fell 0.6 per cent to HK$1.71 after it announced it will close all its 22 stores in Singapore and cut 170 jobs to save costs.

 
-- Deb Price 


Hang Seng falls 1.4 per cent on trade worries

The Shanghai Index declined 0.4 per cent to 2,864.
Liquor giant Kweichow Moutai (600519 CH) declined 1.2 per cent to 1,119.50 yuan.
Among mainland stocks in additional to Kweichow Moutai that are heavily traded by northbound investors:
-- Jiangsu Hengrui Medicine (600276 CH)  fell 2.1 per cent to 81.98 yuan, continuing to be weighed down by new negotiated drug prices covered under the government’s health insurance plan.
Among sectors, gold-linked stocks rose 1.2 per cent, while auto parts stocks fell 0.56 per cent, according to gauges tracking them.
-- Deb Price    


Shanghai declines; Kweichow Moutai drops 1.2 per cent

Three companies started trading in China today, and two of them shot up at least  20 per cent at the open.
Chongqing New Dazheng Property Group (002968 CH) shot up to 32.11 yuan, 20 per cent higher than the offering price of 26.76 yuan. The company focuses on managing and operating urban public buildings and facilities.
Maider Medical Industry Equipment (688310 CH) shot up to 31.8 yuan, 28.3 per cent higher than the offering price of 24.79 yuan.
Chison Medical Technologies (688358 CH) opened at 52.40 yuan, 3.7 per cent higher than the offering price of 50.53 yuan. Chison focuses on developing and selling ultrasonic medical imaging equipment.
-- Snow Xia


2 of China’s 3 IPOs open with gains of at least 20 per cent

Century Ginwa Retail Holdings (162 HK) soared 58.8 per cent to HK$0.405 after announcing a sale of shares representing 29.24 per cent of the  total ordinary shares.
The operator of department stores and shopping malls in northwest China had halted trading of its shares Monday pending an announcement. It started trading again this morning.
“Purchasers agreed to purchase 336,166,156 ordinary shares in the Company each with a nominal value of HK$0.10 (the “Sale Shares” ) at a consideration of HK$0.2123 per Sale Share, equivalent to an aggregate consideration of HK$71,368,074.90,” it said in an overnight stock exchange filing.
Maritime Century disposed of the shares to Xi’an Qujiang Cultural Financial Holdings and Qujiang Financial Holdings, the filing said. Maritime Century is a company wholly-owned by Ginwa Investments, 92 per cent of which is owned by Wu Yujian, the chairman and executive director of Century Ginwa Retail, according to the filing. 
-- Deb Price   


Century Ginwa Retail soars after announced sale of 29.24 per cent of total shares

Precious metal stocks rose 0.8 per cent, according to a gauge tracking them.
Shandong Zhongrun Investment (000506 CH) rose 2.2 per cent, Chifeng Jilong Gold (600988 CH) rose 1.8 per cent, and Gansu Ronghua Industry Group (600311 CH) rose 1.6 per cent.
-- Snow Xia


Precious metals stocks rally in China

China Overseas Land and Investment (688 HK) and China Resources Land (1109 HK) are on track for their second straight session of gains, after data showed China’s developers saw strong contracted home sales in November.
China Overseas rose 2.8 per cent to HK$27.70, while China Resources Land climbed 1.4 per cent to HK$35.80. That followed gains on Monday of 2.7 per cent and 4.3 per cent, respectively. 
In a new note, Daiwa Capital Markets analysts said they continue to see a challenges ahead for the sector, despite a number of Chinese cities extending supportive property measures since October. 
“While we highlight the possibility of policy fine-tuning and supportive property measures (for qualified individuals) in more cities, we expect the local governments to remain active in managing the property market and maintain their overall property tightening stance in the near term,” they wrote. 
“We continue to anticipate a challenging operating environment for developers and hence recommend a selective approach to investment. We favour property names with steady sales and profitability, growing recurring income, healthy financial positions, as well as those that have been prudent in land acquisitions and have acquired land at reasonable costs through channels other than public auctions,” they added.
Daiwa maintained its neutral call on the sector.
Its picks in the sector are Shimao Property (813 HK), which is flat today at HK$29.45,  China Resources Land, China Overseas Land, Longfor Group (960 HK), also flat at HK$32.90 and Yuexiu Property (123 HK), flat this morning at HK$1.68.
Developers saw an average growth of 5 per cent month-on-month and 43 per cent year-on-year, according to data from CRIC.   
-- Deb Price    


China Resources Land, China Overseas Land on track to extend gains to second session

The 1 per cent fall of Dow Jones overnight and worries about the tensions between China and the US at a time of trade talks created negative sentiment in the Hong Kong stock market, says Kenny Tang Sing-hing, chief executive of Royston Securities.
The Hang Seng has recovered some of its early losses and is now down 0.1 per cent at 26,406.66. 
The Shanghai Index declined 0.1 per cent and the Shenzhen Index dropped 0.3 per cent.
“The [Hang Seng] trading volume is not so high. Most of the traders are holding and waiting to see the market attitude,” said Tang.
The latest official report on retail sales also added pressure to the Hong Kong stocks market, said Tang.
The retail sector in Hong Kong had the biggest monthly fall ever. The estimated value of retail sales in October was HK$ 30.1 billion, down 24.3 per cent from the same month in 2018 and 4.3 per cent higher than expected, according to the Census and Statistics Department of Hong Kong government.
The Hang Seng will be trading at between 26,000 and 27,000 level this week, predicted Tang.
“The market is waiting for the [Hong Kong] government, which is likely to announce stimulus measures to drive internal demand,” Tang added.
At an economic summit held Monday, city leader Carrie Lam noted that the government had already launched three rounds of stimulus measures and would continue to do so, if needed, to help businesses weather the financial storm of protests and the trade war.
-- Snow Xia


Worries about US-China trade war weighing on sentiment, says analyst Kenny Tang

China stocks will start the afternoon trying to dig out of losses.
By morning's close, the Shanghai Composite Index was down 0.11 per cent at 2,872.74.
The Shenzhen Component Index was down 0.27 per cent at 9579.56.
Gainers have been rare earth metals, up 1 per cent, and higher-education stocks. Dragging down the market are animal vaccines, shipping, and digital currency.
Liquor giant Kweichow Moutai (600519 CH) fell 1.1 per cent.
Shanghai Chuangli Group (603312 CH), a coal mining machine supplier, fell by the daily 10 per cent limit.
-- Snow Xia


China stocks slip in morning trading; Kweichow Moutai falls 1.1 per cent

“Investors are worried about the global trade war -- not only US-China,” says Kenny Wen, Everbright Sun Hung Kai Wealth Management strategist.
Overnight, President Donald Trump reinstated tariffs on steel and aluminum from Brazil and Argentina, and US manufacturing data showed continued weakness. 
“US economic data was worse than expectation. That brings pressure on US and Hong Kong stocks. However, we see support at around 26,000 level,” Wen said.
“Investors are waiting on news from trade deal. And, approaching year end, they don’t prefer to hold stocks too long. Rather, they are focusing on short term investment opportunities. It makes the market volatile,” Wen said.
The Hang Seng Index ended the morning session down 0.2 per cent to 26,405.96.
-- Deb Price     


Investors focusing on short term bets, creating volatility, says strategist Kenny Wen

The Hang Seng Index is testing its support level of 26,000, says Alan Li, portfolio manager at Atta Capital.
“HSI may stay over 26,000 and wait to see if China agrees on a trade deal before December 15, when the US is set to impose an additional 15 per cent tariff,” Li said.
The Hang Seng was last below the level on October 10, when it closed at 25,707.93.
Li said traders have “no real faith in the short term.”
That is putting pressure on stocks like Alibaba (9988 HK), which is down 1.4 per cent to HK$192.70, and food delivery giant Meituan Dianping (3690 HK), which has fallen 1.3 per cent to HK$103.30.
 

-- Deb Price    


Hong Kong traders showing ‘no real faith in the short term,’ says analyst Alan Li

Citi, Alibaba’s American depositary shares (ADS) depositor, held 116 million fewer Alibaba ADS (with an estimated value of HK $23 billion) before Alibaba’s listing in Hong Kong, according to the Central Clearing And Settlement System (CCASS) of Hong Kong Stock Exchange. (Alibaba owns the South China Morning Post.)
The ADS are designed and issued for foreign companies listed in the US. Citi, which holds shares in the CCASS system, allows its investors to convert American depositary shares into common shares in Hong Kong.
Citi’s move of holding fewer ADS signals that some US investors have converted their Alibaba ADS into common shares in Hong Kong.
Alibaba (9988 HK) is down 1.3 per cent at HK$192.90, putting it on track to post its third straight session of losses.
-- Snow Xia   


Alibaba’s investors convert US shares into Hong Kong shares

Daiwa Capital Markets reiterated its “outperform” rating on CNOOC (883 HK), China’s dominant offshore oil and gas producer, and kept its 12-month target price at HK$12.90.
“We expect the oil price to remain resilient in the near term as the IPO for Saudi Aramco is still in progress. We expect Saudi Arabia to push for an oil output cut extension during the OPEC meeting on 5-6th December for a higher IPO pricing,” analysts Dennis Ip and Tony Wu write in a new note. 
They maintained their oil price forecast at $65 per barrel for 2019, US$64 per barrel for 2020 and US$65 for 2021.
“CNOOC’s management is optimistic of reaching the high end of its production target for 2019 of c.490 mmboe (about 490 million barrels of oil equivalent). It expects to boost the daily output from 1.3mmboe/d to 2mmboe/d (daily) in 7 years, implying a 6.3% (compound annual growth rate) for its overall production. For 2020-21, the production growth will mainly come from organic growth, while exploration discoveries will contribute to longer-term growth, as per management,” they write. 
CNOOC declined 0.2 per cent to HK$11.34 in afternoon trading. From that price to Daiwa’s target price would be a near 14 per cent gain.
-- Deb Price    


Daiwa Capital reiterates ‘outperform’ rating on CNOOC

China’s state-owned media Global Times tweeted today that China will release an “unreliable entity list” that includes US companies, in response to what Beijing sees as US interference in China’s internal affairs in Xinjiang, where Uighur Muslims have allegedly been abused. 
The US House of Representatives is expected to  vote on the Xinjiang bill overnight after President Donald Trump signed into law legislation supporting the Hong Kong protesters. The Xinjiang bill would impose sanctions against Chinese officials, especially those involved in the work of Xinjiang re-education camps, and ban the export of US goods and services to state agents in Xinjiang.
Beijing’s threat is worrying traders, who are concerned it endangers the trade negotiations under way between the US and China. The key date is December 15, when Trump’s next 15 per cent tariffs on US$160 billion of Chinese goods are set to go into effect. 
Global Times Editor-in-Chief Hu Xijin tweeted, “China is considering to impose visa restrictions on US officials and lawmakers who’ve had odious performance on Xinjiang issue; it might also ban all US diplomatic passport holders from entering Xinjiang.”
While Global Times announced this potential retaliation loudly towards foreigner readers, there has not been any relevant news in the Chinese language on the mainland’s Internet yet.
On Monday, China responded to the US legislation supporting Hong Kong protesters by suspending visits of US military vessels and aircraft to Hong Kong. (Read full story here.) Like the proposed Xinjiang legislation, the Hong Kong Act allows Washington to impose sanctions on officials deemed to have violated human rights in Hong Kong.
The ministry also announced sanctions on five US-based NGOs that Beijing accuses of supporting violent activities in Hong Kong: Human Rights Watch, the National Endowment for Democracy, the National Democratic Institute for International Affairs, the International Republican Institute and Freedom House.
 
Based on what I know, since US Congress plans to pass Xinjiang-related bill, China is considering to impose visa restrictions on US officials and lawmakers who've had odious performance on Xinjiang issue;it might also ban all US diplomatic passport holders from entering Xinjiang.
  — Hu Xijin 胡锡进 (@HuXijin_GT) December 3, 2019
-- Snow Xia   


China threatens to blacklist US companies 

Auto parts stocks in China jumped by the daily 10 per cent limit on the new report on that the proportion of new energy car sales will increase to about 25 percent by 2025.
The report was released by China’s Ministry of Industry and Information Technology.
In 2018, 1.3 million new energy vehicles were sold in China, accounting for 4.6 per cent of total vehicle sales, according to China Association of Automobile Manufacturers.
Harbin VITI Electronic (603023 CH), Nanjing Chervon Auto (603982 CH), Hamaton Automotive Tech (300643 CH), and Shanghai Baolong (603197 CH) jumped 10 per cent.
-- Snow Xia


Auto parts stocks jump in China

China stocks gained.
The Shanghai Composite Index closed at 2884.70, up 0.3 per cent.
The Shenzhen Component Index rose 0.6 percent to 9657.65.
Kweichow Moutai  (600519 CH), heavily traded by northbound investors, fell 1.3 per cent. The investigation into alleged bribery by Wang Chonglin, former deputy general manager of Kweichow Moutai, has just ended and prosecution will start soon.
Most of the sectors closed up, led by the automobile and hydrogen energy.
The losers were voice technology, animal vaccines and steel stocks.
Chinese authorities’ new report on the sales growth of new energy vehicles boosted auto parts and hydrogen energy stocks.
Yangzhou Yaxing Motor Coach (600213 CH), Automotive Tech (300643 CH), Shanghai Baolong (603197 CH), and Beijing Jingcheng Machinery Electric (600860 CH) jumped 10 per cent.
-- Snow Xia


China stocks gain, with auto parts sector boosted by report on expected EV sales growth 

The Hang Seng Index declined 0.2 per cent to 26,391.30, as threats out of China about what it sees as US interference in its domestic affairs weighed on trading sentiment.
Of the 50 constituent members of the index, 21 fell, while 21 gained and eight were unchanged.
CSPC Pharmaceutical Group (1093 HK), which plunged 9.7 per cent on Friday, continued to fall, declining 1.3 per cent to HK$17.60. The stock has been taking a pounding over the Chinese government’s negotiated drug prices in which, on average, prices of drugs eligible for reimbursement were cut by 50 per cent. 
Subway operator MTR (66 HK), a frequent target of ongoing protests, fell 1.1 per cent to HK$43.40.
Chinese Internet giant Tencent (700 HK) slipped 0.6 per cent to HK$331.
Meanwhile, Alibaba (9988 HK) fell 1.5 per cent to HK$192.60, in its third straight session of losses. (Alibaba is the owner of the South China Morning Post.)
Snack producer Want Want China (151 HK) rose 1.6 per cent to HK$6.81 on positive earnings for the six months ending September 30.
Sa Sa International (178 HK), Hong Kong’s biggest cosmetics retailer, fell 1.7 per cent to HK$1.69 after it announced it will close all of its 22 stores in Singapore and cut 170 jobs to save costs.
-- Deb Price 
   


Hang Seng declines; CSPC Pharmaceutical continues to fall

Hang Seng Index falls on worries about US-China trade deal

CSPC Pharmaceutical continues to fall Want Want China rises on positive earnings

CSPC Pharmaceutical continues to fall

Want Want China rises on positive earnings