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Good day, traders, and TGIF ­­—
Check out the day's action below. Please shoot any feedback or questions to deb.price@scmp.com .
— Zhang Shidong in Shanghai and Deb Price in Hong Kong 
 


Hong Kong and mainland China stocks finish year with world-leading gains

China’s Zhipu AI launches US$560 million share sale as Hong Kong’s IPO tech race heats up

Hong Kong stocks inch up on last full trading day of year as yuan eclipses 31-month high

Insilico Medicine leads 6 Hong Kong IPOs, capping banner year for fundraising

Stocks

Stocks Blog:  Finally, markets perk up, as Sinopharm and Poly Developments jump but MTR slides

Runners in the 10K event of the 2019 Standard Chartered Hong Kong Marathon held on February 17. Photo: Felix Wong

The bull sculpture at Exchange Square in Hong Kong. Photo: David Wong


Business

Markets

Sinopharm gets upgrade to outperform by Credit Suisse
MTR drops by most in 7 months on 1H provision


Shanghai ends ahead for first time in four days. Hang Seng posts 1 per cent gain. 


China markets

Hong Kong stock exchange

Live

* Overnight markets/ What futures foretell
  -- Overnight in US markets, the S&P 500 gained 0.4 per cent, the Nasdaq rose 0.3 per cent, and the Dow Industrials was little changed.
 -- Hong Kong futures were 0.6 per cent higher, while the China A50 futures also climbed by that amount.
* IPO debuts: Grace Fabric Technology (603256 CH) will start trading in Shanghai today. The much-heralded Science and Technology Innovation Board, the Star market, will begin next Monday, with 25 companies to debut simultaneously.
* Economic statistics/Central Bank action: nothing major
* Corporate events: earnings, meetings, news conferences
-- Hangzhou Hikvision Digital Technology (002415 CH) is due to release its first-half earnings report today. Second-quarter earnings probably increased 13 per cent from a year earlier, according to Bloomberg data. Net income dropped 15 per cent for the preceding three-month period.
Good Reads: China's 5G network investments will grow rapidly, eclipsing buildout by North America, reports Li Tao.


Morning guidance 

The cancellation of Budweiser Brewing Company APAC’s mega flotation has hurt more than just Hong Kong’s global listings ambitions. Retail investors, who had borrowed a combined HK$38 billion (US$4.8 billion) for the initial public offering, have lost thousands of dollars in interest payments, an issue that has once again highlighted the city’s lengthy listings process.
The investors will have to bear the cost, stockbrokers said, after brewing giant Anheuser-Busch InBev scrapped the US$9.8 billion IPO
 of its Asia unit on Saturday, about a week before the shares were to debut on the Hong Kong stock exchange.
The listing would have been the largest globally this year and would have boosted the city’s chances of reclaiming the crown of the world’s top IPO market.
At an interest rate of between 3.8 per cent and 5 per cent, the investors will have to collectively pay HK$28 million to HK$36 million in interest.
Read full story by Enoch Yiu here. 


Axed Budweiser IPO cost investors up to HK$36 million

China’s 5G network investments are predicted to surpass those in North America between 2019 and 2023, as the world’s second largest economy rapidly shifts from 4G to the next-generation mobile technology amid trade tensions with the United States.
Total spending on 5G in China will be “more than twice the size” of North America’s next-generation network investments over that period, according to a report on Wednesday by Dell’Oro Group, without providing these figures. Founded in 1995, US-based Dell’Oro is a leading independent market research firm for the telecommunications industry.
That pace of 5G expenditure in China marks the country’s attempt to move ahead in the global race to roll out ultra-fast, next-generation telecoms networks that will help power the industrial internet, autonomous driving and smart cities.
Initial commercial 5G mobile services have already been rolled out in South Korea, the US, Australia, the UK, Switzerland and Spain. Still, the scale of China’s market is likely to dwarf the combined size of those economies, negating any first-mover advantage.
Read full story by Li Tao here. 
Read story by Yujing Liu with tips about investing in 5G stocks here.
 
 


China's 5G network investments to grow rapidly

China and Hong Kong stocks climbed, buoyed by an increase in risk appetite in Asia trading after a Federal Reserve official said policy makers should act quickly before growth in the US begins to stall.
The comment was widely interpreted as a signal that the US central bank will lower the borrowing costs soon, though a spokesman for the official later said that the remark was not meant to suggest a significant cut in the interest rates by the end of the month.
The Shanghai Composite Index gained 0.7 per cent, while the Hang Seng Index added 1 per cent. Chinese brokerages such as Hongta Securities (601236 CH) and ChinaLin Securities (002945 CH) led the rally before the new technology board starts trading on Monday.
— Zhang Shidong 


China’s stocks open higher, on track to closing higher for first time in four days

MTR (66 HK), the operator of the city’s subway system, slid 2.1 per cent to HK$54.55, poised for its biggest decline since December 10.
The company will make a first-half provision of HK$2.43 billion (US$311 million) for Hung Hom workmanship incidents and First MTR South Western Trains, a unit MTR holds a 30 per cent stake in, according to an exchange filing to the Hong Kong exchange. Provisions are set aside money for an expected loss.
The amount of the provision accounted for about 52 per cent of the profit for MTR’s 2018 first-half net income, it said.
— Zhang Shidong 


MTR drops by most in 7 months on 1H provision

Sinopharm (1099 HK) shot up in morning trading after it was upgraded to outperform from neutral by Credit Suisse, with its target price boosted to HK$35.39 from HK$33.44.
It was up 2.4 per cent to HK$30.15.
The Shanghai-based Sinopharm provides pharmaceutical supply chain services.
Of analysts tracked by Bloomberg, 20 call it a buy, four a hold and two a sell, with a consensus price target of  HK$37.75.
— Deb Price
 


Sinopharm shoots up as Credit Suisse upgrades it to outperform

Poly Developments and Holdings Group (600048 CH) jumped 4.9 per cent to 14.21 yuan in Shanghai after earnings growth at the property developer accelerated in the first half.
In a preliminary earnings statement, the developer said net income for the first six months increased 59 per cent from year earlier, because of higher project margins and increased investment gains. Growth for the first quarter was 23 per cent.
The stock was heading for the biggest gain since March 29.
 

— Zhang Shidong


Poly Developments rises most almost four months on preliminary 1H result

"Although Cathay Pacific's June data continues to highlight that headwinds remain, this was in line with previous monthly data releases and management comments during analyst briefing in June," analysts Andrew Lee and Lois Zhou write in a new note.
"Passenger yields continue to be under pressure, as we believe the company is discounting ticket prices to stimulate demand, while cargo is still facing demand and yield pressures. We estimate CX was still profitable in 1H19 and 2H to be sequentially stronger," they continue.
They put a price target on shares (293 HK) at HK$16.
Shares are trading up 0.65 per cent to HK$12.26.
— Deb Price 


Cathay kept a buy at Jefferies

Coolpad Group (2369 HK), the phone maker that used to be chaired by Jia Yueting, plunged 61 per cent to HK$0.28 in Hong Kong when its shares resumed trading after a two-year suspension.
It halted trading in March 2017 when it announced a delay in publication of financial results, which followed a profit warning. It said at the time its sales had plummeted due to fierce competition in the domestic smartphone market.
— Eugene Tang 
 


Smartphone maker Coolpad plunges 61 per cent after it resumes trading

Shares of Grace Fabric Technology (603256 CH), a producer of fibre optics and high-tech yarns, began trading at 5.32 yuan, a 20 per cent premium to its initial public offering price of 4.43 yuan on the Shanghai stock exchange.
— Eugene Tang


Grace Fabric Technology debuts, with 20 per cent premium to IPO price

Trading in Hong Kong got off to a nice start.
All sectors are up on the Hang Seng Index, with information technology rising the most by nearly 4 per cent.
Of the 50 members of the benchmark, 46 are up, and only four down.
After a string of losing days, oil shares were rallying. China Petroleum (386 HK) rose 2.5 per cent to HK$5.26, CNOOC (883 HK) was up 2.17 per cent to HK$13.16, and PetroChina (857 HK) climbed 1.65 per cent to HK$4.31.
Oil shares have been pounded lately due to high US stockpiles and concerns the continuing US-China trade dispute will dampen demand. Oil futures are down 7 per cent this week, but a four-day losing streak was broken after a U.S. warship downed an Iranian drone. 
Sunny Optical (2382 HK) was the biggest gainer in percentage terms, up 4.65 per cent to HK$89.95. 
Intra-day losers include MTR (66 HK), down 1.89 per cent to HK$54.65, on news it will make a first-half provision of HK$2.43 billion due to setbacks at Hung Hom station and First MTR South Western Trains.
Also Hong Kong Exchange and Clearing (388 HK), which owns and operates the city's stock exchange, was down 0.7 per cent to HK$271 on a downgrade by Goldman Sachs to sell from neutral, over low stock market volumes. The average daily turnover in the past two weeks was at its lowest level since the start of the year, Bloomberg reported from its data. 
The Hang Seng is trading up 1.1 per cent, to 28,777.52.
— Deb Price
  
 


Hang Seng rallying, including battered oil shares 

"I was talking to my peers and we were trying to understand [the market gains today] ... but we don't know,"  said Louis Tse, managing director of VC Asset Management.
"It's not because of the US Fed official's comments talking about a possible interest rate cut [hinting at] a half a per cent cut. That doesn't affect Hong Kong and China," he said, throwing water on one possibility from overnight US news.
Money coming out of Budweiser's aborted initial public offering on the Hong Kong exchange may have contributed to the Hang Seng's gains, Tse said.
"That could drive the [Hong Kong] market higher than 29,000, and will likely test the recent high of 29,070 with enough turnover," Tse said.
The Hang Seng Index is up at the lunch break by 1 per cent to 28,772.46.
For that much of a rise, Tse would have expected a positive development in the US-China trade talks, or a change in political leadership in Hong Kong leading to a withdrawal in the controversial extradition bill.
"This will drive the Hang Seng up, and the property counters up, and retail up," he said of a big change around the protests, which have dampened sales and weighed on sentiment.
But Tse noted the market activity and high turnover could be simply down to "momentum betting".
"In Hong Kong and China, there are much more retail investors than institutional investors. [Some retail investors] just gamble. They jump in without second thought or care for fundamentals."
— Daryl Choo
 


 What's driving the markets today? At least one expert is stumped

It may be too early to cheer that a rebound is under way in China’s stocks market.
While the benchmark Shanghai Composite Index recorded an intraday gain of as much as 1.3 per cent today, the values of shares that have changed hands on the Shanghai bourse was 23 per cent below the 30-day average for this time of the day today, and the same case goes for the smaller Shenzhen exchange, according to Bloomberg.
The sluggish trading volumes signal that there was not much buying interest and the bounce-back could be short-lived.
 

— Zhang Shidong 


Turnovers suggest China stock rebound not convincing

China’s stocks closed higher for the first time in four days on Friday on optimism that the Federal Reserve will cut interest rates to stave off a recession in the world’s largest economy.
The Shanghai Composite Index rose 0.9 per cent to 2,924.20 at the close, snapping a three-day, 1.4 per cent decline. For the week, the gauge was down 0.2 per cent. Brokerages were among the biggest gainers before the start of the trading of the new technology board in Shanghai on Monday. Twenty-five companies will debut on the so-called Star market.
— Zhang Shidong


China’s stocks finish up first time in four days

The ongoing protests sparked by a controversial extradition bill in Hong Kong could weigh on the local stock market’s valuation going forward, according to Jim McCafferty, joint head of Asia-Pacific equity research at Nomura.
“We’ll see an increase in political risk, and that’ll mean the equity risk premium unfortunately to that market will increase, and therefore the value of future cash flows will go down,” McCafferty said during a recent press conference.
“Investors won’t be willing to pay as much for companies listed in Hong Kong because of that political risk,” he said.
The protests started in early June and have spread from the central business district to all corners of the city, as angry citizens shifted their focus from the extradition bill to police brutality and the lack of democracy in Hong Kong.
A new series of demonstrations is set to begin over the weekend, with the pro-establishment camp also scheduled to hold a meeting on Saturday to voice their support for the police.
— Yuijing Liu 


Hong Kong protests to damage stock valuations, Nomura says

It's time to sell and pocket profits rather than buy, says Geo Securities' chief executive Francis Lun.
He is baffled by the run-up in today's Hang Seng Index and Shanghai Composite Index, and thinks speculation on unknowns is behind it. 
"I think the market is hopeful that the central bank might reduce interest rates, or lower the RRR (reserve requirement ratio). The market is betting that the Chinese government will do something to stimulate the economy," he said.
"This is pure speculation, there's no concrete analysis," he said. 
China's central bank said on June 17 that the second phase of a cut in the RRR freed about 100 billion yuan (US$14.44 billion) worth of long term funds in a bid to keep liquidity levels stable and help small- and medium-sized companies weather the slowdown, Reuters reported.
"I think people should sell," Lun said.
"The market will retreat after today unless there is something concrete," he added. "[The Hang Seng] has recently hit 29,000, which is the upper resistance level."
"Across Asia, Korea and Indonesia have cut interest rates, so China may be the next to follow. This is part of a global trend," Lun added, but was quick to stress there was no concrete indication that China will follow suit.
— Daryl Choo


 Sell to pocket profits. Markets aren't on a big rebound, says Francis Lun

Stocks Blog: Finally, markets perk up, as Sinopharm and Poly Developments jump but MTR slides

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}Sinopharm gets upgrade to outperform by Credit Suisse MTR drops by most in 7 months on 1H provision

Sinopharm gets upgrade to outperform by Credit Suisse

MTR drops by most in 7 months on 1H provision