Company profile
EQUITIES HONG KONG STRATEGY
INSTITUTIONAL RESEARCH: TRADING PLACES
DATE MONDAY AUG 3, 2015
QUAM PULSE China Plans Urban Utilities Tunnels (China Daily)– China is planning to establish a network of urban tunnels to hold pipelines for public utilities ranging from utilities to communications to water by 2020. The nationwide project will start soon, and is likely to th be written into China’s 13 Five-Year Plan (2016-2020) for development, which is set to be discussed in October, according to the Vice Minister of Housing and Urban-Rural Development (MHURD) Lu Kehua. Authorities will try to attract private investments for the network’s construction and operation. Better urban underground infrastructure will stimulate investments, improve the supply of public goods and drive urbanization. The State Council called for a number of tunnels to be opened nationwide as demonstrations, and for overhead power lines to be replaced by underground cables. The MHURD and the MoF have jointly chosen 10 pilot cities, including northeastern Shenyang and Harbin, to bore almost 400 km of tunnels within three years. Total investment will reach RMB35.1bn. 69 cities have started boring the required tunnels this year, with a combined length reaching ~1,000 km, and a total investment of ~RMB88bn. Our take: We believe the above policy is favorable to pipe and pipe fittings companies in China, such as China Lesso (2128 HK); over 40% of its pipe products are used in water supply and ~20% in power supply and telecommunications. A nationwide establishment of urban tunnels will boost the demand for China Lesso’s pipe and pipe fittings business. It currently trades at 8x P/E for 2015, according to Bloomberg consensus.
HSI TOP MOVERS Leaders Ticker GALAXY ENTER SANDS CHINA POWER ASSETS CHINA UNICOM CKH HOLDINGS
Laggers % 5.62 4.26 3.11 2.43 2.4
Ticker LENOVO GROUP LI & FUNG LT CATHAY PAC A MENGNIU DAIR BELLE INTL
INDEX
1D Chg
1D % Chg
24636.28 11131.68 3816.70 8665.34 2030.16 3202.50 1723.14 28124.26 8535.95
138.30 -5.65 1.29 13.85 11.13 -47.02 23.22 418.91 114.15
0.56 -0.05 0.03 0.16 0.55 -1.45 1.37 1.51 1.36
1435.49 4802.53 7550.00 5699.16
18.00 90.04 39.61 29.64
1.27 1.91 0.53 0.52
Asia HSI HSCEI SHSZ300 TWSE KOSPI FSSTI KLCI SENSEX NIFTY SET JCI PCOMP AS51
COMMODITIES
QUAM RESEARCH Baguio Green (1397 HK, Current Price: HK$1.27, Rating: BUY, TP: HK$1.50) “Foray into China” – Baguio announced last week that it has signed a MOU with a partner for penetrating into the PRC market in six biogas multipurpose utilization and organic fertilizer recycling projects in Shandong, Henan, Hebei and Guangdong provinces. The projects involve processing livestock manure collected from large farms to produce biogas and natural gas, which in turn can generate electricity. The residues from the process will be used as organic fertilizer for growing animal feed in farms. We believe the project is a significant step for Baguio to speed up its expansion, although detailed terms and financial impact to Baguio of the project are still subject to the signing of formal agreement and completion of due diligence exercise which will be within 6 months of the date of the MOU. We reiterate our BUY rating. Analyst: Jennifer So +852 2847 2222
CHINA TAKEAWAYS
% -2.66 -2.60 -1.93 -1.82 -1.59
Close
1D % Chg YTD % Chg
Energy WTI Brent Natural Gas Gasoline
47.64 52.65 2.78 182.65
-1.81 -1.24 0.29 -0.08
-17.15 -17.11 -7.80 5.73
236.60 1080.60 14.57 973.80
-0.46 -0.75 -1.26 -1.61
-16.32 -8.76 -7.28 -19.39
Corn Wheat Soybeans Coffee Sugar Cotton
385.00 499.25 950.50 125.00 11.28 63.38
0.33 0.55 0.05 0.08 0.09 -0.27
-8.55 -17.45 -5.47 -28.24 -28.02 -1.61
Baltic Dry
1100.00
-0.36
40.66
Metals Copper Gold (Spot) Silver (Spot) Platinum (Spot)
Agriculture
HSI Daily
China Considers Limiting Third-party Online Payments– China’s central bank has proposed limiting the size of transactions through third-party online payment systems like Alipay, to ensure security for consumers’ information and money. Under the proposal released by the PBOC last Friday, the amount shoppers would be able to spend through third-party payment per day may be limited to RMB1,000-5,000. While platforms that have both digital certification and signature qualification checks will be exempted from restrictions, the limit would be set at RMB1,000 per day if the platform has only one qualification check. Citadel’s Account in China Restricted from Trading – According to Sina Finance, U.S. hedge fund Citadel LLC said that their account managed by Guosen Futures Ltd. – Citadel (Shanghai) Trading Ltd had its trading on the Shenzhen Stock Exchange suspended, while they continue to operate normally from their offices. The Shanghai and Shenzhen bourses has launched a probe into accounts with frequent trading and frequent cancelled orders, and have restricted trading on 24 stock accounts.
Institutional Research Team [email protected] Jennifer So, Head of Research
+852 2971-5433
Christopher Ho, Analyst
+852 2971-5436
1
China to Impose Export Control on Some Drones and Computers – China will impose export control on some drones and high performance computers starting on Aug 15, according to an announcement published by the Ministry of Commerce and the General Administration of Customs. Companies need to apply for permits from the related commerce department under the State Council in order to export some drones and other listed commodities. China to Expand Medical Insurance for Major Illnesses – China will expand medical insurance to cover all critical illnesses for all urban and rural residents by the end of the year, the cabinet said on Sunday. The State Council said 50% of the medical costs will be covered by insurance in a bid to more effectively reduce the burden of medical expenses, in a statement posted on the government’s website. Online Lending Turnover Up 25% MoM in July – P2P online lending turnover amounted to RMB85.5bn in July, having increased by 25.1% MoM and 3.8x YoY, according to the latest data released by wangdaizhijia.com. Online lending turnover in Beijing has surpassed that of Guangdong, amounting to RMb24.3bn. The outstanding loan amount of online lending reached RMB239.2bn in July, having risen 14.6% MoM and 4.6x YoY.
QUAM INSTITUTIONAL SALES
STANLEY NG
Sales Director
+852 2217 2857
GUY STILLE
Executive Director
+852 2217 2853
[email protected] [email protected]
If you w ant to trade w ith us, please feel free to contact our institutional sales team above 18/F China Building, 29 Queen's Road Central, Hong Kong
Disclaimer and Risk Statement This document is published by Quam Securities Company Limited (“Quam Securities”), a licensed corporation (central entity num ber AAC557) regulated by the Securities and Futures Commission in Hong Kong. This document is for distribution in Hong Kong only to persons who are “Professional Investors” as defined in Part 1 of Schedule 1 of Securities and Futures Ordinance (Cap 571) of Hong Kong and any rules made thereunder. This document is not intended for distribution to or use by, any person or entity who is a citizen or resident of any jurisdiction where such distribution or use would be contrary to applicable law or regulation within such jurisdiction. This document does not constitute an offer or a solicitation of an offer to buy or sell any securities. This document is circulated to addresses solely and may not be reproduced or redistributed to any other person or published, in whole or in part, for any purpose. The research is based on information obtained from sources believed to be reliable, but Quam Securities does not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without prior notice. Any recommendation does not have regard to specific investment objectives, financial situation and particular needs of any specific addressee. Quam Securities accepts no liability whatsoever for any direct or consequenti al loss arising from any use of this document. Quam Securities and its affiliates as well as persons associated with any of them from time to time may or may not have interests in the securities mentioned in this document. The prices of securities may move up or down, and past performance is not an indication of future performance. Investors shall consider seeking separate legal or financial advice before making investment decisions
2
INSTITUTIONAL RESEARCH: TRADING PLACES
DATE MONDAY AUG 3, 2015
QUAM PULSE China Plans Urban Utilities Tunnels (China Daily)– China is planning to establish a network of urban tunnels to hold pipelines for public utilities ranging from utilities to communications to water by 2020. The nationwide project will start soon, and is likely to th be written into China’s 13 Five-Year Plan (2016-2020) for development, which is set to be discussed in October, according to the Vice Minister of Housing and Urban-Rural Development (MHURD) Lu Kehua. Authorities will try to attract private investments for the network’s construction and operation. Better urban underground infrastructure will stimulate investments, improve the supply of public goods and drive urbanization. The State Council called for a number of tunnels to be opened nationwide as demonstrations, and for overhead power lines to be replaced by underground cables. The MHURD and the MoF have jointly chosen 10 pilot cities, including northeastern Shenyang and Harbin, to bore almost 400 km of tunnels within three years. Total investment will reach RMB35.1bn. 69 cities have started boring the required tunnels this year, with a combined length reaching ~1,000 km, and a total investment of ~RMB88bn. Our take: We believe the above policy is favorable to pipe and pipe fittings companies in China, such as China Lesso (2128 HK); over 40% of its pipe products are used in water supply and ~20% in power supply and telecommunications. A nationwide establishment of urban tunnels will boost the demand for China Lesso’s pipe and pipe fittings business. It currently trades at 8x P/E for 2015, according to Bloomberg consensus.
HSI TOP MOVERS Leaders Ticker GALAXY ENTER SANDS CHINA POWER ASSETS CHINA UNICOM CKH HOLDINGS
Laggers % 5.62 4.26 3.11 2.43 2.4
Ticker LENOVO GROUP LI & FUNG LT CATHAY PAC A MENGNIU DAIR BELLE INTL
INDEX
1D Chg
1D % Chg
24636.28 11131.68 3816.70 8665.34 2030.16 3202.50 1723.14 28124.26 8535.95
138.30 -5.65 1.29 13.85 11.13 -47.02 23.22 418.91 114.15
0.56 -0.05 0.03 0.16 0.55 -1.45 1.37 1.51 1.36
1435.49 4802.53 7550.00 5699.16
18.00 90.04 39.61 29.64
1.27 1.91 0.53 0.52
Asia HSI HSCEI SHSZ300 TWSE KOSPI FSSTI KLCI SENSEX NIFTY SET JCI PCOMP AS51
COMMODITIES
QUAM RESEARCH Baguio Green (1397 HK, Current Price: HK$1.27, Rating: BUY, TP: HK$1.50) “Foray into China” – Baguio announced last week that it has signed a MOU with a partner for penetrating into the PRC market in six biogas multipurpose utilization and organic fertilizer recycling projects in Shandong, Henan, Hebei and Guangdong provinces. The projects involve processing livestock manure collected from large farms to produce biogas and natural gas, which in turn can generate electricity. The residues from the process will be used as organic fertilizer for growing animal feed in farms. We believe the project is a significant step for Baguio to speed up its expansion, although detailed terms and financial impact to Baguio of the project are still subject to the signing of formal agreement and completion of due diligence exercise which will be within 6 months of the date of the MOU. We reiterate our BUY rating. Analyst: Jennifer So +852 2847 2222
CHINA TAKEAWAYS
% -2.66 -2.60 -1.93 -1.82 -1.59
Close
1D % Chg YTD % Chg
Energy WTI Brent Natural Gas Gasoline
47.64 52.65 2.78 182.65
-1.81 -1.24 0.29 -0.08
-17.15 -17.11 -7.80 5.73
236.60 1080.60 14.57 973.80
-0.46 -0.75 -1.26 -1.61
-16.32 -8.76 -7.28 -19.39
Corn Wheat Soybeans Coffee Sugar Cotton
385.00 499.25 950.50 125.00 11.28 63.38
0.33 0.55 0.05 0.08 0.09 -0.27
-8.55 -17.45 -5.47 -28.24 -28.02 -1.61
Baltic Dry
1100.00
-0.36
40.66
Metals Copper Gold (Spot) Silver (Spot) Platinum (Spot)
Agriculture
HSI Daily
China Considers Limiting Third-party Online Payments– China’s central bank has proposed limiting the size of transactions through third-party online payment systems like Alipay, to ensure security for consumers’ information and money. Under the proposal released by the PBOC last Friday, the amount shoppers would be able to spend through third-party payment per day may be limited to RMB1,000-5,000. While platforms that have both digital certification and signature qualification checks will be exempted from restrictions, the limit would be set at RMB1,000 per day if the platform has only one qualification check. Citadel’s Account in China Restricted from Trading – According to Sina Finance, U.S. hedge fund Citadel LLC said that their account managed by Guosen Futures Ltd. – Citadel (Shanghai) Trading Ltd had its trading on the Shenzhen Stock Exchange suspended, while they continue to operate normally from their offices. The Shanghai and Shenzhen bourses has launched a probe into accounts with frequent trading and frequent cancelled orders, and have restricted trading on 24 stock accounts.
Institutional Research Team [email protected] Jennifer So, Head of Research
+852 2971-5433
Christopher Ho, Analyst
+852 2971-5436
1
China to Impose Export Control on Some Drones and Computers – China will impose export control on some drones and high performance computers starting on Aug 15, according to an announcement published by the Ministry of Commerce and the General Administration of Customs. Companies need to apply for permits from the related commerce department under the State Council in order to export some drones and other listed commodities. China to Expand Medical Insurance for Major Illnesses – China will expand medical insurance to cover all critical illnesses for all urban and rural residents by the end of the year, the cabinet said on Sunday. The State Council said 50% of the medical costs will be covered by insurance in a bid to more effectively reduce the burden of medical expenses, in a statement posted on the government’s website. Online Lending Turnover Up 25% MoM in July – P2P online lending turnover amounted to RMB85.5bn in July, having increased by 25.1% MoM and 3.8x YoY, according to the latest data released by wangdaizhijia.com. Online lending turnover in Beijing has surpassed that of Guangdong, amounting to RMb24.3bn. The outstanding loan amount of online lending reached RMB239.2bn in July, having risen 14.6% MoM and 4.6x YoY.
QUAM INSTITUTIONAL SALES
STANLEY NG
Sales Director
+852 2217 2857
GUY STILLE
Executive Director
+852 2217 2853
[email protected] [email protected]
If you w ant to trade w ith us, please feel free to contact our institutional sales team above 18/F China Building, 29 Queen's Road Central, Hong Kong
Disclaimer and Risk Statement This document is published by Quam Securities Company Limited (“Quam Securities”), a licensed corporation (central entity num ber AAC557) regulated by the Securities and Futures Commission in Hong Kong. This document is for distribution in Hong Kong only to persons who are “Professional Investors” as defined in Part 1 of Schedule 1 of Securities and Futures Ordinance (Cap 571) of Hong Kong and any rules made thereunder. This document is not intended for distribution to or use by, any person or entity who is a citizen or resident of any jurisdiction where such distribution or use would be contrary to applicable law or regulation within such jurisdiction. This document does not constitute an offer or a solicitation of an offer to buy or sell any securities. This document is circulated to addresses solely and may not be reproduced or redistributed to any other person or published, in whole or in part, for any purpose. The research is based on information obtained from sources believed to be reliable, but Quam Securities does not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without prior notice. Any recommendation does not have regard to specific investment objectives, financial situation and particular needs of any specific addressee. Quam Securities accepts no liability whatsoever for any direct or consequenti al loss arising from any use of this document. Quam Securities and its affiliates as well as persons associated with any of them from time to time may or may not have interests in the securities mentioned in this document. The prices of securities may move up or down, and past performance is not an indication of future performance. Investors shall consider seeking separate legal or financial advice before making investment decisions
2
