Quam Pulse
INSTITUTIONAL RESEARCH: TRADING PLACES
DATE THURSDAY JUNE 26, 2014
EQUITIES HONG KONG STRATEGY
QUAM PULSE Reform of Agricultural Subsidy Program (China Daily) - According to China Daily, China has begun the reform of the agricultural subsidy system. Previously, a minimum purchase price for rice and a temporary storage policy for soy and cotton were in place and caused price gaps between domestic agricultural prices and international agricultural prices. Under the new policy, the government will set up a target price for each kind of major agricultural product. Farmers will receive subsidies from the government when the market price is below the target, while low-income groups will receive subsidies when the market price sours. Soy and cotton are the first in line to be implemented within the new system. Our take: We believe direct subsidies to cotton farmers to replace a central reserve of cotton is beneficial to the whole textile industry in China. This will help to lower the huge gap between international and Chinese cotton prices that has existed since 2012. We expect major textile and garment producers to benefit from lower raw material costs, thus further improving their gross profit margins for this year. Key beneficiaries will include Texwinca (321 HK) and Texhong Textile (2678 HK). Texwinca and Texhong Textile are currently trading at a 2014 P/E of 12x and 5.6x.
CHINA TAKEAWAYS Foxconn To Invest In Car Electronics - Foxconn announced that it will invest in new businesses including car electronics and cloud computing as the company chases clients such as Tesla Motors amid slowing sales. It plans to hire at least 5,000 people in its Taipei headquarters to be in charge of R&D. Foxconn is the key manufacturer for Apple’s iPhone. Walmart to Open 40 New Stores in Guangdong – Walmart will focus on the development of Supercentre and Sam’s Club, aiming to open 40 new stores in Guangdong in the coming three to five years, the Senior Vice President of Corporate Affairs at Walmart China said in an investment conference. It is going to open 25 new stores, including 5 Sam’s Clubs, in Guangzhou and its surrounding areas. Currently, Walmart has more than 400 stores in ~170 cities in China. NDRC to Expedite Approval on Nuclear Power Projects – According to CBN, the National Development and Reform Commission(NDRC) stated in a conference on Tuesday that it will expedite approvals on nuclear power projects. In a government conference held on Jun 13, Mr Xi Jinping, the general secretary of China, said that the country will pay close attention to the new nuclear power projects in the eastern coastal areas. According to internal staff from China’s nuclear power enterprises, nuclear projects in Liaoning Dalian, Liaoning Hulu, Shandong Haiyang, Zhejiang Sanmen, Guangdong Lufeng and Shandong Rongcheng will have priority in obtaining approval from the NDRC.
HSI TOP MOVERS Leaders Ticker CHINA RES PO HENDERSON LA LENOVO GROUP CHINA RES EN HUTCHISON WH
Laggers % 2.18 1.55 1.36 1.18 1.15
Ticker PING AN INSU CHINA OVERSE CHINA MERCHA BANK OF COMM BELLE INTERN
% -1.65 -1.46 -1.03 -0.75 -0.71
Close
1D Chg
1D % Chg
22866.70 10180.05 2133.37 9242.16 1981.77 3261.54 1889.55 25299.58 7563.15 1468.49 4838.98 6834.68 3587.55
-13.94 -70.11 -11.45 -4.04 -12.58 -0.49 -2.78 -69.32 -17.05 7.57 -23.26 41.61 -24.98
-0.06 -0.68 -0.53 -0.04 -0.63 -0.02 -0.15 -0.27 -0.22 0.52 -0.48 0.61 -0.69
Close
1D % Chg
YTD % Chg
106.52 113.85 4.53 310.42
0.46 -0.53 -0.04 -0.69
11.42 4.96 9.36 7.33
314.60 1313.67 20.86 1455.85
0.03 -0.35 -0.29 -0.93
-6.54 9.32 7.15 6.19
Corn Wheat Soybeans Coffee Sugar Cotton
439.00 579.75 1227.50 175.35 18.60 76.67
-0.40 -0.17 0.24 -0.51 -0.48 0.24
-2.50 -7.46 8.15 49.68 9.09 -2.24
Baltic Dry
867.00
-2.14
-61.92
Asia HSI HSCEI SHSZ300 TWSE KOSPI FSSTI KLCI SENSEX NIFTY SET JCI PCOMP ASX
COMMODITIES Energy WTI Brent Natural Gas Gasoline
Metals Copper Gold (Spot) Silver (Spot) Platinum (Spot)
Agriculture
Aquila’s Bass Accepts Baosteel and Aurizon Takeover Bid – Aquila Resources cofounder Charles Bass, who holds ~10.7% of Aquila, said on Wednesday he intends to accept a AUD1.4bn takeover offer from China’s Baosteel and Auizon Holdings, Australia media reported. Aquila Chairman Tony Poli, who holds ~28.92% of Aquila, has also said he inteneds to accept the offer. Baosteel and Auizon will gain 50% of the company’s share after the takeover. Huiyuan Juice to Cooperate with Haichang Holdings Ltd – Huiyuan Juice(1886 HK) has signed a strategic cooperation framework agreement with Haichang Holdings Ltd(2255 HK), to sell Huiyuan’s beverage products in Haichang’s theme parks. Haichang Holdings Ltd is the largest ocean themed park operator in China, with six ocean themed 1
parks in Dalian, Qingdao, Tianjin, Wuhan.
Yantai
and
QUAM INSTITUTIONAL BUSINESS UNIT RESEARCH
SALES
JENNIFER SO
+852 2971 5433
STANLEY NG
+852 2217 2857
ANDY CK WONG
+852 2971 5434
GUY STILLE
+852 2217 2853
CHRISTOPHER HO
+852 2971 5436
quam research@quam group.com 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 number 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 consequential 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 docum ent. 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
DATE THURSDAY JUNE 26, 2014
EQUITIES HONG KONG STRATEGY
QUAM PULSE Reform of Agricultural Subsidy Program (China Daily) - According to China Daily, China has begun the reform of the agricultural subsidy system. Previously, a minimum purchase price for rice and a temporary storage policy for soy and cotton were in place and caused price gaps between domestic agricultural prices and international agricultural prices. Under the new policy, the government will set up a target price for each kind of major agricultural product. Farmers will receive subsidies from the government when the market price is below the target, while low-income groups will receive subsidies when the market price sours. Soy and cotton are the first in line to be implemented within the new system. Our take: We believe direct subsidies to cotton farmers to replace a central reserve of cotton is beneficial to the whole textile industry in China. This will help to lower the huge gap between international and Chinese cotton prices that has existed since 2012. We expect major textile and garment producers to benefit from lower raw material costs, thus further improving their gross profit margins for this year. Key beneficiaries will include Texwinca (321 HK) and Texhong Textile (2678 HK). Texwinca and Texhong Textile are currently trading at a 2014 P/E of 12x and 5.6x.
CHINA TAKEAWAYS Foxconn To Invest In Car Electronics - Foxconn announced that it will invest in new businesses including car electronics and cloud computing as the company chases clients such as Tesla Motors amid slowing sales. It plans to hire at least 5,000 people in its Taipei headquarters to be in charge of R&D. Foxconn is the key manufacturer for Apple’s iPhone. Walmart to Open 40 New Stores in Guangdong – Walmart will focus on the development of Supercentre and Sam’s Club, aiming to open 40 new stores in Guangdong in the coming three to five years, the Senior Vice President of Corporate Affairs at Walmart China said in an investment conference. It is going to open 25 new stores, including 5 Sam’s Clubs, in Guangzhou and its surrounding areas. Currently, Walmart has more than 400 stores in ~170 cities in China. NDRC to Expedite Approval on Nuclear Power Projects – According to CBN, the National Development and Reform Commission(NDRC) stated in a conference on Tuesday that it will expedite approvals on nuclear power projects. In a government conference held on Jun 13, Mr Xi Jinping, the general secretary of China, said that the country will pay close attention to the new nuclear power projects in the eastern coastal areas. According to internal staff from China’s nuclear power enterprises, nuclear projects in Liaoning Dalian, Liaoning Hulu, Shandong Haiyang, Zhejiang Sanmen, Guangdong Lufeng and Shandong Rongcheng will have priority in obtaining approval from the NDRC.
HSI TOP MOVERS Leaders Ticker CHINA RES PO HENDERSON LA LENOVO GROUP CHINA RES EN HUTCHISON WH
Laggers % 2.18 1.55 1.36 1.18 1.15
Ticker PING AN INSU CHINA OVERSE CHINA MERCHA BANK OF COMM BELLE INTERN
% -1.65 -1.46 -1.03 -0.75 -0.71
Close
1D Chg
1D % Chg
22866.70 10180.05 2133.37 9242.16 1981.77 3261.54 1889.55 25299.58 7563.15 1468.49 4838.98 6834.68 3587.55
-13.94 -70.11 -11.45 -4.04 -12.58 -0.49 -2.78 -69.32 -17.05 7.57 -23.26 41.61 -24.98
-0.06 -0.68 -0.53 -0.04 -0.63 -0.02 -0.15 -0.27 -0.22 0.52 -0.48 0.61 -0.69
Close
1D % Chg
YTD % Chg
106.52 113.85 4.53 310.42
0.46 -0.53 -0.04 -0.69
11.42 4.96 9.36 7.33
314.60 1313.67 20.86 1455.85
0.03 -0.35 -0.29 -0.93
-6.54 9.32 7.15 6.19
Corn Wheat Soybeans Coffee Sugar Cotton
439.00 579.75 1227.50 175.35 18.60 76.67
-0.40 -0.17 0.24 -0.51 -0.48 0.24
-2.50 -7.46 8.15 49.68 9.09 -2.24
Baltic Dry
867.00
-2.14
-61.92
Asia HSI HSCEI SHSZ300 TWSE KOSPI FSSTI KLCI SENSEX NIFTY SET JCI PCOMP ASX
COMMODITIES Energy WTI Brent Natural Gas Gasoline
Metals Copper Gold (Spot) Silver (Spot) Platinum (Spot)
Agriculture
Aquila’s Bass Accepts Baosteel and Aurizon Takeover Bid – Aquila Resources cofounder Charles Bass, who holds ~10.7% of Aquila, said on Wednesday he intends to accept a AUD1.4bn takeover offer from China’s Baosteel and Auizon Holdings, Australia media reported. Aquila Chairman Tony Poli, who holds ~28.92% of Aquila, has also said he inteneds to accept the offer. Baosteel and Auizon will gain 50% of the company’s share after the takeover. Huiyuan Juice to Cooperate with Haichang Holdings Ltd – Huiyuan Juice(1886 HK) has signed a strategic cooperation framework agreement with Haichang Holdings Ltd(2255 HK), to sell Huiyuan’s beverage products in Haichang’s theme parks. Haichang Holdings Ltd is the largest ocean themed park operator in China, with six ocean themed 1
parks in Dalian, Qingdao, Tianjin, Wuhan.
Yantai
and
QUAM INSTITUTIONAL BUSINESS UNIT RESEARCH
SALES
JENNIFER SO
+852 2971 5433
STANLEY NG
+852 2217 2857
ANDY CK WONG
+852 2971 5434
GUY STILLE
+852 2217 2853
CHRISTOPHER HO
+852 2971 5436
quam research@quam group.com 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 number 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 consequential 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 docum ent. 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
