Quam Pulse
EQUITIES HONG KONG STRATEGY
INSTITUTIONAL RESEARCH: TRADING PLACES
DATE TUESDAY FEBRUARY 10, 2015
QUAM PULSE Qualcomm to Pay USD975mn to Resolve Antitrust Dispute with China (Reuters) – Qualcomm Inc (QCOM.US) has agreed to pay China a fine of USD975mn, the largest in the country’s corporate history, ending a 14-month government investigation into anticompetitive practices. The deal also requires Qualcomm to lower its royalty rates on patents used in China, likely helping Chinese smartphone makers like Xiaomi Technology and Huawei Technologies. China’s expanding high-speed 4G network is driving demand for smartphones with leading-edge technology, but Qualcomm’s opportunities have been clouded by the antitrust investigation, which has also contributed to trouble with collecting royalty payments from device makers. Under the terms of the agreement, Qualcomm will offer licences to its current 3G and 4G essential Chinese patents, widely used by Chinese device makers, separately from its other patents. For companies opting for the new agreement, which applies to phones sold for use in China, Qualcomm will calculate royalties based on 65% of the selling prices of phones, instead of on the whole price. Our Take: Qualcomm’s 4G chipsets were widely used by Chinese smartphone makers in 2014 in high-end smartphones, as the company led the China market with its advanced multi-mode technology, followed by Marvell Technology(MRVL.US) and MediaTek(2454.TT). Currently, the chipset accounts for 10-16% of the total bill of materials(BOM) cost of a smartphone. We believe the royalty rate reduction by one third on patents used in China will help cut BOM costs for Chinese smartphone makers that use Qualcomm’s chipsets in their smartphones, including Xiaomi, Lenovo(992.HK), Huawei, Coolpad(2369.HK), OPPO and ZTE. We also expect the move to spur 4G smartphone demands, driven by further ASP decline. Lenovo and Coolpad are currently trading at 15.6x and 8.6x FY2015 P/E respectively, according to Bloomberg consensus.
CHINA TAKEAWAYS ZTE Opens Smart Device Factory in West China– ZTE Corporation opened a new factory in western China on Monday to help it meet ambitious production targets for smart devices including mobile phones and tablet computers. The factory in Xi’an City will become the largest manufacturing base for such terminals in the country’s west, expected to churn out 15mn handsets a year and with potential to triple the capacity in five years, the corporation said. It is hoping that the base can generate added value in related industries worth RMB30bn and bring about 3,000 jobs to the region. Mainland Launches Stock Option Trading– The Chinese mainland launched its first stock options yesterday, giving investors more tools to manage risks, with diverse choices of products in enriching trading strategies. The first day’s trading involved transactions involving about 18,800 contracts. Premium trade volume reached RMB29mn. < http://www.ecns.cn/business/2015/02-10/154254.shtml>
HSI TOP MOVERS Leaders Ticker LENOVO GROUP CHINA OVERSE BOC HONG KON CHINA SHENHU CHINA UNICOM
INDEX
Laggers % 3.13 2.40 1.10 0.97 0.94
Ticker WANT WANT CH GALAXY ENTER WHARF HLDG MENGNIU DAIR HENGAN INTL
% -3.38 -2.91 -2.69 -2.48 -2.04
s
1D Chg
1D % Chg
24521.00 11647.42 3345.92 9421.50 1947.00 3418.02 1811.58 28227.39 8526.35
-158.39 -49.90 33.50 -34.68 -8.52 -13.34 -1.67 -490.52 -134.70
-0.64 -0.43 1.01 -0.37 -0.44 -0.39 -0.09 -1.71 -1.56
1601.77 5348.47 7782.57 5814.93
-11.86 5.96 54.39 -5.25
-0.73 0.11 0.70 -0.09
Asia HSI HSCEI SHSZ300 TWSE KOSPI FSSTI KLCI SENSEX NIFTY SET JCI PCOMP AS51
COMMODITIES
Close
1D % Chg YTD % Chg
Energy WTI Brent Natural Gas Gasoline
51.87 57.51 2.68 155.69
0.35 -0.50 3.76 -0.14
-3.41 -1.20 -7.60 3.51
258.15 1243.44 17.15 1225.25
-0.15 0.76 2.52 0.12
-8.64 4.99 9.14 1.43
Corn Wheat Soybeans Coffee Sugar Cotton
385.50 524.75 973.25 165.45 14.67 61.46
-0.06 -0.43 -0.03 -0.84 1.10 -0.21
-2.90 -11.02 -4.91 -0.69 1.03 1.97
Baltic Dry
559.00
-0.89
-28.52
Metals Copper Gold (Spot) Silver (Spot) Platinum (Spot)
Agriculture
HSI Daily
China Raises Retail Oil Prices– China announced that the retail price of gasoline would be raised by RMB290 per tonne and diesel by RMB280 per tonne, snapping the trend of 13 consecutive cuts since last July. The adjustments will come into effect on Tuesday suggesting that retail prices will edge up RMB0.20 per liter for gas and RMB0.24 per liter for diesel. In 2013, China adopted a pricing regime that adjusts domestic fuel prices when international crude prices change by more than RMB50 per tonne for 10 consecutive days. Some oil companies’ decisions to cut capital spending and recent robust job data in the U.S. helped to lift oil prices. Alibaba to Invest USD590mn in Phone Maker Meizu – Alibaba Group (BABA.US) announced on Monday that it had inked a USD590mn investment deal with budget smartphone maker Meizu in a bid to evolve its ecosystem. Alibaba will provide resources and support in e-commerce and mobile internet to Meizu, in an effort to hone the integration of hardware and software and to advance its mobile strategy, the company
Institutional Research Team [email protected] Jennifer So, Head of Research Christopher Ho, Analyst
+852 2971-5433 +852 2971-5436
1
said. Meizu will offer support for the promotion of the YunOS operating system and offline sale channels to Alibaba.
QUAM INSTITUTIONAL SALES
STANLEY NG
Sales Director
+852 2217 2857
GUY STILLE
Executive Director
+852 2217 2853
CATHERINE FONG
Associate Director
+852 2217 2854
[email protected] [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 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 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 TUESDAY FEBRUARY 10, 2015
QUAM PULSE Qualcomm to Pay USD975mn to Resolve Antitrust Dispute with China (Reuters) – Qualcomm Inc (QCOM.US) has agreed to pay China a fine of USD975mn, the largest in the country’s corporate history, ending a 14-month government investigation into anticompetitive practices. The deal also requires Qualcomm to lower its royalty rates on patents used in China, likely helping Chinese smartphone makers like Xiaomi Technology and Huawei Technologies. China’s expanding high-speed 4G network is driving demand for smartphones with leading-edge technology, but Qualcomm’s opportunities have been clouded by the antitrust investigation, which has also contributed to trouble with collecting royalty payments from device makers. Under the terms of the agreement, Qualcomm will offer licences to its current 3G and 4G essential Chinese patents, widely used by Chinese device makers, separately from its other patents. For companies opting for the new agreement, which applies to phones sold for use in China, Qualcomm will calculate royalties based on 65% of the selling prices of phones, instead of on the whole price. Our Take: Qualcomm’s 4G chipsets were widely used by Chinese smartphone makers in 2014 in high-end smartphones, as the company led the China market with its advanced multi-mode technology, followed by Marvell Technology(MRVL.US) and MediaTek(2454.TT). Currently, the chipset accounts for 10-16% of the total bill of materials(BOM) cost of a smartphone. We believe the royalty rate reduction by one third on patents used in China will help cut BOM costs for Chinese smartphone makers that use Qualcomm’s chipsets in their smartphones, including Xiaomi, Lenovo(992.HK), Huawei, Coolpad(2369.HK), OPPO and ZTE. We also expect the move to spur 4G smartphone demands, driven by further ASP decline. Lenovo and Coolpad are currently trading at 15.6x and 8.6x FY2015 P/E respectively, according to Bloomberg consensus.
CHINA TAKEAWAYS ZTE Opens Smart Device Factory in West China– ZTE Corporation opened a new factory in western China on Monday to help it meet ambitious production targets for smart devices including mobile phones and tablet computers. The factory in Xi’an City will become the largest manufacturing base for such terminals in the country’s west, expected to churn out 15mn handsets a year and with potential to triple the capacity in five years, the corporation said. It is hoping that the base can generate added value in related industries worth RMB30bn and bring about 3,000 jobs to the region. Mainland Launches Stock Option Trading– The Chinese mainland launched its first stock options yesterday, giving investors more tools to manage risks, with diverse choices of products in enriching trading strategies. The first day’s trading involved transactions involving about 18,800 contracts. Premium trade volume reached RMB29mn. < http://www.ecns.cn/business/2015/02-10/154254.shtml>
HSI TOP MOVERS Leaders Ticker LENOVO GROUP CHINA OVERSE BOC HONG KON CHINA SHENHU CHINA UNICOM
INDEX
Laggers % 3.13 2.40 1.10 0.97 0.94
Ticker WANT WANT CH GALAXY ENTER WHARF HLDG MENGNIU DAIR HENGAN INTL
% -3.38 -2.91 -2.69 -2.48 -2.04
s
1D Chg
1D % Chg
24521.00 11647.42 3345.92 9421.50 1947.00 3418.02 1811.58 28227.39 8526.35
-158.39 -49.90 33.50 -34.68 -8.52 -13.34 -1.67 -490.52 -134.70
-0.64 -0.43 1.01 -0.37 -0.44 -0.39 -0.09 -1.71 -1.56
1601.77 5348.47 7782.57 5814.93
-11.86 5.96 54.39 -5.25
-0.73 0.11 0.70 -0.09
Asia HSI HSCEI SHSZ300 TWSE KOSPI FSSTI KLCI SENSEX NIFTY SET JCI PCOMP AS51
COMMODITIES
Close
1D % Chg YTD % Chg
Energy WTI Brent Natural Gas Gasoline
51.87 57.51 2.68 155.69
0.35 -0.50 3.76 -0.14
-3.41 -1.20 -7.60 3.51
258.15 1243.44 17.15 1225.25
-0.15 0.76 2.52 0.12
-8.64 4.99 9.14 1.43
Corn Wheat Soybeans Coffee Sugar Cotton
385.50 524.75 973.25 165.45 14.67 61.46
-0.06 -0.43 -0.03 -0.84 1.10 -0.21
-2.90 -11.02 -4.91 -0.69 1.03 1.97
Baltic Dry
559.00
-0.89
-28.52
Metals Copper Gold (Spot) Silver (Spot) Platinum (Spot)
Agriculture
HSI Daily
China Raises Retail Oil Prices– China announced that the retail price of gasoline would be raised by RMB290 per tonne and diesel by RMB280 per tonne, snapping the trend of 13 consecutive cuts since last July. The adjustments will come into effect on Tuesday suggesting that retail prices will edge up RMB0.20 per liter for gas and RMB0.24 per liter for diesel. In 2013, China adopted a pricing regime that adjusts domestic fuel prices when international crude prices change by more than RMB50 per tonne for 10 consecutive days. Some oil companies’ decisions to cut capital spending and recent robust job data in the U.S. helped to lift oil prices. Alibaba to Invest USD590mn in Phone Maker Meizu – Alibaba Group (BABA.US) announced on Monday that it had inked a USD590mn investment deal with budget smartphone maker Meizu in a bid to evolve its ecosystem. Alibaba will provide resources and support in e-commerce and mobile internet to Meizu, in an effort to hone the integration of hardware and software and to advance its mobile strategy, the company
Institutional Research Team [email protected] Jennifer So, Head of Research Christopher Ho, Analyst
+852 2971-5433 +852 2971-5436
1
said. Meizu will offer support for the promotion of the YunOS operating system and offline sale channels to Alibaba.
QUAM INSTITUTIONAL SALES
STANLEY NG
Sales Director
+852 2217 2857
GUY STILLE
Executive Director
+852 2217 2853
CATHERINE FONG
Associate Director
+852 2217 2854
[email protected] [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 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 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
