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Daily Commentary

21 May 2019

Market Outlook

HSI is expected to test lower to around 27,500 today.

Concerned about US corporate bonds: Powell pointed out that corporate lending reached a record level of about 35% of the company's assets, clearly reaching the level that companies and investors should think about. If the debts increase again, or significantly increase the vulnerability of enterprises. The ultimate source of financing sources and corporate debt is not transparent, and if the lender begins to default, it may lead to an economic downturn.

Pay attention to Huawei's industrial chain: The US Department of Commerce issued a temporary license to enable Huawei to maintain its existing network service capabilities and provide software update services for Huawei mobile phones. The temporary license is valid until Aug 19, allowing Huawei customers to have time to switch equipment. However, the US still intends to block Huawei in the long run, and US tech stocks are under pressure.

Today’s Focus Stock

HK Stocks

Mengniu (02319.HK)

(Rating: Buy; Target Price: HKD33; Current Price: HKD29.45)

Profit margin continues to increase with product mix optimization.

Raw milk resources integration underpins fresh milk business.

Defensive business given limited impact by Sino-US trade war.

Galaxy (00027.HK)

(Rating: Buy; Target Price: HKD60 down from HKD63; Current Price: HKD47.95)

1Q2019 VIP business drop 25% YoY, market share loss.

Promising mass business in May with 37% YoY growth of Golden Week visitors.

Phases 3 & 4 and overseas projects to drive long-term growth.


Inspur Electronic (000977.SZ)

(Rating: Buy; Target Price: RMB36; Current Price: RMB24.30)

Satisfactory 1Q2019 results

Decent development of server business

Benefited by the development of AI and Cloud computing

Sector and Company News

VTECH Holdings (00303) announced annual results ended March 2019. Net profit amounted to USD171 mn, down 17% YoY. Final DPS was US50 cents. Full-year DPS totaled US67 cents.

China Unicom (00762) announced that the aggregate number of mobile billing subscribers in April reached 324 mn, representing net addition of 1.136 mn. During the month, the aggregate number of 4G subscribers reached 233 mn, representing net addition of 2.608 mn.

China Telecom (00728) announced that mobile subscribers reached 319 mn in April, representing a net increase of 3.51 mn subscribers. Among which, 4G users amounted to 260 mn with a net increase of 4.07 mn subscribers, decelerating from a net addition of 5.51 mn subscribers in March.

Xiaomi (01810) announced its results for 1Q2019. Its revenue grew 27.2% YoY to RMB43.757 bn; its gross profit increased 21.3% YoY to RMB5.216 bn; its net profit was RMB3.126 bn.

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