Research Reports and Commentaries

Daily Commentary

16 Nov 2018

Market Outlook
HSI may fluctuate at around 26,200 to 26,600 points today.

The Hang Seng Index opened higher by 207 points yesterday. Afterwards, the index turned to a negative territory and once dropped 42 points at most to touch its intra-day low of 25,611 points. Afterwards, the index regained its upward trend and rose 106 points at midday. During the afternoon session, HK stocks extended its gains and grew 472 points at most to reach its intra-day high of 26,127 points. The HSI finally closed at 26,103.34 points, up 448.91 points or 1.75%. Market turnover amounted to HKD86.375 billion. The ADR proportional HSI index closed overnight at 26,270 points with 167 points or 0.64% than closing price yesterday. HSI going to test 50-day MA. Dow was up by 208 points or 0.83% to 25,289 points. HSI may fluctuate at around 26,200 to 26,600 points today.

Today’s A-share Snapshot

Company’s Profile:WXTJ (600667.SH) is mainly engaged in the businesses of semiconductor, polyester fiber, engineering technical service, as well as the investment and operation of photovoltaic power station.

Brief Comments:The Company recently announced the Company's subsidiary EDRI became the successful bid unit of G8.5 LCD base plate glass construction and installation engineering project of Rainbow (Hefei) LCD, Xinzhan High-tech Zone, with the bidding price of RMB529 million.. This is expected to bring positive impact to the Company's operating performance. In 9M2018, the Company's operating income rose 35.19% YoY to RMB11.226 billion while its net profit increased 23.92% YoY to RMB368 million. It is expected that the Company’s results might continue to maintain its growth rate. The major raw materials of semiconductor business include circuit board and gold thread. Thus, the volatility of such materials’ prices is expected to affect the Company’s business operation.

Stock Pick

Cobalt in tighter supply; CMOC (03993) benefits in short term

Previously Glencore subsidiary Katanga Mining Ltd suspended cobalt exports from its Kamoto Project in Congo after it found excessive levels of uranium in the ore. The suspension is expected to defer Katanga’s cobalt sales to the second half of 2019 from the fourth quarter of this year. Glencore’s original plan was to sell 65,000 tonnes of cobalt, with 34,000 tonnes from Katanga Mining, being a significant portion of the global cobalt market in 2019. Due to the Glencore halt, the global cobalt price will gain support before mid-2019.

CMOC engages in non-ferrous metal mining, mainly the selection, smelting, and deep processing of copper, molybdenum, tungsten, cobalt, niobium and phosphate. It is the second largest cobalt manufacturer in the world. During 9M18, CMOC recorded revenue amounted to RMB20bn, up 13.4% YoY Net profit surged by 155.9% YoY to RMB4.137bn. The EPS was 19 fen.

Despite the imbalance of Cobalt demand- supply, and the Congo’s super profits tax bring uncertainties to CMOC, the share price of CMOC already reflect the negative factors. The valuation becomes attractive after the share pull-back since Mar18.

Investors are advised to buy the share at HKD3 or below, with the target price and stop- loss price at HKD4.5 and HKD2.5 respectively.