HSI is expected to consolidate at around 27,700 today.
Sino-US tension continues: The United States postponed the ban on Huawei by 90 days. Tension in trade war has eased slightly, and US stocks have risen. However, considering that President Xi Jinping went to Jiangxi for investigation on Monday, he investigated Jinli permanent magnets in Ganzhou, learned about the development of the rare earth industry. The market is worried about China restricting the export of rare earths, investors should not be overly optimistic about the trade negotiation.
The United States targets Chinese high-tech companies: In addition to Huawei, the United States also exerts pressure on other Chinese companies. The drone company DJI faces sanctions risks. CNN reported that nearly 80% of UAVs in Canada and the United States are from DJI, and the United States is worried about drones stealing national data.
Today’s Focus Stock
HK Stocks
Tencent (00700.HK)
(Rating: Buy; Target Price: HKD440; Current Price: HKD341.20)
Reported mixed 1Q results.
Expected capitalization of “Peacekeeper Elite” as catalyst.
Sticky WeChat users and huge social platform client base.
Xiaomi Group (01810.HK)
(Rating: Buy; Target Price: HKD12; Current Price: HKD9.87)
1Q better than expectations, revenue turned from losses to profit.
Overseas expansion such as India to enhance market position.
Self-owned operating system, not affected by the US ban.
A-share
Hualu-Hengsheng (600426.SH)
(Rating: Buy; Target Price: RMB18.50; Current Price: RMB15.30)
Decent sales growth.
Increasing revenue for fertilizer and polyalcohol’s sector.
Continuously improving industry chain.
Sector and Company News
Sino Biopharm (01177) announced its results for 1Q2019. Its revenue grew 33.4% YoY to RMB6.208 bn; its net profit grew 11.1% YoY to RMB857 mn.
Truly INT'L (00732) released the results announcement for the three months ended 31 March 2019. Its revenue grew 12.5% YoY to HKD4.58 bn while its net profit grew 715.6% YoY to HKD102 mn.
Towngas China (01083)'s 1Q2019 total gas sales volume burgeoned 17% YoY to 3.05 bn cubic metres. Meanwhile, total number of customers reached 12.81 mn, with 210,000 new customers and an ideal growth.
Man Wah Hldgs (01999) announced annual results ended March 2019. Its revenue increased 12.3% YoY to HKD11.258 bn; its net profit amounted to HKD1.364 bn, down 11.2% YoY. Final DPS was HK6 cents. Full-year DPS totaled HK12 cents.
Canvest Env (01381) gained the PPP project of waste-to-energy plant in Ruili, Yunnan. Based on the contact, the daily garbage disposal ability of the plant will be 1,000 tons. The right of franchise will last for 30 years.
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.
A-share
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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