[Today’s Guide]
○ Promotion of MSCI on A-share market more long-term
○ Mainstream institutions prefer stability before 5,000 points of SSE composite index
○ Radio and TV network to be access to intelligent households
○ Assets liquidation of Hi-Tech Development to speed up
[XFA View]
Promotion of MSCI on A-share market more long-term
------
Recently, FTSE Group, a British provider of stock market indexes and associated data services, starts the interim plan of incorporating A-share market into its global benchmark indexes, while Morgan Stanley will also announce its final decision of whether incorporating A-share market into MSCI Emerging Market Index or not on June 10 (Beijing time). Pushing A-share market to be incorporated into international renowned indices has always been the key work of regulators since the long-term positive promotion of these indices on domestic capital market is valued, but in short-term, they have limited impact on accelerating the inflow of international capital.
According to the measurement of international investment banks, if A-share market is incorporated into MSCI as 5 percent initial weight, then only less than 20 billion yuan of passively-configured funds will flow into A-share market. Even if the demonstration effect of MSCI is taken into consideration and actively-configured funds also flow in, the fund scale will also just total around 80~100 billion yuan, only accounting for nearly one third of current total investment scale of SSE SH Equities.
But if A-share market can be successfully incorporated into MSCI, its positive impacts on domestic capital market lie in that on the one hand, as an important sign marking the opening of capital market, the access of international funds and investors will further push market-oriented reform and accelerate the two-way opening of markets. On the other hand, it helps to expand the inflow channel of international funds under current open systems including QFII and RQFII, and attract quality international institutional investors to enter A-share market.
It is noteworthy that though it is a general trend that the A-share market will be incorporated into MSCI, it is still uncertain whether it will succeed or not this time. According to relevant regulations, the entrance of MSCI must be approved by main institutional investors globally by voting. But considering multi indicators including convenience, openness, degree of internationalization and service function, etc. in domestic financial market and the administrative control in two-way capital flow, it is hard to be agreed by most main institutional investors. (You Wen)
[Institutions' Movement]
Mainstream institutions prefer stability before 5,000 points of SSE composite index
------
Mainstream publicly-offered funds and privately-offered funds including China Universal Asset Management Co., Ltd., China Southern Asset Management Co., Ltd., China Broad Capital Co., Ltd. accepted the latest survey by XFA on June 3, it is commonly believed that though it is possible that the stock market will surge in the middle term, considering the accelerated launch of new stocks or re-financing by large-scale enterprises, economic fundamentals might not stabilize in the short term. Especially that the Small and Medium Enterprise Board and the Chinext Board surge too fast, to maintain short-term balanced allocation while holding leading growth stocks can mitigate risks. Leave some position to catch investment opportunities in consumption, real estate, automobile, white spirit, etc. sectors. Moreover, as the economic slowdown eases up, some cyclical industries including airlines, breeding, etc. show clear signs of improvement and they are worthy of attentions.
The XFA View on May 31 disclosed that above institutions indicated after the sharp drop on “May 28” that they owned abundant cash on hand and were optimistic about the new economy area leading economic transformation, especially the Small and Medium Enterprise Board and the Chinext Board involved in “Internet Plus”.
Insurance companies expect low long-term interest rate
------
With the orderly advancing of the second generation of the solvency regulatory system, the interest rate’s effect on life insurance companies has reached over 90 percent. As a result, the setting of the benchmark interest rate of insurance products will directly affect the future profit of the insurance industry. It is reported that most insurance companies currently regard 2.5 percent as the benchmark interest rate of products.
Comment: Based on the history of the industry and the marketization of fees, insurance companies intend to raise the benchmark interest rate to improve their competitiveness. The current cut of the benchmark interest rate of products to 2.5 percent shows that insurance institutes, which have traditional advantages in expecting the interest rate trend, expect that the long-term interest rate in China will be low. The downward long-term interest rate is one of the cornerstones of this round of the bullish market.
[XFA Viewpoint]
Three networks integration irreversible, radio and TV network to be access to intelligent households
------
Cai Fuchao, director general the State Administration of Press, Publication, Radio, Film and Television, emphasized on June 2 during an inspection that the integration of media is an irresistible trend and relevant authorities should spare more efforts in consolidating media resources. To promote the integration of the traditional radio and television media and new media, cable network companies have conducted various reforms this year. Hubei Radio & Television Information Network Co., Ltd. (000665.SZ), Hunan TV & Broadcast Intermediary Co., Ltd. (000917.SZ) and Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd. (600831.SH) have suspended trading to mull significant matters in May. Facing the ‘intelligent wave’ initiated by the big data and cloud computing, radio and television enterprises have set the establishment of ‘intelligent radio and TV network’ as a key goal in transformation and upgrading. Meanwhile, as the access to intelligent households, the cable network operators are likely to be targets of Internet tycoons in China. Statistics show that the number of cable and digital TV users has reached 187 million by the end of 2014 and the comprehensive coverage of TV programs reached 98.6 percent. Radio and television enterprises are able to control the access to intelligent households through the ‘boxes’.
Beijing Gehua CATV Network Co., Ltd. (600037.SH) actively embraces the trend in the Internet-based TV industry. It has achieved cross-region expansion through consolidating local operators and the content services providers in the upper stream. It recently joined hands with VisionVera to improve the audio and video value-added services to government and enterprise clients and expand the distant education and medical treatment operation of the company.
Jishi Media Co., Ltd. (601929.SH) has been actively developing the new media, the integration of three networks, namely the telecommunication network, the cable TV network and the Internet, the cultural tourism and the financial industry in recent years. With its 7 million users, it gradually transforms into a comprehensive contents service platform. The company has greatly improved the users’ average revenue per user (ARPU) and accelerated the realization of users’ value through household intelligent gateways, the construction of household access system and cinemas.
[Information Radar]
Progress made in litigation, assets liquidation of Hi-Tech Development to speed up
------
Chengdu Hi-Tech Development Co., Ltd. (000628.SZ) announced the latest progress of the litigation on June 3. The market estimates that with the progress of the litigation faced by the company, the assets liquidation of Hi-Tech Development will speed up. Hi-Tech Development is currently engaged in various businesses, including building construction and futures brokerage, but its profitability is relatively weak. The company has been loss-making since last year. Chengdu Hi-tech Investment Group Co., Ltd., the controlling shareholder of Hi-Tech Development, has completed the capital injection into the company in end-April, which also increased the expectation on the assets liquidation of the company in the future.
○ Promotion of MSCI on A-share market more long-term
○ Mainstream institutions prefer stability before 5,000 points of SSE composite index
○ Radio and TV network to be access to intelligent households
○ Assets liquidation of Hi-Tech Development to speed up
[XFA View]
Promotion of MSCI on A-share market more long-term
------
Recently, FTSE Group, a British provider of stock market indexes and associated data services, starts the interim plan of incorporating A-share market into its global benchmark indexes, while Morgan Stanley will also announce its final decision of whether incorporating A-share market into MSCI Emerging Market Index or not on June 10 (Beijing time). Pushing A-share market to be incorporated into international renowned indices has always been the key work of regulators since the long-term positive promotion of these indices on domestic capital market is valued, but in short-term, they have limited impact on accelerating the inflow of international capital.
According to the measurement of international investment banks, if A-share market is incorporated into MSCI as 5 percent initial weight, then only less than 20 billion yuan of passively-configured funds will flow into A-share market. Even if the demonstration effect of MSCI is taken into consideration and actively-configured funds also flow in, the fund scale will also just total around 80~100 billion yuan, only accounting for nearly one third of current total investment scale of SSE SH Equities.
But if A-share market can be successfully incorporated into MSCI, its positive impacts on domestic capital market lie in that on the one hand, as an important sign marking the opening of capital market, the access of international funds and investors will further push market-oriented reform and accelerate the two-way opening of markets. On the other hand, it helps to expand the inflow channel of international funds under current open systems including QFII and RQFII, and attract quality international institutional investors to enter A-share market.
It is noteworthy that though it is a general trend that the A-share market will be incorporated into MSCI, it is still uncertain whether it will succeed or not this time. According to relevant regulations, the entrance of MSCI must be approved by main institutional investors globally by voting. But considering multi indicators including convenience, openness, degree of internationalization and service function, etc. in domestic financial market and the administrative control in two-way capital flow, it is hard to be agreed by most main institutional investors. (You Wen)
[Institutions' Movement]
Mainstream institutions prefer stability before 5,000 points of SSE composite index
------
Mainstream publicly-offered funds and privately-offered funds including China Universal Asset Management Co., Ltd., China Southern Asset Management Co., Ltd., China Broad Capital Co., Ltd. accepted the latest survey by XFA on June 3, it is commonly believed that though it is possible that the stock market will surge in the middle term, considering the accelerated launch of new stocks or re-financing by large-scale enterprises, economic fundamentals might not stabilize in the short term. Especially that the Small and Medium Enterprise Board and the Chinext Board surge too fast, to maintain short-term balanced allocation while holding leading growth stocks can mitigate risks. Leave some position to catch investment opportunities in consumption, real estate, automobile, white spirit, etc. sectors. Moreover, as the economic slowdown eases up, some cyclical industries including airlines, breeding, etc. show clear signs of improvement and they are worthy of attentions.
The XFA View on May 31 disclosed that above institutions indicated after the sharp drop on “May 28” that they owned abundant cash on hand and were optimistic about the new economy area leading economic transformation, especially the Small and Medium Enterprise Board and the Chinext Board involved in “Internet Plus”.
Insurance companies expect low long-term interest rate
------
With the orderly advancing of the second generation of the solvency regulatory system, the interest rate’s effect on life insurance companies has reached over 90 percent. As a result, the setting of the benchmark interest rate of insurance products will directly affect the future profit of the insurance industry. It is reported that most insurance companies currently regard 2.5 percent as the benchmark interest rate of products.
Comment: Based on the history of the industry and the marketization of fees, insurance companies intend to raise the benchmark interest rate to improve their competitiveness. The current cut of the benchmark interest rate of products to 2.5 percent shows that insurance institutes, which have traditional advantages in expecting the interest rate trend, expect that the long-term interest rate in China will be low. The downward long-term interest rate is one of the cornerstones of this round of the bullish market.
[XFA Viewpoint]
Three networks integration irreversible, radio and TV network to be access to intelligent households
------
Cai Fuchao, director general the State Administration of Press, Publication, Radio, Film and Television, emphasized on June 2 during an inspection that the integration of media is an irresistible trend and relevant authorities should spare more efforts in consolidating media resources. To promote the integration of the traditional radio and television media and new media, cable network companies have conducted various reforms this year. Hubei Radio & Television Information Network Co., Ltd. (000665.SZ), Hunan TV & Broadcast Intermediary Co., Ltd. (000917.SZ) and Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd. (600831.SH) have suspended trading to mull significant matters in May. Facing the ‘intelligent wave’ initiated by the big data and cloud computing, radio and television enterprises have set the establishment of ‘intelligent radio and TV network’ as a key goal in transformation and upgrading. Meanwhile, as the access to intelligent households, the cable network operators are likely to be targets of Internet tycoons in China. Statistics show that the number of cable and digital TV users has reached 187 million by the end of 2014 and the comprehensive coverage of TV programs reached 98.6 percent. Radio and television enterprises are able to control the access to intelligent households through the ‘boxes’.
Beijing Gehua CATV Network Co., Ltd. (600037.SH) actively embraces the trend in the Internet-based TV industry. It has achieved cross-region expansion through consolidating local operators and the content services providers in the upper stream. It recently joined hands with VisionVera to improve the audio and video value-added services to government and enterprise clients and expand the distant education and medical treatment operation of the company.
Jishi Media Co., Ltd. (601929.SH) has been actively developing the new media, the integration of three networks, namely the telecommunication network, the cable TV network and the Internet, the cultural tourism and the financial industry in recent years. With its 7 million users, it gradually transforms into a comprehensive contents service platform. The company has greatly improved the users’ average revenue per user (ARPU) and accelerated the realization of users’ value through household intelligent gateways, the construction of household access system and cinemas.
[Information Radar]
Progress made in litigation, assets liquidation of Hi-Tech Development to speed up
------
Chengdu Hi-Tech Development Co., Ltd. (000628.SZ) announced the latest progress of the litigation on June 3. The market estimates that with the progress of the litigation faced by the company, the assets liquidation of Hi-Tech Development will speed up. Hi-Tech Development is currently engaged in various businesses, including building construction and futures brokerage, but its profitability is relatively weak. The company has been loss-making since last year. Chengdu Hi-tech Investment Group Co., Ltd., the controlling shareholder of Hi-Tech Development, has completed the capital injection into the company in end-April, which also increased the expectation on the assets liquidation of the company in the future.
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