[Today’s Guide]
○ Public funds encounter no redemption by industry
○ Financial supportive measures of Shanghai Innovation Center to launch
○ Promising future development for Shanghai New World in big health industry
○ Guiguan Electric Power to undertake Datang’s hydropower project in Laos
[XFA View]
Blind raise of expectation after “two cuts” still not recommended
------
On June 27, the Central Bank unexpectedly launched the initiatives to cut reserve requirement ratio (RRR) and the deposit and loan interest rate. From the perspective of public reaction, this move is like a powerful sedative which has greatly soothed the panic ofinvestors, because the risk of short-term stock index slump resulting from more leverage funding’s closing positions or more redemption of public funds, is greatly decreased. But after the two “cuts”, investors still need to take the macroeconomic trend and the change of market supply and demand into comprehensive consideration and pay special attention to the ensuing measures of supervision authorities so as to make the right decision on mid-term operation strategy for their owns. It’s not advisable to raise expectation irrationally.
On June 24 ,XFAreminded investors that though overall mobility of interbank market is currently looser than previous years, the short-term interest rate has signs of climbing up with the end of season and mid-year drawing near. Plus the recent acceleration of IPO and strengthened risk control over off-market margin financing, the leveragedbull run is bearing short-term pressure from the “mid-year effect” of liquidity. The “two cuts” move by the central bank will undoubtedly reverse the expectation of continuously deteriorating liquidityand will greatly curb the spreading of panic among investors.
Firstly, channels for liquidity to enter the marketwill shift from off-market margin financing to margin trading and securities lending inside the market. The vehement fluctuation during the past week has to a big extent strengthened the market participators’ perceptual awarenesson leverage and off-market margin financing, and it’s believed that the related stricter supervision measures won’t fall by the way-side. Actually, through the early-stage reorganization and regulation, the margin trading and securities lending businesses of securities companies have greatly improved in safety and controllability, which is expected to be more favorable and may become the main source for extra future funding.
Secondly, in anticipation of the registration system launching at year-end, IPO stock has strong demand to be released and is accumulating negative effect on the liquidity of floor trading. Moreover, driven by the stable return rate of IPO against a high fluctuation backdrop, new investors will naturally participate in it, and this means that the market factors at both supply and demand ends, which make the bull round, are having subtle changes.
In view of these, A shares may hence turn into slow yet stable bull market from the previous mad and scurrying bull market. Accordingly, investors should have lower expectations of the rise of indexes in the second half of the year, and make their investment decisions with respect to carefully observing the result of “ballot” by funds on different target shares.
[Institutions’ Movement]
Public funds encounter no redemption by industry
------
XFA learned from some medium-to-large public funds in Beijing and Shanghai that after the collapse in the previous two weeks, they haven’t encountered any industry-scale redemption which was worried by the market; contrarily, scales of all funds remain stable .
All of the interviewed public funds expressed that, recently, there are no requirements from major institutions ,either insurance companies or social security organizations , for redemption. Neither the grading index funds that have grown quite rapidly in the recent half of the year are redeemed at any large amount. In the past week, active equity funds saw application for redemption increase in small degree, but the whole situation is on balance: except for the rare cases of particular small funds, the majority equity funds interviewed hold a normal daily net redemption rate with no exceeding 2 percent.
Low-position private funds consider three directions for investment after sharp decrease
------
Some famous private funds interviewed by XFA voiced their opinion that the panicking slump has basically come to end after the reserve requirement ratio cut and the interest rate cut. The market is expected to stabilize, and the bull market won’t end. But the overall rapidly rising bullishness has come to a halt for the moment. The newly-created private funds with almost 0 position and mainstream private funds with about 30% position, expect bullish investment orientations in the following area:
Firstly, those refer to low-valuated stocks with safe margin in fields such as medicine, consumption, and environmental protection. Many balanced funds believe that low-valuated stocks have lagged demands for rising. Secondly, those are stocks relating to state-owned enterprise reform. The state-owned enterprise reform will achieve substantial progress in the next half year. So there is a huge potential for investment. Thirdly, those are some quality growing stocks that have suffered excessive price decrease in the previous panic sell-off and are likely to open positions again.
[Hotspot Investigation]
Financial supportive measures of Shanghai Innovation Center to launch
------
According to the latest news from Lujiazui forum, together with Shanghai IFC construction and FTZ financial reform as one of the three major themes, the financial supportive measures of Shanghai Technology Innovation Center is expected to be launched quickly.
◆ Capital account convertibility to facilitate resources allocation
The upcoming “to promote the interactive development of Shanghai IFC and FTZ” include those related measures which may pilot some breakthrough policies in FTZ , such asquoted convertibility in capital account, and QDII2. The qualified enterprises may be allowed to conduct cross-border capital account transaction under the quota, including direct investment, merger and acquisition, debt instrument and financial investment. The capital turnover and exchange related to investment and financing are unconstrained.
◆To strengthen multi-level capital markets’ support on technology and innovation enterprises
While Shanghai Stock Exchange (SSE) is stepping up to make preparation for strategic emerging industries board, Shanghai Equity Exchange (SEE) also plans to set up technology and innovation board, and Shanghai municipal government will put forward related measures to link these two boards. Moreover, Shanghai will apply to first pilot in tiny securities companies which exclusively serve in regional equity markets.
◆ Attract internet financing tycoon to be established in Shanghai with policy space
Shanghai government will collaborate with supervision departments to promote licensed operation of the internet financing institutions with regulated management and development potential and to attract large e-commerce platforms to found small-loan companies, financial lease institutions and commercial factoring institutions in Shanghai. It takes the lead in piloting equity-based crowd-funding all over the country ,while Ant Dake (Ant Financial's equity-based crowd-funding platform) has been granted with the first business license numbered as “001”. Shanghai also encourages the strong private enterprises to establish Zhangjiang Technology Investment Bank to especially serve science-and-technology enterprises.
[Information Radar]
Promising future development for Shanghai New World in big health industry
------
According to XFA’s exclusive interview with Shanghai New World Co., Ltd. (600628.SH) and its wholly-owned subsidiary Caitongdetang, Shanghai New World is devoting great efforts to promoting big health strategy with works going well. At present, over 70 percent of its sales revenue contribute to its department stores and hotels. Based on the company’s new strategic planning, the big health industry, which will enjoy promising development, will be an important part in the company’s future business. On June 15, Shanghai New World announced to raise funds through private placement for extended projects of big health industry.
Shanghai New World is building an industry chain of TCM (traditional Chinese medicine) diagnosis and treatment through its subsidiary Shanghai Qunli Herbal Drug Store (holding 60 percent of stake in the company), which is running at full capacity with currently receiving more than 1,000 tumor patients every day. With Shanghai as the center and a radius of 30 kilometers, the company plans to build chain stores of Qunli Herbal Drug Store in districts like Jinshan, Fengxian and Baoshan in the future.It is expected to realize rapid expansion after finishing this private placement. It will also establish Caitongdetang-based healthcare industry chain to combine TCM and western medicine, not excluding gaining new chemical medicines through mergers and acquisitions. In addition, it is going to expand O2O mode of TCM healthcare and link with medical institutions, likely to upgrade into service industry.
Guiguan Electric Power to undertake Datang’s hydropower project in Laos
------
Guiguan Electric Power (600236.SH) is likely to undertake more overseas projects in the future, as its major shareholder China Datang Corp. (00991.HK) accelerates the construction of the “Belt and Road Initiatives”. Datang Corp. recently held a meeting to promote overseas projects under the “Belt and Road Initiatives”. Wang Yeping, general manager of Datang Corp. pledged joint efforts to sort out overseas operating projects. Currently, the hydropower project jointly developed by Datag Corp. and countries along the Mekong River has achieved new progress. The preliminary infrastructure of Pak Beng and Sanakham hydropower stations (whose installed capacity is 912MW and 660MW respectively) was approved by Laos. The market expects that Guiguan Electric Power, as an important listed hydropower company owned by Datang Corp., will possibly undertake the project mentioned.
[Industry Observation]
Jiangxi Copper Corp. to integrate Ganzhou Rare Earth
------
Recently, Jiangxi Copper Corp., major shareholder of Jiangxi Copper Co. Ltd. (600362. SH; 00358. HK), and its listed company visited the secretary of Ganzhou Municipal Party Committee to discuss cooperation on rare earth, according to the website of Guangzhou Municipal Government. Both sides agreed to speed up the construction of China South Rare Earth Group. Li Baomin, chairman of Jiangxi Copper Corp. and Jiangxi Copper Co. Ltd., addressed that Jiangxi Copper Corp. will give full play to its own advantages to promote the transformation and upgrading of China South Rare Earth Group. The market expects that the integration will continue.
Ganzhou Rare Earth Corp., Jiangxi Copper Corp. and Jiangxi Tungsten Industry Group jointly founded China South Rare Earth Group this March. Under the guide of Jiangxi Provincial SASAC, Jiangxi Copper Corp. is likely to accelerate to integrate with China South Rare Earth Group.
○ Public funds encounter no redemption by industry
○ Financial supportive measures of Shanghai Innovation Center to launch
○ Promising future development for Shanghai New World in big health industry
○ Guiguan Electric Power to undertake Datang’s hydropower project in Laos
[XFA View]
Blind raise of expectation after “two cuts” still not recommended
------
On June 27, the Central Bank unexpectedly launched the initiatives to cut reserve requirement ratio (RRR) and the deposit and loan interest rate. From the perspective of public reaction, this move is like a powerful sedative which has greatly soothed the panic ofinvestors, because the risk of short-term stock index slump resulting from more leverage funding’s closing positions or more redemption of public funds, is greatly decreased. But after the two “cuts”, investors still need to take the macroeconomic trend and the change of market supply and demand into comprehensive consideration and pay special attention to the ensuing measures of supervision authorities so as to make the right decision on mid-term operation strategy for their owns. It’s not advisable to raise expectation irrationally.
On June 24 ,XFAreminded investors that though overall mobility of interbank market is currently looser than previous years, the short-term interest rate has signs of climbing up with the end of season and mid-year drawing near. Plus the recent acceleration of IPO and strengthened risk control over off-market margin financing, the leveragedbull run is bearing short-term pressure from the “mid-year effect” of liquidity. The “two cuts” move by the central bank will undoubtedly reverse the expectation of continuously deteriorating liquidityand will greatly curb the spreading of panic among investors.
Firstly, channels for liquidity to enter the marketwill shift from off-market margin financing to margin trading and securities lending inside the market. The vehement fluctuation during the past week has to a big extent strengthened the market participators’ perceptual awarenesson leverage and off-market margin financing, and it’s believed that the related stricter supervision measures won’t fall by the way-side. Actually, through the early-stage reorganization and regulation, the margin trading and securities lending businesses of securities companies have greatly improved in safety and controllability, which is expected to be more favorable and may become the main source for extra future funding.
Secondly, in anticipation of the registration system launching at year-end, IPO stock has strong demand to be released and is accumulating negative effect on the liquidity of floor trading. Moreover, driven by the stable return rate of IPO against a high fluctuation backdrop, new investors will naturally participate in it, and this means that the market factors at both supply and demand ends, which make the bull round, are having subtle changes.
In view of these, A shares may hence turn into slow yet stable bull market from the previous mad and scurrying bull market. Accordingly, investors should have lower expectations of the rise of indexes in the second half of the year, and make their investment decisions with respect to carefully observing the result of “ballot” by funds on different target shares.
[Institutions’ Movement]
Public funds encounter no redemption by industry
------
XFA learned from some medium-to-large public funds in Beijing and Shanghai that after the collapse in the previous two weeks, they haven’t encountered any industry-scale redemption which was worried by the market; contrarily, scales of all funds remain stable .
All of the interviewed public funds expressed that, recently, there are no requirements from major institutions ,either insurance companies or social security organizations , for redemption. Neither the grading index funds that have grown quite rapidly in the recent half of the year are redeemed at any large amount. In the past week, active equity funds saw application for redemption increase in small degree, but the whole situation is on balance: except for the rare cases of particular small funds, the majority equity funds interviewed hold a normal daily net redemption rate with no exceeding 2 percent.
Low-position private funds consider three directions for investment after sharp decrease
------
Some famous private funds interviewed by XFA voiced their opinion that the panicking slump has basically come to end after the reserve requirement ratio cut and the interest rate cut. The market is expected to stabilize, and the bull market won’t end. But the overall rapidly rising bullishness has come to a halt for the moment. The newly-created private funds with almost 0 position and mainstream private funds with about 30% position, expect bullish investment orientations in the following area:
Firstly, those refer to low-valuated stocks with safe margin in fields such as medicine, consumption, and environmental protection. Many balanced funds believe that low-valuated stocks have lagged demands for rising. Secondly, those are stocks relating to state-owned enterprise reform. The state-owned enterprise reform will achieve substantial progress in the next half year. So there is a huge potential for investment. Thirdly, those are some quality growing stocks that have suffered excessive price decrease in the previous panic sell-off and are likely to open positions again.
[Hotspot Investigation]
Financial supportive measures of Shanghai Innovation Center to launch
------
According to the latest news from Lujiazui forum, together with Shanghai IFC construction and FTZ financial reform as one of the three major themes, the financial supportive measures of Shanghai Technology Innovation Center is expected to be launched quickly.
◆ Capital account convertibility to facilitate resources allocation
The upcoming “to promote the interactive development of Shanghai IFC and FTZ” include those related measures which may pilot some breakthrough policies in FTZ , such asquoted convertibility in capital account, and QDII2. The qualified enterprises may be allowed to conduct cross-border capital account transaction under the quota, including direct investment, merger and acquisition, debt instrument and financial investment. The capital turnover and exchange related to investment and financing are unconstrained.
◆To strengthen multi-level capital markets’ support on technology and innovation enterprises
While Shanghai Stock Exchange (SSE) is stepping up to make preparation for strategic emerging industries board, Shanghai Equity Exchange (SEE) also plans to set up technology and innovation board, and Shanghai municipal government will put forward related measures to link these two boards. Moreover, Shanghai will apply to first pilot in tiny securities companies which exclusively serve in regional equity markets.
◆ Attract internet financing tycoon to be established in Shanghai with policy space
Shanghai government will collaborate with supervision departments to promote licensed operation of the internet financing institutions with regulated management and development potential and to attract large e-commerce platforms to found small-loan companies, financial lease institutions and commercial factoring institutions in Shanghai. It takes the lead in piloting equity-based crowd-funding all over the country ,while Ant Dake (Ant Financial's equity-based crowd-funding platform) has been granted with the first business license numbered as “001”. Shanghai also encourages the strong private enterprises to establish Zhangjiang Technology Investment Bank to especially serve science-and-technology enterprises.
[Information Radar]
Promising future development for Shanghai New World in big health industry
------
According to XFA’s exclusive interview with Shanghai New World Co., Ltd. (600628.SH) and its wholly-owned subsidiary Caitongdetang, Shanghai New World is devoting great efforts to promoting big health strategy with works going well. At present, over 70 percent of its sales revenue contribute to its department stores and hotels. Based on the company’s new strategic planning, the big health industry, which will enjoy promising development, will be an important part in the company’s future business. On June 15, Shanghai New World announced to raise funds through private placement for extended projects of big health industry.
Shanghai New World is building an industry chain of TCM (traditional Chinese medicine) diagnosis and treatment through its subsidiary Shanghai Qunli Herbal Drug Store (holding 60 percent of stake in the company), which is running at full capacity with currently receiving more than 1,000 tumor patients every day. With Shanghai as the center and a radius of 30 kilometers, the company plans to build chain stores of Qunli Herbal Drug Store in districts like Jinshan, Fengxian and Baoshan in the future.It is expected to realize rapid expansion after finishing this private placement. It will also establish Caitongdetang-based healthcare industry chain to combine TCM and western medicine, not excluding gaining new chemical medicines through mergers and acquisitions. In addition, it is going to expand O2O mode of TCM healthcare and link with medical institutions, likely to upgrade into service industry.
Guiguan Electric Power to undertake Datang’s hydropower project in Laos
------
Guiguan Electric Power (600236.SH) is likely to undertake more overseas projects in the future, as its major shareholder China Datang Corp. (00991.HK) accelerates the construction of the “Belt and Road Initiatives”. Datang Corp. recently held a meeting to promote overseas projects under the “Belt and Road Initiatives”. Wang Yeping, general manager of Datang Corp. pledged joint efforts to sort out overseas operating projects. Currently, the hydropower project jointly developed by Datag Corp. and countries along the Mekong River has achieved new progress. The preliminary infrastructure of Pak Beng and Sanakham hydropower stations (whose installed capacity is 912MW and 660MW respectively) was approved by Laos. The market expects that Guiguan Electric Power, as an important listed hydropower company owned by Datang Corp., will possibly undertake the project mentioned.
[Industry Observation]
Jiangxi Copper Corp. to integrate Ganzhou Rare Earth
------
Recently, Jiangxi Copper Corp., major shareholder of Jiangxi Copper Co. Ltd. (600362. SH; 00358. HK), and its listed company visited the secretary of Ganzhou Municipal Party Committee to discuss cooperation on rare earth, according to the website of Guangzhou Municipal Government. Both sides agreed to speed up the construction of China South Rare Earth Group. Li Baomin, chairman of Jiangxi Copper Corp. and Jiangxi Copper Co. Ltd., addressed that Jiangxi Copper Corp. will give full play to its own advantages to promote the transformation and upgrading of China South Rare Earth Group. The market expects that the integration will continue.
Ganzhou Rare Earth Corp., Jiangxi Copper Corp. and Jiangxi Tungsten Industry Group jointly founded China South Rare Earth Group this March. Under the guide of Jiangxi Provincial SASAC, Jiangxi Copper Corp. is likely to accelerate to integrate with China South Rare Earth Group.
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