[Today’s Guide]
> Method on investment of pension fund to solicit public opinions, stock market to see more capitals
> SMIC to develop 14nm technology and to improve overall IC level I China
> Taiji Industry to develop engineering service, China Sun Pharmaceutical Machinery to add stakes in gene sequencing
> Leveraged staff shareholding shows confidence, stocks dropping below offering prices concerned
[XFA Focus]
○Method on investment of pension fund to solicit public opinions, stock market to see more capitals
------
The Ministry of Human Resources and Social Security (MHRSS) and the Ministry of Finance issued a document to solicit public opinions on the ‘Management Method on Investment of Pension Fund’ (the ‘Method’). It will appoint professional investment management companies to manage the pension fund. The maximum proportion of investment in stocks, stock funds, mixed funds and stock-based pension products is restricted to 30 percent of total net assets.
Comment: Based on the statistics of the MHRSS, the total basic pension fund reached 3.56 trillion yuan by the end of last year. The ‘Method’ will change the current situation that the pension fund can only be deposited in banks or invested in treasury bonds. It will bring over 1 trillion yuan into the stock market theoretically. As the core logic of the bull market driven by reform and transformation remain unchanged, the cut of interest rate and the required reserve ratio by the central bank indicates increasingly loose monetary policies. The investment in the stock market with pension fund shows that the stock market plays an important role in national economy. As shareholders and senior management are increasing their shareholdings in more and more companies, it is expected to gradually reverse the pessimistic expectation on the market. If the market continues to suffer excessive decreases out of panic in short term, it cannot rule out the possibility that more good policies will be introduced.
◆ Many large insurance companies told XFA that they conducted bottom-fishing initiatives in recent two trading days and mainly bought banks, consumables and other blue chips. It is estimated that the size can be 10 billion yuan at least.
[XFA Selection]
○ The signing ceremony of the Articles of Agreement of the Asian Infrastructure Investment Bank was held on June 29. 50 founding members with domestic approval formally signed the agreement.
○ XFA learnt that the overall plan on the reform of the oil and gas system reform is expected to be discussed at the Beidaihe meeting and will be submitted to the Leading Group for Overall Reform in September or October.
○ The ceremony marking the start of construction on the Chinese section of the China-Russia East Route natural gas pipeline was held on June 29. It will ensure that the pipeline will be completed and put into operation on schedule in 2018.
○ The Ministry of Environmental Protection issued the first report on handling haze on June 29. The PM2.5 in three major economic circles has reduced by over 10 percent since last year.
○ Bloomberg reported that BlackRock, the largest fund management company in the world, plans to invest in A shares through the Shanghai-Hong Kong Stock Connect.
[Industry Information]
○SMIC and Belgium-based institute to develop 14nm technology
------
XFA learnt that Semiconductor Manufacturing International Corporation (SMIC, 00981.HK), SMIC Advanced Technology Research & Development (Shanghai) Corporation and the Belgium-based microelectronics research institute IMEC held the signing ceremony for the joint research and development of the 14nm advanced technology on June 29. Chinese Premier Li Keqiang and Belgian Prime Minster Charles Michel witnessed the signing ceremony. SMIC, Huawei, IMEC and Qualcomm signed an agreement to invest in the formation of SMIC Advanced Technology Research & Development on June 23. The company will develop the next generation (4nm) of CMOS technology and build the most advanced platform for the research and development integrated circuit in China.
Comment: Based on the targets proposed in the ‘Outline on Promoting the Development of Integrated Circuit Industry in China’, the 16/14nm manufacturing technique will conduct mass production in 2020. The packaging and testing technology will reach the leading level in the world and key equipment and materials will be covered by the international purchasing system. An advanced, safe and reliable integrated circuit industrial system will be established basically. The above cooperation will facilitate achieving the targets and improve the overall technical level of the integrated circuit industry in China.
○Jinbei-Jiangsu UHV DC transmission project to initiate
------
XFA learnt from the State Grid Corporation of China that the ±800 kilovolt ultra-high voltage and direct current transmission project from the northern part of Shanxi Province to Nanjing City, Jiangsu Province will initiate construction on June 29. An investment of 16.2 billion yuan will be made in the project and the output value of power transmission and transformation equipment manufacturing will reach 11.8 billion yuan. The project was approved by the National Development and Reform Commission in June and plans to put into operation in 2017.
Comment: The project is a key power transmission channel adopted in the air pollution prevention and treatment campaign plan. The project will adopt self-developed ultra-high voltage and direct current transmission technology and equipment. It is expected to bring substantial orders to relevant enterprises. The completion of the project will facilitate the development and delivery of coal and wind power energy in Shanxi Province. It is expected that 15 million kilowatt of thermal power and 7.8 million kilowatt of wind power and other new energy will put into operation in northern Shanxi in the following five years.
[Announcement Interpretation]
○Taiji Industry to acquire EDRI to develop engineering technology service
------
Wuxi Taiji Industry Company Ltd. (600667.SH) plans to issue 493 million shares at 4.61 yuan per share to Wuxi Industry Development Group Co., Ltd., Wuxi Financial Investment Limited Liability Company, etc. to acquire 81.74 percent equities of the IT Electronic Eleventh Design & Research Institute Scientific and Technological Engineering Corporation Limited (EDRI) held by them with 2,272 million yuan.
The company also plans to issue 420 million shares to the staff shareholding plan of EDRI, etc. at 5 yuan per share through private placement to raise a supporting fund of 2.1 billion yuan to construct, operate and acquire photovoltaic power station, supplement working capital, etc. Upon completion of transaction, the company will develop engineering technology service business and photovoltaic power station investment and operation business.
○China Sun Pharmaceutical Machinery to control Shenyou Biotechnology to add stakes in gene sequencing
------
Hunan China Sun Pharmaceutical Machinery Co., Ltd. (300216.SZ) plans to acquire 56.47 percent equities of Shanghai Shenyou Biotechnology Limited Liability Company with 70.10 million yuan. The latter is previously owned by Shanghai Human Genome Research Center under Shanghai Academy of Science & Technology and its industrialization of gene sequencing products takes a leading position globally. Meanwhile, China Sun Pharmaceutical Machinery plans to invest 60,000,000 yuan, accounting for 11 percent of total equity, in establishing “Changyin Financial Leasing Company”, the first financial leasing company in Hunan.
○Longjian Road＆Bridge gains big engineering construction order
------
Longjian Road＆Bridge Co., Ltd. (600853.SH) receives bid-winning notice from the engineering construction headquarter of Baoquan-Lanxi section of Heilongjiang-Dalian Road. The company and its wholly-owned subsidiary totally win the bidding of seven sections with a total contract amount of 1,184 million yuan, accounting for 21.26 percent of the company’s revenue in 2014.
○Actual controller of Conba Pharmaceutical increases shareholding
------
Hu Jiqiang, actual controller of Zhejiang Conba Pharmaceutical Co., Ltd. (600572.SH), increased shareholding in the company on June 29 by 1.10 million shares at an average price of 21.48 yuan per share, accounting for 0.11 percent of the company’s total share capital. Hu plans to increase shareholding by no more than 10 million shares (above 1.10 million shares included) depending on circumstances from June 29 to August 28. The shareholding proportion planned to be increased will not exceed 2 percent of the company’s total share capital.
[Financial Reports Express]
○Wanfeng Auto Wheel, Longjin Pharmaceutical and Lead Auto Equipment plan high share conversion
------
Controlling shareholder of Zhejiang Wanfeng Auto Wheel Co., Ltd. (002085.SZ) proposes a 12-for-10 conversion of capital surplus into shares in its semiyearly report; controlling shareholder of Kunming Longjin Pharmaceutical Co., Ltd. (002750.SZ) proposes a 20-for-10 conversion of capital surplus into shares in its semiyearly report; Wuxi Lead Auto Equipment Co., Ltd. (300450.SZ) proposes a 10-for-10 conversion of capital surplus into shares in its semiyearly report.
○Yongli Belting and Canaan Technology forecast performance growth in semiyearly report
------
Since the financial statement of Tsingdao Yingdong Modeling Technology Company Limited will be covered in report period, Shanghai Yongli Belting Co., Ltd. (300230.SZ) estimates its net profit in the first half year to see a year-on-year growth of 20~50 percent in semiyearly report; due to increasing capacity and sales, Zhejiang Canaan Technology Co., Ltd. (300412.SZ) predicts that its net profit will see a year-on-year growth of 30~60 percent in the first half year.
[Data Speaks]
○Leveraged staff shareholding shows confidence, stocks dropping below offering prices concerned
------
According to XFA’s statistics, due to recent sharp market adjustment, some companies launching leveraged staff shareholding plans see their stock prices drop below the offering prices of their staff shareholding plans. Compared with equity incentive plan, staff shareholding capital needs to be locked in advance and some are leveraged, showing enterprises’ confidence in future development. Therefore, their performance and capital operation will be more concerned by market in the future.
Data shows that at present, nearly 60 companies have completed staff shareholding plan and around 10 of them have dropped below offering prices. The offering prices of Wonders Information Co., Ltd. (300168.SZ), Hubei Dinglong Chemical Co., Ltd. (300054.SZ) and Chuying Agro-Pastoral Group Co., Ltd. (002477.SZ) have dropped by 35 percent, 24.5 percent and 20 percent, respectively, ranking the top.
> Method on investment of pension fund to solicit public opinions, stock market to see more capitals
> SMIC to develop 14nm technology and to improve overall IC level I China
> Taiji Industry to develop engineering service, China Sun Pharmaceutical Machinery to add stakes in gene sequencing
> Leveraged staff shareholding shows confidence, stocks dropping below offering prices concerned
[XFA Focus]
○Method on investment of pension fund to solicit public opinions, stock market to see more capitals
------
The Ministry of Human Resources and Social Security (MHRSS) and the Ministry of Finance issued a document to solicit public opinions on the ‘Management Method on Investment of Pension Fund’ (the ‘Method’). It will appoint professional investment management companies to manage the pension fund. The maximum proportion of investment in stocks, stock funds, mixed funds and stock-based pension products is restricted to 30 percent of total net assets.
Comment: Based on the statistics of the MHRSS, the total basic pension fund reached 3.56 trillion yuan by the end of last year. The ‘Method’ will change the current situation that the pension fund can only be deposited in banks or invested in treasury bonds. It will bring over 1 trillion yuan into the stock market theoretically. As the core logic of the bull market driven by reform and transformation remain unchanged, the cut of interest rate and the required reserve ratio by the central bank indicates increasingly loose monetary policies. The investment in the stock market with pension fund shows that the stock market plays an important role in national economy. As shareholders and senior management are increasing their shareholdings in more and more companies, it is expected to gradually reverse the pessimistic expectation on the market. If the market continues to suffer excessive decreases out of panic in short term, it cannot rule out the possibility that more good policies will be introduced.
◆ Many large insurance companies told XFA that they conducted bottom-fishing initiatives in recent two trading days and mainly bought banks, consumables and other blue chips. It is estimated that the size can be 10 billion yuan at least.
[XFA Selection]
○ The signing ceremony of the Articles of Agreement of the Asian Infrastructure Investment Bank was held on June 29. 50 founding members with domestic approval formally signed the agreement.
○ XFA learnt that the overall plan on the reform of the oil and gas system reform is expected to be discussed at the Beidaihe meeting and will be submitted to the Leading Group for Overall Reform in September or October.
○ The ceremony marking the start of construction on the Chinese section of the China-Russia East Route natural gas pipeline was held on June 29. It will ensure that the pipeline will be completed and put into operation on schedule in 2018.
○ The Ministry of Environmental Protection issued the first report on handling haze on June 29. The PM2.5 in three major economic circles has reduced by over 10 percent since last year.
○ Bloomberg reported that BlackRock, the largest fund management company in the world, plans to invest in A shares through the Shanghai-Hong Kong Stock Connect.
[Industry Information]
○SMIC and Belgium-based institute to develop 14nm technology
------
XFA learnt that Semiconductor Manufacturing International Corporation (SMIC, 00981.HK), SMIC Advanced Technology Research & Development (Shanghai) Corporation and the Belgium-based microelectronics research institute IMEC held the signing ceremony for the joint research and development of the 14nm advanced technology on June 29. Chinese Premier Li Keqiang and Belgian Prime Minster Charles Michel witnessed the signing ceremony. SMIC, Huawei, IMEC and Qualcomm signed an agreement to invest in the formation of SMIC Advanced Technology Research & Development on June 23. The company will develop the next generation (4nm) of CMOS technology and build the most advanced platform for the research and development integrated circuit in China.
Comment: Based on the targets proposed in the ‘Outline on Promoting the Development of Integrated Circuit Industry in China’, the 16/14nm manufacturing technique will conduct mass production in 2020. The packaging and testing technology will reach the leading level in the world and key equipment and materials will be covered by the international purchasing system. An advanced, safe and reliable integrated circuit industrial system will be established basically. The above cooperation will facilitate achieving the targets and improve the overall technical level of the integrated circuit industry in China.
○Jinbei-Jiangsu UHV DC transmission project to initiate
------
XFA learnt from the State Grid Corporation of China that the ±800 kilovolt ultra-high voltage and direct current transmission project from the northern part of Shanxi Province to Nanjing City, Jiangsu Province will initiate construction on June 29. An investment of 16.2 billion yuan will be made in the project and the output value of power transmission and transformation equipment manufacturing will reach 11.8 billion yuan. The project was approved by the National Development and Reform Commission in June and plans to put into operation in 2017.
Comment: The project is a key power transmission channel adopted in the air pollution prevention and treatment campaign plan. The project will adopt self-developed ultra-high voltage and direct current transmission technology and equipment. It is expected to bring substantial orders to relevant enterprises. The completion of the project will facilitate the development and delivery of coal and wind power energy in Shanxi Province. It is expected that 15 million kilowatt of thermal power and 7.8 million kilowatt of wind power and other new energy will put into operation in northern Shanxi in the following five years.
[Announcement Interpretation]
○Taiji Industry to acquire EDRI to develop engineering technology service
------
Wuxi Taiji Industry Company Ltd. (600667.SH) plans to issue 493 million shares at 4.61 yuan per share to Wuxi Industry Development Group Co., Ltd., Wuxi Financial Investment Limited Liability Company, etc. to acquire 81.74 percent equities of the IT Electronic Eleventh Design & Research Institute Scientific and Technological Engineering Corporation Limited (EDRI) held by them with 2,272 million yuan.
The company also plans to issue 420 million shares to the staff shareholding plan of EDRI, etc. at 5 yuan per share through private placement to raise a supporting fund of 2.1 billion yuan to construct, operate and acquire photovoltaic power station, supplement working capital, etc. Upon completion of transaction, the company will develop engineering technology service business and photovoltaic power station investment and operation business.
○China Sun Pharmaceutical Machinery to control Shenyou Biotechnology to add stakes in gene sequencing
------
Hunan China Sun Pharmaceutical Machinery Co., Ltd. (300216.SZ) plans to acquire 56.47 percent equities of Shanghai Shenyou Biotechnology Limited Liability Company with 70.10 million yuan. The latter is previously owned by Shanghai Human Genome Research Center under Shanghai Academy of Science & Technology and its industrialization of gene sequencing products takes a leading position globally. Meanwhile, China Sun Pharmaceutical Machinery plans to invest 60,000,000 yuan, accounting for 11 percent of total equity, in establishing “Changyin Financial Leasing Company”, the first financial leasing company in Hunan.
○Longjian Road＆Bridge gains big engineering construction order
------
Longjian Road＆Bridge Co., Ltd. (600853.SH) receives bid-winning notice from the engineering construction headquarter of Baoquan-Lanxi section of Heilongjiang-Dalian Road. The company and its wholly-owned subsidiary totally win the bidding of seven sections with a total contract amount of 1,184 million yuan, accounting for 21.26 percent of the company’s revenue in 2014.
○Actual controller of Conba Pharmaceutical increases shareholding
------
Hu Jiqiang, actual controller of Zhejiang Conba Pharmaceutical Co., Ltd. (600572.SH), increased shareholding in the company on June 29 by 1.10 million shares at an average price of 21.48 yuan per share, accounting for 0.11 percent of the company’s total share capital. Hu plans to increase shareholding by no more than 10 million shares (above 1.10 million shares included) depending on circumstances from June 29 to August 28. The shareholding proportion planned to be increased will not exceed 2 percent of the company’s total share capital.
[Financial Reports Express]
○Wanfeng Auto Wheel, Longjin Pharmaceutical and Lead Auto Equipment plan high share conversion
------
Controlling shareholder of Zhejiang Wanfeng Auto Wheel Co., Ltd. (002085.SZ) proposes a 12-for-10 conversion of capital surplus into shares in its semiyearly report; controlling shareholder of Kunming Longjin Pharmaceutical Co., Ltd. (002750.SZ) proposes a 20-for-10 conversion of capital surplus into shares in its semiyearly report; Wuxi Lead Auto Equipment Co., Ltd. (300450.SZ) proposes a 10-for-10 conversion of capital surplus into shares in its semiyearly report.
○Yongli Belting and Canaan Technology forecast performance growth in semiyearly report
------
Since the financial statement of Tsingdao Yingdong Modeling Technology Company Limited will be covered in report period, Shanghai Yongli Belting Co., Ltd. (300230.SZ) estimates its net profit in the first half year to see a year-on-year growth of 20~50 percent in semiyearly report; due to increasing capacity and sales, Zhejiang Canaan Technology Co., Ltd. (300412.SZ) predicts that its net profit will see a year-on-year growth of 30~60 percent in the first half year.
[Data Speaks]
○Leveraged staff shareholding shows confidence, stocks dropping below offering prices concerned
------
According to XFA’s statistics, due to recent sharp market adjustment, some companies launching leveraged staff shareholding plans see their stock prices drop below the offering prices of their staff shareholding plans. Compared with equity incentive plan, staff shareholding capital needs to be locked in advance and some are leveraged, showing enterprises’ confidence in future development. Therefore, their performance and capital operation will be more concerned by market in the future.
Data shows that at present, nearly 60 companies have completed staff shareholding plan and around 10 of them have dropped below offering prices. The offering prices of Wonders Information Co., Ltd. (300168.SZ), Hubei Dinglong Chemical Co., Ltd. (300054.SZ) and Chuying Agro-Pastoral Group Co., Ltd. (002477.SZ) have dropped by 35 percent, 24.5 percent and 20 percent, respectively, ranking the top.
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