[Today’s Guide]
> SCO summit to convene soon, One Belt and One Road to receive more supports
> Pilot reform on exploration of oil and gas in Xinjiang initiates to build special energy zone
> NDRC and NEA to launch rural power grid modification with investment around RMB100 bln
> Chaodong Cement, YunNan Metropolitan Real Estate Development, etc. increase shareholding, Gf Securities forecasts great performance growth
[XFA Focus]
○SCO summit to convene soon, One Belt and One Road to receive more supports
------
The 2015 SCO and BRICS summits will be held in Ufa, Russia from July 8 to July 10. Chinese President Xi Jinping will attend the summits. The Chinese Academy of Social Sciences issued a report on July 7, pointing out that the development of the SCO and the construction of the One Belt and One Road can be advanced in coordination. It advises to accelerate the establishment of the SCO Development Fund and the SCO Development Bank and strengthen cooperation in energy, traffic, transportation and other infrastructure. China and Russia will jointly promote the construction of free trade zones under the framework of the SCO. The Ministry of Commerce disclosed on the same day that China will be the guest of hour at the Russian International Innovation Industry Exhibition to be held during the same period. The “Harmony” bullet train, Hualong One, big aircraft and drilling platforms will be present at the exhibition.
Comment: This is President Xi’s another visit to Russia after two months. China is conducting increasingly deep cooperation with Russia and other countries along the One Belt and One Road. Leading Chinese enterprises in the high-speed rail, nuclear power, aerospace, oil and gas as well as other key industries will see more development opportunities in the international capacity cooperation.
[XFA Selection]
○ The weekly report of China Securities Depository and Clearing Corporation Limited (CSDC) shows that last week saw a slight increase of 3 percent in the number of new investors on a weekly basis and the proportion of shareholding accounts dropped by 0.2 percentage points compared with the previous week.
○ The four biggest banks in China, namely Industrial and Commercial Bank of China Limited (01398.HK; 601398.SH), Agricultural Bank of China Limited (01288.HK; 601288.SH), China Construction Bank Corporation (00939.HK; 601939.SH) and Bank of China Limited (03988.HK; 601988.SH), recorded new RMB loans of 294.7 billion yuan in May, higher than the 191.9 billion yuan in April.
○ 160 listed companies in Jiangsu Province and 27 listed companies in Hainan Province indicated that they would take concrete actions to stabilize the stock market. More companies have joined the efforts in stabilizing the stock market.
○ The Ministry of Agriculture announced that the turnover of online agricultural products transaction exceeds 100 billion yuan across the country last year. The transaction size doubled.
○ The General Administration of Sport disclosed that eight provinces and municipalities have issued implementation opinions on the sport industry. The target in the industrial scale in 2025 is about 1.9 trillion yuan.
[Industry Information]
○Pilot reform on exploration of oil and gas in Xinjiang initiates with public tender for transfer
------
The Ministry of Land and Resources (MLR) issued a tender announcement on the exploration of oil and natural gas in several areas in Xinjiang Uygur Autonomous Region on July 7. With the approval of the State Council, the pilot reform on the exploration and exploitation of oil and gas in Xinjiang officially initiated. The MLR determined to conduct public tender for the transfer a total of six areas within China for the exploration of oil and natural gas in Xinjiang.
Comment: The move marks the commencement of the reform in the upper stream of the oil and gas resources with Xinjiang as the pilot. It is expected to end the monopoly of state-owned oil companies in the upper stream of the oil and gas industry. XFA reported that relevant authorities have planned to list Xinjiang as the pilot for the comprehensive reform in China’s energy industry and would provide more policy supports in the region. In the future, the exploration and refining are likely to be firstly deregulated in Xinjiang to build it into a “special energy zone”. Equipment manufacturers and operation enterprises with experiences in the oil and gas exploration are likely to embrace opportunities to participate in the resources development in the upper stream.
○NDRC and NEA to launch rural power grid modification with investment around RMB100 bln
------
The website of National Energy Administration (NEA) showed on July 7 that to ensure effective investment and promote stable economic growth, National Development and Reform Commission (NDRC) and NEA newly launched investment projects of around 92.62 billion yuan concerning rural power grid modification and upgrading this year. 25 provinces and the Xinjiang Production and Construction Corps are involved. NDRC and NEA require that each unit must kick off the construction in July and complete the construction tasks timely.
Comment: Rural power grid has very wide coverage across the country. The huge engineering and investment will obviously drive economic growth. NEA indicated that the investment in rural power grid modification will mainly be used to purchase flexible power units including circuit, transformer, tower, controlling system, communication system, etc. to drive the development of power equipment manufacturing industrial chain.
[Announcement Interpretation]
○Chaodong Cement, YunNan Metropolitan Real Estate Development, etc. increase shareholding
------
More companies join in the stream of increasing shareholding. Anhui Xinli Investment Group Co., Ltd., substantial shareholder of Anhui Chaodong Cement Co., Ltd. (600318.SH), increased shareholding in the company by 5.67 million shares at an average price of 14.76 yuan per share on July 7, accounting for 2.34 percent of its total share capital. Yunnan Metropolitan Construction and Investment Group Company Limited, controlling shareholder of Yunnan Metropolitan Real Estate Development Co., Ltd. (600239.SH), increased shareholding in the company by 17.18 million shares, accounting for 1.6 percent of its total share capital. It plans to increase shareholding in the company by no more than 2 percent of the company’s total share capital in next two months; actual controller of BaoLingBao Biology Co., Ltd. (002286.SZ) increased shareholding in the company by 4.85 million shares at an average price of 11.06 yuan per share on July 6 and 7, accounting for 1.31 percent of its total share capital. The actual controller promises to increase shareholding in the company by another 8 million shares in next six months, accounting for no more than 2.17 percent of its total share capital. In addition, the controlling shareholder or senior management of Fujian Dongbai (Group) Co., Ltd. (600693.SH), Jiangsu Hongdou Industrial Co., Ltd. (600400.SH), Guangdong Taiantang Pharmaceutical Co., Ltd. (002433.SZ), Xi'an Longi Silicon Materials Corp. (601012.SH), China Western Power Industrial Co., Ltd. (002630.SZ), etc. all increase shareholding in the companies.
At the meantime, multi companies launched repurchase and shareholding increase plans. SJEC Corporation (601313.SH) announces to repurchase its own shares through bidding transaction at a price no more than 15.17 yuan per share and a total amount no more than 152 million yuan. The repurchased shares are expected to account for 2.50 percent of its total share capital. The company’s latest stock price closed at 13.65 yuan per share; controlling shareholder of ZhuZhou QianJin Pharmaceutical Co., Ltd. (600479.SH) plans to increase shareholding in the company by no less than 50 million yuan in next six months; controlling shareholder of Taiyuan Twin Tower Aluminum Oxide Co., Ltd. (000795.SZ) plans to increase shareholding in the company by no less than 1 percent of its total share capital in next three months.
[Financial Reports Express]
○Gf Securities forecasts great performance growth, shadow stocks to benefit
------
Thanks to the increase of both trading volume and price of stock market, Gf Securities Co., Ltd. (000776.SZ) expects its net profit in the first half year to see a year-on-year growth of 399~405 percent and the earning per share is 1.29~1.3 yuan; Zhongshan Public Utilities Group Co., Ltd. (000685.SZ) expects its net profit in the first half year to see a year-on-year growth of 228~239 percent and the earning per share is 1.19~1.23 yuan; Jilin Aodong Pharmaceutical Group Co., Ltd. (000623.SZ) expects its net profit in the first half year to see a year-on-year growth of 196~214 percent and the earning per share is 1.79~1.90 yuan. Dunhua Jincheng Industrial Co., Ltd., substantial shareholder of the company, plans to increase shareholding in the company with 100 million yuan in 10 trading days from July 8. The performance growth of Zhongshan Public Utilities and Jilin Aodong Pharmaceutical mainly comes from the investment return from Gf Securities.
In addition, thanks to the investment return gained by selling the equities of Yibin Tianyuan Group Co., Ltd., Dymatic Chemicals, Inc. (002054.SZ) expects its net profit to see a year-on-year growth of 430~460 percent in its semiyearly report; due to the sales of the stocks of Western Securities Co., Ltd. (002673.SZ) and China Everbright Bank Co., Ltd. (601818.SH), Shanghai SMI Holding Co., Ltd. (600649.SH) expects its net profit in the first half year to see a year-on-year growth of 310~360 percent; thanks to the financial consolidation of Jilin Jinbao Pharmaceutical Co., Ltd., Tong Hua Shuang Long Chemical Industry Co., Ltd. (300108.SZ) expects its net profit to see a year-on-year growth of 320~340 percent in its semiyearly report.
○Guizhou Bailing Group Pharmaceutical plans high share conversion
------
Controlling shareholder of Guizhou Bailing Group Pharmaceutical Co., Ltd. (002424.SZ) proposes a 20-for-10 conversion of capital surplus into shares in the semiyearly distribution plan.
[Trading Trends]
○Balance of margin trade declines sharply, reduction of leverage increases
------
China’s two exchanges in Shanghai and Shenzhen showed the combined outstanding balance of margin trade at 1.77 trillion yuan on July 6. The outflow of funds for margin trade business on Shanghai and Shenzhen stock markets exceeded 136 billion yuan on the same day. The balance of margin trade sees accelerated drop since the latter part of June. According to the investigation by XFA, the financing asset reaching alarm line of certain securities department in Shenzhen accounts around 30 percent. There are two accounts close position passively on average every day in another mid-sized securities department.
> SCO summit to convene soon, One Belt and One Road to receive more supports
> Pilot reform on exploration of oil and gas in Xinjiang initiates to build special energy zone
> NDRC and NEA to launch rural power grid modification with investment around RMB100 bln
> Chaodong Cement, YunNan Metropolitan Real Estate Development, etc. increase shareholding, Gf Securities forecasts great performance growth
[XFA Focus]
○SCO summit to convene soon, One Belt and One Road to receive more supports
------
The 2015 SCO and BRICS summits will be held in Ufa, Russia from July 8 to July 10. Chinese President Xi Jinping will attend the summits. The Chinese Academy of Social Sciences issued a report on July 7, pointing out that the development of the SCO and the construction of the One Belt and One Road can be advanced in coordination. It advises to accelerate the establishment of the SCO Development Fund and the SCO Development Bank and strengthen cooperation in energy, traffic, transportation and other infrastructure. China and Russia will jointly promote the construction of free trade zones under the framework of the SCO. The Ministry of Commerce disclosed on the same day that China will be the guest of hour at the Russian International Innovation Industry Exhibition to be held during the same period. The “Harmony” bullet train, Hualong One, big aircraft and drilling platforms will be present at the exhibition.
Comment: This is President Xi’s another visit to Russia after two months. China is conducting increasingly deep cooperation with Russia and other countries along the One Belt and One Road. Leading Chinese enterprises in the high-speed rail, nuclear power, aerospace, oil and gas as well as other key industries will see more development opportunities in the international capacity cooperation.
[XFA Selection]
○ The weekly report of China Securities Depository and Clearing Corporation Limited (CSDC) shows that last week saw a slight increase of 3 percent in the number of new investors on a weekly basis and the proportion of shareholding accounts dropped by 0.2 percentage points compared with the previous week.
○ The four biggest banks in China, namely Industrial and Commercial Bank of China Limited (01398.HK; 601398.SH), Agricultural Bank of China Limited (01288.HK; 601288.SH), China Construction Bank Corporation (00939.HK; 601939.SH) and Bank of China Limited (03988.HK; 601988.SH), recorded new RMB loans of 294.7 billion yuan in May, higher than the 191.9 billion yuan in April.
○ 160 listed companies in Jiangsu Province and 27 listed companies in Hainan Province indicated that they would take concrete actions to stabilize the stock market. More companies have joined the efforts in stabilizing the stock market.
○ The Ministry of Agriculture announced that the turnover of online agricultural products transaction exceeds 100 billion yuan across the country last year. The transaction size doubled.
○ The General Administration of Sport disclosed that eight provinces and municipalities have issued implementation opinions on the sport industry. The target in the industrial scale in 2025 is about 1.9 trillion yuan.
[Industry Information]
○Pilot reform on exploration of oil and gas in Xinjiang initiates with public tender for transfer
------
The Ministry of Land and Resources (MLR) issued a tender announcement on the exploration of oil and natural gas in several areas in Xinjiang Uygur Autonomous Region on July 7. With the approval of the State Council, the pilot reform on the exploration and exploitation of oil and gas in Xinjiang officially initiated. The MLR determined to conduct public tender for the transfer a total of six areas within China for the exploration of oil and natural gas in Xinjiang.
Comment: The move marks the commencement of the reform in the upper stream of the oil and gas resources with Xinjiang as the pilot. It is expected to end the monopoly of state-owned oil companies in the upper stream of the oil and gas industry. XFA reported that relevant authorities have planned to list Xinjiang as the pilot for the comprehensive reform in China’s energy industry and would provide more policy supports in the region. In the future, the exploration and refining are likely to be firstly deregulated in Xinjiang to build it into a “special energy zone”. Equipment manufacturers and operation enterprises with experiences in the oil and gas exploration are likely to embrace opportunities to participate in the resources development in the upper stream.
○NDRC and NEA to launch rural power grid modification with investment around RMB100 bln
------
The website of National Energy Administration (NEA) showed on July 7 that to ensure effective investment and promote stable economic growth, National Development and Reform Commission (NDRC) and NEA newly launched investment projects of around 92.62 billion yuan concerning rural power grid modification and upgrading this year. 25 provinces and the Xinjiang Production and Construction Corps are involved. NDRC and NEA require that each unit must kick off the construction in July and complete the construction tasks timely.
Comment: Rural power grid has very wide coverage across the country. The huge engineering and investment will obviously drive economic growth. NEA indicated that the investment in rural power grid modification will mainly be used to purchase flexible power units including circuit, transformer, tower, controlling system, communication system, etc. to drive the development of power equipment manufacturing industrial chain.
[Announcement Interpretation]
○Chaodong Cement, YunNan Metropolitan Real Estate Development, etc. increase shareholding
------
More companies join in the stream of increasing shareholding. Anhui Xinli Investment Group Co., Ltd., substantial shareholder of Anhui Chaodong Cement Co., Ltd. (600318.SH), increased shareholding in the company by 5.67 million shares at an average price of 14.76 yuan per share on July 7, accounting for 2.34 percent of its total share capital. Yunnan Metropolitan Construction and Investment Group Company Limited, controlling shareholder of Yunnan Metropolitan Real Estate Development Co., Ltd. (600239.SH), increased shareholding in the company by 17.18 million shares, accounting for 1.6 percent of its total share capital. It plans to increase shareholding in the company by no more than 2 percent of the company’s total share capital in next two months; actual controller of BaoLingBao Biology Co., Ltd. (002286.SZ) increased shareholding in the company by 4.85 million shares at an average price of 11.06 yuan per share on July 6 and 7, accounting for 1.31 percent of its total share capital. The actual controller promises to increase shareholding in the company by another 8 million shares in next six months, accounting for no more than 2.17 percent of its total share capital. In addition, the controlling shareholder or senior management of Fujian Dongbai (Group) Co., Ltd. (600693.SH), Jiangsu Hongdou Industrial Co., Ltd. (600400.SH), Guangdong Taiantang Pharmaceutical Co., Ltd. (002433.SZ), Xi'an Longi Silicon Materials Corp. (601012.SH), China Western Power Industrial Co., Ltd. (002630.SZ), etc. all increase shareholding in the companies.
At the meantime, multi companies launched repurchase and shareholding increase plans. SJEC Corporation (601313.SH) announces to repurchase its own shares through bidding transaction at a price no more than 15.17 yuan per share and a total amount no more than 152 million yuan. The repurchased shares are expected to account for 2.50 percent of its total share capital. The company’s latest stock price closed at 13.65 yuan per share; controlling shareholder of ZhuZhou QianJin Pharmaceutical Co., Ltd. (600479.SH) plans to increase shareholding in the company by no less than 50 million yuan in next six months; controlling shareholder of Taiyuan Twin Tower Aluminum Oxide Co., Ltd. (000795.SZ) plans to increase shareholding in the company by no less than 1 percent of its total share capital in next three months.
[Financial Reports Express]
○Gf Securities forecasts great performance growth, shadow stocks to benefit
------
Thanks to the increase of both trading volume and price of stock market, Gf Securities Co., Ltd. (000776.SZ) expects its net profit in the first half year to see a year-on-year growth of 399~405 percent and the earning per share is 1.29~1.3 yuan; Zhongshan Public Utilities Group Co., Ltd. (000685.SZ) expects its net profit in the first half year to see a year-on-year growth of 228~239 percent and the earning per share is 1.19~1.23 yuan; Jilin Aodong Pharmaceutical Group Co., Ltd. (000623.SZ) expects its net profit in the first half year to see a year-on-year growth of 196~214 percent and the earning per share is 1.79~1.90 yuan. Dunhua Jincheng Industrial Co., Ltd., substantial shareholder of the company, plans to increase shareholding in the company with 100 million yuan in 10 trading days from July 8. The performance growth of Zhongshan Public Utilities and Jilin Aodong Pharmaceutical mainly comes from the investment return from Gf Securities.
In addition, thanks to the investment return gained by selling the equities of Yibin Tianyuan Group Co., Ltd., Dymatic Chemicals, Inc. (002054.SZ) expects its net profit to see a year-on-year growth of 430~460 percent in its semiyearly report; due to the sales of the stocks of Western Securities Co., Ltd. (002673.SZ) and China Everbright Bank Co., Ltd. (601818.SH), Shanghai SMI Holding Co., Ltd. (600649.SH) expects its net profit in the first half year to see a year-on-year growth of 310~360 percent; thanks to the financial consolidation of Jilin Jinbao Pharmaceutical Co., Ltd., Tong Hua Shuang Long Chemical Industry Co., Ltd. (300108.SZ) expects its net profit to see a year-on-year growth of 320~340 percent in its semiyearly report.
○Guizhou Bailing Group Pharmaceutical plans high share conversion
------
Controlling shareholder of Guizhou Bailing Group Pharmaceutical Co., Ltd. (002424.SZ) proposes a 20-for-10 conversion of capital surplus into shares in the semiyearly distribution plan.
[Trading Trends]
○Balance of margin trade declines sharply, reduction of leverage increases
------
China’s two exchanges in Shanghai and Shenzhen showed the combined outstanding balance of margin trade at 1.77 trillion yuan on July 6. The outflow of funds for margin trade business on Shanghai and Shenzhen stock markets exceeded 136 billion yuan on the same day. The balance of margin trade sees accelerated drop since the latter part of June. According to the investigation by XFA, the financing asset reaching alarm line of certain securities department in Shenzhen accounts around 30 percent. There are two accounts close position passively on average every day in another mid-sized securities department.
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