[Today's Guide]
○New hydropower stations expected to start construction and boost investment in hydropower field
○Insurance funds optimistic about state-owned assets and enterprises reform in Shanghai and Chongqing
○Supportive policies for cross-border e-commerce might see accelerated implementation
○Jingwei Electric Wire achieves progress in expanding downstream industrial chain
[Authoritative Voice]
New hydropower stations expected to start construction and boost investment in hydropower field
------
The overall scale of hydropower projects initiated construction in 2015 is less than that in last two years due to the decline in economy of to-be-developed projects and difficulty in coordination of immigration and environmental protection. However, based on the progress of the preparatory work of Baihetan and Wudongde hydropower stations, these two projects are very likely to be approved for starting construction at the end of the year and is expected to boost investment in hydropower field significantly. Public information shows that once completed, the Baihetan hydropower station will be the second largest hydropower station in China after the Three Gorges Hydropower Station. The total installed capacity of Baihetan and Wudongde hydropower stations will reach 26 million kilowatt and the static investment will exceed 100 billion yuan.
Comment: Infrastructure construction is fundamental in hydropower projects construction. China Gezhouba Group Company Limited (600068.SH) won the bidding in the civil engineering and installation of metal structure projects related to Baihetan and Wudongde hydropower stations in 2014 with a total amount of over 9.2 billion yuan. Power Construction Corporation of China, Ltd. (601669.SH) won the bidding in Baihetan hydropower station project in the same year with a total amount of nearly 6 billion yuan. In addition, Baihetan hydropower station plans to adopt the hydropower unit with a unit capacity of 1 million kilowatt. Dongfang Electric Corporation Limited (01072.HK; 600875.SH) is one of the few companies in China enable to develop hydropower units with 1 million kilowatt.
[XFA View]
A shares to reflect fundamentals changes
------
The A-share market experienced a fairly influential recovery led by the concept of SOEs reform since last week, which triggered the successful expectation on double dip of optimistic investors. As a result of the unexpected fluctuation in the exchange rate recently, the valuation on different industries is under adjustment. All these signs show that the A-share market is returning to the normal state after various extraordinary measures on rescuing and it starts to reflect the changes of fundamentals more.
The issue of this column in mid-July reminded investors that the policy bailout plan was to "rescue the market" rather than "ensuring growth". The purposes of the policy bailout plan were to prevent systematic risks, restore the normal pricing and resources allocation functions of the market. After achieving such preliminary targets as stabilizing confidence and restoring the liquidity, its final purpose is to promote the market to return to its normal operation. Based on the moves of the regulatory authorities, the portfolio policies are converting from "rescuing the market" into "stabilizing the market" after eliminating the risks on the out of control and expansion of liquidity crisis in the A-share market.
Recent measures, including the restriction on program trading and the suspension of intraday trading in short selling, are based on regulation and tend to be neutral. It shows the regulatory idea of "stabilizing the market with calmness", which is to reduce market fluctuation, prevent extreme surge and plunge as well as unexpected changes to the macroeconomic regulation caused by the stock market. As a result of the regulatory intention, the fluctuation of the market will be determined by the external environment rather than the changes of endogenous factors.
According to the recent market trend, abnormal conditions during the "stock market crash" with about 1,000 stocks rising or falling together or investors simply gambling on the move of the "national team", have already greatly improved. Wise investors firstly give positive response to bullish factors on fundamentals. For example, the performance of the new energy automobile and cultivation sectors，which are supported by the policies with actual improvement in fundamentals, have outperformed the market. In particular, with the suspension of listed companies under China Ocean Shipping (Group) Company (COSCO), China Shipping (Group) Company and Aviation Industry Corporation of China, the merger and reorganization of listed companies triggered by the state-owned assets reform has gradually become the market hotpot, reflecting that the investors are more reasonable to consider many factors when making the decisions, including the policy-related benefit and internal drivers for the capital market. It is necessary to remind the investors that it will take more time to further determine the actual impact of the current exchange rate fluctuation on the A-share trend and even the valuation of different industries. Investors should pay close attention to this situation.
[Institutions' Movement]
Insurance funds optimistic about state-owned assets and enterprises reform in Shanghai and Chongqing
------
The insurance assets management companies, including the Taikang Life Insurance Co., Ltd., believe that the state-owned assets and enterprises reform is likely to be advanced in a multilevel after finalizing the top-level design. It means that besides central enterprises, relevant moves of local SOEs also worth attention . They are especially rosy about the state-owned assets and enterprises reform in Shanghai and Chongqing. The state-owned asset reform in Shanghai has started earlier and fully prepared. Relevant cases are of benchmarking demonstration in China. The reform in Chongqing is famous for its leadership with rich experience, courage and strategies, which may innovate a new model in leading China's related reform trend.
[Hotspot Investigation]
Liquidity problem of NEEQ might eased gradually
------
Latest special investigation of XFA shows that over 3,000 enterprises have been listed on the National Equities Exchange and Quotations (NEEQ), commonly known as the New Third Board and similar to OTCBB in the U.S. market. These listed enterprises see an average operation time exceeding 10 years and an average registered capital of 46 million yuan. The number of enterprises being listed on NEEQ might exceed 5,000 before year end. It is learnt that impacted by the IPOs suspension on Shanghai and Shenzhen Stock Exchanges, etc., some quality enterprises have determined to be listed on NEEQ instead.
Similar to the situation encountered by main boards, NEEQ also suffered liquidity problem previously. It is learnt that the preliminary scheme of the layer system of NEEQ has been formed. The launch of layer system might find NEEQ a way out of the difficulty. Overseas experience suggests that once 20 percent of enterprises in the market are activated, the trading of the whole market will be revitalized.
[XFA Viewpoint]
Supportive policies for cross-border e-commerce might see accelerated implementation
------
XFA learns exclusively that following the release of the Guidelines on Promoting Healthy and Rapid Development of Cross-Border E-commerce by the General Office of the State Council, the Ministry of Commerce is now mapping out the implementation scheme of the Guidelines to detail its policies and ensure quick implementation. Specific measures include optimizing and improving supervision measures, supporting enterprises in growing bigger and stronger, constructing comprehensive service system (mainly involved with cross-border logistics) etc.
Cross-border e-commerce sees huge market space. China's cross-border e-commerce trading grows by trillions of yuan every year in recent five years. According to the data from China E-commerce Research Center, the import ＆ export value of China's cross-border e-commerce recorded 4.2 trillion yuan in 2014 and is expected to hit 5.5 trillion yuan in 2015.
XFA learns through investigation that the cross-border e-commerce platform developed by Guangbo Group Stock Co., Ltd. (002103.SZ) has been launched for more than one month and received over 10 million yuan sales till now. Wang Junping, general manager of Guangbo Group Stock, acts as the chairman and general manager of the platform and is responsible for making strategies and taking overall charge of the company's operation. It is reported that currently, most cross-border e-commerce platforms mainly focus on exports, while few are based on imports. By making use of its advantages and overseas teams, the company will introduce products of overseas suppliers onto the platform and sell them to customers on various B2C e-commerce platforms. The company aims at becoming a one-stop trading service platform that brings overseas products into Chinese market.
Zhejiang Material Industrial Zhongda Yuantong Group Co., Ltd. (600704.SH) disclosed in February its plan on asset reorganization, suggesting that some of its supporting financing will be invested in the construction of cross-border e-commerce platform. Currently, the company's fund-raising projects - the "Yiwutong" Cross-border Export Platform and the "Baoshuitong" Cross-border Import Platform - have been preliminarily established, and their business scales are rapidly expanding. As of July 31, the "Yiwutong" Cross-border Export Platform has obtained 1.08 billion U.S. dollars in export services and the "Baoshuitong" Cross-border Export Platform has obtained 30.55 million U.S. dollars in import services. Besides, the company has established a steady partnership in direct supply with large e-commerce distribution platforms, such as Tmall International and Jingdong International.
[Information Radar]
Jingwei Electric Wire achieves progress in expanding downstream industrial chain
------
Tianjin Jingwei Zhengneng Electric Equipment Co., Ltd., a wholly-owned subsidiary of Tianjin Jingwei Electric Wire Co., Ltd. (300120.SZ), has achieved smooth progress in the reactor project invested by it. Recently, there have been three sets of international-level sample equipment that have been verified by the China Machinery Industry Federation. Jingwei Electric Wire established Zhengneng Electric Equipment last year, a move extending into the downstream industrial chain and enabling it to produce reactors. Next, it will participate in the bidding for the projects of State Grid Corporation of China. The market is also showing high interest in the progress of the reactor project.
Institutions pay high attention to new-energy automobile motor business of Xinzhi Motor
------
Xinzhi Motor Co., Ltd. (002664.SZ) will be surveyed by institutions recently and its new-energy automobile motor business will be paid high attention to. The gross profit ratio of the company in the first half of this year has somewhat increased compared to the same period of last year, and institutions think that this reflects a higher percentage of the income from the new business of new-energy automobile and that this trend is expected to continue.
Xinzhi Motor announced in July this year that its subsidiaries will invest 6 million U.S. dollars in acquiring 40 percent equities of American RMS Company, a move to guarantee the company's control over the most advanced electronic control technology of new-energy-driven motor. The products of RMS have been applied to professional automobile race such as F1, mass-produced supercars and conceptual prototype vehicles. In addition, the main product of Shanghai Fukuta Motor, one of its subsidiaries and the main supplier of the motor for Model S of Tesla, is three-phase AC induction motor.
○New hydropower stations expected to start construction and boost investment in hydropower field
○Insurance funds optimistic about state-owned assets and enterprises reform in Shanghai and Chongqing
○Supportive policies for cross-border e-commerce might see accelerated implementation
○Jingwei Electric Wire achieves progress in expanding downstream industrial chain
[Authoritative Voice]
New hydropower stations expected to start construction and boost investment in hydropower field
------
The overall scale of hydropower projects initiated construction in 2015 is less than that in last two years due to the decline in economy of to-be-developed projects and difficulty in coordination of immigration and environmental protection. However, based on the progress of the preparatory work of Baihetan and Wudongde hydropower stations, these two projects are very likely to be approved for starting construction at the end of the year and is expected to boost investment in hydropower field significantly. Public information shows that once completed, the Baihetan hydropower station will be the second largest hydropower station in China after the Three Gorges Hydropower Station. The total installed capacity of Baihetan and Wudongde hydropower stations will reach 26 million kilowatt and the static investment will exceed 100 billion yuan.
Comment: Infrastructure construction is fundamental in hydropower projects construction. China Gezhouba Group Company Limited (600068.SH) won the bidding in the civil engineering and installation of metal structure projects related to Baihetan and Wudongde hydropower stations in 2014 with a total amount of over 9.2 billion yuan. Power Construction Corporation of China, Ltd. (601669.SH) won the bidding in Baihetan hydropower station project in the same year with a total amount of nearly 6 billion yuan. In addition, Baihetan hydropower station plans to adopt the hydropower unit with a unit capacity of 1 million kilowatt. Dongfang Electric Corporation Limited (01072.HK; 600875.SH) is one of the few companies in China enable to develop hydropower units with 1 million kilowatt.
[XFA View]
A shares to reflect fundamentals changes
------
The A-share market experienced a fairly influential recovery led by the concept of SOEs reform since last week, which triggered the successful expectation on double dip of optimistic investors. As a result of the unexpected fluctuation in the exchange rate recently, the valuation on different industries is under adjustment. All these signs show that the A-share market is returning to the normal state after various extraordinary measures on rescuing and it starts to reflect the changes of fundamentals more.
The issue of this column in mid-July reminded investors that the policy bailout plan was to "rescue the market" rather than "ensuring growth". The purposes of the policy bailout plan were to prevent systematic risks, restore the normal pricing and resources allocation functions of the market. After achieving such preliminary targets as stabilizing confidence and restoring the liquidity, its final purpose is to promote the market to return to its normal operation. Based on the moves of the regulatory authorities, the portfolio policies are converting from "rescuing the market" into "stabilizing the market" after eliminating the risks on the out of control and expansion of liquidity crisis in the A-share market.
Recent measures, including the restriction on program trading and the suspension of intraday trading in short selling, are based on regulation and tend to be neutral. It shows the regulatory idea of "stabilizing the market with calmness", which is to reduce market fluctuation, prevent extreme surge and plunge as well as unexpected changes to the macroeconomic regulation caused by the stock market. As a result of the regulatory intention, the fluctuation of the market will be determined by the external environment rather than the changes of endogenous factors.
According to the recent market trend, abnormal conditions during the "stock market crash" with about 1,000 stocks rising or falling together or investors simply gambling on the move of the "national team", have already greatly improved. Wise investors firstly give positive response to bullish factors on fundamentals. For example, the performance of the new energy automobile and cultivation sectors，which are supported by the policies with actual improvement in fundamentals, have outperformed the market. In particular, with the suspension of listed companies under China Ocean Shipping (Group) Company (COSCO), China Shipping (Group) Company and Aviation Industry Corporation of China, the merger and reorganization of listed companies triggered by the state-owned assets reform has gradually become the market hotpot, reflecting that the investors are more reasonable to consider many factors when making the decisions, including the policy-related benefit and internal drivers for the capital market. It is necessary to remind the investors that it will take more time to further determine the actual impact of the current exchange rate fluctuation on the A-share trend and even the valuation of different industries. Investors should pay close attention to this situation.
[Institutions' Movement]
Insurance funds optimistic about state-owned assets and enterprises reform in Shanghai and Chongqing
------
The insurance assets management companies, including the Taikang Life Insurance Co., Ltd., believe that the state-owned assets and enterprises reform is likely to be advanced in a multilevel after finalizing the top-level design. It means that besides central enterprises, relevant moves of local SOEs also worth attention . They are especially rosy about the state-owned assets and enterprises reform in Shanghai and Chongqing. The state-owned asset reform in Shanghai has started earlier and fully prepared. Relevant cases are of benchmarking demonstration in China. The reform in Chongqing is famous for its leadership with rich experience, courage and strategies, which may innovate a new model in leading China's related reform trend.
[Hotspot Investigation]
Liquidity problem of NEEQ might eased gradually
------
Latest special investigation of XFA shows that over 3,000 enterprises have been listed on the National Equities Exchange and Quotations (NEEQ), commonly known as the New Third Board and similar to OTCBB in the U.S. market. These listed enterprises see an average operation time exceeding 10 years and an average registered capital of 46 million yuan. The number of enterprises being listed on NEEQ might exceed 5,000 before year end. It is learnt that impacted by the IPOs suspension on Shanghai and Shenzhen Stock Exchanges, etc., some quality enterprises have determined to be listed on NEEQ instead.
Similar to the situation encountered by main boards, NEEQ also suffered liquidity problem previously. It is learnt that the preliminary scheme of the layer system of NEEQ has been formed. The launch of layer system might find NEEQ a way out of the difficulty. Overseas experience suggests that once 20 percent of enterprises in the market are activated, the trading of the whole market will be revitalized.
[XFA Viewpoint]
Supportive policies for cross-border e-commerce might see accelerated implementation
------
XFA learns exclusively that following the release of the Guidelines on Promoting Healthy and Rapid Development of Cross-Border E-commerce by the General Office of the State Council, the Ministry of Commerce is now mapping out the implementation scheme of the Guidelines to detail its policies and ensure quick implementation. Specific measures include optimizing and improving supervision measures, supporting enterprises in growing bigger and stronger, constructing comprehensive service system (mainly involved with cross-border logistics) etc.
Cross-border e-commerce sees huge market space. China's cross-border e-commerce trading grows by trillions of yuan every year in recent five years. According to the data from China E-commerce Research Center, the import ＆ export value of China's cross-border e-commerce recorded 4.2 trillion yuan in 2014 and is expected to hit 5.5 trillion yuan in 2015.
XFA learns through investigation that the cross-border e-commerce platform developed by Guangbo Group Stock Co., Ltd. (002103.SZ) has been launched for more than one month and received over 10 million yuan sales till now. Wang Junping, general manager of Guangbo Group Stock, acts as the chairman and general manager of the platform and is responsible for making strategies and taking overall charge of the company's operation. It is reported that currently, most cross-border e-commerce platforms mainly focus on exports, while few are based on imports. By making use of its advantages and overseas teams, the company will introduce products of overseas suppliers onto the platform and sell them to customers on various B2C e-commerce platforms. The company aims at becoming a one-stop trading service platform that brings overseas products into Chinese market.
Zhejiang Material Industrial Zhongda Yuantong Group Co., Ltd. (600704.SH) disclosed in February its plan on asset reorganization, suggesting that some of its supporting financing will be invested in the construction of cross-border e-commerce platform. Currently, the company's fund-raising projects - the "Yiwutong" Cross-border Export Platform and the "Baoshuitong" Cross-border Import Platform - have been preliminarily established, and their business scales are rapidly expanding. As of July 31, the "Yiwutong" Cross-border Export Platform has obtained 1.08 billion U.S. dollars in export services and the "Baoshuitong" Cross-border Export Platform has obtained 30.55 million U.S. dollars in import services. Besides, the company has established a steady partnership in direct supply with large e-commerce distribution platforms, such as Tmall International and Jingdong International.
[Information Radar]
Jingwei Electric Wire achieves progress in expanding downstream industrial chain
------
Tianjin Jingwei Zhengneng Electric Equipment Co., Ltd., a wholly-owned subsidiary of Tianjin Jingwei Electric Wire Co., Ltd. (300120.SZ), has achieved smooth progress in the reactor project invested by it. Recently, there have been three sets of international-level sample equipment that have been verified by the China Machinery Industry Federation. Jingwei Electric Wire established Zhengneng Electric Equipment last year, a move extending into the downstream industrial chain and enabling it to produce reactors. Next, it will participate in the bidding for the projects of State Grid Corporation of China. The market is also showing high interest in the progress of the reactor project.
Institutions pay high attention to new-energy automobile motor business of Xinzhi Motor
------
Xinzhi Motor Co., Ltd. (002664.SZ) will be surveyed by institutions recently and its new-energy automobile motor business will be paid high attention to. The gross profit ratio of the company in the first half of this year has somewhat increased compared to the same period of last year, and institutions think that this reflects a higher percentage of the income from the new business of new-energy automobile and that this trend is expected to continue.
Xinzhi Motor announced in July this year that its subsidiaries will invest 6 million U.S. dollars in acquiring 40 percent equities of American RMS Company, a move to guarantee the company's control over the most advanced electronic control technology of new-energy-driven motor. The products of RMS have been applied to professional automobile race such as F1, mass-produced supercars and conceptual prototype vehicles. In addition, the main product of Shanghai Fukuta Motor, one of its subsidiaries and the main supplier of the motor for Model S of Tesla, is three-phase AC induction motor.
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