[Today's Guide]
> SOEs reform document officially released, equity consolidation to boom again
> Premier Li emphasizes intelligent manufacturing and high-end equipment during Liaoning visit
> Ecological civilization receives top-level deployment, responsibility investigation system facilitates investment in environmental restoration
> Boxin Investing ＆ Holdings bought through secondary market acquisition to 5 pct limit, Jolly Phar. to control Baicao Chinese Herbal Medicine
[SSN Focus]
○ SOEs reform document officially released, equity consolidation to boom again
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The CPC Central Committee and the State Council released the Guideline on Deepening State-owned Enterprises Reform on Sept. 13, proposing to conduct reform on state-owned enterprises (SOEs) based on the commercial and public welfare categories. It will actively introduce various investors to achieve the equity diversification and greatly promote the restructuring and listing of SOEs and achieve the overall listing of group companies. It requires generally completing the transformation of corporate system and establish certain key SOEs with international competitiveness. The State Council Information Office will hold a briefing on Sept. 14 morning and invite officials from various ministries and commissions to introduce relevant conditions of the guideline.
Comment: It means that the "1" in the "1 N" documents on the SOEs reform has been released. The SOEs reform will enter into a period of overall promotion and deepening process from the discussion on policies and partial pilots. This round of reform will focus on the equities of SOEs and the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) will transform from the assets management into the capital management. A huge wave of mergers and reorganization of central enterprises is expected to surge and local state-owned assets reform will also speed up after the central government set the tone for it. Institutes are rosy that local financial controlling platforms, including Luxin Venture Capital Group Co., Ltd. (600783.SH) under Shandong Luxin Investment Holdings Group Co., Ltd. and Leaguer Stock Co., Ltd. (000532.SZ) under Zhuhai Financial Holding Equity Investment Fund Management Co., Ltd., will play more important roles in the reform. SOEs with small market value have less difficulties in the SOEs transformation. Liaoning Shidai Wanheng Co., Ltd. (600241.SH) is actively transforming into the new energy industry. Xinjiang Changyuan Water Group Cop., Ltd., a company under the actual controller of Xinjiang Korla Pear Co., Ltd. (600506.SH), has been stripping off it non-main business assets and is expected to reinitiate listing.
◆ China Railway Group Limited (00390.HK; 601390.SH) announced trading suspension from Sept. 14 as it is mulling significant assets consolidation with China Railway Erju Co., Ltd. (600528.SH), a company under it. Many institutes concerned about the internal resources consolidation of China Railway Group and China Railway Construction Corporation Limited (01186.HK; 601186.SH) and are rosy about their SOEs reform prospects. It is analyzed that central enterprises with listing platforms, including China Huaneng Group, China Datang Corporation, China Huadian Corporation, the State Power Investment Corporation, China Three Gorges Corporation, the FAW Group and China Nonferrous Metal Mining (Group) Co., Ltd., are expected to further advance the overall listing of the group or the core business sectors.
[SSN Selection]
○ Newly-added loans in August reached 809.6 billion yuan, up by 49 billion yuan year on year. Industrial added value and total volume of retail sales were all higher than those in July.
○ The central bank changes the assessment system on reserve requirement ratio from meeting the criteria on a daily basis to meeting the criteria on daily average, lowering the frequentness of the banks to temporarily raise funds in the monetary market.
○ Five institutions are punished by the China Securities Regulatory Commission (CSRC) as they have not carried out effective management on the HOMS system under Hundsun Technologies Inc. (600570.SH). Two natural persons were punished for stock price manipulation.
○The General Office of the State Council issued a document to enhance the establishment of the hierarchical diagnosis and treatment system. Private hospitals specialized in special and common diseases will see new development opportunities.
○ Potash fertilizer prices increased by about 10 percent in various areas last week. Domestic potash fertilizer produced by Qinghai Salt Lake Industry Co., Ltd. (000792.SZ) will definitely see prices hike driven by the hike in costs and demand recovery.
○ The film Monster Hunt achieved a box office of 2,429 million yuan, surpassing the Fast and the Furious 7 to be the new champion of the box office in China's film industry.
[Industry Information]
○ Premier Li emphasizes intelligent manufacturing and high-end equipment during Liaoning visit
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The www.gov.cn reported that the Premier Li Keqiang carried out an inspection on industrial upgrading, entrepreneurship and innovation of Dalian City, and learnt about the equipment manufacturing and go-out situations reported by Liaoning Province during his attendance in the World Economic Forum. Li indicated that he hopes the Liaoning Province will gasp the new round opportunities for comprehensive promotion in Northeast China, combine the SOEs reform, entrepreneurship and innovation, hold the opportunities during the implementation of the national strategy Made in China 2025, and strive for intelligent transformation of the equipment manufacturing industry.
Comment: As a key province of equipment manufacturing in Northeast China, Liaoning is likely to see in the transformation and upgrading opportunities, with the promotion by the Internet and the strategy of Made in China 2025. In terms of listed companies, Premier Li carried out the inspection on the substantial shareholder of Dalian Huarui Heavy Industry Group Co., LTD. (002204.SZ), principally engaged in heavy casting and forging. Shenyang Brilliant Elevator Co., Ltd. (002689.SZ) proposed to transform to the intelligent industry and change its name to Shenyang Yuanda Intellectual Industry Group Co., Ltd.. Shenyang Machine Tool Co., Ltd. (000410.SZ), principally engaged in R＆D and sales of the numerical control machine tool, is focusing to push out i5 intelligent machine tool.
○Ecological civilization receives top-level deployment, responsibility investigation system facilitates investment in environmental restoration
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The meeting of the Political Bureau of the CPC Central Committee convened on Sept. 11 approved the Overall Plan for Ecological Civilization System Reform. The meeting proposed to stick to the public ownership of natural resources and assets, the unified urban and rural environmental governance system, and insist combination of stimulation and restriction. Besides, method of responsibility investigation on CPC and government leading cadres for eco-environmental damage (trial implementation) has been carried out recently. It put forward investigating the cadres' responsibilities in damaging eco-environment and formed the environmental protection responsibility list for the CPC and government cadres.
Comment: Driven by the responsibility investigation system, governments at all levels will pay greater attention to eco-environment and increase relevant investment in environment restoration. Yonker Environmental Protection Co., Ltd. (300187.SZ) is leading in technologies in atmospheric controlling and restoration of heavy metal contaminated soil. Inner Mongolia Hotision ＆ Monsod Drought-resistance Greening Co., Ltd. (300355.SZ) cultivates and applies Inner Mongolia grass to build economical eco-environment based on the status of ecologic environment in China's arid and semi-arid region. Heilongjiang Interchina Watertreatment Co., Ltd. (600187.SH) owns a complete industry chain in water environmental protection and is involved in atmospheric controlling and heavy metal wastewater and sludge disposal.
[Data Speaks]
○Two companies to benefit from integration of Zhabei and Jingan districts
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Recently, the official Weibo "Shanghai Release" of Shanghai municipal government's information office indicated that it was preparing and soliciting opinions on integration of Zhabei and Jingan districts to one district. As a result, Shanghai Shibei Hi-tech Co., Ltd. (600604.SH) and other listed companies with land in Zhabei District performed well recently. Financial Street Holdings Co., Ltd. (000402.SZ) announced in July that it won the tender for a land on north of the north square of Shanghai Railway Station in Zhabei District with 8,815 million yuan. Huafa Industrial Co., Ltd. Zhuhai (600325.SH) announced in June that its subsidiary and China Resources Land Limited (01109.HK) jointly won the tender for a residential and office land in the Shibei High-tech Park in Zhabei District with a total of 8,795 million yuan. Once the integration of the two districts is implemented, the land of the two companies is expected to be revalued.
[Announcement Interpretation]
○ Boxin Investing ＆ Holdings bought by Tibet Kangsheng Investment Management through secondary market acquisition to 5 pct limit
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Guangdong Boxin Investing ＆ Holdings Co., Ltd. (600083.SH) announces that as of Sept. 11, Tibet Kangsheng Investment Management Company Limited totally bought 11.50 million shares of the company with around 127 million yuan, accounting for 5 percent of its total share capital. Tibet Kangsheng Investment Management declares that it increases shareholding in the company because of its promising development and it might continue the shareholding increase in the company in next 12 months. Tibet Kangsheng Investment Management, a subsidiary under Greattown Holdings Ltd. (600094.SH), also bought the shares of Anhui Annada Titanium Industry Co., Ltd. (002136.SZ) through secondary market acquisition to 5 percent limit less than 10 days ago.
○ Jolly Phar. to control Baicao Chinese Herbal Medicine with RMB130 mln and resume trading
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Zhejiang Jolly Pharmaceutical Co., Ltd. (300181.SZ) plans to acquire 51.01 percent equities of Zhejiang Baicao Chinese Herbal Medicine Co., Ltd. with 130 million yuan. Baicao Chinese Herbal Medicine, principally engaged in the R＆D and sales of prepared herbal medicine in small pieces ready for decoction, produces more than 700 products. Its net profits in 2014 and the first half of 2015 record 10.12 million yuan and 4.65 million yuan, respectively. The company's acquisition this time is an important move in building "chronic disease and health management" ecosystem.
○ Sany Heavy Industry joins hands with NUDT in developing unmanned equipment
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Sany Heavy Industry Co., Ltd. (600031.SH) signs cooperation agreement with National University of Defense Technology (NUDT). Both parties will jointly establish "unmanned equipment engineering center" to develop products with high intelligent equipment technology for the military industry. The company will make use of its own advantages in development, manufacturing and etc. to undertake specific development and transformation work of engineering machines and be responsible for the industrialization of relevant advanced equipment products in China.
○ Alpha Animation and Culture to control Zhuoyou Information Technology with RMB120 mln to explore issuance of games
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Alpha Animation and Culture (Hong Kong) Co., Ltd., a wholly-owned subsidiary under Guangdong Alpha Animation and Culture Co., Ltd. (002292.SZ), plans to acquire 51 percent equities of Guangzhou Zhuoyou Information Technology Co., Ltd. with 120 million yuan. Zhuoyou Information Technology, principally engaged in the issuance of games, is now 100 percent controlled by Hu Chunliang. Hu worked for 10 years in the online game division of NetEase, Inc. (NASDAQ: NTES) and has rich working experience and abundant interpersonal relationship resources in the games issuance area. The investment this time benefits the company in making further arrangement in mobile games. The company also plans to invest 10 million yuan in establishing a cultural industrial investment fund.
○ Pudong Development Bank again bought by Funde Sino Life Insurance to 5 pct limit
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Shanghai Pudong Development Bank Co., Ltd. (600000.SH) announces that as of Sept. 11, Funde Sino Life Insurance Co., Ltd. has purchased a total of 1.86 billion A shares of the company, accounting for 10 percent of its total share capital. Previously, Funde Sino Life Insurance had acquired a total of over 5 percent equities of the company via various accounts as of Aug. 28.
[Weekly Review]
○ Focus on investment opportunities as reform accelerates
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To ride a bullish run, the stock market must have liquidity as well as hotspots that attract investors. Over the past few weeks, A-share market has been gloomy due to the lack of liquidity and hotspot. On the one hand, A shares still have not fully recovered. On the other hand, policies in the mid-year are lackluster, and no strong reform measures have been released. As a result, the market forces can hardly converge on a point.
Yet the status will be gradually improved in the future as A shares showed signs of upward trends in the latter half of last week following the government's strong move to stabilize the market. Industrial policies on state-owned enterprise (SOE) reform, local and regional innovation, nuclear power that SSN has been tracing have reacted well, indicating that the market liquidity is improving.
Meanwhile, the top level will accelerate releasing policies, with the guidance on deepening SOE reform unveiled on the weekend as a beginning. In China, it is always the case that once the Central Committee of the Communist Party makes the general plan, the local governments will surely implement soon. So a hotspot will be expected in the stock market, which will lead a structural bullish run. Investment opportunities deserve high attention as the reform accelerates.
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