Early Bird

Early Bird 15-September-2015

XFA Premium News
2015-09-15 12:50

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[Today's Guide]
> Second batch of special construction funds to invested this month, more measures on promoting investment released
> China and U.S. combat cyber crimes, information security industry to see rapid development
> Nonghua Intelligent Agriculture Technology sees shareholding increase, Yunyi Electric to issue employee shareholding plan
> Zhangzhou Development to develop environmental protection through private placement, clear-up of off-market margin financing to bull for long run

[SSN Focus]
○ Second batch of special construction funds to invested this month, more measures on promoting investment released
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The National Development and Reform Commission (NDRC) held a video and telephone conference on promoting investment and maintaining economic growth on Sept. 14, indicating that it is focusing on the promotion of ten key measures to maintain stable investment and economic growth. The work on the second batch of special construction funds is under progress currently and is expected to be invested by end-Sept. It will also continue to promote the financing and investment system reform and smooth the channels for the flow of financial capitals into the real economy. The NDRC approved two infrastructure projects on the same day with an estimated total investment of 6.2 billion yuan.

Comment: The NDRC has approved various railway, road, bridge and tunnel as well as other infrastructure projects recently. The total investment in the projects approved in the past week reached 100 billion yuan. With continuous loose monetary and fiscal policies, the investment in infrastructure may continue to hike. In terms of the area, more than half of the above projects are located in Yunnan Province, Tibet Autonomous Region and other border areas. Infrastructure companies in such areas may firstly benefit from the One Belt and One Road initiative. China and Thailand have reached consensus on the cooperation in railway construction. The going out of the railway construction is expected to speed up.

[SSN Selection]
○ Chinese State Councilor Yang Jiechi will attend the China-U.S. climate-smart and low-carbon cities summit in Los Angeles from Sept. 15 to 17, as a special envoy of Chinese President Xi Jinping.
○ Chinese Vice Premier Wang Yang inspects the development of the Internet plus modern agriculture in Beijing on Sept. 14, requiring greatly facilitating the application of Internet-based technologies in agriculture.
○ The Foreign Ministry indicates that China has the capability, need and obligation to provide the region and the international community with more public goods and services and satisfy the requirement of military defense by building some necessary facilities in the South China Sea.
○ Leaders of Xinjiang Production and Construction Corps (XPCC) indicated in an interview that XPCC will establish "big state-owned assets" and build the industrial and financial carrier covering the real and virtual economy.
○ Chinese financial institutions' new yuan funds outstanding for foreign exchange witnessed a record dive in August. The central bank is expected to continue to cut the reserve requirement ratio to hedge liquidity pressure.

[Industry Information]
○ China and U.S. combat cyber crimes, information security industry to see rapid development
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Recently, President Xi Jinping's special envoy Meng Jianzhu, head of the Commission for Political and Legal Affairs of the CPC Central Committee, and officials from the ministries of public security, state security, justice and information technology made a visit to the U.S. and met with U.S. Secretary of State John Kerry. They exchanged in-depth views on tackling outstanding issues of law enforcement and security, including cyber crimes and reached important consensus on combating cyber crimes. Statistics show that the overall revenue of listed companies in information security industry increased by 43.32 percent in the first half and the net profit hiked by 254.36 percent, far higher than the average level in the computer industry.

Comment: At present, the input in cyber security in China only accounts for 2 percent in the whole IT industry, far below about 10 percent in European and American countries. It enjoys a huge potential. In terms of listed companies, Bluedon Information Security Technologies Co., Ltd. (300297.SZ) is principally engaged in integrated information security services. It acquired the electromagnetic security and prevention assets of Guangzhou Hopewell Technology Co., Ltd. to establish a whole security system covering data security and physical security. Surfilter Network Technology Co., Ltd. (300311.SZ) is principally specialized in integrated services on network contents review and security products. Venustech Group Inc. (002439.SZ) is a leading enterprise in the domestic information security industry and enjoys a high market share in the government and the military engineering market.

[Announcement Interpretation]
○ Nonghua Intelligent Agriculture Technology sees shareholding increase
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Jiangsu Jiangdong Group Co., Ltd., the controlling shareholder of Jiangsu Nonghua Intelligent Agriculture Technology Co., Ltd. (000816.SZ), increases shareholding in the company by 11.98 million shares at an average price of 6 yuan per share on Sept. 14. Zhang Mingyuan, the actual controller of Guangdong Macro Co., Ltd. (000533.SZ), increases shareholding in the company by 1 million shares at an average price of 6.16 yuan per share on Sept. 14. Guangzhou Highsun Enterprises Group Corp., the controlling shareholder of Guangdong Highsun Group Co., Ltd. (000861.SZ), increased shareholding in the company by 9 million shares at an average price of 5.75 yuan per share from Sept. 1 to 14. Yuan Jinyu, president of Shenzhen Sunlord Electronics Co., Ltd. (002138.SZ), increases shareholding in the company by 1.55 million shares at an average price of 9.99 yuan per share on Sept. 14.

○ Yunyi Electric to issue employee shareholding plan with RMB75 mln
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Jiangsu Yunyi Electric Co., Ltd. (300304.SZ) announced a draft on employee shareholding plan to raise the funds, with no more than 30 million yuan for the first phrase. The company also proposed to purchase its shares with a total amount of no more than 75 million yuan after the fundraising based on a proportion of 1:1.5, expecting to involve 4.95 million shares based on the closing price of 15.14 yuan on Sep. 11, accounting for 2.48 percent of the total share capital.

○ Zhangzhou Development to raise RMB1 bln through private placement for environmental protection investment, Originwater Tech. to involve in subscription
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Fujian Zhangzhou Development Co., Ltd. (000753.SZ) proposed to issue 179 million shares through private placement at 5.59 yuan per share to raise 1 billion yuan for three BOT sewage treatment plant projects, Jinfeng water plant renovation and extension project and circulating fund supplement. The controlling shareholders of the company will get involved in the private placement, including Fujian Zhanglong Group Co., Ltd., Wolong Holding Group, Beijing Originwater Technology Co., Ltd. (3000070.SZ) and Shanghai Kangrong Private Equity Fund, with the subscription amounts of 400 million yuan, 250 million yuan, 200 million yuan and 150 million yuan respectively. Beijing Originwater Technology indicated that this investment will enhance its comprehensive industrial cooperation with Zhangzhou Development in the water-rated services field.

[Trading Trends]
○ Panic sentiment spreads again, clear-up of off-market margin financing to bull for long run
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The Shanghai composite index decreased by 2.67 percent on Sep. 14 when compared to the closing price yesterday, with SZSE composite index down by 6.55 percent and ChiNext Index down by 7.49 percent. The total turnover of Shanghai and Shenzhen stock exchanges reached 680 billion yuan, obviously expanded than that of previous trading day. In terms of industries, the closing prices of the two main market supporters, banking and insurance industries, increased when compared to those of previous trading day, with closing prices of other sectors lower than those of previous trading day. Small and medium cap stocks are the main objects to be influenced by short sentiment.

Comment: Currently, the clear-up of off-market margin financing, including umbrella-type trust, is regarded as the main factor to bear the market. However, the SSN information shows that the actual scale of off-market margin financing to be cleared up is likely to reach about 150 billion yuan, far lower than the common market expectation of 300 to 400 billion yuan. Insider of the securities company indicated that clear-up of off-market margin financing is likely to disturb the market in a short-term, but it will contribute to the sound development of the capital market for a long run. Institutions believed that the ChiNext Board needs to wait until the fundamentals are confirmed, however, the structural market trend will still be active, and attention should be paid to the catalyst in a short-term, like the Fifth Plenary Session of the 18th Central Committee of the CPC.
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