EARLYBIRD
18-Jan-2015
[Today's Guide]
> Regulators tighten margin trading and short selling, bull market expects to slow down
> State Council supports service outsourcing to fuel rapid industrial growth
> XJ Electric and Staidson (beijing) Biophar. expect profit growth in annual reports
[XFA Focus]
○ Regulators tighten margin trading and short selling, bull market expects to slow down
------
China Securities Regulatory Commission (CSRC) announced administrative supervision measures on Jan. 16 that Citic Securities Company Limited (600030.SH; 06030.HK), Haitong Securities Company Limited (600837.SH; 06837.HK) and Guotai Junan Securities Co. Ltd. were temporarily stopped opening new margin trading and short selling accounts for three months. CSRC also required securities companies to further strengthen eligibility management of investors, and shall not conduct margin trading and short selling business to clients with securities assets below 500,000 yuan.
Comment: Most research institutions believe that CSRC aims to cool down the stock market by tightening margin trading and short selling, and hopes that bullish stock indexes can slow down, and expects the market to return to rationality from over excitement. Overlapped with that the substantial shareholders of Citic Securities greatly decreased the shareholding in the company, short-term adjustment of securities stocks, directly pressured by policies, is unavoidable. Furthermore, under the pressure of disclosing annual reports, some stocks with low performance and whose price rise was driven by margining trading capitals in early stage are also faced with large adjustment possibility. Anyway, the general trend that China’s wealth allocation is tending to stock market is not changing. Listed companies with matched growth and valuation will still be favored by capitals in the long term.
[XFA Selection]
○ China Securities Regulatory Commission (CSRC) will promote stock issuance registration system reform in 2015 and supply new stocks fairly at proper time.
○ Guangdong, Fujian and Tianjin Free Trade Zones (FTZ) and expanded Shanghai FTZ will be established officially on March. 1.
○ The first Internet bank WeBank started trial operation on Jan. 18 with “face-to-face approval” being replaced by “face identification” technology.
○ Huang Qifan, mayor of Chongqing City, proposed on Jan. 18 to accelerate the stocklization of SOEs and make emerging industries bigger and stronger.
○ Gold sees a rise in price for the sixth consecutive trading days on Jan. 16 in New York. Market believes that the Federal Reserve will not raise interest rate too early.
[Industry Information]
○ State Council supports service outsourcing to fuel rapid industrial growth
------
The “Suggestions on Accelerating the Development of Service Outsourcing Industry from the State Council” was released on Jan. 16, requiring cultivating a batch of leading enterprises rapidly through supporting measures like fiscal and taxation policies so as to make international service outsourcing business grow by an average annual increase rate of over 25 percent in scale.
Comment: This is the first comprehensive planning made by the State Council after its executive meeting discussed the acceleration of service outsourcing industry in the seminar on Nov. 26 last year. Service outsourcing industry belongs to human resources and knowledge intensive industries and can absorb lots of high-and-mid-end labor forces. Among listed companies, Beyondsoft Corporation (002649.SZ) owns more than 20 branches in the main outsourcing markets around the world; Jiangsu HopeRun Software Co., Ltd. (300339.SZ) is principally engaged in the software outsourcing service of professional areas.
○ Bird flu cases attack several places, warm winter goes against control of epidemic situation
------
Shanghai, Shenzhen and Shanwei City in Guangdong Province reported one confirmed human infection of H7N9 bird flu respectively last weekend. And the first patient infected with H7N9 bird flu in Linyi City, Shandong Province died. Multiple provinces adopted countermeasures as killing infected fowls, replacing live fowl trading by cold chain distribution, etc. Pork price rose largely in Taiwan recently, and some stocks of Taiwan-funded companies producing disinfectant and protection suits soared by the daily 10 percent limit。
Comment: The cold air affecting China is relatively weak this year and the temperature is relatively high. If warm winter continues, dry air and frequent activities of wild birds that come along are to the disadvantage of the control of epidemic situation. As for the prevention of human infection, Lianhua Qingwen Capsule of Shijiazhuang Yiling Pharmaceutical Co., Ltd. (002603.SZ) is selected into the treatment scheme published by National Health and Family Planning Commission. As for poultry vaccines, China Animal Husbandry Industry Co., Ltd. (600195.SH) is the first enterprise approved by the Ministry of Agriculture to produce bird flu vaccine.
[Announcement Interpretation]
○ Inspur Electronic Information fully controls military enterprise Shandong Chaoyue
------
Inspur Electronic Information Industry Co., Ltd. (000977.SZ) plans to issue 82.57 million shares through private placement at 35.12 yuan per share to raise 2.9 billion yuan, among which, 1.4 billion yuan is for purchasing 100 percent equities of Shandong Chaoyue Digital-control Electronic Limited, 700 million yuan is for investing in projects like cloud servers, high-end storage system, Shandong Chaoyue trusted computing platform, etc., and the rest 800 million yuan is for supplementing working capital. Inspur Software Co., Ltd. (600756.SH) under the same controlling shareholder with Inspur Electronic Information, subscribes not less than 10 percent.
Main products of Shandong Chaoyue cover three categories, namely, reinforced computing platform, security products, and equipment system and service. Its downstream clients include research institutes and main domestic military industry groups. It sees rapid performance growth in recent two years with net profit hit 64.14 million yuan in 2013 and an expected net profit of 99.55 million yuan in 2014.
○ Yangtze New Materials to control Russian color-coated sheet enterprise
------
Suzhou Yangtze New Materials Co., Ltd. (002652.SZ) proposes to purchase 51 percent equities of Russian United New Materials Company with 285 million yuan at its disposal. The subject matter produces and sells color-coated sheet. The counterparty promises that its net profit will be not less than 90 million, 100 million and 110 million yuan from 2015 to 2017. The net profit of Yangtze New Materials was 36.19 million yuan in 2013.
○ Gosuncn bought by Shanghai Fuli through secondary market acquisition to 5 pct limit
------
Shanghai Fuli Investment Consulting Partnership, a party acting in concert with Xinjiang Guigu Tiantang Jiaming Equity Investment Partnership, the shareholder of Gosuncn technology group Co., Ltd. (300098.SZ), increases its shareholding in the company by 674,600 shares at an average price of 24.82 yuan per share between Jan. 14 and 15, and their total shareholding in the company reached 5 percent of its total share capital. The company’s stock price closed at 25.42 yuan last Friday.
Comment: Gosuncn inked a strategic cooperation agreement with Guigu Tiantang Group in Sept., 2014, and the cooperation is implemented in the way of capital operations like merger, etc. In that same month, Xinjiang Guigu Tiantang and Shanghai Fuli were respectively transferred 2.72 percent and 1.91 percent equities of Gosuncn through block trade. Gosuncn launched its first session of employee shareholding plan last Dec.
○ Merro Phar. and Qunxing Toys resume reorganization approval
------
Merro Pharmaceutical Co., Ltd. (600297.SH) and Guangdong Qunxing Toys Joint-Stock Co., Ltd. (002575.SZ) announced that their reorganization approvals, which were suspended due to suspected noncompliance, have been resumed. And the approval of Merro Pharmaceutical is just suspended for only one week which is the shortest ever. According to previous announcement, China Grand Automotive Services, Co., Ltd. plans back-door listing through Merro Pharmaceutical and the latter will turn its business to car distribution service and finance leasing, while Qunxing Toys plans to purchase mobile game company Xingchuang Hulian.
[Companies Hotspot]
○ Zhongding expects rapid performance growth in 2014
------
Benefited from increasing efforts in market expansion, the cost advantage brought by low natural rubber price, and the low performance base of the same term in 2013, Anhui Zhongding Sealing Parts Co., Ltd. (000887.SH) expects rapid performance growth in 2014. Institutions expect that the company’s annual performance growth speed to surpass 50 percent and the speed to maintain around 40 percent in 2015.
Furthermore, Zhongding accelerates extensional purchase in recent years and actively layouts in energy conservation and environment protection, and new energy vehicle areas. The company explicitly proposes the strategy of integrating global market resources and transforming itself into an assembly and integrated system supplier from a single components supplier.
[Financial Reports Express]
○ Kuangda Automobile Textile and Hybio Phar. propose high share dividend
------
Shen Jieliang, actual controller of Jiangsu Kuangda Automobile Textile Group Co., Ltd. (002516.SH), proposes a 15-for-10 conversion of capital surplus into shares combined with 1 yuan dividend for every 10 shares in annual distribution. Hybio Pharmaceutical Co., Ltd. (300199.SZ) plans a 10-for-10 conversion of capital surplus into shares combined with 1 yuan dividend for every 10 shares. The company previously expected its net profit to grow by 25 to 40 percent in annual report.
○ XJ Electric and Staidson (beijing) Biophar. expect profit growth in annual reports
------
XJ Electric Co., Ltd. (000400.SH) expects its profit in 2014 to see a year-on-year growth of 80 to 110 percent. The principal cause is that the assets injected through reorganization are combined in the company’s consolidated statements. Staidson (Beijing) Biopharmaceuticals Co., Ltd. (300204.SZ) expects its profit in 2014 to grow by 65 to 95 percent year on year. The profit growth is mainly contributed to rapid products sales growth.
[Weekly Review]
○ Short-term fluctuation hardly shakes expectation of long bull market
------
Shanghai securities composite index pinched with positive end last week. By then, stock indexes continuously short squeeze. Weekly K line closed as positive for 8 consecutive weeks. At the approach of the highest record, 3478 points, in 2009, fluctuation is unavoidable. At the beginning of the new year, IPO speeds up. Xiao Gang, Chairman of the China Securities Regulatory Commission (CSRC), indicates that stocks issuance registration system reform is a matter of primary importance in capital market in 2015. And recently, CSRC standardized management over margin trading and short selling. Trading shrink, the market is in fear of high indexes, thus confidence in the market shakes again.
Insight is needed in current stage that short-term fluctuation will not change the tendency of a long bull market. Every time when stock indexes fluctuate violently, the market expects the central bank to release liquidity and calls for policies supporting stock indexes. The A-share market has been weak for years, and it is like a burned child fears fire at a slight sign of disturbance. Only when main capital forces obviously chase blue-chips that can drive the increase of stock indexes can the confidence in holding shares be strengthened. The power of China’s economy transformation is irresistible now. SOEs reform and the “One Belt and One Road” are the reflection of state will. And this is the foundation for starting the bull market of capital market. Financial reform pioneers this round of SOEs reform. We can see that securities stocks quiet down for nearly one month after large surging. And during this period, high-speed rail and infrastructure construction stocks act as the main roles in the market, and then insurance stocks come. Banks stocks jump and drop, and Internet finance stocks show signs of coming back. Good news like financial innovation will come one after another, stock prices will be solidified after short-term risk release, and securities stocks might stage a comeback. Current fluctuations brought by standardization measures on margin trading and short selling might also be opportunities to buy in. As the Spring Festival draws near, stocks with high share dividend, wine stocks, medicine stocks, agriculture stocks will boom in the year-end A-share market as usual. Investors must proceed with confidence!
[Institutions' Movement]
○ Intelligent capitals: strategic allocation of resources stocks favorable
------
Some institutions of Pearl River Delta who are in the lead of this round of market indicate during XFA investigation that strategic allocation opportunities of resources stocks appear. Reasons are as follows: economic growth of U.S. is highly possible in 2015; China’s economy is expected to stabilize in 2015; Europe is very likely to promote easing monetary policy. Under the situation of rebounded demand and pinched supply, resources stocks are expected to see large rebound. Under current strategic allocation period, subject matters related to precious metals like gold, aluminum and zinc, etc. are firstly recommended, and sub-selections are subject matters related to coal and crude oil.
18-Jan-2015
[Today's Guide]
> Regulators tighten margin trading and short selling, bull market expects to slow down
> State Council supports service outsourcing to fuel rapid industrial growth
> XJ Electric and Staidson (beijing) Biophar. expect profit growth in annual reports
[XFA Focus]
○ Regulators tighten margin trading and short selling, bull market expects to slow down
------
China Securities Regulatory Commission (CSRC) announced administrative supervision measures on Jan. 16 that Citic Securities Company Limited (600030.SH; 06030.HK), Haitong Securities Company Limited (600837.SH; 06837.HK) and Guotai Junan Securities Co. Ltd. were temporarily stopped opening new margin trading and short selling accounts for three months. CSRC also required securities companies to further strengthen eligibility management of investors, and shall not conduct margin trading and short selling business to clients with securities assets below 500,000 yuan.
Comment: Most research institutions believe that CSRC aims to cool down the stock market by tightening margin trading and short selling, and hopes that bullish stock indexes can slow down, and expects the market to return to rationality from over excitement. Overlapped with that the substantial shareholders of Citic Securities greatly decreased the shareholding in the company, short-term adjustment of securities stocks, directly pressured by policies, is unavoidable. Furthermore, under the pressure of disclosing annual reports, some stocks with low performance and whose price rise was driven by margining trading capitals in early stage are also faced with large adjustment possibility. Anyway, the general trend that China’s wealth allocation is tending to stock market is not changing. Listed companies with matched growth and valuation will still be favored by capitals in the long term.
[XFA Selection]
○ China Securities Regulatory Commission (CSRC) will promote stock issuance registration system reform in 2015 and supply new stocks fairly at proper time.
○ Guangdong, Fujian and Tianjin Free Trade Zones (FTZ) and expanded Shanghai FTZ will be established officially on March. 1.
○ The first Internet bank WeBank started trial operation on Jan. 18 with “face-to-face approval” being replaced by “face identification” technology.
○ Huang Qifan, mayor of Chongqing City, proposed on Jan. 18 to accelerate the stocklization of SOEs and make emerging industries bigger and stronger.
○ Gold sees a rise in price for the sixth consecutive trading days on Jan. 16 in New York. Market believes that the Federal Reserve will not raise interest rate too early.
[Industry Information]
○ State Council supports service outsourcing to fuel rapid industrial growth
------
The “Suggestions on Accelerating the Development of Service Outsourcing Industry from the State Council” was released on Jan. 16, requiring cultivating a batch of leading enterprises rapidly through supporting measures like fiscal and taxation policies so as to make international service outsourcing business grow by an average annual increase rate of over 25 percent in scale.
Comment: This is the first comprehensive planning made by the State Council after its executive meeting discussed the acceleration of service outsourcing industry in the seminar on Nov. 26 last year. Service outsourcing industry belongs to human resources and knowledge intensive industries and can absorb lots of high-and-mid-end labor forces. Among listed companies, Beyondsoft Corporation (002649.SZ) owns more than 20 branches in the main outsourcing markets around the world; Jiangsu HopeRun Software Co., Ltd. (300339.SZ) is principally engaged in the software outsourcing service of professional areas.
○ Bird flu cases attack several places, warm winter goes against control of epidemic situation
------
Shanghai, Shenzhen and Shanwei City in Guangdong Province reported one confirmed human infection of H7N9 bird flu respectively last weekend. And the first patient infected with H7N9 bird flu in Linyi City, Shandong Province died. Multiple provinces adopted countermeasures as killing infected fowls, replacing live fowl trading by cold chain distribution, etc. Pork price rose largely in Taiwan recently, and some stocks of Taiwan-funded companies producing disinfectant and protection suits soared by the daily 10 percent limit。
Comment: The cold air affecting China is relatively weak this year and the temperature is relatively high. If warm winter continues, dry air and frequent activities of wild birds that come along are to the disadvantage of the control of epidemic situation. As for the prevention of human infection, Lianhua Qingwen Capsule of Shijiazhuang Yiling Pharmaceutical Co., Ltd. (002603.SZ) is selected into the treatment scheme published by National Health and Family Planning Commission. As for poultry vaccines, China Animal Husbandry Industry Co., Ltd. (600195.SH) is the first enterprise approved by the Ministry of Agriculture to produce bird flu vaccine.
[Announcement Interpretation]
○ Inspur Electronic Information fully controls military enterprise Shandong Chaoyue
------
Inspur Electronic Information Industry Co., Ltd. (000977.SZ) plans to issue 82.57 million shares through private placement at 35.12 yuan per share to raise 2.9 billion yuan, among which, 1.4 billion yuan is for purchasing 100 percent equities of Shandong Chaoyue Digital-control Electronic Limited, 700 million yuan is for investing in projects like cloud servers, high-end storage system, Shandong Chaoyue trusted computing platform, etc., and the rest 800 million yuan is for supplementing working capital. Inspur Software Co., Ltd. (600756.SH) under the same controlling shareholder with Inspur Electronic Information, subscribes not less than 10 percent.
Main products of Shandong Chaoyue cover three categories, namely, reinforced computing platform, security products, and equipment system and service. Its downstream clients include research institutes and main domestic military industry groups. It sees rapid performance growth in recent two years with net profit hit 64.14 million yuan in 2013 and an expected net profit of 99.55 million yuan in 2014.
○ Yangtze New Materials to control Russian color-coated sheet enterprise
------
Suzhou Yangtze New Materials Co., Ltd. (002652.SZ) proposes to purchase 51 percent equities of Russian United New Materials Company with 285 million yuan at its disposal. The subject matter produces and sells color-coated sheet. The counterparty promises that its net profit will be not less than 90 million, 100 million and 110 million yuan from 2015 to 2017. The net profit of Yangtze New Materials was 36.19 million yuan in 2013.
○ Gosuncn bought by Shanghai Fuli through secondary market acquisition to 5 pct limit
------
Shanghai Fuli Investment Consulting Partnership, a party acting in concert with Xinjiang Guigu Tiantang Jiaming Equity Investment Partnership, the shareholder of Gosuncn technology group Co., Ltd. (300098.SZ), increases its shareholding in the company by 674,600 shares at an average price of 24.82 yuan per share between Jan. 14 and 15, and their total shareholding in the company reached 5 percent of its total share capital. The company’s stock price closed at 25.42 yuan last Friday.
Comment: Gosuncn inked a strategic cooperation agreement with Guigu Tiantang Group in Sept., 2014, and the cooperation is implemented in the way of capital operations like merger, etc. In that same month, Xinjiang Guigu Tiantang and Shanghai Fuli were respectively transferred 2.72 percent and 1.91 percent equities of Gosuncn through block trade. Gosuncn launched its first session of employee shareholding plan last Dec.
○ Merro Phar. and Qunxing Toys resume reorganization approval
------
Merro Pharmaceutical Co., Ltd. (600297.SH) and Guangdong Qunxing Toys Joint-Stock Co., Ltd. (002575.SZ) announced that their reorganization approvals, which were suspended due to suspected noncompliance, have been resumed. And the approval of Merro Pharmaceutical is just suspended for only one week which is the shortest ever. According to previous announcement, China Grand Automotive Services, Co., Ltd. plans back-door listing through Merro Pharmaceutical and the latter will turn its business to car distribution service and finance leasing, while Qunxing Toys plans to purchase mobile game company Xingchuang Hulian.
[Companies Hotspot]
○ Zhongding expects rapid performance growth in 2014
------
Benefited from increasing efforts in market expansion, the cost advantage brought by low natural rubber price, and the low performance base of the same term in 2013, Anhui Zhongding Sealing Parts Co., Ltd. (000887.SH) expects rapid performance growth in 2014. Institutions expect that the company’s annual performance growth speed to surpass 50 percent and the speed to maintain around 40 percent in 2015.
Furthermore, Zhongding accelerates extensional purchase in recent years and actively layouts in energy conservation and environment protection, and new energy vehicle areas. The company explicitly proposes the strategy of integrating global market resources and transforming itself into an assembly and integrated system supplier from a single components supplier.
[Financial Reports Express]
○ Kuangda Automobile Textile and Hybio Phar. propose high share dividend
------
Shen Jieliang, actual controller of Jiangsu Kuangda Automobile Textile Group Co., Ltd. (002516.SH), proposes a 15-for-10 conversion of capital surplus into shares combined with 1 yuan dividend for every 10 shares in annual distribution. Hybio Pharmaceutical Co., Ltd. (300199.SZ) plans a 10-for-10 conversion of capital surplus into shares combined with 1 yuan dividend for every 10 shares. The company previously expected its net profit to grow by 25 to 40 percent in annual report.
○ XJ Electric and Staidson (beijing) Biophar. expect profit growth in annual reports
------
XJ Electric Co., Ltd. (000400.SH) expects its profit in 2014 to see a year-on-year growth of 80 to 110 percent. The principal cause is that the assets injected through reorganization are combined in the company’s consolidated statements. Staidson (Beijing) Biopharmaceuticals Co., Ltd. (300204.SZ) expects its profit in 2014 to grow by 65 to 95 percent year on year. The profit growth is mainly contributed to rapid products sales growth.
[Weekly Review]
○ Short-term fluctuation hardly shakes expectation of long bull market
------
Shanghai securities composite index pinched with positive end last week. By then, stock indexes continuously short squeeze. Weekly K line closed as positive for 8 consecutive weeks. At the approach of the highest record, 3478 points, in 2009, fluctuation is unavoidable. At the beginning of the new year, IPO speeds up. Xiao Gang, Chairman of the China Securities Regulatory Commission (CSRC), indicates that stocks issuance registration system reform is a matter of primary importance in capital market in 2015. And recently, CSRC standardized management over margin trading and short selling. Trading shrink, the market is in fear of high indexes, thus confidence in the market shakes again.
Insight is needed in current stage that short-term fluctuation will not change the tendency of a long bull market. Every time when stock indexes fluctuate violently, the market expects the central bank to release liquidity and calls for policies supporting stock indexes. The A-share market has been weak for years, and it is like a burned child fears fire at a slight sign of disturbance. Only when main capital forces obviously chase blue-chips that can drive the increase of stock indexes can the confidence in holding shares be strengthened. The power of China’s economy transformation is irresistible now. SOEs reform and the “One Belt and One Road” are the reflection of state will. And this is the foundation for starting the bull market of capital market. Financial reform pioneers this round of SOEs reform. We can see that securities stocks quiet down for nearly one month after large surging. And during this period, high-speed rail and infrastructure construction stocks act as the main roles in the market, and then insurance stocks come. Banks stocks jump and drop, and Internet finance stocks show signs of coming back. Good news like financial innovation will come one after another, stock prices will be solidified after short-term risk release, and securities stocks might stage a comeback. Current fluctuations brought by standardization measures on margin trading and short selling might also be opportunities to buy in. As the Spring Festival draws near, stocks with high share dividend, wine stocks, medicine stocks, agriculture stocks will boom in the year-end A-share market as usual. Investors must proceed with confidence!
[Institutions' Movement]
○ Intelligent capitals: strategic allocation of resources stocks favorable
------
Some institutions of Pearl River Delta who are in the lead of this round of market indicate during XFA investigation that strategic allocation opportunities of resources stocks appear. Reasons are as follows: economic growth of U.S. is highly possible in 2015; China’s economy is expected to stabilize in 2015; Europe is very likely to promote easing monetary policy. Under the situation of rebounded demand and pinched supply, resources stocks are expected to see large rebound. Under current strategic allocation period, subject matters related to precious metals like gold, aluminum and zinc, etc. are firstly recommended, and sub-selections are subject matters related to coal and crude oil.
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