[Today's Guide]
Central government studies Beijing-Tianjin-Hebei planning, Tianjin to see increasing policy advantages
Anti-monopoly to promote IC domestication, car production and sales embrace good start in Jan.
Sunway Communication to acquire a connector company, Dare Technology to develop wood industry
Etrol Technologies edges into oilfield services industry, Baoxiniao Garment and Anoky to develop e-business
[XFA Focus]
○ Central government studies Beijing-Tianjin-Hebei planning, Tianjin to see increasing policy advantages
------
Chinese President Xi Jinping hosted the ninth meeting of the Central Finance Leading Group on Feb. 10 morning, listened to the reports on the implementation of important strategies concerning new-type urbanization planning, food security, water security, energy security, innovation-driven development, the establishment of Asian Infrastructure Investment Bank, founding of Silk Road funds, etc. determined by the Central Finance Leading Group, and deliberated and studied the outline of Beijing-Tianjin-Hebei cooperative development planning. Xi required promoting balanced development of regions by decentralizing the non-capital functions of Beijing to form new growth pole.
Comment: Feb. 26 will be the first anniversary of Beijing-Tianjin-Hebei strategy proposed by Xi. Research institutions believe that supporting policies like the top design of Beijing-Tianjin-Hebei coordinated development, etc. might be launched soon and regional development will speed up gradually. Tianjin Municipality, enjoying policies of both free trade zones and national self-dependent innovation demonstration zones at the same time, has obvious advantages in attracting advanced manufacturing industry transfer and good conditions in undertaking the transfer of Beijing’s industrial population, thus local listed companies will see better development opportunities. Tianjin Songjiang Co., Ltd. (600225.SH) established two companies including Tianjin Hengtai Huijin Financial Leasing Co., Ltd. in Dongjiang Free Trade Port Zone of Tianjin in the third quarter of last year and succeeded in raising 1.6 billion yuan through private placement recently; Tianjin Tianbao Infrastructure Co., Ltd. (000965.SZ) is the only state-owned listed company held by the district government in Tianjin Bonded Zone. The company plans to purchase 60 percent equities of Tianjin Zhongtian Aviation Industry Investment Co., Ltd. to expand to aircraft manufacturing industry.
[XFA Selection]
○ Both CPI and PPI recorded a five-year new low in Jan. Experts call on tax reduction as soon as possible to prevent the risk of deflation.
○ China’s social financing scale stock recorded 122.86 trillion yuan at the end of 2014, indicating that the ratio to nominal GDP of the same term is 193 percent.
○ Li Xiaojia, chief executive officer of Hong Kong Exchanges and Clearing Limited (HKEx, 00388.HK), indicated that it is highly possible that the Shenzhen-Hong Kong Stock Connect program will be kicked off in the second half of the year. The possibility that A shares be incorporated into MSCI is higher and higher now.
○ 68 reform tasks of state-owned assets and enterprises held by Sichuan Province have been started comprehensively with nearly half of the key state-owned enterprises covered in the pilot.
○ Dalian Wanda Group purchased Infront Sports & Media with 1.05 billion euro. Wang Jianlin, the founder and president of the group, indicated on Feb. 10 that this move will quicken China’s pace in bidding for the World Cup.
[Industry Information]
○ QUALCOMM receives largest anti-monopoly ticket, China’s IC industry to overtake around curves
------
On Feb. 10 (Beijing time), QUALCOMM Incorporated (NASDAQ:QCOM) announced that it accepted the punishment of 6,088 million yuan, an all-time high in China’s anti-monopoly history, penalized by China’s National Development and Reform Commission (NDRC) and indicated that it will not refute. QUALCOMM is also required to decrease patent licensing fees. 3G and 4G patent licensing will no longer be tied up with other patents.
Comment: This will weaken QUALCOMM’s advantage in patents and urge it to maintain market share through opening technical cooperation. If China’s integrated circuit (IC) industry can catch up forthwith, it might overtake around curves. National companies like ZTE Corporation (000063.SZ; 00763.HK), Datang Telecom Technology Co., Ltd. (600198.SH), etc. play important roles as representing China to participate in global competition and occupy commanding height.
○ Auto production and sales embrace good start in Jan., attributes of low valuation and blue-chip interested
------
The China Association of Automobile Manufacturers released statistics showing that China’s Auto industry embraced a good start in Jan., especially in passenger car area, which saw a year-on-year growth of 15.1 percent and 10.4 percent in production and sales, respectively. The market share of Chinese brands increases for six consecutive months, representing a year-on-year growth of 3.9 percentage points.
Comment: Auto industry has the advantages of high growth certainty, stable market position of blue-chip companies, low valuation in market, etc. Theme investments like SOEs reform, car networking, Shenzhen-Hong Kong Stock Connect program, etc. also contribute to valuation increase. The production and sales express in Jan. released by Chongqing Changan Automobile Company Limited (000625.SZ), Great Wall Motor Company Limited (601633.SH; 02333.HK) and Jiangling Motors Corporation, Ltd. (000550.SZ) are better than expected and are interested by institutions. Moreover, Faw Car Co., Ltd. (000800.SZ), soared by the 10 percent daily limit on Feb. 10, sees net buying of 120 million yuan through institutional seats.
[Announcement Interpretation]
○Sunway Communication to acquire a connector company
------
Shenzhen Sunway Communication Co., Ltd. (300136.SZ) intends to acquire 80 percent equities of Shenzhen Yalisheng Connectors Co., Ltd., which is priced at 480 million yuan, by issuing shares at 19.15 yuan per share through private placement and in cash. It will fully control the company after the transaction and raise a supporting fund of 90 million yuan. Yalisheng Connectors is principally engaged in the provision of industrial automation connectors used in production and manufacturing to Foxconn and other mobile terminals manufacturing bases. The counterparty committed that its net profit after extraordinary items in 2015 will be no less than 45 million yuan with a corresponding acquisition P/E ratio of 10.67 times. The stocks of Sunway Communication closed at 18.75 yuan before trading suspension.
○Dare Technology to strip off non-principal assets and develop wood industry
------
Dare Technology Co., Ltd. (000910.SZ) plans to sell its non-principal assets, including tobacco packaging, auto components and information communication, to its controlling shareholder at 900 million to 1.1 billion yuan. Meanwhile, the company proposes to acquire equities of six wood subsidiaries under it at 900 million to 1.1 billion yuan to fully control them.
Comment: The tobacco packaging business of the company will see factory relocation while the information communication business suffers continuous losses. The adjustment of the above businesses will help improve the profitability of the company.
○Etrol Technologies edges into oilfield services industry
------
Beijing Etrol Technologies Co., Ltd. (300370.SZ) proposes to buy 100 percent equities of Beijing Geoshine Oilfield Technology Services Co., Ltd., which is priced at 310 million yuan by issuing shares at 33.79 yuan per share through private placement and in cash. It also intends to raise a supporting fund of 81.30 million yuan. Geoshine Oilfield Technology Services is a high and new technology enterprise principally engaged in measurement while drilling projects in oilfield directional and horizontal wells. The counterparty committed that its net profit in 2015 will be no less than 28 million yuan with a corresponding acquisition P/E ratio of 11 times. The stocks of Etrol Technologies closed at 40 yuan before trading suspension.
○Baoxiniao Garment and Anoky to develop e-business
------
A venture capitals company wholly controlled by Zhejiang Baoxiniao Garment Co., Ltd. (002154.SZ) intends to invest 45 million yuan to obtain 25 percent equities of Shanghai Xiaogui Network Technology Co., Ltd. The subject company is engaged in e-business on social networks and charges sales commissions after introducing users to corresponding merchants through massive users and relation chains on the open platform of Tencent Holdings Limited (00700.HK). It also charges displaying fees from merchants under promotion. Based on the assessment criteria, Xiaogui Network shall achieve a profit before taxation of 15 million yuan in 2015.
Shanghai Anoky Group Co., Ltd. (300067.SZ) proposes to contribute 21 million yuan or 70 percent to establish the Color Cloud Electronic Business Company with other four printing, dyeing and textile companies and set up an electronic business platform for dyestuffs and relevant chemical products, which will be engaged in the online transaction, online payment, logistics and delivery as well as technical services for relevant products.
[Financial Reports Express]
○Changshan Biochemical Phar. and eGOVA to propose high share conversion and dividend
------
The controlling shareholder of Hebei Changshan Biochemical Pharmaceutical Co., Ltd. (300255.SZ) proposes a 15-for-10 conversion of capital surplus into shares according to its 2014 annual report. The actual controller of Beijing eGOVA Co., Ltd. (300075.SZ) proposes a 10-for-10 conversion of capital surplus into shares. The latest stock prices of the two companies were 33.5 yuan and 38.18 yuan, respectively.
[Trading Trends]
○Insurance companies subscribe index funds and to increase buying when index falls below 3,000 points
------
XFA learnt from various insurance institutes that the investment operation of insurance capitals in the period before the Spring Festival will be prudent with a wait-and-see attitude. Some insurance institutes subscribed funds for IPOs and index funds at certain scales and indicated that if the index falls below 3,000 points, it would be an excellent opportunity to buy index funds at a large range.
[Data Speaks]
○ Peak for frozen funds passes, holding of stocks to see more profits before the Spring Festival
------
17 new stocks completed IPOs on Feb. 10 and the frozen capitals for online subscription are expected to be nearly 1 trillion yuan, the highest level in this round of IPOs. The funds will be unfrozen on Feb. 13. According to the statistics of XFA, the regulatory authorities have issued eight batches of new stocks at a large scale. The SSE Composite Index hiked seven times within one week after the funds for IPOs were unfrozen. In addition, the SSE Composite Index hiked 13 times in the week before the Spring Festival holidays in the past 15 years. It may indicate that the holding of stocks will see more profits than the holding of money before the Spring Festival.
[Trading Alarms]
○Three new shares for subscription on 11th Feb., including Ningbo Techmation------
。
Ningbo Techmation Co., Ltd. (732015.SH), principally engaged in the controlling system of injection molding machines, issues shares at 10.6 yuan per share with an upper subscription limit of 20,000 shares for each account. Suzhou Kelida Building & Decoration Co., Ltd. (732828.SH), principally engaged in curtain walls and public decoration, issues shares at 17.2 yuan per share with an upper subscription limit of 12,000 shares for each account. Silvery Dragon Prestressed Materials Co., Ltd. Tianjin (732969.SH), principally engaged in steels for pre-stressed concrete, issues shares at 13.79 yuan per share with an upper subscription limit of 20,000 shares for each account. Full subscription of these shares needs 690,000 yuan in total.
Central government studies Beijing-Tianjin-Hebei planning, Tianjin to see increasing policy advantages
Anti-monopoly to promote IC domestication, car production and sales embrace good start in Jan.
Sunway Communication to acquire a connector company, Dare Technology to develop wood industry
Etrol Technologies edges into oilfield services industry, Baoxiniao Garment and Anoky to develop e-business
[XFA Focus]
○ Central government studies Beijing-Tianjin-Hebei planning, Tianjin to see increasing policy advantages
------
Chinese President Xi Jinping hosted the ninth meeting of the Central Finance Leading Group on Feb. 10 morning, listened to the reports on the implementation of important strategies concerning new-type urbanization planning, food security, water security, energy security, innovation-driven development, the establishment of Asian Infrastructure Investment Bank, founding of Silk Road funds, etc. determined by the Central Finance Leading Group, and deliberated and studied the outline of Beijing-Tianjin-Hebei cooperative development planning. Xi required promoting balanced development of regions by decentralizing the non-capital functions of Beijing to form new growth pole.
Comment: Feb. 26 will be the first anniversary of Beijing-Tianjin-Hebei strategy proposed by Xi. Research institutions believe that supporting policies like the top design of Beijing-Tianjin-Hebei coordinated development, etc. might be launched soon and regional development will speed up gradually. Tianjin Municipality, enjoying policies of both free trade zones and national self-dependent innovation demonstration zones at the same time, has obvious advantages in attracting advanced manufacturing industry transfer and good conditions in undertaking the transfer of Beijing’s industrial population, thus local listed companies will see better development opportunities. Tianjin Songjiang Co., Ltd. (600225.SH) established two companies including Tianjin Hengtai Huijin Financial Leasing Co., Ltd. in Dongjiang Free Trade Port Zone of Tianjin in the third quarter of last year and succeeded in raising 1.6 billion yuan through private placement recently; Tianjin Tianbao Infrastructure Co., Ltd. (000965.SZ) is the only state-owned listed company held by the district government in Tianjin Bonded Zone. The company plans to purchase 60 percent equities of Tianjin Zhongtian Aviation Industry Investment Co., Ltd. to expand to aircraft manufacturing industry.
[XFA Selection]
○ Both CPI and PPI recorded a five-year new low in Jan. Experts call on tax reduction as soon as possible to prevent the risk of deflation.
○ China’s social financing scale stock recorded 122.86 trillion yuan at the end of 2014, indicating that the ratio to nominal GDP of the same term is 193 percent.
○ Li Xiaojia, chief executive officer of Hong Kong Exchanges and Clearing Limited (HKEx, 00388.HK), indicated that it is highly possible that the Shenzhen-Hong Kong Stock Connect program will be kicked off in the second half of the year. The possibility that A shares be incorporated into MSCI is higher and higher now.
○ 68 reform tasks of state-owned assets and enterprises held by Sichuan Province have been started comprehensively with nearly half of the key state-owned enterprises covered in the pilot.
○ Dalian Wanda Group purchased Infront Sports & Media with 1.05 billion euro. Wang Jianlin, the founder and president of the group, indicated on Feb. 10 that this move will quicken China’s pace in bidding for the World Cup.
[Industry Information]
○ QUALCOMM receives largest anti-monopoly ticket, China’s IC industry to overtake around curves
------
On Feb. 10 (Beijing time), QUALCOMM Incorporated (NASDAQ:QCOM) announced that it accepted the punishment of 6,088 million yuan, an all-time high in China’s anti-monopoly history, penalized by China’s National Development and Reform Commission (NDRC) and indicated that it will not refute. QUALCOMM is also required to decrease patent licensing fees. 3G and 4G patent licensing will no longer be tied up with other patents.
Comment: This will weaken QUALCOMM’s advantage in patents and urge it to maintain market share through opening technical cooperation. If China’s integrated circuit (IC) industry can catch up forthwith, it might overtake around curves. National companies like ZTE Corporation (000063.SZ; 00763.HK), Datang Telecom Technology Co., Ltd. (600198.SH), etc. play important roles as representing China to participate in global competition and occupy commanding height.
○ Auto production and sales embrace good start in Jan., attributes of low valuation and blue-chip interested
------
The China Association of Automobile Manufacturers released statistics showing that China’s Auto industry embraced a good start in Jan., especially in passenger car area, which saw a year-on-year growth of 15.1 percent and 10.4 percent in production and sales, respectively. The market share of Chinese brands increases for six consecutive months, representing a year-on-year growth of 3.9 percentage points.
Comment: Auto industry has the advantages of high growth certainty, stable market position of blue-chip companies, low valuation in market, etc. Theme investments like SOEs reform, car networking, Shenzhen-Hong Kong Stock Connect program, etc. also contribute to valuation increase. The production and sales express in Jan. released by Chongqing Changan Automobile Company Limited (000625.SZ), Great Wall Motor Company Limited (601633.SH; 02333.HK) and Jiangling Motors Corporation, Ltd. (000550.SZ) are better than expected and are interested by institutions. Moreover, Faw Car Co., Ltd. (000800.SZ), soared by the 10 percent daily limit on Feb. 10, sees net buying of 120 million yuan through institutional seats.
[Announcement Interpretation]
○Sunway Communication to acquire a connector company
------
Shenzhen Sunway Communication Co., Ltd. (300136.SZ) intends to acquire 80 percent equities of Shenzhen Yalisheng Connectors Co., Ltd., which is priced at 480 million yuan, by issuing shares at 19.15 yuan per share through private placement and in cash. It will fully control the company after the transaction and raise a supporting fund of 90 million yuan. Yalisheng Connectors is principally engaged in the provision of industrial automation connectors used in production and manufacturing to Foxconn and other mobile terminals manufacturing bases. The counterparty committed that its net profit after extraordinary items in 2015 will be no less than 45 million yuan with a corresponding acquisition P/E ratio of 10.67 times. The stocks of Sunway Communication closed at 18.75 yuan before trading suspension.
○Dare Technology to strip off non-principal assets and develop wood industry
------
Dare Technology Co., Ltd. (000910.SZ) plans to sell its non-principal assets, including tobacco packaging, auto components and information communication, to its controlling shareholder at 900 million to 1.1 billion yuan. Meanwhile, the company proposes to acquire equities of six wood subsidiaries under it at 900 million to 1.1 billion yuan to fully control them.
Comment: The tobacco packaging business of the company will see factory relocation while the information communication business suffers continuous losses. The adjustment of the above businesses will help improve the profitability of the company.
○Etrol Technologies edges into oilfield services industry
------
Beijing Etrol Technologies Co., Ltd. (300370.SZ) proposes to buy 100 percent equities of Beijing Geoshine Oilfield Technology Services Co., Ltd., which is priced at 310 million yuan by issuing shares at 33.79 yuan per share through private placement and in cash. It also intends to raise a supporting fund of 81.30 million yuan. Geoshine Oilfield Technology Services is a high and new technology enterprise principally engaged in measurement while drilling projects in oilfield directional and horizontal wells. The counterparty committed that its net profit in 2015 will be no less than 28 million yuan with a corresponding acquisition P/E ratio of 11 times. The stocks of Etrol Technologies closed at 40 yuan before trading suspension.
○Baoxiniao Garment and Anoky to develop e-business
------
A venture capitals company wholly controlled by Zhejiang Baoxiniao Garment Co., Ltd. (002154.SZ) intends to invest 45 million yuan to obtain 25 percent equities of Shanghai Xiaogui Network Technology Co., Ltd. The subject company is engaged in e-business on social networks and charges sales commissions after introducing users to corresponding merchants through massive users and relation chains on the open platform of Tencent Holdings Limited (00700.HK). It also charges displaying fees from merchants under promotion. Based on the assessment criteria, Xiaogui Network shall achieve a profit before taxation of 15 million yuan in 2015.
Shanghai Anoky Group Co., Ltd. (300067.SZ) proposes to contribute 21 million yuan or 70 percent to establish the Color Cloud Electronic Business Company with other four printing, dyeing and textile companies and set up an electronic business platform for dyestuffs and relevant chemical products, which will be engaged in the online transaction, online payment, logistics and delivery as well as technical services for relevant products.
[Financial Reports Express]
○Changshan Biochemical Phar. and eGOVA to propose high share conversion and dividend
------
The controlling shareholder of Hebei Changshan Biochemical Pharmaceutical Co., Ltd. (300255.SZ) proposes a 15-for-10 conversion of capital surplus into shares according to its 2014 annual report. The actual controller of Beijing eGOVA Co., Ltd. (300075.SZ) proposes a 10-for-10 conversion of capital surplus into shares. The latest stock prices of the two companies were 33.5 yuan and 38.18 yuan, respectively.
[Trading Trends]
○Insurance companies subscribe index funds and to increase buying when index falls below 3,000 points
------
XFA learnt from various insurance institutes that the investment operation of insurance capitals in the period before the Spring Festival will be prudent with a wait-and-see attitude. Some insurance institutes subscribed funds for IPOs and index funds at certain scales and indicated that if the index falls below 3,000 points, it would be an excellent opportunity to buy index funds at a large range.
[Data Speaks]
○ Peak for frozen funds passes, holding of stocks to see more profits before the Spring Festival
------
17 new stocks completed IPOs on Feb. 10 and the frozen capitals for online subscription are expected to be nearly 1 trillion yuan, the highest level in this round of IPOs. The funds will be unfrozen on Feb. 13. According to the statistics of XFA, the regulatory authorities have issued eight batches of new stocks at a large scale. The SSE Composite Index hiked seven times within one week after the funds for IPOs were unfrozen. In addition, the SSE Composite Index hiked 13 times in the week before the Spring Festival holidays in the past 15 years. It may indicate that the holding of stocks will see more profits than the holding of money before the Spring Festival.
[Trading Alarms]
○Three new shares for subscription on 11th Feb., including Ningbo Techmation------
。
Ningbo Techmation Co., Ltd. (732015.SH), principally engaged in the controlling system of injection molding machines, issues shares at 10.6 yuan per share with an upper subscription limit of 20,000 shares for each account. Suzhou Kelida Building & Decoration Co., Ltd. (732828.SH), principally engaged in curtain walls and public decoration, issues shares at 17.2 yuan per share with an upper subscription limit of 12,000 shares for each account. Silvery Dragon Prestressed Materials Co., Ltd. Tianjin (732969.SH), principally engaged in steels for pre-stressed concrete, issues shares at 13.79 yuan per share with an upper subscription limit of 20,000 shares for each account. Full subscription of these shares needs 690,000 yuan in total.
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