[Today’s Guide]
> Central bank cuts rate slightly, stock index unlikely to surge significantly again
> Top leaders concern soccer reform, industry sees development opportunities
> Two-tier pricing of natural gas merged, 4G to compete for same market
> Rainbow Fine Chemical to develop photovoltaic power generation, Lecron Energy Saving Materials to develop Internet
[XFA Focus]
○ Central bank cuts rate slightly, stock index unlikely to surge significantly again
------
People’s Bank of China, the central bank, announced that it would cut the one-year deposit and lending rates by 0.25 percentage points and increase the deposit ceiling to 1.3 times of the benchmark rate from March 1.
Comment: The rate cut followed the trend of interest rate cut initiated on Nov. 22, 2014, which will improve the economy and stock market in the long term, such industries as power and real estate, etc. with high leverage and low valuation in particular. Many institutes surveyed believe that the Main Board is expected to reach the previous highest level. As the rate cut is expected by the market and the blue-chip stocks have accumulated certain growth, the SSE Composite Index is unlikely to surge significantly. Market capitals are more likely to focus on industries with growth potentials and sectors to benefit from reform.
[XFA Selection]
○Under the Dome, an investigative report made by Chai Jing (a former hostess and journalist of CCTV), was given a thumbs-up by the Minister of Environmental Protection. Environmental protection stocks are expected to be highly favored by investors.
○ China is formulating policies to encourage the promotion and application of ethanol biofuel in Beijing, Tianjin Municipality and Hebei Province to effectively reduce haze.
○ The pilot plan for the Guangxi Qinzhou free trade zone has been submitted to the State Council and is likely to be covered by the third free trade zones of China.
○ Xinjiang Uygur Autonomous Region introduces new policies to subsidize deeds for the trading of new commodity houses and support projects under construction with credit.
○ The surveillance equipment of Hangzhou Hikvision Digital Technology Co., Ltd. (002415.SZ) is reported to have potential safety hazards, which will further improve enterprises’ awareness on information security.
○ As the relevant parties could not reach an agreement with respect to the vehicle of the strategic investment and other important aspects of the investment, New China Life Insurance Company Ltd. (01336.HK; 601336.SH) decided to terminate the significant matter and resume the trading of its shares.
[Industry Information]
○ Overall plan for reform of Chinese soccer approved, Chinese soccer embraces development opportunities
------
Chinese President Xi Jinping chaired the tenth meeting of China’s Leading Group for Overall Reform on Feb. 27. The meeting deliberated and approved the “Overall Plan for the Reform of Chinese Soccer”, highlighting that the fulfillment of the Chinese dream of great renewal of the Chinese nation and a sports power is closely related. The development of soccer is an inevitable requirement to establish a sports power as well as an ardent wish of the public. It requires overcoming the institutional defects impeding the development of soccer and consolidating the public foundation to develop young players and hone their skills.
Comment: The meeting injected the strongest execution power into the reform of Chinese soccer. The development of Chinese will no longer solely depends on the General Administration of Sport and the Chinese Football Association. It will form a complete system with infrastructure, investments in soccer as well as campus and social soccer. Such subdivided industries as football clubs, matches operation, construction of fields and soccer materials are expected to expand capacities. In terms of listed companies, the substantial shareholder of Jiangsu Sainty Corp., Ltd. (600287.SH) owns the JS Guoxin Sainty Football Club and other assets. Ledman Optoelectronic Co., Ltd. (300162.SZ) is the only partner in the LED equipment for the Chinese Football Association Super League. China Sports Industry Group Co., Ltd. (600158.SH) is the only listing platform in the system of the General Administration of Sport.
○ Two-tier pricing of natural gas merged, downstream gas demand may burst
------
China’s natural gas pricing will be unified from April 1. The city-gate prices for the “incremental”, non-residential users will be cut by 0.44 yuan per cubic meter and the prices of “existing” gas will be raised by 0.04 yuan per cubic meter. It also conducts pilot deregulation on the pricing of gas directly supplied to users.
Comment: Institutes estimated that the rise on existing gas price and the incremental price would be 0.24 yuan per cubic meter, respectively. The adjustment will benefit downstream enterpriser natural gas users and improve the proportion of gas in energy consumption. According to the plan, the consumption of natural gas will reach 360 billion cubic meters in 2020, which is nearly double of that in 2014. In terms of listed companies, Shaanxi Provincial Natural Gas Co., Ltd. (002267.SZ) is principally engaged in the operation of distant gas pipelines. Shenzhen Gas Corporation Ltd. (601139.SH) has a high market share in the natural gas market in Guangdong Province. The backdoor listing of Sinosky Energy (Holdings) Co., Ltd. through Changchun Department Jituan Store Company Limited (600856.SH) has been approved.
○ Communication industry fully enters 4G times, communication equipment industry to boom
------
The Ministry of Industry and Information Technology issued the FDD-LTE 4G licenses to China United Network Communications Limited (600050.SH; 000762.HK) and China Telecom Corporation Limited (CHA.NYSE; 00728.HK) on Feb. 27. The three major operators, namely China Mobile Limited (CHL.NYSE; 00941.HK), China United Network and China Telecom, all entered into the 4G time. The two 4G networks will be conducted in China and the time for high-speed network will arrive soon.
Comment: Prior to the issuance of FDD licenses, the 4G market was dominated by China Mobile without sufficient competition. The competition with two systems is likely to cut the 4G fees and attract more users. ZTE Corporation (00763.HK; 000063.SZ) and other 4G equipment manufacturers will obtain more new market demands. Dingli Communications Corp., Ltd. (300050.SZ), Sunwave Communications Co., Ltd. (002115.SZ) and other network improvement equipment suppliers will also benefit from the development of mixed network.
[Announcement Interpretation]
○ Rainbow Fine Chemical to raise RMB2 bln through private placement to develop distributed photovoltaic power generation
------
Shenzhen Rainbow Fine Chemical Industry Co., Ltd. (002256.SZ) plans to raise 2.06 billion yuan by issuing shares at 9.84 yuan per share through private placement, among which, 1.46 billion yuan will be invested in the three distributed photovoltaic power generation projects and the rest 600 million yuan will be used to supplement working capital. In terms of purchasers, Chen Yongdi, actual controller of the company, and Shenzhen Qianhai Xinwangzhao Investment Partnership, controlled by the directors, supervisors and senior management of the company, participate in the private placement with 1.6 billion yuan and 59 million yuan, respectively. The stock price of Rainbow Fine Chemical closed at 10.06 yuan per share before trading suspension.
○ Lecron Energy Saving Materials to fully control Xinhe Culture Transmission with RMB1.3 bln to develop Internet
------
Lecron Energy Saving Materials Co., Ltd. (300343.SZ) plans to purchase 100 percent equities of Shanghai Xinhe Culture Transmission Co., Ltd. through private placement and in cash. The transaction is priced at 1,322 million yuan. Meanwhile, a supporting fund of 340 million yuan will be raised through private placement from Li Hongguo, controlling shareholder of the company, etc. and the offering price is 26.46 yuan per share. With core business in the advertisement marketing of automobile and Internet game, Xinhe Culture Transmission achieved a net profit of 60.53 million yuan in the first three quarters of 2014. The counterparty committed that the net profit of Xinhe Culture Transmission will be no less than 100 million yuan, 130 million yuan and 150 million yuan from 2015 to 2017.
Comment: As a supplier of the raw material of construction polyurethane, the company will be transformed into a company with paralleled business in chemical raw material and chemicals manufacturing as well as Internet and relevant service industries after the transaction. Xinhe Culture Transmission will greatly enhance the current profitability of the listed company.
○ China United Travel inks operation agreement of National Winter Games
------
China United Travel Co., Ltd. (600358.SH) inks the joint development agreement of the market management of the 13th National Winter Games with Beijing Olympics Economic and Technology Development Co., Ltd., Beijing Guoao Shiji Assets Management Co., Ltd. and Urumchi Diyihong Commerce Co., Ltd. China United Travel is responsible for the packaging and planning of the competitions of the Winter Games, the formulation of the investment invitation promotion scheme and the implementation of press release as well as the detailed work of media promotion. 2 million yuan will be invested in the cooperation project as start-up funds and China United Travel enjoys 40 percent equities of the project. The settlement of the project is determined to be within three months after Dec. 31, 2017.
[Financial Reports Express]
○ Wenfeng plans high share conversion and dividend
------
The net profit of Wenfeng Great World Chain Development Corporation (601010.SH) sees a year-on-year growth of 15 percent in its annual report and its earnings per share is 0.6 yuan. The company proposes a 15-for-10 conversion of capital surplus into shares combined with 3.6 yuan dividend for every 10 shares.
○ Net profit of Jinlong Machinery & Electronic sees year-on-year growth of 400 percent in 2014
------
Thanks to the largely increased revenue of Jinlong Machinery & Electronic Co., Ltd. (300032.SZ), it achieved a net profit of 117 million yuan in 2014, representing a year-on-year growth of 452.5 percent. Moreover, the company has completed merger and reorganization. Shenzhen Jiaai Motor Co., Ltd. and Wuxi Booyi Technology Co., Ltd., two subsidiaries of the company, are consolidated.
[Weekly Review]
○ Weighted stocks set up the stage and theme stocks have a good performance
------
At the beginning of the year of sheep, weighted stocks set up the stage and theme stocks have a good performance. The SSE Composite Index reaches 3,300 points and the ChiNext Index constantly makes new records. The blue-chip stocks saw value return last year, but the economy is still in downtrend and the excessive capacity of traditional industries are not completely got rid of. The turning of market style to growth stocks is a reflection of the urgency of economic transformation. It conforms to the development trend of history that various strategic emerging industries are favored by the main funds.
As two sessions are just around the corner, the A-share market will usually see some beneficial policies. For example, the central bank’s decision of interest cut at this moment is beneficial for blue-chip stocks to stabilize valuation. The concept of two sessions will become the next focus of the A-share market. Hotspots like SOEs reform, energy conservation and environment protection, reform of people's livelihood, national security and military industry, domestic alternative, etc. all will show up.
XFA closely follows up these hotspots. Themes focused on in recent reports such as energy saving reform of central enterprises, information security of SIM cards, private elderly care industry, increasing investment in aerospace industry, etc. all gained good market effect. Later attentions can be paid to energy conservation and environment protection, this theme runs throughout the stock market in recent years and is at its height during the two sessions. Information creates value. We will work harder to provide the lasted information to investors.
> Central bank cuts rate slightly, stock index unlikely to surge significantly again
> Top leaders concern soccer reform, industry sees development opportunities
> Two-tier pricing of natural gas merged, 4G to compete for same market
> Rainbow Fine Chemical to develop photovoltaic power generation, Lecron Energy Saving Materials to develop Internet
[XFA Focus]
○ Central bank cuts rate slightly, stock index unlikely to surge significantly again
------
People’s Bank of China, the central bank, announced that it would cut the one-year deposit and lending rates by 0.25 percentage points and increase the deposit ceiling to 1.3 times of the benchmark rate from March 1.
Comment: The rate cut followed the trend of interest rate cut initiated on Nov. 22, 2014, which will improve the economy and stock market in the long term, such industries as power and real estate, etc. with high leverage and low valuation in particular. Many institutes surveyed believe that the Main Board is expected to reach the previous highest level. As the rate cut is expected by the market and the blue-chip stocks have accumulated certain growth, the SSE Composite Index is unlikely to surge significantly. Market capitals are more likely to focus on industries with growth potentials and sectors to benefit from reform.
[XFA Selection]
○Under the Dome, an investigative report made by Chai Jing (a former hostess and journalist of CCTV), was given a thumbs-up by the Minister of Environmental Protection. Environmental protection stocks are expected to be highly favored by investors.
○ China is formulating policies to encourage the promotion and application of ethanol biofuel in Beijing, Tianjin Municipality and Hebei Province to effectively reduce haze.
○ The pilot plan for the Guangxi Qinzhou free trade zone has been submitted to the State Council and is likely to be covered by the third free trade zones of China.
○ Xinjiang Uygur Autonomous Region introduces new policies to subsidize deeds for the trading of new commodity houses and support projects under construction with credit.
○ The surveillance equipment of Hangzhou Hikvision Digital Technology Co., Ltd. (002415.SZ) is reported to have potential safety hazards, which will further improve enterprises’ awareness on information security.
○ As the relevant parties could not reach an agreement with respect to the vehicle of the strategic investment and other important aspects of the investment, New China Life Insurance Company Ltd. (01336.HK; 601336.SH) decided to terminate the significant matter and resume the trading of its shares.
[Industry Information]
○ Overall plan for reform of Chinese soccer approved, Chinese soccer embraces development opportunities
------
Chinese President Xi Jinping chaired the tenth meeting of China’s Leading Group for Overall Reform on Feb. 27. The meeting deliberated and approved the “Overall Plan for the Reform of Chinese Soccer”, highlighting that the fulfillment of the Chinese dream of great renewal of the Chinese nation and a sports power is closely related. The development of soccer is an inevitable requirement to establish a sports power as well as an ardent wish of the public. It requires overcoming the institutional defects impeding the development of soccer and consolidating the public foundation to develop young players and hone their skills.
Comment: The meeting injected the strongest execution power into the reform of Chinese soccer. The development of Chinese will no longer solely depends on the General Administration of Sport and the Chinese Football Association. It will form a complete system with infrastructure, investments in soccer as well as campus and social soccer. Such subdivided industries as football clubs, matches operation, construction of fields and soccer materials are expected to expand capacities. In terms of listed companies, the substantial shareholder of Jiangsu Sainty Corp., Ltd. (600287.SH) owns the JS Guoxin Sainty Football Club and other assets. Ledman Optoelectronic Co., Ltd. (300162.SZ) is the only partner in the LED equipment for the Chinese Football Association Super League. China Sports Industry Group Co., Ltd. (600158.SH) is the only listing platform in the system of the General Administration of Sport.
○ Two-tier pricing of natural gas merged, downstream gas demand may burst
------
China’s natural gas pricing will be unified from April 1. The city-gate prices for the “incremental”, non-residential users will be cut by 0.44 yuan per cubic meter and the prices of “existing” gas will be raised by 0.04 yuan per cubic meter. It also conducts pilot deregulation on the pricing of gas directly supplied to users.
Comment: Institutes estimated that the rise on existing gas price and the incremental price would be 0.24 yuan per cubic meter, respectively. The adjustment will benefit downstream enterpriser natural gas users and improve the proportion of gas in energy consumption. According to the plan, the consumption of natural gas will reach 360 billion cubic meters in 2020, which is nearly double of that in 2014. In terms of listed companies, Shaanxi Provincial Natural Gas Co., Ltd. (002267.SZ) is principally engaged in the operation of distant gas pipelines. Shenzhen Gas Corporation Ltd. (601139.SH) has a high market share in the natural gas market in Guangdong Province. The backdoor listing of Sinosky Energy (Holdings) Co., Ltd. through Changchun Department Jituan Store Company Limited (600856.SH) has been approved.
○ Communication industry fully enters 4G times, communication equipment industry to boom
------
The Ministry of Industry and Information Technology issued the FDD-LTE 4G licenses to China United Network Communications Limited (600050.SH; 000762.HK) and China Telecom Corporation Limited (CHA.NYSE; 00728.HK) on Feb. 27. The three major operators, namely China Mobile Limited (CHL.NYSE; 00941.HK), China United Network and China Telecom, all entered into the 4G time. The two 4G networks will be conducted in China and the time for high-speed network will arrive soon.
Comment: Prior to the issuance of FDD licenses, the 4G market was dominated by China Mobile without sufficient competition. The competition with two systems is likely to cut the 4G fees and attract more users. ZTE Corporation (00763.HK; 000063.SZ) and other 4G equipment manufacturers will obtain more new market demands. Dingli Communications Corp., Ltd. (300050.SZ), Sunwave Communications Co., Ltd. (002115.SZ) and other network improvement equipment suppliers will also benefit from the development of mixed network.
[Announcement Interpretation]
○ Rainbow Fine Chemical to raise RMB2 bln through private placement to develop distributed photovoltaic power generation
------
Shenzhen Rainbow Fine Chemical Industry Co., Ltd. (002256.SZ) plans to raise 2.06 billion yuan by issuing shares at 9.84 yuan per share through private placement, among which, 1.46 billion yuan will be invested in the three distributed photovoltaic power generation projects and the rest 600 million yuan will be used to supplement working capital. In terms of purchasers, Chen Yongdi, actual controller of the company, and Shenzhen Qianhai Xinwangzhao Investment Partnership, controlled by the directors, supervisors and senior management of the company, participate in the private placement with 1.6 billion yuan and 59 million yuan, respectively. The stock price of Rainbow Fine Chemical closed at 10.06 yuan per share before trading suspension.
○ Lecron Energy Saving Materials to fully control Xinhe Culture Transmission with RMB1.3 bln to develop Internet
------
Lecron Energy Saving Materials Co., Ltd. (300343.SZ) plans to purchase 100 percent equities of Shanghai Xinhe Culture Transmission Co., Ltd. through private placement and in cash. The transaction is priced at 1,322 million yuan. Meanwhile, a supporting fund of 340 million yuan will be raised through private placement from Li Hongguo, controlling shareholder of the company, etc. and the offering price is 26.46 yuan per share. With core business in the advertisement marketing of automobile and Internet game, Xinhe Culture Transmission achieved a net profit of 60.53 million yuan in the first three quarters of 2014. The counterparty committed that the net profit of Xinhe Culture Transmission will be no less than 100 million yuan, 130 million yuan and 150 million yuan from 2015 to 2017.
Comment: As a supplier of the raw material of construction polyurethane, the company will be transformed into a company with paralleled business in chemical raw material and chemicals manufacturing as well as Internet and relevant service industries after the transaction. Xinhe Culture Transmission will greatly enhance the current profitability of the listed company.
○ China United Travel inks operation agreement of National Winter Games
------
China United Travel Co., Ltd. (600358.SH) inks the joint development agreement of the market management of the 13th National Winter Games with Beijing Olympics Economic and Technology Development Co., Ltd., Beijing Guoao Shiji Assets Management Co., Ltd. and Urumchi Diyihong Commerce Co., Ltd. China United Travel is responsible for the packaging and planning of the competitions of the Winter Games, the formulation of the investment invitation promotion scheme and the implementation of press release as well as the detailed work of media promotion. 2 million yuan will be invested in the cooperation project as start-up funds and China United Travel enjoys 40 percent equities of the project. The settlement of the project is determined to be within three months after Dec. 31, 2017.
[Financial Reports Express]
○ Wenfeng plans high share conversion and dividend
------
The net profit of Wenfeng Great World Chain Development Corporation (601010.SH) sees a year-on-year growth of 15 percent in its annual report and its earnings per share is 0.6 yuan. The company proposes a 15-for-10 conversion of capital surplus into shares combined with 3.6 yuan dividend for every 10 shares.
○ Net profit of Jinlong Machinery & Electronic sees year-on-year growth of 400 percent in 2014
------
Thanks to the largely increased revenue of Jinlong Machinery & Electronic Co., Ltd. (300032.SZ), it achieved a net profit of 117 million yuan in 2014, representing a year-on-year growth of 452.5 percent. Moreover, the company has completed merger and reorganization. Shenzhen Jiaai Motor Co., Ltd. and Wuxi Booyi Technology Co., Ltd., two subsidiaries of the company, are consolidated.
[Weekly Review]
○ Weighted stocks set up the stage and theme stocks have a good performance
------
At the beginning of the year of sheep, weighted stocks set up the stage and theme stocks have a good performance. The SSE Composite Index reaches 3,300 points and the ChiNext Index constantly makes new records. The blue-chip stocks saw value return last year, but the economy is still in downtrend and the excessive capacity of traditional industries are not completely got rid of. The turning of market style to growth stocks is a reflection of the urgency of economic transformation. It conforms to the development trend of history that various strategic emerging industries are favored by the main funds.
As two sessions are just around the corner, the A-share market will usually see some beneficial policies. For example, the central bank’s decision of interest cut at this moment is beneficial for blue-chip stocks to stabilize valuation. The concept of two sessions will become the next focus of the A-share market. Hotspots like SOEs reform, energy conservation and environment protection, reform of people's livelihood, national security and military industry, domestic alternative, etc. all will show up.
XFA closely follows up these hotspots. Themes focused on in recent reports such as energy saving reform of central enterprises, information security of SIM cards, private elderly care industry, increasing investment in aerospace industry, etc. all gained good market effect. Later attentions can be paid to energy conservation and environment protection, this theme runs throughout the stock market in recent years and is at its height during the two sessions. Information creates value. We will work harder to provide the lasted information to investors.
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