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A-Share Strategy 2015-05-14

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2015-05-14 17:58

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 [Today’s Guide]
○ Revised draft of ‘Securities Law’ to solicit public opinions soon
○Reform of Shandong state-owned asset speeds up, Lushang Group participates actively
○Environmental protection company under Xiandai Investment to listed in NEEQ
○Kingenta Ecological Engineering to achieve substantial progress in planning rural material e-commerce
 
 
[Authoritative Voice]
Revised draft of ‘Securities Law’ to solicit public opinions soon
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It is reported that the Standing Committee of the National People’s Congress (NPC) has completed the first deliberation on the revised draft of the ‘Securities Law’. Based on relevant legislation progress, it will release the full text of the revised draft to solicit opinions from the public. It will improve the draft based on the feedback and submit to the Standing Committee of the NPC for the second and third deliberation. All deliberations are expected to be completed in the fourth quarter of this year at the soonest.
It is expected to further clarify the thought on the reform of the registration system for stocks issuance to solicit opinions on the revised draft of the ‘Securities Law’. But the specific operation for the transition from the approval system to the registration system has to be specified in the implementation plan on the registration system preparing by the China Securities Regulatory Commission (CSRC).
 
 
[XFA View]
 ‘Internet Plus’ concept should develop for long term
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Driven by the visit of Chinese Premier Li Keqiang to Zhongguancun, the support to mass innovation and entrepreneurship, and etc., the ChiNext Board surged by over 15 percent in three consecutive trading days. The performance of the ‘Internet Plus’ concept sector represented by Leshi Internet Information & Technology Corp., Beijing (300104.SZ) surprised various investors. However, the author believes that despite the internal reasonableness in its outstanding performance, the ‘Internet Plus’ concept as a theme in the economic transformation should develop for long term. The exaggeration of bubbles and the diversion from the actual development progress will bring losses to medium and small investors.
 
Under the background of economic structural adjustment, certain investors consider emerging industries as core drivers in China’s economic growth in the future. Some technology stocks have become the glamour stocks in the market. It should be admitted that the investment itself is beyond reproach. Take the ‘Internet Plus’ as an example, China is more competitive in population density and application permeability compared with European and American countries. It is reasonable that the market value of Chinese Internet companies is higher than European and American enterprises. The data in the 2014 annual reports and those for the first quarter also show that based on the net profit growth, business revenue growth, gross profit, ROE and the turnover ratio of trade receivables, the performance of the computer, non-banking financial industry and transportation industry continued to improve while the performance of banks, construction materials and excavation industries continue to worsen.
 
However, what is more important is that when the market value of most Internet concept stocks is over 50 billion yuan and even 100 billion yuan, the simple transformation or concept cannot support the huge market value for a long term. The effectiveness of the previous logic to improve the stock price is necessary to conduct a ‘second testing’. Preliminary results show that most A-share Internet companies with a market value similar with or more than Chinese concept stocks may see huge differentiation if they cannot match or surpass the core index and business models of the Internet industry. As a matter of fact, today’s market shows some hints. Despite slight growth in the ChiNext Board index, individual stocks saw huge declines. Flagship stocks maintained the trend, but the position is under pressure. (An Wen)
 
 
 [Institutions’ Movement]
Insurance companies suggest to avoid highly-leveraged stocks with huge surge
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The insurance asset management companies like Taikang Life Insurance Co., Ltd., People's Insurance Company of China, etc. surveyed by XFA indicate that considering the increasing fluctuation of A-share market in recent days, they are now starting to sell highly-leveraged stocks which surged a lot in the early stage and they are optimistic about the sectors benefiting from “One Belt and One Road” which will see actual implementation as well as the military industry sector.
 
 
[XFA Viewpoint]
Reform of Shandong state-owned asset speeds up, Lushang Group participates actively
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XFA learns that the SOEs reform in Shandong Province has entered a new stage of all-round deepening. Shandong Province distributed opinions on deepening SOEs reform in March this year, clearly proposing to map out equity incentive plan of state-owned holding listed company before end-April. Now the limit of end-April has passed, the equity incentive plan might see accelerated launch. Shandong Province now has established State-Owned Asset Investment Operation Company, trying to sort out the relationship between listed companies and the state-owned shareholders.
Among the state-owned enterprise groups in Shandong Province, Lushang Group owns various quality assets and two listed platforms. It might expect deep participation in this round of state-owned asset reform. The equity of Silver Plaza Group Co., Ltd. (600858.SH), under Lushang Group, is consecutively bought by Maoye through secondary market acquisition to the 5 percent limit, speeding up the reform. Recently, the company plans to acquire asset through private placement to eliminate horizontal competition and to introduce strategic investors to fuel its transformation. Lushang Property Co., Ltd. (600223.SH), as an important asset operation platform under the group, might directly play an important role in this round of reform in the future. Lushang Property announced in late April that Shandong State-owned Asset Investment Holding Co., Ltd. reduces its shareholding of the company from 6.67 percent to 4.99 percent. The reduction of shares held by state-owned asset leaves space for “mixed ownership reform”.
 
 
[Information Radar]
Environmental protection company under Xiandai Investment to listed in NEEQ
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Hunan Xiandai Environment Technology, under Xiandai Investment Co., Ltd. (000900.SZ), started to get prepared for being listed in the National Equities Exchange and Quotations (NEEQ), commonly known as the New Three Board and similar to OTCBB in the U.S. market, in last year. According to relevant process, the market expects that the company might be officially listed in NEEQ recently. It will help the company to further expand financing channels and meet the demand of increasing orders. The company gained 1,977 million yuan from its main business of high way, while its revenue from non-principal business like environmental protection reached 2,354 million yuan, exceeding the income of main business for the first time.
 
Kingenta Ecological Engineering to achieve substantial progress in planning rural material e-commerce
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Kingenta Ecological Engineering Group Co., Ltd. (002470.SZ) speeds up in planning rural material e-commerce. The market expects that substantial progress might be achieved recently. The company aims to build an international e-commerce platform, actively make use of offline agrochemical service centers and channels, integrate industrial resources and build a trans-industries e-commerce ecosphere. The company will start the agriculture project in the form of “product and service” to enter the whole value chain of agriculture management.
 
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