[Today's Guide]
○ Political Bureau studies economic work and emphasizes stock market healthy development
○ Gold price exceeds USD1,300, low interest rate rise expectation promotes capital inflow
○ Steel PMI hits new high in three years, carbon points system to introduce
○ Zhonghe to resume trading, Leo Group to invest Chehejia Information Technology
[SSN Focus]
○ Political Bureau studies economic work and emphasizes stock market healthy development
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The Political Bureau of the CPC Central Committee convened a meeting on April 29 to study the current economic conditions and work. The meeting emphasized that it should maintain the healthy development of the stock market, give full display to the regulation function of the market mechanism, strengthen the establishment of basic systems and the market regulation and protect the interests of investors. Based on the requirements on improving the urbanization rate of urban residents and deepening the housing system reform, it should reduce the property inventories in an orderly way, focus on regional and structural problems and implement differentiated regulatory policies. It should also pay attention to the price changes, guarantee effective supply and promote pricing reform in an active and steady way.
[TOP]
○ Gold price exceeds USD1,300, low interest rate rise expectation promotes capital inflow
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As at 20:50 May 5, the price of spot gold hiked 0.25 percent and reached a record high of 1,303 U.S. dollars/ounce in over one year. The daily K line surged for six consecutive days. The price of spot silver also exceeded 18 U.S. dollars/ounce in trading hours.
Comment: As the Federal Reserve gives no specific signals on the time of interest rate hike, the exchange rate of U.S. dollars continues weakening recently, which drives more investors into the precious metal market. In the recent statistics period, the Commodity Futures Trading Commission (CFTC) found that the short positions of U.S. dollars surged to the highest level in over three years and the long positions of COMEX silver reached a record high. In terms of supplies, the World Gold Survey (Chinese version) released on April 28 estimates that the global gold supply will stop increasing. Currently, the current gold sector in the A-share market is at a low level. Based on the research report of Founder Securities Co., Ltd. (601901.SH), the profit growth of Hunan Gold Corporation Limited (002155.SZ) is subject to the changes of gold prices. Shandong Humon Smelting Co., Ltd. (002237.SZ) enjoys advantages in stimulus system and cost control. Shandong Gold Mining Co., Ltd. (600547.SH) owns the highest gold inventory in unit asset.
[TOP]
[SSN Selection]
○ The spokesperson of the China Securities Regulatory Commission (CSRC) indicated on April 29 that there are still some commodities futures under overheated trading and it will strictly restrain excessive speculations.
○ The CSRC indicated that regulate private funds in the principle of supporting outstanding ones while eliminating bad ones. The Asset Management Association of China indicated that approximately 2,000 private fund management institutes without registration will be cancelled in registration.
○ Warren Buffett indicated that he is rosy about the high-end manufacturing industry at the 2016 general meeting and wishes to find another three to four enterprises engaged in similar precision casting.
○ Disney Town and Starwish Park embraced over 10,000 tourists during the May Day holiday and the Disney Station of Shanghai Metro even controlled the number of tourists.
○ The spokesperson of the Office of the Central Leading Group for Cyberspace Affairs indicated on May 2 that it will establish a joint investigation team with the State Administration for Industry and Commerce and the National Health and Family Planning Commission to investigate Baidu Inc.
○ Xinhua News Agency learnt from the public security authorities of Qingdao City that Xu Xiang, the general manager of Zexi Investment and Cheng Boming, the general manger of CITIC Securities Company Limited (06030.HK; 600030.SH), are legally arrested.
[Industry Information]
○ Steel PMI hits new high in three years, upstream raw materials to benefit
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The purchasing managers' index (PMI) tracking China's iron and steel sector increased to 57.3 percent in April, up 7.6 percentage points from March, according to a report of the Steel Logistics Professional Committee of the China Federation of Logistics ＆ Purchasing (CFLP). It is the highest monthly reading since March 2013 and also the first time for the index to climb above 50 percent in two years. The production sub-index, the sub-index of new order and new export orders all increased significantly and the inventory of finished products has been shrinking. It shows that the iron and steel industry is recovering with booming production and sales. In addition, according to the statistics of the National Bureau of Statistics, the PMI in China was 50.1 percent in April, expanding for two consecutive months and climbed above 50 percent.
Comment: Insiders estimate that the daily average output of crude steel is very likely to hit a new high in May, which will also boost the demand for raw materials in the upstream. Among listed companies, Hainan Mining Co., Ltd. (601969.SH) and Shandong Jinling Mining Co., Ltd. (000655.SZ) are principally engaged in iron ores. Kailuan Energy Chemical Co., Ltd. (600997.SH) is engaged in the production of coke.
○ Carbon points system to introduce, long-term effective mechanism to promote new energy development
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It is reported that Xu Heyi, chairman of BAIC Motor Corporation Ltd., indicated that the carbon points system in the vehicles industry in China is expected to be introduced in May. All vehicles enterprises will accumulate points based on the models of vehicles produced and sold. The sale of one new energy vehicles will accumulate positive points while the traditional petrol with huge energy consumption will see negative points. Meanwhile, China will establish a platform for market transactions. Enterprises with negative pints have to buy points on the platform and those with positive points can also sell their points.
Comment: The introduction of the carbon points system will reduce financial pressure and form a long-term effective mechanism to promote the development of new energy vehicles. Among listed companies, BYD Company Limited (01211.HKJ; 002594.SZ) is a domestic leader in the manufacturing of new energy passenger vehicles. Do-Fluoride Chemicals Co., Ltd. (002407.SZ) is principally engaged in the production of lithium hexafluorophosphate and lithium battery. It is developing the manufacturing of complete new energy vehicles through the acquisition of Red Star Auto Manufacturing Company.
[TOP]
○ New energy vehicles increase boost infrastructure construction, charging piles industry sees frequent inspections
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SSN learnt that institutes have increased the inspection on the charging piles and equipment industry since mid-April. Hangzhou Zhongheng Electric Co., Ltd. (002364.SZ) has been inspected by more than ten institutes, including Haitong Securities Company Limited (06837.HK; 600837.SH) and Essence Securities Co., Ltd. Such institutes mainly learnt about the orders for the charging piles of the company. Guotai Junan Securities Co., Ltd. (601211.SH), Huatai Securities Co., Ltd. (601688.SH) and other institutes inspected Zhongyeda Electric Co., Ltd. (002441.SZ). The prefabricated charging stations of the company as well as its subsequent development plans attracted the attention of such institutes. In addition, investors inquired the development of the charging equipment business of Shenzhen Clou Electronics Co., Ltd. (002121.SZ) at its performance brief.
It is also reported that the tender amount of the State Grid Corporation of China (SGCC) is about 5 billion yuan this year, far higher than previous years. It has announced the the successful candidates for the second materials procurement on April 28. Driven by increasing new energy vehicles, the construction of charging infrastructure will speed up. It is expected that the charging equipment market will reach 132 billion yuan in 2020.
[Announcement Interpretation]
○ Zhonghe to resume trading after terminating reorganization
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Zhonghe Co., Ltd. (002070.SZ) will resume trading after terminating major asset swap to. The company bought shares in Xiamen Boshi Trading Co., Ltd. in 2012 to enter the lithium battery material industry and later continued to increase investment in the lithium battery industry. In November 2015, the company acquired 100 equities in Sichuan State Lithium Material Co., Ltd., Sichuan Blossom Lithium Industrial Co., Ltd. and Sichuan Huamin Mining Co., Ltd. for over 1 billion yuan, greatly increasing its lithium resources. During its suspension, the lithium sector rose dramatically.
○ Leo Group to invest RMB350 mln into Chehejia Information Technology
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Leo Group Co., Ltd. (002131.SZ) plans to invest another 350 million yuan in Beijing Chehejia Information Technology Co., Ltd. After the investment, Leo Group will hold 11.75 percent equities in Chehejia Information Technology. Chehejia Information Technology positions itself as an urban intelligent transportation service provider. In the latter half year of 2017, it will launch pure SEV (smart electrical vehicle) to meet the demand for urban travel within a radius of 30 kilometers. In the latter half of 2018, it will launch electrical SUV (sports utility vehicle) to meet the demand for ravel within a radius of 300 kilometers. Leo Group said that it is a move into the smart electrical vehicle manufacturing field.
[TOP]
○ Haisco Pharmaceutical to participate in establishment of life insurance firm with RMB400 mln
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Haisco Pharmaceutical Group Co., Ltd. (002653.SZ) plans to initiate the establishment of Xinxin Life Insurance Co., Ltd. with its own capital of no more than 400 million yuan. It is estimated its proportion in the total share capital will be no more than 20 percent. The transaction is still in the planning stage. It has not yet officially signed equity subscription agreement. Haisco Pharmaceutical Group believes that its participation in the establishment of Xinxin Life Insurance will push for its development into the health industry.
○ Mindong Electric Power to raise RMB700 mln to develop wind power, state-owned company to buy all shares
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Fujian Mindong Electric Power Limited Company (000993.SZ) plans to raise 700 million by issuing shares at 7.7 yuan per share through private placement to invest in its wind power project in Fuying Isle, Xiapu County and supplement working capital. Specially, 500 yuan proceeds will be invested in the wind power project. After the project reaches designed capacity, the company's annual average net profit is estimated to improve about 31.44 million yuan.
Ningde State-owned Assets Investment Co., Ltd., the controlling shareholder of Mindong Electric Power under the State-owned Assets Supervision and Administration Commission of the State Council of Ningde City, Fujian Province will subscribe 150 million yuan. Fujian Investment ＆ Development Group Co., Ltd. under the State-owned Assets Supervision and Administration Commission of the State Council of Fujian Province will subscribe 550 million yuan.
○ Hexing Packaging Printing to raise RMB951 mln to expand main businesses
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Xiamen Hexing Packaging Printing Co., Ltd. (002228.SZ) plans to raise 951 million yuan by issuing 50 million shares through private placement. The proceeds will be invested in the development of intelligent packaging integration service and the construction of packaging industrial chain cloud platform.
[Financial Reports Express]
○ Ligong Environment and Energy Technology forecasts growth for H1
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Ningbo Ligong Environment and Energy Technology Co., Ltd. (002322.SZ) reports a growth of 198 percent in the first quarter and forecasts a growth of 837 to 887percent for the first half year mainly due to integration of the financial statement of Jiangxi Booway New Technology Co., Ltd. and Beijing SysTek Orient Environmental Hi-Tech Co., Ltd. Vtron Technologies Ltd. (002308.SZ) reports a growth of 219 percent in the first quarter and forecasts a growth of 220 to 270percent for the first half year mainly due to its expansion in kindergarten operation and management service. TDG Holding Co., Ltd. (600330.SH) reports a growth of 326 percent in the first quarter and forecasts a growth of 350 to 400percent for the first half year mainly due to growth in various industries.
Taihai Manoir Nuclear Equipment Co., Ltd. (002366.SZ) reports a growth of 8,556 percent in the first quarter and forecasts a growth of 1,073 to 1,344percent for the first half year mainly due to growth in nuclear grade material sales and continued fulfillment of technical service contracts. Besides, the company's controlling shareholder will increase shareholdings in the company for 200 million yuan at a price of no more than 55 yuan per share within a year.
[Trading Trends]
○Sunward Intelligent Equipment bought by five institutions
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The trading volume ranking list on April 29 shows that Sunward Intelligent Equipment Co., Ltd. (002097.SZ) was bought by five institutions with a total amount of 68,796,000 yuan, accounting for 17.67 percent of its intraday turnover. Another institutional seat sold 13.02 million yuan.
Comments: The company previously reported a growth of 136 percent in net profit in the first quarter and forecast a growth of 450 to 500 percent in net profit for the first half year. Institutions point out that the company's equipment, mainly military equipment, has increased 40 percent year on year. The military civil integration has risen to a national strategy and China's general aviation is booming. The company expects to see continuing growth in these two businesses.
[Weekly Review]
○ Good performance; good prospect; good bosses
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What is the essence of stock investment? Some hold that the stock market is like a weighing machine in the long term, and investors have to seek for well-performed and value-led companies. Some say that the fundamental function of the stock market is to optimize resource allocation; therefore, investors should seek for growth companies in line with the economic transformation. But, except those value-led and growth companies, there are the third types of companies that should deserve our attention.
Compared to commodity residential house and rebar, the most distinguishing feature of A-share listed companies is their flexibility. Some small-cap companies were taken as shell resources and transformed their main businesses; some continued to acquire other companies and grew into big companies from small ones. If we only focus on financial data, we can hardly seize opportunities in these companies. But one thing we can be certain of is that behind the bewildering capital operation there must be supports from the company's shareholder. Thus we can change our thinking to discover these black horses by looking for good bosses.
Last week SSN continued to report and analyze this issue. The former substantial shareholders of Zhejiang Unifull Industrial Fiber Co., Ltd. (002427.SZ) and Zhejiang Dongliang New Material Co., Ltd. (002082.SZ) sold their controlling rights to new investors. Jiangsu Sanfangxiang Industry Co., Ltd. (600370.SH) were bought by Butterfly Color Asset Management (Shanghai) Co., Ltd., a company with rich experience in capital operation. The stock prices of the three companies went up against the market. Besides, as more listed companies released their first-quarter earnings forecasts, SSN also mentioned opportunities in well-performed companies and reported the continued booming lithium battery and liquor industries.
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