[Today's Guide]
○ RQFII and Northbound trading both witnessed large capital inflows, foreign capitals continue to increase holding A shares
○ Two Ziyuan III satellites to form network, geomatics industry to embrace rapid development
○ SF Express to go backdoor listing via Dingtai Rare Earth ＆ New Materials, Yongle Film to go backdoor listing via Hongda New Material
○ Sinosteel Engineering ＆ Technology signs big contract, Wuzhou Communications shareholder to launch shareholding increase plan
[SSN Focus]
○ RQFII and Northbound trading both witnessed large capital inflows, foreign capitals continue to increase holding A shares
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CSOP FTSE CHINA A50 ETF, the biggest overseas RQFII A-share ETF, recorded a net subscription of 217 million fund units on May 30. It means that about 2 billion yuan flew into the ETF, the biggest intraday subscription in nearly one year. It is learnt that this subscription was initiated by multiple foreign institutions. On the same day, the net intraday buying turnover of the Northbound trading increased to 2.4 billion yuan, the highest in more than one month. In the latest four trading days, a total of 4.6 billion yuan net buying was recorded.
Comment: the Shanghai and Shenzhen stock exchanges on last weekend issued relevant guidance, to regulate the suspension and resumption of trading of A share companies. Institutions believe that the new rules on trading suspension and resumption will drive the A share market to become a more mature market. The chance of including A shares into the MSCI index apparently increase. Positive attitude of the Chinese authorities also heightens the expectation for the announcement of timetables of opening Shenzhen-Hong Kong Stock Connect and further optimization and expansion of Shanghai Hong Kong Stock Connect. Historic experience shows that low valuation blue-chip stocks such as financial, property and auto stock, as well as industries with Chinese characteristics such as liquor and traditional Chinese medicine are more likely to gain popularity among foreign capitals.
[TOP]
○ President Xi Jingping attends event of tech circle, saying CAS should play greater role
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On May 30, President Xi Jinping gave an important speech at the national science and technology innovation conference, meeting of academicians of the Chinese Academy of Sciences (CAS) and Chinese Academy of Engineering (CAE) and the ninth national convention of the China Association for Science and Technology (CAST), emphasizing that as China's development is on the new historical starting point, we should play technological innovation in a more important position, and try to achieve the goal of building China into a technology power. Xi also pointed out that the CAS and the CAE as the pool of masters of science and technology, should play its role as the high-end think tank of the nation, and its leading role as the highest academic institution.
[SSN Selection]
○ The Shanghai Stock Exchange on May 30 announced to cancel postponing information disclosure and prior application for exemption, aiming to strengthen regulations during and after the trading.
○ The spot rate of RMB against the U.S. dollar on May 30 closed at the lowest in 4 months. But panic is not seen on the market as that has happened in last August and this January.
○ The clarified standard of layering drives the new third board to experience rises in trading volume and prices. Qualified companies in the innovative layer are favored by funds.
○ Special team of SOEs reform for northeast China consisted of relevant personnel of the Ministry of Industry and Information Technology (MIIT) has recently visited Heilongjiang Province for special investigation.
○ Yao Guoji, shareholder and individual investor of Ningbo Gqy Video＆ Telecom Joint-stock Co., Ltd. (300076.SZ) was forced to liquidate his position of 3.23 million shares, since his account suffered huge loss and was not able to repay the financing.
[Industry Information]
○ Two Ziyuan III satellites to form network, geomatics industry to embrace rapid development
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China has recently launched the Ziyuan III 02 satellite. As the first satellite designated in the Medium-long Term Plan for National Civil Space Infrastructure (2015-2025), the satellite will form network observation with the Ziyuan III 01 satellite, which is currently in service. This will improve China's ability and timeliness in acquiring geographical information. Li Qide, Deputy head of the State Bureau of Surveying and Mapping (SBSM), on May 30 revealed that the bureau will continuously start the projects of Ziyuan III/ Ziyuan IV and Gaofen VII satellites from the second half year, to provide long-term, stable and constant satellite data resources for high precision surveying and mapping remote sensing.
Comment: following the launch of a series of surveying and mapping remote sensing satellites, the total output value of geomatics industry has grown steadily in recent years. In 2015, the total output value reached 360 billion yuan, representing growth rate of 22 percent. It is estimated that by 2020, the output of the industry is expected to increase to trillion yuan. In listed companies, Beijing Supermap Software Co., Ltd. (300036.SZ) is a leading software provider of geographic information systematic platform; Changchun Up Optotech Co., Ltd. (002338.SZ)is a leading manufacturer of high-end Imaging chip, and its video image sensor products has been applied to Jilin I remote sensing satellite project.
[TOP]
○ Rare earth management rules to be introduced, benefiting supervision of whole rare earth industry
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SSN learnt from industry insider that rare earth management rules will soon be introduced. It involves management measures of the control of the total capacity of rare earth and the exploitation, smelting and transportation. It worth noting that the current total capacity control plan falls into the department level administration. The implementing rules to be issued in the future will be national rules, which has stronger binding effect of total capacity control, and will impose stricter control on illegal exploitation.
It is also learnt that currently the rare earth oxides control indicator of 105,000 tons is low. In the future, China may increase the indicator to squeeze out illegal capacity. China aims to control the total production of rare earth within 180,000 to 200,000 tons, but the overall legal production capacity will not increase.
[Announcement Interpretation]
○ SF Express to go backdoor listing via Dingtai Rare Earth ＆ New Materials for RMB43.3 bln
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Maanshan Dingtai Rare Earth ＆ New Materials Co., Ltd. (002352.SZ) proposes to acquire 100 percent equities of SF Express for 43.3 billion yuan. The company will swap all its assets and liabilities for 800 million yuan. The spread will be paid by issuing 3.95 billion shares at 10.76 yuan per share through private placement. The company also plans to raise 8 billion yuan supporting fund at 11.03 yuan per share through private placement.
Comment: It only takes the company only two months to go backdoor listing, from suspending trading, to preparing plan and resuming trading. SF Express has established a express network covering the whole country and is expanding to major countries around the world. It is much better than STO Express and YTO Express.
○ Yongle Film to go backdoor listing via Hongda New Material
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Jiangsu Hongda New Material Co., Ltd. (002211.SZ) announces that Yongle Film plans to go backdoor listing via the company for 3.26 billion. The company proposes to swap all its its assets and liabilities for 100 equities of Yongle Film. The spread 2.45 billion yuan will be paid in cash and by issuing shares at 8.01 yuan per share through private placement. Meanwhile, the company plans to raise 1.0 billion yuan supporting fund at 9 yuan per share through private placement.
Yongle Film is mainly engaged in the plan, investment, filming, production and distribution of film and TV series. Its net profit from 2013 to 2015 was 70.45 million yuan, 83.4 million yuan and 183 million yuan respectively. Its net profit from 2016 to 2018 is estimated at 269 million yuan, 367 million yuan and 467 million yuan, respectively.
[TOP]
○ Sinosteel Engineering ＆ Technology signs RMB4 bln contract
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Sinosteel MECC the wholly-owned subsidiary of Sinosteel Engineering ＆ Technology Co., Ltd. (000928.SZ), signed EPC contract on 660MW coal thermoelectric project with Yangguan Coal Industry (Group) Co., Ltd. The contract price totals 4,072 million yuan, accounting for 41.76 percent of the company's 2015 operating revenue. The construction period is 24 months.
○ Controlling shareholder of Wuzhou Communications to launch shareholding increase plan
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The controlling shareholder of Guangxi Wuzhou Communications Co., Ltd. (600368.SH) increased shareholding in the company by 687 million shares on May 27, and plans to increase no more than 2 percent shares in the following 12 months. Xinhu Zhongbao Co., Ltd. (600208.SH) repurchases a total of 300 million shares for 1,146 million yuan, accounting for 3.25 percent shares of the company's total share capital. The controlling shareholder of Sichuan Hebang Biotechnology Co., Ltd. (603077.SH) increased shareholding in the company by 2.8 million shares on May 30. The controlling shareholder of Xiamen ITG Group Corp., Ltd. (600755.SH) increased shareholding in the company by a total of 16.68 million shares from February 2 to May 30.
[TOP]
○Hainan Rubber Industry to raise RMB3.9 bln through private placement to improve industry chain
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China Hainan Rubber Industry Group Co., Ltd. (601118.SH) plans to raise 3,903 million yuan by issuing 757 million shares at prices no less than 5.16 yuan per share. The proceeds will be invested in tropical efficient non-rubber agriculture project, planting upgrading in special rubber plantation, acquisition of rubber trading company R1 and supplementary of working capital. The tropical efficient non-rubber agriculture project will aim at mid- and high-end market both at home and abroad, and will produce pineapple, pomelo, mango and banana to meet market demands for safe foods. The stock prices closed at 5.19 yuan per share before suspending trading.
○ Sinomach Automobile signs strategic cooperation agreement with Alibaba auto department
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Sinomach Automobile Co., Ltd. (600335.SH) signed a strategic cooperation agreement on automobile e-commerce with Zhejiang Tmall Co., Ltd. Under commission of Alibaba Group. The two parties will conduct strategic cooperation in automobile sales and service to create a whole new sales and service model that serves automakers and their authorized dealers and consumers and explore cooperation in more projects.
[Trading Trends]
○ Tongfang Guoxin Electronics bought by four institutions
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The trading volume ranking list on May 30 shows that Tongfang Guoxin Electronics Co., Ltd. (002049.SZ) was bought by four institutions with a total amount of 205 million yuan, accounting for 24.62 percent of its intraday turnover. Another two institutional seats sold 8.04 million yuan.
Comment: Industry insiders indicated that Apple is buying 2D NAND Flash. Institutions believe that there will be an explosion of new PCs and brand smart phones. And as chip makers have been updating their technology this year, it is expected that NAND Flash will be in short supply. Tongfang Guoxin Electronics, as the first-tier chip supplier in China, is expected to benefit from the short supply of NAND Flash.
[Trading Alarm]
○Sokon Industry Group to debut IPO on May 31
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Chongqing Sokon Industry Group Stock Co., Ltd. (780127) will offer shares at 5.81 yuan per share with an upper limit of 42,000 shares for each applicant. The company's PE ratio is 18 times. The company is mainly engaged in mini vehicles and parts.
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