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Thursday July 19, 2018

Stock Indices (Wednesday)

Shanghai Composite Index

Shanghai B

Shenzhen Component Index

Shenzhen B

Last 288.49 Open 288.74 High 289.80 Low 288.04Change -0.52%

Last 9,195.24 Open 9,293.20 High 9,335.09 Low 9,195.24 Change -0.97%

Last 1,047.48 Open 1,049.03High 1,051.79 Low 1,044.39 Change -0.02%

Last 2,787.26 Open 2,801.78 High 2,818.40 Low 2,786.04 Change -0.39%

Chinese RMB

100 Hong Kong dollars 85.25 100 U.S. dollars 669.14 100 Japanese yen 5.9262 100 Euros 780.04 100 British pounds 877.27100 Swiss francs 669.22 100 Canadian dollars 507.03100 Australian dollars 494.19 100 Singapore dollars 490.38

Hong Kong dollar 7.8492 Japanese yen 113.07Euro 0.8594 British pound 0.7635 Swiss franc 1.0027Canadian dollar 1.3237 Australian dollar 1.3605 Singapore dollar 1.3680

U.S. dollar

Exchange Rates (Wednesday)

THE Hong Kong stock exchange said yesterday it has agreed to work with mainland bourses toward the inclusion of dual-class shares in a cross-market trading link, marking a step toward resolving a dispute regarding the link.

Hong Kong Exchanges and Clearing (HKEX), operator of Hong Kong’s stock exchange, said in a statement that Hong Kong-listed dual-class shares will need to establish their trading stabil-ity during an initial period after which they could be included in the stock connect program, if other requirements are met.

HKEX also said that it would set up a working group with the Shanghai and Shenzhen stock exchanges to formulate the spe-cifi c programs and rules for the inclusion of dual-class shares in the trading link.

A spokesman for HKEX said no further details of the program were immediately available.

The announcement came after the two mainland stock exchanges said Saturday they would not expand the stock connect program with Hong Kong to foreign fi rms, so-called “stapled” securities and companies with different voting right structures.

The mainland exchanges said the move was aimed at protecting less sophisticated

investors from the complexi-ties of such shares.

The ban was considered a blow to Hong Kong, which has been working to improve its ability to attract mainland tech companies to list in the city.

HKEX said the three exchanges acknowledged that as mainland investors were not yet familiar with weighted voting rights (WVR) companies, there was a need to consider the maturity and regulatory practices of the two markets.

Shares of smartphone maker Xiaomi Corp. plunged Monday after the weekend announce-ment, before recovering later in the day.

Xiaomi was the fi rst com-pany to list in Hong Kong with weighted voting rights and investors had hoped that its inclusion in the Hang Seng Composite Index this month would help attract capital from the mainland.

On Monday, HKEX chief execu-tive Charles Li said he was fl ying to Beijing to discuss the rule change with mainland authorities.

The stock connect program, which links exchanges on the mainland with the Hong Kong bourse, allows mainland inves-tors their only direct means of trading offshore stocks and international investors access to mainland fi rms. (SD-Agencies)

Bourses to work on trading link rules

A BMW iX3 electric concept car is displayed during a media preview at the Auto China 2018 motor show in Beijing in this fi le photo. BMW has obtained the right to make an equity investment of as much as 2.85 billion yuan (US$427 million) in Shenzhen-listed electric-car battery maker Contemporary Amperex Technology Co. SD-Agencies

BMW AG is the fi rst overseas carmaker to get a potential toehold in electric-car battery maker Contemporary Amperex Technology Co. (CATL), obtain-ing the right to make an equity investment of as much as 2.85 billion yuan (US$427 million).

BMW Brilliance, the German carmaker’s Chinese joint ven-ture, is entitled to invest in CATL if the company plans to sell shares in China or abroad, according to a statement from the battery maker Tuesday.

At CATL’s current stock price, the right would give BMW a stake of less than 2 per-

cent of the company. CATL’s Shenzhen-listed shares closed fl at at 82.28 yuan yesterday.

With the demand for electric vehicles projected to surge, competition among carmakers to cooperate with battery sup-pliers is heating up.

CATL, which said it shipped more batteries last year than any competitor, struck joint ventures or received minority equity investments from Chinese automakers including Dongfeng Motor Group Co., SAIC Motor Corp. and Chongqing Changan Automobile Co. before its initial public offering last month.

BMW Brilliance will also prepay 2.85 billion yuan as part of a long-term contract to buy batteries from CATL. It’s also purchasing a 815 million yuan battery pro-duction project from the supplier to make designated products, according to the statement.

CATL will build its fi rst pro-duction site in Europe in Erfurt in eastern Germany and around 240 million euros (US$280 mil-lion) will be invested in the fi rst phase of the project.

BMW plans to source 4 billion euros of battery cells from CATL over the next few years.

(SD-Agencies)

BMW strikes deal for potential stake in CATL

THE aviation regulator will cut fl ights by Air China’s Boeing 737 fl eet by 10 percent and cancel the licenses of the pilot and co-pilot involved in an emergency descent last week, domestic media said yesterday.

The Civil Aviation Administra-tion of China (CAAC) will also launch a safety crackdown on Air China for three months and fi ne the airline 50,000 yuan (US$7,460), China Central Televi-sion said on its WeChat account.

The cuts to the carrier’s Boeing 737 fl ight hours amount to 5,400 hours a month, it added. It also suspended the licences of other

staff involved in the emergency incident, which was linked to a co-pilot smoking an electronic cigarette in the cockpit.

Air China’s Shanghai-listed shares fell in response to the safety crackdown. The stock is down nearly 40 percent so far this year, amid a falling yuan and higher oil prices.

BOCOM International ana-lyst Geoffrey Cheng said the punishment would likely have an impact on Air China’s fl ight schedules, especially as it entered a peak travel season, but could also prompt the airline to ratio-nalize its network to cut poorly

performing routes. “It could have pros and cons,” he said.

The penalties by the regulator are likely to hurt Beijing-based Air China, which is already brac-ing for higher expenses from a weakening yuan and rising fuel costs. The penalties could result in about a 3 percentage point drop in Air China’s capacity, according to an estimate by Tianfeng Securities Co.

Air China operated 269 Boeing 737s out of its 655-strong fl eet at the end of December, according to its full-year report issued in March. It has 311 Airbus 320 and 321 jets. (SD-Agencies)

Regulator cuts Air China’s fl ight hours

CHINA’S property bulls say that bearish investors who sent some developers’ bonds to record lows and their stocks to near-crisis levels have it all wrong.

JPMorgan Chase and Nomura see a share-price rebound loom-ing and Janus Henderson Group said fi rms’ valuations are out of line with fundamentals.

That’s after the average price of 22 major builders sank to a two-year low of 5.1 times next year’s estimated earnings, near what JPMorgan calls a crisis level. Three similar slides in the past seven years were fol-lowed by rallies.

Major developers are set to benefi t from further consolida-

tion in the Chinese property industry, analysts at JPMorgan and CGSCIMB Research say.

China’s 30 largest developers accounted for about half of the nation’s home sales in the fi rst six months of the year, up from 38 percent a year earlier.

Another reason not to panic: developers’ funding costs are still below past highs despite a spike for offshore debt. And their revenue continues to grow, with China Evergrande Group fore-cast by analysts to post a 44 percent gain in 2018, after a 47 percent increase last year.

“Investors are very pessimistic today,” said JPMorgan analyst Ryan Li, one of the most bullish.

In six to 12 months, “they’ll fi nd they were wrong.”

He focused on three occasions when low valuations were fol-lowed by share price rallies that delivered returns of 146 percent, 52 percent and 113 percent.

Optimism persists even after smaller developers missed debt repayments, China escalated a crackdown on property specu-lation and fi nancing channels have been tightened.

While developers’ valuations and near-term earnings might appear attractive, the big ques-tion is whether the govern-ment will keep tightening, said Dai Ming of Hengsheng Asset Management. (SD-Agencies)

Bulls decide property stocks aren’t terrible after all