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Daily Commentary

10 Dec 2018

Market Outlook

HSI may fluctuate at around 25,600 to 26,100 pts today.

The HSI opened higher by 93 pts last Friday and then once grew 124 pts to reach its intra-day high of 26,280 pts. However, during the afternoon session, HK stocks turned to a negative territory and dropped 100 pts at most to touch its intra-day low of 26,055 pts. The HSI finally closed at 26,063.76 pts, down 92.62 pts or 0.35%. Market turnover amounted to HKD98.958 bn. As a review of last week, the HSI dropped 442.99 pts or 1.67% in total. The ADR proportional HSI index closed overnight at 25,899 pts with 164 pts or 0.63% than closing price last Friday. Market's concerns about US trade policy increased, coupled with worries on inverted yield curve, US stock dropped. Dow was down by 558 pts or 2.24% to 24,388 pts. HSI may fluctuate at around 25,600 to 26,100 pts today.

Today’s A-share Snapshot

Company’s Profile:Sanxing Medical (601567.SH) is mainly engaged in the energy measurement and data acquisition products and power distribution equipment.

Brief Comments:The company announced that Ochs High-tech, a wholly-owned subsidiary of the Company, was recently recommended as the candidate of winning the bid in the fourth bidding project of distribution network material agreement inventory of all provinces (regions) of State Grid Corporation of China in 2018, with a total bid winning amount of RMB259 mn. This is expected to bring positive impacts on the Company’s operational performance in this fiscal year. For the first three quarters of 2018, the Company’s revenue rose 21.35% YoY to RMB4.21 bn and its net profit dropped 0.87% YoY to RMB415 mn. In particular, the Company’s financial cost grew 793.56%, mainly due to the exchange gain and loss. The following factors might drag the Company’s profitability in the future such as (1) the decreased scale of grid investment by the Chinese government, (2) the intensifying market competition, and (3) the increasing prices of silicon steel sheet and copper.

Stock Pick

Geely Auto (00175)’s sales volume increased 0.3% YoY to 141,661 units in November 2018.

Geely Auto recently announced its unaudited sales volume. The total sales volume of the Company (including the sales volume of LYNK & CO-branded vehicles sold by the Company’s 50%-owned joint venture) for November 2018 was 141,661 units, representing an increase of 0.3% YoY or 10% MoM. In particular, the Company’s total sales volume in China market decreased 1% YoY to 138,559 units while its exports volume grew 162% YoY to 3,102 units. For the first eleven months of 2018, its overall sales volume rose 29% YoY to 1,407,505 units, achieving 89% of the full year sales volume target of 1,580,000 units in 2018.

In different car types, the sales volume in February 2018 of “New Emgrand” and “Vision” sedan dropped 25.9% YoY and 19.8% YoY respectively. The sales volume of “Emgrand GS” (帝豪GS), its crossover SUV model, decreased 32.2% YoY. The sales volume of “Emgrand GL” (帝豪GL), its A+ segment sedan model, dropped 5.4% YoY to 13,438 units. The sales volume of “LYNK & CO 01”, “LYNK & CO 02” and “LYNK & CO 03” was 5,302 units, 3,008 units and 4,011 units respectively.

Overall, Geely’s sales performance for November 2018 was decent. The sales of the Group for the first eleven months increased 29% YoY, achieving 89% of the full year sales volume target. Moreover, the sales volume of “LYNK & CO 01” decreased from 8,476 units in October 2018 to 5,302 units in November 2018, mainly due to engine shortages and weakening demand for SUVs. The Company announced that most of the Company's newly launched models this year have been very well received, the latest new sedan model “Bin Rui” (繽瑞) recorded a very high sales volume of 10,197 units in its third month of sales in November 2018. The latest new SUV model “Bin Yue” (繽越) recorded a very high sales volume of 10,139 units in its first month of sales in November 2018. We believed the related models might increase the market competitiveness of the Group. Therefore, we hold a cautiously optimistic view towards the Company’s business outlook this year.

Geely Auto share price dropped 1.64% and closed at HKD 14.32 in last Friday. Technically, it has already fallen below all the main MAs with RSI declining to 41.80, which indicated a weak momentum. Therefore, we expect the share price to test HKD 14.00 in the short term.