The Third Plenum is over – finally. Yet, after a vaguely worded communiqué following the conclusion of the meeting, investors are waiting for more signals on how the Communist Party will run the economy this year, next year and the following10 years. The initial market reaction was poor. A pledge to increase reliance on market mechanisms, a move that could force state firms to run more efficiently and in a more competitive environment, hurt equities markets in Hong Kong and the mainland on Wednesday. Despite the negativity, analysts see a few key signs for good stock buys in Hong Kong while the Chinese government slowly throw out details. As the country pushes forward with urbanization, and house prices continue to rise, China will need to build more affordable housing units, Francis Cheung, head of China and Hong Kong strategy at CLSA Asia-Pacific Markets, said. China State Construction International Holdings (CSCI; 3311.HKG) is likely to benefit from government building. “CSCI is a social housing play,” Cheung said in an email on Thursday. As property investment slows next year, the government may look to social housing projects to help power GDP growth, he noted. No need to wait too long for the government to fully unveil its plan. It might only take another 10 years.
Carlsberg raises a glass in China
China is hardly considered the beer capital of the world. One would normally think of Germany or the US, whose pours are sold in bars across the globe. But China is the world’s largest producer and consumer of the alcohol made from barely and hopes. Little wonder that multinationals are seeking a share of the domestic market. This year has been busy time for foreign brewers, with many adding local Chinese producers to their ever-growing stable of brands. Danish brewer Carlsberg (CARL-A.CPH ) at the end of October got the nod to raise its stake in Chongqing Brewery from 29.7% to 60%, signaling its desire to increase its current 2.6% share of the fragmented Chinese beer market. FransHøyer, a Copenhagen-based equity analyst at Jyske Market, said in an email that this is a prudent move by the fourth-largest brewer in the world. “Carlsberg has, in the past, been accused of being too slow, too conservative,” he said. Shareholders should be very happy with Carlsberg’s China plans, he noted. The fragmented market can be consolidated, just like it was in Russia. It’ll be a long process but many predict it’ll pay off. So sit back, relax and sip on a refreshing pint of Carlsberg.
Saying I love myself with a new car
As expected, the Singles Day shopping frenzy produced more world record-breaking e-commerce sales results. Although there isn’t much now to play directly with proceedings over for another year, Monday’s event has delivered some interesting insights. In a report, Hong Kong-based analysts at Barclays noted that one of the key drivers of the growth was the surge in orders that were placed by mobile phone. This is a notable development. “With the rising smartphone penetration rates, mobile e-commerce will also become an important driver to support stronger e-commerce growth in China for the next three-five years,” the analysts wrote. Tech firm Tencent (0700.HKG) unveiled integrated shopping via its WeChat talk application that allowed users to browse and purchase items from its 51buy.com store directly via their phones, payment processing included. With 300 million users in China, that could translate into a lot of shopping. Looking at transaction data from Monday published in local media, car purchases via auto sales platforms topped US$2.29 billion, a strong showing from a sector that is relatively new to online. Autohome.com, the biggest such platform in China, saw large volumes. The website has just applied to list in the US. And don’t forget those who made many of these purchases possible. Telecoms equipment firm ZTE (0763.HKG) provided high-speed data transmission systems to help Alibaba Group handle a record-breaking surge in online shopping traffic on Single’s Day, the company said. Reported IPO candidate Alibaba Group saw the value of transactions on its e-commerce platforms including Taobao and Tmall almost double from a year earlier to US$5.75 billion (RMB 35 billion) in the 24-hour bonanza.
IPO Watch
The overseas IPO market is picking up with several listing planned for the next few weeks in Hong Kong, following those of the past month. On Wednesday Foshan-based financial services provider China Success Finance Group (3623.HKG) went public on the Hong Kong bourse. The company provides financial guarantees to SMEs to assist them in obtaining loans from banks or other financial institutions. Performance data wasn’t out at the time of going to press.