Tomorrow's Headlines Today (02/17/2022)

This article is reposted from our main newsletter at chinastocks.substack.com. Daily Reflection on China is a regular publication offering local news and curated insights (no investment or financial advice). If you enjoy reading this, please click here to subscribe.

Below is a summary of the important financial news from China that you need to know. For more information about this column, please read this.

State-owned Enterprises Among the Most Fervent Buyers in Beijing’s Land Auction

(My read: The regulatory environment dictates that property development is changing from a good business to a not-so-good business and to eventually a bad business, with significantly lower margins and ROE. The good old glory days are gone. Perhaps it’s best suited for the SOEs to move in…)

The capital city Beijing just completed the first day of its first round of land auctions in 2022. One piece of land passed the bid, yet nine parcels of land were sold at the reserve price, bringing in a total sales of RMB 20.7 billion (USD 3.3 billion). It is reported that there will be another eight pieces of land for auction today (February 17). Central state-owned enterprises such as China Resources Land (1109.HK) and China Overseas Properties (0688.HK) remain the biggest buyers in the auction. Judging from the results from the auction, the (Beijing) land market is highly differentiated. The distribution of buyer bids is also largely uneven, suggesting the real estate companies, in general, are still under financial pressure. Apparently, the number of participating companies in this auction is much lower than that a year ago. Source: Securities Daily (证券日报)

Beijing Plans to Suspend Training and Education Apps for Preschoolers

Beijing Municipal Education Commission recently issued the "Notice on Improving the Filing and Management of Educational Mobile Internet Applications (Draft for Comments)”. The proposed policy aims to legalize, institutionalized, and standardized mobile apps for training and education. The policy states that education apps will be divided into two groups: subject-based education (for primary and secondary school subjects) and non-subject education (for non-primary and secondary school subjects). Regarding the second category, the policy clarifies that all education apps for preschool children should cease operation. Source: People.cn (人民网)

More than 70 Pharmaceutical IPOs Are Below the Issue Price

(My read: IPOs falling below the issue price is not common in China A-shares. Most domestic investors expect IPOs to make money and trade above the initial offer price. In China, there are even funds set up to take advantage of the “riskless” profits from IPO subscriptions. However the landscape is changing. The poor IPOs of pharmaceutical companies should continue to impair the investment sentiment on the sector.)

Chinese pharmaceutical stocks (A-shares) continue to decline since the beginning of this year. This not only has an impact on the healthcare sector funds, but also exerts pressure on newly listed pharmaceutical companies. Wind data shows that since the beginning of last year till February 16 this year, a total of 565 companies (all sectors) have successfully gone public in the China A-share market. Among them, 76 stocks have fallen below the IPO price, equivalent to 13.5% of the total. It is worth noting that 11 of these 76 companies are drug makers. In addition, there are 28 companies whose stock prices fell by more than 20% below the issue price. And four of the top five losers are in the pharmaceutical industry: namely Mabwell Therapeutics (688062.SH) down 39% since IPO, BeiGene (688235.SH) down 38%, Dizhal Pharma (688192.SH) down 38%, and Chengda Biotech (688739) down 37%. Source: Wind (万得)

Subscribe now

Disclaimer

By reading, using and sharing this newsletter, you confirm that you understand, accept and agree to the following:

Daily Reflection on China (the “Publication”) is a newsletter for news, commentary and analysis on Chinese markets. The Publication is for information purpose only and should not be construed as investment or financial advice. Also this Publication does not constitute a recommendation, offer, or a solicitation of an offer to buy/sell any securities, portfolios of securities, financial products, investment schemes or trading strategies etc.

The information contained in this Publication (the “Information”) may reflect the opinions of the writer(s) and may include estimates and projections that involve subjective judgment and analysis. The Information has been compiled with considerable care to ensure its accuracy and validity. However no representation or warranty, express or implied, is made to the accuracy or completeness of the Information. The owners of the Publication (the “Owner”), its writers, representatives, principals and moderators (collectively the “Team”) accept no liability for any direct or consequential financial losses or damages, including for any loss of capital arising from the use of the Publication. The views and opinions expressed in this Publication are subject to change without notice.

This Publication is the property of the Owner and is protected by applicable intellectual property laws. Any redistribution or reproduction of the Publication is prohibited without the prior written permission of the Owner. The Publication is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution would be considered unlawful or illegal.

The Team may trade the securities and other interests of the companies mentioned in this Publication, and each may act on his/her own without having to disclose such trades or positions. The Team is not registered as a securities broker-dealer or investment advisor with the U.S. Securities and Exchange Commission (SEC).

In addition to producing this Publication, the Owner also works for a fund manager (the “Manager”) licensed by the Securities and Futures Commission of Hong Kong (SFC). The Manager has no ownership stake in and no direct association with this Publication. The views expressed in the Publication are not the views of the Manager.

? Copyright 2021 Qi Wang All Rights Reserved.