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Tuesday December 26, 2017

Stock Indices (Monday)

Shanghai Composite Index

Shanghai B

Shenzhen Component Index

Shenzhen B

Last 335.96 Open 337.42 High 338.32 Low 335.53 Change -0.52%

Last 11,005.50 Open 11,102.16 High 11,132.59 Low 10,967.37 Change -0.80%

Last 1,149.65 Open 1,152.85 High 1,158.42 Low 1,147.27 Change -0.26%

Last 3,280.46 Open 3,296.21 High 3,312.30 Low 3,270.44 Change -0.50%

Chinese RMB

100 Hong Kong dollars 84100 U.S. dollars 656.83 100 Japanese yen 5.7975 100 Euros 778.72 100 British pounds 877.94100 Swiss francs 663.96 100 Canadian dollars 516.27 100 Australian dollars 506.66100 Singapore dollars 488.79

Hong Kong dollar 7.8127 Japanese yen 113.23 Euro 0.8422British pound 0.7467 Swiss franc 0.9884Canadian dollar 1.2721Australian dollar 1.2950 Singapore dollar 1.3434

U.S. dollar

Exchange Rates (Monday)

IFLYTEK Co., a Shenzhen-listed developer of speech-recognition software, has consistently failed to meet analysts’ profi t estimates.

And yet it’s one of the hottest stocks in China, gaining some 110 percent this year as of yesterday, thanks to the latest investment craze sweeping the country’s US$7.5 trillion equity market: artifi cial intelligence (AI).

Ifl ytek and other AI-related companies are dominating gains among large-cap Chinese stocks. The buying frenzy has added US$61 billion in market value to China’s fi ve most popu-lar AI plays, vaulting some into the ranks of the world’s most actively traded securities.

BOE Technology Group Co., a Beijing-based maker of LCD panels that is developing a system to help drivers avoid traffi c accidents, had the equiva-lent of US$2.5 billion in shares change hands on a single day in November, outtrading Wal-Mart Stores and AT&T combined.

“Retail investors in particular are crazy about companies that have an AI story,” said Zhang Gang, a Shanghai-based strate-gist at Central China Securities.

A growing number of analysts and fund managers warn that the rally has gone too far, too fast. They say many AI technologies are unlikely to prove profi table, and even those that do could take

years to make signifi cant contri-butions to fi rms’ bottom lines.

“Almost every company is standing at the starting line,” said Wang Menghai, a Shang-hai-based money manager at Fullgoal Fund Management Co. “The short-term increases for these stocks are a bit too much.”

Ifl ytek, which has trailed analysts’ net income projec-tions every year since its stock began trading in 2008, has a market value of US$12.3 billion. It trades at 109 times projected 2018 earnings, compared with an average of 13 for China’s CSI 300 Index and 25 for the Indxx Global Robotics & Artifi cial Intelligence Thematic Index, which tracks companies around the world.

Retail investors pay little atten-tion to metrics such as earnings, said Kenny Wen, a strategist at Everbright Sun Hung Kai Co. Some are using borrowed money to amplify their bets on stocks including Ifl ytek’s and BOE Technology’s, said Xia Yu, a Beijing-based analyst at ICBC Credit Suisse Asset Management.

Fans of AI stocks say the high price-earnings ratios are justifi ed by the fi rms’ long-term potential. Because many AI-related busi-nesses are still so new, inves-tors should focus more on sales growth, said Sam Kuo, manager of the UPAMC Global Innovative Tech Fund. (SD-Agencies)

AI-related stocks are investors’ hot picks

CHINESE stock investors can expect better performance next year as earnings growth picks up and MSCI Inc. includes the coun-try’s equities in its benchmark indexes, according to the most accurate forecaster for 2017.

Zhu Bin, strategist for South-west Securities Co., predicts the Shanghai Composite Index will climb to 3,700 by the end of 2018, implying a 13 percent gain from yesterday’s close, helped by an increase in mergers.

A year ago, Zhu success-fully forecast a deleveraging campaign would weigh on the nation’s equities, picking 3,300 as his year-end target. The gauge, which has trailed most major

global benchmarks this year with a 5.3 percent advance, closed at 3,280.46 yesterday.

“By now, companies would be more adapted to the slow-ing economy, where we expect accelerated industry consolida-tion to help drive stronger earn-ings and stock performance for market-leading fi rms,” Zhu said. “MSCI’s inclusion of some A shares will also offer strong support for stocks.”

Zhu’s target is more closely aligned with other analysts polled than last year, when he was the least bullish among participants. The median forecast among 13 analysts and fund managers for next year is 3,650.

Offshore Chinese shares are still likely to offer better opportu-nities, according to the poll. The Hang Seng China Enterprises Index, which has jumped more than 20 percent in Hong Kong so far this year, will rise 17 percent to 13,300 next year, according to the median estimate of 10 analysts. The MSCI China Index is estimated to gain 15 percent to 100 by end-2018.

Technological, fi nancial and health care stocks are preferred by most analysts on the main-land and in Hong Kong for next year, while commodity, materi-als and mainland developers may underperform.

(SD-Agencies)

Top forecaster sees brighter outlook for 2018

SHANGHAI-BASED drug developer Hua Medicine has appointed George Lin, a veteran Bank of America Merrill Lynch banker, as its chief fi nancial offi -cer (CFO), as it seeks to go public in the next 12 to 18 months.

Lin, who was most recently the head of Asia-Pacifi c con-sumer, retail and health care investment banking at the Wall Street bank, will be responsible for corporate fi nance as well as for helping commercialize and license drugs at the diabetes-focused biopharmaceutical fi rm.

The initial public offering (IPO) plans of Hua Medicine

come as investors are beginning to bet big on the potential of Chi-nese biopharma groups.

The share prices of fi rms such as Chi-Med, Beigene and Zai Lab have soared on international markets this year, fuelled by hopes for their drugs and recent reforms to China’s regulatory system that should speed up approvals of drugs.

Lin, who has spent the bulk of his career in investment banking, is one of several senior bankers to leave the industry for opportuni-ties in China’s “new economy” fi rms, which range from bio-pharma fi rms to online retailers.

Hua Medicine plans to list either in the United States or Hong Kong, Lin said.

“There is no reason to hire someone like me [now] unless they want to go public in the next 12 to 18 months,” he said.

Hua Medicine was set up in 2011 by Chinese-born, West-ern-educated Li Chen, who previously ran Swiss group Roche’s Chinese research and development arm. Its develop-ment pipeline includes a novel diabetes treatment, which Lin expects to be approved in China by 2019.

(SD-Agencies)

Hua Medicine appoints new CFO ahead of listing

Executives from a domestic power equipment fi rm celebrate after the fi rm’s shares started trading on the New Third Board in Beijing in this fi le photo. The National Equities Exchange and Quotations, China’s main over-the-counter equity market, will improve its trading mechanism by introducing auction trading, in an apparent effort to boost liquidity. Xinhua

CHINA’S main over-the-coun-ter (OTC) equity market will improve its trading mecha-nism by introducing auction trading, in an apparent effort to boost liquidity.

The National Equities Exchange and Quotations (NEEQ) published Friday new rules on discriminative treat-ment of companies that traded on the New Third Board and on information disclosure.

China launched the OTC

equity board in 2015, hoping it would become a hotbed of innovation. But after ini-tial excitement, the market slumped, before entering a prolonged decline, strangled by thin liquidity.

An index tracking the board Friday fell to a record low of 987.8741 points, down more than 60 percent from its 2015 peak.

Starting Jan. 15, negotiation-based share transfers during the trading session would be

scrapped and replaced by call auction trading, general man-ager Li Ming, told a news con-ference in Beijing.

Qualifi ed fi rms can also choose equity trading via market makers, while negotiation-based share transfers would only be allowed outside the trading session.

Call auction trading, a mechanism adopted by stock exchanges, is expected to make the OTC board more liquid.

(SD-Agencies)

Main OTC equity market to boost liquidity