SINGAPORE (July 10): Markets across Asia traded choppily mid-week, after tensions on the Korean peninsula heated up in the wake of a North Korean missile launch into the Sea of Japan. The Nikkei 225 fell to a three-week low after trading opened in Tokyo on July 5. While it regained some ground at the end of the trading session, the index fell again on July 6 and ended the day lower at 19,994.06 points. In Hong Kong, the Hang Seng Index ended July 6 0.22% lower.

On July 4, Pyongyang conducted its first test of an intercontinental ballistic missile. The missile would, in theory, be able to strike Alaska, on the US mainland. The launch came as the US prepared to mark Independence Day, and sparked an emergency meeting at the United Nations (UN). US ambassador to the UN Nikki Haley has condemned the missile test as a “clear and sharp military escalation” that is pushing the US towards military action. Haley told the UN Security Council that the US “is prepared to use the full range of our capabi lities to defend ourselves and our allies”.

Separately, Japan and the European Union (EU) are set to craft a historic trade pact after a meeting between Japanese Prime Minister Shinzo Abe and European Commission president Jean-Claude Juncker in Brussels, on the eve of the July 7 and 8 G20 meeting in Hamburg.

The leaders have formally agreed, in principle, to outline a trade deal. That paves the way for a trading bloc that excludes the US, but encompasses 40% of global trade, 30% of the global economy, and 10% of the world’s population. That is comparable to the size of the North American Free Trade Agreement.

While details of the Japan-EU deal have yet to be firmed up, the deal is likely to lower trade barriers for an array of products, including Japanese cars and electrical machinery, as well as European wine, leather, shoes and dairy products. The agreement is also said to include stronger data privacy protections. Observers say this runs counter to the interests of US multi national companies, which had previously argued for the free movement and storage of data around the world.

Fosun dips on rumours Fosun International and its subsidiaries saw their stocks slump in Hong Kong trading on July 6, amid rumours swirling on the internet that the Chinese conglomerate had lost contact with its chairman, Guo Guangchang. Fosun says Guo was in Xi’an, Shaanxi province, at a government-organised conference, where he reportedly said the group, which owns the Club Med resorts, would help officials develop the province’s economy.

Shares in Fosun fell as much as 4.5% during the day, before closing 0.2% lower. Still, the stock is 9.5% higher than at the beginning of the year. Subsidiary Shanghai Fosun Pharmaceutical (Group) Co fell as much as 7.1%, but pared some of its losses to end the day 2.6% lower than the previous day’s close. Its shares have gained 23.8% since the beginning of the year.

This is the second time in as many weeks that Fosun shares have taken a beating. On June 22, the stck slumped 6% on Chinese media reports that China’s bank regulator had asked some financial institutions to provide information on overseas loans made to Fosun, as well as to a handful of other large Chinese conglomerates, amid concerns of “systemic risk”.

The companies, which include HNA Group, Dalian Wanda Group and Anbang Insurance Group Co, have embarked on aggressive expansion plans in recent years by making multibillion- dollar acquisitions around the world. The deals were struck in spite of the Chinese government’s capital controls that clamped down on overseas deals.

In recent years, as the Chinese government embarked on its anti-corruption campaign, a number of high-profile Chinese executives have been uncontactable, or gone missing, for short periods of time. Last month, Anbang chaiman Wu Xiaohui was detained. Fosun’s Guo himself was uncontactable for four days in 2015. It was later revealed that he had been assisting in a police investigation, about his personal affairs.

CITIC Envirotech jumps on broker report Shares in CITIC Envirotech jumped in trading on July 6, following a “buy” recommendation by UOB Kay Hian that touted the stock’s attractive valuations as well as the company’s impending contract wins. The water treatment company, formerly known as United Envirotech, gained 2% from its close the day before. The stock is up 9% so far this year.

In the July 6 report, analysts Edison Chen and Nicholas Leow note that CITIC’s share price has fallen to its lowest levels this year. At 74.5 cents, the stock is below the 82.5-cent adjusted acquisition price that Chinese stateowned conglomerate CITIC and investment group KKR & Co had offered in their buyout of the company in 2015.

“This presents an opportunity for investors looking to position [themselves] in an industry that is projected to account for more than RMB900 billion ($183 billion) in major water project investments by end-2017, with 9% annual growth between 2017 and 2021,” says UOBKH. The analysts see CITIC Envirotech’s stock trading at $1.10, or 48% higher than its close on July 5.

The brokerage also pointed out that CITIC Envirotech is on track to hit its target of $1 billion in new project wins for 2018, as the Chinese government aims to meet its clean water targets. UOBKH forecasts CITIC Envirotech recording earnings of $110.6 million for FY2017, about 37% higher than in FY2016, on the back of $804.5 million in revenue. For FY2018, earnings could rise a further 42% to $157.5 million as revenue reaches $952.4 million. However, the company’s debt levels would also increase. According to UOBHK’s estimates, net debt-to-equity is expected to hit 48% this year, and 81% in 2018.

HC Surgical Specialists gains on acquisitions Shares in medical specialist HC Surgical Specialists hit a new high on July 6 and are now 2½ times their IPO price of 27 cents.

HC Surgical, which listed on the Catalist last November, specialises in endo scopic procedures, including gastroscopies and colono scopies. On July 5, the company said it had completed the acquisitions of a 49% interest in Medinex, and 51% of Medical L & C Services. HC Surgical paid a total of $5.4 million for the acquisitions.

Medinex is a clinic management and ser vices provider. According to HC Surgical’s filing to the stock exchange, its services include setting up clinics and applying for clinic licences, training administrative staff, and providing back-end accounting and secretarial services as well as third-party concierge services for local and overseas customers.

Following the acquisitions, HC Surgical will employ the vendor of Medical L & C, Lai Junxu, as a family physician, as part of the group’s heartland endoscopy services.

M1 falls on MyRepublic comments Singapore’s smallest telco M1 saw its shares fall as much as 1.4% in trading on July 6, to their lowest in 10 weeks, after broadband service provider MyRepublic said it does not intend to make an offer for the company.

MyRepublic CEO Malcom Rodrigues said at a media briefing that while the company had initially expressed interest in M1, it quickly decided it was not the right fit. Instead, My- Republic hopes to become a mobile virtual network operator. Rodrigues says MyRepublic was approached by all three local telcos about the possibility of leasing airtime capacity. M1 is currently leasing airtime capacity to mobile virtual network operator Circles.Life.

Meanwhile, Rodrigues says MyRepublic is set to launch mobile services in Singapore as early as October, and is planning an IPO at end-2018.

What to look out for The corporate earnings season is starting up again. First on the schedule is SPH REIT, which reports its 3QFY2017 results on July 12, while parent company Singapore Press Holdings reports on July 14. Soilbuild Business Space REIT reports its 2QFY2017 results on July 13.

The markets are also prepping for key economic data out of Singapore, the US and China. Singapore’s second-quarter GDP growth figures are expected during the week, as are figures for the US’ retail sales and industrial production for June.

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