Nov 11 HK and China rebound on easing of property curbs. Covid still overhangs.


11 Nov

This and previous notes can be found at Substack ( Asian Market Sense )
Check out ERI-C.com  for your research needs

HSI +252pts (+1%) 25,248 HSCEI +137pts (+1.5%) 9,048 T/O HK$136.34bn (unch DoD)  

HK/CHINA Connect Flows
Shanghai
Northbound Rmb 46,358m Sell 21,033m vs 25,325m Buy
Southbound HK$ 16,075m Sell 8,577m vs 7,498m Buy
Shenzhen
Northbound Rmb 56,604m Sell 26,143m vs 30,461m Buy
Southbound HK$ 15,746m Sell 8,735m vs 7,011m Buy


Europe
Open flatish but working better as investors react to the US inflation data and the mixed UK data. Earnings still a big focus with Bilfinger, Delivery Hero, Merck, RWE, Siemens (beat and +VE outlook), Aviva, Tate & Lyle and Burberry (disappointed), Auto Trader (beat & strong guidance) amongst others reporting.
Eurozone
ECB Economic Bulletin
UK 
Balance of Trade Sept £-2.8B vs £-1.9B Aug revised (F/cast was £-3.4B)
GDP Growth Rate Q3 6.6% YoY vs 23.6% Q2 (F/cast was 6.5%)
GDP Growth Rate Q3 1.3% QoQ vs 5.5% Q2 (F/cast was 1.5%)
GDP Sept 5.3% YoY vs 6.6% Aug (F/cast was 5.5%)
GDP Sept 0.6% MoM vs 0.2% Aug revised (F/cast was 0.5%)
Goods Trade Balance Sept £-14.736B vs £-14.927B Aug revised (F/cast was £-13.8B)
Goods Trade Balance Non Eu Sept £-9.103B vs £-8.395B Aug revised (F/cast was £-7.8B)
Industrial Production Sept 2.9% YoY vs 4% Aug revised (F/cast was 3.4%)
Industrial Production Sept -0.4% MoM vs 1% Aug revised (F/cast was 0.2%)
Manufacturing Production Sept 2.8% YoY vs 4.2% Aug revised (F/cast was 3.2%)
Manufacturing Production Sept -0.1% vs 0.3% Aug revised (F/cast was 0.3%)
Business Investment Q3 0.8% YoY vs 12.9% Q2 (F/cast was 5.1%)
Business Investment Q3 0.4% QoQ vs 4.5% Q2 (F/cast was 1.2%)
Constructions Output Sept 7.2% YoY vs 9.3% Aug revised (F/cast was 6.5%)
Constructions Orders Q3 10.7% YoY vs 134.6% Aug revised (F/cast was 45%)
Later
NIESR Monthly GDP Tracker.
US Veterans Day Bond market closed
Futures  
Opened Dow -5pts S&P and NDX +0.1% but later reversed now Dow +4pts, S&P and NDX +VE. No data but earnings in focus. After market Wednesday: Disney, Beyond Meat, AMC Ent, Bumble were weak. Affirm and Honest Company +VE following earnings.
Earnings today: 
Brookfield Asset Management, Siemens, Tapestry, Burberry, Lordstown Motors, Edgewell Personal Care

CHINA CSI 300 closed +78pts (+1.6%) @ 4,899
CSI 300 opened flat but rallied strongly in the first 30 minutes to 4,860 level led by the developers on hopes the regulator will ease the restrictions and Evergrande avoiding default again. PBoC continues to add liquidity. Financials followed the property stocks on the news too. EV’s and Clean Energy weak despite the US deciding that China didn’t subsidise prices. CSI 300 traded sideways with 4,860 as support into lunch. PM working higher and testing 4,880.
Covid concerns remain an overhang.

Shanghai Comp +40pts (+1.2%) @ 3,533 T/O US$67,337m (+4.5% DoD)
Shenzhen Comp +184pts (+1.3%) @ 14,700 T/O US$102,965m (+3% DoD)
ChiNext Comp +37pt (+1%) @ 3,672

CHINA DATA
China's National Health Commission reported 62 confirmed cases of COVID-19 yesterday (10 November),
with 15 of them being imported cases and 47 being local infections.
Among 35 asymptomatic cases, 12 were imported and 23 were locally transmitted.


HONG KONG 
Pre market opened @ 24,856 -140pts vs -120pts ADR’s with broad weakness but most was Ecommerce. Wuxi Bio and AIA +VE. After initial choppy trading market rallied to test 25,100 as Chinese Developers rebound (shorts squeezed) on news that Evergrande had avoided default and that China might ease property curbs. But once shorts had covered the market sold back down, brief support at 25,000 but then continued down to 24,900. Good support there and rebounded into lunch 24,958. PM opened higher, tested 24,950 but then bounced higher with Property sentiment improved, Financials followed. Ecommerce Tencent remain weak and a drag on the market but others rebounded on metaverse hopes.

Results at lunchtime
AAC TECH (02018.HK) announced the result of 3Q ended 30 September 2021.
The revenue amounted to RMB4.246 billion, down 6.1% YoY. The net profit plunged 57.4% YoY to RMB183 million. EPS was RMB0.15. The GPM of the period was 22.7%, down 0.9 ppts.

HUA HONG SEMI (01347.HK) announced the 3Q result ended September 2021. The revenue rose 78.5% year on year to US$451 million. The net profit amounted to US$50.807 million, up 187.1% year on year. EPS  was US$0.039.

HONG KONG DATA
Reported no new cases of covid today 
but quarantined 120 schoolchildren on possible connection to yesterday’s aircrew cases.

SHORT SELLING HSI Thursday 13.9% vs 18.5% Wednesday
Top shorts 
BoC HK (2388) 36%, Country Garden (2007) 36%, BoC (3988) 35%, Hang Seng Bank (11) 35%, China Res Land (1109) 35%, Sinopec (386) 33%, Techtronics (669) 32%, ICBC (1398) 30%, Galaxy Ent (27) 27%,  HSBC (5) 27%, Hengan (1044) 27%, Henderson Land (12) 26%, Longfor (960) 26%, CM Bank (3938) 25%, Xinyi Solar (968) 25%, Wharf REIC (1997) 25%.


AFTER MARKET NEWS

CK ASSET (01113.HK) announced that, a wholly-owned subsidiary of Li Ka Shing (Global) Foundation acquired a total of 389,500 shares in CK Asset at the average price of HK$47.8317 and HK$47.6733 per share on 5 November and 10 November 2021 respectively.  As a result, the deemed interests of Li Ka-shing and Victor T K Li in CK Asset have increased from 46.25% to 46.26%, and increased from 46.32% to 46.33%, respectively.

China's National Health Commission (NHC) announced that Ma Xiaowei, minister of the NHC, has visited Dalian, Liaoning yesterday to inspect the progress of the pandemic-related works. Ma remarked that China is now at a critical moment under stiff and tangled pandemic prevention and control conditions.

MTR CORPORATION (00066.HK) announced that, to support Senior Citizen’s Day on 21 November 2021 (Sunday), 
the MTR Corporation is pleased to offer free rides on the MTR, Light Rail and MTR Bus that day to Elder Octopus cardholders aged 65 or above.

The 2021 "double 11" shopping festival on BABA-SW (09988.HK)'s Tmall has entered its final stage. The group revealed that, during the double 11 festival period this year (1-10 November), over 7 million overseas customers have shopped at Taobao and Tmall. Also, as at 8 am today, 220 time-honored brands on the platforms have achieved a YoY growth of over 100% in transaction volume.

S&P Global Ratings mentioned the rising contagion risks in China's real estate market, citing recent sentiment hits from news headlines of the debt-laden developers including EVERGRANDE (03333.HK).  China's home sales will fall 10% next year and 5%-10% in 2023, with price slide as steep as 3%, predicted Charles Chang, Greater China Country Lead, Corporate Ratings, S&P Global Ratings.Regional Markets
MSCI rebalance announcement due Friday.

Australia
Market opened lower and tested yesterday’s close in early trades but then trended lower. Weak employment data prompted further selling. Market bottomed out around 12:30pm and then worked better but resistance around 7,400 level and then drifted lower to close -42pts (-0.6%) @ 7,382.
All sectors weak but Fortescue +7.5% (off highs) on the back of a deal to supply green hydrogen to US-based Universal Hydrogen for use in the aviation industry, which softened the downside. Ramsay Health weak after Q1 earnings dropped, Xero also weak it flagged higher investment costs and unveiled lower than expected revenue and underlying earnings for the first half.
Nine Ent +VE as advertising rebounded rallied to A$3.13 before easing back.
Employment Data
Unemployment Rate Oct 5.2% vs 4.6% Sept (F/cast was 4.6%)
Part Time Employment Change Oct -5.9k vs -166.2k Sept revised (F/cast was +100k)
Employment Change Oct -46.3k vs -141.1k Sept (F/cast was +70k)
Full Time Employment Change Oct -40.4k vs +25.1k Sept (F/cast was +50k)
Participation Rate Oct 64.7% vs 64.5% Sept (F/cast was 64.5%)

Japan
Inflation concerns as PPI out pre market higher than expected but positive moves over the Chinese developers and good earnings propping up the market.  Friday watch for small Nov SQ MOO  also watch Yen which was briefly 114 today.  
Nikkei opened lower but worked better through the morning to 29,336 just before lunch. PM opened lower and traded sideways to close +148pts (+0.6%) @ 29,255
Topix saw a choppier start but then rallied and worked better to a high of 2,019 pre lunch. A lower PM opened and traded sideways to close +6pts (+0.3%) @ 2,014.
Leaders NonFeros Metals, Warehouses, Precision Insts, Insurers
Laggards Miners, Construction, Property and Info/Comm
Data
PPI Oct +8% YoY vs +6.4% Sept revised from +6.3% (F/cast was +7%)
PPI Oct +1.2% MoM vs +0.3% Sept (F/cast was 0.4%)
Tokyo Office Vacancies Oct 6.47% vs 6.43% Sept

S Korea 
Foreigners small net buyers, Local Institutions net sellers across most sectors.
EV’s +VE after Rivian strong debut. Internet’s +VE after NCSoft’s mixed earnings. Hugel -11% resumed trading and confirmed been ordered to stop botox sales by FDA; which is was 52% of 2020 revenues.
Kospi opened lower as inflation concerns elevated. Market traded sideways in a tight range 2,903/923 but rallied at the end to close -5pts (-0.2%) @ 2,925
Kosdaq opened lower but rallied to 995 in early trades but then reversed, rallied and eased to flat but then worked better for the last hour to close +5pts (+0.5%) @ 993

Taiwan 
Taiex opened lower and sold down to 17,403 in early trades before working better to 17,520 the opening level but unable to hold and reversed back down to close -134pts (-0.8%) @ 17,426 TSMC leading the declines as they and others report monthly sales.
Laggards Energy, Semicons, Plastics
Leaders Iron/Steel, Shipping, Electric Machinery
T/O wasUS$14.37bn vs US$12.65bn Wednesday
CECC reported 9 new covid cases all imported.
Hon Hai Precision Industry Co. announced Thursday that it had struck a definitive deal to buy the bulk of Lordstown Motors' electric vehicle assembly plant in Ohio for US$230 million.

Movers
Active Heavyweights

PING AN (02318.HK) +2.150 (+3.792%) Short selling $252.40M; Ratio 17.307% closed at $58.85, up 3.8%
MEITUAN (03690.HK) +5.000 (+1.802%) Short selling $215.88M; Ratio 15.573% closed at $282.4, up 1.8%
BABA (09988.HK) +2.000 (+1.241%) Short selling $236.62M; Ratio 19.091% closed at $163.2, up 1.2%
TENCENT (00700.HK) -6.000 (-1.241%) Short selling $689.82M; Ratio 6.695% closed at $477.6, down 1.2%
CCB (00939.HK) +0.040 (+0.771%) Short selling $58.60M; Ratio 9.555% closed at $5.23, up 0.8%
AIA (01299.HK) +0.400 (+0.485%) Short selling $100.55M; Ratio 5.410% closed at $82.95, up 0.5%
HKEX (00388.HK) +0.600 (+0.129%) Short selling $76.93M; Ratio 18.709% closed at $464.6, up 0.1%

HSI & HSCEI Constituents on Move:
SUNAC (01918.HK) +1.340 (+8.438%) Short selling $289.63M; Ratio 19.994% closed at $17.22, up 8.4%
XINYI GLASS (00868.HK) +1.550 (+7.635%) Short selling $15.63M; Ratio 7.343% closed at $21.85, up 7.6%
KUAISHOU-W (01024.HK) +6.450 (+6.917%) Short selling $19.44M; Ratio 2.448% closed at $99.7, up 6.9%
EVERGRANDE (03333.HK) +0.160 (+6.751%) Short selling $10.09M; Ratio 4.844% closed at $2.53, up 6.8%
AAC TECH (02018.HK) +1.900 (+5.975%) Short selling $2.88M; Ratio 5.840% closed at $33.7, up 6%
CHINA RES LAND (01109.HK) +1.750 (+5.547%) Short selling $219.81M; Ratio 31.128% closed at $33.3, up 5.5%
COUNTRY GARDEN (02007.HK) +0.390 (+5.387%) Short selling $76.02M; Ratio 29.472% closed at $7.63, up 5.4%
HAIDILAO (06862.HK) +1.100 (+5.213%) Short selling $29.98M; Ratio 19.666% closed at $22.2, up 5.2%
LONGFOR (00960.HK) +1.850 (+5.062%) Short selling $118.69M; Ratio 29.598% closed at $38.4, up 5.1%
CHINA OVERSEAS (00688.HK) +0.900 (+5.056%) Short selling $187.88M; Ratio 19.126% closed at $18.7, up 5.1%
CG SERVICES (06098.HK) +2.900 (+5.009%) Short selling $30.80M; Ratio 4.535% closed at $60.8, up 5%
SUNNY OPTICAL (02382.HK) +9.000 (+4.348%) Short selling $53.33M; Ratio 12.839% closed at $216, up 4.3%
CPIC (02601.HK) +1.000 (+4.175%) Short selling $50.09M; Ratio 26.787% closed at $24.95, up 4.2%
CM BANK (03968.HK) +2.500 (+4.003%) Short selling $87.29M; Ratio 21.332% closed at $64.95, up 4%

HSMI & HSSI Constituents on Move:
HOPE EDU (01765.HK)  +0.290 (+22.481%)    Short selling $14.64M; Ratio 20.231%    closed at $1.58, up 22.5%
KINTOR PHARMA-B (09939.HK) +10.100 (+20.404%) Short selling $11.85M; Ratio 4.457% closed at $59.6, up 20.4%
KOOLEARN (01797.HK) +0.620 (+14.220%) Short selling $3.48M; Ratio 5.768% closed at $4.98, up 14.2%
U-PRESID CHINA (00220.HK) +0.890 (+14.038%) Short selling $1.44M; Ratio 1.546% closed at $7.23, up 14%
CIFI HOLD GP (00884.HK) +0.550 (+12.472%) Short selling $22.27M; Ratio 12.183% closed at $4.96, up 12.5%
CHINA AOYUAN (03883.HK) +0.290 (+11.934%) Short selling $7.93M; Ratio 5.474% closed at $2.72, up 11.9%
SKYWORTH (00751.HK) +0.640 (+11.700%) Short selling $15.51M; Ratio 9.893% closed at $6.11, up 11.7%, hitting new high
CARSGEN-B (02171.HK)  +4.200 (+10.500%)    Short selling $6.03M; Ratio 36.288%    closed at $44.2, up 10.5%


Market News 

SHK PPT (00016.HK) has recently forked out land premiums of around $3.719 billion for the Shap Sze Heung project in Sai Kung, reported Ming Pao. The total number of residential flats rose to 9,500 units from 4,930 units in 2017, up over 92%. The gross floor area expanded by 17.6% to 5.8527 million sq.ft. as well.

JD-SW (09618.HK)  recorded a "Double 11" shopping order value of more than RMB311.4 billion as of 2:09 p.m. today (11 November), against an aggregate value of RMB271.5 billion for last year's shopping gala, reported Chinese media.

The Brazilian freight management platform Frete.com has become the latest unicorn company in Latin America after completing a funding round led by a Latin America fund of Japan's SoftBank Group and TENCENT (00700.HK), reported Reuters.   Frete.com was valued at slightly above USD1 billion in the USD200-million funding round.

Overnight HIBOR last posted at 0.03946%, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.07054%, marking a 1-month high.

Citibank announced the result of 3Q21 residential property ownership survey, with 18% of the interviewed citizens believing that they could become home owners in the next ten years, marking a 1-ppt decline QoQ in the percentage of this category.  Josephine Lee, Head of Retail Bank at Citibank, expressed that, for those who are interested in purchasing property, an average decline of 26% in home prices would entice them to enter the housing market. However, the interviewees who are already home owners expressed that they would seriously consider selling the property only when an offer is 11% higher than the market price, Lee added.

TENCENT (00700.HK) sold approximately 73.872 million shares of YIXIN (02858.HK) off market last Friday (5th), at an average price of about $1.52 per share, cashing in approximately $112 million, according to data released by the Stock Exchange. After the offloading, TENCENT's stake in YIXIN was reduced to 53.97%, from 55.1%.

Foreign media reported that EVERGRANDE (03333.HK) has successfully settled the overdue interest payments for three batches of USD bonds, thus avoiding a default again.  DMSA, a German data service institution which invested in three of EVERGRANDE's offshore bonds, however, announced that it has not received any interest payments until the end of grace period yesterday (10th). DMSA announced that it is now preparing bankruptcy proceedings against EVERGRANDE and calls on all bond investors to join it.

Lawrence Ho, Chairman and CEO of Melco Resorts & Entertainment, expressed that the company is expected to track a 15-20% growth if travel between Hong Kong and Macau was resumed, reported Macao Daily.
Following the travel resumption between China and Hong Kong later this year, Ho believed that the border between Hong Kong and Macau will soon be reopened as well. Ho predicted that if the initial travel resumption between China and Hong Kong proves to be successful, the border between China and Hong Kong will be fully reopened by June 2022.

The Chinese government is planning to sell some of EVERGRANDE (03333.HK)'s assets to other Chinese firms, so as to achieve a "controlled" implosion, while limiting the damage to buyers of EVERGRANDE properties and businesses involved in its projects, reported foreign media, citing sources.  However, the process of taking the property giant apart may take years, with multiple details still under discussion, the report added. While EVERGRANDE may continue to survive, its operation scale will likely be drastically reduced.

Securities Times published an article on the front cover, stating that the People's Bank of China has responded to the market's concerns yesterday (10th) by releasing the surveying data of personal property loans in October 2021. The  volume of personal property loans in October increased by RMB101.3 billion compared to the month before, illustrating that the credit environment of the property sector is already improving.
The article remarked that, as the property sector is now supported by both favorable policies and loan funding, the market's risk appetite will likely continue to recover. Stable and sustainable growth for the property sector can only be achieved when all relevant parties remain steadfast on the principle of eradicating residential property speculation, the article concluded.

EVERGRANDE (03333.HK) has once again averted a default. A Clearstream spokesperson said customers of the international clearing firm had received Evergrande's coupon payments on three U.S. dollar bonds, reported Bloomberg. Equally, investors holding two Evergrande USD bonds confirmed the receipt of interest payments.Pre Market News

PICC GROUP (01339.HK) announced the expiry of the restriction period of around 26.91 billion restricted shares next Monday (15 November),
representing 60.84% of the total share capital of the Company.

The videoconference between U.S. President Joe Biden and his Chinese counterpart Xi Jinping is tentatively scheduled for the evening of next Monday (U.S. time), Politico citing people familiar with the matter.

The Novel Coronavirus Response and Coordination Centre of Macau announced last night that one imported confirmed re-positive case of COVID-19 was recorded yesterday (10th). The patient was previously tested positive for COVID-19 in a foreign country before entering Macau on 3 November.

GALAXY ENT (00027.HK) announced that the group's net revenue was HK$4.282 billion for the third quarter of 2021, up 1.76x YoY and down 23% QoQ. The adjusted EBITDA was HK$503 million, compared to a loss of HK$943 million in the corresponding period of the previous year.

HSBC HOLDINGS (00005.HK) announced that it has repurchased 2.1609 million shares of the company in the London market yesterday (10th), at a price ranging between GBP4.289 and GBP4.3325, with a volume weighted average price of GBP4.3108, involving GBP9.315 million (approximately HKD97.383 million).

At the virtual APEC CEO Summit, Chinese President Xi Jinping delivered a speech on adhering to sustainable development and co-building an Asia-Pacific community of common destiny, reported CCTV. Xi admitted China's carbon emission cut is a far-reaching economic and social reform. However onerous the task may be, China will work tirelessly to make contributions to the global green transition, he added.

Over the first ten months of the year, the average financing interest rate for the property developers in China has seen a relatively conspicuous decline, 
indicating that the financing cost pressure has been easing to an extent, reported China Securities Journal, citing data released by relevant institutions. The 10M21 average financing interest rate for property developers was 5.61%, down 0.69 ppts YoY, according to the latest data from the China Index Academy. The total financing amount of the developers in 10M21, on the other hand, amounted to RMB1.56 trillion, down 21.2% YoY.

Regarding the global metaverse fad, TENCENT (00700.HK) President Martin Lau said at the 3Q result conference call that this is a highly exciting opportunity, depicting metaverse as a big concept in vogue. 
He believed Tencent is in a position to explore and develop the metaverse technology and capability, with multi-faceted tech abilities to build the metaverse concept. He further expressed that for both China and the global market, more stringent oversight will likely become a new norm of the gaming sector. Lau added that the relevant regulatory measures were introduced by Beijing to protect the rights and privacy of consumers and to propel higher-quality, more sustainable and more benign growth of the entire industry.  James Mitchell, the company's Chief Strategy Officer, on the other hand, predicted that the current gaming regulation imposed on minors will not be extended to cover adult players. Mitchell deemed the current challenge which the Chinese gaming sector is facing as temporary and believed that the group is capable to overcome such obstacle.PICC GROUP (01339.HK)  announced that, pursuant to the PRC Accounting Standards for Business Enterprises, the original premiums income as derived from operating subsidiaries PICC P&C, PICC Life and PICC Health for the first ten months of 2021 were RMB372.823 billion, RMB83.796 billion and RMB32.053 billion, respectively.
The total amount was RMB488.672 billion, up 0.7% YoY.


Comments
* The email will not be published on the website.