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Free Mifid Webinar with Russell Napier tomorrow Friday
opic: 'Why The Growing Deflationary Risk From China Sets The Scene for Higher Global Inflation'
Session 1 : 9am London 4pm HKT Click to register
Session 2: 3pm London 10am EST Click to register
The President of China, in pursuit of common prosperity, is attempting to re-orientate his financial system to redistribute wealth. This re-distribution will be largely effected through redirecting the credit of the state-run financial system.This shift comes at a time when China is already running too tight a monetary policy and with a large residential property market overhang. These are the ingredients to push the cost of credit higher, the price of property lower and raise questions as to the solvency of the private sector credit system.The Solid Ground has long accepted such a disinflationary/ deflationary outcome for China even as the developed world shifted decisively to inflationary policies in early 2020.So how do the deflationary forces emanating from China interact with the policy of monetary largesse in the developed world? Is there one last deflationary shock to come? How should investors position for the major structural transition already underway in China?
HSI -354pts (-1.4%) 24,870 HSCEI -132pts (-1.5%) 8,820 T/O HK$128.33bn (+8.2% DoD)
HK/CHINA Connect Flows
Northbound Rmb 45,942m Sell 23,968m vs 21,974m Buy
Southbound HK$ 12,377m Sell 5,784m vs 6,593m Buy
Northbound Rmb 58,347m Sell 28,476m vs 29,871m Buy
Southbound HK$ 14,258m Sell 7,093m vs 7,165m Buy
Opened flat and working slightly better, Oil/Gas weak, Tech and Household Goods climbing. Data is mixed.
Earnings from British Airways parent IAG, Germany’s Uniper and Spain’s Amadeus were among the companies reporting earnings before the bell on Friday.
UBS to ditch the rank of group managing director as CEO Ralph Hamers looks to streamline the Swiss lender’s management hierarchy.
Construction PMI Oct 51.2 vs 50 Sept (F/cast was 50.2)
Later Retail Sales
Industrial Production Sept -1.1% MoM vs -3.5% Aug revised (F/cast was +0.9%)
Construction PMI Oct 47.4 vs 47.1 Sept (F/cast was 49.1)
Industrial Production Sept -1.3% MoM vs +1% Aug (F/cast was +0.3%)
Private Non Farm Payrolls Q3 +0.5% QoQ vs +1.4% Q2 (F/cast was +0.5%)
Construction PMI Oct 50.3 vs 48.9 Sept (F/cast was 49.5)
Later Retail Sales
Halifax House Price Index Oct +0.9% MoM vs +1.7% Sept (F/cast was +1%)
Halifax House Price Index Oct +8.1% YoY vs +7.4% Sept (F/cast was +7.9%)
Later Mortgage Rate
Opened Dow -8pts, S&P and NDX flat but have eased back to -24pts but S&P and NDX still flat.
Data out Total Vehicle Sales Oct 12.99m vs 12.18m Sept
Data due LMI Logistics Managers Index Current, Non Farm Payrolls, Unemployment Rate, Government Payrolls, Non Farm Payrolls, Average Hourly Earnings, Average Weekly Hours, Manufacturing Payrolls, Participation Rate, Average Hourly Earnings, Baker Hughes Oil Rig Data and Consumer Credit Charge.
Earnings: DraftKings, AMC Networks, Canopy Growth, Gannett, Johnson Controls, Sempra Energy, Groupon, Elanco Animal Health, Goodyear Tire, Cinemark, Embraer, Berkshire Hathaway.
CHINA CSI 300 closed -26pts (-0.5%) @ 4,842
CSI 300 opened lower; concerns over Kaisa/Chinese developers and bond market; turns out other SOE’s may be going to buy assets from it. Also President Xi’s comments about ending/reducing subsidues to SOE’s and digital companies (connected to application to CPATPP to which Taiwan has also applied).
CSI 300 dipped to 4,850 before rebounding strongly to 4,890 but failed to hold and eased back to 4,877 at lunch. PM has trended lower and closed at the day low.
Cement weak as producers slash prices as inventories rise but demand reduces. EV/Battery weak after the SES on Thursday unveiled the world’s largest lithium-metal battery that is big enough to power an electric vehicle that supports quick charging. The +VE news was that Saudi Arabia’s Sovereign wealth fund might invest more in Chinese companies.
Shanghai Comp -35pts (-1%) @ 3,492 T/O US$68,894m (+1.6% DoD)
Shenzhen Comp -93pts (-0.6%) @ 14,463 T/O US$103,060m (+7.5% DoD)
ChiNext Comp -10pts (-0.3%) @ 3,570
None Friday but Trade data due on Sunday.
Pre market opened @ 24,951 +275pts vs -250pts ADR’s but dropped lower after Kaisa Group and Units suspended without reason (PM announced to sell 18 projects in Shenzhen to ease cashflow issues). Market sold down to 24,800 before finding some support and rebounding to the opening level and then tested to 25,050 but saw resistance and traded sideways into lunch. PM seeing the market trend lower but found support at 24,730 around 3.30pm. The worked higher into the close but general caution ahead of the China Data on Sunday and US Jobs report tonght.
HSBC and Standard Chartered sold off as BoE failed to raise rates and ECommerce remains weak. HK developers slight +VE from BoE move and Henderson +VE on winning harbour site. Retail still +VE on re-opening hopes. Macau names also +VE.
HONG KONG DATA
The Hong Kong Monetary Authority (HKMA) announced that the official foreign currency reserve assets of Hong Kong amounted to US$498.1 billion as at the end of October 2021, higher than that of US$494.9 billion as at the end of September.
SHORT SELLING HSI Friday 17.2% vs 18.4% Thursday
Top shorts Country Garden (2007) 65%, Hang Seng Bank (11) 39%, CM Bank (3938) 34%, Hengan (1044) 33%, CKI (1038) 33%, Henderson Land (12) 33%, Li Ning (2331) 29%, Petrochina (857) 29%, Shenzhou Int (2313) 29%, BoC (3988) 28%, ICBC (1398) 28%, Wharf REIC (1997) 27%, Xinyi Glass (868) 26%, Longfor (960) 25%, Geely Auto (175) 25%, PingAn (2318) 25%.
AFTER MARKET NEWS
MTR CORPORATION (00066.HK) announced that it received a total of 5 tender submissions for the Tung Chung Traction Substation Property Development on 28 October 2021. The corporation has decided not to accept any of the tender submissions and will retender the project in due course, the announcement added.
Centa-City Leading Index (CCL) last posted 186.27, up 0.05% WoW. CCL ended the five-week consecutive decline over the first week after the announcement of Policy Address, remarked the research department of Centaline Property. Adding that the potential impact of the U.S. Federal Reserve's decision to begin tapering the bond-buying program on the housing market will be reflected in the CCL reading from late November. They further predicted that CCL could soon garner support and stand firmly at peak.
CCL Mass -0.19% WoW, to post at 188.41.
CCL (small & medium units) likewise -0.15% WoW, to post at 186.54.
CCL (large units), on the other hand, +1.14% WoW to post at 184.85.
Market to opened higher and testing 7,460 in early trades and then worked higher but resistance approaching 7,480 level and failed to break above and then drifted lower to close; +29pts (+0.4%) @ 7,457. Energy sector closed in the red after the OPEC decision other sectors were positive; Gold Miners helped by the BoE rate decision. Re-opening names in focus. Energy names -VE as OPEC+ maintains production levels.
Westpac Ex Div today. News Corp +7% on good results and buyback. REA Group +8% after results. Lin Admin +8.5% off earlier highs after Carlyle increased its offer. Afterpay -5.5% after poor results from Square.
Services Index Oct 47.6 vs 45.7 Sept (F/cast was 52)
Pre market Household Spending beat estimates and overnight Tech was positive. Reaction to Earnings moving some stocks Repositioning regarding bond yields follow the BoE leaving rates unchanged. Also caution ahead of US jobs numbers and China Trade data on Sunday; prompting some locking in of gains.
The Japanese government is planning to provide a cash payment of JPY100,000 (HKD6,845.8) to all children and teenagers aged below 18, as part of the economic stimulus program, reported Yomiuri Shimbun, citing sources. The total budget for the payout scheme was approximately JPY2 trillion (about HKD136.92 billion).
Nikkei opened slightly higher but trended lower but found support around 29,600 level andclosed there at lunch. PM market dipped lower and tested 29,500 before working higher currently -183pts (-0.6%) @ 29,612
Topix opened lower but followed a similar pattern. PM low was 2,033 and currently -14pts (-0.7%) @ 2,041
Leaders Metal Products, Miners, Rubber and Retail
Laggards Shippers, Iron/Steel, Warehouses.
Household Spending Sept -1.9% YoY vs -3% Aug (F/cast was -4%)
Household Spending Sept +5% MoM vs -3.9% Aug (F/cast was +2.5%)
due Monday BoJ Summary of options, Foreign Exchange Reserves, Leading Economic Index and Coincident Index
After Market announced to ease covid border curbs from Monday
Local Institutions broad sellers (Prop desks & Pensions), Foreigners sidelined for most of the day but were net buyers MOC.
Steel weak, Financials weak following bond weakness after the BoE rate decision (Kakao Bank -3.5%). Apparel stocks +VE. Auto flat but seeing interest.
Kospi opened higher at 3,003 but trended lower to find support around 2,960 level after the first hour and then traded sideways around there; currently -14pts (-0.5%) @ 2,969
Kosdaq opened 1,006 but trended lower to test 995 in the first hour but then rebounded back into the green and traded around yesterday’s closing level. Currently -0.1pt (flat) @ 1,001
Current Account Sept $10.07b vs 7.51b Aug (F/cast was 8b)
Taiex opened higher rallied to 17,180 in early trades and then eased back before working better through the day to close at the day high +219pts (+1.3%) @ 17,297 Tech in focus with strong buying of TSMC following the QualComm numbers.
T/O was US$11.59b vs US$11.07b Thursday
After Market Data
Inflation Rate Oct 2.58% YoY vs 2.63% Sept (F/cast was 2.6%)
Inflation Rate Oct -0.06% MoM vs +0.51% Sept (F/cast was +0.6%)
Wholesale Prices Oct 14.78% vs 11.96% Sept (F/cast was 12.2%)
Foreign Exchange Reserves Oct $546.7b vs 544.9b Sept (F/cast was 546.4b)
BABA (09988.HK) -6.100 (-3.684%) Short selling $533.70M; Ratio 23.705% closed at $159.9, down 3.4%
MEITUAN (03690.HK) -9.200 (-3.217%) Short selling $184.70M; Ratio 9.701% closed at $276.8, down 3.2%
TENCENT (00700.HK) -12.800 (-2.662%) Short selling $594.13M; Ratio 11.973% closed at $467.4, down 2.8%
PING AN (02318.HK) -0.950 (-1.727%) Short selling $84.89M; Ratio 18.037% closed at $54.05, down 1.7%
CCB (00939.HK) -0.070 (-1.333%) Short selling $160.78M; Ratio 19.620% closed at $5.17, down 1.5%
AIA (01299.HK) +0.650 (+0.759%) Short selling $314.68M; Ratio 21.104% closed at $86.15, up 0.6%
HKEX (00388.HK) +0.600 (+0.129%) Short selling $90.57M; Ratio 12.310% closed at $466, up 0.3%
HSI & HSCEI Constituents on Move:
SUNAC (01918.HK) -1.040 (-7.056%) Short selling $165.11M; Ratio 42.297% closed at $13.74, down 6.8%
HAIDILAO (06862.HK) +1.090 (+5.461%) Short selling $38.18M; Ratio 12.756% closed at $21.05, up 5.5%
PETROCHINA (00857.HK) -0.180 (-4.972%) Short selling $59.28M; Ratio 22.684% closed at $3.44, down 5%
JD (09618.HK) -14.400 (-4.447%) Short selling $116.37M; Ratio 31.212% closed at $309.8, down 4.3%
SUNNY OPTICAL (02382.HK) +7.200 (+3.380%) Short selling $93.12M; Ratio 21.251% closed at $221.2, up 3.8%
HSBC HOLDINGS (00005.HK) -1.800 (-3.818%) Short selling $161.50M; Ratio 17.806% closed at $45.45, down 3.6%
CSPC PHARMA (01093.HK) -0.290 (-3.550%) Short selling $16.49M; Ratio 18.092% closed at $7.89, down 3.4%
XINYI GLASS (00868.HK) -0.770 (-3.711%) Short selling $13.67M; Ratio 19.794% closed at $20.05, down 3.4%
HSMI & HSSI Constituents on Move:
DONGYUE GROUP (00189.HK) -2.620 (-14.719%) Short selling $50.65M; Ratio 7.765% closed at $15.18, down 14.7%
HENGTEN NET (00136.HK) -0.300 (-12.821%) Short selling $5.13M; Ratio 1.920% closed at $2.03, down 13.2%
CHINA AOYUAN (03883.HK) -0.340 (-13.492%) Short selling $7.47M; Ratio 8.663% closed at $2.19, down 13.1%
CHINA DONGXIANG (03818.HK) -0.090 (-11.111%) Short selling $1.97M; Ratio 11.284% closed at $0.71, down 12.3%
SKYWORTH (00751.HK) +0.240 (+4.908%) Short selling $44.20M; Ratio 13.128% closed at $5.13, up 4.9%, hitting new high
KAISA GROUP (01638.HK) is raising funds for debt, including a missed wealth product payment and a US$11-billion bond, by asset disposal as reported by SCMP. Four listed firms belonging to the Kaisa group of companies suspended trading on Stock Exchange from this morning.
KAISA GROUP will start auctioning off 18 Shenzhen property projects measuring 1.45 million sq.m., with a total value of RMB81.82 billion. The developer plans to begin the disposal as early as next month, set to wrap up the deal by end-2022, revealed insiders.
Over the first three quarters of this year, HSBC has recorded a high single-digit YoY growth in its personal loans, said Amy Kam, Head of Cards and Personal Lending, Wealth and Personal Banking, Hong Kong, HSBC. Kam added that, driven by the gradual economic recovery, the personal loan volume could potentially track a double-digit YoY growth next year.
A forum and signing ceremony on Sinopec was held in Shanghai yesterday (4 November) on the sidelines of the 4th China International Import Expo (CIIE). Accordingly, Sinopec inked procurement contracts worth US$41.5 billion with 34 suppliers from 14 countries and regions, involving 42 types of products under 11 categories like crude oil, natural gas, chemicals and equipment materials.
The trading in the shares of LINK REIT (00823.HK) was halted from 1 pm today (5th). The reason behind the trading halt remains unknown at the moment. Later said it was pending the release of an announcement in relation to a proposed acquisition.
China has authorized 12 banks, including BANK OF CHINA (03988.HK), BANKCOMM (03328.HK) and CICC (03908.HK), to arrange the issuance of a batch of EUR sovereign bonds, reported Reuters, citing documents. The timing of issuance, on the other hand, will depend on the market conditions, the report added.
At lunchtime NISSIN FOODS (01475.HK) announced the result for the first three quarters ended 30 September 2021. The net profit amounted to HK$231 million, down 12.4% annually. EPS was HK21.59 cents.
The Court of Final Appeal unanimously ruled that the small house policy is both legal and constitutional in its entirety, and that all the indigenous residents of the New Territories are within their constitutional rights to build small houses on private land, or apply to the government for construction through private treaty grants or land swaps.
XINYI GLASS (00868.HK) announced that the Group has purchased 7 million shares of XINYI SOLAR (00968.HK) and 2.402 million shares of XINYI ENERGY (03868.HK) on 3 November, at an average price of $14.3188 each and $4.0875 each, respectively.
BABA-SW (09988.HK)'s AliExpress announced the official launch of the two-day 11.11 Global Shopping Festival from 12 a.m. on 11 November (US West Coast time). Sellers participating in this year's event surged by 30% from that in 2020, said AliExpress General Manager Wang Mingqiang.
TENCENT (00700.HK)'s Honor of Kings, League of Legends: Wild Rift, and Game for Peace topped the October mobile game revenue chart in China's App Store, followed by NTES-S (09999.HK)'s Harry Potter: Magic Awakened, announced by Sensor Tower. Tencent's global game grossing rose 32% monthly and 23.3% yearly to a record high in October, according to the analysis.
TENCENT (00700.HK) introduced the employee retirement benefit plan, illustrating that, when TENCENT's employees retire at the statutory retirement age, they will be entitled to customized souvenir, long service payment and honorary retirement payment, reported Chinese media. At the moment, the average age of the employees of large-scaled internet corporates is about 30 years old. As most of the internet firms do not have specific retirement and benefits arrangement in place, TENCENT's introduction of retirement plan may inspire its peers to follow suit, the report added.
For the first three quarters of this year, China's newly added tax and fee reduction amounted to RMB910.1 billion in total, with RMB788.9 billion of new tax reduction and RMB121.2 billion of new fee reduction, according to the latest data released by the State Administration of Taxation (SAT).
Hong Kong's Chief Executive Carrie Lam expressed when attending a forum that, the discussion between medical experts from China and Hong Kong has been showing satisfactory progress and that the Hong Kong government is hoping for a quarantine-free travel resumption between China and Hong Kong with a substantial scale by February next year.
The Government is studying different means for further financial infrastructure development in Hong Kong through big data, including the pilot of Commercial Data Interchange that enables alternative credit scoring by banks, said Christopher Hui, Secretary for Financial Services and the Treasury, at the Hong Kong FinTech Week.
CKH HOLDINGS (00001.HK) announced the financial result for CK Hutchison Group Telecom (CKHGT), an indirect wholly-owned subsidiary of the company, for the first three quarters ended 30 September 2021. Over the period, CKHGT's revenue dropped 2% YoY to EUR7.429 billion. The total margin amounted to EUR5.19 billion, down 4%.
HKT-SS (06823.HK) announced that, in response to the government’s recently announced anti-epidemic measures, HKT is launching a one-stop shop service to help the elderly use the LeaveHomeSafe mobile app. This includes smartphone workshops and a 24-hour service hotline, as well as affordable smartphones and mobile service plans, the announcement added.
As the border between China and Hong Kong was said to resume by mid-December at the earliest, HSBC was reported to have issued an internal notice to its employees yesterday (4th), requiring all the staff of the group in Hong Kong, including outsourced workers and those under third-party service providers, to receive vaccination for COVID-19.
Pre Market News
Hong Kong Government and experts from relevant Chinese authorities held a videoconference on Tuesday (2 November), Sing Tao Daily citing sources. The Chinese side reiterated that Hong Kong Health Code will require real-name registration and users' residential address.
On another note, China will send commissioners for on-site inspections in Hong Kong to sharpen their understanding of the city's anti-epidemic measures before determining a border reboot.
KAISA GROUP (01638.HK), KAISA PROSPER (02168.HK), KAISA CAPITAL (00936.HK), and KAISA HEALTH (00876.HK) announced that the trading in the shares of the companies will be suspended from this morning (5th). The reason behind the trading halt remained unclear; later revealed to be the release of insider information.
Macau's Novel Coronavirus Response and Coordination Center expressed that, as of yesterday, Macau's vaccination rate was 68%. The center added that it is actively considering to lower the eligible age for COVID-19 vaccination from 12 years old and above at the moment, to 3 years old and above.
Payment on a product issued by Kaisa Finance and guaranteed by KAISA GROUP (01638.HK) was overdue, reported Cailian Press. In this regard, KAISA GROUP said the rumored repayment plan for the Kaisa Finance product was merely the first draft, adding it would take time to finalize the plan as the group was still in talks with investors.
HSBC HOLDINGS (00005.HK) announced that, it has repurchased approximately 3.3951 million shares of the company in the London market yesterday (4th), at a price ranging between GBP4.3105 and GBP4.458, with a volume weighted average price of GBP4.3708, involving about GBP14.8394 million (about HKD156 million).
Chinese President Xi Jinping expressed on 4 November, when attending the opening ceremony of the fourth China International Import Expo, that China will thoroughly cooperate with the international community in terms of green, low-carbon projects and digital economy, as well as actively confront the climate change, with the aim to safeguard the food and energy security for the world. China will concentrate on expanding its imports to foster a balanced trading development, Xi added. He remarked that the Chinese government will set up import trade promotion and innovation demonstration zones, to optimize the list of retail imports in cross-border e-commerce and to propel barter trade import assembly among border residents.
At an internal meeting, EVERGRANDE (03333.HK) chairman Hui Ka Yan urged employees to go all out for work and production resumption while ensuring property delivery, reported China Youth Daily. Only in this way can the group recover in terms of sales, alongside normal operation and loan repayment. Everyone should keep cool amid the company's tougher times, said Hui when cheering the staff up. Real estate industry is a capital-intensive one that requires massive cash flows, he added.
E-COMMODITIES (01733.HK) announced that the Company has on 4 November repurchased an aggregate of 5.4 million shares of the Company at HK$0.82 per share. The total settlement cost is around HK$4.44 million.
GREENTOWN CHINA (03900.HK) announced that, for the first ten months of 2021, Greentown Group recorded a saleable area of approximately 7.57 million sqm, with a contracted sales amounting to RMB220.3 billion (increased by 57% year-on-year).
CKH HOLDINGS (00001.HK)'s statement disclosed that, on 4 November, it has repurchased 180,000 shares of the company on the Stock Exchange, at a price between $51.85-52.25 per share, involving a total amount of approximately $9.38 million. YTD, CKH HOLDINGS has repurchased a total of 20.0535 million shares of the company, accounting for 0.52% of the company's share capital.
CHINA MOBILE (00941.HK) announced that the Company’s application for the RMB Share Issue has been reviewed and approved by the CSRC. Currently, the Company has not received the written approval from the CSRC.
DONGFENG GROUP (00489.HK) announced that the auto production and sales volume for October reached 219,182 units and 227,759 units, respectively down 19.1% YoY and 21% YoY.