Nov 8 HK closed lower, China higher but on lighter volumes.


08 Nov

This and previous notes can be found at Substack ( Asian Market Sense )
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HSI -107pts (-0.4%) 24,764 HSCEI -27pts (-0.3%) 8,794  T/O HK$121.93bn (-5.2% DoD)  

HK/CHINA Connect Flows
Shanghai
Northbound Rmb 44,384m Sell 21,807m vs 22,577m Buy
Southbound HK$ 12,168m Sell 6,273m vs 5,895m Buy
Shenzhen
Northbound Rmb 57,877m Sell 29,825m vs 28,052m Buy
Southbound HK$ 15,619m Sell 8,386m vs 7,233m Buy


Europe
Opened flat with concerns over rising covid cases in Europe & China and the mixed Chinese Trade data off setting the re-opening of US flight routes. Earnings still coming and some caution ahead of PPI and CPI data from the US this week.  Retail  slightly weaker, Oil & Gas slightly stronger.
No data but ECB’s Lane speaks and Eurogroup meets.  Earnings from Henkel which was trading weaker after lowering guidance.  Siemens Gamesa strong on FY results.  Covestro also reported.
US Futures 
Opened Dow flat, S&P -0.1% and NDX -0.3% but turning +VE Dow +55pts, S&P flat but NDX-VE
Seven Fed speakers tonight, Consumer Inflation Expectations, Senior Loan Officers survey.
Earnings: Virgin Galactic, Zynga, PayPal, Trip Advisor, AMC Entertainment, Cabot, Lemonade, Marriott Vacations, US Foods, Roblox, Tencent Music.


CHINA CSI 300 closed +6pts (+0.1%) @ 4,848
CSI 300 opened lower; and dipped to test 4,830 in early trades bounced to 4,845 then sold down again bounced to flat sold down to 4,827 before rebounded to 4,840 at lunch. PM opened flat but quickly rallied to 4,864 but then trended lower, found support at 4,845 and saw an uptick into the close. Concerns over growth after Trade data, resurgence of covid and the ‘zero tolerance’ policy. Chinese developers debts also an issue. Phama names hurt by news of the Pfizer pill’s effectiveness but some re-opening stocks rally on the news.
Sixth plenum underway likely to set the framework for Xi to be able to rule for life. Some caution ahead of inflation data, PPI and we may get New Loans data this week.

Shanghai Comp +7pts (+0.2%) @ 3,498 T/O US$61,187m (-11% DoD)
Shenzhen Comp +46pts (+0.3%) @ 14,509 T/O US$97,037m (-6% DoD)
ChiNext Comp +27pts (+0.8%) @ 3,597

CHINA DATA
China's National Health Commission reported 89 confirmed cases of COVID-19 yesterday (7 November),
with 24 of them being imported cases and 65 being local infections.
Among 46 asymptomatic cases, 12 were imported and 34 were locally transmitted.

HONG KONG 
Pre market opened @ 24,744 -127pts vs -52pts ADR’s.
Market effectively traded sideways 24,838/634
Weakness in Ecommerce and Phama/BioTech weak but +VE moves for Macau names on the Pfizer covid pill news. Financials & Developers seeing bargain hunting; China Vanke +VE on news it will spin off its Property Management under a separate listing. Haidilao to shut 300 units with low traffic but will not lay off staff. Retail mixed on news China to restrict border opening to 1,000 per day vs 5,000 HK sought
Tencent -0.8% ahead of earnings due Wednesday.
Expect some margin call selling Tuesday open after HK closed lower again.

HONG KONG DATA
Reported no cases of covid today

SHORT SELLING HSI Monday 19%  vs 17.2% Friday
Top shorts 
Country Garden (2007) 50%, AliHealth (241) 44%, Mengniu Dairy (2319), Baba-SW (9988), PingAn (2318) 39%, CM Bank (3938) 39%, Xinyi Glass (868) 34%, BoC (3988) 31%, HK EX (388) 31%, Sunny Optical (2382) 30%, Bud Apac (1876) 30%, Xinyi Solar (968) 30%, Hang Seng Bank (11) 28%, Haidilao (6862) 26%, China Life (2628) 26%, Hang Lung Ppty (101) 25%, Hengan (1044) 25%, ICBC  (1398) 25%, CSPC Pharma (1093) 25%.

AFTER MARKET NEWS

CHINA AOYUAN (03883.HK)  announced that in October 2021,
the Group achieved unaudited property contracted sales of approximately RMB10.13 billion, down 33.2% yearly.

GAC GROUP (02238.HK) announced that in October, the company's automobile production and sales volume dropped 4.48% and 8.11% YoY
to 192,600 units and 192,900 units.

EVERGRANDE (03333.HK) disposed of 200 million HENGTEN NET (00136.HK) shares in the market on 8 November, at an average price of $2.0365, cashing in $407 million as revealed by the Stock Exchange.  Upon completion, EVERGRANDE's shareholding in HENGTEN NET dropped from 22.98% to 20.82%.

The retail sales volume of China's broad-sense passenger vehicles amounted to 1.738 million units in October, down 14.1% YoY but up 8.3% MoM, according to data from China Passenger Car Association (CPCA).  The retail sales volume of new-energy passenger cars reached 321,000 units, up 141% YoY but down 3.9% MoM

The Government announced that, in accordance with the Articles of Association of the MTR CORPORATION (00066.HK) (MTRCL) and as the majority shareholder, the Financial Secretary Incorporated has re-appointed Dr Rex Auyeung Pak-kuen as the Chairman of the board of directors of the Corporation for two and a half years. The re-appointment of Dr Auyeung will take effect from January 1, 2022, to June 30, 2024. Dr Auyeung first took up the post of the Chairman of the board of directors of the MTRCL on July 1, 2019.

Regional Markets
Australia
Market opened flat but initially rallied to 7,474 briefly before trending lower through the morning to 7,433 at midday before trading sideways for a couple of hours before ticking higher but failed to break above Friday’s close and trended lower to close -5pts (-0.1%) @ 7,452.
Energy, materials and Industrial names leading the gains. Iron ore miners remain weak along with Healthcare and IT.
PolyNovo -9.7% following the departure of the CEO on management style differences.
Flight Centre +5.7% CEO said to be considering asking the courts to review the Western Australian Govt border policy; saying its ‘unreasonable’.
IPO Siteminder +7.7% on its debut.
Japan
Nikkei opened higher (29,735) but sold down to 29,518 around 10.30 am before rebounding to 29,590 at lunch. PM opened lower and dipped to 29,515 onweak Economic data then traded slightly better but then sold down at the end to close -105pts (-0.4%) @ 29,507
Topix traded in a similar pattern during the morning. PM seeing more selling pressure; closed -6pts (-0.3%) @ 2,035
Re-opening plays +VE. Earnings remain in focus with stocks reacting. Softbank’s after market numbers were weak but later announced a 1tn Yen buyback. Honda weak after cutting its FY F/casts.
Leaders Transport and Re-opening names.
Laggards Miners, Food, Tech and Pharma
Data
Foreign Exchange Reserves Oct $1404.5b vs 1409.3b Sept
BoJ Summary of Options
Leading Economic Index Prelim Sept 99.7 vs 101.3 Oct (F/cast was 101.5)
Conincident Index Prelim Sept 87.5 vs 91.3 Oct (F/cast was 92)
Construction names seeing weakness after Obayashi cut its guidance by over 50% due to rising material costs.
Sega Sammy strong after announcing buyback.
S Korea 
Foreigners & Local Institutions net sellers in cash (sold Pharma & Services. Buying Auto & Financials) but turned buyers in futures. Retail rotated into re-opening names and NFT’s. Earnings still in focus.
Kospi opened at 2,965 just below Friday’s close and sold down to 2,930 in the first hour. Small bounce but only to 2,940 and then traded sideways until about 1:30pm when the market rebounded but failed to regain Friday’s closing level.
Laggards Pharma names weak along with Finance and Services.
Leaders Textile/Apparel, Utilities, Transport.
Kosdaq followed a similar trading pattern to Kospi but managed to close just above Friday’s level +1pts (+0.1%) @ 1,003
Kakao Bank weak as share lock-up expires.
Taiwan 
Taiex opened higher and trended higher to close at day high in choppy trading; Closed +118pts (+0.7%) @ 17,415,
Leaders Iron/Steel, Shipping, Plastics, OptoElectric, Semiconductors
Laggards Electric Machinery, Electronics, Auto’s.
ASE +VE announces share buyback.
TSMC on track to move 3nm process technology into volume production in 2022 as planned; 5nm capacity to be fully utilised too
T/O was US$13.41bn vs US$11.59b Friday
After Market Data
Balance of Trade Oct $6.12b vs $6.45b Sept (F/cast was 6.6b)
Exports Oct 24.6% vs 29.2% Sept (Consensus was 24.4%)
Imports Oct Sept 37.2% vs 29.2% Sept (Consensus was 30.7%)
CECC reported 3 new covid cases all imported.

Movers
Active Heavyweights

PING AN (02318.HK) +2.150 (+3.978%) Short selling $468.96M; Ratio 48.050% closed at $56.2, up 4%
MEITUAN (03690.HK) -5.600 (-2.023%) Short selling $175.04M; Ratio 10.975% closed at $271.2, down 2%
CCB (00939.HK) +0.090 (+1.741%) Short selling $43.02M; Ratio 7.196% closed at $5.26, up 1.7%
BABA (09988.HK) -2.600 (-1.626%) Short selling $737.78M; Ratio 39.312% closed at $157.3, down 1.6%
TENCENT (00700.HK) -3.600 (-0.770%) Short selling $1.05B; Ratio 17.541% closed at $463.8, down 0.8%
HKEX (00388.HK) +0.800 (+0.172%) Short selling $276.81M; Ratio 37.659% closed at $466.8, up 0.2%
AIA (01299.HK) 0.000 (0.000%) Short selling $123.96M; Ratio 17.446% closed at $86.15, unchanged

HSI & HSCEI Constituents on Move:
WUXI BIO (02269.HK) -8.800 (-8.636%) Short selling $248.19M; Ratio 7.661% closed at $93.1, down 8.6%
SANDS CHINA LTD (01928.HK) +1.320 (+7.710%) Short selling $43.65M; Ratio 10.556% closed at $18.44, up 7.7%
SUNNY OPTICAL (02382.HK) -15.200 (-6.872%) Short selling $218.56M; Ratio 31.450% closed at $206, down 6.9%
GALAXY ENT (00027.HK) +2.100 (+5.006%) Short selling $97.67M; Ratio 11.431% closed at $44.05, up 5%
HAIDILAO (06862.HK) +1.000 (+4.751%) Short selling $196.69M; Ratio 19.964% closed at $22.05, up 4.8%
GEELY AUTO (00175.HK) -1.100 (-4.151%) Short selling $65.06M; Ratio 9.449% closed at $25.4, down 4.2%
WHARF REIC (01997.HK) +1.500 (+3.464%) Short selling $21.40M; Ratio 15.763% closed at $44.8, up 3.5%
CHINA GAS HOLD (00384.HK) +0.560 (+3.143%) Short selling $3.41M; Ratio 5.050% closed at $18.38, up 3.1%
COUNTRY GARDEN (02007.HK) +0.210 (+3.066%) Short selling $49.54M; Ratio 42.649% closed at $7.06, up 3.1%

HSMI & HSSI Constituents on Move:
CANSINOBIO (06185.HK)  -33.100 (-17.204%)    Short selling $174.04M; Ratio 41.997%    closed at $159.3, down 17.2%
ZAI LAB (09688.HK) -136.000 (-17.172%) Short selling $16.60M; Ratio 40.765% closed at $656, down 17.2%
FOSUN TOURISM (01992.HK) +1.530 (+15.789%) Short selling $1.15M; Ratio 5.579% closed at $11.22, up 15.8%
SAMSONITE (01910.HK) +2.300 (+14.375%) Short selling $5.19M; Ratio 3.532% closed at $18.3, up 14.4%

Market News 

The Japanese government will establish a legal system to subsidize advanced semiconductor firms setting up plants in the country, reported Nikkei. The amendment will be submitted to the National Diet in December.  The government weighs up adding semiconductor as a new priority field to a law currently applicable to 5G developing companies.  The new Kumamoto plant built by Taiwan Semiconductor Manufacturing Company Ltd. (TSM.US) will likely be the first beneficiary, according to market estimates. Tokyo purportedly looks to subsidize up to half of TSMC's plant investment on the scale of JPY1 trillion.

Some creditors who are holding the U.S. dollar bonds issued by EVERGRANDE (03333.HK)'s arm Scenery Journey Ltd have not received the interest payments due last Saturday (6th) by Monday morning (8th) in Asia, Reuters cited sources. The report said it is unsure whether EVERGRANDE has informed the related creditors in advance of the non-payments of interests in due time.  EVERGRANDE was originally due to settle the semi-annual coupon payments on Saturday, aggregating US$82.49 million on its 13% November 2022 and 13.75% November 2023 bonds. The payment failure will trigger a 30-day grace period.

Sunmei, a hotel chain group in China, announced the receipt of strategic investment from XIAOMI-W (01810.HK). Both parties will co-explore new opportunities for future hotel + technology development, with Lighthouse Capital being the exclusive financial advisor for the strategic investment.  Sunmei said the strategic alliance with XIAOMI-W marked the first step towards the intelligent upgrade of its key hotel brand.

PA GOODDOCTOR (01833.HK) and AstraZeneca entered into a strategic cooperation agreement at China International Import Expo (CIIE). Pursuant to which, the two parties will mount an in-depth cooperation in pharmaceutical retail ecological innovation and chronic disease management, and look at innovative models of medical and health services that create value to users and are conducive to the industry.    In addition, both companies will give full play to their respective advantages to jointly explore the establishment of a chronic disease service center, according to the agreement, and build an online service scenario for users with chronic disease screening and management needs.

During an interview with Hong Kong Economic Times, Chief Executive Carrie Lam said the Hong Kong Government could not ask the Chinese Government to open up all provinces for quarantine-free arrangement for Hong Kong people, although Lam's administration is striving to reopen border with China as soon as possible.  Insisting that the resumption should be in smaller scale first and conducted in orderly and gradual manner, Lam forecast the initial resumption would be limited to Guangdong Province. The first pilot place could be land ports between Hong Kong and Shenzhen or Hong Kong-Zhuhai-Macao Bridge. The border reopening should come with conditions, Lam added, including completion of Covid vaccination, proof of negative NAT, upload of LeaveHomeSafe's tracking records, which will be linked with China's health code system.

SWIRE PROPERTIES (01972.HK) mentioned the continuous mall sales recovery for the third quarter of 2021, with a healthy business growth among food and beverage tenants led by reviving local consumption sentiment. The developer also noted the robust sales in luxury and lifestyle brands.   The construction of brand-new Two Taikoo Place, part of the Taikoo Place redevelopment project, is making decent progress and expected to be completed in the first half of 2022. The office floor area in Taikoo Place will be magnified by a million sq.m. upon completion, with Julius Baer being the first major tenant.

The Food and Agriculture Organization's (FAO), in its report earlier, revealed that the global food prices notched a ten-year high in October, being on the rise for three consecutive months, fueled by increases in cereals and vegetable oils.  The FAO's food price index averaged 133.2 in October, above the revised 129.2 for September. The 133.2 reading was also the peak since July 2011.

Primary home sales exceeded 420 amid a vibrant market last weekend (6-7 November). Of which, CK ASSET (01113.HK)'s #LYOS immediately sold out 200 units launched under a price list in the first log.
Centralcon Properties' The Arles sold 272 units in the 3rd round. An open-handed buyer purchased all eight flats on the same floor for $100 million.

The 4th China International Import Expo (CIIE) opened in Shanghai on 5 November. This year, BABA-SW (09988.HK) made a debut on the event with almost 1,000 small and medium-sized overseas brands, first showing more than 1,000 new items on the Double 11 shopping bonanza.

Pre Market News

Financial Secretary Paul Chan, in his blogpost, revealed that he is preparing for the consultation of the next Budget, and foresaw that the fiscal deficit of this year of Hong Kong to be well below the estimate made in early year.  Year to date, Chan elaborated, Hong Kong's economy has been riding on the vibrant exports and gradually tapering epidemic to improve; what's more, the booster effect of e-voucher scheme on catering, retailing and servicing industries also laid foundation for upside of government revenue. Besides, quality land parcels in some regions sold at high premium, together with market optimism on the housing market outlook, shored up the related revenue to hit historic high (more than $40 billion as of the end of October).

HSBC HOLDINGS (00005.HK) announced that it has repurchased 2.7058 million shares of the company in the London market last Friday (5th), at a price ranging between GBP4.3225 and GBP4.416, with a
volume weighted average price of GBP4.3808, involving GBP11.8537 million.

China aims to give full play to its energy-saving and NEV inter-ministerial joint meeting system, with a raft of policies and measures supporting faster NEV buildout through coordination and research, revealed Guo Shougang, deputy director of MIIT's Equipment Industry Department I, at the Chinese Automotive Industry Development Forum on the sidelines of the 4th CIIE.
Equally, NEV safety tech standards will be bolstered for stronger intelligent connected vehicle (ICV) data security, network security, as well as registration and management of software upgrades, added Guo.

The Hong Kong Government is endeavoring to realize a small-scale border resumption with China by the end of this year, and imposing at least three curbs on the arrangement, HK01 cited sources. First of all, the initial border resumption should be controlled under a quota, in Chinese government's view, i.e. the number of quarantine-free entrants from Hong Kong to China could only be limited to 1,000 or below per day, in wake of epidemic flare-ups in China.
Secondly, Chinese authority will trigger the "circuit breaker" even if only one local Covid case is found in Hong Kong. Thirdly, the quarantine-free arrangement will not be expanded until end-February or early March next year, that is, after Beijing Winter Olympics. Sources said a full-scale reboot could be anticipated at end-June next year.

CATL (300750.SZ) announced the proposed construction of the lithium-ion battery manufacturing base project (phase I) in Xiamen, Fujian with a total investment of no more than RMB8 billion. The project is set for building power and energy storage battery production lines, with a planned site area of around 1,200 mu.  Meanwhile, CATL intended to build the phase I project of NEV power and energy storage battery production lines in Gui'an New District, Guiyang, with a total investment of no more than RMB7 billion.

LINK REIT (00823.HK) announced the acquisition of 50% interests in three key leading retail properties in Australia, namely Queen Victoria Building (QVB), The Galeries and The Strand Arcade (together “the portfolio”), at a total consideration of AUD538.2 million (equivalent to approximately HKD3.1196 billion). The transaction is expected to complete in the first half of 2022.  Link will fully fund the acquisition through its cash resources and debt facilities. Upon completion, Link’s ratio of debt to total assets will change from 20.1% to 21.4%, based on its consolidated financial position as at 31 March 2021.
The rare portfolio, sitting in the heart of Sydney CBD, was offered to the market for the first time.

Wang Yao, Secretary General of China Automobile Industry Association (CAAM), mentioned at the 4th China International Import Expo the grave data isolation phenomenon in China's automotive industry, citing companies' lack of data interaction channels.  Wang believed China shall prepare for the construction of an auto big data blockchain platform to enable data desensitization and interaction in the sector, leveraging the immutable, traceable and transparent nature of blockchain technology.

With concentrated promotion activities of the "Double 11" Shopping Carnival drawing close, China's State Administration for Market Regulation (SAMR) issued the "Work Guidelines on Regulating 'Double 11' Promotion Activities" to the internet platform companies and local market supervisors nationwide.  The Guidelines touched upon eight directions, aiming to regulate the promotion behaviors during the Shopping Festival, safeguard the online market order and protect the legitimate rights of consumers.

PETROCHINA (00857.HK) (601857.SH)'s  subsidiary inked 33 procurement agreements with 33 global partners,
  including Saudi Aramco, Schlumberger, Siemens Energy and Baker Hughes,  at China International Import Expo (CIIE). The aggregate contract amount  ran into almost US$15.5 billion.

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