Oct 11HK rallies back above 25k, China flat, Japan higher, S Korea & Taiwan closed

11 Oct

This and previous notes can be found at  Substack ( Asian Market Sense )
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HSI +487pts (+2%) 25,325 HSCEI +224pts (+2.6%) 8,999 T/O HK$162.92bn (flat DoD)  

No data due but a cautious open after the US jobs data, US earnings kicking off and a large number of Fed speakers this week.  FTSE trading around flat, DAX was weaker but working back to flat and CAC dipped initially but coming back to flat.
US Futures opened Dow -71pts, S&P -0.28% and NDX -0.33% caution as Q3 earnings season gets under way (JPM, GS, BoA, MS, Wells Fargo and Citi on Wednesday) and after the weak jobs report Friday and GS lowering their growth forecast.

CHINA CSI 300 closed +6 pts (+0.1%) @ 4,936
CSI 300 opened strongly, testing 4,980 before trending lower to +23pts (+0.5%) @ 4,953 at lunch. PM opened at 4,960 and initially traded there but then trended lower to 4,950 and then at 2:30 pm sold down to 4,940 and then 4,930 before a bounce into the close @ 4,936
Coal names surging Xi revises energy pricing after flooding in Shanxi puts supplies in jeopardy. PBoC pre market drains 190b with reverse repo’s. But news that Helongjiang relaxing home loan policy, offering subsidies to attract immigrants and +VE terms for Developer pre-sales. But sentiment remains cautious with Evergrande seen as the precusor for other developers who are in breach of the ‘three red lines’.
Shanghai Comp -0.5pt (unch) @ 3,592 T/O US$68,288m (-5.2% DoD)
Shenzhen Comp -47prs (-0.3%) @ 14,368 T/O US$81,139m (-7.5% DoD)
ChiNext Comp -38pts (-1.1%) @ 3,421

No data today 
but Trade data due Wednesday, Inflation Thursday and may also get New Loans, Outstanding Loan Growth, Total Social Financing, M2 Money Supply.

Pre market opened @ 25,162 +324pts vs +152pts ADR’s  prompting wider short covering with market rallying to 25,350 levels. Baba +9.4% and Meituan +8% as Meituan fine was less than expected suggests crackdown easing; Tencent +3%, JD.com +5.3%. Energy strong with coal prices surging; IPP’s +VE as they will be allowed to raise prices. Tech also firm. Sportswear weak along with HK Property and Financials.  
Worth noting Severe Tropical Storm Kompasu is enroute towards HK
and could come within 400km tomorrow and increase to a typhoon which might impact the market Tuesday/Wednesday and key as the market will be closed on Thursday.

The Centre for Health Protection (CHP) announced that as of 0.00am, October 11, it was investigating 7 new covid cases.  
The clock re-started for days without a local covid case from Saturday.  No new cases on Sunday but illustrates that an absolute zero case policy is unlikely to work long term.

SHORT SELLING HSI Monday 21.9 vs 20.1 Friday
Top shorts 
Hengan (1044) 46%, Country Garden (2007) 44%, Henderson Land (12) 42%, AAC Tech (2018) 39%, Wharf REIC (1997) 36%, Sands  China (1928) 33%, Sunny Optical (2382) 33%, Baba-SW (9988) 33%, CM Bank (3968) 31%, CLP (2) 31%, Bud Apac (1876) 31%, Power Assets (6) 30%, Hang Seng Bank (11) 29%, Ali Health (241) 28%, Haidilao (6862) 28%, HK & China Gas (3) 28%, BYD (1211) 27%, CG Services (6098) 27%, MTRC (66) 27%, Bank of China (3988) 26%, HSBC (5) 26%, SHKP (16) 26%, Mengniu Dairy (2319) 25%.

SUNNY OPTICAL (02382.HK)  announced that the shipment

volume of handset lens sets in September decreased by 20.8% YoY to 133 million units, which was mainly due to the weaker demand from the overall smartphone market compared to the same period of last year.

GEELY AUTO (00175.HK)  announced that the total sales

volume of the Group (including the sales volume of LYNK & CO-branded vehicles sold by the Group’s 50%-owned joint venture, namely LYNK & CO JV) during the month of September 2021 was 103,900 units, a decrease of approximately 18% from the same period last year, but up approximately 18% from August 2021.  The total sales volume in the first nine months of 2021 was 921,800 units, an increase of approximately 5% from the same period last year, achieving 60% of the Group’s full year sales volume target of 1.53 million units in 2021.

ASM PACIFIC (00522.HK) announced that its subsidiary, ASM USA, entered into a definitive agreement with Mycronic and AEi, pursuant to which ASM USA agreed to acquire all of the issued shares of AEi from Mycronic in an all-cash transaction.

China Evergrande New Energy Vehicle Group Limited underwent a business change, according to the Tianyancha app. The entity's registered capital rose from about US$2.015 billion to US$2.515 billion, up around 24.81%.

Regional Markets

Market opened lower with allegations about the casino operator Star Ent -18% being involved in money laundering and other improper activities (-VE cross read). CBA also opened lower but has recovered as it faces fines for underpaying staff. Energy names strong as oil and gas prices rise plus Ampol’s take over of Z Energy. Iron ore prices +VE as China re-opens and Collins Foods +VE as lockdown in NSW ends.
Market dipped to test 7,250 in early trades which it tested a number of times before working better for the rest of the session to close -20pts (-0.3%) @ 7,300
Sentiment helped by weak Yen +VE exporters and PM Kishida saying no plans for capital gains taxes but aiming at more stimulus.
Airlines +VE on more talk of travel corridors and opening up. Sony +VE on news of JV with TSMC for semi factory in Japan.
Daikin +2.1% will phase out rare earths from aircons. Softbank +4.9% as Chinese internet plays rebound
Earnings remain in focus. Yaskawa initial weakness but worked better.
Leaders Auto, Shipping, Traders
Laggards EPG’s, Construction, Food, Pharma and Retail
Nikkei opened lower 27,977 but worked higher, slight resistance at 28,400 and then at 28,550 after which it eased back; 28,493 at lunch. PM effectively worked sideways around 28,485 level with a rally at the end to close +449pts (+1.6%) @ 28,498
Topix opened higher and worked higher, resistance at 1,993. PM trading around 1,992 level but again rallied at the end to close +35pts (+1.8%) @ 1,997.
Machine Tool Orders at 2pm Sept 71.9% YoY vs 85.2% Aug revised from 86.2% (F/cast waChina Cheng Xin International Credit Rating announced that Fantasia Group's sovereignty and related debt ratings were downgraded from "AA+" to "A", and the company was included on the watch list for possible downgrades.s 80%)
S Korea Market closed re-opens Tuesday
Taiwan Market closed re-opens Tuesday. Tension with China over annexation running high after comments from Chinese President Xi, Taiwan says it will defend its freedom.

HK/CHINA Connect Flows
Northbound Rmb 52,951m Sell 25,497m vs 27,454m Buy
Southbound HK$ 17,818m Sell 8,841m vs 8,977m Buy
Northbound Rmb 58,805m Sell 30,287m vs 28,518m Buy
Southbound HK$ 18,660m Sell   8,354m vs 10,306m Buy

Active Heavyweights
MEITUAN (03690.HK)  +21.400 (+8.359%)    Short selling $3.22B; Ratio 21.433%    closed at $277.4, up 8.4%
BABA (09988.HK) +12.300 (+7.910%) Short selling $4.73B; Ratio 32.521% closed at $167.8, up 7.9%
PING AN (02318.HK) +2.000 (+3.457%) Short selling $698.68M; Ratio 23.440% closed at $59.85, up 3.5%
TENCENT (00700.HK) +14.200 (+2.947%) Short selling $1.87B; Ratio 14.452% closed at $496, up 2.9%
AIA (01299.HK) -1.350 (-1.500%) Short selling $315.08M; Ratio 19.042% closed at $88.65, down 1.5%
CCB (00939.HK) -0.020 (-0.364%) Short selling $190.00M; Ratio 13.605% closed at $5.47, down 0.4%
HKEX (00388.HK) -0.800 (-0.169%) Short selling $318.24M; Ratio 17.657% closed at $471.2, down 0.2%

HSI & HSCEI Constituents on Move:
JD HEALTH (06618.HK)  +6.150 (+8.436%)    Short selling $122.27M; Ratio 17.447%    closed at $79.05, up 8.4%
BIDU-SW (09888.HK) +9.800 (+6.409%) Short selling $187.10M; Ratio 24.548% closed at $162.7, up 6.4%
HANSOH PHARMA (03692.HK) +1.080 (+5.505%) Short selling $3.10M; Ratio 2.871% closed at $20.7, up 5.5%
BYD COMPANY (01211.HK) +12.800 (+5.203%) Short selling $569.91M; Ratio 27.307% closed at $258.8, up 5.2%
JD (09618.HK) +15.400 (+5.199%) Short selling $595.04M; Ratio 36.786% closed at $311.6, up 5.2%
KUAISHOU-W (01024.HK) +4.250 (+5.075%) Short selling $276.91M; Ratio 13.871% closed at $88, up 5.1%
CM BANK (03968.HK) +3.000 (+4.975%) Short selling $446.70M; Ratio 31.129% closed at $63.3, up 5%
NTES (09999.HK) +6.600 (+4.552%) Short selling $351.82M; Ratio 22.346% closed at $151.6, up 4.6%
ANTA SPORTS-200 (02020.HK) -5.900 (-4.490%) Short selling $418.33M; Ratio 15.220% closed at $125.5, down 4.5%
HAIDILAO (06862.HK) +1.100 (+4.059%) Short selling $60.27M; Ratio 28.307% closed at $28.2, up 4.1%
XINYI GLASS (00868.HK) -0.800 (-3.747%) Short selling $40.61M; Ratio 8.834% closed at $20.55, down 3.7%
XINYI SOLAR (00968.HK) +0.540 (+3.714%) Short selling $49.13M; Ratio 8.664% closed at $15.08, up 3.7%
CG SERVICES (06098.HK) +2.000 (+3.281%) Short selling $208.66M; Ratio 26.769% closed at $62.95, up 3.3%
COUNTRY GARDEN (02007.HK) -0.250 (-3.226%) Short selling $130.21M; Ratio 44.337% closed at $7.5, down 3.2%

HSMI & HSSI Constituents on Move:
DONGYUE GROUP (00189.HK)  -2.480 (-14.692%)    Short selling $45.57M; Ratio 2.279%    closed at $14.4, down 14.7%
TONGDAO LIEPIN (06100.HK) +1.340 (+12.570%) Short selling $438.49K; Ratio 2.867% closed at $12, up 12.6%
LEGENDHOLDING (03396.HK) -1.980 (-12.516%) Short selling $21.32M; Ratio 14.181% closed at $13.84, down 12.5%
LINKLOGIS-W (09959.HK) +0.850 (+10.429%) closed at $9, up 10.4%

Market News
The All-China Federation of Industry and Commerce (ACFIC) released the list of top 500 private enterprises by R&D and inputs at the Greater Bay Area private enterprise tech and innovation summit, reported chinanews.com. 
Huawei Investment & Holding Co., Ltd. topped the chart, followed by BABA-SW (09988.HK), TENCENT (00700.HK), Zhejiang Geely Holding, BIDU-SW (09888.HK) and JD-SW (09618.HK)

China's thermal coal futures  were capped for further hike after surging 8% to last at RMB1,408.2/ ton, Chinese media reported.  Floods in Shanxi Province affected lives of 1.7571 million people from 11 cities and 76 counties. Also, the production of 60 coal mines were suspended.

China Cheng Xin International Credit Rating announced that Fantasia Group's sovereignty and related debt ratings were downgraded from "AA+" to "A", and the company was included on the watch list for possible downgrades.

During an interview with Bloomberg Television, Chief Executive Carrie Lam conceded that the prevailing travel restrictions in Hong Kong may undermine its reputation as a global financial hub.  Although Singapore and other financials hubs open their travel successively and tend to adopt the "Coexisting with COVID-19" approach, Lam said she is obliged to protect Hong Kong residents through travel curbs.  On the other hand, she revealed that the Hong Kong government is endeavoring to resume normal travel with China and overseas through progressive and orderly means.

Chief Executive Carrie Lam will meet with the Real Estate Developers Association (REDA) of Hong Kong at Central Government Offices tomorrow (12th), set to discuss relevant housing measures mentioned in the Policy Address, reported Sing Tao Daily.

The registered capital of Ant Group under BABA-SW (09988.HK) has recently increased from RMB23.779 billion to RMB35 billion, Tianyancha APP showed. The approval date was 30 September 2021.   Cailian Press quoted Ant's response that the change in registered capital was caused by the conversion of capital reserve into share capital, adding that the company had not conducted any marketization financing and had not introduced investors.  Pursuant to the relevant regulatory requirements and the company's business development needs, increasing the registered capital was to reserve more room for the company's subsequent development.

The Hong Kong Observatory said , according to the present forecast track, Tropical Cyclone Kompasu will move across the Luzon Strait today (11 October) and come within 800 kilometres of Hong Kong overnight tonight. The Observatory will issue tropical cyclone warning signal by then.  Under the combined effect of Kompasu and the northeast monsoon, winds over the coast of southern China will strengthen gradually in the next couple of days. With Kompasu moving across the northern part of the South China Sea and edging closer to Hong Kong, the local weather is expected to deteriorate later tomorrow. Winds will also further strengthen. Kompasu is expected to be closest to Hong Kong early on Wednesday, skirting around 400 kilometres to the south of the territory. Winds may reach gale force over some areas in the territory and there may be widespread rainstorms with squalls.

EVERGRANDE (03333.HK), amid debt crisis, will see more debt coming to mature this week, running into approximately US$148 million worth of due offshore bond interests of three dollar bond coupons, Nikkei Asia cited Refinitiv statistics.  In addition, EVERGRANDE had failed to repay the interests on two offshore bonds last month, and may go defaulted if it does not settle the amount within the 30-day grace period.

Singapore announced to exempt fully-vaccinated visitors from eight countries, including Britain, France, Spain and the United States, from quarantine starting 19 October.  Singapore shall reach a "new normal" with lightened curbs as Covid cases stabilize, which will likely take at least three months or up to six months, said Prime Minister Lee Hsien Loong.

Pre Market News
The People's Bank of China (PBOC) said it conducted seven-day RMB10 billion of reverse repos today (11th), 
with a flattish bidding interest rate of 2.2%. The single-day net return reached RMB190 billion today.

CHINA POWER (02380.HK)  announced the discussion with Jilin Electric, an associate of the Company's ultimate controlling shareholder SPIC, for a proposed asset restructuring.  
After series of discussion and negotiation with Jilin Electric and consultation with external professional advisors regarding the Proposed Asset Restructuring, the Company and Jilin Electric could not fully agree on the core terms of the transaction. In the interests of the Company, Jilin Electric and each of our shareholders, both parties have agreed to terminate the Proposed Asset Restructuring.

FANTASIA (01777.HK) announced that the Company has appointed Houlihan Lokey as its financial adviser to assess the Group’s capital structure, 
evaluate the liquidity of the Group and explore all feasible solutions to ease the current liquidity issue and reach an optimal solution for all the stakeholders as soon as possible.  The Company has also appointed Sidley Austin as its legal adviser in support of this effort.

The lives of 1.7571 million people from 11 cities and 76 counties in Shanxi have been disrupted by heavy floods, where 120,100 have been displaced, as Xinhua learnt from the province's emergency management department. The disaster has also destroyed 2.8496 million hectares of crops and knocked down over 17,000 buildings.

China has rolled out an online game anti-addiction system targeting indulgence among the underage, said People's Daily in its commentary titled "Keeping Minors Away from Online Game Addiction". 
With game account renting on some online platforms, users can bypass the regulation and enjoy unbridled gameplay by either renting or buying accounts. In other words, there are still loopholes in the first entry point of teenagers' access to online games, which is something worth paying great attention to.

Chief Executive Carrie Lam said while she had outlined the long-term land and housing supply plan in the latest Policy Address, the government will also do its upmost to speed up public housing construction to help the people in need.  
In the long run, the government will persist in adding housing and land supply by multi-pronged approach, Lam furthered, projecting the government-led land supply will provide one million public and private housing units in the next 20-25 years, if the initiatives drafted by her in the Address are going to implement.  Hong Kong's short-term housing measures were rolled out at full strength in the past four years, said Chief Executive Carrie Lam during the "On the Record" programme. She mentioned the Government's aim to accelerate home completion, citing Modular Integrated Construction (MiC) which can speed up building time especially for public rental homes. However, the model has rarely been adopted by the Housing Authority (HA).
Accordingly, Lam is planning that the Housing Authority would pay cash allowance in lieu of the Government to eligible citizens queuing for public rental housing (PRH). The monthly sum will be approximately $2,700 for a three-person household.

CNOOC (00883.HK) announced that a Committee of the Board of Directors of the NYSE had in last Friday (8th) maintained the decision to delist the American depositary shares (ADSs) of the Company. 
The NYSE will file a Form with the U.S. SEC to strike the Company’s ADSs from listing. The delisting of the Company’s ADSs will be effective 10 days after the Form is filed.  Each ADS can be cancelled for delivery of 100 ordinary shares of the Company, which are listed for trading on The Stock Exchange of Hong Kong Limited, CNOOC said.  Given that the Company's ADSs are also traded on the Toronto Stock Exchange in Canada, the Company will maintain communication with the Toronto Stock Exchange to deal with related matters.

BYD COMPANY (01211.HK)'s Zhengzhou BYD Auto Co.,Ltd. splashed RMB727 million to win four industrial land sites in Zhengzhou with about 4,104 mu, Chinese media Hexun.com reported.  
Besides, BYD purportedly planned for its domestic production capacity for passenger vehicles, under which by 2025, BYD's planned production capacity will reach 3 million units; and 5 million units for the mid-to-long term.

SUNAC (01918.HK)'s Sunac Culture & Tourism plans to authorize Yongle Huazhu to manage 22 hotels under the group across 11 cities, including Xishuangbanna, Guangzhou, Chengdu,
reported The Paper.    On 22 March 2021, HUAZHU-S (01179.HK) announced a strategic partnership with SUNAC's Sunac Culture & Tourism to form Yongle Huazhu Hotel & Resort Group.

Harbin is to roll out opinions on prompting the solid and healthy real estate market development with effect 1 October 2021 until 31 December 2022. 
Accordingly, home-buying subsidies will be implemented to woo home purchases by talents above the college and technical secondary school levels.
The one-off subsidies will be RMB100,000 for each full-time PhD student, RMB50,000 for master's student, RMB30,000 for undergraduate student, and RMB20,000 for college and vocational school student. Equally, the tenor of provident fund loans to buy second-hand homes and building age limit will be raised from 20 years to 30 years.

EVERG VEHICLE (00708.HK)'s Hengchi NEV Research Institute (Shanghai) Co., Ltd. has registered commercial change recently with registered capital expanding by 900% 
from RMB100 million to RMB1 billion, Tianyancha APP reported.

China's National Development and Reform Commission announced to raise domestic gasoline and diesel prices by RMB345 per ton and RMB330 per ton 
with effect from 24:00 on 9 October 2021, marking the sharpest hike YTD.

In terms of beefing up the anti-monopoly oversight and maintaining a fair competition order, China issued anti-monopoly guidelines in the field of platform economy in 2021 to strengthen anti-monopoly and prevent the disorderly capital expansion, 
as the PBOC Governor Yi Gang said at the big tech international meeting of Bank for International Settlements (BIS) earlier.  Looking head, the Chinese central bank will play a better role in the supervision of anti-monopoly authorities to constrain monopolistic behaviors that abuse its dominant position in the market, and actively react to new types of monopoly issues such as algorithmic discrimination.  As its next step, the PBOC will enforce better supervision over financial holding companies, implement consolidated statement management, regulate connected transactions and enhance cautious scrutinyas the PBOC Governor Yi Gang said at the big tech international meeting of Bank for International Settlements (BIS) earlier.

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