Oct 15 HK & CHINA rebound, Asia +VE PBOC says Evergrande's risks are controllable

15 Oct

This and previous notes can be found at Substack ( Asian Market Sense )
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HSI +368pts (-1.5%) 25,331 HSCEI +117pts (-1.7%) 8,966 T/O HK$179.61bn (+31% DoD light considering two days of no trading)  

Markets opened higher and currently FTSE & CAC trending towards flat. DAX trading sideways.  Earnings in focus with Rio Tinto, Redrow and Schroders were among those reporting earnings
French consumer price inflation was largely inline as were Eurozone new car registrations but at -23.1%.
THG climbed 3.7% in early trade to lead the Stoxx 600, continuing its rebound from a 35% single-day plunge on Tuesday.
Temenos -13% after missing Q3 revenue expectations.
Data out 
Balance of Trade Aug €4.8B vs €20.7B Jul (F/cast was €16.4B)
New Car Registrations Sept -23.1% YoY vs19.1% Aug (F/cast was -23%)
Inflation Rate Final Sept +2.2% YoY vs 1.9% Aug (F/cast was 2.1%)
Inflation Rate Final Sept -0.2% MoM vs +0.6% Aug (F/cast was -0.2%)
US Futures
Opened in Asia 
Dow Jones Industrial Average +36 points. S&P 500 futures +0.11%, and Nasdaq 100 futures +0.12%. Earnings from GS in focus.  Futures rose through the day and currently Dow +129pts S&P and NDX both +VE
Data due Retail Sales, Import & Export Prices, NY State Empire State Manufacturing Index, Michigan Prelim Data, Baker Hughes Rig Numbers, Monthly Budget Statement.

CHINA CSI 300 closed +19pts (+0.4%) @ 4,932
CSI 300 opened lower but rallied in early trades to 4,930 before easing back slightly below Thursday’s close before rebounding but choppy trading. Developers and Banks helped by the news that China is to ease banks mortgage limits for the rest of the year; and pushing banks to speed up mortgage approvals as well as to sell mortgage backed securities. Some weakness in on-line brokers that allow access to US markets on tighter control -VE
PM market opened lower but worked higher but resistance around 4,940 levels and market eased back to trade around 4,930 level for the last hour. Monday’s focus will be on the data due at 10am; GDP, Retail Sales, Industrial Production, Capacity Utilisation and Fixed Asset Investment data.
Sentiment also helped by talk of re-opening borders early 2022 if population vaccination rate is 85% plus.
T/O increased as Hong Kong markets reopened

Shanghai Comp +14pts (+0.4%) @ 3,572 T/O US$61,382m (+13% DoD)
Shenzhen Comp +75pts (+0.5%) @ 14,416 T/O US$87,737m (+17% DoD)
ChiNext Comp +36pts (1.1%) @ 3,462

China's National Health Commission reported 12 confirmed COVID-19 cases yesterday (11th), 
with all of them being imported cases.

Pre market opened @ 25,187 +225pts vs +68pts ADR’s as the market played catch up after a two day break. But initially the market sold back down to flat I would have thought on margin call selling from Tuesday’s sell off. Then market rallied back to 25,200 level on news of China easing mortgage limits. Market then traded 25,100/200
PM saw the market move higher and trade around the 25,260 level but ticked higher in the closing auction to close at the day high.
Internet stocks +VE (and were 18% of T/O) along with Auto’s after some good passenger sales data. Oil refiners, coal stocks and Consumer Staples seeing weakness.

Hong Kong reported 9 imported covid cases
No data

SHORT SELLING HSI Friday 17.8%  vs 23.6% Tuesday
Top shorts 
Ali Health (241) 44%, CM Bank (3968) 39%, Country Garden (2007) 39%, Hengan (1044) 39%, Hang Seng Bank (11) 33%, Henderson Land (12) 30%, Xinyi Solar (968) 29%, Wharf REIC (1997) 27%, Shenzhou (2313) 26%,  ICBC (1398) 25%, Li Ning (2331) 25%, CSPC Pharm (1093) 25%.

PBOC commenting on Evergrande says the risks are controllable.
It vows to support Evergrande’s resumption of projects
Also urging developers and shareholders to fulfill their obligations.
Banks to keep stable orderly loans to real estate

YUEXIU PROPERTY (00123.HK) is mulling to exit a USD1.7 billion deal to acquire EVERGRANDE (03333.HK)'s headquarters building located in Hong Kong, r
eported Reuters, citing people familiar with the matter.  YUEXIU PROPERTY and EVERGRANDE came close to completing the deal to buy China Evergrande Centre in Wan Chai in August, the sources added. However, the board of YUEXIU PROPERTY voiced opposition to the proposal over concerns that the debt crisis of EVERGRANDE may bring complications to the transaction.

Chinese President Xi Jinping published an article on Qiushi, stressing the direction of firmly propelling the scheme of "common prosperity". In particular, the article remarked that the government should actively drive the legislation and reform of property tax and strengthen the management of the revenue distribution of monopolistic industries and SOEs, so as to rectify the order of income distribution.

The Financial Reporting Council (FRC) has today (15th) initiated an investigation on the going concern reporting of EVERGRANDE (03333.HK), involving an enquiry into the financial statements of China Evergrande Group for both the year ended 31 December 2020 and the six months ended 30 June 2021, and an investigation of the audit carried out by PricewaterhouseCoopers (PwC) on the 2020 Annual Accounts.   The FRC identified questions about the adequacy of reporting on going concern in China Evergrande’s 2020 Annual Accounts and 2021 Interim Accounts and PwC’s auditor’s report for the 2020 Audit through its market surveillance activities.

Hong Kong property prices have seen temporarily weakening as the market anticipates the U.S. Federal Reserve to begin tapering the bond-purchase program, remarked the research department of Centaline Property.  Over this week, among the eight major CCL indices, only the home prices of New Territories West managed to stabilize amid the downward trend of the overall market.
CCL Mass in New Territories West last posted at 175.62, up 1.09% WoW.
Centa-City Leading Index (CCL) slumped 0.94% WoW to post at 187.15.
CCL Mass dropped 1.22% WoW; last stood at 189.80. CCL (small-and-medium units)
CCL (large units) likewise lost 1.01% and 0.58% WoW, to post at 187.67 and 184.42 respectively.

An official from MOC's Department of Market Operation and Consumption Promotion briefed on the auto consumption conditions for the first three quarters of 2021, mentioning an overall stable car spending in the period.  However, new car sales were under heavier downside pressure given an ascending base in the same period of 2020, unresolved chip scarcity and the epidemic within the country.

Regional Markets
Market opened higher following the gains seen in the US overnight. Resistance at 7,370 level and the markets eased back to 7,320 level around lunch before rebounding but resistance approaching 7,360 and then traded 7,340/360 with a small uptick at the end to close +50pts (+0.7%) 7,362
Rio Tinto -0.8% as it released its Q3 update and cut iron ore guidance. Energy names +VE as oil continue to moves higher, Gold and Iron ore +VE. Qantas +2% as travel restrictions are being lifted in Australia and other countries too it expects to bring forward international flights. Flight Centre +3.8%, Webjet +4%
The Harvey Norman Holdings Limited (ASX: HVN) share price is trading ex-dividend for its fully franked 15 cents per share final dividend this morning and could trade lower. Elsewhere, shareholders of Eagers Automotive Ltd (ASX: APE) and HUB24 Ltd (ASX: HUB) can look forward to being paid their latest dividends later today.
Nikkei opened higher and trading sideways around 28,800 level but around 10:50am rallied to test 28,950 but failed and eased into lunch. PM opened higher and tested 29,000 early afternoon and traded just below there for most of the PM but tested that level with 40 minutes to go and tick higher in the last 10 minutes to close +518pts (+1.8%) @ 29,069
Topix traded around 2,005 level before moving higher to 2,012 at lunch. PM has tested 2,017, then 2,020 and it the closing minutes rallied to close +37pts (+1.9%) @ 2,024
Leaders Machinery, Electrical Appliances, Shippers, Chems and Precision Instruments
Laggards Airlines, Railways, Fish/Agri, Textiles, Apparels, Pharma.
Earning increasingly in focus. Robotic names seeing interest Fanuc +5.2% and Yaskawa +5%, Keyence +3%
Toyota unch to cut global production by 15% and being sued by Nippon Steel for pattern infringement.
S Korea 
Third +VE day but first day of Tech leading as Foreigners turn buyers; Hynix +3.6% and Samsung +1.4% after good TSMC numbers.
Earnings in focus.
Leaders Memory, Info Tech, Utilities, Banks
Laggards Auto, Energy, Healthcare
Kospi opened higher and initially tested to 3,022 but then eased back to 3,000 before working better but saw resistance at 3,020; closed +26pts (+0.9%) @ 3,015.
Kosdaq opened higher and tested 992 before selling down Thursday’s close bounced but then sank to 981 and tested there for awhile before rebounding back to the opening level and traded around 990 level for most of the afternoon and closed on an uptick +7pts (+0.7%) @ 991
Taiex opened higher at 16,426 and quickly broke through the 16,500 resistance and then tested 16,700 at 10am but resistance around 16,750. Tech leading with strength in TSMC after earnings but all sectors trading in the green. Closed +394pts (+2.4%) @ 16,781
T/O was US$10.13bn at the higher end of recent trading.

HK/CHINA Connect Flows
Northbound Rmb 63,835m Sell 30,819m vs 33,016m Buy
Southbound HK$ 19,634m Sell 10,398m vs 9,237m Buy
Northbound Rmb 74,561m Sell 37,033m vs 37,528m Buy
Southbound HK$  20,933m Sell  9,782m vs  11,150m Buy

Active Heavyweights
MEITUAN (03690.HK)  +11.800 (+4.387%)    Short selling $2.03B; Ratio 15.991%   closed at $280.8, up 4.4%
TENCENT (00700.HK) +12.400 (+2.566%) Short selling $2.60B; Ratio 18.045% closed at $495.6, up 2.6%
HKEX (00388.HK) +6.800 (+1.471%) Short selling $426.94M; Ratio 21.657% closed at $469, up 1.5%
PING AN (02318.HK) +0.700 (+1.233%) Short selling $436.18M; Ratio 18.792% closed at $57.45, up 1.2%
CCB (00939.HK) -0.020 (-0.364%) Short selling $251.79M; Ratio 15.885% closed at $5.47, down 0.4%
AIA (01299.HK) +0.300 (+0.343%) Short selling $420.37M; Ratio 14.519% closed at $87.8, up 0.3%
BABA (09988.HK) +0.500 (+0.310%) Short selling $1.39B; Ratio 21.015% closed at $161.8, up 0.3%

HSI & HSCEI Constituents on Move:
GEELY AUTO (00175.HK)  +1.800 (+7.965%)    Short selling $387.35M; Ratio 17.230%   closed at $24.4, up 8%
BYD COMPANY (01211.HK) +19.200 (+7.565%) Short selling $743.91M; Ratio 17.851% closed at $273, up 7.6%
XINYI GLASS (00868.HK) +1.350 (+6.553%) Short selling $85.28M; Ratio 13.955% closed at $21.95, up 6.6%
XINYI SOLAR (00968.HK) +0.960 (+6.426%) Short selling $309.38M; Ratio 28.595% closed at $15.9, up 6.4%
LI NING (02331.HK) +3.850 (+4.736%) Short selling $477.04M; Ratio 24.990% closed at $85.15, up 4.7%
TECHTRONIC IND (00669.HK) +7.000 (+4.711%) Short selling $175.81M; Ratio 19.429% closed at $155.6, up 4.7%
HAIDILAO (06862.HK) +1.150 (+4.028%) Short selling $60.52M; Ratio 18.886% closed at $29.7, up 4%
CSPC PHARMA (01093.HK) -0.350 (-3.889%) Short selling $152.53M; Ratio 24.702% closed at $8.65, down 3.9%
CHINA OVERSEAS (00688.HK) -0.640 (-3.567%) Short selling $142.74M; Ratio 16.497% closed at $17.3, down 3.6%
BUD APAC (01876.HK) -0.720 (-3.564%) Short selling $56.90M; Ratio 13.152% closed at $19.48, down 3.6%
JD (09618.HK) +10.400 (+3.417%) Short selling $456.11M; Ratio 31.667% closed at $314.8, up 3.4%
SUNNY OPTICAL (02382.HK) +6.300 (+3.261%) Short selling $165.49M; Ratio 17.102% closed at $199.5, up 3.3%
BIDU-SW (09888.HK)  +4.800 (+3.073%)    Short selling $217.84M; Ratio 39.130%   closed at $161, up 3.1%

HSMI & HSSI Constituents on Move:

NEW HIGHER EDU (02001.HK) +0.780 (+22.159%) Short selling $2.58M; Ratio 2.930% closed at $4.3, up 22.2%
CATHAY EDU (01981.HK) +0.610 (+22.101%) Short selling $470.64K; Ratio 1.261% closed at $3.37, up 22.1%
HOPE EDU (01765.HK) +0.250 (+19.231%) Short selling $25.81M; Ratio 8.020% closed at $1.55, up 19.2%
CHINA EAST EDU (00667.HK) +1.470 (+17.905%) Short selling $61.34M; Ratio 16.066% closed at $9.68, up 17.9%
CHINA EDU GROUP (00839.HK) +2.300 (+17.139%) Short selling $174.70M; Ratio 30.315% closed at $15.72, up 17.1%
MEITU (01357.HK) +0.190 (+11.801%) closed at $1.8, up 11.8%
TIMES ELECTRIC (03898.HK) +3.600 (+10.827%) Short selling $34.22M; Ratio 6.521% closed at $36.85, up 10.8%
FUYAO GLASS (03606.HK) +4.150 (+10.311%) Short selling $91.84M; Ratio 22.360% closed at $44.4, up 10.3%
CGN NEW ENERGY (01811.HK)  +0.650 (+10.109%)    Short selling $38.45M; Ratio 6.727%   closed at $7.08, up 10.1%

The UBS Global Real Estate Bubble Index 2021, a yearly study by UBS Global Wealth Management's Chief Investment Office, was announced yesterday (14 October). From mid-2020 to mid-2021, inflation-adjusted house price growth in 25 major cities around the world accelerated to around 6%, the highest annual increase since 2014.
Frankfurt, Toronto, and Hong Kong top this year’s index, with the three cities warranting the most pronounced bubble risk assessments in the analyzed housing markets.
Risk is also elevated in Munich and Zurich; Vancouver and Stockholm have both reentered the bubble risk zone, while Madrid, Milan, and Warsaw remain fairly valued. Dubai is the only undervalued market and the only one to be classified in a lower category than last year.

The Hong Kong Tourism Board (HKTB) announced that the provisional visitor arrivals for September were 9,879, an 8.2% increase year on year, with a daily average of approximately 329.

The HKTB is now preparing for a series of mega events and promotions for the coming months, including the "Hong Kong Wine & Dine Festival", the "Hong Kong New Year Countdown Celebrations" and a new round of the Spend-to-Redeem “Free Tours”, to continue to drive positive local ambience, stimulate the economy and support the tourism, dining and retail sectors while maintaining Hong Kong’s presence and positive image in mainland and global markets, the announcement added.

Secretary for Financial Services and the Treasury, Christopher Hui, expressed that as the new Policy Address has outlined the major direction of further strengthening Hong Kong's offshore RMB business segment, the government will actively study to boost the demand for the issuance and trading of RMB securities in the Hong Kong offshore market.  Hui added that the government will have to seek new demand for the RMB securities in a market-oriented direction and that allowing the Southbound Trading of the "Hong Kong Stock Connect" to be RMB-denominated could be one of the possible options.

HKEX (00388.HK) will roll out the futures contract based on the MSCI China A 50 Connect Index on 18 October. 
Mao Zhirong, Managing Director and Co-Head of Mainland Division at HKEX, told China Business Network that the launch under mutual market access would enable investors to achieve one-stop risk management on the Stock Exchange through Stock Connect and A-share index futures.
Going ahead, HKEX will optimize the market system and enrich the mutual market access mechanism further.

TENCENT (00700.HK) issued an internal notice on a structural reform, announcing to establish an "information platform and service line" under its platform and content group (PCG), involving operations of QQ browser, Kandian services, search engine, free reading of fictions and articles, etc., reported Jiemian News.  Yin Yu, vice president of TENCENT and head of Tencent Kandian, will lead the "information platform and service line" and report to the president of Tencent PCG, Mark Ren.

Macau's Civil Protection Operations Centre announced that, 
in accordance with the Dispatch of the Chief Executive and paragraph 1, Article 9 of the Civil Protection Legal Regime, the state of immediate prevention has been terminated from 12:00 this afternoon.

Sogou has officially completed the hand-over to TENCENT (00700.HK) on 15 October (today), with its existing staff transferring to TENCENT and its product and technology departments merged into TENCENT's corresponding business segments, 
reported Sina Tech. Sogou's CEO, Wang Xiaochuan, has been employed as an advisor for the TENCENT group, the report added.

U.S. Trade Representative Katherine Tai expressed that the U.S. has had a decent start in last week's meeting with Chinese Vice-Premier Liu He, 
and that she is planning to discuss the matter of China not fulfilling the promises under the initial phase of the trade deal in the upcoming meeting. Tai added that the U.S. will mobilize all resources to fight for its economic interest and that a new attitude should be adopted in approaching and competing with China.

Secretary for Transport and Housing of Hong Kong, Frank Chan, expressed yesterday (14th) that the government remains resolute and determined in resolving the issue of subdivided flats, 
by utilizing community efforts, resources from the business sector and government policies. Chan contended that the government should allow contractors to join the process of design and construction of some of the public housing projects.

The two Hong Kong power companies have ramped up the fuel cost adjustment for this month, with CLP HOLDINGS (00002.HK)   lifting it by HK2.1 cents MoM to HK34.1 cents per unit; and HKELECTRIC-SS (02638.HK) lifting it by HK3.4 cents MoM to HK25.7 cents per unit.

SAMR's city and district branches have recently conducted food safety probes into restaurant chains, "internet famous" restaurants and gourmet cities in Beijing, according to Beijing Consumer Association's WeChat sources.  
On 9 October, the Association issued a list of catering companies with food safety problems, including Wallace, Yang Guo Fu Ma La Tang, XIABUXIABU (00520.HK), and NAYUKI (02150.HK)

The Arles, a Fo Tan residential project under Centralcon Properties, launched the third price list for 134 units, 
with a discounted entry fee of $6.925 million.  A total of 536 flats are covered by the first three price lists, to be rolled out for sale this weekend.

GEELY AUTO (00175.HK) announced on its Weibo account that it will unveil a brand-new power technology brand on 31 October. 
The new power technology brand is expected to pave the way for the Chinese carmaker to compete with strong rivals such as Toyota, with a focus on the new energy segment, reported Chinese media Yi Che Xun

Pre Market News
Given specified cross-border personal information rules under the Personal Information Protection Law of the PRC, online brokers offering equity trading services for key global markets like the U.S. and Hong Kong will be facing new challenges, according to an article on People.com.cn.  
The commentary also cast doubt on information security risks tied to cross-border online brokers like Futu Holdings Limited (FUTU.US), backed by TENCENT (00700.HK)  +11.200 (+2.318%)    Short selling $1.47B; Ratio 16.864%   , and UP Fintech Holding Limited (TIGR.US)

CATL (300750.SZ)  and PICC P&C (02328.HK) held a signing ceremony for their strategic alliance framework agreement in Beijing. 
According to the agreement, the partnership will concentrate on developing the NEV aftermarket segment, with the aim to forge a highly-effective synergistic competitive advantage for both parties and to propel the advancement of NEV-related technology.

China's food price slumped 5.2% YoY in September, 
widening the drop by 1.1 ppt compared to last month, prompting the CPI to recline by approximately 0.98 ppts, according to data from National Bureau of Statistics (NBS). In particular, the pork price dropped by 46.9% YoY, deepening its decline by 2 ppts.

GANFENGLITHIUM (01772.HK) issued a positive profit alert, 
forecasting the company's net profit for 9M21 to range at RMB2.083-2.573 billion, up 530-678% YoY.   During the period, the production and sales volume of the products of the company increased and the average sales price of the products increased, which result in the year-on-year increase of the company’s operating net profit, the announcement added.

ZTE (00763.HK) issued a positive profit alert, f
orecasting the company's net profit for 9M21 to range at RMB5.6-6 billion, up 106.5%-121.2% YoY, mainly on the back of a year-on-year growth of operating revenue, continuous recovery in gross margin as well as substantial improvement in profitability.

FAST RETAIL-DRS (06288.HK) announced the result for the fiscal year ended 31 August 2021.
The total revenue amounted to JPY2.1329 trillion, up 6.2% YoY. Net profit stretched 88% to JPY169.8 billion.  EPS  was JPY1,663.12. The final dividend was maintained at JPY240.

PICC P&C (02328.HK) announced that the original insurance premium income of the Company for the first nine months of 2021 totaled RMB345.796 billion, up 0.5% from the same period in 2020.

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