Oct 21 HK worries and China rebounds with Team China back in support.

21 Oct

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

HSI -118pts (-0.5%) 26,018 HSCEI -3pts (-0.03%) 9,274 T/O HK$147.95bn (-5.5% DoD)  

HK/CHINA Connect Flows
Northbound Rmb 49,719m Sell 22,005m vs 27,713m Buy
Southbound HK$ 13,104m Sell 6,573m vs 6,531m Buy
Northbound Rmb 54,131m Sell 24,843m vs 29,289m Buy
Southbound HK$ 12,798m Sell 6,086m vs 6,712m Buy

Market opened lower with a focus on earnings with good results from Barclays but with the overhang of worry about the Chinese Property market
Earnings in focus with Hermes, L’Oreal and Pernod-Ricard reporting their latest sales numbers, and earnings also coming Vivendi, Eurotunnel, Daimler, SAP, Randstad, ABB, Barclays, Unilever and Rentokil reporting
Eurozone Consumer Confidence
Business Confidence Oct 107 vs 107 Sept revised (F/cast was 105)
Business Climate Indicator Oct 113 vs 111 Sept revised (F/cast was 111)
Public Sector Net Borrowing Sept £-21.8B vs £-16.8B Aug (F/cast was £-24.4B)
CBI Industrial Trends & Business Optimism Index
US Futures
Opened lower Dow -35pts S&P and NDX -0.1%  but then fell further as Europe opened Dow -86pts S&P and NDX both -VE
AHEAD Philadelphia Fed Manufacturing Index, Initial Claims, 4 week average and continuing claims, Existing Home Sales, EIA Gas Stocks report, CD Leading Index, 5yr TIPS Auction.
Earnings: AT&T, Intel, Blackstone, Union Pacific, Chipotle Mexican Grill, Snap, Whirlpool, Celanese, Southwest Airlines, AutoNation, American Airlines, KeyCorp, Crocs, Marsh and McLennan, Ally Financial, Freeport-McMoRan, Nucor, Quest Diagnostics, Mattel, Genuine Parts, Alaska Air, Tractor Supply

CHINA CSI 300 closed +18pts (+0.4%) @ 4,928
CSI 300 opened higher and tested to 4,944 in early trades but then reversed and sold down to 4,900 before bouncing back to flat at lunchtime. PM saw the market trend lower in choppy trading with support around the 4,890 level, but then worked better and closed +VE, looked like ‘Team China’ back to support the market.
PBOC injected 100bn yuan today having previously been withdrawing liquidity as House prices fell and there is news that land sales have fallen too as developers hold onto cash which will cause funding issues for local governments.

Shanghai Comp +8pts (+0.2%) @ 3,595 T/O US$65,831m (+1% DoD)
Shenzhen Comp -7pts (-0.1%) @ 14,445 T/O US$84,207m (-5% DoD)
ChiNext Comp -11pts (-0.3%) @ 3,481

Pre market opened @ 26,142 +6pts vs +16pts ADR’s Evergrande resumed trading -10.5% in the pre-market. Traded in a tight range for the first hour then rallied following China and tested to 26,230 but then reversed into lunch @ 26,060. PM opened lower and tested to 25,840 following the wider Asian sell off before working better for the rest of the after to recover some of the loses to close -119pts (-0.5%) @ 26,017.
China property back in focus as Evergrande -12.5% resumed trading and announced sales -97% YoY in Sept/Oct. Other Developers rallied as senior officials say Evergrande is a company specific issue.
Ecommerce weak as regulation concerns resurface. Sportwear weak on concerns of more US action.
Leaders Property, Energy and Financials
Laggards Materials, Consumer Discretionary and Healthcare.

Hong Kong reported 6 imported covid cases
After market
Unemployment Sept 4.5% vs 4.7% Aug (F/cast was 4.5%

SHORT SELLING HSI Thursday 20.7% vs 21.2% Wednesday
Top shorts 
Country Garden (2007) 44%, Baba (9988) 36%, CM Bank (3968) 35%, Petrochina (857) 31%, BoC HK (2388) 30%, Hang Seng Bank  (11) 30%, Xiaomi (1810) 29%, Ali Health (241) 29%, Bank of China (3988) 29%, Hengan (1044) 28%, Sunny Optical (2382) 28%, Techtronic (669) 27%, Sands China (1928) 26%.

As a result of the slightly relaxed quarantine measures in Macau for most of September, the number of inbound visitor arrivals over the month amounted to 629,000, up 53.7% MoM and 40.1% YoY, 
according to data from Macau's Statistics and Census Service.
The same-day visitor arrivals and overnight visitor arrivals recorded a YoY increase of 20.2% and 76.1% respectively.

SINO BIOPHARM (01177.HK) announced that the Company repurchased 1.7 million shares at around $10.1 million today (21st), reflecting the group's confidence in its development prospects

.CHINA UNICOM (00762.HK) announced that, in the first three quarters of 2021, the profit attributable to the equity shareholders of the company amounted to RMB12.923 billion, up by 19.4% year-on-year. The revenue likewise grew 8.5% year-on-year to RMB244.489 billion.  Also that for September 2021 the aggregate number of mobile billing subscribers amounted to 316 million, representing a MoM net increase of 2.6 million units, which was significantly greater than the net increase of 1.342 million units in August.  The aggregate number of 5G package subscribers, on the other hand, amounted to 137 million, representing a MoM net increase of 7.884 million units, which was slower than the net increase of 7.989 million units recorded in August.

YANZHOU COAL (01171.HK) announced that, for 3Q21, the production  volume of saleable coal amounted to 26.8 million tons, 
down 15.3% YoY. The sales volume of saleable coal, likewise plunged 33.15% to 26.56 million tons.

Regional Markets
Market opened slightly higher but eased and traded around flat for most of the morning but rallied from 11:30am and worked better to test the 7,450 level but failed and then trended back to flat and closed +2pts (flat) @ 7,415. Property strong but weakness in Consumer Staples.
Perpetual +7.6% +VE Q1 update and AUM +2.7% YoY. Healius +4.2% off highs after strong Q1 update BUT Flight Centre Travel -6% continued selling
Business Confidence Q3 was -1 vs +18 Q2
Nikkei opened lower and traded sideways for the morning 29,070/200 but very light turnover. PM saw a broad sell off down to close -547pts (-1.9%) @  28,709 with all sectors in the red.
Topix traded in a similar pattern Currently -27pts (-1.3%) @ 2,001
Not clear what prompted the sell off; it could have beeen comments from PM Kishida who is carrying out some election street speeches. Or just retail raising cash raising ahead of Japan Posts public offering. But with few headlines as most companies in news blackout ahead of earnings which kick off in earnest next week.
S Korea 
Pre market
PPI Sept +0.2% MoM vs +0.5% Aug revised (F/cast was +0.7%)
PPI Sept +7.5% YoY vs +7.4% Aug revised (F/cast was 7.8%)
On the Open
Exports 1- 20 days Oct +36.1% YoY vs 22.9% Sept
Imports 1- 20 days Oct +48.0% YoY vs 38.8% Sept
Foreigners and Local Insts small net buyer. With buying in Service, Financials and Steel.
Laggards were Chem and EV Battery plays.
Leaders Apparel
Kospi opened flat but rallied on the Trade data but then sold down into the red at 10am. Then worked back to 3,025 at 11.45am before reversing and trended lower following the selling action in Japan to close -6pts (-0.2%) @ 3,007 just off the day low.
EV/Battery weak as expected after the Tesla earnings. Gaming and NFT saw early interest.
Kosdaq opened higher but initially sold down to 955 before bouncing back to 1,005 but then sold down to the day low before bouncing to close -8pts (-0.8%) 994
Taiex opened higher and worked better to 17,026 by 10.30am after strong Export data out after market Wednesday. But then reveresed and sold down to flat by 12.30pm and then traded around flat into the close. +2pts (flat) @ 16,890
T/O Thursday US$10.5bn vs US$9.52bn Wednesday
CECC reported 2 new imported covid cases

Active Heavyweights
PING AN (02318.HK)  +4.400 (+7.541%)    Short selling $1.18B; Ratio 22.652%    closed at $62.75, up 7.5%
HKEX (00388.HK) -9.400 (-1.915%) Short selling $256.19M; Ratio 15.294% closed at $481.4, down 1.9%
MEITUAN (03690.HK) -5.400 (-1.838%) Short selling $1.32B; Ratio 15.674% closed at $288.4, down 1.8%
AIA (01299.HK) -1.000 (-1.103%) Short selling $283.09M; Ratio 18.699% closed at $89.7, down 1.1%
BABA (09988.HK) -1.900 (-1.081%) Short selling $2.47B; Ratio 36.101% closed at $173.9, down 1.1%
TENCENT (00700.HK) -4.000 (-0.785%) Short selling $1.44B; Ratio 17.005% closed at $505.5, down 0.8%
CCB (00939.HK) 0.000 (0.000%) Short selling $165.00M; Ratio 14.774% closed at $5.46, unchanged

HSI & HSCEI Constituents on Move:
EVERGRANDE (03333.HK)  -0.370 (-12.542%)    Short selling $51.05M; Ratio 6.567%    closed at $2.58, down 12.5%
SUNAC (01918.HK) +1.680 (+10.194%) Short selling $541.33M; Ratio 30.325% closed at $18.16, up 10.2%
EVERG SERVICES (06666.HK) -0.410 (-8.008%) Short selling $47.72M; Ratio 7.886% closed at $4.71, down 8%
LONGFOR (00960.HK) +2.650 (+7.637%) Short selling $99.61M; Ratio 13.576% closed at $37.35, up 7.6%
CHINA GAS HOLD (00384.HK) -1.100 (-5.288%) Short selling $76.47M; Ratio 13.025% closed at $19.7, down 5.3%
CHINA OVERSEAS (00688.HK) +0.840 (+4.855%) Short selling $100.13M; Ratio 10.902% closed at $18.14, up 4.9%
CHINA FEIHE (06186.HK) -0.580 (-4.155%) Short selling $17.43M; Ratio 8.878% closed at $13.38, down 4.2%
TECHTRONIC IND (00669.HK) -6.500 (-4.037%) Short selling $194.19M; Ratio 26.675% closed at $154.5, down 4%
XINYI SOLAR (00968.HK) -0.640 (-3.842%) Short selling $78.20M; Ratio 19.793% closed at $16.02, down 3.8%
CSPC PHARMA (01093.HK) -0.330 (-3.687%) Short selling $44.98M; Ratio 8.043% closed at $8.62, down 3.7%
CHINA RES LAND (01109.HK) +1.100 (+3.503%) Short selling $212.87M; Ratio 24.308% closed at $32.5, up 3.5%
COUNTRY GARDEN (02007.HK) +0.270 (+3.457%) Short selling $195.46M; Ratio 43.461% closed at $8.08, up 3.5%
CG SERVICES (06098.HK) +2.100 (+3.281%) Short selling $162.18M; Ratio 19.157% closed at $66.1, up 3.3%
MENGNIU DAIRY (02319.HK) -1.550 (-3.256%) Short selling $66.18M; Ratio 16.831% closed at $46.05, down 3.3%
HAIDILAO (06862.HK) -0.950 (-3.115%) Short selling $71.68M; Ratio 19.216% closed at $29.55, down 3.1%
WUXI BIO (02269.HK) -3.600 (-3.085%) Short selling $197.52M; Ratio 15.276% closed at $113.1, down 3.1%

HSMI & HSSI Constituents on Move:

JS GLOBAL LIFE (01691.HK) -3.100 (-17.634%) Short selling $43.80M; Ratio 5.661% closed at $14.48, down 17.6%
EXCELLENCE CM (06989.HK) +0.660 (+11.892%) Short selling $5.85M; Ratio 14.887% closed at $6.21, up 11.9%
CHINA FOODS (00506.HK) +0.330 (+11.301%) Short selling $4.25M; Ratio 21.957% closed at $3.25, up 11.3%
SUNAC SERVICES (01516.HK) +1.780 (+10.934%) Short selling $44.66M; Ratio 11.440% closed at $18.06, up 10.9%
ZHONGYU GAS (03633.HK)  +0.160 (+2.195%)    Short selling $22.27K; Ratio 0.105%    closed at $7.45, up 2.2%, hitting new high

Market News
EVERGRANDE (03333.HK)'s episode is a unique event, assured Liu Zhongrui, Head of Statistical Information and Risk Monitoring Department of China Banking and Insurance Regulatory Commission (CBIRC),
who gauged the situation not to pose much impact on the industry or the entire Chinese corporate goodwill.  The related departments and local governments in China are resolving the incident now in accordance with legalization and marketization principles, added Liu.Susquehanna International Group, one of the earliest and largest investors of TikTok's owner ByteDance, is pondering to sell its shares in the company which worth approximately USD500 million, reported Bloomberg News, citing sources.  Susquehanna International Group, the report added that, is hoping to diversify its investment portfolio and reap profit from the growth of ByteDance amid the Chinese government's crackdown on the technology sector.

China's purchases of U.S. goods and services have reached only 53% of the promised value under the phase 1 Sino-US trade deal signed in early 2020, way behind its target, according to Bloomberg's estimates based on China's customs data.  China bought US$11.7 billion worth of American manufactured, agricultural and energy goods in September.

Fitch Ratings placed 29 Chinese property developers Under Criteria Observation (UCO) to reflect the potential adjustment to the corporates' ratings, while remarking that all companies on the UCO will be reviewed over the coming six months.
The relevant companies included: BCG Chinastar International Investment Ltd., Beijing Capital Group, CHINA AOYUAN (03883.HK), CHINA JINMAO (00817.HK), R&F PROPERTIES (02777.HK), KAISA GROUP (01638.HK), KWG GROUP (01813.HK), LONGFOR GROUP (00960.HK), RONSHINECHINA (03301.HK), SUNAC (01918.HK) and YUZHOU GROUP (01628.HK)

A batch of USD260 million bonds issued by the EVERGRANDE (03333.HK)'s joint venture company Jumbo Fortune and guaranteed by EVERGRANDE matured on 3 October, reported REDD. However, the embattled Chinese property developer reached an agreement this week with the bond holders to extend the maturity date of relevant bonds by over three months, while EVERGRANDE was required to provide additional collateral.

KERRY LOG NET (00636.HK) and HENGAN INT'L (01044.HK) set up a joint venture company to create synergy in the business-to-business ('B2B') bulk distribution and wholesale market of medical, healthcare and hygiene products, as well as to provide innovative solutions to customers in both the public and private medical and healthcare sectors.  While it is looking to expand its business into other Asian countries and territories going forward, the joint venture will also have full support of the "Banitore" brand of products, which are owned by Hengan Group, in the Hong Kong market, the announcement added.

A.S. Watson Group announced the partnership with South Korean cosmetics brands Mise En Scene and COSRX in the Asian market.

Customers are unable to visit South Korea for the latest cosmetics products under the pandemic despite ever-growing demand for K-beauty products, said Susanna Yuen, Watsons International's Head of Exclusive Brands. Therefore, Watson has launched the K-Beauty Land to offer more than 8,000 Korean beauty items in both offline and online stores.

Paul Chan, Financial Secretary of Hong Kong, revealed that the government will continue to maintain constant communication with China and strive to perfect and expand various interconnection arrangements, 
with the aim to provide effective channels for the two-way flow of cross-boundary RMB funds.  Chan remarked when giving a speech at the Financial Street Forum that the Hong Kong government will endeavor to fulfil the role and function as an international offshore RMB market.

FAST RETAIL-DRS (06288.HK) announced that the directors of the Company will consider passing of a written resolution on 2 November, 2021 to approve payment of final dividend of the Company for the year ended August 31, 2021.

Over the past year (July 2022 to June 2021), 28 of the 93 interviewed Hong Kong institutions have announced pay freeze, while the remaining 65 of them have raised the wage level by 2.7-3.2%, according to a survey conducted by the Centre for Human Resources Strategy and Development, School of Business, Hong Kong Baptist University, Centre for Human Resources Management, School of Business Administration, South China University of Technology, Hong Kong People Management Association and Talent Development and Management Association of Guangdong.

Alibaba Cloud, the digital technology and intelligence backbone of BABA-SW (09988.HK), unveiled "Tingwu" at the Apsara Conference, an AI-powered meeting assistant, alongside a new version of its cloud computer.  The solutions are tailored for the new world of work and address surging demand from corporate users looking to work remotely with more automated support, a trend accelerated by the pandemic, the company introduced.

XIAOMI-W (01810.HK)'s affiliated company Chengdu Best Asset Management Co., Ltd. has recently registered business change, with the legal representative being changed from Hong Feng to Alain Lam, and Executive Director Lei Jun quitting as key personnel, Tianyancha App showed.

The reasonable capital demand of Chinese property developers are being satisfied, said Chinese Vice Premier Liu He, furthering the trend of healthy development of the industry will remain intact. As a result, the HK-listed Chinese developers leaped notably. In particular, CIFI HOLD GP (00884.HK) bounced back 9.3% to $5.03. SUNAC (01918.HK)  and TIMES CHINA (01233.HK)  soared 8.5% and 7% to $17.88 and $6.11.
Four major blue-chip Chinese developers, COUNTRY GARDEN (02007.HK) / CHINA RES LAND (01109.HK) / CHINA OVERSEAS (00688.HK) / LONGFOR GROUP (00960.HK) , advanced almost 4%-7%. Besides, CHINA VANKE (02202.HK) ticked up 2.6% to $21.4.

YUM CHINA-S (09987.HK) announced the official launch of its digital R&D centers located in Shanghai, Nanjing and Xi'an, which would integrate and expand relevant resources to develop solutions and services and propel end-to-end digitalization for corporates, with the aid of technologies such as big data and artificial intelligence.  Joey Wat, CEO of YUM CHINA-S, revealed that digitalization is one of key drivers of the company's tenacity and long-term development and that the company is planning to invest USD1-1.5 billion in digitalization infrastructure over the coming five years.

CHINESE EST H (00127.HK) announced that the group disposed of the senior notes issued by KAISA GROUP (01638.HK) through a series of transactions in the over-the-counter market with an aggregate principal amount of US$48 million for an aggregate consideration of US$18.3071 million or US$20.3774 million (including accrued interest).  It is expected that the group will record a realised loss of approximately HK$226 million in profit or loss for the year ending 31 December 2021 as a result of the disposal, the announcement added.

Kimbee Chan Hoi-wan, a substantial shareholder and the CEO of CHINESE EST H (00127.HK), sold Gough Hill Residences at 3B Gough Hill Path, The Peak for $600 million, Ming Pao citing market sources.  
The house has a saleable area of 4,299 sq.ft., with a garden and a swimming pool measuring 5,314 sq.ft. in combination.  Joseph Lau Luen-hung bought the property from the Chan family of the Park Lane Hotel at $180 million in January 2009, granting it to Kimbee Chan afterwards. This means the current selling price per sq.ft. is over 200% above the purchase price nearly 13 years ago.

AAC TECH (02018.HK) announced that the company and the seller Toyo Rikagaku Kenkyusho Co., Ltd. entered into the Equity Transfer Agreement, pursuant to which the company agreed to purchase 100% equity interests in Toyo Precision Appliance (Kunshan) Co., Ltd. at the Consideration of RMB450 million. The Purchaser will pay the Consideration using the internal resources of the Group.  The Target Company's principal business is design, development and manufacturing of material for metal frame of IT products. It mainly manufactures metal frame, bottom case and parts of tablets, wearables and notebooks products.

CHINA MOBILE (00941.HK) announced the operating data in September 2021, with the total number of mobile customers amounting to over 955 million, 
representing a MoM net increase of 4.606 million units, which surpassed the growth pace of 3.635 million units in August. The total number of 5G package customers in September amounted to 331 million, reflecting a MoM net increase of 27.076 million units, likewise beating the net increase of 24.537 million units recorded in August.

Pre Market News
The oil price may escalate to USD100 per barrel by 1H22 due to the relatively lower global oil commercial inventory, said Iraq’s Oil Minister Ihsan Abdul Jabbar Ismaael. In the long-run, the acceptable oil price range should be between USD75-85 per barrel, the minister added.  OPEC+ is pondering on feasible methods to balance the market but remained opposed to the further increase of the global oil inventory at the moment, as it could ultimately lead to the collapse of the oil markets, the oil minister remarked.

Impeded by the persisting chip shortage, Renault predicted a even bigger automobile production cut of over 300,000 units for this year, more than the previous projected shortfall of 220,000, reported Reuters, citing people familiar with the matter.  The sources expressed that the full-year auto production shortfall is likely to be between 300,000-400,000 units, representing at least 8% of the French carmaker's pre-COVID auto sales of 3.75 million units in 2019.

China's National Development and Reform Commission (NDRC) is soliciting public opinions on amending the Catalogue for Guiding Industry Restructuring (2019 Version), proposing to include "Virtual Currency (Mining) Activities" in the "I. Outdated Production Techniques and Equipment" under the catalogue's elimination category.

The U.S. charge d'affaires David Bisbee expressed during the eighth World Trade Organization meeting on reviewing China trade policies that China's industry policies have been distorting the competitive landscape of the market and are disadvantageous for foreign suppliers. Bisbee added that the U.S. will pursue all means to urge China to reform said policy.  In addition, China's other major trading partners, including Australia, the U.K., Canada and the European Union likewise called for China to further liberalize its market, trade sources suggested.

OSHIDORI (00622.HK)  announced that, among the approximately 138 million EVERG VEHICLE (00708.HK)  shares disposed by the company during the period from 27 September 2021 to 30 September 2021, about 115 million EVERG VEHICLE shares were classified as financial assets at fair value through profit or loss.
After the disposal of these approximately 115 million EVERG VEHICLE shares, the group is expected to recognise a loss of about HK$3.201 billion in total revenue for the year ending 31 December 2021.

GANFENGLITHIUM (01772.HK) announced that the acquisition of an 8.58% equity interest of Litio Minera Argentina S.A., a mineral exploration and investment company in Argentina, at a total consideration of about USD13.178 million. The Company indirectly holds 100% equity interest of Litio upon completion.  Litio holds a 100% interest in Mariana lithium salt lake project in Salta Province, Argentina.

Las Vegas Sands Corp., the controlling shareholder of SANDS CHINA LTD (01928.HK) (SCL), announced its financial results for the fiscal third quarter ended September 30, 2021.  On a US GAAP basis, total net revenues for SCL increased 2.66x YoY to US$611 million for the third quarter of 2021. Net loss for SCL was US$423 million for the third quarter of 2021, compared to US$562 million in the third quarter of 2020.  SCL’s adjusted property EBITDA was US$32 million for the third quarter of 2021, compared to an adjusted property EBITDA loss of US$233 million for the third quarter of 2020.

People's Bank of China (PBOC)'s Governor Yi Gang expressed during the "Annual Conference of Financial Street Forum 2021" that, China's money supply and the growth pace of the aggregate financing to real economy are compatible with the GDP growth rate. Yi remarked that the current aggregate control policy is, therefore, reasonable, with sufficient liquidity.

Giving a written speech at the 2021 Annual Conference of Financial Street Forum, Chinese Vice Premier Liu He stressed the financial system has to be more proactive in serving the real economy and do well in monetary policy adjustment. In addition, China shall beef up the financing support for the private sector economy as well as small and micro businesses.  Noting individual problems in the real estate market, however, Liu found the overall risk manageable. The market's reasonable capital demand is being satisfied. China's overall trend of a healthy real estate market development will not change, he restated.

The U.S. Federal Reserve released the latest Beige Book, stating the U.S. economy has been growing at a moderate pace in September and early October as the latest wave of COVID-19 outbreak begins to subside.  Overall, the Fed maintained an optimistic view on the near-term outlook of economic activities but remarked that some districts have noted increased uncertainties and more cautious positive sentiment compared to the past few months.

* The email will not be published on the website.