Oct 6 HK Closed -138pts as Asia gives up initial gains

06 Oct

This and previous notes can be found at Substack ( Asian Market Sense )
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HSI -138pts (+0.3%) 23,967 HSCEI -103pts (-1.2%) 8,413 T/O HK$103.96bn (+4.2% DoD no connect flows)  

Markets opened lower with rising energy cost raising inflation / stagflation fears
Construction PMI Sept 50 vs 49.5 Aug (F/cast was 50)
Retail Sales Aug +0.3% MoM vs -2.6% Jul (F/cast was +1%)
Retail Sales Aug 0% YoY vs +3.1% Jul (F/cast was +0.6%)
Factory Orders Aug -7.7% MoM vs +4.9% Jul (F/cast was -1.6%)
Construction PMI Sept 47.1 vs 44.6 Aug (F/cast was 48.6)
Construction PMI Sept 48.9 vs 44.9 Aug (F/cast was 48.6)
Retail Sales Aug -2.1% YoY vs 7.8% Jul (F/cast was +6.5%)
Retail Sales Aug -1.2% MoM vs -0.7% Jul (F/cast was +0.9%)
New Car Registrations Sept +2.63% YoY vs -15% Aug (F/cast was -8.6%)
Construction PMI Sept 52.6 vs 55.2 Aug (F/cast was 54.9)

US Futures
Opened in Asia ; Dow +55pts, S&P and NDX +0.1% but have reversed and now Dow -113pts, S&P and NDX -VE
AHEAD MBA Mortgage Applications and 30 yr Mortgage Rate, ADP Employment Change, EIA Oil Report

Closed re-opens on Friday

China's YTD real estate defaults have reached 39 as of September 27th, up 25 cases from that in 2020, according to CRIC's statistics. 
The events involve a sum of RMB46.75 billion, up 159% year-on-year.  CRIC also pointed out the YTD liquidity tightness in numerous developers, including CFLD (600340.SH), BRC (600466.SH), SUNSHINE 100 (02608.HK), Tahoe Group (000732.SZ), FANTASIA (01777.HK), SINIC HOLDINGS (02103.HK) and EVERGRANDE (03333.HK)

Pre market opened @ 24,259: +155pts vs +19pts ADR’s Led by ECommerce and HSBC but sold down to 23,810 in the first 30 minutes. Then traded sideways until around 11am when Carrie Lam started her policy speech and worked slightly better into lunch.
PM opened at 24,000 and traded higher to test yesterday’s close but failed to break above and eased back to trade around 24,000 until 3pm when it dipped and to 23,930 and bounced around there will a small uptick at theend to close 23,966.
Key being a new 300sq km town near the border; which will take around 10 years; having minimal impact on the HK developers today
Leaders Energy, HK Developers, Banks and BABA
Laggards Consumer, Tech, Chinese Developers, Sportswear

HK reported 6 new covid case; all imported 
Now over 50 days without a local case.
Pre Market
PMI  Sept 51.7 vs 53.3 Aug (F/cast was 52.1)
This represented an eighth successive month in which the Hong Kong private sector registered better business conditions, though the rate of growth fell to a two-month low. The PMI showed the private sector continuing to enjoy strong growth in demand and business activity amid stable COVID-19 conditions, said Jingyi Pan, Economics Associate Director at IHS Markit. This also translated to further business confidence and increased buying activity recorded among private sector firms. That said, concerns with lingering COVID-19 uncertainties sustained and the virus can also be seen still dampening foreign orders.

SHORT SELLING HSI Wednesday 23.4% vs 19% Tuesday
Top shorts 
Bud Apac (1876) 61%, Country Garden (2007) 53%, Wharf REIC (1997) 52%, China Overseas (688) 47%, Ali Health (241) 45%,  MTRC (66) 45%, Haidilao (6862) 44%, HKEX (388) 42%, AIA (1299) 42%, HK & China Gas (3) 40%, Hengan (1044) 40%, BDY (1211) 38%, Sands China (1928) 40%, Wuxi Bio (2269) 34%, Shenzhou (2313) 34%, Power Assets (6) 33%, AAC Tech (2018) 33%, Henderson Land (12) 32%, CKI (1038) 32%, ICBC (1398) 31%, Xiaomi (1810) 30%, CM Bank (3968) 30%, Xinyi Solar (968) 30%, SHKP (16) 29%, Hang Seng Bank (11) 28%, HSBC (5) 27%, Petrochina (857) 27%, CKH (1) 26%, Geely (175) 26%, CLP (2) 26%, CCB (939) 26% , CK Asset (1113) 25%, Bank of China (3988) 25%,  China Res Land (1109) 25%.

TAM JAI INTL (02217.HK), which is set to debut tomorrow (7th), opened flat at $3.33 in the gray market,
before dropping to as low as $2.94 at one point, PhillipMart data showed. The stock last posted $3.05, down 8.4% against its listing price of $3.33, on a
volume of 4.7 million shares.

Daily Journal Corporation (DJCO.US)  +0.960 (+0.299%)    owned by Warren Buffett's partner Charlie Munger has expanded its stake in the U.S. shares of Alibaba Group Holding Limited (BABA.US)  by 82.7% within a single quarter, as of the end of September 2021, at an average price of USD182.3 per share, according to the document filed by the company to the U.S. Securities and Exchange Commission (SEC).  As of the end of September, DJCO holds approximately 302,000 U.S. shares of Alibaba, accounting for 19.86% of its entire investment portfolio.

Regional Markets

Market opened higher but saw resistance at 7,280 in the first ten minutes and then trended lower for the rest of the morning. Around midday it sold down in the red. Some support at 7,220 but only short term and then the market sank to 7,190 level before seeing a bounce then retested the low before a bounce to close -42pts (-0.6%)@ 7,207
Tech and Energy +VE but Financial and Travel weak
New Zealand raised rates to 0.5% raising concerns of more rises ahead.
Inflation Gauge Sept +0.3% MoM vs 0.0% Aug revised
Nikkei opened higher and traded up to 28,200 in early trades following the rebound overnight in US Tech but then revesed and sold off down to 27,290 level before a slight bounce into lunch.
PM opened lower and trading around 27,400 level but worked better in the last hour to close -293pts (-1.05%) @ 27,529
Topix traded in a similar pattern closed -6pts (-0.3%) @ 1,942
Inflation concerns after the S Korean inflation data and rising energy prices.
Leaders Miners, Oil, Pulp&Paper and Utilities
Laggards Airlines, Shippers, Auto and Pharma
S Korea 
Pre market inflation data was higher than expected -VE
Foreigners continued sellers especially in Tech (mainly passive programme selling). Local Institutions and Retail quiet. Broadbased selling. Insurers and Internet seeing some interest
Market closed at its lowest since Dec 2020 and wiped out all YTD gains.
The National Pension Service (NPS) of Korea could suffer a US$3.5-million loss due to investment in EVERGRANDE (03333.HK) shares, as Bloomberg cited Kim Sungjoo, a lawmaker from the ruling Democratic Party. -VE
Kospi opened higher following the US initially dipped to 2,980 but bounced to 2,993 in the first hour before selling down to 2,920 by midday. After 1pm sold down to 2,910 level bounced but resistance at 2,940 and then sold down to close -54pts (-1.8%) @ 2,908
Kosdaq traded in a similar pattern closed -33pts (-3.5%) @ 922
Inflation Rate Sept +2.5% YoY vs +2.6% Aug (F/cast was +2.4%)
Inflation Rate Sept +0.5% MoM vs +0.6% Aug (F/cast was +0.4%)
Taiex opened higher and tested 16,550 in early trades but then reversed down to 16,370 level before bouncing back to flat, only to sell down again to 16,350 and then traded sideways to close -68pts (-0.4%) @ 16,393.
Leaders Energy, Consumer Staples and Utiilities
Laggards Industrials, Tech, Healthcare
After market
Inflation Rate Sept +2.63% YoY vs +2.35% Aug revised from 2.36% (F/cast was +2.6%)
Inflation Rate Sept 0.51% MoM vs +0.31% Aug (F/cast was +0.2%)
Wholesale Prices Sept +11.96% YoY vs +11.96% Aug revised from 11.88% (F/cast was +12.3%)
T/O US$10.29bn vs US$11.75bn Tuesday

HK/CHINA Connect Flows
Closed until Friday.

Active Heavyweights
PING AN (02318.HK)  +1.650 (+3.235%)    Short selling $154.69M; Ratio 17.272%    closed at $52.6, up 3.1%
MEITUAN (03690.HK) -2.600 (-1.113%) Short selling $432.63M; Ratio 23.648% closed at $228.6, down 2.1%
BABA (09988.HK) +2.100 (+1.552%) Short selling $203.30M; Ratio 15.586% closed at $137.3, up 1.5%
TENCENT (00700.HK) -3.200 (-0.711%) Short selling $165.97M; Ratio 6.685% closed at $446.4, down 0.8%
CCB (00939.HK) -0.040 (-0.722%) Short selling $121.99M; Ratio 23.274% closed at $5.5, down 0.7%
HKEX (00388.HK) -1.400 (-0.295%) Short selling $199.91M; Ratio 43.963% closed at $471.2, down 0.6%
AIA (01299.HK) -0.350 (-0.389%) Short selling $310.58M; Ratio 49.551% closed at $89.45, down 0.6%

HSI & HSCEI Constituents on Move:
JD HEALTH (06618.HK)  -5.350 (-7.294%)    Short selling $22.90M; Ratio 20.357%    closed at $67.85, down 7.5%
CHINA RES BEER (00291.HK) -4.300 (-7.439%) Short selling $62.02M; Ratio 30.428% closed at $53.5, down 7.4%
LI NING (02331.HK) -6.500 (-7.170%) Short selling $130.75M; Ratio 22.480% closed at $84.2, down 7.1%
SHENZHOU INTL (02313.HK) -11.300 (-6.920%) Short selling $69.48M; Ratio 30.411% closed at $152, down 6.9%
HANSOH PHARMA (03692.HK) -1.220 (-6.212%) Short selling $1.33M; Ratio 2.652% closed at $18.42, down 6.2%
HAIDILAO (06862.HK) -1.450 (-5.273%) Short selling $78.68M; Ratio 41.340% closed at $26.1, down 5.1%
ANTA SPORTS-200 (02020.HK) -7.400 (-5.263%) Short selling $63.47M; Ratio 11.958% closed at $133.5, down 5%
SUNNY OPTICAL (02382.HK) -8.200 (-4.139%) Short selling $109.96M; Ratio 22.652% closed at $189.5, down 4.3%
PETROCHINA (00857.HK) +0.170 (+4.282%) Short selling $176.79M; Ratio 26.212% closed at $4.14, up 4.3%, hitting new high
CG SERVICES (06098.HK) -2.400 (-4.027%) Short selling $77.45M; Ratio 23.812% closed at $57.2, down 4%
WH GROUP (00288.HK) -0.170 (-3.184%) Short selling $12.66M; Ratio 10.579% closed at $5.16, down 3.4%
SINO BIOPHARM (01177.HK) -0.180 (-3.030%) Short selling $37.41M; Ratio 16.950% closed at $5.74, down 3.4%
HSBC HOLDINGS (00005.HK) +1.400 (+3.406%) Short selling $180.88M; Ratio 27.332% closed at $42.45, up 3.3%
SINOPEC CORP (00386.HK) +0.110 (+2.806%) Short selling $47.49M; Ratio 10.351% closed at $4.04, up 3.1%

HSMI & HSSI Constituents on Move:
BJ ENT WATER (00371.HK) +0.350 (+11.364%) Short selling $8.62M; Ratio 5.851% closed at $3.43, up 11.4%
CEB GREENTECH (01257.HK) +0.330 (+10.749%) Short selling $2.30M; Ratio 7.815% closed at $3.4, up 10.7%
CHINA STATE CON (03311.HK) +0.600 (+8.708%) Short selling $2.84M; Ratio 2.672% closed at $7.49, up 8.7%, hitting new high
CGN NEW ENERGY (01811.HK) +0.640 (+7.931%) Short selling $27.64M; Ratio 14.534% closed at $8.74, up 8.3%, hitting new high
CHINA WATER (00855.HK) +0.400 (+4.381%) Short selling $4.14M; Ratio 6.084% closed at $9.58, up 4.9%, hitting new high
BEIJING ENT (00392.HK) +0.300 (+0.948%) Short selling $3.02M; Ratio 7.590% closed at $32.05, up 1.3%, hitting new high

Market News
Link to Chief Executives 2021 Policy address https://www.policyaddress.gov.hk/2021/eng/index.html
Key being a 300 sqkm new town near the border with China.

The U.S. Nuclear Regulatory Commission paused shipping radioactive materials and a hydrogen isotope used in reactors to China General Nuclear Power Group (CGN) last month. 
The White House saw this as a move to further Washington's national security interests, as well as common defense and security in accordance with the Atomic Energy Act of 1954.  The ban involves CGN, CGN POWER (01816.HK) and its arms or related entities.

Alipay announced that the tourist attractions' spending over the National Day holiday leaped over 9x compared to the previous month. 
The theme parks located in China, in particular, tracked the most vibrant consumptions, with Fantawild, Shanghai Disneyland and Universal Studio Beijing ranked as the top three.

Dented by the EVERGRANDE (03333.HK) debt crisis, the Chinese bond market has seen the largest capital outflow in the past six months in September, reported Reuters. 
With multiple emerging markets issuing vast amount of new bonds, the scale of foreign capital inflow into the emerging markets was likewise largest since June, the report added.  Over September, the negotiable securities of the emerging markets amassed foreign capital of USD29.8 billion in total, according to the data from IIF.

Macau's Novel Coronavirus Response and Coordination Centre said the third round of universal NAT has begun from 9pm on Monday (4th). 
Around 500,800 people have been sampled as of 9am this morning (6th), with about 404,900 of them showing negative test results.

BYD COMPANY (01211.HK)  announced that the company will form a partnership with Levo Mobility LLC, a joint venture company by Nuvve (NVVE.US), Stonepeak Partners and Evolve Transition (SNMP.US) . 
Through the partnership, the two parties will endeavor to integrate Nuvve's leading vehicle-to-grid (V2G) technology into BYD's battery electric vehicles (BEV) and to deploy up to 5,000 BEVs from BYD on a global scale over the next five years.

Pre Market News
Hangzhou Linping District People's Government announced the strategic cooperation agreement with BABA-SW (09988.HK)'s Hema. P
ursuant to which, a "Linping Hema Village"  will be established to introduce local quality farm produce to the Hema platform, conducive to developing contract farming and digital agriculture while promoting common prosperity.  The first batch of 12 kinds of produce has been introduced to the platform, involving orders worth RMB30 million.

Singapore's GIC is considering to adjust its investment portfolio, mainly due to the Chinese government's large-scaled crackdown across multiple sectors, reported Bloomberg News. 
While it still favors the sectors supported by Beijing, the fund contended that the regulation may cause the return of the Chinese market to decline. When asked about whether the fund would invest in China and EVERGRANDE (03333.HK)-issued bonds, GIC's CEO, Lim Chow Kiat, expressed that the fund will invest in China on a selective basis, but investment decisions will have to be made based on the comprehens
Fitch Ratings lowered the long-term foreign-currency issuer default rating (IDR) of FANTASIA (01777.HK) to "RD" (restrictive default) from "CCC-" to reflect the company's incapability to repay the principal of US$206 million on its senior notes due 4 October.
S&P Global Ratings, likewise, lowered the long-term issuer credit rating on FANTASIA to "SD" (selective default) from "CCC". Despite the fact that the company reported to have sufficient cash on hand, failing to settle payment on time signifies issue of tight liquidity, the rating institution analyzed.
Moody's also downgraded the corporate family rating (CFR) of FANTASIA to "Ca" from "B3", with a negative outlook. The downgrading is to reflect the grim recovery prospects for the company in the case of default, Moody's remarked.
The International Monetary Fund (IMF) forecast that the global economic growth for this year will be slightly missing the estimate of 6% released in July, mainly due to the relevant risks associated with debts, inflation and divergent economic trends, IMF chief Kristalina Georgieva expressed. The U.S. and China will continue to be the major growth drivers for the global economy, Georgieva remarked. As for the inflation issue, the IMF chief contended that the inflation pressures of most countries are predicted to fade away over next year, but with lingering effect on certain new and developing economies. Georgieva cautioned that the continuous increase in inflation could lead to rapid interest rate hike and tightening of the financial sector.

CST GROUP (00985.HK) announced that on 5 October, the Company disposed an aggregate 32.18 million EVERG VEHICLE (00708.HK
)  Shares on the open market at an aggregate consideration of HK$125 million at an average price of HK$3.89 per Share.

XIAOMI-W (01810.HK)'s statement disclosed that on 5 October, it repurchased 2.15 million shares of the company on the Stock Exchange at $20.4-20.95 per share, involving approximately $44.87 million.

SMARTONE TELE (00315.HK)  announced that Tam Lok-man, Norman is appointed as Executive Director and Deputy Chief Executive Officer of the company with effect from 15 November 2021. Tam is entitled to a projected cash emolument of HK$7.5 million per annum and a one-off compensation of HK$4.0 million, for his loss of certain benefits from his current employment.  Tam is currently a vice president of Tencent Cloud International, vice president of JOOX Music, and the chief executive of WeChat Pay Hong Kong Limited.

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