Sept 23 HK/China Wrap Evergrande still overhangs


23 Sep

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

HSI +289pts (+1.2%) 24,511 HSCEI +93pts (+1.1%) 8,734 T/O HK$178.98bn (+50.2% DoD)  

Europe
Markets opened higher FTSE trading sideways ahead of BoE rate decision. DAX and CAC working higher.  All sectors in the green.
Flash PMI data along with the BoE Interest rate decision.
Earning due from Superdry to release full-year preliminary results and Royal Mail publishes a July and August trading update.
PMI data was weaker than expected.
Eurozone
Flash PMI’s
Manufacturing Sept 58.7 vs 61.4 Aug (F/cast was 59.9)
Services Sept 56.3 vs 59 Aug (F/cast was 58.6)
Composite Sept 56.1 vs 59 Aug (F/cast was 58.5)
Germany 
Flash PMI’s
Manufacturing Sept 58.5 vs 62.6 Aug (F/cast was 60.9)
Services Sept 56 vs 60.8 Aug (F/cast was 60)
Composite Sept 55.3 vs 60 Aug (F/cast was 59.4)
France 
Flash PMI’s
Manufacturing Sept 55.2 vs 57.5 Aug (F/cast was 56.5)
Services Sept 56 vs 56.3 Aug (F/cast was 55.7)
Composite Sept 55.1 vs 55.9 Aug (F/cast was 55.4)
Business Confidence Sept 106 vs 110 Aug (F/cast 108)
Business Climate Indicator Sept 112 vs 110 Aug (F/cast was 109)
UK
Flash PMI’s
Manufacturing Sept 56.3 vs 60.3 Aug (F/cast was 59)
Services Sept 54.6 vs 55 Aug (F/cast was 55.1)
Composite Sept 54.1 vs 54.8 Aug (F/cast was 55)
Later BoE Interest Rate Decision
US Futures
Dow futures +105 points. S&P 500 futures and Nasdaq 100 futures both traded in positive territory. 
Ahead 
Initial claims data, Flash PMI’s, EIA gas report and Kansas Fed Manufacturing Index and 10 yr TIPS auction.

CHINA
 
CSI 300 opened higher and tested to 4,877 in the first 30 mins but then trended lower to 4,840 before bouncing into lunch. PM opened slightly higher but basically traded sideways but then sold down at 2pm to 4,840 before working back and higher to close +31pts (+0.7%) @ 4,853
PBOC injects more liquidity.
Leaders SemiCons, Consumer Staples, Property and Energy.

Shanghai Composite +14pts (+0.4%) @ 3,642 T/O US$90,529m +13% DoD
Shenzhen Composite +110pts (+0.8%) @ 14,387 T/O US$105,825m +15% DoD
ChiNext Composite +19pts (+0.5%) @ 3,487

CHINA DATA
China's National Health Commission reported 43 confirmed COVID-19 cases yesterday (22nd), with 28 of them being local infections (20 in Fujian; 8 in Heilongjiang).


HONG KONG 
Pre market opened @ 24,614 +393pts vs +278pts ADR’s a broad rebound although there is still a lack of clarity on Evergrande. Market drifted lower through the morning. PM tested lower then bounced before working slowly higher into the close
A rebound of the Property Developers and Macau names after news that Evergrande would make some payments for the onshore bonds. Laggards Ecommerce, Auto and Consumption names

BUYBACKS
XIAOMI-W (01810.HK)'s statement disclosed that, on 21 September, it has repurchased 1.2174 million shares of the company on the Stock Exchange, at a price ranging between $22.6-22.8 per share, involving a total amount of approximately $27.72 million.

TENCENT (00700.HK)'s statement disclosed that, on 21 September, it has repurchased 230,000 shares of the company on the Stock Exchange, at a price ranging between $443.4-453.6 per share, involving approximately $103 million.

CKH HOLDINGS (00001.HK)’s statement disclosed that on 21 September, it repurchased 184,000 shares of the company on the Stock Exchange, at a price between $50.8-51.5 per share, involving a total amount of about $9.455 million.

HONG KONG DATA
HK reported 2 new covid case; 
imported. Now 37 days without a local case.

SHORT SELLING HSI Thursday 17.9% vs 17.1% Tuesday
Top shorts 
Bud Apac (1876) 46%,   Country Garden (2007) 38%, BYD (1211) 36%, Mengniu Dairy (2319) 34%, MTR (66) 32%,  HKEX (388) 29%, Baba (9988) 29%, Petrochina (857) 29%,  Bank of China (3988) 28%, HSBC (5) 26%,  Henderson Land (12) 25%,  CH Res Land (1109) 25%, CCB (939) 25%

After Market News
WSJ says China is telling local authorities to prepare for the potenial downfall of China Evergrande.


Chinese regulators are ordering EVERGRANDE (03333.HK) to focus on ensuring the commencement of projects under construction and avoiding a recent US dollar bond default, Bloomberg citing sources.

Swiss National Bank Chairman Thomas Jordan said the bank is closely monitoring the EVERGRANDE (03333.HK) saga situation. Asked about the potential impact on Switzerland, Jordan replied that it is wrong to either be "alarmist" or dismiss the issue as a "local small problem".

Shanghai Stock Exchange and Shenzhen Stock Exchange announced the relevant market arrangement during the National Day holiday. 
The markets will be closed from 1 October (Friday) to 7 October (Thursday) and will resume normal operation on 8 October (Friday).

MINSHENG BANK (01988.HK) (600016.SH) expressed on an investor relation platform that all of EVERGRANDE Group's loans at the bank are project financing, and the pledged assets remain sufficient and effective for now, reported Chinese media Securities Times.
MINSHENG BANK further expressed that it will continue to track and monitor the operational and financial situation of EVERGRANDE Group and its connected parties.

CHINA TELECOM (00728.HK) released the operating statistics for August 2021. The number of the company's mobile subscribers amounted to nearly 367 million, representing a net increase of 2.18 million or 0.6% users for the month.  In particular, the number of users subscribed to CHINA TELECOM's 5G package exceeded 146 million, translating into a net increase of 8.41 million users for the month, which reflects a faster growth pace compared to the net increase of 7.06 million users recorded in July.

EVERGRANDE (03333.HK)  announced to settle the interest payments for the maturing USD35.9 million onshore bonds on time. The troubled developer, however, did not mention whether the group would be able to pay for the interests for another batch of offshore bonds worth USD85.3 million, reported Nikkei.  Although the financial crisis of EVERGRANDE seems to have slightly alleviated for now, the ultimate test on the group's cash flow ability is predicted to arrive next year, as the group will be facing maturing bond payment of as much as USD7.6 billion, the report added.

IPO
BRONCUS-B (02216.HK), whose shares will be listed tomorrow (24th), opened at $19 in gray market,
up 1.6% against the listing price of $18.7, and last stood at $17.48, down 6.52% against the listing price, on  turnover of $13.3 million, PhillipMart data showed.


Regional Markets

Australia
Market climbed in early trades to 7,350 and then worked better to trade around 7,375 level from around 11am and closed +73pts (1%) @ 7,370. Oil names +VE but Gold weak.
Data Flash PMI’s
Manufacturing Sept 57.3 vs 52 Aug (F/cast was 51)
Services Sept 44.9 vs 42.9 Aug (F/cast was 44)
Composite Sept 46 vs 43.3 Aug (F/cast was 44)
Japan Market closed; re-opens Friday
S Korea 
Kospi re opened after Chuseok holiday opened lower and dipped to test the 3,110 support around 9:30am after a couple of tests the market worked back to trade in the range 3,120-3,130 but closed -13pts (-0.4%) @ 3,128
Kosdaq opened lower initially rose to 1,043 before dipping to 1,036 but then rebounded and traded in the range 1,040-1,042; before selling down to close -10pts (-0.9%) @ 1,036
Taiwan 
Taiex opened higher and rallied to 17,100 in early trades, eased before testing to 17,145. Then eased back and traded in the range 17,050 - 17,100 and closed +152pts (+0.9%) 17,078
T/O US$9.03bn vs US$10.57bn Wednesday
CECC reported 9 new covid cases
(all imported)
Taiwan needs to face the issue of a decade-long ban on Japanese food imports from areas affected by the 2011 nuclear disaster, now that it has formally applied to join the Tokyo-led Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the nation's top trade negotiator said on Thursday.
The president of the Marshall Islands David Kabua on Wednesday urged the United Nations to put an end to the "shameful silence" targeting Taiwan in the U.N. system, on the second day of the General Debate of the U.N. General Assembly's 76th session in New York.
After Market 
Interest Rate Decision 1.125% vs 1.125% prior (F/cast was 1.125%)
M2 Money Supply Aug +8.44% YoY vs 8.7% Jul

HK/CHINA Connect Flows
Shanghai
Northbound RMB 79,518m Sell 41,667m vs 37,852m Buy
Southbound HK$   23,576m Sell 12,707m vs 10,869m Buy
Shenzhen
Northbound RMB 82,538m Sell 41,516m vs 41,022m Buy
Southbound HK$  28,024m Sell 13,321m vs  14,703m Buy

Movers
Active Heavyweights
MEITUAN (03690.HK)  +12.000 (+5.204%)    Short selling $1.49B; Ratio 21.678%    closed at $242.6, up 5.2%
TENCENT (00700.HK) +13.200 (+2.933%) Short selling $815.60M; Ratio 7.943% closed at $463.2, up 2.9%
CCB (00939.HK) +0.080 (+1.481%) Short selling $376.93M; Ratio 24.943% closed at $5.48, up 1.5%
PING AN (02318.HK) +0.500 (+0.951%) Short selling $428.49M; Ratio 12.715% closed at $53.1, up 1%
AIA (01299.HK) -0.350 (-0.394%) Short selling $971.76M; Ratio 23.927% closed at $88.4, down 0.4%
BABA (09988.HK) -0.300 (-0.202%) Short selling $1.39B; Ratio 28.831% closed at $148.4, down 0.2%
HKEX (00388.HK) 0.000 (0.000%) Short selling $459.28M; Ratio 28.956% closed at $484.4, unchanged

HSI & HSCEI Constituents on Move:
EVERGRANDE (03333.HK) +0.400 (+17.621%) Short selling $42.99M; Ratio 2.138% closed at $2.67, up 17.6%
CG SERVICES (06098.HK) +6.100 (+12.735%) Short selling $140.70M; Ratio 7.384% closed at $54, up 12.7%
LONGFOR (00960.HK) +3.050 (+9.698%) Short selling $14.47M; Ratio 1.442% closed at $34.5, up 9.7%
SUNAC (01918.HK) +1.280 (+9.091%) Short selling $251.22M; Ratio 17.477% closed at $15.36, up 9.1%
EVERG SERVICES (06666.HK) +0.330 (+7.857%) Short selling $5.57M; Ratio 1.049% closed at $4.53, up 7.9%
COUNTRY GARDEN (02007.HK) +0.510 (+7.153%) Short selling $206.43M; Ratio 38.160% closed at $7.64, up 7.2%
CHINA RES LAND (01109.HK) +1.900 (+6.529%) Short selling $239.87M; Ratio 25.128% closed at $31, up 6.5%
CHINA OVERSEAS (00688.HK) +1.020 (+6.250%) Short selling $168.54M; Ratio 16.901% closed at $17.34, up 6.3%
ENN ENERGY (02688.HK) -7.400 (-5.312%) Short selling $60.42M; Ratio 9.165% closed at $131.9, down 5.3%
GEELY AUTO (00175.HK) -1.250 (-5.123%) Short selling $295.64M; Ratio 11.312% closed at $23.15, down 5.1%
ANTA SPORTS (02020.HK) -5.700 (-3.770%) Short selling $250.64M; Ratio 11.827% closed at $145.5, down 3.8%
ALI HEALTH (00241.HK) +0.420 (+3.640%) Short selling $80.05M; Ratio 21.630% closed at $11.96, up 3.6%
CHINA RES BEER (00291.HK) -2.100 (-3.618%) Short selling $71.22M; Ratio 7.591% closed at $55.95, down 3.6%
WHARF REIC (01997.HK) +1.300 (+3.552%) Short selling $31.79M; Ratio 21.242% closed at $37.9, up 3.6%
CHINA FEIHE (06186.HK) -0.480 (-3.519%) Short selling $21.97M; Ratio 5.673% closed at $13.16, down 3.5%
CHINA GAS HOLD (00384.HK) +0.700 (+3.196%) Short selling $35.23M; Ratio 15.534% closed at $22.6, up 3.2%
MENGNIU DAIRY (02319.HK) +1.550 (+3.193%) Short selling $338.92M; Ratio 33.456% closed at $50.1, up 3.2%
SANDS CHINA LTD (01928.HK) +0.500 (+3.189%) Short selling $113.14M; Ratio 13.739% closed at $16.18, up 3.2%
HANG LUNG PPT (00101.HK)  +0.540 (+3.140%)    Short selling $10.06M; Ratio 20.301%   closed at $17.74, up 3.1%HSMI & HSSI Constituents on Move:
CHINA POWER (02380.HK) +0.520 (+15.758%) Short selling $112.55M; Ratio 10.951% closed at $3.82, up 15.8%, hitting new high
CHINA RES POWER (00836.HK) +2.840 (+14.228%) Short selling $249.48M; Ratio 9.259% closed at $22.8, up 14.2%, hitting new high
DATANG POWER (00991.HK) +0.180 (+13.433%) Short selling $2.67M; Ratio 3.061% closed at $1.52, up 13.4%
CGN POWER (01816.HK) +0.250 (+12.255%) Short selling $32.61M; Ratio 5.650% closed at $2.29, up 12.3%, hitting new high
AGILE GROUP (03383.HK) +0.800 (+12.195%) Short selling $27.91M; Ratio 21.178% closed at $7.36, up 12.2%
C TRANSMISSION (00658.HK) +0.760 (+11.710%) Short selling $12.17M; Ratio 8.518% closed at $7.25, up 11.7%
SHIMAO SERVICES (00873.HK) +1.600 (+11.268%) Short selling $54.32M; Ratio 26.101% closed at $15.8, up 11.3%
CGN NEW ENERGY (01811.HK) +0.640 (+11.111%) Short selling $28.29M; Ratio 3.688% closed at $6.4, up 11.1%, hitting new high
EB ENVIRONMENT (00257.HK) +0.650 (+11.092%) Short selling $22.77M; Ratio 4.596% closed at $6.51, up 11.1%, hitting new high
CIFI ES SERVICE (01995.HK)  +1.360 (+10.287%)    Short selling $23.39M; Ratio 26.346%   closed at $14.58, up 10.3%



Market News
New rounds of power rationing have been initiated in some Guangdong regions, the entire Anhui province and the whole Zhejiang province, reported Chinese power news Beijixing.
The rationing in Guangdong and Anhui was due to tight electricity supply, while that in Zhejiang was resulted from the "dual control system" upgrade for energy consumption.
Guangdong has asked energy-intensive firms to avert electricity overload in the course of daily industrial production during 22-26 September 2021, China Business Network citing a message from Guangdong Power Grid.HSBC announced that the best lending rate will be kept unchanged at the current level of 5%. The previous adjustment traced back to 1 November 2019 when the rate was reduced by 12.5 bps.  HSBC announced that the best lending rate will be kept unchanged at the current level of 5%. The previous adjustment traced back to 1 November 2019 when the rate was reduced by 12.5 bps.
Indonesia is closely monitoring the situation of the Chinese financial market and has warned that EVERGRANDE (03333.HK)'s debt crisis could affect the global economy, 
expressed the country's finance minister Sri Mulyani Indrawati.  The minister illustrated that the Indonesian government has identified the emerging risks to China's financial system stability, and remarked that such risks could trigger a serious ripple effect on the global economy.

HSBC HOLDINGS (00005.HK) CEO Noel Quinn predicted EVERGRANDE (03333.HK)’s debt turmoil to spill over to capital markets 
without direct impact on the group.

Zhejiang Geely Holding Group's chairman, Li Shufu, expressed that the group has already developed multiple models of methanol-powered passenger vehicles (PVs) and commercial vehicles. 
Li further remarked that, should the methanol-powered vehicles be popularized in China, the country's crude oil import weighting could be reduced to about 50% from 73%.Overnight HIBOR last posted at 0.03705%, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.06196%, marking a 1-month low.

Despite the market's growing apprehension over EVERGRANDE (03333.HK)'s potential default risk faced by other real estate developers, the Chinese regulatory institutions are believed to be capable of containing the relevant risk and prevent its spread to other sectors, remarked Benson Cheng, an Assurance partner at PwC.   
Cheng added that the Chinese government has strengthened the control on the banks since last year, in terms of granting interest-bearing loans to property corporates, and has outlined concrete operating standards to property developers, with the aim to propel benign development within the sector. China, therefore, is expected to be able to the level of dependence on property sector for economic growth, Cheng added.

The Kwok family has, through the family foundation, purchased 7.24 million shares of SHK PPT (00016.HK) on the market on 20 September, at an average price of $94.7981 per share, involving a total of $686 million, according to data from the Stock Exchange.   
The group's chairman, Raymond Kwok, also added 1.5 million shares of the company on exchange on the same day, at an average price of $94.7493 per share, involving $142 million, boosting his stake in the company from 18.56% to 18.61%. Adam Kwok, son of Thomas Kwok, likewise purchased 230,000 shares of the company, at an average price of $95.0463 per share, involving $21.86 million.

Fitch Ratings trimmed China's economic growth forecast for this year from 8.4% to 8.1%, to reflect the hampered domestic demand performance due to the slowdown in the property sector.  
The Chinese property market's de-leveraging, along with the Chinese government's policy adjustment, are weighing on the economic recovery, remarked the rating agency. The slacking in property activity will affect the domestic demand and the global commodities market, which would in turn pose greater challenges for the growth of emerging markets over next year.

Lithuania’s Defence Ministry recently published a report, suggesting that XIAOMI-W (01810.HK)'s smartphones are equipped with censoring capability on sensitive words and will transmit users' data to its server in Singapore. 
XIAOMI-W denied the claim that there is built-in censoring capability in its smartphone products.   XIAOMI-W will not restrict and intercept any individual behavior of its smartphone users and will respect and protect the legitimate rights of the users, said a spokesman from the company.

EVERGRANDE (03333.HK) convened a midnight conference on Wednesday (22nd), where Chairman Hui Ka Yan stressed the importance of striving to resume construction works and production, according to the state media China.com.cn. 
It is the company's duty and responsibility to ensure the quality and  volume of property delivery, he opined. The group shall hence put all efforts into work and production resumption as well as ensuring property delivery.

The People's Bank of China (PBoC) today initiated the 7-day and 14-day

reverse repos of RMB60 billion each. With RMB10 billion reverse repos due today, the net investment reached RMB110 billion.  The successful bidding rates for the 7-day and 14-day reverse repos were flattish at 2.2% and 2.35%, respectively.

Bank of Japan's governor Haruhiko Kuroda expressed that the debt crisis of EVERGRANDE (03333.HK) is currently posing limited impact, reported foreign media.  
Kuroda, however, remarked that, due to the EVERGRANDE crisis, the global financial market is becoming relatively "tense" and that the Bank of Japan will continue to monitor the situation closely.

Pre Market News
HSBC announced to launch “Credit Connect”, a credit facility solution that caters to the growing business demand for seamless cross-boundary financing in the Greater Bay Area (GBA).  
With Credit Connect, pre-approved credit limits across Hong Kong, Macao and Guangdong can be flexibly transferred in as quickly as one business day, enabling businesses to have quicker access to liquidity within the GBA and better manage their financing needs, HSBC added.BlackRock, HSBC HOLDINGS (00005.HK) and UBS are among the largest buyers of the debts of the embattled Chinese real estate developer EVERGRANDE (03333.HK), suggested data from Morningstar.
BlackRock increased 31.3 million notes of EVERGRANDE bonds throughout the first eight months of this year, with its stake in EVERGRANDE's debts accounting for 1% of the assets in its USD1.7 billion Asian High Yield Bond Fund. HSBC, on the other hand, has enlarged its position in the Chinese developer by 40% as of July, while UBS increased its by 25% as of May.

Upon approval of China's State Council, the Ministry of Finance (MOF) will issue RMB20-billion RMB Sovereign Bonds by three tranches in Hong Kong this year. 
The first batch of RMB8-billion RMB Sovereign Bonds will be issued today.

CHINESE EST H (00127.HK) announced that during the period from 30 August 2021 to 21 September 2021, the Group disposed of an aggregate of 109 million EVERGRANDE (03333.HK) 
Shares (representing approximately 0.82% of the issued share capital of Evergrande) for an aggregate consideration of approximately HK$247 million.  The Group continues to hold about 751 million Evergrande Shares (representing approximately 5.66% of the issued share capital of the latter). The Group will, depending on the prevailing market conditions, dispose of all or some of the remaining Mandate Shares during the Mandate Period, being a period of 12 months from 23 September 2021.

EVERGRANDE (03333.HK)'s Hengda Real Estate Group announced yesterday (22nd) that the company will settle the payment for bond interest maturing today (23rd) as the group obtained means of repayment through an off-exchange private negotiation.  
The news temporarily alleviated the market's apprehension over EVERGRANDE's potential default, prompting China Evergrande Group ADR (EGRNY) to surge 33%.

MEITUAN-W (03690.HK)'s off-site food delivery orders burgeoned by 31.49% for this year's 
Mid-Autumn Festival holiday as compared with the same period last year, according to the giant's data.  Equally, "reunion dinner" takeaway orders expanded by 574.56% during the same period.

China's production and sales volume for commercial vehicles for August 2021 amounted to 229,000 units and 247,000 units respectively, down 27.5% MoM and 20.9% MoM; 
and declined 46.2% YoY and 42.8% YoY respectively, according to data from China Association of Automobile Manufacturers (CAAM)

The new infrastructure construction plan under the 14th Five-Year Plan was considered and passed at the Chinese State Council executive meeting chaired by Premier Li Keqiang on 22 September, set to facilitate domestic demand expansion, propel transformation and increase potential. 
The State Council also encourages diversified inputs and open collaboration to support new infrastructure investment and operation by private enterprises and offshore capital.

Ant's Huabei (Ant Check Later) made a work progress explanatory statement on the orderly inclusion into the Financial Credit Information Basic Database (
i.e. PBoC's Credit Reference Center, or "PBCCRC"). Accordingly, Huabei is gradually facilitating its connection to PBCCRC.
Regarding earlier rumors that bank lending may be affected by such inclusion, Huabei said those using the credit service normally with good repayment habit will experience no difficulty in securing loans.

The Land Reserve Center of Anqing City in Anhui Province announced that the Anqing municipal government had cancelled the Contract for State-Owned Construction Land Use Right Assignment for Evergrande's central park project site according to the law, 
as Anqing Yuetong  had failed to pay land transaction fees for the site.

Several listed banks in China responded to their business ties with Evergrande, 
reported Securities Times. Of which, CZBANK (02016.HK)  (601916.SH)  said it currently has a RMB3.8-billion credit line to Evergrande Group with sufficient collateral. The lender finds the overall risk controllable.

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