Sept 24 HK China Market sell off into the close. Beijing to control Evergrandes A/C's. Japan & Taiwan +VE but S Korea weak


24 Sep

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

HSI -318pts (-1.3%) 24,192 HSCEI -129pts (-1.5%) 8,605 T/O HK$147.53bn (-17.6% DoD)  

Europe
Markets opened lower and drifting lower as German Business sentiment remained weak, caution ahead of the German election on Sunday and ongoing concerns over Evergrande.
Parisian airport operator ADP +3% on hopes of relation on travel ahead.
AstraZeneca +VE on news it had invested in the start-up behind Imperial College London’s experimental Covid-19 vaccine. The deal will see both companies working together to develop and sell drugs based on the latter’s self-amplifying RNA technology platform.
Rolls Royce and German lender Commerzbank both added around 2%.
BUT private equity firm EQT weak along with Deliveroo which lost a deal with Shell’s gas station convenience stores to rival Uber Eats.
BP were flat saying it would close some of its British gas stations due to truck driver shortages disrupting supply.
Data
Germany
 
Ifo data
Business Climate Sept 98.8 vs 99.6 Aug revised (F/cast was 98.5)
Current Conditions Sept 100.4 vs 101.4 Aug (F/cast was 102)
Expectations Sept 97.3 vs 97.8 Aug revised (F/cast was 96.5)
UK 
Consumer Confidence Sept -13 vs -8 Aug (F/cast was -8)
Distributive Trades Sept 11 vs 60 Aug (F/cast was 45)
US Futures
Opened Dow +20 points. S&P 500 futures and Nasdaq 100 futures were little changed.
Ahead New Home Sales, Baker Hughes, Fed Speakers: Powell, Clarida, Bowman.

CHINA
Closed -4pts (-0.1%) @ 4,849
CSI 300 opened in the red but trended higher to 4,897 in the first hour before easing back to 4,879 at lunch (+26pts +0.5%). Markets encouraged again as the PBOC continues to inject capital but the Evergrande effect is worrying; in the morning EV was weak on news that staff and suppliers have not been paid. I would imagine ‘Team China’ were active to support the market from Evergrande contagion.
PM the market sold down on news of enforced power cuts as provinces seek to meet their reduced power and emission targets. Clean energy names +VE

Shanghai Composite -29pts (-0.8%) @ 3,613 T/O US$86,627m -4% DoD
Shenzhen Composite -30pts (-0.2%) @ 14,358 T/O US$103,211m -3% DoD
ChiNext Composite -10pts (-0.3%) @ 3,477

CHINA DATA
China's National Health Commission reported 54 confirmed COVID-19 cases yesterday (23rd), with 30 of them being local infections (15 in Heilongjiang and 15 in Fujian).

HONG KONG 
Pre market opened @ 24,487 -23pts vs -146pts ADR’s mixed open
Southbound Bond Connect started today. Market initially sold down to 24,340 level in the first 30 minutes. Rebounded back to 24,600 before easing back to flat at lunchtime. PM the market was trading sideways for the first hour but started selling down from 2pm on news of industrial power cuts in more provinces in China as they try and meet the reduced targets for energy and emissions -VE for output and the recovery. Market sold down 300pts in an hour. Support at 24,096 with a small bounce into the close.
The lack of information on Evergrande worrying some investors. Short week next week and quarter end; then Golden Week in China.

BUYBACKS
TENCENT (00700.HK)'s statement disclosed that, on 23 September, it has repurchased 220,000 shares of the company on the Stock Exchange, at a price ranging between $456.6-466.8, involving approximately $102 million.

HONG KONG DATA
HK reported 7 new covid case; 
imported. Now 38 days without a local case.

SHORT SELLING HSI Friday 20% vs 17.9% Thursday
Top shorts 
Wharf REIC (1997) 51%, Haidilao (6862) 46%, Country Garden (2007) 44%, Henderson Land (12) 41%,  China Overseas (688) 36%, Power Assets (6) 36%,  HKEX (388) 33%, MTR (66) 33%, Meituan (3690) 31%, CH Res Land (1109) 31%, Wuxi Bio (2269) 31%, CM Bank (3968) 30%, Mengniu Dairy (2319) 30%,  Petrochina (857) 30%, Bud Apac (1876) 30%,  Galaxy Ent (27) 30%, Ali Health (241) 29%, Bank of China (3988) 29%, AAC Tech (2018) 28%, BYD (1211) 28%,  CKI (1038) 25%, CLP  (2) 25%, HSBC (5) 25%,  BoC HK (2388) 25%

After Market News
Reports that Beijing has taken oversight of Evergrande’s accounts to ensure existing prepaid units are built and delivered.  
That is likely to constrain the groups ability to pay bond holders. 

CALC (01848.HK) announced that China Asset Leasing, a subsidiary of the Company, entered into the Agreements to purchase four lease-attached aircraft from ARI's China Aero Assets Leasing. 
The consideration payable by the Company represents a discount of approximately 10% against the valuation of the Aircraft.

HKRH (02882.HK) Profit Warning it announced that the group is expected to record a substantial decrease in loss by more than 70% for the year ended 30 June 2021 as compared to the financial year ended 30 June 2020.

In the Executive Committee meeting of The Real Estate Developers Association of Hong Kong (REDA) held today (24th), members discussed a story reported by a foreign news agency of the alleged concerns of unnamed Mainland officials about Hong Kong’s housing problem, according to REDA's statement. 
Members of the Executive Committee clarified that they had not heard of the subject of the story and neither had REDA.  As a member of the society, REDA has all along been paying care and attention to the livelihood and economic issues of Hong Kong including the land and housing supply problem. It has been working closely with the SAR HKRH (02882.HK)  -0.010 (-2.941%)   announced that the group is expected to record a substantial decrease in loss by more than 70% for the year ended 30 June 2021 as compared to the financial year ended 30 June 2020.Government and the various stakeholders to address these issues. Under the new political environment of good governance, REDA and its members will continue to support the SAR Government in increasing land and housing supply for the social and economic well being of Hong Kong.

Hong Kong ranked third globally in the Global Financial Centres Index (GFCI) 30 Report published by Z/Yen from the United Kingdom and the China Development Institute from Shenzhen, 
rising by one place from the March issue of the index this year.
The result is an unequivocal affirmation of Hong Kong's status and strengths as a leading global financial centre as it has remained among the top in various areas of competitiveness, remarked a government spokesman.

People's Bank of China (PBOC) announced that the trading and speculation activity of virtual currency is posing disturbance to the financial order and is inducing other illegal and criminal activities, which severely threatens the property safety of the people.

The PBOC expressed that Chinese financial institutions and non-bank payment institutions are strictly forbidden from providing services to virtual currency-related businesses, in order to prevent relevant risks of virtual currency speculation and to safeguard national security and social stability.

TENCENT (00700.HK) announced a notice on further stringent management to prevent minors' online game indulgence as well as actual arrangements for holidays and time off in lieu. 
Accordingly, Tencent Games will impose a curb and a ban on underage users of online games operated in Mainland China before and after the National Day holiday.  Minors may login between 8-9pm during 24-25 September, 1-8 October and on 10 October. They will be banned from playing games during 26-30 September and on 9 October.

HKE HOLDINGS (01726.HK) Positive Profit Alert. 
The Group is expected to record an increase in its consolidated net profit to about SGD250,000 for the year ended 30 June 2021 on an annual basis.

Centa-City Leading Index (CCL) last stood at 190.55, the second highest of all time, up 0.75% WoW, which represents the largest rise over the past eight weeks.
CCL Mass last posted 193.33, +0.49% WoW.
CCL (small-and-medium units) +0.59% WoW to post at 190.82.
CCL (large units) +1.60% WoW to post at 189.12.

IPO
BRONCUS-B (02216.HK), debut 
closed HK$15.00 -20%  vs the listing price of $18.7.

Regional Markets

Australia
Market opened flat but has trended lower through the session; finding support around the 7,340 level and then work sideways and closed -28pts (-0.4%) @ 7,343. Most sectors in the red, the exception being Energy. Health, mining and real estate were the biggest weights, with all other sectors see-sawing throughout the morning. Press reports European automakers are in discussions with Australian rare earths explorer Arafura Resources about sourcing elements that help power electric cars from outside China, which dominates global supply.
Japan
Pre market Inflation data mixed but the PMI data better than F/cast
Nikkei re-opened higher and tested 30,200 in early trades and then traded around that level in the morning session. PM the market worked slight higher before dipping into the close +609, (+2%) @ 30,249. Huge volume with all sectors +VE with Cyclicals, Shipping, Financials, Autos and Tech leading.
Sony at year high on the Zee TV deal in India.
Laggards Electric Power, Construction and Retail.
Topix traded in a similar fashion. Closed +47pts (+2.3%) @ 2,091
Data
Inflation Rate Aug -0.4% YoY vs -0.3% Jul (F/cast was -0.1% )
Inflation Rate Aug -0.2% MoM vs +0.2% Jul (F/cast was +0.3%)
Core Inflation Rate Aug 0.0% YoY vs -0.2% Jul (F/cast was -0.1% )
Inflation Ex Food & Energy Aug -0.5% vs -0.6% Jul (F/cast was -0.4% )
Flash PMI’s
Manufacturing Sept 51.2 vs 52.7 Aug (F/cast was 51.5)
Services Sept 47.4 vs 42.9 Aug (F/cast was 43)
Composite Sept 47.7 vs 45.5 Aug (F/cast was 46)
S Korea 
Kospi opened higher after PPI data better than expected and initially traded around the 3,140 level but then sold down heavily at 10:30am to 3,120 before a bounce to flat but trended slightly lower to close -2pts (-0.1%) @ 3,125
Kosdaq opened higher and tested to 1,044 but then eased back to 1,042 but then sold down to 1,036 (the previous close) and traded around that level and closed +1pts (+0.1%) @ 1,037
Data out
PPI Aug 7.3% YoY vs 7.1% Jul (F/cast was 7.7%)
PPI Aug 0.4% MoM vs 0.7% Jul (F/cast was 1%)
Taiwan 
Taiex opened higher and tested to 17,273 in the first 35 minutes. Then eased back but effective traded sideway around 17,250 level for most of the session before easing slightly in the last hour to close +182pts (-1.1%) @ 17,260. Property weak as Central Bank tightens up on loans criteria. Industrials and Materials leading the market.
T/O US$9.94bn vs US$9.03bn Thursday
CECC reported 8 new covid cases
(7 imported)
After Market 
Export Orders Aug +17.6% YoY vs 21.4% Jul (F/cast was +18%)

HK/CHINA Connect Flows
Shanghai
Northbound RMB 67,940m Sell 33,488m vs 34,451m Buy
Southbound HK$   16,896m Sell  8,259m vs   8,637m Buy
Shenzhen
Northbound RMB 69,510m Sell 33,871m vs 35,638m Buy
Southbound HK$  22,323m Sell   8,799m vs  13,523m Buy

Movers
Active Heavyweights
BABA (09988.HK)  -4.100 (-2.763%)    Short selling $863.42M; Ratio 19.509%    closed at $144.3, down 2.8%
PING AN (02318.HK) +1.150 (+2.166%) Short selling $408.06M; Ratio 14.861% closed at $54.25, up 2.2%
AIA (01299.HK) -1.900 (-2.149%) Short selling $515.10M; Ratio 19.215% closed at $86.5, down 2.1%
HKEX (00388.HK) -8.000 (-1.652%) Short selling $419.28M; Ratio 33.378% closed at $476.4, down 1.7%
MEITUAN (03690.HK) +2.000 (+0.824%) Short selling $1.86B; Ratio 31.298% closed at $244.6, up 0.8%
TENCENT (00700.HK) -3.000 (-0.648%) Short selling $737.92M; Ratio 9.546% closed at $460.2, down 0.6%

HSI & HSCEI Constituents on Move:
EVERGRANDE (03333.HK) -0.310 (-11.610%) Short selling $38.14M; Ratio 5.759% closed at $2.36, down 11.6%
KUAISHOU-W (01024.HK) -9.300 (-9.672%) Short selling $427.97M; Ratio 16.669% closed at $86.85, down 9.7%
ENN ENERGY (02688.HK) -12.300 (-9.325%) Short selling $219.94M; Ratio 28.919% closed at $119.6, down 9.3%
XINYI GLASS (00868.HK) -1.850 (-7.327%) Short selling $132.28M; Ratio 18.510% closed at $23.4, down 7.3%
SUNAC (01918.HK) -1.060 (-6.901%) Short selling $113.91M; Ratio 18.344% closed at $14.3, down 6.9%
ALI HEALTH (00241.HK) -0.760 (-6.355%) Short selling $97.00M; Ratio 28.672% closed at $11.2, down 6.4%
LI NING (02331.HK) -5.100 (-5.437%) Short selling $269.87M; Ratio 10.128% closed at $88.7, down 5.4%
CHINA GAS HOLD (00384.HK) -1.200 (-5.310%) Short selling $85.49M; Ratio 25.847% closed at $21.4, down 5.3%
EVERG SERVICES (06666.HK) -0.200 (-4.415%) Short selling $13.00M; Ratio 6.577% closed at $4.33, down 4.4%
LONGFOR (00960.HK) -1.500 (-4.348%) Short selling $50.65M; Ratio 13.982% closed at $33, down 4.3%
SANDS CHINA LTD (01928.HK) -0.700 (-4.326%) Short selling $121.37M; Ratio 23.996% closed at $15.48, down 4.3%
GALAXY ENT (00027.HK) -1.750 (-4.167%) Short selling $216.83M; Ratio 29.820% closed at $40.25, down 4.2%
HENDERSON LAND (00012.HK) -1.100 (-3.685%) Short selling $73.03M; Ratio 41.349% closed at $28.75, down 3.7%
CITIC (00267.HK) -0.320 (-3.544%) Short selling $26.19M; Ratio 12.398% closed at $8.71, down 3.5%
SHK PPT (00016.HK) -3.050 (-3.089%) Short selling $196.80M; Ratio 21.579% closed at $95.7, down 3.1%
CHINA FEIHE (06186.HK) -0.400 (-3.040%) Short selling $31.17M; Ratio 7.971% closed at $12.76, down 3%

HSMI & HSSI Constituents on Move:
KINTOR PHARMA-B (09939.HK) -17.550 (-25.602%) Short selling $161.56M; Ratio 13.148% closed at $51, down 25.6%
DONGYUE GROUP (00189.HK) -4.710 (-19.915%) Short selling $164.19M; Ratio 6.682% closed at $18.94, down 19.9%
HENGTEN NET (00136.HK) -0.190 (-10.053%) Short selling $24.99M; Ratio 11.075% closed at $1.7, down 10.1%
CHINA POWER (02380.HK) +0.280 (+7.330%) Short selling $126.47M; Ratio 13.379% closed at $4.1, up 7.3%, hitting new high
SITC (01308.HK)  +1.500 (+4.412%)    Short selling $68.67M; Ratio 16.482%    closed at $35.5, up 4.4%, hitting new high

Market News
Hong Kong developers were notified to safeguard national interest using their resources and influence, while helping with the home shortage problem, reported Reuters earlier. 
The Real Estate Developers Association of Hong Kong (REDA) is set to hold a closed-door meeting this afternoon (24 September), likely bringing up the matter for discussion.  Real estate sector representatives including REDA President Keith Kerr, Chairman of REDA's Executive Committee Stewart Leung, SHK PPT (00016.HK) Executive Director Adam Kwok, HENDERSON LAND (00012.HK) Executive Director Augustine Wong, etc. will attend the meeting.

China's key glass contracts (FGO) dived 7.04% to last post at RMB2,245/ ton, reported Sina Finance. XINYI GLASS (00868.HK) eroded 7.3%

China has hit the ground running by taking stronger regulatory or antitrust actions against dotcom platforms, and education and training sectors in recent years, sparking market concerns over a possible spillover to Hong Kong in the next step.  
Hong Kong developers were told to safeguard national interests and help resolve the home shortage issue, reported Reuters last Friday. In other words, they were informed that the gaming rules have changed already without tolerance of monopolistic behaviors. Property names were in sell-off on Monday following the news, with an over 9%-13% slide in CK ASSET (01113.HK), SHK PPT (00016.HK), HENDERSON LAND (00012.HK) and NEW WORLD DEV (00017.HK).  According to UBS' report, farmland resumption can be an alternative to resolve the prevailing home shortage in Hong Kong.

Tianyancha App showed that Tencent Technology (Shenzhen) has recently applied for multiple trademarks for "Game for Peace Metaverse" and "Oasis Era Metaverse", 
reported Chinese media. The tech giant has applied for close to one hundred metaverse-related trademarks in September, such as "Honor of Kings Metaverse" and "TiMi Metaverse".

Overnight HIBOR last posted at 0.0353%, according to HKAB. 
Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.06161%, marking a 1-month low.

The Shenzhen Municipal People's Government announced that it will issue offshore Renminbi (RMB) municipal government bonds not exceeding RMB5 billion in Hong Kong in October, which will be listed on the Stock Exchange. The bonds will be issued in two-year tenor, three-year tenor and five-year tenor. The three-year and five-year bonds are green bonds.  In respect of interest paid or profit received, the Hong Kong Government plans to exempt the payment of profits tax, said Financial Secretary Paul Chan.

Chinese state-owned media People's Daily published an article, underlining that the internet platforms' respective barriers are preventing direct sharing of information, which affects the users' experience and violates their rights. In addition, platforms' barriers would also pose disturbance to market order and fair competition, which is detrimental to the benign and sustainable development of the internet industry and platform economy, the article added.  The article remarked that the platform companies ought to be aware of the fact that inter-connection is the necessary condition for the internet sector to realize high-standard development. Enabling users the safe and smooth internet access is the only pathway to enhance the competitiveness of one's own and to gain market recognition. The article concluded by urging the platforms to actively scrap the barriers and to cooperate in cultivating an open and sharing ecology within the internet sector.

EVERGRANDE (03333.HK) has resolved the interest payment for a batch of onshore bonds earlier this week but is still confronted with the interest of USD83.5 million due Thursday (23rd) for a batch of USD2 billion offshore bonds, along with another interest payment of USD47.5 million maturing next week, reported Reuters.  The sources suggested that, some of the bond investors have already lost hope on receiving the interest payment for the USD2 billion offshore bonds on Thursday but are still expecting additional information on payment arrangement from EVERGRANDE.

HSBC announced that it has completed the first set of trades for several mainland Chinese institutional clients under "Southbound Bond Connect", 
making these among the market’s first batch of deals under the new route.  HSBC is pleased to have successfully executed the first set of trades for the mainland clients under the Southbound Bond Connect this morning, remarked David Liao, co-chief executive of the bank. Liao further added that the market is reacting very positively to the new route.

Pre Market News
STANCHART (02888.HK)'s Group Chief Financial Officer Andy Halford expressed that the group has no direct exposure or substantial indirect exposure to EVERGRANDE (03333.HK), 
and that the debt crisis of the Chinese real estate developer will not deter the group from investing in China, reported Reuters.  Even though one aspect of the Chinese economy is facing decline at the moment, China is still tracking an extremely strong economic growth, compared to most parts of the world. The group's investment enthusiasm in China, therefore, will not be dented, said Halford.

Nike, Inc. (NKE.US) announced that, for the first fiscal quarter ended August 2021, the company's profit stretched 23% to USD1.87 billion, while the revenue rising 15.7% to USD12.25 billion, beating market's average estimate of USD12.46 billion.  
Nike chopped the sales forecasts for this fiscal year from the original low double-digit growth to mid single-digit growth, as the company foresees the tight supply chain to induce issues such as soaring freight rate and delayed shipment of products during the peak holiday shopping season.

Bank of England Deputy Governor Sam Woods said British lenders had no direct material exposures to EVERGRANDE (03333.HK), with little concern in the first round effect, reported Reuters. 
However, Woods was cautiously optimistic that China's authorities would like to find a way through the turmoil without creating a major issue. Therefore, he did not expect the Evergrande crisis to "go badly wrong" in the base case.

TRIP.COM-S (09961.HK) announced the interim results for this year. 
The 1H non-GAAP net income amounted to RMB524 million, compared to a net loss of RMB3.376 billion for the corresponding period of the previous year. The 2Q non-GAAP net income amounted to RMB728 million, compared to net loss of RMB1.155 billion and RMB204 million for the corresponding period of the previous year and for 1Q21 respectively.

EVERGRANDE (03333.HK)'s EVERG VEHICLE (00708.HK) owed wages to some employees and failed to pay certain suppliers for plant equipment on time, Bloomberg citing sources.  
Most EVERG VEHICLE staff are paid by two instalments at the beginning of every month and again on the 20th. However, some mid-level managers have not received the 2nd installment for September yet.

Richard Li's FWD Group has filed for a listing in the United States with a valuation between US$13 billion and US$15 billion, 
reported Reuters. The insurance company targets to raise as much as US$3 billion.

Fang Heying, the President of CITIC BANK (00998.HK) , has expressed that, as of the end of August 2021, the remaining value of the unified credit granted to EVERGRANDE (03333.HK) has been significantly reduced compared to 2018 levels,
reported foreign media. The bank is fully aware of the potential risks in dealing with the real estate developer and has already made impairment provisions, Fang added.

Local governments in China are asked by authorities to brace for EVERGRANDE (03333.HK)'s potential downfall, The Wall Street Journal citing sources.  
Local-level agencies and SOEs have been instructed to step in only at the last moment should the debt-saddled group fail to manage its affairs in an orderly way, the people said.

Mango (300413.SZ)  announced that the company's board has approved the proposal for Hangzhou Ali Venture Capital Co., Ltd. to conduct a negotiated transfer of the latter's 93.6479 million shares in Mango (accounting for 5.01% of the company's total share capital). 
Calculating with the closing price of RMB41.31 on the day, the relevant stocks have a market worth of RMB3.87 billion.

The vice-president of the Supreme People's Court of China, He Rong, expressed that the court will soon release a batch of typical case studies on anti-monopoly and anti-unfair competition, 
along with a statutory interpretation on anti-unfair competition, with the aim to propel fair development among enterprises of diverse scales and to safeguard the legitimate rights of the consumers.

Evergrande Wealth made a reply on the physical asset payment time, according to Securities Times. 
Based on registered fund raisers across provinces, the online house selection for monthly physical asset payment will be completed by the 28th of each month.

New brand survival rate is one of the core strategies of Tmall, said BABA-SW (09988.HK) Vice President Chui Xue at the retailer's new brand strategy conference. Accordingly, Tmall unveiled a plan to incubate 2,000 potential new brands by pouring 10 billion Yuan in five years.Farizon Auto (or Yuan Cheng Auto) will unveil a concept heavy duty truck model this year, supporting multiple NEV formats like BEV (including battery-swapping) and methanol use, Zhejiang Geely Holding Group Chairman Li Shufu was quoted as saying by Gasgoo.com.

Huawei has officially released the nova 9 series, which are equipped with a fully upgraded video system, utilizing innovative technologies to provide new possibilities to video recording.  The nova 9 series' selling prices start from RMB2,699 with that of Huawei nova 9 Pro starting from RMB3,499.

During a teleconference, the People's Bank of China asked all branches to attach great value to promoting the standing lending facility (SLF) operation mode reform, while prioritizing the additional RMB300-billion relending quota rollout for small and medium-sized enterprises (SMEs).CFLD (600340.SH)  made a trading suspension announcement regarding a significant transaction. The Company has started formulating an integrated risk mitigation plan under the guidance of the provincial and municipal governments.  Trading of CFLD's shares will be suspended from this morning. The Company will complete the communication tasks for the plan and resume trading as soon as possible.

Comments
* The email will not be published on the website.