Aug 6 HK/China Wrap Closed lower caution ahead of Trade data Saturday


06 Aug

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

HSI 
-25pts (-0.1%) 26,179 HSCEI -23pts (-0.3%) 9,274 T/O HK$148.04bn (-12.1% DoD)  

CHINA CSI 300 closed -27pt (-0.6%) @ 4,922
CSI 300 opened lower with concerns over the covid resurgence likely to slow the recovery. China's National Health Commission reported 124 confirmed COVID-19 cases yesterday (5th), with 80 of them being local cases - VE. Also credit concerns as Evergrande credit rating downgraded. Market initially sold down to 4,910 level, bounced but trended lower into lunch. PM saw an initial spike but then sold down to day low 4,890 level before rebounding to close -27pts (-0.5%) @ 4,922
Data on Saturday Balance of Trade, Exports,Imports, Foreign Exchange Reserves.
Data on the open Monday Inflation Rate & PPIShanghai Composite -8pts (-0.2%) @ 3,448 T/O US$72,270.33 -4% DoD
Shenzhen Composite -45pts (-0.3%) @ 14,827 T/O US$109,868 -5% DoD
ChiNext Composite Index -24pts (-0.6%) @ 3,674

CHINA DATA
China's National Health Commission reported 124 confirmed COVID-19  cases yesterday (5th), 
with 80 of them being local cases (61 recorded  in Jiangsu; 9 in Hunan; 6 in Hubei; 1 in Inner Mongolia; 1 in Henan; 1  in Hainan and 1 in Yunnan).

HONG KONG

Pre market opened @ 26,263 +58pts vs +42pts ADR’s but then sold down to test 26,000 support which held and market bounced and worked back to flat by 10am. Then sold down to 26,060 before seeing support and worked back to flat at lunchtime. PM traded sideways to close -25pts flat @26,179
Tencent +3.3% seeing a rebound other Ecommerce names mixed. BabyFormula Milk names weak as media calls for more regulatory control. Kuaishou -4.7% off day lows; calls for more control over ‘vulgar’ content and unlock of IPO shares. Evergrande -4.6% on credit rating downgrade

HONG KONG DATA
HK reported no new local untraceable covid cases 
and 2 imported cases.
MARKET COMMENTARY
* MILK FORMULA PROVIDERS dropped after Xinhua News posted that experts warn that the marketing of formula milk powder affects breastfeeding. Stocks including H&N INTL (1112 HK-2.5%) AUSNUTRIA (1717 HK-1.2%) CHINA FEIHE (6186 HK-4%) YASHILI INTL (1230 HK-5%) slumped.
* E-COMMERCE/INTERNET trade mixed amid regulatory concerns. KUAISHOU (1024 HK-5.1%) and NETEASE (9999 HK-1.7%) slumped after state-run Economic Daily commented that China’s live-streaming video companies need to set up a recommendation system and algorithm for high-quality content in line with users’ expectations. It says the live-streaming platforms have large number of “vulgar” videos that set a “negative” example for the public. TENCENT (700 HK+3.8%) staged a rebound from yesterday's sell-off, and after being added onto Goldman's conviction list. ALIBABA (9988 HK+0.6%) JD.COM (9618 HK+1.2%) MEITUAN (3690 HK+1.3%) BIDU (9888 HK+1.2%).
* TECH & COMPONENTS traded in divergence. SUNNY OPT (2382 HK-4.7%) TRULY (732 HK-2.9%) saw profit-taking, but semicon remain strong amid huge demand for chips across industries. SMIC (981 HK+0.9%) HUA HONG (1347 HK+3.7%).
* CH PROPS traded under pressure on policy-tightening worries following Shanghai and Hangzhou announced new home-curbing measures. EVERGRANDE's (3333 HK-4.5%) rating got further downgraded S&P, AGILE (3383 HK-1.3%) LONGFOR (960 HK-2%) KWG (1813 HK-3%).
* AUTOS traded lower on consolidation, but BYD (1211 HK+1.7%) advanced on a market rumor that BYD is about to supply Tesla with "blade batteries" in the second quarter of next year. BYD's July vehicle sales +83% YoY to 57,410 units. July NEV sales 50,492 units vs 15,100 units a year ago. DONGFENG (489 HK-2%) July Vehicle Sales 192,340 units, +16.1% YoY. GEELY (175 HK-2.7%) GREAT WALL (2333 HK-1.7%). ZTE (763 HK-2.3%) dropped ahead of HUAWEI's earnings, which reported quarterly sales slump 38% after close.
* OTHER MOVERS: XINYI GLASS (868 HK+5.7%), the company announced bought back 11.93m shs in the past 2 days. DONGYUE GROUP (189 HK+6.5%) rebound after consolidation as supply for PVDF for making lithium batteries remain tight.

Regional Markets
Australia
Market opened lower with the weak Services index and covid concerns and traded in a tight range a low of 7,500 in the morning and then closed at the day high+27pts  (+0.4%) 7,538 a new high.  RBA’s Gov Lowe said it was likely the economy would avoid a recession due to the covid resurgence,  he expects a strong bounce. News Corp +VE along with ResMed.    
Data out
Services Index Jul 51.7 vs 57.8 Jun (F/cast was 58)
Japan
Pre market data was weak but market is focused on earnings and despite opening lower the market rallied to 27,889 in early trades. But it was unable to hold and eased back to flat by mid morning. It then worked better into lunch. PM opened higher and traded sideways; closed +92pts (+0.3%) @ 27,820.  Focus was on results  Market will be closed on Monday.
Topix traded in a similar pattern closed flat @ 1,929  
Data out Pre Market
Household Spending Jun -3.2% MoM vs -2.1% May (F/cast was +2.2%)
Household Spending Jun -5.1% YoY vs +11.6% May (F/cast was +0.4%)
Ave Cash Earnings Jun -0.1% YoY vs +1.9% May (F/cast was +2%)
Foreign Exchange Reserves Jul $1386.5b vs 1376.5b Jun
Out Later
Coincidence Index Jun 94.0 vs 92.1May revised (F/cast was 93)
Leading Economic Index Jun 104.1 vs 102.6 May (F/cast was 103)
S Korea
KDCA announced 1,704 new covid cases (-72 DoD); and social distancing measures to be extended.  
Market continues to focus on results. Pharma +VE as government to fund the sector to become a top global producer. Kakao Bank IPO debut strong +VE
Kospi opened higher and tested up to 3,288 but then reversed and sold down to 3,260 level around 11:20am and then worked sideways/slightly better. Closed -6pts (-0.2%) @ 3,270
Kosdaq similar pattern; support at 1,056 and closed flat @ 1,060
Data out
Current Account Jun $8.85b vs $10.76b May (F/cast was 12b)
Taiwan
Taiex opened lower and sold down to 17,470 in the first 25 minutes then saw a rebound a trade around the 17,550 level but then sold down to close -77pts (-0.4%) @ 17,526 Semi cons weak following the Phili Semicon index.
TSMC -0.8% despite expecting to expand the order volume for chips of 16nm or above from August while also raising the prices by approx 10-15%, marking a relatively major price hike from the semiconductor maker in this year, reported Taiwanese media.
CECC reported 12 new covid cases (2 Imported)
T/O was US$ 14.31bn

CONNECT FLOWS
Shanghai
Northbound RMB 55,347m Sell 28,218m vs 27,130m Buy
Southbound HK$  20,082m Sell   9,250m vs 10,832m Buy
Shenzhen
Northbound RMB 71,206m Sell 35,296m vs 35,910m Buy
Southbound HK$ 23,854m Sell 9,625m vs 14,229m Buy

Active Heavyweights
TENCENT (00700.HK)  Short selling $801.27M; Ratio 4.116%    closed at $453.6, up 3.3%
HKEX (00388.HK)  Short selling $493.10M; Ratio 24.599%    closed at $529.5, up 1.4%
MEITUAN (03690.HK)  Short selling $529.71M; Ratio 13.652%    closed at $213.8, up 1.2%
PING AN (02318.HK)  Short selling $412.62M; Ratio 29.195%    closed at $68, down 0.9%
BABA (09988.HK)  Short selling $701.18M; Ratio 23.495%    closed at $193.5, up 0.5%

HSI & HSCEI Constituents on Move:
WUXI BIO (02269.HK)  Short selling $240.00M; Ratio 14.022%   closed at $123.5, down 4.9%
SUNNY OPTICAL (02382.HK) Short selling $417.05M; Ratio 27.328% closed at $237.6, down 4.7%
KUAISHOU-W (01024.HK) Short selling $628.40M; Ratio 9.039% closed at $84.9, down 4.7%
EVERGRANDE (03333.HK) Short selling $18.19M; Ratio 5.531% closed at $5.2, down 4.6%
CHINA FEIHE (06186.HK) Short selling $367.98M; Ratio 28.005% closed at $14.06, down 4.4%
ANTA SPORTS (02020.HK) Short selling $106.56M; Ratio 6.954% closed at $170.9, down 3.6%
EVERG SERVICES (06666.HK) Short selling $6.08M; Ratio 1.481% closed at $5.07, down 3.4%
XINYI SOLAR (00968.HK) Short selling $87.00M; Ratio 13.194% closed at $17.38, down 3.1%
CNOOC (00883.HK)  Short selling $22.66M; Ratio 2.016%   closed at $8.09, up 3.1%

HSMI & HSSI Constituents on Move:
FOSUN PHARMA (02196.HK)  Short selling $131.77M; Ratio 9.761%   closed at $67.05, down 10.3%

MARKET HOURS NEWS
.
CAOCAO Mobility's connect company Hangzhou Youxing Technology has included Geely Holding as its shareholder with its register capital grew from RMB366 million to RMB433 million, reported Chinese media.

Over 30 of the most influential American business groups representing retailers, chipmakers, farmers, etc. are urging the US government to resume talks with China and lower tariffs on imports, claiming the Sino-US tension is a drag on the American economy, The Wall Street Journal reported.

The rout in online video industry in China warrants attention since innumerable videos not only present indecent and exaggerated contents but also promote ignorance of health and life safety, entailing negative impact on the public, as an official Chinese media said in its commentary.  The commentary opined that video platform operators should be clear about the causal relationship between content and internet traffic, and return to the correct direction that "content is primal".

Two lawyers from different legal firms in China have respectively received notices from a Chinese court, requesting their cases involving EVERGRANDE (03333.HK)  Short selling $14.20M; Ratio 5.859%   to be transferred to Guangzhou Intermediate People's Court for centralized jurisdiction, Caixin reported.   An individual at the provincial high court confirmed to Caixin that they was notified by the supreme court that all cases involving EVERGRANDE and its affiliates should be handled in bundle at Guangzhou Intermediate People's Court.LI AUTO-W (02015.HK) (LI.US)   plans to price its HK  IPO at $118 per share, 21.3% below the maximum selling price of $150, Reuters' IFR cited sources. It is expected to capture $11.8 billion funds, and list on 12 August.
LI AUTO's US shares settled at US$31.35, down 4.1%, last night.

NEW WORLD DEV (00017.HK)  Short selling $6.86M; Ratio 37.162%   said it had repurchased 794,000 shares of the company on the Stock Exchange on 5 August, involving $29.373 million.BYD COMPANY (01211.HK)  Short selling $335.91M; Ratio 11.961%   Han EV presented the standard endurance luxury car model, priced at RMB209,800 per unit after comprehensive subsidy. The pre-order is available from today, with the delivery projected from September.The 2Q revenue growth was primarily due to the spiking capacity utilization rate as a result of surging customer demand, analyzed Zhao Haijun, Co-CEO of SMIC (00981.HK)  Short selling $202.18M; Ratio 2.976% . Yet Zhao assumed the related uptrend will not last until the next quarter, meaning the high growth may not sustain till 3Q. He expected the 3Q revenue growth to approximate 2-4% QoQ.Neil Shen, Global Managing Partner at Sequoia Capital and Non-executive Director of MEITUAN-W (03690.HK)  Short selling $201.15M; Ratio 11.282%   , offloaded 211,500 MEITUAN-W shares in the market on 30 July, pocketing around $43.3845 million according to shareholding disclosures.

Sinovac's chairman Weidong YIN expressed during the COVID-19  vaccine collaboration international forum held yesterday (5 August) that  Sinovac has sufficient productivity to supply different types of  CoronaVac vaccines
and that the company will file applications to  respective regulatory departments in different countries for clinical  research and emergency use authorizations of the CoronaVac vaccines  targeted towards the Gamma and Delta mutant strains in near-term.
PRE MARKET NEWS

Foreign media reported that ByteDance's education brands have been undergoing downsizing and business reform. 
The report added that the company has shut down most of its online education businesses, sacking at least few hundreds of staff.  ByteDance responded by stating that the reports are not entirely accurate. All employees being laid off were compensated in the form of "N+2" (working years + two months) while employees above certain ranks are permitted to apply for a transfer to other positions, added the company.Macau's gaming sector has displayed structural change, where a number of VIP clients have become direct customers who are not referred by junket promoters, WYNN MACAU (01128.HK)  Short selling $12.58M; Ratio 43.450%   Executive Director Matthew O. Maddox was quoted as saying by Ming Pao.  VIP will certainly not revive to its past level, while premium mass may keep the momentum, Maddox said.

S&P Global Ratings further downgraded EVERGRANDE (03333.HK)  Short selling $14.20M; Ratio 5.859%   and its Hengda Real Estate and Tianji Holding from "B-" to "CCC".  The agency also lowered its long-term issue rating for USD notes issued by EVERGRANDE and guaranteed by Tianji from "CCC+" to "CCC-". The rating outlook was negative.  S&P elaborated that EVERGRANDE was repeatedly applied for asset freezes by other companies, indicating that its liquidity is tight and that its debt repayment risk is escalating. The stock will be downgraded further in the short term, S&P said.

BIDU-SW (09888.HK)  Short selling $14.01M; Ratio 15.196%   's smart driving brand Apollo announced to launch a new generation of autopilot minibus "Apollon II".
The company expressed that the "Apollon II" is equipped with autonomous driving ability no second to that of Robotaxi along with premium intelligent in-vehicle experience, capable to provide smart transportation services according to different standardized scenarios such as public mobility, mobile policing and health management.SD GOLD (01787.HK)  Short selling $11.13M; Ratio 48.816%   announced that SDG Mining (Laizhou), a majority-owned subsidiary of the Company, agreed to acquire 100% equity interests in Dikuang Laijin (which directly holds 55% equity interests of Hongsheng Mining) and 45% equity interests in Hongsheng Mining from SDG Group Co., the controlling Shareholder of the Company, at a consideration of RMB4.667 billion.

XIAOMI-W (01810.HK)  Short selling $152.08M; Ratio 13.761% 's official Mi Store in Portugal has started to accept cryptocurrency payments, reported U.Today.  
XIAOMI-W's Portugal store announced on its social media page that payment in Bitcoin, Ethereum, Tether and Dash are accepted for the purchases of products including smartphones, vacuum cleaners, smart watches, etc.

CHINA TELECOM (00728.HK)  Short selling $20.36M; Ratio 5.402%   (601728.SH) announced that following the completion of preliminary price consultations with consultees on 3 August 2021 and 4 August 2021, the company will issue 10.396 billion A Shares
(prior to the exercise of the over-allotment option) to 11.956 billion A Shares (after the exercise of the over-allotment option in full) at the issue price of RMB4.53 per A Share. The IPO is estimated to raise RMB54.16 billion maximum617,200 Macao residents have made appointments for the universal NAT program as of 11pm on 5 August, representing 90.35% of the city's population, said Macao's Novel Coronavirus Response and Coordination Centre.   483,800 people have already been tested, accounting for 70.83% of the population. The test results available to 154,800 folks are all negative.

Several Chinese experts expressed, during the World Breastfeeding Week 2021 meeting organized by Chinese Nutrition Society
, that the marketing of infant milk formula products is a determining factor for pregnant women when deciding whether to breastfeed or not, reported Xinhua News Agency. It should therefore, the experts opined, be strictly regulated.New energy passenger vehicles reached 2.35 million units worldwide for the first half of 2021, said Cui Dongshu, secretary general of the China Passenger Car Association (CPCA). Of which, China's new energy PVs made up 47% of the world's total.

Mainland China has been an advocate for technological development serving the collective advancement of humanity without politicizing tech problems,
stressed Xiao Yaqing, Minister of Industry and Information Technology, at the G20 Digital Economy Ministers' Meeting 2021. Equally, China encourages the creation of an open, fair and non-discriminatory digital economic environment, said Xiao.
People's Daily's foreign version published an article, stating that as the major "battlefield" of decarbonization, the energy sector accounts for over 80% of China's total carbon emission and any rash movement to expedite the reduction of carbon emission could easily result in severe damage to the industry's skeleton
as well as potential threat to the country's economic growth in the future and energy safety.
The article urged companies in relevant sector to pursue decarbonization with a realistic framework and consideration to economic development requirements.
GREENTOWN CHINA (03900.HK)  Short selling $3.94M; Ratio 22.181%   announced that for the first seven months of 2021, Greentown Group recorded a saleable area of about 5.44 million sqm, with a contracted sales amounting to RMB152.3 billion (increased by 94% year-on-year); of which approximately RMB79.1 billion was attributable to the Greentown Group.MGM CHINA (02282.HK)  Short selling $3.83M; Ratio 20.879%   announced the results for the six months ended June 30, 2021. The loss narrowed to $1.733 billion from $2.86 billion in the same period last year, with LPS of 45.6 cents. No interim dividend was declared.STANCHART (02888.HK)  Short selling $486.26K; Ratio 3.131%   disclosed that on 4 August, the company repurchased 1.214 million shares on London Stock Exchange, involving approximately GBP5.39 million.

IGG (00799.HK)  Short selling $16.09M; Ratio 20.322%   announced the results for the six months ended 30 June 2021. Net profit reached HK$577 million, down 44% year-on-year.  EPS  was 49.01 cents. An interim dividend of 14.5 cents per share was declared.CHINA AOYUAN (03883.HK)  Short selling $4.20M; Ratio 32.892%   announced that the Group’s accumulated property contracted sales for the first seven months of 2021 was RMB77.19 billion in total, representing an increase of 28% over the corresponding period of 2020.

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