July 13 HK/CHINA wrap Strong China data but worries remain. T/O flat DoD. HK rallies but China flat.


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HSI +448pts (+1.6%) 27,963 HSCEI +168pts (+1.7%) 10,113 T/O HK$155.7bn (+0.7% DoD)

Europe
DAX & CAC aslightly weak open with German & French Inflation inline with f/casts. FTSE slightly higher as BoE Financial Stability Report allows for UK banks to resume dividends.
Data
German Inflation Jun +2.3% YoY vs +2.5% May (F/cast was +2.3%)
German Inflation Jun +0.4% MoM vs +0.5% May (F/cast was +0.4%)
French Inflation Jun +1.5% YoY vs +1.4% May (F/cast was +1.5%)
French Inflation Jun +0.1% MoM vs +0.3% May (F/cast was +0.2%)
Due later IEA Oil report

US Futures 
Opened flat Dow +13pts, S&P flat with NDX +0.05% ahead of bank earnings. Have eased back during Asian/Euro hours currently Dow -20pts, S&P unch and NDX slight +VE.
Ahead NFIB Business Optimism, Inflation, Redbook, Budget Statement, After market API Crude Stock Change.

Biden team preparing a digital trade deal in Asia to counter China’s advantage.  In the FT; Biden to warn US companies about operating in China; citing Chinese access to data and a law that will allow  sanctions on people who enable foreign penalties on Chinese groups and officials.


CHINA
CSI 300 closed +9pts (+0.2%) @ 5,142
CSI 300 opened lower but rallied to 5,150 then trended lower in very choppy trading to flat at lunchtime. Better than expected trade data out around 11am having little impact as Customs briefing talks about a weaker 2H. News of more defaults in the Property sector -VE for sentiment. PM saw initially sold down to 5,115 level beforere bounding to flat and then grinding higher resistance at 5,143 level.
Team China giving support but sentiment remains weak ahead of Thursday’s GDP and other data. Investor worried about debt defaults. Turnover of Shanghai and Shenzhen stock markets exceeded RMB 1 trillion for the 9th consecutive trading day.
Leaders were cloud gaming, liquor, silicone, and BIPV concepts were strong all day with coal, electricity, and carbon neutral concepts rising in the afternoon.
Laggards were semiconductor, military, and brokersAfter market the banking regulator (CBIRC) issued a directive to prevent local governments increasing their current debt positions. The PBoC was also out making statements about policy being unchanged after the RRR cut and that policy had returned to pre-pandemic norms.

Shanghai Composite +19pts (+0.5%) @ 3,567
Shenzhen Composite +28pts (+0.2%) @ 15,189
ChiNext Composite Index -7pts (-0.2%) @ 3,644

CHINA DATA
Data out around 11am
Balance of Trade Jun $51.53 vs 45.53b May (F/cast was 40b)
Exports Jun 32.2% YoY vs 27.9% May (F/cast was 24%)
Imports Jun 36,7% YoY vs 51.1% May (F/cast was 32%)

Earlier the Customs reports came out
In 1H21, China's exports to "Belt & Road" countries gained  29.1% yearly to RMB3.03 trillion, whilst imports climbed 25.6% to  RMB2.32 trillion, according to the statistics of the General  Administration of Customs of the PRC (GAC).

China's general trade imports and exports value burgeoned 30.7% YoY to RMB11.19 trillion, representing 61.9% of the country's total foreign trade value, according to statistics from General Administration of Customs of the PRC (GAC). The figure edged up 1.7 ppts from the same period in 2020.
According to the statistics from General Administration of Customs of the PRC (GAC), for the first half of the year, the total amount of imports and exports in foreign trade recorded at RMB18.07 trillion, up 27.1% year-over-year, realizing a positive year-over-year growth for the 13th consecutive month, reported CCTV.

HONG KONG

HSI Pre market opened @ 27,694 +179pts vs 106pts ADR’s
After some initial weakness rallied strongly to 27,900 in the first 30 minutes and then 28k in the next 30 minutes. Then traded around the 28k level. PM saw the market intially sell down to 27,900 before a bounce and then traded around 27,970 through the afternoon. HSBC and Standard Chartered rallied in the PM on news the BoE would allow them to pay dividends.
E commerce names seeing renewed interest; as Tencent got approval for an acquisition of search engine SOGOU. Drugmakers +VE too.

HONG KONG DATA
Hong Kong reported 1 new imported covid case today

Short Selling Tuesday 14.8% vs 15% Monday
Top Shorts 
Country Garden (2007) 35%, CK Asset (1113) 34%, AIA (1299) 31%,  Ping An (2318) 29%, Bank of China (3988) 28%, Hang Seng Bank (11) 27%, Xinyi Solar (968) 26%, Hengan (1044) 26%, Sunny Optical (2382) 24%.    

AFTER MARKET NEWS

DA YU FIN (01073.HK)  Profit Warning 
announced that based on the preliminary review on the unaudited consolidated management accounts of the Group for the five months ended 31st May, 2021, the Group has recorded a net loss attributable to the shareholders of the Company of approximately HK$3.7 million as compared to a net profit attributable to the Shareholders of approximately HK$10.7 million recorded in the same period last year.

NCI (01336.HK) announced that the accumulated gross premium income of the company for the period between 1 January 2021 and 30 June 2021
was RMB100.61 billion, representing a 3.85% year-over-year increase.

CHOW TAI FOOK (01929.HK) announced a retail sales value (RSV) growth of 69.8% year-on-year for the fiscal quarter ended 30 June 2021.
  The same store sales (SSS) growth was 42.8% for Mainland China and 110.4% for Hong Kong and Macau.

XTEP INT'L (01368.HK) positive profit alert,
announcing that the group is expected to record a significant increase of not less than 65% in its unaudited consolidated profit attributable to ordinary equity holders of the company for the six months ended 30 June 2021 as compared to that for the corresponding period in 2020.  Also, the group announced that the core XTEP brand realized a 40-45% year-over-year retail sell-through growth for the six months ended 30 June 2021 as compared to that for the corresponding period in 2020.

Sun Guofeng, Director of the Monetary Policy Department of the People's Bank of China, suggested looking at the phased upturn in China's producer price index (PPI) from a historical perspective and in an objective way.  On another note, PPI had been noted for its sharp volatility historically. Overall, he expected PPI to stay high in the second and third quarters of 2021, and likely recede in the fourth quarter of 2021 and in 2022.

MARKETS COMMENTARY
*COAL STRONG increasing demand during the hot summer season and tight supply. CH COAL (1898 HK +4.3%) YZ COAL (1171 HK +5.5%).
*TELCOS STRONG after China released the "5G Application Action Plan (2021-2023)".  CH TEL (728 HK +8%) saw a block trade of 4.44m shares CH UNICOM (762 HK +2.2%) CH MOBILE (941 HK +1.6%).
*E-COMMERCE STRONG REBOUND, after TENCENT's (700 HK +3.5%) acquisition of Sogou got approval from China’s anti-monopoly regulator, a signal that suggests clampdowns may be easing. ALIBABA (9988 HK +4%) are among Chinese  firms that weigh bids for UNISPLENDOUR 46.45% stake being sold by Tsinghua Unigroup, which is worth ~US$7.7b.  MEITUAN (3690 HK +3.8%) KUAISHOU (1024 HK +5.7%) BILIBILI (9626 HK +3.4%) BIDU (9888 HK +3.6%).
*HK BANKS STRONG after BOE removed restrictions imposed at the height of the pandemic on the nation's banks to make sure lenders could weather deep losses. The central bank concluded the industry now has enough capital to resume payments as they wish. HSBC (5 HK +3%) STAN CHARTERED (2888 HK +2.3%) HANG SENG BANK (11 HK +1.1%).
*CHINA PROPERTY WEAK as defaults worries on Chinese developers are rising as SICHUAN LANGUANG DEVELOPMENT failed to repay a 900m yuan local bond on Sunday. EVERGRANDE (3333 HK -0.9%) COUNTRY GARDen (2007 HK -0.4%) VANKE (2202 HK -0.2%).
CR LAND (1109 HK +0.5%) June contracted sales +21.8% YoY to 38.7b yuan.
*SPORTWEAR MAKERS saw support following strong export data in June.
POU SHENG (3813 HK +1.1%) 1H net income of 13.08bn yuan rose 11.4% YoY, net income in June -12.1% YoY to 1.94b yuan.
YUE YUEN's (551 HK -0.1%) June consolidated operating income rose 8.7% YoY to US$788m. 1H net income +17.7% YoY to US$4.8bn. LI NING (2331 HK +2.6%) ANTA (2020 HK +0.8%).
*OTHER MOVERS: 
GEELY AUTO (175 HK +5.4%) launched its premium SUV Xingyue S line, with four models priced from RMB135,700-171,700. The newly announced coupe SUV line is built on the CMA architecture and powered by the 2.0T turbo engine.
DONGYUE (189 HK -6.6%) profit-taking after stock price more than doubled in less than a month. The company announced granted 62.57m shares options to selected employees.

Regional Markets
Australia
.
Market opened strongly and tested to 7,380 in early trades but then trended lower through the day with sentiment hurt by the poor Business Confidence data and continued worries over the covid outbreak. It closed -1.4pts @ 7,332. Leaders were Tech and Industrials. Laggards were Financials, Property and Energy.
Data was weak but PM Morrison is due to unveil a new financial assistance package. HelloFresh made a $125 million bid for Youfoodz +77.5%, which floated on the ASX less than eight months ago valued at $165 million.
Data
Business Confidence Jun 11 vs 20 May (F/cast was 19)
New Home Sales Jun 14.8% vs 15.2% May (F/cast was 20))
Japan
Nikkei opened higher and worked higher in the first hour to 28,852 before easing back to 28,770 and then ticking hihger and trading sideways into lunch.  PM the market drifted lower but  saw support at 28,700 to close +149pts (+0.5%) @ 28,718.
Topix followed a similar pattern, rose to 1,973 eased back to 1,966 but then worked better to 1,970 before easing back into lunch. PM opened lower and traded sideways to close +14pts (+0.7%) 1,968
S Korea
Tech seeing interest with strong foreign buying on the expectation of strong Q2 earnings. Trading volumes were moderate.
Kospi opened higher and worked to 3,271 in the first 35 mins. Then eased back to trade around 3,265 for about an hour before ticking higher to trade around 3,270 level; which is did for most of the day but then ticked higher in the 30 minutes to close +25pts (+0.8%) @ 3,271
Kosdaq Initially rallied to 1,039 then legged up to 1,044 before easing back to 1,040 around 10:30am. Then worked higher but seeing resistance approaching 1,045. Then sold down with support at 1,040 and worked better to close +9pts (+0.8%) @ 1,043
KDCA reported 1,150 new covid cases remaining over 1,000 for a week.
Taiwan
Taiex opened higher at 17,931 and rallied to 17,984 (TSMC broke above NT$600) but then eased back with support at 17,950 for about 30 mins before testing 18,000 but that brought out sellers market sold down to 17,920 level before a bounce to 17,950 but then sold down again and traded around17,890 but then sold down to close +33pts (+0.2%) @ 17,848 just off the day low. T/O was high US$23.44bn vs US$19.79b Monday
CECC reported 29 new covid cases


CONNECT FLOWS  
Shanghai
Northbound RMB 59,118m Sell 27,726m vs 29,392m Buy
Southbound HK$   18,872m Sell  7,992m vs 10,880m Buy
Shenzhen
Northbound RMB 73,812m Sell 36,449m vs 37,363m Buy
Southbound HK$ 20,535m Sell 10,969m vs 9,566m Buy

Active Heavyweights
BABA (09988.HK)  Short selling Ratio 18.415%   closed at $205.2, up 4%
TENCENT (00700.HK) Short selling Ratio 4.002% closed at $555.5, up 3.9%
MEITUAN (03690.HK) Short selling Ratio 14.435% closed at $295, up 3.4%
AIA (01299.HK) Short selling Ratio 33.281% closed at $97, up 3.1%
PING AN (02318.HK) Short selling Ratio 23.553% closed at $71.95, up 0.8%
HKEX (00388.HK) Short selling Ratio 14.114% closed at $506, up 0.6%
CCB (00939.HK)  Short selling Ratio 22.802%   closed at $5.55, up 0.2%

HSI & HSCEI Constituents on Move:
KUAISHOU-W (01024.HK)  Short selling Ratio 16.197%   closed at $158, up 5.7%
GEELY AUTO (00175.HK) Short selling Ratio 21.003% closed at $25.4, up 5.2%
JD (09618.HK) Short selling Ratio 18.890% closed at $291, up 3.4%
BIDU-SW (09888.HK) Short selling Ratio 34.428% closed at $180.8, up 3.3%
WUXI BIO (02269.HK)  Short selling Ratio 30.290%   closed at $131.3, down 3.1%

HSMI & HSSI Constituents on Move:
TIANGONG INT'L (00826.HK)  +12.5%
MEIDONG AUTO (01268.HK) +8.6%, hitting new high
CHINA TELECOM (00728.HK) +8.1%, hitting new high
YONGDA AUTO (03669.HK) +6.4%, hitting new high
CHINASOFT INT'L (00354.HK) +4.9%, hitting new high
XINYI GLASS (00868.HK) +2.5%, hitting new high


MARKET HOURS NEWS
.

BOE (000725.SZ) Positive Profit Alert announced the preliminary results, forecasting the net profit attributable to parent company's owners for the first half of 2021 to range RMB12.5-12.7 billion, representing a year-over-year increase of 1,001-1,018%.

BABA-SW (09988.HK) may team up with a company owned by the local government to bid for a stake in UNIS (000938.SZ)  alongside several Chinese state-backed firms, Reuters citing sources.  Saddled with over US$31 billion in debt, Tsinghua Unigroup is looking to sell a 46.45% UNIS stake likely valued at RMB40-50 billion (US$6.2-7.7 billion), representing a 34-68% premium to the share's average price last month.

Alibaba Hong Kong Entrepreneurs Fund (AEF) today (13th) announced it will be an anchor investor in the AEF Greater Bay Area Fund (GBA Fund).  As Hong Kong's first-ever venture fund formed by the private sector focused exclusively on startups in the Greater Bay Area (GBA), the GBA Fund aims to provide comprehensive programs to nurture entrepreneurship in the region. The target funding solution of the GBA Fund amounts to HKD2 billion. The final closing of the GBA Fund is expected to take place in the first half of 2022.

BABA-SW (09988.HK)'s mobile office DingTalk announced to launch the new vocational online learning platform 3.0 version jointly with the Ministry of Human Resources and Social Security (MOHRSS).  The jointly developed platform concentrates on training a new generation of skilled workers specifically geared towards the transitional works for digitalization of various industries.

The Bank of England announced to scrap dividend restrictions on HSBC HOLDINGS (00005.HK), Barclays and other banks during the pandemic, as stress test showed the sector is well-capitalized in the face of economic fallout from the epidemic.In June, China accepted 13.648 million cyber complaints, down 4.3% yearly, as the Office of the Central Cyberspace Affairs Commission reported on its public WeChat account. Among which, the Office accepted 532,000 reports involving illegal and improper information, up 236.5% yearly.
Leading dotcoms were being reported, including Weibo, BIDU-SW (09888.HK), BABA-SW (09988.HK), KUAISHOU-W (01024.HK), TENCENT (00700.HK), JD-SW (09618.HK) and Pinduoduo (PDD.US) , which made up 71.6% of the total accepted cases.

Blue, an online life insurance joint venture between TENCENT (00700.HK) and Hillhouse Capital, launched the WeMedi Top Up scheme to provide subsidies for existing outpatient insurance plans and relieve clients' economic burden of medical care.

Tencent Cloud declared the strategic partnership with Boston Consulting Group (BCG). Leveraging their brand, resources and technology edges, both sides will team up comprehensively in Asia-Pacific and around the world to explore the development of localized digital solutions and promote corporate digital transformation for finance, retail and other fields.

BABA-SW (09988.HK) announced to set up the Alibaba Artificial Intelligence Governance Laboratory (AAIG), focusing on sustainable, reliable, trustworthy and usable AI technologies and applications, and fostering sustainable healthy economic development by building a trust mechanism of the digital economy and punishing behaviors that undermine the interests of businesses and users.

China's mobile phone shipment reached over 174 million units in the first half of the year, up 13.7% year-over-year, with that of 5G mobile phones surged 100.9% year-over-year to record 128 million units, according to Ministry of Industry and Information Technology (MIIT).

EVERGRANDE (03333.HK)  clarified an online rumor that Vanke and Jinmao will be purchasing the company's asset package as untrue, and stated that the company reserves the right to pursue the legal liability of the perpetrator of the rumor.

State Administration for Market Regulation (SAMR) announced yesterday (12th) to have approved unconditionally TENCENT (00700.HK)'s purchase on Sogou, Inc. (SOGO.US) 's shares.  TENCENT and Sogou struck a deal in last September for the former to privatize Sogou at the price of USD9 per ADS.

YUXING INFOTECH (08005.HK)  announced that during the period between 21 May 2021 and 2 July 2021, the Company disposed of an aggregate of 3 million PING AN (02318.HK)  H-Shares in the open market at an average price of HK$77.25 per H-Share for an aggregate consideration of approximately HK$232 million.  Up to now, the Company no longer holds any Ping An H-Shares.  The Group received net proceeds of HK$231 million from the Disposals.

MEITUAN-W (03690.HK) announced the liability exemption mechanism for deliverymen under extreme weather in a bid to protect their safety during delivery amid stormy weather in Beijing.  Apart from canceling the worktime tracking records online, the company also waives the responsibility of deliverymen in overtime jobs caused by extreme weather. Moreover, the allowed delivery time of affected areas is also adjusted according to the weather condition with the delivery scope being shrunk.

Ant Group announced to launch the Ant chain corporate carbon neutrality management SaaS platform which aids corporates in their management of carbon neutrality projects through the blockchain technology.  The group expressed that the platform will be built on the several core technologies of the group with the aim to provide corporates with relevant services to realize carbon reduction, carbon emissions trading and products' carbon footprint tracking, etc.

PRE MARKET HOURS NEWS

China's National Health Commission announced to have recorded 29 new confirmed cases yesterday
(12th), with 27 of them being imported and 2 of them being local cases, located in Jiangsu and Yunnan respectively.

UBS (Lux) Equity Fund - China Opportunity (USD), the biggest China equity fund in the world, reduced its 4.11% stake in TENCENT (00700.HK)  in June,
the only stake reduction of the fund in the month among its top ten heavyweight holdings, as Securities Times cited Morningstar data.  As at 30 June 2021, the fund held US$1.367 billion worth of TENCENT's shares, representing its largest heavyweight holding, with negative 4.07% annual return.  The fund size is US$13 billion.

Jiangsu's Health Commission announced to have recorded one new local confirmed COVID-19 case yesterday, 
which has been deemed as an imported-related case, along with another imported case.

Regarding that the State Administration for Market Regulation of the People's Republic of China, or the SAMR, posted an announcement of its decision to prohibit the proposed merger between HUYA Inc. (HUYA.US)  and DouYu International Holdings Limited (DOYU.US) , HUYA announced on its official website the termination of the relevant merger agreement. 
DouYu also announced for the termination of merger, saying fully respects and will abide by the SAMR Decision, and will comply with all regulatory requirements, conduct its businesses in accordance with the applicable laws and regulations, and fulfill its social responsibilities.

Chinese telecoms gear company Huawei and the US' biggest telco Verizon Communications (VZ.US)  reached a confidential settlement regarding their patent infringement lawsuits.

OFILM (002456.SZ) Profit Warning it 
predicted the net profit for the first half of 2021 to range between RMB32 million and RMB48 million, down 90.44%-93.63% year-on-year.

HUTCHMED (00013.HK)  announced the first commercial sale in China of ORPATHYS (savolitinib), HUTCHMED’s oral, potent, and highly selective small molecule inhibitor of MET, a receptor tyrosine kinase, which occurred on July 12, 2021.  
ORPATHYS was approved in China for the treatment of patients with locally advanced or metastatic non-small cell lung cancer (NSCLC) with MET exon 14 skipping alterations who have progressed following prior systemic therapy or are unable to receive chemotherapy. Under the terms of the license and collaboration agreement between HUTCHMED and AstraZeneca AB (publ) (AstraZeneca), a US$25 million non-creditable and non-refundable milestone payment is triggered by the first commercial sales of ORPATHYS in China.

CHINA TELECOM (00728.HK) and CHINA UNICOM (00762.HK)  recently released their 2.1GHz 5G base station procurement plan, hoping to acquire 242,000 stations in total. The upper limit of the tender amount for this purchase is set at RMB20.532 billion.

Semiconductor Manufacturing Electronics (ShaoXing) Corporation (SMEC) intended to conduct an A-share IPO with HAITONG SEC (06837.HK) (600837.SH)  as its pre-listing tutor, Securities Times citing Zhejiang Securities Regulatory Bureau's document. The tutoring period will last from July to October 2021.  SMIC (00981.HK)    (688981.SH)  is the second-largest shareholder of SMEC, with a stake of 19.57%.

Yunnan's National Health Commission reported one local COVID-19 case yesterday

CHINA RES LAND (01109.HK) announced that, for the first half of 2021, 
the gross contracted sales achieved RMB164.8 billion with contracted GFA of approximately 9.6336 million square meters, up by 48.7% and 52.4% YoY respectively.  The Group also acquired 7 land parcels in Zhengzhou, Chengdu, Kunming, Zhuhai, Changchun, Huai’an and Foshan with total gross floor area (GFA) of approximately 1.9811 million square meters.  The attributable consideration payable amounted to approximately RMB10.59 billion.