May 18 HK rallies, trades sideways light T/O Pre Budda's birthday. CHINA struggles to FLAT


18 May

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HSI +400pts (+1.4%) 28,594 HSCEI +151pts (+1.4%) 10,654 T/O HK$130.53bn (-10.4% DoD slightly worse if you exclude this morning’s placement.  No Northbound connect flows as HK closed Wednesday)

EUROPE
Markets opened higher but drifting lower as the Euro zone enters a technical recession. Oil & Gas strong but Telco weak after poor earnings from Iliad and Vodafone.
Earnings expected from Engie, Homeserve, Imperial Brands.
Vodafone weak after it missed expectations to report a 1.2% drop in full-year adjusted earnings with capex on 5G rollout seen as an issue. Iliad very weak after missing first-quarter revenue expectations.
Sonova strong after projecting strong full-year growth on the back of the market recovery and new product ranges.
Data
Eurozone
Balance of Trade Mar  €15.8B vs €23B Feb revised (F/cast was €26.5B)
Employment Change Prelim Q1 -0.3% QoQ vs +0.4% Q3 (F/cast was +0.5%)
Employment Change Prelim Q1 -2.1% YoY vs -1.9% Q3 (F/cast was -1.4%)
GDP Growth Rate 2nd est Q1 -0.6% QoQ vs -0.7% Q3 (F/cast was -0.6%)
GDP Growth Rate 2nd est Q1 -1.8% YoY vs -4.9% Q3 (F/cast was -1.8%)
UK  
Claimant count change Apr -15.1K vs -19.4k Mar revised F/cast was +25k)
Employment Change Feb 84k vs -73k Jan (F/cast was -42k)
Ave Earnings (Inc Bonus) Mar +4% vs +4.5% Feb (F/cast was +4.4%)
Ave Earnings (Ex Bonus) Mar +4.6% vs +4.4% Feb (F/cast was +4.5%)
Unemployment Rate Mar +4.8% vs +4.9% Feb (F/cast was 5%)
Labour Productivity Prelim Q1 +0.8% QoQ vs-4.3% Q4 ( F/cast was +2.9%)
20 year Gilt auction +1.392% vs 1.223% prior

US Futures
Opened in Asia Dow +50pts, S&P and NDX +0.1% but then eased, recovered but Dow +90pts slipped but S&P +0.3% and NDX +0.7% stronger.
Pre market
Macy’s +VE as earnings & revenue topped beat plus SSS +60% it also raised its full-year forecast.
Home Depot +VE as strong earnings & revenue beat and SSS +31%. (+VE cross read to Techtronics (669 HK))
Walmart +VE earnings & revenue and SSS of +6% beat. It also raised its Q2 and FY outlook.
Tesla weak as Michael Burry annouced a large short
Fisker weak but earnings loss less than expected but concerns as it left its capex forecast unchanged for the year.
Toyota strong after hitting a new high in Japanese market trading, after forecasting a return to pre-pandemic profitability levels and dealing successfully with the global semiconductor shortage.
AHEAD Housing Starts, Building Permits, Redbook, API Crude Oil Stock Change
Earnings Walmart, Home Depot, Macy’s, Baidu, Take-Two Interactive, Trip.com, NetEase


CHINA
CSI 300 closed +3pts (+0.05%) 5,188
CSI 300 opened slightly higher and tested 5,200 in early trades but then reversed and traded down to test 5,160 level before a bounce into lunch. PM saw initial selling but then worked better but saw resistance as it approached yesterdays closing level and reversed back to 5,167 before rebounding and working better into the close, just managing to hold in green at the close.
Traders are cautious given recent volatility amid tight liquidity and regulatory risks.
Leaders oil exploration, mining services, catering, and air transport Laggards biological products, agriculture, rubber, building materials, and livestock and poultry breeding.

Shanghai Composite +11pts (+0.3%) @ 3,529
Shenzhen Composite -6pts (-0.04%) @ 14,451
ChiNext Index -10pts (-0.3%) @ 3,089

CHINA DATA 
None

HSI
Pre market opened @ 28,438 +244pts vs +137pts ADR’s
China Mobile strong on proposing RMB share issue on the main board
Worked higher to 28,600 in the first 5 minutes and then traded around that level all day with the day high being 28,617.
A broad based recovery with all sectors seeing interest but T/O remained light ahead of Budda’s Birthday holiday tomorrow helping to keep the market high.
HONG KONG DATA
The Centre for Health Protection (CHP) reported 1 new covid cases
(vs 1 Monday)

Short Selling Tuesday 15.5% vs 16.5% Monday
Top Shorts  
Shenzhou Int (2313) 36%, Bud Apac(1876) 35%, Bank Comm (3328) 35%, ICBC (1398) 32%,  Bank of China (3988) 31%,  Country Garden (2007) 30%, Sands China (1928) 26%, Hang  Seng Bank (11) 25%, Sinopec (386) 25%.  

AFTER MARKET NEWS
BIDU-SW 1Q21 Non-GAAP NP Adds 39.4% YoY
to RMB4.297B
The Financial Services Development Council (FSDC) published the market study report on REITs. Although Hong Kong is one of the earlier markets to have rolled out its REITs regime in 2003, it is still falling behind other markets so far.  FSDC proposed the authorities to refine the REITs value proposition and regulatory system, hence attracting REITs from across the globe to list in Hong Kong.  Equally, it proposed to include REITs as eligible securities under the Stock Connect  schemes, thereby allowing two-way REITs investment.
NTES-S (09999.HK) announced its financial results for the first quarter ended March 31, 2021. Net income was RMB4.439 billion, up 25% yearly. Diluted net income per share equaled RMB1.31. A dividend of US$0.06 per share (US$0.3 per ADS) was declared.
CHINA TAIPING (00966.HK) announced that the gross premium income of Taiping Life Insurance, Taiping General Insurance and Taiping Pension for the first four months of 2021 aggregated RMB80.751 billion, up 3.53% yearly.
The Chinese government is in initial stages of rectifying CHINA HUARONG (02799.HK), who has more than US$40 billion of debt inside and outside China, The New York Times citing two insiders.  In other words, both domestic and foreign bondholders could be subject to significant investment losses.
The Hong Kong Tourism Board (HKTB) announced that the provisional visitor arrivals for April were 5,706, a 38.3% increase on the same month in 2020.
ZIJIN MINIG (02899.HK)'s gold mine in Buritica, Colombia is exposed to output loss due to illegal mining, said Reuters.   Losses amounted to 20% of the total production, a local executive told the press.

MARKET COMMENT
*COMMODITIES FIRM.
oil continues to rise hitting a two-year high on rising optimism of demand recovery in the U.S. offsets Covid-19  surges in parts of Asia. CNOOC (883 HK +3.5%) CH OILFIELD (2883 HK +4.3%) PETROCHINA (857 HK +4.5%)
BASE METAL rebounded;  Gold hit a more than three-month high as investors are turning more positive on the metal. Copper rebounded on supply disruption in Chile and signs that Chinese demand is picking up. ANGANG (347 HK +5.7%) CHALCO (2600 HK +3%), ZHAOJIN (1818 HK +4.6%) MAANSHAN (323 HK +4.2%).
*E-COMMERCE/INTERNET FIRM ahead of BAIDU's (9888 HK +2.1%) earnings due after market and hot demand on the JD's (9618 HK +2%) JD LOGISTIC (2618 HK) IPO. TENCENT's (700 HK +1.4%) music arm agreed to a multiyear extension of the digital distribution agreement with Sony Music Entertainment.  Tencent reports Thursday.
NETEASE (9999 HK +1.2%) Cloud Music said it entered into a direct digital distribution relationship with Sony Music Entertainment, will make music from SME available to its users in China. ALIBABA (9988 HK +1%) KUAISHOU (1024HK +1%).
*TECH & COMPONENTS FIRM on attractive valuations and positive outlook. AAC (2018 HK +5.3%) SUNNY OPTICAL(2382 HK +1.5%) BYDE (285 HK +3.6%).
Chip makers traded mixed after the Philadelphia Semiconductor Index dropped as much as 10% from a peak in early April. HUA HONG (1347 HK +1.2%) FIT HON TENG (6088 HK +0.5%). SMIC (981 HK -1%) rumours of problems due to US sanctions still.
*TELCOS STRONG as CHINA MOBILE's (941 HK +2.6%) board approved yuan share issue and listing on the Shanghai stock exchange, proposes to issue as many as 964.8m shares, pending shareholders and regulators approvals. CH TEL (728 HK unch) CHINA UNICOM (762 HK +0.5%)
*SPORTWEAR WEAK on share placement concerns, after  LI NING's (2331 HK -3.2%) shareholder Viva China raised HK$3.82b selling 60m Li Ningh shares at HK$63.6 apiece, represents 6.5% from yesterday's closing price of HK$68.05. ANTA (2020 HK-0.5%) 361 DEGREES (1361 HK-2.6%).
*CHINA PROPERTY STRONG  as average new home prices in China's 70 major cities was +0.6% MoM in April, according to data released by the National Bureau of Statistics, the quickest pace since August 2020 and a notch up from +0.5% in March.  But I would advise caution as the PBOC is keen to rein in lending to the sector.
CH JINMAO (817 HK +3.6%) CIFI (884 HK +3%) COUNTRY GAD (2007 HK +3.9%) AGILE (3383 HK +4.7%).
*HK PROPERTY STRONG as NWD (17 HK +1.7%) got presale consent for the third phase of The Pavilia Farm atop Tai Wai Station, which provides 892 flats, from one-bedroom flats to four-bedroom flats. The  337 units in the first price list of phase two were offered at an average HK$19,838 psf after discounts, about 5% higher than the first price list of phase one. HENDERSON LD (12 HK +1.6%) SHKP (16 HK +2.5%) HYSAN (14 HK +2.8%).  But local press saying that housing could be an issue in the selection of the HK Chief Executive; as CY Leung raisies the issue on his blog.
*AIRLINES/TOURISM STRONG on recovery hopes. TONCHENG-ELONG (780 HK +12%) provides online travel services, turned to a profit of 170m yuan vs 55.6m yuan lost the same period a year ago. CEA (670 HK +4%) CSA (1055 HK +5%) AC (753 HK +3%).  Cathay Pac (293 HK +1.9%) announced it had carried a total of 22,400 passengers last month, +63.2% YoY, but -99.3% compared to the pre-pandemic level in April 2019.

Regional Markets
Australia
Market opened higher and then traded in the 7,060 - 7,080 range and closed +42pts (+0.6%) @ 7,066.  Mining and energy leading the gains.
Japan 
Nikkei opened higher as indicated by the futures and despite the weak GDP data. It worked higher through the morning to 28,480 level before easing back into lunch @ 28,400 PM opened slight higher and traded sideways to close +582pts (+2.1%) @ 28,407
Leaders Japan Steel Works, T&D Holdings, Recruit, Sumitomo Metal & Mining, Dai-ichi Life.
Laggards Nippon Light Metal, Nisshin Seifun, Tokyo Gas, Osaka Gas, Teijin
Topix traded in a similar pattern with resistance @ 1,912 level and close +29pts (+1.5%) @ 1,908
Data
GDP Q1 Data Prelim
Growth Rate Q1 -1.3% QoQ vs +2.8% Q4 (F/cast was -1.1%)
Annualised Q1 -5.1% vs +11.6% Q4 (revised from 11.7%) (F/cast was -4.8%)
Price Index Q1 -0.2% YoY vs +0.2% Q4 (revised from +0.3%)
Capital Expenditure Q1 -1.4% QoQ vs +4.3% Q4 (Consensus was +1.1%)
External Demand Q1 -0.2% QoQ was +1.1% (Consensus was -0.2%)
Private Consumption Q1 -1.4% QoQ vs +2.2% (Consensus was -2%)
Later Tertiary Index Mar 1.1% vs +0.3% Feb (F/cast was +0.7%)
S Korea 
Stocks rebounded with bargain hunting in the chip stocks with moderate trading volume. Foreigners and retail were net sellers; with good institutional buying supporting the market. Posco strong along with Hynix but Samsung unch as investors await news of its capex plans. Internet and Pharma +VE S Korea Markets will be closed tomorrow for Budda’s Birthday.
President Moon will visit the U.S. 19-22 May and meet with U.S. President Biden.
Kospi opened higher and worked up to 3,176 by mid morning, then traded sideways for the rest of the day to close +40pts (+1.3%) @ 3,175
Kosdaq dipped to 956 initially before reversing and the worked better for the rest of the day. Saw resistance in the PM as it approached 970 and closed +7pts (+0.7%) @ 970
Taiwan 
Taiex opened higher and despite yesterday’s selling little sign of margin call selling. Market then slowly worked better through the morning with resistance approaching 16,155, eased slightly and then traded sideways to close +792pts (+5.2%) 16,146. 
Sentiment improved with talk of that more vaccines would be available soon after Biden said he’d send 80m doses overseas and strong foreign institutional buying on Monday as the market sold off; which continued on Tuesday. Today was a record gain for the index. The CECC reported 245 new covid cases today (240 local).
TSMC +4.2%, UMC & Novatek closed limit up, Media Tek +8.8%, Hon Hai +8.9%.  Old economy +VE too; China Steel,  Tung Ho Steel and  Kao Hsing Chang Iron & Steel all limit up. EverGreen Marine and Yang Ming Marine, Wan Hai Lines limit up.  Cathay Financial limit up, Fubon Financial +8.8%

CONNECT FLOWS
Shanghai
Northbound
Southbound HK$ 12,779m Sell 5,908m vs 6,871m Buy
Shenzhen
Northbound
Southbound HK$ 16,191m Sell 6,389m vs 9,802m Buy

Active Heavyweights
MEITUAN (03690.HK)  +2.3%
HKEX (00388.HK) +2.1%
TENCENT (00700.HK) +1.2%
BABA (09988.HK) +1.1%
AIA (01299.HK) +0.8%
PING AN (02318.HK)  +0.2%

HSI & HSCEI Constituents on Move:
SHENZHOU INTL (02313.HK)  +5.8%
AAC TECH (02018.HK) +5.3%
SINO BIOPHARM (01177.HK) +5.2%
PETROCHINA (00857.HK) +4.8%, hitting new high
SINOPEC CORP (00386.HK) +4.4%
COUNTRY GARDEN (02007.HK) +3.9%
CHINA GAS HOLD (00384.HK) +3.8%
HANSOH PHARMA (03692.HK) +3.7%
CHINA RES LAND (01109.HK) +3.3%
CNOOC (00883.HK) +3.2%
CITIC (00267.HK) +3.1%
CG SERVICES (06098.HK) +3.1%
SHIMAO GROUP (00813.HK) +3%
ENN ENERGY (02688.HK)  +0.6%, hitting new high

HSMI & HSSI Constituents on Move:
TONGCHENG-ELONG (00780.HK)  +12.2%
HOPSON DEV-100 (00754.HK) +6.5%, hitting new high
SHINEWAY PHARM (02877.HK) +6.3%, hitting new high
GENSCRIPT BIO (01548.HK) +2.9%, hitting new high

MARKET HOURS NEWS.
The Government announced that it will introduce the Medical Registration (Amendment) Bill 2021 into the Legislative Council (LegCo) to create a new pathway for admission of qualified non-locally trained doctors who are Hong Kong permanent residents to practice in Hong Kong.
Brent crude futures  zoomed past US$70 per barrel for the first time since mid-March, given signs that demand recovery had whittled away a glut amid the pandemic.  Brent futures climbed 0.98% to last post at US$70.14 a barrel.
BOC HONG KONG (02388.HK)  unveiled the following fraudulent website, https: //202. 74. 40 .193/, which purported to be from BOCHK’s corporate internet banking platform iGTB NET.   The fraudulent website has a login page which intends to steal customers’ data, such as iGTB NET number/login name, user ID, password and two-factor verification code.
Sino Group announced that roughly 1,000 vacancies will be offered at the recruitment event dated May 29, of which 30% are suitable for the youth and fresh graduates.
JD LOGISTICS (02618.HK) announced that it has entered into strategic cooperation with China Railway Container Transport (CRCT) to foster a closer tie on market expansion, informatization upgrade, etc..
Tencent Music Entertainment Group (TME.US)  has been facing tighter regulation from the Chinese government in recent months, Reuters citing the group's Chief Strategy Officer Tony Yip. Tencent Music is actively cooperating with the authorities in compliance with antitrust laws and other regulation, he added.
The Government announced that Hong Kong Economic, Trade and Cultural Office (Taiwan) (HKETCO) has temporarily suspended operations with effect from today (May 18).  During the temporary suspension of HKETCO operations, the Government will continue to handle general enquiries and requests for assistance made by Hong Kong residents in Taiwan, as well as provide Taiwan residents with information related to Hong Kong, through the hotline services of 1823 and 1868, and the GovHK website.
CATHAY PAC AIR (00293.HK) announced that it had carried a total of 22,400 passengers last month, +63.2% YoY, but -99.3% compared to the pre-pandemic level in April 2019.
BEST MART 360 (02360.HK) has issued a positive profit alert, expecting a significant YoY increase of not less than 5 times in the net profit for the year ended 31 March 2021.
Sharp unveiled the Aquos R6 5G smartphone equipped with a camera system co-developed with Leica. The device will be available through NTT DOCOMO and SoftBank in mid-June.
Tencent Cloud announced today that it has nailed down a cooperation MoU with Seoul's Ministry of Culture, Sports and Tourism, whereby the two parties will design and create a tourism mobile app and smart tourism solution for Chinese tourists through Tencent Cloud's AI technology.
NTES-S (09999.HK)'s NetEase Cloud Music announced that it has entered into a digital distribution relationship with Sony Music Entertainment.  Both sides will work on areas such as music distribution, music streaming services, online karaoke, and music vlogs (Mlogs), among others.
The Pay Trend Survey Committee (PTSC) accumulated data from 113 companies covering 145,000 employees over the past year, according to Chairman Lee Luen-fai.  Findings showed a 0.48% salary bump for junior civil servants, a 0.49% pay rise for middle-level civil servants, and a -1% change for senior civil servants for 2021.  The above figures were based on preliminary evaluation, he added.
A consortium led by BABA-SW (09988.HK) and Baring Private Equity Asia is investing US$400 million in the retail arm of Vietnamese conglomerate Masan Group, a deal which will hopefully strengthen the Chinese e-commerce giant’s online groceries presence in Southeast Asia.
GDS-SW (09698.HK) intends to acquire the data center business of Singapore's GLP Pte to expand digital infrastructure capability in China, Bloomberg citing insiders.Both sides are in preliminary talks, and any possible deal could value the assets at US$8-10 billion.
Moody's has affirmed the Macao SAR’s long-term issuer ratings at “Aa3” with a “stable” rating outlook.  The international rating agency pointed out that Macao’s strong fiscal and external positions as well as high per capita income will continue to support its credit profile. Meanwhile, the “stable” rating outlook is granted as Moody's expects that Macao’s economic activity will be restored to pre-pandemic levels by 2024.
HZBANK (600926.SH) announced that CHINA LIFE (02628.HK) (601628.SH) plans to sell no more than 59.302 million shares of the bank, or at most 1% of the total ordinary shares, within roughly six months.

PRE MARKET HOURS NEWS
NWFB & Citybus told reporters that they will ponder over application for another round of fare hike if the pandemic rages on and cost-cut measures fail to water down financial pressures.
Equally, they will remain in touch and study with the Transport Department and other authorities on the fare adjustment arrangements.
VIVA CHINA (08032.HK) announced that Viva China BVI, a wholly-owned subsidiary of the Company, would place a 2.41% stake in LI NING (02331.HK) at HK$63.6 each, representing a discount of 6.54% to the closing price of HK$68.05 on the previous day.  The Board would consider to apply the net proceeds for declaration of a special dividend after completion of the Placing as a reward to the Shareholders if considered appropriate by the Board after taking into account of overall financial performance and funding needs of the Group.
The Government announced that in view of the persistent unstable epidemic situation in various overseas places, as well as the prevalent transmission and outbreaks of cases involving the more transmissible and potentially more serious mutant virus strains, upon closely monitoring the epidemic developments 
in the relevant places and the case importation risks they may pose to Hong Kong, the Government will specify Argentina, Italy, Japan, Kenya, Malaysia, the Netherlands and Singapore as high-risk Group B specified places with effect from May 21.
Tencent Music Entertainment Group (TME.US) announced Q1 net profit of RMB926 million, +4.4% YoY.  The company's mobile MAU for online music fell 6.4% annually to 615 million.  Tencent Music's shares saw little change, last at US$15.31.
Tencent Cloud announced on WeChat that it had executed a fintech strategic cooperation agreement with Guosen Securities (002736.SZ), whereby the two parties will foster ties in fintech innovation, etc..
The China Securities Regulatory Commission had officially approved the registration of the first batch of four infrastructure REIT projects of Shenzhen Stock Exchange, which was expected to raise nearly RMB14 billion. In the next step, the exchange will streamline procedures on price consultation and offering.
The China Securities Regulatory Commission had officially approved the registration of the first batch of four infrastructure REIT projects of Shenzhen Stock Exchange, which was expected to raise nearly RMB14 billion. In the next step, the exchange will streamline procedures on price consultation and offering.
Chinese regulators' stock market investigation was just the beginning, reported China Securities Journal.
A regulatory storm could be gathering force.  China Securities Regulatory Commission (CSRC) decided to probe into the alleged price manipulation of stocks like Lettall Electronic (603629.SH) and ZOY (603709.SH) reported Securities Daily.
GCL-POLY ENERGY (03800.HK) announced that Deloitte Touche Tohmatsu had tendered its resignation as the auditor of the Company with effect from 14 May.  The Board has resolved to appoint Crowe (HK) CPA Limited as the new auditor of the Company to fill the casual vacancy following the Resignation.
FAIRWOOD HOLD (00052.HK) issued a positive profit alert. The Group is expected to record a profit attributable to the Shareholders of approximately HK$150 million for the year ended 31 March 2021, as compared to that of HK$61 million for the year ended 31 March 2020, representing an increase of around 146%.
CHINA MOBILE (00941.HK) announced that, in order to grasp the window of opportunity to develop the information services market, the Company proposes to apply for the RMB Share Issue on the Main Board of the Shanghai Stock Exchange.  The Company proposes to conduct a public offering of no more than 964 million Shares, representing 4.5% of the Company’s total share capital as enlarged.

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