Apr 26 HK/CHINA WRAP Markets closed in the red on China credit concerns and ahead of earnings

26 Apr

HSI -126pts (-0.4%) 28,953 HSCEI -87pts (-0.8%) 10,981  T/O HK$147.48bn (+3.1% DoD)

Markets opened flat; CAC +VE and FTSE -VE trading sideways, DAX slipping lower after the Ifo data. Mood is cautious ahead of a busy week for earnings and the BoJ and FOMC meetings.
Earnings due from Pearson and Michelin
Philips weak despite reporting a 74% jump in core earnings in tQ1 to 362 million euros ($438 million) and upgraded its earnings forecasts for 2021. But it is taking a 250 million euro provision for risks in respiratory care devices.
Tate & Lyle climbed after announcing that it is considering selling its commercial sweeteners unit.IMI gained after raising its 2021 profit guidance.
AMS weak after Credit Suisse double-downgraded the stock on concerns about potential lost product supply deals with Apple.
GERMAN Ifo  Data 
Business Climate Apr 96.8 vs 96.6 Mar (F/cast was 97.5)
Current Conditions  Apr 94.1 vs 93.1 Mar raised (F/cast was 94)
Expectations  Apr 99.5 vs 100.3 Mar revised (F/cast was 101.5)
US Futures 
Opened in Asian time Opened flat Dow +3pts, S&P and NDX slightly -VE but less than 0.1% now the Dow and S&P flat with NDX slightly lower.
Data due Durable Goods Orders, Dallas Fed Manufacturing Index
Earnings Tesla, Canadian National Railway, Canon, Check Point Software, Otis Worldwide, Vale, Ameriprise, NXP Semiconductor, Albertsons, Royal Phillips

CHINA CSI 300 closed -58pts (-1.1%) @ 5,077
CSI300 opened higher but initially sold down to 5,130 (vs Friday’s close 5,135) but then rallied 5,180 which was resistance, tested a couple of times, consolidated rallied but then sold down into lunch. PM traded sideways initially but after 20 minutes sold down and then 10 minutes later the selling intensified losing 76pts in 30 minutes, before finding some support at 5,092, it bounce but then trended lower to 5,074 before a small uptick into the close.
Pharma names initially strong on hopes that the recent surge in India could impact medicine production. The afternoon market sell off looked to be driven by concerns on China's corporate debts, China Huarong Asset Mgmt said its 2020 earnings results would be delayed past an April 30 deadline, adding to concerns over wider defaults, there was also an article in the FT 'Beijing alert to precarious debt conditions’.
Investors also cautious ahead of this weeks results and next week’s Labor Week holidays.
Laggards were Beer, liquor, dairy stocks, brokers, tourism, steel, and environment protection.
Leaders were Coal miners, medical equipment, petroleum, non-ferrous metals, and semiconductors.

Shanghai Comp -33pts (-1%) @ 3,442
Shenzhen Comp -127pts (-0.9%) @ 14,225
ChiNext Comp -17pts (-0.6%) @ 3,009

Pre market opened @ 29,107 +28pts vs +90pts ADR’s
With Ecommerce names seeing good interest.
Sold down to test 29,000 in early trades before rebounding to 29,238, then trended lower, with choppy trading; testing Friday close (29,078) before a small bounce into lunch @ 29,102. PM initially traded sideways but then sold off following the sell off in China and then drifted lower after China closed with support at 28,910 level around 3:30 pm and then worked slightly better into the close.
Chinese Financial weak (they report later this week) Ecommerce names firm but Tencent the laggard, I think it will be force to hand over client financial data like Ant has been. Chinese consumer names weak especially the brewers. Shipping names continue to see interest.

The Centre for Health Protection reported 4 new covid cases (vs 6  Sunday) all imported
Short Selling Monday 15.2% vs 14.2%  Friday
Top Shorts
  Bud Apac (1876) 40%,  Hengan (1044) 39%, Bank Of China (3988) 34%, Country Garden (2007) 32%,  CCB (939) 31%, Wuxi Bio (2269) 31%, Wharf REIC (1997) 30%, BankComm (3328) 26%, HK & China Gas (3) 26%, NWD (17) 26%, CK Asset (1113) 26%, Ali Health (241) 25%
Earnings Tuesday 27 April 
HSBC Holdings plc 00005.HK Banks
Hang Seng Bank Ltd. 00011.HK Banks
WH Group Ltd. 00288.HK Agricultural, Poultry & Fishing Production
Jiangxi Copper Co. Ltd. - H Shares 00358.HK Nonferrous Metal
Guangshen Railway Co. Ltd. - H Shares 00525.HK Public Transport
Skyworth Group Limited 00751.HK Household Appliances
China Education Group Holdings Limited 00839.HK Other Support Services
Guangzhou Baiyunshan Pharmaceutical Holdings Co. Ltd.- H Shs 00874.HK Medicine
Dongjiang Environmental Co. Ltd. - H Shares 00895.HK Environmental Goods
Huaneng Power International, Inc. - H Shares 00902.HK Electricity Supply RES
Anhui Conch Cement Co. Ltd. - H Shares 00914.HK Construction Materials
Sinopec Yizheng Chemical Fibre Company Limited- H Shares 01033.HK Petroleum & Gases Equipment & Services Sinopharm Group Co. Ltd. - H Shares 01099.HK Medicine
COSCO SHIPPING Ports Limited 01199.HK Marine & Harbour Services
China International Marine Containers (Group) Co., Ltd.- H Shares 02039.HK Machinery & Equipment
Aluminum Corporation of China Ltd. - H Shares 02600.HK Nonferrous Metal
China Molybdenum Co., Ltd. - H Shares 03993.HK Nonferrous Metal
China Merchants Securities Co., Ltd.-H shares 06099.HK Securities
China YuHua Education Corporation Limited 06169.HK Other Support Services

BABA-SW (09988.HK) announced establishment of TMall Shanghai center, as the connection between TMall and local brands.
There were reports on XIAOMI-W (01810.HK)'s talks with GREATWALL MOTOR (02333.HK) on EV production using the latter's plants.  GREATWALL MOTOR dismissed the reports as inaccurate, adding there have been no negotiations between the automaker and XIAOMI-W in this regard.
HSBC HOLDINGS (00005.HK) is set to appoint Jean-Manuel Richier as the head of investment banking for continental Europe, in succession to Hubert Preschez, according to internal documents seen by foreign press.
Dowson Tong, Senior Executive Vice President of TENCENT (00700.HK)  cum President of Cloud and Smart Industry Business Unit, said at a press conference that it is not going to manufacture vehicles for the time being because its core capability is "linkage", alike the old times when it did not make phones, Chinese media reported. That said, it will support the industry in terms of software.
Chinese State Administration of Market Regulation (SAMR) announced that it has based on recent reports launched an investigation into MEITUAN-W (03690.HK)'s "choose one from two" syndicated action.  The company wrote in WeChat that it would fully cooperate in investigation, after receiving today a notice from Chinese State Administration of Market Regulation (SAMR) about an investigation into its alleged syndicated behavior, cited Chinese press. The group clarified that all businesses are running smoothly as usual.

*COMMODITIES/RESOURCES MIXED. OIL COMPANIES weak on concerns that the severe Covid outbreak in India and weight on a global recovery and weigh on oil demand. CH OILFIELD (2883 HK -1.3%) ANTON (3337 HK -2%). BASE METALS STRONG as China's keeps production curbs; ANGANG (347 HK +2.4%) MAANSHAN (323 HK +1.4%) CHALCO (2600 HK +3%) JIANGXI COPPER (358 HK +3%).  
*CH BANKS WEAK Ahead of earnings this week and after China’s banking regulator urged five large banks to boost loans to small- and micro-sized companies by more than 30% this year. They usually follow the letter but not the spirit and lend to companies that have linked to the SOE companies that are already their clients; hence minimising their risk and also the benefit to the wider economy.
ICBC (1398 HK-1.5%) ABC (1288 HK -1.9%) BOC (3988 HK -1.9%) CCB (939 HK -1.9%). CMB (3968 HK -1.6%) reported 1Q Net profit +15.2% YoY to 32.015b yuan.
*E-COMMERCE/INTERNET MIXED KUAISHOU (1024 HK +6.8%) ahead of new apps launches.
MEITUAN (3690 HK -0.5%) BIDU (9888 HK +2%) NTES (9999 HK -1%). TENCENT (700 HK -0.6%)-backed online healthcare platform We Doctor has started the non-deal roadshow ahead of its HK IPO that could raise up to US$3b, with an aim to sell shares this quarter, news reported. But it will now also be under pressure to releases client data to the PBoC for its credit scoring system.
JD.COM's (9618 HK+0.7%) JD Logistics is seeking to pass a listing hearing for its HK IPO that could raise about US$3b to US$4b at  the end of this month, planning to list in May.
ALIBABA's (9988 HK +0.1%) B2B cross-border trade platform Alibaba.com, posted a 151% annual increment of Gross  Merchandise Volume in its goods in the first quarter, while ANT Group and the PBOC's digital currency research institute signed an agreement to jointly push for the development of digital yuan’s technology platform.
*HK CONSUMPTION/TOURISM FIRM on news that HK & Singapore to a start a two-way air travel bubble next month. Flights will begin from May 26 and the number will increase by June 26 if there aren't further outbreaks in either city. CATHAY PAC (293 HK +2.5%) SASA (178 HK +0.5%) LUK FOOK (590 HK +0.2%) TAI HING (6811 HK +1.4%).
*AUTO MAKERS WEAK on semiconductor shortage worries, despite GREAT WALL AUTO (2333 HK -7.3%) said it is buying chips globally and strengthening its supply chain management to alleviate the impact of tight supply, and that the group has no plan to halt production at its Chongqing and Xushui manufacturing bases.
GAC (2338 HK -1.5%) GEELY(175 HK -2.9%) BYD (1211 HK -1.9%) DONGFENG (489 HK -1.5%).
*EDUCATION PROVIDERS MIXED after Beijing’s market regulator fined four private education providers for pricing violations, as China steps up oversight of after-school educational programs, including KOOLEARN EDU (1797 HK +0.4%), GSX TAL, and GAOSI. TIANLI EDY (1773 HK -2.8%) CH KEPEI EDU (1890 HK-1.4%) MINSHENG EDU (1569 HK -2.1%) CH MAPLE LEAF EDU (1317 HK +2.4%).
I think this is an area where government action could upset the middle class in China who believe in education; whilst the government is worried about the schools not teaching the party line.
*PHARM/MEDICAL FIRM as India's Covid situation worsens and its lockdown measures have stoked speculation that medicine production there could be affected. CANSINO (6185 HK+1.2%) UNITED LAB (3933 HK +4.7%) FOSUN PHARM (2196 HK +3.7%) SIHUAN PHARM (460 HK +5.5%).

Regional Markets 
ASX 200 opened has oscillated all day around 7,060 level, and traded 7,070/050 for most of the day but dipped lower into the close to 7,045 before a small uptick at the end to close -15pts (-0.2%) @ 7,051. Whitehaven Coal -6.8%, Blackmores -4.6% and Kogan.com -4.1%
Polynovo -4.1% JB Hi-Fi -4.1% and Zip Co. -3.8%
Nib Holdings +10.2% Fortescue Metals Group +4.8% and Perpetual +4.4%
Perenti Global +3.2%, Champion Iron +3.1% and ALS +2.9%
Nikkei opened +75pts @ 29,095 but sold down to 28,920 in the first 10 minutes and bounced before testing the 28,900 support a few times, which held and then worked higher to 29,145 before easing into lunch.  PM opened higher ,tested 29,100 and then worked higher  to 29,241  before easing back with caution ahead of the BoJ meeting tomorrow and traded sideways to close +106pts (+0.4%) @ 29,126.  As I wrote this morning the new emergency states have largely been priced in
Topix traded in a similar pattern, tested down further to 1,907 and didn’t rise so much to close +3pts (+0.2%)@ 1,918
No data today but BoJ and Quaterly report tomorrow.
Kospi opened higher and worked higher with resistance around the 3,210 level which it tested several times and has now eased back from traded sideways and then attempted again into the close but finished +31pts (+1%) @ 1,218
Kosdaq dipped into the red in early trading but then trended higher, resistance at 1,030 eased back but worked back to at the end to closed +3pts (+0.3%)@ 1,030No data today but GDP Growth Rate tomorrow TAIWAN 
Open higher after good Industrial Production and Retail Sales data Friday along with the US bounce. Worked higher to 17,572 but then eased back in the last hour to close +272pts (+1.6%) @ 17,572

CONNECT FLOWS (saw a significant increase)
Northbound RMB 46,130m Sell 23,116m : 23,014m Buy
Southbound HK$ 17,246m Sell 8,024m : 9,223m Buy
Northbound RMB 57,966m Sell 27,330m : 30,636m Buy
Southbound HK$ 20,279m Sell 9,749m : 10,530m Buy

Active Heavyweights
CCB (00939.HK) -2%
HKEX (00388.HK) +1.4%
PING AN (02318.HK) -1.3%
AIA (01299.HK) +1.2%
TENCENT (00700.HK) -0.6%
MEITUAN (03690.HK) -0.5%
BABA (09988.HK) +0.1%
HSI & HSCEI Constituents on Move:
KUAISHOU-W (01024.HK) +6.9%
CPIC (02601.HK) -4.2%
MENGNIU DAIRY (02319.HK) -3.2%
HSMI & HSSI Constituents on Move:CSSC SHIPPING (03877.HK)  +20.8%, hitting new high
HUABAO INTL (00336.HK) +11.5%
CANVEST ENV (01381.HK) +6.6%, hitting new high
SITC (01308.HK) +6.2%, hitting new high
XINYI GLASS (00868.HK) +1.9%, hitting new high
CHINA COAL (01898.HK) +0.7%, hitting new high

To support local exhibitors affected by the twice-deferred Hong Kong Book Fair 2020, the Government will allocate $10 million under the Anti-epidemic Fund (AEF) to provide a one-off financial assistance of $15,000 to each local exhibitor registered with the event to help them explore the diversification of sales channels in addition to the Book Fair.
TENCENT (00700.HK)'s Tencent Cloud announced the signing of a cooperation MoU with Japan's cosmetics firm Premier Anti-Aging to expand beauty product sales in the Chinese market by pushing forward the latter's smart retail strategy.
XIAOMI-W (01810.HK)  announced that it has applied for, and The Stock Exchange of Hong Kong Limited has granted, a waiver from Rule 8A.18(1) of the Listing Rules to facilitate the transfer by Lin Bin, an executive director and Vice-Chairman of the Company, of his 95% equity interest in Apex Star LLC, a company that holds class A ordinary shares of the Company, to Lin’s family trust. The Company applied for the Waiver, and the Waiver was granted, on the bases, among others, that Lin will retain a beneficial interest in the class A ordinary shares and be in a position to control the voting rights attached to the class A ordinary shares under the Trust Arrangement.
Edward Yau: Travel Bubble's Vaccination Requirement Aims At Self-Protection; HK May Talk with AUS, NZ about Travel Bubble.  Asked why Hongkongers have to be vaccinated before joining "air travel bubble" while Singaporeans are not required so, Edward Yau, Secretary for Commerce and Economic Development, told reporters that this requirement is an extra measure to protect visitors themselves, as vaccination means greater protection for an individual, especially when he/she is travelling somewhere else.The Government considers Australia and New Zealand among the first choices when it comes to further extending "air travel bubble" arrangements, disclosed Yau.The Governments of the Hong Kong Special Administrative Region and Singapore today (April 26) announced that designated flights under the bilateral Air Travel Bubble (ATB) arrangement will begin on May 26, resuming cross-border air travel in a gradual and orderly manner amidst stabilized epidemic situations of the two places.
With gradual stabilization of the fourth wave of the epidemic in Hong Kong, the Government has been engaging in active discussions with Singapore on the re-launch of the ATB, said Edward Yau, Secretary for Commerce and Economic Development. The two governments have reached consensus on the latest arrangement and will put in place more stringent public health protocols in response to the latest epidemic development. The goal remains striking a right balance between public health and travel convenience so that the public will rest assured while maintaining certainty.
The Government decided to expand the "Return2HK" programme's coverage from Guangdong Province and Macau to the rest of Chinese provinces and cities, said Secretary for the Civil Service Patrick Nip. Eligible travelers from Mainland will hence be exempted from the 14-day quarantine.  The airport arrival quota under the scheme was fixed at 1,000 per day, he added.
The Draft of Futures Law was summited for initial review at the 28th session of the 13th NPC Standing Committee (NPCSC) today, signaling China's first special legislation and facilitation of healthy futures market development, reported Xinhua.
XIAOMI-W (01810.HK) has shipped more than 1 million units of Mi Band 6 worldwide, said Chairman Lei Jun.
Shenzhen unveiled certain measures on accelerating the entire 5G industrial chain's high-quality development (draft for comment).  Accordingly, Shenzhen will support the establishment of an RMB10-billion 5G industry development fund using social capital. Eligible upstream and downstream 5G sector players will be underpinned and introduced to go public in the city, enabling them to raise funds through various means like stock and bond issue.
XIAOMI-W (01810.HK) has recently applied for several trademark registrations (米汽, 米車, 小米汽車 and xiaomicar), according to the tianyancha app.
The Draft Personal Information Protection Law tabled today at the second review meeting of the NPC Standing Committee regulates that the personal information operators which render basic internet platform services, handle enormous number of users and complicated business types should establish an independent institution primarily comprised of external members, overseeing the personal information activities, Xinhua News Agency reported. Such operators are also required to publish a social responsibility report regularly in relation to personal information protection.
GREATWALL MOTOR (02333.HK) Denied earlier reports rumored that affected by the shortage of chip supply, encountered the bottleneck of production capacity, and, in May and June, the two major production bases of Chongqing Yongchuan and Xushui were expected to face the shutdown of production, which would affect various popular models including Haval H6, Great Wall POER and TANK 300.

Hong Kong and Singapore will announce as soon as today the launch of their air travel bubble scheme on May 26, Bloomberg citing insiders.  The number of flights between the two regions will be boosted by June 26 should there be no further outbreaks in either Hong Kong or Singapore.
The PBoC and Ant Group have entered into a strategic cooperation agreement, whereby they will co-develop a digital RMB technology platform based on Ant Group's Ocean Base and mPaaS, Securities Times reported.
Business sentiment has turned around recently amid the easing epidemic, wrote Financial Secretary Paul Chan in his blog. Together with a low-base effect, he predicted a significant improvement in Hong Kong's 1Q21 GDP. following six consecutive quarters of negative growth.
The unemployment rate for the catering service sector fell 0.8 ppts to 13.3% in 1Q21, reflecting how the pandemic and social distancing steps had been affecting business operations and vexing the job market.
China is booking U.S. corn which will be harvested in the fall, a sign of tight supplies across the world, Bloomberg reported.
TENCENT (00700.HK) partook in the 4th Digital China Construction Summit yesterday (25 April) as a digital RMB operator, reported National Business Daily. At the meeting, the giant exhibited the e-yuan trial results together with PBoC's Digital Currency Research Institute and other operators.
CAFE DE CORAL H (00341.HK) announced that the Group expects to record a profit attributable to shareholders of approximately HK$350 million for the year ended 31 March 2021, up 3.76 times yearly.
The increase in the Group’s profit for the Year is largely due to the following reasons:
(1) The Group had quickly developed and implemented specific measures to improve productivity and efficiency in different perspectives;
(2) The Group received pandemic relief and subsidies from the Hong Kong and PRC governments during the Year, including subsidies under the Employment Support Scheme, which were used in their entirety for paying salaries and wages to its employees;
(3) Some of its landlords, especially the Hong Kong Housing Authority and Hong Kong Housing Society, had granted temporary rental concessions to the Group during the Year.
ByteDance, owner of TikTok, has suspended its initial public offering plan due to difficulties meeting regulatory requirements from both Beijing and Washington, SCMP citing insiders. ByteDance cannot come up with a business structure meeting both Chinese and U.S. demands, especially in separating Douyin's business from TikTok's operations as both units are sharing the same algorithm.
FORDOO (02399.HK) announced that its subsidiary Honggao Technology had entered into a letter of intent with Zhejiang Yichuidingyin Technology, a wholly-owned subsidiary of BABA-SW (09988.HK).  Pursuant to the letter of intent, BABA-SW’s "Alibaba Auction Platform" will fully use its advantages in the fields of e-commerce, finance, and big data, leveraging the resources of Changyou operation center of Honggao Technology in overseas port services, supply chain and delivery services. Both parties will jointly establish a new retail business model for parallel imported cars that combine online ecommerce trading platforms and offline imported car global procurement centers.
As "May 1 Golden Week" draws near, Maria Helena de Senna Fernandes, Director of Macao Government Tourism Office told Macao Daily that Beijing remains yet to issue any warning to cross-provincial trips, a positive sign to trips to the gambling hub. The daily average tourist figure was thus anticipated to surmount 30,000 during the weekend holiday.
Volkswagen warned managers to gear up for a deteriorating global chip shortage in the second quarter, Financial Times citing Wayne Griffiths, head of the group's Spanish brand Seat. Griffiths was informed by the firm's management and suppliers that Volkswagen will have to face probably more significant challenges in the second quarter than the previous quarter.
Financial Secretary Paul Chan anticipated the launch of the southbound leg of the Bond Connect (also known as "Southbound Bond Connect") in the second half of 2021. The Southbound Bond Connect will be rolled out in early July as a gift for celebrating the 24th anniversary of Hong Kong's return to the motherland, Hong Kong Economic Journal citing market rumors.
Looking into 2021, China’s GDP growth may hit around 8% with a descending trend, according to the China financial report 2020 from the Institute of Finance and Banking of the Chinese Academy of Social Sciences (CASS).
BABA-SW (09988.HK)'s Ant Group has inked a strategic technology cooperation deal with PBoC's Digital Currency Research Institute, where both sides will exchange views and tie up on the technological space excluding specific product choices, reported 21st Century Business Herald.
CHINA HUARONG (02799.HK) announced postponement to FY20 annual report disclosure as it failed to finish the report auditing before April 30 2021.

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