Feb 24 HK/CHINA WRAP HK -914pts T/O +32% DoD budget excuse, CHINA weak on US policy worries


24 Feb

HSI -914pts (-3%) 29,718  HSCEI -400pts (-3.4%) 11,509 T/O HK$353bn (+32%DoD) 

Today’s sell off looks to be overdone but reflects the growing nervousness of investors as the recovery outlook changes.  The stamp duty hike as part of the overall cost of investing is minimal but it provided an excuse.  Expect margin call selling on the open tomorrow and bargain hunting
Also interesting that the government didn’t consult HK Exchange ahead of the announcement; I think that reflects the administration becoming more like Beijing and less market friendly which is more worrying for investors.


Link to the Full HK Budget statement 

https://www.budget.gov.hk/2021/eng/index.html
Link to Budget highlights pdf
https://www.budget.gov.hk/2021/eng/pdf/Budget2021_eng.pdf

EUROPE 
Markets opened flat/lower following the lead from Asia but working better and now all in the green as Investors react to positively to Powell’s testimony.
Auto’s leading but Media weak. Sterling continues to strengthen on the back of a lockdown exit plan. German GDP growth was better than expected but French confidence data missed; CAC trading sideways around flat.
Lloyds weak despite earnings beating forecasts
Telecom Italia shares strong after forecasting a stabilization of profits and sales
Tui and Carnival each climbed on hopes of vaccine passports (EU to discuss on Thursday most are +VE but Germany and France resistant) and easing of lockdown.
Biomerieux strong as earnings beat 2020 profit expectations and increased its dividend.
Wolters Kluwe weak as analysts reacted indifferently to the Dutch IT firm’s earnings report and outlook.
Earnings still due from Accor, William Hill, Metro Bank, Reckitt Benckiser and Iberdrola.
Data
GERMANY
 
GDP Growth Rate Final Q4 -3.7% YoY vs -4% Q3 (F/cast was -3.9%)
GDP Growth Rate Final Q4 +0.3% QoQ vs +8.3% Q3 (F/cast was +0.1%)
FRANCE 
Business Confidence Feb 97 vs 96 Jan revised (F/cast was 98)
Business Climate Indicator Feb 90 vs 91 Jan revised (F/cast was 94)

US Futures 
Opened in Asia with the Dow hovering around flat, S&P -0.1% and NDX -0.2% but have risen Dow +50pts S&P and NDX slightly higher
Data due
MBA Mortgage Applications and 30 yr Mortgage Rate, New Home Sales, EIA Oil Report
Fed Chairman Powell semi-annual economic testimony at House Financial Services Committee
Earnings: Lowe’s, NVIDIA, Viacom, Public Storage, Booking Holdings, TJX, Brookdale, Royal Bank of Canada, Apache, Petrobras, Pure Storage, L Brands, Casper Sleep

CHINA 
CSI 300 closed -142pts (-2.6%) @ 5,438
CSI 300 opened slightly higher but trend lower through the session until seeing support at 5,380 level mid afternoon it then worked slightly higher to 5,450 before easing lower into the close. Investors remain concerned about US/China relations as the proposed #2 at the US Treasury recommend Trump type policies against China to ensure a level playing field; he said
"It is critical that we use Treasury's tools to hold China accountable for actions they take that are not consistent with international law and that put our national security at risk,"
Also uncertainties remain over the PBoC’s tightening despite assurances from that it will maintain stable policies.
Investors continue to rotate into value/cyclicals. Wine sector lead the declines and white goods were weak with concerns that PBoC tightening will hurt the property sector.
Shanghai Comp -72pts (-2%) @ 3,564
Shenzhen Comp -373pts (-2.4%) @ 14,871
ChiNext -105pts (-3.4%) @ 3,008
CHINA DATA No data

HSI 
Pre market opened @ 30,703 +70pts vs -73 ADR’s
Market traded sideways for the first 30 minute but then trended lower as rumours about the HK budget circulated. Selling accelerated around 11:15am on news that the Govt would increase stamp duty on share transactions from the current 0.1% to 0.13%. Some support on news of E Coupons. Market found support in the morning at 29,860 level and bounced ahead of lunch. PM opened lower and trended down to 29,680 and saw bounce but then resume the down trend support found at 29,550. Then saw a small bounce before trading sideways into the close.
Expect further margin call selling on the open tomorrow. Earnings in focus with a number of Property companies reporting; a number of elements of the budget were supportive to them and certainly at the moment they are facing an improving outlook.
HONG KONG DATA 
Private Domestic Price Index January came in at 380, up 0.1% monthly, snapping the three-month decline. On a yearly basis, it inched up less than 0.1%.
After Market 
GDP Growth Rate Final Q4 +0.2% QoQ vs +2.7% Q3 (F/cast was +0.2%)
GDP Growth Rate Final Q4 -3% YoY vs -3.6% Q3 (F/cast was -3%)
Centre for Health Protection said there were 17 new COVID-19 cases in Hong Kong today; (vs 12 Tuesday) with 6 from unknown sources.
Tomorrow, after market, we get Balance of Trade, Exports, Imports

SHORT SELLING Wednesday 11.2% vs12.8% Tuesday  
Top Shorts:  Ping An (2318) 38%,  Bud Apac (1876) 36% ahead of earnings today,  Hengan (1044) 32%, China Res Land (1109) 29%, Henderson Land (12) 28%, Wharf REIC (1997) 28%, Galaxy (27) 27% reports Thursday, NWD (17) 25% reports Friday,  SHKP (16) 24% reports Thursday.

Earnings due Thursday include Hysan (14), SHKP (16), China Motor Bus (26), Galaxy (2), Sino Land (83), TST Properties (247), ASM Pacific (522), Bossini (592), UMP Healthcare (722), NW Dept Store (825), Kantone (1059), APAC (1104), Sino Hotels (1221), Plover Bay Tech (1523), Pacifc Basin Shipping (2343), Standard Chartered (2888)

AFTER MARKET NEWS 
SCICLONE PHARMA (06600.HK), whose public offering has closed today, recorded over 430,000 subscribers, representing 1,067 times of over-subscription, freezing approximately $235.1 billion, said market rumors.

MARKET COMMENT 
*HKEX (388 HK -8.8%) despite good results it was sold off after HK unveiled its first stamp-duty increase on stock trades since 1993. The planned trading-tax increase to 0.13% from 0.10% was part of a raft of new measures announced in HK’s budget. During lunch, HKEX reported net income for 2020 +23% per cent to HK$11.5b, beats analysts est of HK$11.4b.At the press conference it revealed it had not be consulted by the government about the proposal and felt ‘let down’.  That said today’s selling was probably overdone; I would expect bounce tomorrow.
*HK RETAILERS and LANDLORDS STRONG  as the budget announced  a proposal to give HK resident citizens over 18 spending vouchers to a value of HK$5000  to be valid for a month and the provision of loans for the unemployed up to HK$80,000 at 1% pa repayable over 5years but payment moratorium for the first 12 months. SASA (178 HK +9.3%) BONJOUR (653 HK +6%) LUK FOOK (590 HK +0.2%) I.T. (999 HK +0.7%) LINK REIT(823 HK +0.9%) WHARF (4 HK +1.1% CKH (1 HK +1.7%).
*PETROCHEMS WEAK weakness as API data after US market closed showed US inventories rose as US refinery look to resume after the Texas freeze. CNOOC (883 HK -7.3%) CN OILFIELD (2883 HK -9.6%) ANTON (3337 HK -6.1%) PETROCH (857 HK -2.7%).
*E-COMMERCE WEAK as rotation out of the sector continues. Also news that China's State Administration for Market Regulation (SAMR) said it will strengthen supervision of these internet platforms.TENCENT’s (700 HK -2.8%) despite news the Italian govt authorized Jack Dorsey’s Square and Tencent  investment into the payments app Satispay, Reuters reports. KINGSOFT's (3888 HK -13%) despite announcing its Beijing Kingsoft Office Software (688111 CH) said last year's net profit increased 1.2x YoY to 879m yuan. MEITUAN (3690 HK -6.8%) WEIMOB (2013 HK -8.7%) KUAISHOU (1024 HK -8.6%) MING YUAN CLOUD (909 HK -9.6%).
*CHINA FINANCIALS FIRM as investors bargain-hunt on old economy stocks.PING AN's (2318 HK -1.2%) insurance premium -5.5% YoY to 134.85b yuan. CH LIFE (2628 HK -0.9%) CH TAIPING (966 HK -1.7%) NCI (1336 HK -1.2%). CHINESE BANKS weak after recent rally on inflation bets; ICBC (1398 HK -2%) BOC (3988 HK -1%).
*CASINOS MIXED, erased some of earlier gains on news of quarantine-free travel for mainland visitors. SJM (880 HK unchg)after reporting a net loss of  HK$3.03b last year, compared to a net profit of HK$3.21b in 2019. GALAXY (27 HK -1.5%) MELCO (200 HK +0.5%) WYNN (1128 HK +4%) SANDS (1928 HK -2.9%).
*CHINA PROPERTY WEAK despite yesterdays strong China new home prices  rises (+3.9% YoY and 0.3% MoM) across 70 mainland medium and large-sized cities and Secondary home prices in Shenzhen surged 15.3% in January, and  secondary flat prices were also up 1.7% MoM.  Concerns are that the PBoC will tighten policies to prevent a bubble.SUNAC (1918 HK -3%) TIMES CH (1233 HK -3.7%) AGILE (3383 HK +1%) COUNTRY GARDEN (2007 HK -2.3%).
*PHARMA WEAK on consolidation despite continuous vaccine rollouts. Argentina to receive 904k SINOPHARM (1099 HK-2.2%) SINO BIOPHARM (1177 HK +2.5%) vaccines  Thursday. Egypt received 300k doses of Sinopharm vaccine from China. Mexico has received 3.04m CANSINO (6185 HK -4.8%) vaccines since December. Pfizer-BioNTech vaccines, provided by FOSUN (2196 HK -4.9%), is expected to arrive in HK this week but rumours it may be delayed.

Regional Markets
JAPAN 
Nikkei re opened lower an initally sold off but found support around 29,850 which it tested a couple of times before working back to the opening level. But failed to break above and sold down into lunch. PM opened lower and drifted lower to close -484pts (-1.6%) @ 29,672 the day low
Topix opened lower and sold down 12pts in the first 10 minutes to 1,922 and then trended lower for the rest of the day, found support at 1,904 going into the close. Closed -35pts (-1.8%) @ 1,903
S KOREA  
Pre market Business Confidence missed, down MoM. Foreign and Institutional selling continued despite Powells comments with Kospi closing just below 3,000. Volumes were moderate. Most large caps closed lower.
Kosdaq opened flat but initially sold down to 928 before reversing and worked higher to 944 around midday but then trended lower for the rest of the session to close -30pts (-3.2%) @ 906
Kospi traded in a similar pattern to close -75pts (-2.5%) @ 2,995.Data Business Confidence Deb 82 vs 85 Jan (F/cast was 83)Tomorrow we get the BoK rate decision no change expected
TAIWAN 
Opened lower but worked higher to test yesterday’s close but having tested to a couple of times reversed and trended lower for the rest of the session to close -231pts (-1.4%) @ 16,213
After Market data  
Export Orders Jan +49.3% vs 38.3% Dec (F/cast was +44%)
Tomorrow after market: Unemployment, Retail Sales, M2 Money Supply

CONNECT FLOWS (increase in flows )
Shanghai 
Northbound RMB 73,232m Sell 36,688m : 36,544m Buy
Southbound HK$ 49,804m Sell 30,823m : 18,088m Buy
Shenzhen 
Northbound RMB 82,573m Sell 41,551m : 41,022m Buy
Southbound HK$ 50,476m Sell 29,297m : 21,179m Buy

Active Heavyweights
HKEX (00388.HK) -8.8%
MEITUAN (03690.HK) -6.9%
AIA (01299.HK) -3.8%
TENCENT (00700.HK) -2.8%
CCB (00939.HK) -2%
BABA (09988.HK) -1.9%
PING AN (02318.HK) -1.2%

HSI & HSCEI Constituents on Move:
CPIC (02601.HK) -7.8%
CHINA FEIHE (06186.HK) -7.4%
CNOOC (00883.HK) -7.3%
JD HEALTH (06618.HK) -6.7%
GEELY AUTO (00175.HK) -5.8%
CM BANK (03968.HK) -5.5%
SUNNY OPTICAL (02382.HK) -5.2%
SHENZHOU INTL (02313.HK) -5.1%
ANTA SPORTS (02020.HK) -4.8%
TECHTRONIC IND (00669.HK) -4.8%
WUXI BIO (02269.HK) -4.7%
XIAOMI (01810.HK) -4.4%
MENGNIU DAIRY (02319.HK) -4.4%
CHINA RES BEER (00291.HK) -4.2%
HAIDILAO (06862.HK) -4%
JD (09618.HK) -3.9%
CHINA UNICOM (00762.HK) -3.8%
PSBC (01658.HK) -3.5%
SMIC (00981.HK) -3.4%
CHINA TOWER (00788.HK) -3.3%
EVERGRANDE (03333.HK) -3.2%
ENN ENERGY (02688.HK) -3.2%
SUNAC (01918.HK) - 3.1%

HSMI & HSSI Constituents on Move:
MMG (01208.HK) -16%
GCL-POLY ENERGY (03800.HK) -14.4%
YEAHKA (09923.HK) -14.3%
KINGSOFT (03888.HK) -13.2%
ZHUGUANG HOLD (01176.HK) +13.2%, hitting new high
JIANGXI COPPER (00358.HK) -12.8%
CRRC TIMES ELEC (03898.HK) -11.3%
YADEA (01585.HK) -11.1%
MEITU (01357.HK) -10.5%
SIHUAN PHARM (00460.HK) -10.3%
SA SA INT'L (00178.HK) +9.3%, hitting new high
TONGCHENG-ELONG (00780.HK) +3.5%, hitting new high
AIR CHINA (00753.HK) +2.2%, hitting new high
GREAT EAGLE H (00041.HK) +2.1%, hitting new high

MARKET HOURS NEWS
Stewart C K Leung, Chairman of Wheelock Properties, Regarding the budget proposal to review the Rate System opined that the Government should postpone the review as the economic development will be hijacked if the Government increases revenue sources at this juncture. He added that the proposal may backfire the economy if it has not yet recovered.
It is now uncertain whether the first batch of Fosun-BioNtech vaccines will arrive in Hong Kong tomorrow as planned, said market rumors.
Regarding the low-price dumping by online community group buying platforms, China's State Administration for Market Regulation (SAMR) said it will strengthen supervision of these internet platforms at the next step. On 22 December 2020, SAMR and MOC convened an Administrative Guidance Meeting for Standardizing Community Group Purchase. BABA-SW (09988.HK), TENCENT (00700.HK), JD-SW (09618.HK), MEITUAN-W (03690.HK)  -27.000 (-6.874%), Pinduoduo (PDD.US)  and Didi partook the meeting.
Taiwan's Health and Welfare Minister Chen Shih-chung said the country will lift entry curbs on non-Taiwanese travelers from 1 March 2021 (local time in departure cities), considering global Covid situations, domestic vitality to contain the plague, and the need for commercial trade exchange. Accordingly, non-Taiwanese persons with valid residency permits (including foreigners and residents of Hong Kong, Macau and Mainland China) will be allowed to enter Taiwan. Those without residence permits can apply for special entry permits for reasons other than tourism and regular social visits.
TENCENT (00700.HK) backed Yuanfudao is looking to raise at least US$1 billion in a fresh funding round, as the cash-burning battle in the Chinese online education sector shows no signs of abating, Bloomberg citing insiders. The online education platform is seeking financing at a valuation of US$20 billion, the press learnt.
CANSINOBIO-B (06185.HK) announced that, the Company has conducted a global multicenter phase III clinical trial for the Recombinant Novel Coronavirus Vaccine (Adenovirus Type 5 Vector) (“Ad5-nCoV”, trade name: Convidecia) jointly developed by the Company and Beijing Institute of Biotechnology, Academy of Military Medical Sciences, in five countries including Pakistan, Mexico, Russia, Chile and Argentina.  On February 21, the Company officially filed an application with the National Medical Products Administration (NMPA) of PRC for conditional marketing authorization of Ad5-nCoV and NMPA has accepted such application.
At lunchtime BANK OF E ASIA (00023.HK) announced annual results ended December 2020. Total operating income declined 12.4% year on year to HK$17.31 billion. Net profit amounted to HK$3.614 billion, up 10.9%.EPS equaled HK$0.97. Second interim DPS was HK$0.24. Full-year DPS was HK$0.4.
At lunchtime HKEX (00388.HK) annual results ended December 2020.  Revenue and other income rose 17.7% yearly to HK$19.19 billion, in-line with HK$18.556-19.869 billion in broker forecast as compiled by our reporters. Net profit amounted to HK$11.505 billion, up 22.5% yearly, in-line with HK$11.059-12.1 billion in broker forecast. EPS equaled HK$9.11. Second interim DPSwas HK$4.46. Full-year DPS hit record HK$8.17, setting all-time high.
Chinese car maintenance service provider Tuhu is pondering over an
IPO in the US this year,
Reuters learnt from insider sources. The startup has recently raised US$300-400 million from its latest fundraising, led by TENCENT (00700.HK) and Sequoia Capital China, said insiders. The expected valuation reaches approximately US$3.8 billion.
HK budget broadcast started at 11am Pre Budget Local Landlords and Retail names saw strong interest on rumours of HK$5,000 E vouchers to be announced in the budget
Chinachem sold three units under the Kwun Tong project Mount Anderson after the first 68 flats had been launched yesterday. The developer commented that the sales response came in-line with expectations.

PRE MARKET HOURS NEWS
Oversea-Chinese Banking Corporation announced the full year 2020 results. Net profit receded 26% yearly to SGD3.586 billion. Provisions burgeoned by 1.3 times to SGD2.043 billion. The group's OCBC Wing Hang Bank saw reported net profit of HKD2.491 billion, up 7% annually. Operating profit rose 10% to a new high of HKD3.02 billion.
Italy has given a conditional green light to Square and TENCENT (00700.HK), allowing them to acquire local digital payment startup Satispay, foreign media citing sources. Square and TENCENT each plan to invest EUR15 million in Satispay, but the Italian government has the right to deter bids in strategic sectors like banking, telecoms and healthcare, the press learnt.
SoftBank Group plans to step up investments in biotech and healthcare industries through its asset manager SB Northstar, Bloomberg citing insiders. The Japanese group aims to pour billions of US dollar to invest in listed biotech companies.
Goldman Sachs Asset Management announced the partnership with BANK OF E ASIA (00023.HK) for selling its investment fund portfolio to Hong Kong retail customers. The sales channels include the retail banking, private banking, and corporate banking units of BANK OF E ASIA.
The Government announced that at 2am today, around 520 residents had undergone testing and no confirmed cases were found, after it had enforced last night "restriction-testing declaration" and compulsory testing notice in respect of specified "restricted area" in San Po Kong.
Information from Macao Statistics and Census Service (DSEC) indicated that number of visitor arrivals in January 2021 dropped by 15.6% month-to-month to 556,800, which also represented a year-on-year decline of 80.5%.  Same-day visitors and overnight visitors totalled 287,800 and 268,900 respectively. The average length of stay of visitors extended by 0.4 day year-on-year to 1.6 days; the duration for overnight visitors (3.0 days) increased by 0.7 day, whereas that for same-day visitors (0.1 day) shortened by 0.1 day.
SINO BIOPHARM (01177.HK) announced that, the interim analysis of the phase III clinical trial of Penpulimab (product name: Annike; research and development code:AK105), an anti-PD-1 monoclonal antibody drug jointly developed by the Company and AKESO-B (09926.HK) in combination with paclitaxel and carboplatin for first-line treatment of locally advanced or metastatic squamous non-small cell lung cancer patients, has reached key research endpoints.
KINGSOFT (03888.HK) announced that Kingsoft Office (688111.SH), a subsidiary of the Company listed on the SSE STAR Market, published its preliminary results announcement for the year ended 31 December 2020. Net profit burgeoned 119.6% YoY to RMB879 million, with an EPS of RMB1.91.

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