Jan 11 HK/CHINA WRAP HSI +30pts but China closes in the red.

11 Jan

HSI +30pts (+0.1%) 27,908  HSCEI +104pts (+1%) 11,060  T/O HK$254.14bn (-6% DoD )

Markets opened flat/lower with caution following a mixed day in Asia; with concerns over US/China/Taiwan relations. Investors watching for indications from Biden regarding additional stimulus. Basic Resources weak and Healthcare firm. Covid cases still a concern Tui weak in early trading following Friday’s news of a capital raise.Jeronimo Martins strong along with JD Sports after a strong trading update.No data only a speech from Lagarde due today.
US Futures 
Opened flat in Asian time but fell through the day; now Dow -180pts, S&P and NDX weakConcerns about US/China relations and the scope for more US stimulus as covid cases weight on investors after the poor US payrolls number on Friday.Data due Consumer Inflation Expectations

CHINA CSI 300 Closed -54pts (-1%) @ 5,441 
Opened flat but sold down on deteriorating US relations. But Inflation and PPI data on the open beat F/casts and the market rallied to 5,540 level. Traded sideways for about an hour before selling down to flat at lunchtime. PM opened flat initial ticked higher but then sold down day low, 5,415 before bouncing to 5,465 but then sold down into the close
Shanghai Comp -39pts (-1.1%) @ 3,532
Shenzhen Comp -203pts (-1.3%) @ 15,115
ChiNext Index -58pts (-1.8%) @ 3,093

Inflation Rate Dec +0.2% YoY vs -0.5% Nov (F/cast was +0.1%)
Inflation Rate Dec +0.7% MOM vs -0.6% Nov (F/cast was +0.4%)
PPI Dec -0.4% vs -1.5% Nov (F/cast was -0.8%)
Inflation driven by rising food prices due to bad weather and ahead of Chinese New Year. Health cost along with Education, and other goods and services also rising. Household goods and services flat. Declines in the price of transport, rent, fuel, utilities and clothing.
PPI was the 11month of declines but the smallest since Feb 2020, showing the economy continues to recover.

HSI Pre Market opened at 28,003 +125pts vs +275pts ADR’s but they were before US changed rules on relations with Taiwan and China announced retaliatory measure against US sanctions.  
E-Commerce names +VE but Geely weak as the Baidu JV is with its parent.
Market then trended higher in choppy trading to 28,175 at lunch. PM opened lower retested 28,100 but failed and sold down to 27,800 before finding support. Saw a small bounce to 27,950 but eased back slightly before trading sideways into the close.
Centre for Health Protection said there were 41 new COVID-19 cases in Hong Kong today (vs 28 Sunday) 11 local cases from unknown sources.

SHORT SELLING Monday 11.1% vs 9.2% Friday 
Top Shorts: Bud APAC (1876) 53%, Hengan (1044) 39%, Hang Seng Bank (11) 36%,  Galaxy Ent (27) 34%, Ping An (2318) 33%, CK Assets (1113) 32%, Sunny Optical (2382) 30%, Wharf REIC (1997) 29%, HSBC (5) 27%, WH Group (288) 26%.

China is pondering to allow certain commercial banks to sell their non-performing loans (NPLs) to NPL asset managers as soon as this month, Bloomberg cited sources.  At the top-tier national financial meeting last month, Chinese banks and NPL asset managers were asked to speed up preparation for smooth pilot program this month, sources said.  ICBC (01398.HK) will be the first bank selling the related assets. The trial details remain yet set in stone, subject to China Banking and Insurance Regulatory Commission (CBIRC)'s greenlight.  As a result, Chinese banks are expected to offload RMB1 trillion NPLs, according to estimate by mainland research house.
SUNAC (01918.HK) Chairman Sun Hongbin on 5 January, acquired 940,000 shares of the company, involving $25.716 million, according to the equity disclosure of HKEX. Subsequently, Sun's shareholding in the company boosted to 45.21%.
Indonesian BPOM today allowed Sinovac's vaccines for emergency use, foreign media reported.  The country extended the entry ban on foreigners by 14 days.
The Strategic Planning Committee of the Hong Kong Housing Authority (HA) approved at its meeting on January 11 to convert the public rental housing (PRH) development at Diamond Hill Comprehensive Development Area Phase 2 at Wong Tai Sin to a Green Form Subsidised Home Ownership Scheme (GSH) project for sale in 2021. This GSH project will provide 2,112 flats in three residential blocks. Subject to smooth progress of the preparatory work, the authority plans to launch the sale of the GSH flats around May this year, said a spokesperson. The flats are estimated to be ready for occupation in the first quarter of 2024.
BABA-SW (09988.HK) announced that up to 200 million new products had their debut in TMall in 2020, up roughly 100% yearly.  During the year, roughly 1,000 brands realized over RMB100 million in turnover on TMall.
ABC (01288.HK)'s Shenzhen branch has launched the digital yuan deposit and withdrawal functions at ATMs, reported Shenzhen Special Zone Daily. In future, the pilot program will be expanded to public utility payment, people's livelihood improvement, urban development, smart government administration and so on.
Xin Guobin, deputy head of the Ministry of Industry and Information Technology (MIIT), accentuated at a meeting that automakers and battery companies are reminded of the need to beef up their technology, such as enhancing the low-temperature driving performance of electric vehicles to better user experience.
Midland Confidence Index last printed at 57.1, up 1.3 pts or around 2.3% weekly.  Midland Property Price Index last printed at 163.20, down 0.17% weekly.
Nintendo has shipped 1 million Switch consoles in China, surpassing Microsoft and Sony, since the introduction at the end of 2019, said its Chinese partner TENCENT (00700.HK)
CHOW TAI FOOK (01929.HK) announced that Same Store Sales (SSS) growth in Mainland China +12.2% YoY and Hong Kong/ Macau -31% YoY for the three months ended 31 December 2020.ByteDance's Douyin and TikTok garnered nearly US$142 million in user spending worldwide from App Store and Google Play in December 2020, up 3.3 times yearly, according to Sensor Tower.
CHINA RAIL CONS (01186.HK) announced that the President of the US issued an executive order to prohibit any transaction by any United States person in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of certain Chinese companies. The prohibition of the Executive Order will become effective beginning 9:30 a.m. on 11 January 2021. The Company is in normal production and operation. The Company is conducting a comprehensive assessment of the potential impact of the Executive Order
VALUE PARTNERS (00806.HK) POSITIVE PROFIT ALERT  expecting the consolidated profit attributable to owners to increase significantly to about HK$1.3 billion for the year ended 31 December 2020 as compared to HK$513.4 million for the year ended 31 December 2019.
CNOOC (00883.HK) announced that the Company noted that the Office of Foreign Assets Control (OFAC) of the Department of the Treasury of the United States of America added the Company to its list of Chinese companies with alleged ties to the Chinese military on 8 January. The Company regrets the aforesaid decision and action of OFAC. Since its listing in February 2001, the Company has strictly complied with the laws, regulations and regulatory requirements of its listing venues and has been operating in accordance with laws and regulations.
China plans to ask tech powerhouses including Ant Group, TENCENT (00700.HK) and JD-SW (09618.HK) to share consumer loan data, aiming to deter excess borrowing and fraud, Reuters citing insiders.
The PC shipment +13.1% yearly last year to nearly 303 million units, IDC wrote in its report. In terms of brands, LENOVO GROUP (00992.HK)'s shipment +12% to 72.669 million units last year, followed by HP and Dell.

Market Comment
*PETROCHEMS MIXED oil jumped as Iraq raised all February crude pricing for Asian customers after a similar move by Saudi Arabia. It also increased pricing for Light and Medium barrels to the U.S. but kept Basrah Heavy unchanged. Separately, Abu Dhabi  boosted prices for February sales of its main oil grade. PETROCHINA (857 HK +1.7%) SINOPEC (386 HK -0.8%) CNOOC (883 HK +0.6%) CH OILFIELD (2883 HK -1.6%).
*TELCOS  STRONG as mainland funds buy on record inflow amid bargain-hunting. The three giant telcos declined last week as index firms said they’d remove them from their gauges to comply with U.S. sanctions, and the NYSE said it would delist them. CH TEL (728 HK +1.5%) CH UNICOM (762 HK +5.7%) CH MOBILE (941 HK +5.8%).
*CHINA CONSUMER NAMES WEAK. Restaurant chain HAIDILAO (6862 HK -7.6%) on a  block trade at HK$62.99, a shareholder sold 75m shs at a 7.8% discount to Friday's close.LI NING (2331 HK -6.7%) announced spending about 1.73b yuan subscribed to independent third parties structured products.
*E-COMMERCE FIRM on  positive sector's outlook, except ALIBABA (9988 HK -1.4%) under pressure amid regulatory concerns. Ant Group will reorganize a significant amount of its operations under a financial holding company umbrella for transparency at the bidding of Chinese regulators, according to news. During a meeting, Chinese authorities urged Internet platforms to regulate businesses according to laws. JD (9618 HK +1.7%) established JD.com Technology subgroup to become the core providing technical services, integrating its cloud and AI businesses to achieve integrated  collaboration in the technology sector. TENCENT (700 HK +3.1%) NTES (9999 HK +0.5%).
*TECH & COMPONENT FIRM on speculation of increasing demand amid upgrade of phone models and new 5G handsets. Comes after good numbers from TSMC and other tech companies; SUNNY OPTICAL (2382 HK +5.2%) announced its vehicle lens sets shipments +37.3% YoY to 5.736m units. XIAOMI (1810 HK +0.3%) ZTE (763 HK +0.9%) SIM TECH (2000 HK +3%).
*AUTO MAKERS MIXED GREAT WALL (2333 HK +3.5%) Dec. vehicle sales +41.6% YoY, and 2020 unit sales reached 1.11m,  +4.8% YoY. GEELY (175 HK -2.6%) GAC (2238 HK -2.9%) BYD (1211 HK +6.6%).  Sector concerns over ship shortages.
*CHINA PROPERTY FIRM on sales data. SHIMAO's (813 HK +2%) contracted sales amounted to 37.50b yuan in Dec 2020. The group's aggregated contracted sales for the year ended December 2020 amounted to 300.31b yuan. LONGFOR (960 HK +0.6%) said the group's total contracted sales for the year was 270.61b yuan, a YoY increase of 11.59%, beating the sales target. POWERLONG's (1238 HK +1.4%) Dec contracted sales value amounted to 9.6b yuan. The total contracted sales value for the year amounted to 81.55b yuan, a YoY total contracted sales value increase of 35.1%.
*HK RETAILERS WEAK as BAUHAUS INTL (483 -13%), same-store sales (SSS) growth of its self-managed offline shops -38% YoY for the last quarter. In HK and Macau, the SSS performance of its self-managed retail business fell by 36% YoY, and fell 68% YoY in other areas. SASA (178 HK -1.6%) LIFESTYLE (1212 HK -1%) BONJOUR (653 HK -8.1%).

Regional Markets
Market closed for Coming of Age Day.
Tomorrow we get for Japan Current Account, Bank Lending, Eco Watchers Survey (Current & Outlook)
Kospi opened higher and after the initial rally worked to 3,266 driven by Samsung (possible deal with Intel over Chip outsourcing but could also go to TSMC) and Hyundai (announced talks with Apple). Other large caps also started out higher. But mid morning market reversed and sold down to flat and traded sideways. Then around 1pm sold down to 3,100 support before bouncing to close -9pts (-0.3%) @ 3,122.
Kosdaq opened flat and tested down to 975 in early trades before bouncing back Friday’s closing level. Traded Sideways until 11am the trended lower, first support at 970 but then sold down to 953 around 1:30pm. The worked better to close -17pts (-1.7%) @ 971
TAIWAN Opened lower on the range of news. TSMC and Intel possible outsourcing, US to further open relations and good trade data after market Friday.  Initially rallied to 15,517 before selling back down.  Basically then traded sideways  15,412/476 until 1pm when it rallied;  to close +93pts (+0.6%) @ 15,557
Northbound Rmb 68,967m Buy 34,958m vs 34,009m Sell
Southbound HK$ 37,127m Buy 13,279m vs 23,848m Sell
Northbound Rmb 85,536m Buy 41,846m vs 43,689m Sell
Southbound HK$ 31,745m Buy 11,414m vs 20,331m Sell

Active Heavyweights
TENCENT (00700.HK) +3.1%
MEITUAN (03690.HK) -2.6%
CCB (00939.HK) +2.2%
PING AN (02318.HK) -1.6%
BABA (09988.HK) -1.4%
AIA (01299.HK) -0.2%

HSI & HSCEI Constituents on Move:
HAIDILAO (06862.HK) -7.6%
PSBC (01658.HK) +6.3%
CHINA MOBILE (00941.HK) +5.8%
CHINA UNICOM (00762.HK) +5.7%
JD HEALTH (06618.HK) +5.6%
CHINA OVERSEAS (00688.HK) +5.4%
CM BANK (03968.HK) +5.3%, hitting new high
SUNNY OPTICAL (02382.HK) +5.2%, hitting new high
CONCH VENTURE (00586.HK) +4.3%
CHINA RES LAND (01109.HK) +4.2%
CHINA FEIHE (06186.HK) +4.1%
CHINA RES BEER (00291.HK) -3.8%
SUNAC (01918.HK) +3.8%CHINA TOWER (00788.HK) +3.8%
TECHTRONIC IND (00669.HK) -3.4%
EVERGRANDE (03333.HK) +3.2%
SANDS CHINA LTD (01928.HK) -3%
CPIC (02601.HK) +2.4%, hitting new high

HSMI & HSSI Constituents on Move:
CGN NEW ENERGY (01811.HK) +16.2%, hitting new high
NEXTEER (01316.HK) +14.4%
FUYAO GLASS (03606.HK) +14.1%, hitting new high
SH ELECTRIC (02727.HK) -10.4%
XINYI SOLAR (00968.HK) -10.4%
TRAVELSKY TECH (00696.HK) -10.3%
GCL-POLY ENERGY (03800.HK) -10.2%
CMOC (03993.HK) -10.1%

In December 2020, PCCW (00008.HK) Chairman Richard Li joined the board of three connected companies, including FWD Group Limited and FWD Limited, a move deemed to be preparing grounds for an IPO, Apple Daily learnt from the Registrar of Companies. According to the Articles of Association of FWD, HKEX (00388.HK) and such other internationally recognized exchanges were mentioned in the post-IPO convertible preferred share arrangements, likely implying that Hong Kong is one of the possible hubs for its public fundraising, cited the report.
Ant Group will restructure many businesses under its umbrella-like financial holding company at the request of Chinese regulatory bodies in order to increase transparency, The Nikkei cited sources.   BABA-SW (09988.HK) will shift mutual fund, insurance sales and loan intermediary businesses to the holding company with Ant as the parent, the report said.
Total shipments in China's handset market declined 12.6% yearly to 26.595 million units in December 2020, according to data from China Academy of Information and Communications Technology (CAICT).
Nan Fung will upload the sales brochure for LP10 tomorrow (12th), said Geoffrey Lo, General Manager of Property Development Department & Sales Department at the Group.
Flat prices of the project will possibly be unveiled as soon as this week, he added.
Q TECH (01478.HK) announced Dec sales volume of camera modules was 37.205 million +6.4% MoM and fingerprint recognition modules was 10.304 million units, -1.4% monthly.
 JD-SW (09618.HK) announced to integrate cloud and AI businesses with JDD by establishing JD Technology. JDD CEO Li Yayun will act as the CEO of JD Technology.
State Administration for Market Regulation (SAMR) said the department will prompt amendment of antitrust law, introduction of antitrust guidelines on platform economy, network transaction monitor methods, improvement of recognition of antitrust platform companies, and regulations on consumer interest protection.
BYD COMPANY (01211.HK) announced that it secured an order for 1,002 electric buses from a tender in Colombian capital, Bogota, last year. The deal represented the largest electric bus order in overseas regions so far.
KINTOR PHARMA-B (09939.HK) announced the final results for male patients from the Clinical Trail (ClinicalTrials.gov identifier: NCT04446429) of Proxalutamide for the treatment of COVID-19.  The Final Results showed that Proxalutamide could significantly inhibit the transition of condition of male patients infected with COVID-19 from mild to severe and had good safety for short-term administration.
HAIDILAO (06862.HK) shareholders are weighing placement of 75 million shares at a discount of up to 8.8% to cash in $4.665-4.815 billion, said market rumors.
BYD COMPANY (01211.HK) announced that the company has recently received a notice from Youngy Investment Holding, a shareholder of the company, saying the pledge of 13.93 million shares as held by it was released, representing 0.51% of the total share capital of the company.
Hutchison China MediTech Limited (Chi-Med) and Inmagene Biopharmaceuticals announced a strategic partnership to further develop four novel preclinical drug candidates discovered by Chi-Med for the potential treatment of multiple immunological diseases. Funded by Inmagene, the companies will work together to move the drug candidates towards investigational new drug (IND) submission. If successful, Inmagene will then move the drug candidates through global clinical development.
HAITONG SEC (06837.HK) announced that the group and its relevant subsidiaries recently received the Decision Letter on Self-disciplinary Action of Interbank Bond Market from the National Association of Financial Market Institutional Investors (NAFMII) respectively.  The group will conduct comprehensive in-depth rectification in respect of the decision on self-disciplinary action and optimize its internal processes so as to facilitate its sustainable and healthy development of relevant businesses, according to the announcement.
53 new homes were transacted at the weekend, down from 56 deals in the previous week as the market was waiting for new project launches. EVERGRANDE (03333.HK)'s Emerald Bay reported 13 sales. Starfront Royale, co-developed by Empire Group and HK FERRY (HOLD) (00050.HK), saw 9 deals.
As for the second-hand market, Centaline's ten major housing estates tracked 24 deals, up 4 deals or 20% WoW.

Financial Secretary Paul Chan cited pieces of budget advice from various sectors, where some citizens suggested the Government gradually start scaling back some handout measures or heightening the tax rates, given a significant deficit this year and possible deficits for the coming years. New taxes may be imposed to boost revenue streams.
Equally, Chan acknowledged the significance of tax system reform and tackling economic inequality.
Baidu (BIDU.US) declared to set up a smart electric vehicle company with Zhejiang Geely Holding Group, owner of GEELY AUTO (00175.HK), for EV R&D and production. The new company will be named "Baidu Auto" to be independently operated by Baidu.
SMIC (00981.HK) announced that in relation to the restrictions on United States persons in their dealings in the Company’s traded securities, the Executive Order issued by the President of the United States of America dated 12 November 2020 and the removal from OTCQX, it has been notified by OTC Markets Group, the market operator of OTCQX Market, that OTC Markets Group was notified by its regulator, that they have changed their position regarding the effective date of the Executive Order and are now permitting trading in the Company’s securities to continue until 1 February 2021.   As such, OTC Markets Group has cancelled the pending deletion of SMICY and SIUIF and plans to reinstate both on OTCQX before market open on 11 January 2021.
The Government will hopefully switch on vaccination program during or after Chinese New Year after the Fosun-BioNTech coronavirus vaccines arrive Hong Kong around February, said Patrick Nip, Secretary for the Civil Service.  One center will be established in each of the 18 districts, according to the plan, for which the public may make online booking. Preserved in an ultra-low temperature, the vaccines will universally be handled by the injection center. The bureau will be in talks with the industry about the vaccination equipment and subsidy to private physicians under the program, and the amount subject to negotiation, disclosed Nip. Upon the receipt of subsidy, private physicians will not collect extra charges for the vaccination.
GEELY AUTO (00175.HK) announced that having made such enquiry with respect to the Company as is reasonable in the circumstances, the Board confirms that it is not aware of any reason for these price movements or of any information which must be announced to avoid a false market in the Company’s securities or of any inside information that needs to be disclosed.  The Board also noted that there were certain press articles on 8 January 2021 stating Zhejiang Geely Holding Group Company Limited will cooperate with Baidu Inc. to make smart electric vehicles. The Company clarified and confirmed that it is not a party to the Proposed Transaction and it is not partnering with Geely Holding or providing financing to Geely Holding in relation to the Proposed Transaction. If the Proposed Transaction materialised, subject to the compliance with the Listing Rules and taking into account the interests of the Company and its shareholders as a whole, the Company does not rule out the possibility of exploring potential cooperation opportunities with Baidu Inc.
TRACKER FUND (02800.HK) announced that in light of the US Executive Order, no new investments will be made in a sanctioned entity with effect from 11 January 2021 or such later date which is the effective date applicable to a sanctioned entity, which is consistent with guidance and/or licences published by OFAC. US President Donald Trump had signed an executive order to ban American investors from investing in multiple firms tied to the Chinese military.

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