Jan 6 HK/CHINA Wrap. HSI +42pts after weak China PMI data. China closed higher again


06 Jan

HSI +42pts (+0.6%) 27,692  HSCEI +126pts (+1.2%) 10,900  T/O HK$218.12bn (+1.4% DoD )

EUROPE Markets opened higher despite the poor China PMI data and mixed European data. Covid issues and the US Georgia run-off election result in focus; networks are saying Democrat Warnock is projected to beat Republican Loeffler but the other contest is too close to call.
Data 
EUROZONE
Services PMI Dec 46.4 vs 41.7 Nov (F/cast was 47.3)
Composite PMI Dec 49.1 vs 45.3 Nov (F/cast was 49.8)
PPI to come.
GERMANY
Services PMI Dec 47 vs 46 Nov (F/cast was 47.7)
Composite PMI Dec 52 vs 51.7 Nov (F/cast was 52.5)
Inflation Rate.
FRANCE
Services PMI Dec 49.1 vs 38.8 Nov (F/cast was 49.2)
Composite PMI Dec 49.5 vs 40.6 Nov (F/cast was 49.6)
Inflation Rate Dec 0% YoY vs +0.2% Nov (F/cast was +0.1%)
Inflation Rate Dec +0.2% vs +0.2% Nov (F/cast was +0.3%)
Consumer Confidence Dec 95 vs 89 Nov revised (F/cast was 91)
UK
Services PMI Dec vs 47.6 Nov (F/cast was 49.9)
Composite PMI Dec vs 49.0 Nov (F/cast was 50.7)
New Car Sales Dec -10.9% YoY vs -27.4% Nov (F/cast was -23%)

US Futures 
Opened slightly lower and eased back in Asian time but now Dow flat S&P and NDX slightly -VE. Georgia state run-off election in focus, covid cases and Trump still trying to overturn the US election results.
Data
MBA Mortgage Applications and 30 yr Mortgage Rate, Services and Composite PMI, ADP Employment Change, Factory Orders, EIA Oil Report, FOMC Minutes.

CHINA CSI 300 Closed +49pts (+0.9%) @ 5,418 
CSI 300 opened higher and tested to 5,430 level but then traded down to 5,340 after PMI data was weaker than forecast. Saw a small bounce into lunch. PM opened flat but worked higher throughout the session to at the PM high but just off the day high.
Indexes
Shanghai Comp +22pts (+0.6%) @ 3,550
Shenzhen Comp +40pts (+0.3%) @ 15,188
ChiNext Index +17pts (+0.6%) @ 3,115

CHINA DATA  Caixin Services PMI Dec 56.3 vs 57.8 Nov (F/cast was 56.9)
Caixin Composite PMI Dec 55.8 vs 57.5 Nov (F/cast was 56.4)

HSI Pre Market Opened at 27,613 -36pts  vs +64pts ADR’s
Ecommence names +VE with Baba +2.2% and JD.Com +7.4% but Financials were mixed. Rail Infrastructure names +VE on broker upgrade.
Markets initial popped to 27,700 but then trended lower to 27,400 at lunch after the weaker than F/cast PMI data. PM the market opened higher and worked back to 27,650 yesterday’s close but found resistant there and traded sideways then around 3pm pushed higher to 27,756 but then drifted slightly lower into the close.
IPO’s 
ZONBONG ENVIRO (01855.HK), on debut, closed  at $2.05, up 5 cents or 2.5% against the listing price $2, on volume of 36.09 million shares and turnover of $76.47 million. Excluding the handling fees, a book gain of $100 was reported per board lot of 2,000 shares.
NEWLINK TECH (09600.HK), on debut, closed at $4.1, down 26 cents or nearly 6% against the listing price $4.36, on volume of nearly 188 million shares and turnoverof $830 million. Excluding the handling fees, a book loss of $208 was reported per board lot of 800 shares.
HONG KONG DATA
Pre Market PMI Dec 43.5 vs 50.1 Nov (F/cast was 50)
An 8 month low
Centre for Health Protection said there were 25 new COVID-19 cases in Hong Kong today (vs 32 Tuesday) 7 local cases from unknown sources.

SHORT SELLING Wednesday 14% vs 13.2% Tuesday Top Shorts: Wharf REIC (1997) 52%, MTRC (66) 49%, CLP (2) 44%, Sands China (1928) 42%, Link REIT (823) 41%, Anta Sports (2020) 41%, Country Garden (2007) 40%, Mengniu Dairy (2319) 35%, Sunny Optical (2382) 34% (as Largen in Taiwan missed #’s), Power Assets (6) 33%, Hengan (1044) 32%, Henderson Land (12) 32%, CKI (1038) 29%, Hang Lung Property (101) 29%, Ping An (2318) 28%, Bank of China (3988) 26%.

AFTER MARKET NEWS  
CH OVS G OCEANS (00081.HK) announced that from January to December 2020, the total property contracted sales amounted to RMB64.709 billion and the total contracted GFA reached 5.3034 million square meters, with year-on-year increase of 20.4% and 5.1% respectively.
Wheelock Properties sold around 1,000 flats last year, pocketing more than $11.5 billion, said Managing Director Ricky Wong Kwong-yiu. Disrupted by the pandemic, the launch schedule of MONACO project in Kai Tak was delayed from 4Q20 until 2021. Wheelock had obtained the pre-sale consent of MONACO last month, and the sales brochure will be uploaded in 24 hours,He also said that he modelled a 5-8% overall home price uptick this year based on conservative projection.  Equally, Hong Kong's property prices may chase laggard in 2021, in lack of normal rally over the past two years.
GEELY AUTO (00175.HK)  announced that the total sales volume for the year of 2020 was 1.3202 million units, a decrease of 3% from the same period last year, and in line with the Group’s full year sales volume target. The Group set its sales volume target for the year of 2021 at 1.53 million units, representing an increase of 16% from the total sales volume achieved in 2020.
Chinese Foreign Ministry Spokeswoman Hua Chunying urged the U.S. to earnestly respect market economy and fair competition principles, and comply with international trading rules.   China is bound to take necessary actions to protect the legitimate rights of its companies, she added. Follows Trump inking an executive order to ban U.S. transactions with eight Chinese software and apps, including Alipay under BABA-SW (09988.HK)'s Ant Group, as well as TENCENT (00700.HK)'s QQ Wallet and WeChat Pay.
Centa-Salesman Index (CSI) last printed at 50.88, up 0.80 pts weekly, saidCentaline Property.   The frontline agent sentiment is turning positive as the pandemic was going muted and the second-hand market was turning vibrant.

Market Comment
*PETROCHEMS FIRM after Saudi Arabia pledged to voluntarily cut output by an extra 1m barrels a day. CNOOC (883 HK +4.3%) CH OILFIELD (2883 HK +8.7%) PETROCHINA (857 HK +2.9%) SINOPEC (386 HK +3.1%).
*E-COMMERCE FIRM despite U.S. Commerce Secretary Wilbur Ross says he will advise his department to begin implementing an executive order signed by President Trump that bans transactions with multiple Chinese software applications, including Alipay, WeChat Pay, and Tencent QQ. ALIBABA (9988 HK +3.1%) plans to sell up to US$8b bonds as early as next week. JD.COM (9618 HK +7.7%) NTES (9999 HK +3.9%). TENCENT  (700 HK +2.2%). MEITUAN (3690 HK +4.5%) will take a 20% stake in the hotel group Doosen Intl Group at around 5b yuan valuation, news said. Founded in 2006, the hotel group runs more than 3,000 hotels across the country, and has over 35m paying members.
*TELCOS FIRM after yesterday's rebound, despite the NYSE decided to reconsider its decision to halt the delisting of three major Chinese telecommunications firms after Treasury Secretary Steven Mnuchin told the Big Board he opposed its shock announcement to grant the companies a reprieve. CH MOBILE (941 HK +1.2%) CH UNICOM (762 HK +3.5%) CH TEL (728 HK +3.7%).
*TECH & COMPONENTS MIXED  XIAOMI (1810 HK -4%) despite being expected to replace Huawei as the third largest smartphone producer in the world this year, behind Samsung and Apple, according to an industry research report.SMIC (981 HK +12%) on hopes that the political headwinds the company faces could be easing.
*AUTOS MIXED  BYD (1211 HK -2.6%) AS sales in 2020 WERE -7.7% despite a 30% YoY jump in December. Car sales in December were 56,322 units and full-year sales were 427,000 units.  New energy vehicle sales surged 120% YoY to 28,841 last month while full-year sales of  NEVs was up 17.35% to 189,689 units.
DONGFENG (489 HK +5%) said vehicle sales in December +20% YoY to 343,000 while passenger vehicle sales +21.1% to 293,747. Vehicle sales in 2020 -2.2% YoY to 2.868m units. Passenger vehicle sales fell 6.09% YoY to 2.313m units while commercial vehicle sales rose 18.47% to 554,812 units.
GAC (2238 HK -1%) says NEV JV with NIO to get 2.41b yuan investment. GAC will own a 25% stake in it.
DEALERSHIPS  were sold off across the board as EVs sales is expected to be in focus. ZHONGSHENG  (881 HK -9.5%) YONGDA (3669 HK -6%) MEIDONG (1268 HK -7.3%).
*CHINESE  PROPERTY FIRM  with some sector rotation. EVERGRANDE (3333 HK +2.4%) said its contracted sales of properties grew by 20.3% YoY to 723.25 b yuan in 2020. It set a contracted sales target of 750b yuan this year and vowed to reduce its interest-bearing  indebtedness by 150b yuan.
R&F (2777 unch) said it has paid back 7.5b yuan to investors of a bond issued in 2018 and will repay a 6b yuan bond on Jan 11.
GEMDALE (535 HK +5.4%) 2020 contracted sales +18% to 75.17b yuan.
MIDEA (3990 HK +3.6%) said 2020 contracted sales +25% YoY to 126.16b yuan. *CHINESE  PROPERTY  MGMT STRONG after China issued guidelines encouraging such firms to expand the scope of their businesses to provide elderly care, day care and other services.  EVER SUNSHINE (1995 HK +20%) CH OVS PPT (2669 HK +25.6%) A-LIVING (3319 HK +17%) POLY PPT SERV (6049 HK +22%).


Regional Markets
JAPAN 
Nikkei 225 opened lower spiked but the trenched on the PMI data, worked better but then sold down to 27,040 support and saw a small rebound into lunch. PM opened lower and tested 27k support before working back to the lunchtime level. But sold down at the end to close -102pts (-0.4%) @ 27,056
Topix followed a similar pattern but stayed in the green; currently +5pts (+0.3%) @ 1,796
Data
Services PMI Dec 47.7 vs 47.8 Nov (F/cast was 47.2)
Composite PMI Dec 48.5 vs 48.1 Nov (F/cast was 48)
Consumer Confidence Dec 31.8 vs 33.7 Nov (F/cast was 35)Expectation that Japan will announce a state of emergency tomorrow to cope with covid.
S KOREA  
Kospi opened higher and tested to 3,020 but then sold down to 2,980 level has since traded around yesterday’s record closing level; but then sold down in the last 50 mins to close -22pts (-0.8%) @ 2,968
Kosdaq followed a similar trading pattern and closed -4pts (-0.4%) @ 981
Data
Foreign Exchange Reserves Dec $443.1b vs 436.38b Nov (F/cast was 444b)
TAIWAN 
Opened flat but traded higher to test 15,200 but failed toi break higher. Eased back to yesterday’s closing level then worked higher to 15,100 level before selling down to 14,944 and then tested 15,000 but found resistance and sold down to 14,840 level before retesting 15,000 but again failed to break above and drift lower to close -17pts (-0.1%) @ 14,983
After Market
Foreign Exchange Reserves Dec $529.91b vs 513.4b Nov (F/cast was 515b)
CONNECT FLOWS 
Shanghai 
Northbound Rmb 62,412m Buy 30,271m vs 32,140m Sell
Southbound HK$ 27,170m Buy 10,676m vs 16,493m Sell
Shenzhen 
Northbound Rmb 77,857m Buy 39,745m vs 38,112m Sell
Southbound HK$ 28,424m Buy 10,922m vs 17,501m Sell

Active Heavyweights
MEITUAN (03690.HK) +4.5%
AIA (01299.HK) -3.6%
BABA (09988.HK) +3.1%
TENCENT (00700.HK) +2.2%
HKEX (00388.HK) -1.8%
PING AN (02318.HK) -0.2%

HSI & HSCEI Constituents on Move:
SMIC (00981.HK) +12.9%
JD (09618.HK) +7.7%
CONCH CEMENT (00914.HK) +6.4%
HAIDILAO (06862.HK) +5.3%, hitting new high
CNOOC (00883.HK) +4.2%
CHINA FEIHE (06186.HK) +4%, hitting new high
XIAOMI (01810.HK) -4%
NTES (09999.HK) +3.9%
WUXI BIO (02269.HK) -3.8%
CHINA OVERSEAS (00688.HK) -3.8%
CHINA UNICOM (00762.HK) +3.5%
CHINA TOWER (00788.HK) -3.4%
HSBC HOLDINGS (00005.HK) +3.4%
SINOPEC CORP (00386.HK) +3.1%
ANTA SPORTS (02020.HK) +2.6%, hitting new high
MENGNIU DAIRY (02319.HK) +1.4%, hitting new high

HSMI & HSSI Constituents on Move:
CHINA OVS PPT (02669.HK) +25.6%
POLY PPT DEV (06049.HK) +22%
EVERSUNSHINE LS (01995.HK) +20%, hitting new high
CRRC (01766.HK) +19.6%
A-LIVING (03319.HK) +16.6%
POWERLONG CM (09909.HK) +15.6%
CC NEW LIFE (09983.HK) +15%
TIMES NEIGHBOR (09928.HK) +14.1%
CHINA LONGYUAN (00916.HK) +12.9%, hitting new high
CHINA COMM CONS (01800.HK) +11.2%
KB LAMINATES (01888.HK) +11.1%, hitting new high
WEIMOB INC (02013.HK) +10.6%, hitting new high
NEXTEER (01316.HK)  -10.1%

MARKET HOURS NEWS
Apple (AAPL.US) has made orders for a production volume of 95-96 million units of iPhone, up almost 30% yearly, during the first half of this year, supply chain sources were quoted as saying by Nikkei Asia.
K11 announced that resilient growth (+45% yearly) was recorded in 2H20 sales
turnover.
In particular, K11 (HK) recorded 56% annual growth in 2H20 sales turnover.
LP10, the Phase X of LOHAS Park co-developed by Nan Fung Group and MTR CORPORATION (00066.HK), comprises two residential blocks to offer a total of 893 flats.  Having obtained a pre-sale consent for the project, Nan Fung is actively preparing the sales brochure and expecting to upload it very soon.
The Land Registry released its statistics for 2020 the number of sale and purchase agreements for all building units received for registration was 73,300 (-2.% YoY and -7.4% compared with 2018).  The total consideration for these agreements for 2020 was $628.39 billion (-9.2 per cent compared with 2019 and -15.2 per cent compared with 2018).
From 4 January 2021, Shanghai has set about emergency coronavirus vaccination for designated clusters, where 326,000 individuals have been vaccinated, Chinese media reported.
BABA-SW (09988.HK) intends to issue at least US$5 billion bond this month, of which the scale may whop US$8 billion contingent on the investor reaction, Reuters cited people with the knowledge of the matter. The company is very likely utilizing the capital in general corporate expenditure.  While the report said the plan and schedule may change, BABA-SW declined to comment on the matter.
MEILAN AIRPORT (00357.HK)  said it has recently received a notice of arbitration in relation to its subscription agreement of 200 million New H Shares signed in late September of 2019. Pursuant to the Notice of Arbitration, Aero Infrastructure Holding Company Limited, as the claimant, filed an arbitration with the Hong Kong International Arbitration Centre against the Company asserting allegations in connection with the Subscription Agreement.  The Claimant alleged that the Company breached the Subscription Agreement and claimed damages and related arbitration costs in the amount of HK$5.832 billion or HK$6.962 billion.
European countries like Denmark and Britain plan to delay giving out second doses of Covid vaccine due to undersupply, longer than the suggested 21-28 days between shots so they could give more people their first jabs.  WHO's vaccine advisory group said the doses could be deferred for a few weeks in special circumstances. However, the group admitted there is no data proving the safety and efficacy of delaying the second shots.
DONGFENG GROUP (00489.HK) announced that PSA and FCA had held shareholder meeting in 2020 (French time) and approved the merger of FCA and PSA to create Stellantis NV Upon receipt of the final regulatory clearances over the course of the last month, including notably from the European Commission and the European Central Bank, FCA and PSA expect to complete the Combination on January 16, 2021.
HARMONY AUTO (03836.HK) announced that on January 4, FMC, Foxconn Technology Group and China Nanjing Economic and Technological Development Zone signed a strategic cooperation framework agreement on the BYTON project, under which the three parties will work together to promote the mass production of BYTON and accelerate BYTON to become a first-tier brand of new energy vehicles as soon as possible.
The U.S. has announced sanctions against a Chinese steel enterprise Kaifeng Pingmei New Carbon Materials Technology12 Iranian steel and metals manufacturers and three foreign-based sales agents and mining companies.
China Foreign Exchange Trade System announced today (6 January) that the central parity of USD/RMB surged 156 bps from the last trading day to 6.4604, logging an over-2.5-year high.

PRE MARKET NEWS
A clutch of Asian suitors have entered the second-round bidding for Philips' home appliance business, Bloomberg citing insiders.  The shortlisted bidders include Chinese private equity firm CDH Investments, home appliance maker TCL Technology, Hillhouse Capital and another company.
The Chinese government is seeking to shatter Ant Group's monopoly in the data sector, besides requirements to oversee its loan business in a similar way as banks, the Wall Street Journal learnt from Chinese officials. One of the weighed proposals is telling Ant Group' to import its data into the Chinese central bank's nationwide credit report system, according to the insiders.  This is something that I had been expecting; the key will be to watch to see if it changes peoples spending habits.
Travel Industry Council of Macau disclosed that the visitor flow under individual travel scheme has been restored by 60%, with mid-to-high end travel packages being a particular darling, as the Government's advertising efforts in China have ramped up Chinese visitors' confidence and travel appetite towards the gambling hub, cited Macao Daily. The council foresaw another post-pandemic high in intraday inbound passenger flow during the Lunar New Year holiday, targeting 35,000 passengers, as long as the plague in China remains reined.
US President Donald Trump inked an executive order on Tuesday (5th) to ban transactions with eight Chinese software and apps, comprising Alipay under BABA-SW (09988.HK)'s Ant Group, reported Reuters.  Other apps include TENCENT (00700.HK)'s QQ Wallet and WeChat Pay, CamScanner, SHAREit, VMate and WPS Office.
CKH HOLDINGS (00001.HK)'s Husky Energy announced the transaction to strategically combine with Cenovus Energy has closed. The combination creates Canada’s third-largest crude oil and natural gas producer. Cenovus is also now the second-largest Canadian-based refiner and upgrader, with total North American upgrading and refining capacity of approximately 660,000 barrels per day.
The People's Bank of China (PBOC) and Ministry of Housing and Urban-Rural Development (MOHURD) convened a seminar talking about the financing of major property developers in China. People within the circle disclosed that the "three redlines" of property financing may see relaxed scope in trial areas.  The "three redlines" were set based on the level of leverage: the debt ratio after deducting advance receipts must not exceed 70%, the net debt ratio must not exceed 100%, and the cash-to-short-term-debt ratio must not be less than a double.
China's Ministry of Ecology and Environment published the administrative measures for carbon emission trading (for trial implementation) with effect from 1 February 2021. A company will be considered a greenhouse gas emission unit if it is in a sector covered by the national carbon trading market, while having annual greenhouse gas emissions of 26,000 tons of equivalent CO2.
SUNAC (01918.HK) announced that in 2020, the Group had achieved contracted sales value of RMB575.26 billion, up 3.4% yearly, and contracted sales area amounted to approximately 41.021 million sq.m.
PRADA (01913.HK)  announced that the Second Half of 2020, despite being impacted by ongoing store closures, saw a progressive recovery in sales, culminating for the retail sales in a full recovery to 2019 levels in the month of December. Careful management of quality and product mix has contributed tomargin recovery and offset the deficit incurred in the first half of 2020, thus ending financial year 2020 with EBIT in positive territory, according to the announcement. 
CASH FIN SER GP (00510.HK) announced that on 5 January 2021, the Group had acquired an aggregate of 210,000 CHINA MOBILE (00941.HK) shares through the open market at an aggregate consideration of HK$9.9 million.

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