Dec 1 HK WRAP HSI +226pts Expect more upside as OECD raises global forecast


03 Dec

HSI +226pts (+0.9%) 26,565 HSCEI +113pts (+1.1%) 10,659  T/O HK$153.12bn (-36.4% DoD)

EUROPE
Markets opened higher following the surge in Asia on good PMI Manufacturing data. European PMI data was generally about 50 (except France). Covid remains a concern but +VE vaccine news is currently outweighing the rising cases. News that the OECD raised its forecast also +VE.
Data out
EUROZONE
Manufacturing PMI Nov 53.8 vs 54.8 (F/cast was 53.6)
Core Inflation Rate Nov +0.2% YoY vs +0.2% Oct (F/cast was +0.2%)
Inflation Rate Nov -0.3% YoY vs -0.3% Oct (F/cast was -0.2%)
Inflation Rate Nov -0.3% MoM vs +0.2% Oct (F/cast was -0.2%)
GERMANY
Unemployment Rate Oct 6.1% vs 6.2% Sept (F/cast was 6.3%)
Manufacturing PMI Nov 57.8 vs 58.2 (F/cast was 57.9)
FRANCE
Manufacturing PMI Nov 49.6 vs 51.3 (F/cast was 49.1)
New Car Registrations to come Oct was -9.5% f/cast is -18%
UK
Nationwide House Prices Nov +6.5% YoY vs 5.8% Oct (F/cast was +6.2%)Nationwide House Prices Nov +0.9% MoM vs +0.8% Oct (F/cast was +0.4%)Manufacturing PMI Nov 57.8 vs 58.2 (F/cast was 57.9)

US Futures opened slightly +VE but rose during Asian trading and further increased; now Dow Futures +320ots with S&P and NDX +VE too.
Data due Redbook, Manufacturing PMI, Construction Spending, ISM Manufacturing Data (PMI, Employment, New Orders, Prices). Fed’s Powell Testimony. API Crude Oil Stock. Total Vehicle Sales.
Speeches by Brainard, Daly and Evans


CHINA CSI 300 Closed +107pts (+2.2%) @ 5,067
Opened slightly higher and worked higher as the Caixin Manufacturing PMI was higher than forecast, continued to work higher through the morning to 5,040 at lunch. PM opened slightly lower worked higher to 5,072 about 30 mins before the close. Then it eased 20pts before rallying back into the close.
Indexes
Shanghai Comp +60pts (+1.8%) @ 3,452
Shenzhen Comp +260pts (+1.9%) @ 13,930
ChiNext Index +66pts (+2.5%) @ 2,698

CHINA Data
Caixin Manufacturing PMI Nov 54.9 vs 53.6 Oct (F/cast was 53.2)

HSI Pre Market opened @ 26,422 +81pts vs -246pts ADRs at 26,095. Saw an early dip on margin call selling but then worked higher through the morning to test 26,630 just before lunch. PM saw an initial dip but then worked higher to 26,660 but could break out, eased to 26,640 level but could break above and then trended lower into the close but did see a 44pt spike in the closing auction. Chinese banks strong on hopes of a better profit outlook and Insurers on the basis of a rising market. I remain worried about the Chinese Banks after the recent defaults; especially as most of their exposure is to SOE firms.

PICKs Techtroncis closed -0.2% @ HK$99.20; looks like HK$100 is now a resistance having been a recent support. I would accumulate sub HK$100 as I think US and global recovery will involve a lot more construction work and DIY.

HONG KONG DATA
After Market

HK Retail Sales Oct -9.3% YoY vs -13.4% Sept (F/cast was -11%)
The Value of Retail Sales Oct -8.8% YoY (F/cast was -10.3%). It is the 21st month of declines.
Centre for Health Protection said there were 82 new COVID-19 cases in Hong Kong today (vs 76 Monday) 23 cases with unknown origin.

SHORT SELLING Tuesday 18.2% vs 15.4% Monday
Top Shorts
Ping An (2318) 44%, HSBC (5) 38%, Bank of China (3988) 32%, MTRC (66) 31%, Galaxy Ent (27) 31%, Swire Pac (19) 29%, Wharf REIC (1997) 28%, BoC HK (2388) 28%, AIA ((1299) 27%, Sands China (1928) 26%, CLP (2) 26%, NWD (17) 26%.

AFTER MARKET NEWS
OECD raised its Global economic outlook
on the basis of +VE Vaccine news and it sees China driving the recovery. It now expects the global; economy to contract -4.2% vs -4.5% it estimated in September.
XIAOMI-W (01810.HK) is weighing top-up placing of 1 billion shares at $23.7-24.5 each, representing a 6.3-9.4% discount to the closing price today, to cash in $24.5 billion at most, said market rumours. The lock-up period is 90 days.
HKEX (00388.HK) announced the official launch of the Sustainable and Green Exchange (STAGE), Asia’s first multi-asset sustainable investment product platform, supporting fast-growing global demand for sustainable finance. At the heart of the STAGE platform is an online product repository, which at launch features 29 sustainable-themed products from leading Asian corporates. These HKEX-listed sustainable products include sustainability, green, and transition bonds from issuers across a variety of sectors including utilities, transportation, property development and financial services as well as ESG-related exchange traded products. Over time, the scope of the product repository will increase across asset class, industry, in Hong Kong and beyond.
BABA-SW (09988.HK)'s Cainiao is teaming up with Ethiopian Airlines to establish an export line designated for temperature-controlled medicines at the Shenzhen Airport, marking the first routine China-Africa cross-border aviation line for temperature-controlled medicines, said Chinese media.
EVERG SERVICES (06666.HK), to be listed tomorrow, opened at $8.81 in gray market, +1% against the listing price $8.8, and last stood at $8.75, down 5 cents or -0.6% against the listing price, on volume of 7.60 million shares, PhillipMart data showed.

MARKET COMMENT
*PETROCHEMs WEAK
on OPEC uncertainty after the failure to agree Monday a second day of talks is planned for Thursday; which is a slight +VE BUT the threat of sanctions on CNOOC (883 HK -4.5%) is putting pressure on the sector. News that Exxon was cutting Capex and writing down assets also negative for the sector CH OILFIELD (2883 HK +0.8%) PETROCHINA (857 HK -0.8%) SINOPEC (386 HK +1.4%).
*CHINA BANKS STRONG on hopes of an earnings recovery as it is expected that new loan rates for the September quarter will rebound. Also news POSTAL BANK (1658 HK +6.1%) announced to issue A shares at a premium of 6% to controlling shareholders to raise about 30b yuan.
ABC (1288 HK +2.7%) ICBC (1398 HK +3.7%) CITIC BK (998 HK +4.5%).
I still worry about the Banks exposure to bad loans especially exposure to the SoE’s after the recent defaults and with the expectation that there are more to come.
*BROKERAGES FIRM on positive earnings outlook after good trading volumes in Q4. CITIC SEC (6030 HK +3.8%) HAITONG (6837 HK +5%) HUATAI SEC
(6886 HK +4.1%) CGS (6881 HK +3.4%) CH EB (165 HK +4.3%).
*E-COMMERCE MIXED CBIRC chair pledges "innovative" regulation on Fintech giants, to eliminate monopolistic practices and strengthen risk controls in the industry. ALIBABA (9988 HK -1.6%) JD (9618 HK- 1%) NTES (9999 HK -1.9%) BUT TENCENT (700 HK +2.1%) key being that it is more of a platform for games and that is banking business in within the establishment lines.
MEITUAN (3690 HK -0.6%) beat market revenue forecasts as its third quarter net profit surged 374% to 6.32b yuan, driven by a recovery in on-demand services after the end of restrictions imposed to curb the spread of Covid-19. Some concern that it is looking to expand its grocery delivery business which so far has been unprofitable and is in a very competitive area with Alibaba and Pinduoduo.
*HK PROPERTY WEAK concerns about the rising in Covid cases and new lockdown rules being enforced. Centaline Property adjusted down the forecast on property prices from rising 2% in the year-end to remaining flat. HENDERSON (12 HK -3%) NEW WORLD DEV (17 HK -0.4%) HYSAN (14 HK -2.4%) KERRY (683 HK +1.3%) HANG LUNG PT (101 HK +1.5%).
*PHARMA FIRM on expectation of more +VE vaccine news but SINO BIOPHARM (1177 HK -11%) as net profit in the first three quarters -18% YoY to 1.85b yuan, revenue -6.2% to 18.13b yuan.
CANSINO (6185 HK +3%) FOSUN (2196 HK +3.7%) INNOVENT (1801 HK +4.8%) WUXI APPTEC (2359 HK +3.5%).
*MACAU STRONG on inline/slightly better Nov gaming revenue; it was -70.5% YoY vs estimates of -69.8% to -74%. GALAXY ENT (27 HK +2.3%) SANDS (1928 HK +2.5%) MELCO (200 HK +2.2%) WYNN (1128 HK +1.8%).
*OTHER MOVERS:
L'OCCITANE INTL (973 HK +12.7%) after interim net profit -37.5% YoY to 15.61m euros. No dividend was declared. Sales -15.2% to 620m euros from a year ago.
PAX GLOBAL (327 HK +35%) as the company guided that profit would rise +40%
GCL POLY (3800 HK +14%) on expectation of more policies to encourage development on alternative energy.
MINTH GROUP (425 HK -3.6%) following a 5m shs block trade.


Regional Markets
JAPAN 
opened higher, futures had opened -280pts but quickly turned +VE and market opened higher despite weak Unemployment and Capex data and rallied to 26,800 level as Manufacturing PMI was better than forecast and traded sideways around that level into lunch. Opened in the PM as the same level and traded sideways to close +354pts (+1.3%) @ 26,780
Topix opened higher tested to 1,770 but then sold down slight before working back to 1,770 level and traded sideways into lunch. PM opened lower and trade sidewasy to close +14pts (+0.8%) @ 1,768
Data
Unemployment Rate Oct 3.1% vs 3% Sept (F/cast was +2.9%)Jobs/Application Ratio Oct 1.04 vs 1.03 Sept (F/cast was 1.03)Capital Spending Q3 -10.6% vs -11.3% Q2 (F/cast was -3.6%)Manufacturing PMI Nov 49 vs 48.7 Oct (F/cast was 48.3)
S KOREA GDP Growth data pre market was stronger than forecast which saw the market open higher reversing the initial weakness in the futures.
Kospi opened higher and worked higher to 2,627 level where it saw resistance and drift lower down 2,610 level where is saw support and then has worked higher to 2,639 but eased slightly to close +43pts (+1.7%) @ 2,634.
Kosdaq opened higher tests to 892 but failed to break out and sold down to 883 around midday. Then worked higher back to 888 level and its traded sideways, before trending higher to close +5pts (+0.6%) @ 891, just off the opening high.
Data
GDP Growth Rate Final Q3 +2.1% QoQ vs -3.2% Q2 (F/cast was +1.9%)
GDP Growth Rate Final Q3 -1.1% YoY vs -2.7% Q2 (F/cast was -1.3%)
Exports Nov +4% vs -3.8% Oct (Consensus was +6.8%)
Imports Nov -2.1% vs -5.6% Oct (Consensus was +0.2%)
Balance of Trade Nov $5.93 vs 5.8b Oct revised (F/cast was 6.1b)
Manufacturing PMI Nov 52.9 vs 51.2 Oct (F/cast was 50.9)
TAIWAN opened higher and test to 13,850 in early trades as Manufacturing PMI was mush stringer than expected. Then sold down to 13,750 level before working back to 13,850 and working slowly higher; currently +163pts (+1.2%) @ 13,886 at the day high.
Data
Manufacturing PMI Nov 56.9 vs 53.6 Oct (F/cast was 53.2)

CONNECT FLOWS 
Shanghai
Northbound Rmb 49,112m Buy 19,531m vs 29,581m Sell
Southbound HK$ 14,608m Buy 5,977m vs 8,630m Sell
Shenzhen
Northbound Rmb 59,026m Buy 26,391m vs 32,635m Sell
Southbound HK$ 14,467m Buy 6,104m vs 8,363m Sell

Active Heavyweights
AIA (01299.HK) +3.8%
PING AN (02318.HK) +3.6%
TENCENT (00700.HK) +2.7%
CCB (00939.HK) +2%
BABA (09988.HK) -1.6%
MEITUAN-W (03690.HK) -0.3%
HKEX (00388.HK) +0.2%

HSI & HSCEI Constituents on Move:
SINO BIOPHARM (01177.HK) -1.8%
CHINA TAIPING (00966.HK) +7.7%
PSBC (01658.HK) +5.9%
ANTA SPORTS (02020.HK) +4.8%
CPIC (02601.HK) +4.7%
CNOOC (00883.HK) -4.7%
CHINA RES BEER (00291.HK) +4.5%
CITIC BANK (00998.HK) +4.2%
ICBC (01398.HK) +3.7%
MINSHENG BANK (01988.HK) +3.3%
CHINA VANKE (02202.HK) -3.1%

HSMI & HSSI Constituents on Move:
PAX GLOBAL (00327.HK) +35.5%, hitting new high
ASCENTAGE (06855.HK) +15%
GCL-POLY ENERGY (03800.HK) +13.9%, hitting new high
L'OCCITANE (00973.HK) +12.7%
ZOOMLION (01157.HK) +12.6%, hitting new high
LIFETECH SCI (01302.HK) +11.9%, hitting new high
COFCO JOYCOME (01610.HK) +10.3%
YADEA (01585.HK) +7.1%, hitting new high

MARKET HOURS NEWS
The Government will retighten the social distancing measures,
including withdrawal of gathering ban waiver on local tours that allows to serve up to 30 people, due to epidemic resurgence. Also that it is is weighing to double up the fixed penalties on any violations against gathering ban, mandatory mask order and quarantine initiatives to a range of $5,000-10,000 to sour the deterrent effect,In view of the recent developments of the COVID-19 epidemic in Hong Kong, the Governments of the HKSAR and Singapore have decided to defer the commencement of the Hong Kong-Singapore Air Travel Bubble (ATB) to beyond 2020 and will review the arrangement for 2021 towards late December, according to a government announcement. -VE AIRLINES; Cathay Pac (293 HK +2.3%) today did dip as the news was released around 3pm but I would expect weakness on Wednesday.
I-CABLE COMM (01097.HK) stated that the group has to carry out comprehensive reviews and adjustments on the structure and human resources at each department in hopes of tapping new income sources, seeking new opportunities and controlling costs. Of over 1,300 workers in aggregate at this moment, roughly 100 will be subject to transfer or departure. The departed staff will be entitled to lawful remuneration as stipulated under the labour ordinance. The street rumoured that the media giant is sinking 40 positions from its news division, where workers in charge of "News Lancet" are all to be dismissed.
Samsung will possibly discontinue its premium Galaxy Note model next year, hinting at notably shrinking demands for high-end smartphones amid the coronavirus pandemic, sources with knowledge of the matter told Reuters.
XIAOMI-W (01810.HK) announced that its brand new Redmi Note 9 Pro and Note 9 were pieces of hot cakes at the pre-sale stage. As at noon on 1 December, Note 9 series - Note 9 4G, Note 9 and Note 9 Pro - yielded sales of more than 300,000 units across all new retail channels.
KIDSLAND INTL (02122.HK) announced that it collaborates with Tencent Video and Original Force in investing, developing and operating “Secret Jewel in the Cave”, which is a live-action animation, and represents the first season of “Monsters in the Forbidden City” . Kidsland will be responsible for the licensing of toy and peripheral products from this animation. With massive traffic of Tencent Video, top notch creative and production capabilities of Original Force, as well as the comprehensive omni-channel sales system of Kidsland, this collaboration will integrate online and offline resources. This will bring new sources of revenue for Kidsland and improve the Group’s profitability by introducing its own products.
The US Treasury Department blacklisted China National Electronics Import & Export Corp. as the commodities sold by the company to Venezuela constrained local internet services, with an attempt to facilitate President Nicolas Maduro in suppressing opposition camp and carry out network monitoring.

PRE MARKET NEWS
Not in this mornings report
KPMG: More HK Firms May File For Bankruptcy/Default Next Year. The caseload of bankruptcies and debt defaults across Hong Kong corporate is set to go up as the Government support is fading off along with the expiry of bailout policies next year, KPMG wrote in its banking industry outlook report 2021. While the market is anticipating an economic diver from the soon-available coronavirus vaccines, the firm expected supply will be available in Hong Kong not until 3Q21 or 4Q21, for which the tailwind on local banks may not come in that fierce.
MSCI: Eligible STAR Mkt Equities May Join MSCI Flagship Index after Being Added to SH-HK Connect. MSCI told China Securities Journal that the relevant equities have already been included to MSCI Global Investable Market Index since the half-yearly review in November 2019, meaning any of them could join the MSCI flagship index subsequently if they meet the related requirements under the MSCI GIMI index compilation method and are added to Shanghai-Hong Kong Stock Connect
FOUR SEAS MER (00374.HK) results for the six months ended September 2020. Net profit reached $30.02 million, up 58.9% yearly. EPS. equaled 7.8 cents. Interim DPS stayed at 3 cents.

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