Nov 18 HK WRAP HSI +129pts T/O -7% DoD shorts rise as Yuan strengthens


22 Nov

HSI +129pts (+0.5%) 26,544 HSCEI +90pts (+0.9%) 10,640  T/O HK$133.77bn (-6.8% DoD)

OVERVIEW

With markets trading near highs and vaccines expected to be available in the coming months sentiment has improved but the recent resurgence in covid cases has raised some doubts about the speed of the recovery. Rotation still evident as investors look to position for the next phase; with many talking about the potential return of inflation.

EUROPE Markets open lower on concerns the the covid resurgence will undermine the recovery. But markets working back to flat in early trades. UK Inflation data and Retail Sales in line. European Inflation in line too.Maersk, traded higher Q3 profit in line but a stronger-than-expected pickup in demand.
Air France KLM weak on reports that the Franco-Dutch airline is exploring a 6 billion euro cash raise.
Ubisoft strong on the back of an upbeat sales update for its new Assassin’s Creed Valhalla game. But Hargreaves Lansdown was weak.

US Futures opened flat but drift slightly lower in Asian time; currently Dow futures -60pts with S&P and NDX lower too.
Data. MBA Mortgage Applications and 30 yr Mortgage Rate, Housing Starts, Building Permits, EIA Oil Stocks Change Report. Speeches from Fed’s Evans, Williams, Bullard and Bostic
Earnings: NVIDIA, Target, Lowe’s, TJX, L Brands, Copa Holdings, Shoe Carnival, Jack in the Box


CHINA CSI 300 Closed -3pts (-0.1%) @ 4,892
CSI 300 opened lower @ 4,890 but rallied to 4,911and has seen choppy trading in the range throughout the morning. PM saw the market sell down to the day low around 2:20pm @ 4,870 before rebounding in the last 30 minutes to just short of flat. Sentiment weak on news the US SFC is proceeding with a consultation paper on delisting Chinese companies that do not need US accounting standards. Also increased concerns over the SoE defaults and the impact on the banks and credit markets as new issues are withheld.
Stock wise Leading on the downside were Healthcare, Consumption, Electrical Components, and Software sectors. Yuan strengthened to the strongest level in more than two years, fueled by optimism on China’s economic recovery and its interest-rate premium over other nations and an element of USD weakness. That is likely to make it harder for Exporters.
Indexes
Shanghai Comp +7pts (+0.2%) @ 3,347
Shenzhen Comp -74pt (-0.5%) @ 13,658
ChiNext Index -37pts (-1.4%) @ 2,620

CHINA Data None

HSI Pre Market Opened @ 26,434 +19pts vs +30pts ADR’s, initially sold down to 26,350 saw a slow bounce to flat and then spiked into lunch. PM saw the market trend lower back towards yesterday’s close but around 2:30pm the trend revised and the HSI worked higher into the close with a 34pt uptick in the closing auction. Ecommerce seeing a rebound with Financials, Consumer and Autos being good interest

HONG KONG DATA
Centre for Health Protection said there were 9 new COVID-19 cases in Hong Kong today (vs 4 Monday) one local infection of unknown origin

SHORT SELLING Wednesday 16.8% vs 15.7% Tuesday
Top Shorts 
Sunny Optical (2382) 41%, BoC (3988) 39%, CCB (939) 36%, HSBC (5) 36%, Wharf REIC (1997) 35%, Ping An (2318) 35%, BankComm (3328) 34%, Petrochina (857) 31%, Mengniu Dairy (2319) 30%, BoC HK (2388) 30%, Galaxy Ent (27) 30%, CITIC (267) 28%, AAC Tech (2018) 28%, Hengan (1044) 28%, Country Garden (2007) 25%, CLP (2) 25%.

AFTER MARKET NEWS
Spot USD/CNY closed at 6.5425, up 155 bps.
As at 16:53, USD/CNY climbed 79 bps in the night session. USD/CNH stood at 6.5442, up 38 bps.
After Arbour issued its first price list today, Centaline, predicted the Tsim Sha Tsui residential project to reap overwhelming subscription responses, citing its 15% discount to the second-hand homes' in vicinity. They deemed Arbour highly appealing, which has an ultra-short pre-sale period and is situated close to 31 renowned schools.
Centa-Salesman Index (CSI) last stood at 53.96 this week, down 0.12 pts weekly.
CSI was struggling below 55 for the 7th straight weeks, without signs of a downturn, said Centaline Property. The index was gathering momentum for a breakthrough, indicating optimism among front-line agents.
SUNAC SERVICES (01516.HK), a spin-off of SUNAC (01918.HK) to be listed tomorrow, opened flat at $11.6 in gray market, and last stood at $11.74, up 1.2% against the listing price of $11.6, on volume of 60,000 shares, PhillipMart data showed.

MARKET COMMENT
*PETROCHEMS WEAK
after the OPEC+ committee meeting ended on Tuesday without providing a firm recommendation on whether the oil supply hike should proceed as planned in January. Also concerns that rising covid cases/lockdowns will hurt demand. CHINA OILFIELD SVCS (2883 HK -3.3%) SINOPEC (386 HK -1.1%) CNOOC (883 HK -0.34%).
*E-COMMERCE MIXED on news that the US SEC intends to propose a draft regulation that would lead to the delisting of Chinese companies, amid China's refusal to let inspectors from the Public Company Accounting Oversight Board review audits of Alibaba Group Holding Ltd., Baidu Inc. and other firms that trade on U.S. markets. ALIBABA (9988 HK +0.4%) JD (9618 HK -0.8%) NTES (9999 HK -0.4%).
KINGSOFT (3888 HK -4.7%) after reported 3Q Net Income jumped 17 times to 666.9m Yuan, vs 36.1m Yuan YoY. 3Q revenue 1.40b yuan, +33% YoY, 3Q online game revenue 788.2m yuan, +19% YoY.
*TECH & COMPONENTS FIRM on recovery optimism following recent quarterly earnings reports, and TRULY INTL (732 HK -1%) issued a profit warning expects to be +VE for the first nine months this year to increase by 1.4 times to HK$400m. HUA HONG (1347 HK +6.4%) TONGDA (698 HK +2.2%) COWELL (1415 HK +2.2%).
*AUTO MAKERS STRONG on news Daimler AG will jointly develop a gasoline engine that could be electrified down the road with GEELY AUTO (175 HK+6.8%). The engine will be constructed in collaboration with Geely Auto and a unit of its Swedish affiliate Volvo, Daimler said. GREATWALL (2333 HK +2.9%) DONGFENG MOTOR (489 HK +2.7%) BYD (1211 HK +2.6%). BRILLIANCE CHINA (1114 HK +1.5%)
*PHARMA FIRM after recent weakness on news Pfizer looking to partner with Chinese firms. INNOVENT (1801 HK +1.6%) CANSINO 6185 HK +3.6%) SINOPHARM (1099 HK +1.5%). BEIGENE’s (6160 HK +2.6%) its lelizumab treatment for non-small cell lung cancer met its primary endpoint in a Phase 3 trial, the company reported in a press release.
*PAPER MAKERS WEAK as NINE DRAGONS (2689 HK -8.2%) the biggest fall since 2015 on news the CFO Zhang offloaded a total of 1.9m shs between Nov 9-16. LEE & MAN (2314 HK -2.8%) CHENMING (1812 HK +2.3%).
*MINERS STRONG as ZIJING (2899 HK +4%), stock jumped to 12-year high after a restricted stock incentive plan to offer up to 100m shares, or 0.39% of its total, to 700 core staff. ZHAOJIN (1818 HK +1.8%) CH GOLD (2099 HK +3.5%) JIANGXI COPPER (358 HK +1.1%).

Regional Markets
JAPAN 
opened lower and initially trended lower to 25,720 level before rebounding to 25,830 and then trade sideways but sold down in the last 45mins to the 25,700 support and then a small bounce into the close.
The pre market trade data was good and better than expected but I think the fact that the market closed yesterday at 29 year high and Softbank’s Mr Son saying said he aggressively sold assets this year to prepare for a “worst case scenario” that could take place if the world shuts down in a second wave of coronavirus outbreaks; just as covid cases in Asia, Europe and the US hit highs is prompting investors to be cautious. Autos seeing weakness as Yen strengthens. Closed -287pts (-1.1%) @ 25,728
Data
Balance of Trade Oct Yen 872b vs 687.8b Sept revised (Consensus was 250bn)
Exports Oct -0.2% YoY vs -4.9% Sept (F/cast was -4.5%)
Imports Oct -13.3% YoY vs -17.4% Sept redivided (F/cast was -9%)
Details
Exports 23rd month of contraction but only the second with single digit which is an improvement and suggests recovery. Shipments of transport equipment fell by 1.9% vs -7.2% Sept, while exports of machinery -2.8% vs -7.8% prior, due to power generating machinery (-4.3%) and computers and units (-3.3%). Also, sales of manufactured goods tumbled 3.7%, dragged by iron & steel products (-20.4%). Exports increased to China (10.2%), the United States (2.5%), Taiwan (1.9%), and South Korea (9%), whereas sales to Western Europe 7.9%.
Imports fell for an 18th month, Purchases of transport equipment -31.8% mainly due to a 79.6% fall in aircraft. Purchases of mineral fuels -38.5%, (Petroleum -42.6%). Imports fell from China -3.7%, Hong Kong -16%, Taiwan -8.8%, South Korea -19.5%, the US -15.6% and Western Europe -10.8%.
S KOREA
Kospi seeing chopping sideways trading basically in the range 2,550 - 2,537, Closed +7pts (+0.3%) @ 2,546
Kosdaq opened higher an initial dip but then worked higher back to 850 the recent resistance but broke above around 1:30pm and closed at the day high; +12pts (+1.5%) @ 852
TAIWAN opened higher saw an initial dip but then rebounded immediately and worked higher to 13,655 and then traded sideways for 90minutes before working higher to test 13,750 and broke above in the last 20 minutes of trading to close around the day high +180pts (+1.3%) @ 13,773

CONNECT FLOWS (down DoD)
Shanghai
Northbound Rmb 44,720m Buy 22,053m vs 22,666m Sell
Southbound HK$ 11,679m Buy 5,444m vs 6,236m Sell
Shenzhen
Northbound Rmb 54,992m Buy 27,810m vs 27,182m Sell
Southbound HK$ 11,224m Buy 5,108m vs 6,117m Sell

Active Heavyweights
PING AN (02318.HK) +1.5%
TENCENT (00700.HK) +1.3%
MEITUAN-W (03690.HK) -1%
HKEX (00388.HK) -0.8%
AIA (01299.HK) +0.7%
CCB (00939.HK) +0.5%
BABA (09988.HK) +0.1%

HSI & HSCEI Constituents on Move:
GEELY AUTO (00175.HK) +6.9%, hitting new high
SWIRE PACIFIC A (00019.HK) +5.9%
PICC P&C (02328.HK) +5.2%
ANTA SPORTS (02020.HK) +3.6%
CHINA RES LAND (01109.HK) +3.5%
CM BANK (03968.HK) +3.3%, hitting new high

HSMI & HSSI Constituents on Move:
HUABAO INTL (00336.HK) + 20%
GCL-POLY ENERGY (03800.HK) +14.3%
C-MER EYE (03309.HK) +10.9%
TOPSPORTS (06110.HK) +6.7%, hitting new high
CHINAHONGQIAO (01378.HK) +5.4%, hitting new high
SITC (01308.HK) +4.5%, hitting new high

MARKET HOURS NEWS
HSBC HOLDINGS (00005.HK) is offering more work-from-home flexibility to Hong Kong staff, who can now work as many as four days per week from home, foreign media reported. Another option is to be a "flexible office worker" who works from home for up to two days per week.
NTES-S (09999.HK) said the company's Youdao stroke a cooperation with Google, under which an online learning corner "Grow with Google" will be switched on Youdao's MOOC in a package of three courses, further flourishing the MOOC curriculum.
China's Q3 tablet shipment +21.7% YoY to around 6.9 million units, seeing the sharpest single-quarter YoY growth since 2014 given higher demand amid the pandemic and lump-sum purchases for population census, reported IDC.
The virtual bank Livi VB Limited (livi) (formed by BOC Hong Kong 44%, JD Digits 36% and the Jardine Matheson 20%) became the business partner of yuu, a shopping/ catering reward scheme of Dairy Farm. livi showers rewards to welcome new joiners and encourage recommendation. From 17 November to the end of the year, new livi customers can enjoy 20,000 yuu points as orientation gift. Meanwhile, every successful recommendation of one new livi customer will be entitled to 18,000 yuu points.
CATHAY PAC AIR (00293.HK) has permanently shut down seven money-losing routes, including flights from and to Washington, Newark airport near New York, Seattle, Brussels, London Gatwick, and Dublin, SCMP citing internal memo. The carrier is still flying to John F. Kennedy International Airport in New York, and London Heathrow. It is said that the scrapped routes would certainly not return next year, but they may be reinstated once global tourism returns to normal.
Worldwide end-user spending on public cloud services is set to grow 18% from US$257.5 billion in 2020 to US$304.9 billion in 2021, Gartner foretold in a report. The coronavirus pandemic has proven cloud’s value proposition, said the researcher.
In its latest recruitment, remuneration and package survey report, JobsDB foretold salary increment to average 0.8% in the first quarter of 2021, the slimmest increment in almost a decade. The recruitment website compiled the report after engaging an individual institute in September 2020 to survey 436 local companies about their intention in recruitment, remuneration and package. Looking ahead, 64% of the surveyed firms expected market revival to a pre-pandemic level within 2021, where 19% and 20% respectively modeled gradual recovery during the second and third quarter.
TSE SUI LUEN (00417.HK) announced interim results ended September 2020. Loss was $41.578 million, against $1.568 million in profit a year ago. LPS equaled 16.7 cents. No dividend was declared.
US pharmaceutical giant Pfizer is regrouping and hunting for partnership with Chinese biotech companies with novel drug development, given eroded profit margins of its blockbuster drugs under China's aggressive price-cut campaign, Bloomberg reported.

PRE MARKET NEWS
Not in this mornings report
WUXI APPTEC (02359.HK) announced that WuXi Fund I, among other investors, has entered into the Share Purchase Agreement with D3 Bio, pursuant to which WuXi Fund I has agreed to purchase 21 million Series A-1 Shares from D3 Bio at the total consideration of US$21 million. D3 Bio is a global biotechnology company developing and commercializing paradigm-shifting precision medicines to improve or replace existing oncology and immunology standard-of-care treatments that fail to or do not fully meet significant patient needs.
The US posted a QoQ net capital outflow of US$79.9 billion for Sept, with the initial value revised to a net inflow of US$85 billion, according to data from the Treasury Department. China unloaded U.S. bonds for the fourth straight month, where the size grew to US$6.3 billion in September and the aggregate bond holding reduced to US$1.0617 trillion, hitting the trough since February 2017.
FREEMAN FINTECH (00279.HK) announced that it has entered into the Restructuring Deed. Radiant Alliance Limited, a company owned by Cheng Chi-Kong, executive vice-chairman and chief executive officer of NEW WORLD DEV (00017.HK), shall make available to the Company two non-interest-bearing loans worth HK$201 million. In the event that FREEMAN FINTECH's Resumption is approved by the Stock Exchange, Cheng shall inject into the Company the New Subscription Proceeds of HK$80 million by subscribing the Subscription Shares at a total consideration of HK$281 million. Cheng is making investments as a white knight with an enticing offer, Ming Pao citing sources.
Major Chinese paper leaders, like Sun Paper Group, Chenming Paper and Huatai Paper, have recently issued price increase announcements, reported Shanghai Securities News. Accordingly, prices of their printing and writing papers will be raised by RMB200 per ton with effect from 1 December. The price hike was mainly driven by rising market operating costs.
Negative nucleic acid test result holders from Hong Kong will be allowed entry to Macau free from 14-day mandatory isolation when the financial hub records no local infection for 14 straight days and is evaluated as a low-risk region by Beijing, Radio Macau citing Chief Executive Ho Iat Seng. Asked about a travel bubble scheme, Ho called on Macau residents to exercise patience as some countries or regions still bar their access of entry, although the gambling hub has recorded zero local infections for days.
People's Bank of China (PBOC), China Banking and Insurance Regulatory Commission (CBIRC) and other financial regulators are intensely preparing for the rebound of banks' non-performing assets, Economic Information Daily reported. It was expected that Chinese banks would brace for disposal peak season of non-performing assets in 4Q20, of which the scale may reach around RMB1.6 trillion according to the estimation of CBIRC.

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