Dec 4 HK WRAP HSI +107pts after rebalance. Europe up small US Futures rising

04 Dec


HSI +107pts (+0.4%) 26,836 HSCEI +38pts (+0.4%) 10,625  T/O HK$172.26bn (-+27.2% DoD on HSI rebalance) 

EUROPE markets opened flat and DAX trading flat, FTSE and CAC up small and trading sideways after good Construction PMI data but markets cautious on Pfizer vaccine news, ahead of US payrolls and US discussions on a new stimulus package.  Brexit talks still overhang the market.
Construction PMI Nov 45.6 vs 44.9 Oct (F/cast was 41.5)
Factory orders Oct +2.9% MoM vs +1.1% Sept (revised) (F/cast was +1.2%)
Construction PMI Nov 45.6 vs 45.2 Oct (F/cast was 42.5)
Budget Balance Oct Euro 159.9b vs 161.6b (F/cast was 132b)
Construction PMI Nov 42.8 vs 42.7 Oct (F/cast was 38.8)
Construction PMI Nov vs 53.1 Oct (F/cast was 50.9)
New Car Sales Nov -27.4% vs -1.6% Oct (F/cast was -24%)

US Futures opened flat in Asian trading but are moving higher now Dow +120pts with S&P and NDX slightly higher ahead of the US jobs report and other data.
Data dueBalance of Trade, Non Farm Payrolls,  Unemployment Rate, Ave Hourly Earnings, Ave Weekly Hours, Imports, Exports, Factory Orders, Baker Hughes Total Oil Rig Count.
Speeches by Fed’s Evans and Bowman

CHINA CSI 300 Closed +9pts (+0.2%) @ 5,066
Opened lower and sold down to 5,020 in early trades with concerns over US/China relations as US adds 4 companies to its entity list and US Diorector of Intelligence labels China the biggest threat to democracy since WWII. After initial weakness markets worked higher in choppy trading to 5,037 at lunch. PM rallied initial to Thursday's closing level and then spiked to 5,072 eased back but rallied again into the close.
Looks like Team China active in the market today.Leaders were  national defence/military industries, non-ferrous, F&B and liquor names. Laggards were financials and auto companies (after market CAAM reported Nov sales volume of 2.733 million units in November, +6.2% MoM and +11.1% YoYso expect a bounce on Monday).

Shanghai Comp +2pts @ 3,444 T/O was Rmb 329.4m
Shenzhen Comp +55pts (+0.4%) @ 14,026 T/O was Rmb 419.4b
ChiNext Index +18pts (+0.7%) @ 2,730 T/O was Rmb158.6b

CHINA No data today Trade Data out Monday 

HSI Pre Market  Opened  @ 26,811 +83pts vs -52pts ADR’s but sold down in the first hour to 26,650 level before trading sideways inchoppy trading into lunch.  PM rallied to test 26,800 around 2pm but failed to hold and trenched and traded sideways until 3:30pm when it sold down to 26,740. Then spiked in the last 10 minutes with a 35pt uptick in the closing auction, as the HSI rebalance took place.  
Sentiment weak on US/China tensions after the US blacklisting of SMIC -5.4% and CNOOC -3.9% and 112 new covid cases in HK today. Next Digital closed +20% the day low having opened +60% on resumption of trading as Jimmy Lai was denied bail.

PICKs Techtroncis closed +0.4% Tested HK$98.00 in early trades but failed to hold and drifted lower, I would continue to slowly accumulate sub HK$100 as I think US and global recovery will involve a lot more construction work and DIY.

Centre for Health Protection said there were 112 new COVID-19 cases in Hong Kong today (vs 92 Wednesday)  36 cases with unknown origin.  

SHORT SELLING Friday 14.9% vs 17.8% Thursday 
Top Shorts Wharf REIC (1997) 43%, Ping An (2318) 38%, NWD (17) 37%,  Country Garden (2007)
25%, MTRC (66) 21%, Techtroncis (669) 21%,

China Banking and Insurance Regulatory Commission has recently toughened up its investigation into insurers' foreign investment and connected transactions, Cailianshe citing insiders.
Qi Yumin, former Chairman of Huachen Automotive Group Holdings Co. Ltd., is under disciplinary review and regulatory probe over alleged severe violations of law and discipline, according to the website of Central Commission for Discipline Inspection.
FIH (02038.HK) PROFIT WARNING , expecting the Group to record a consolidated net loss of around US$124 million for YTD October 2020 (vs consolidated net loss of around US$48.29 million for YTD October 2019).  The Group expected to record a consolidated net loss for FY 2020 which is likely to be materially higher than the Group’s consolidated net loss of around US$12.178 million for the year ended 31 December 2019.
MELBOURNE ENT (00158.HK) PROFIT WARNING  the Group is expected to record a loss of approximately HK$1.18 billion for the year ended 30 September 2020, as compared with a loss of approximately HK$549 million for the year ended 30 September 2019.
To enrich fund portfolio further and cater to investors' demand, Shenzhen Stock Exchange announced to launch cross-market (Shenzhen, Shanghai and Hong Kong) bond ETFs tracing index constituents, including those traded in the inter-bank bond market. Equally, SZSE revised relevant terms under the detailed implementation rules on the trading and redemption of securities investment funds on the SZSE.
CHINA OVERSEAS (00688.HK) November 2020, the contracted property sales of the China Overseas Series of Companies amounted to RMB34.828 billion +65.2% YoY and the corresponding gross floor area (GFA) sold was 1.729 million square meters, +56.2% YoY
SHIMAO GROUP (00813.HK)  Nov contracted sales RMB31.52 billion +3.3% yearly.
SEAZEN (01030.HK) November 2020, contracted sales of RMB29.061bn +20.1% year-on-year.
GREENTOWN MGMT (09979.HK)  that the contracted sales approx RMB9.2 bn in November 2020.
YUE KAN HOLDINGS (02110.HK), to be listed next Monday, opened at $0.234 in grey market, up 4% against the listing price, and last stood at $0.32, up 42%, on
volume of 18.90 million shares, PhillipMart data showed.
After CATHAY PAC AIR had shut down Cathay Dragon, Lufthansa's LSG Sky Chefs announced today layoff of around 45% of its work force, or about 285 positions, as part of its business reshuffle in Hong Kong. The aircraft catering giant explained the coronavirus pandemic has struck it hard and while Cathay Dragon, its biggest client in Hong Kong, has suspended operation, market resurgence is hardly foreseeable in a near future
Centa-City Leading Index (CCL) last posted at 175.54, -0.08% weekly. 
CCL Mass dipped 0.01% weekly to 178.86, CCL (small-and-medium units) sagged 0.04% weekly to 176.33. The three indices plunged for two weeks altogether.
The 4th COVID-19 outbreak has yet to be factored in this week's index, opined the research department of Centaline Property. They expected home prices to struggle at the current level and start reflecting changes in the coming weeks.
CNOOC (00883.HK)   has noted that the U.S. Department of Defence announced that four Chinese companies (including China National Offshore Oil Corporation, the controlling shareholder of the Company) were added to the list of companies with alleged ties to the Chinese military and that an executive order was signed by the U.S. President on 12 November 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 companies with alleged ties to the Chinese military as defined in the executive order. The Company is comprehensively assessing the impact of the situation on the Group and will close monitor relevant follow-up developments.

*PETROCHEMS WEAK as CNOOC (883 HK -3.2%) confirmed as being on the US Entity list and despite the correction earlier in the weak and Oil edging higher after the OPEC+ agreement to over oil production next year;  giving the market more time to absorb the extra supply.
Analysts concede it unlikely that US will add the other Petrochems; PETROCHINA (857 HK -1.2%) CH OILFIELD SVS (2883 HK -2%) SINOPEC (386 HK -2%).
*CHINA BANKS FLAT News the the top 30 banks in China will be classified as systemically important authorized institutions, meaning a new evaluation method will apply. The PBOC and China's banking regulator will adopt a scoring system to evaluate the country's 30 largest banks next year, but with a grace period to ensure banks have time to adapt.  I think it shows the Govt is aware of the large problems that are building and by labelling them 'important authorized institutions’ it will be able to bail them out if necessary.  Not to do so could undermine the public’s confidence. ICBC (1398 HK -0.2%) ABC (1288 HK +0.7%) CCB (939 HK +0.5%).*E-COMMERCE/INTERNET FIRM after recent consolidation, and led higher by MEITUAN (3690 HK +4.6%) on its HSI entry. ALIBABA's (9988 HK +2.5%) Alibaba Cloud (Aliyun) unfolded an upgraded global hybrid cloud strategy and switched on the Hybrid Cloud Partnership Program. JD.COM (9618 HK +2.4%) NTES (9999 HK +1.3%).
*TECH & COMPONENTS MIXED  Chipmakers in focus as it was confirmed that  SMIC (981 HK -4.5% in PM session as halted in the AM) added to the US Entity list.ASM (522 HK +4.5%) HUA HONG (1347 HK +0.6%). The US rumoured to be in talks with HUAWEI's Meng to resolve charges. The deal is for Huawei's CFO to return home to China from Canada in exchange for admitting wrongdoing in a criminal case, news reported. Meng has so far resisted the proposal because she believes she has done nothing wrong, the report stated.ZTE (763 HK -1.8%) XIAOMI (1810 HK +0.2%).
*CHINA PROPERTY WEAK on sales concerns, after SHIMAO (813 HK -10%) after mgmt lowers its medium-term sales target to 10+% vs expectation of 15%. CHINA EVERGRANDE (3333 HK -3.7%) reported a 24.3% increase in November contracted sales to 46.07b yuan.  But -VE FT Lex article about its debt levelsCOUNTRY GARDEN (2007 HK -2.5%) saw a 5% decline in contracted sales to 57.14b yuan last month. YUEXIU PROP (123 HK unch) despite November contracted sales rose 42% YoY to 11.07b yuan.
*AUTOS MAINLY FIRM. after IDC estimates that China's new energy vehicle sales will be about 1.16m units in 2020, with significant growth in 2021-2022 thanks to the
post-epidemic rebound in the market and the extension of financial subsidies. Late afternoon CAAM released Nov sales volume of 2.733 million, +6.2% MoM and +11.1% YoY but it didn’t have much impact.
EVERGRANDE spent HK$1.3b in two days to raise its stake in EVERGRANDE EV (708 HK -6.7%). The indebted firm bought another 22.33m shares in at an avg price of HK$28.57 yesterday, raising its shareholdings to 74.03%. Investors will be wondering how and why the most indebted property developer is buying a stake in an auto maker at these levels; the share price rose when it started buying but is now falling back to previous levels.BYD (1211 +1.5%) announced that car sales rose 30.6% YoY to 53,943 units last month, among which new energy vehicles +137.88% to 26,690 units, but sales of fuel vehicles -9.4% to 27,253 units. GEELY (175 HK +2.2%) DONGFENG (489 HK +2%).
*PHARMA STRONG on vaccine hopes as vaccine makers around the world speed up production of Covid shots. But there was news that The third batch of Group Purchasing Organization (GPO) in China, covering 55 types of drugs, has commenced nationwide, which could be -VE for some in the sectorCANSINO (6185 HK +6%) INNOVENT (1801 HK +6.7%) GENSCRIPT (1548 HK +5%) PHARMARON (3759 HK +5.6%).
*F&B STRONG on recovery hopes amid positive Covid vaccine development. MENGNIU (2319 HK +6%) WANT WANT (151 HK +2.4%) TINGYI (322 HK +6.4%) TSINGTAO (168 HK +2.6%).

Regional Markets
JAPAN Sentiment weak as covid cases surge and news of potential vaccine roll out delays. PM Suga to hold press conference on the recent surge.
Nikkei 225  lower at 26,700 level and initially rallied to 26,750 before working to 26,800 at around 10am it then sold down to 26,650 before bouncing into lunch.  PM opened higher and is slowly worked higher to 26,772 before easing to close -58pts  (-0.2%) @ 26,751

Topix opened lower but worked into the green before selling down and bouncing into lunch. PM opened flat and trading sideways before working higher in the last hour to close flat @ 1,776
S KOREA Pre market currently account was higher than forecast.  The rally is continuing with Chip makers leading it higher but also good interest in wider Tech, financial and steel related shares on expectations that vaccine roll out will quicken the export-intensive economy.  Rising covid case locally largely ignored.
Kospi opened higher and rallied to 2,743 in early trades and then drifted slightly lower through the session to close  +35pts (+1.3%) @ 2,732 

Kosdaq opened higher @ 910 a dn rallied to 912 before selling down to 908 before working higher again, first to see resistance at 912 which it tested a couple of times before easing back then around 1pm rallied again a broke out to 913.4 but eased back 912 before a final uptick to close +6pts (+0.7%) @ 914
Current Account Oct $11.66b vs 10.21b Sept (F/cast was 8.5b)
TAIWAN Opened above 14,000 and has worked higher with resistance as it approached 14,150; closed at  +155pts (+1.1%) @ 14,132. Tech leading the index higher.
After Market
Foreign Reserves Nov $513.4b vs 501.24b Oct (F/cast was 503b)

Northbound Rmb 38,736m Buy 17,990m vs 20,746m Sell
Southbound HK$ 14,521m Buy 6,099m vs 8,421m Sell
Northbound Rmb 46,277m Buy 22,648m vs 23,630m Sell
Southbound HK$ 13,029m Buy 4,930m vs 8,099m Sell

Active Heavyweights
MEITUAN-W (03690.HK) +4.6%
PING AN (02318.HK) +2.6%
BABA (09988.HK) +2.6%
HKEX (00388.HK) +1.9%
CCB (00939.HK) +0.5%
AIA (01299.HK) +0.1%
TENCENT (00700.HK) - 0.1%

HSI & HSCEI Constituents on Move:
SHIMAO GROUP (00813.HK) -10.4%
MENGNIU DAIRY (02319.HK) +6%, hitting new high
CNOOC (00883.HK) -3.9%

HSMI & HSSI Constituents on Move:
YIXIN (02858.HK) +23.6%, hitting new high
TIANLI EDU (01773.HK) +10.9%
CH MODERN D (01117.HK) +10.8%, hitting new high
LIFETECH SCI (01302.HK) +8.7%, hitting new high
XIABUXIABU (00520.HK) +1.8%, hitting new high

Hong Kong Tourism Board announced due to the need to uphold social distancing measures, there will be no fireworks display over Victoria Harbour for this year’s New Year Countdown. The HKTB has decided after careful consideration that no parade will be held in 2021 Chinese New Year Celebrations. Instead, the HKTB is exploring to organise an Online+Offline event.
China's auto sector recorded sales volume of 2.733 million units in November, +6.2% MoM and +11.1% YoY according to China Association of Automobile Manufacturers (CAAM).
Reserve Bank of India has kept the repurchase rate unchanged at 4%, in-line, given signs of economic recovery and higher inflation
BABA-SW (09988.HK)'s Alibaba Cloud (Aliyun) unfolded an upgraded global hybrid cloud strategy and switched on the Hybrid Cloud Partnership Program. Facing Hong Kong market, the hybrid cloud strategy is set to render companies, particularly SMEs, with products that are more open, safe, flexible and reliable.  Harnessing the high flexibility, scalability and availability of the public cloud paired with advanced hybrid cloud gear, BABA-SW's hybrid cloud will cater the need of companies in flexible deployment and cost efficiency, and assist them to expedite their digital transformation.
SMIC (00981.HK) To resume trading in the PM it noted that after the Company was included in the list of Chinese military companies, United States persons will be restricted in their dealings in the Company’s traded securities.  It said there is no major impact on the Company’s operation, it reiterates that it is an international enterprise operating independently with stakeholders such as investors and customers all over the world. The Company has been fully compliant with all rules and laws, operating in compliance with the relevant laws and regulations of jurisdictions where it performs its businesses. The Company’s services and product are all for civilian and commercial end-uses and are not involved in any military application. The Company strongly opposes the decision of United States Department of Defense, which reflects a fundamental misunderstanding by the United States Department of Defense regarding the end-uses of the Company’s business and technology. The Company will continue to carry out proactive communication with the relevant United States government departments.
The Labour Department (LD) announced that with effect from December 11, 2020 increase the maternity leave (ML) under the Employment Ordinance (EO) (Cap. 57) by four weeks, which should be taken by the employee continuously after the 10 weeks' ML, if so entitled. The current statutory rate of maternity leave pay (MLP) (i.e. four-fifths of the employee's average daily wages) will be maintained for calculating the additional MLP payable in respect of the extension of ML, subject to a cap of $80,000 per employee.
HKEX (00388.HK) CEO Charles Li exchanged opinion with BABA-SW (09988.HK)   Vice Chairman Cai Chongxin at HKEX Southeast Asia Forum 2020, during which the attractiveness of Hong Kong IPO market to Southeast Asian issuers was talked about.  Cai envisioned tremendous potential in Southeast Asia where consumer base is growing compounded with technology enthusiasm in the region. Although most technology companies listing in Hong Kong are from China, Cai predicted more global companies will float in Hong Kong in next 5-10 years, especially those from Southeast Asia.
In terms of user spending across Chinese App Store's mobile games for November 2020, TENCENT (00700.HK)'s games seized the top three spots, according to Sensor Tower's report. The three said games are Honor of Kings, Game for Peace and Moonlight  Blade.  Also In November, 30 Chinese mobile game developers reaped revenue of US$2.01 billion worldwide, accounting for 30.2% of the global mobile game revenue. Among which, TENCENT (00700.HK) topped the chart, preceding NTES-S (09999.HK).
Overnight HIBOR last posted at 0.04607%, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.20286%, up for 8 days.
AT&T (T.US)'s Warner Bros studio will debut all of its 2021 movies in both theatres and HBO Max streaming on the same day, dealing another blow on struggling cinema operators. Subsequently, the share prices of AMC -16% and Cinemark (CNK.US) -22%.
Brazilian's Goias has launched a pilot project that seeks to boost productivity and take fast action against agricultural diseases by means of 5G technology and equipment provided by Huawei.
WhatsApp was the world's most downloaded non-gaming app in November, with 58 million installs, Sensor Tower reported. 30% of the downloads came from India, followed by 10% from Nigeria. TikTok was ranked second in the chart, with 55 million installs.
World Health Organization (WHO) does not recommend "immunity passport" issuance from countries to those having recovered from the novel coronavirus, reported Reuters.  However, the WHO is mulling over e-vaccination certificates similar to those under development with Estonia.
The global wearable device shipment +35.1% YoY to 125 million units in the third quarter of 2020, according to IDC's report.  By brands, Apple (AAPL.IS) headed the market with a 33.1% market share during the period. It was followed by XIAOMI-W (01810.HK), whose shipment grew 26.4% YoY to 17 million units.
SMIC (00981.HK) (688981.SH) halted trading at 9:33am noted it was added by the U.S. Defense Department to the list of firms controlled by the Chinese military. SMIC is evaluating the impact, thus urging investors to take heed of investment risk. Washington added SMIC and CNOOC (00883.HK) to the "Communist Chinese military companies" blacklist yesterday.

Not in this mornings report
Chinese President Xi Jinping delivered a speech at the video conference of the School of Economics and Management, Tsinghua University in Beijing on 3 December, Xinhua News Agency reported.  Xi said the pandemic spiraling across the world hit hard on the global economy and added instabilities and uncertainties to the international landscape.  Hence, China is now building a new development landscape, oriented in domestic circulation and complemented by domestic-foreign circulation, Xi introduced. He also pledged that China will keep opening up to the world and actively integrate into the global market so as to share opportunities with the world and contribute to the global economic recovery.
Airport Authority (AA) announced that a series of projects at Hong Kong International Airport (HKIA) are being implemented progressively as part of the “Airport City” development, a blueprint which entails an investment of over HK$40 billion in the 10 years to 2030 by AA in enhancing the airport’s capacity and functionality, while transforming it into a new landmark and propelling the economic development of Hong Kong and the region. The investment projects include airport facilities enhancement and development of automated car parks on the HKBCF Island.
The German government has banned China Aerospace Science and Industry Corporation (CASIC)'s arm from acquiring German IMST based on national security concerns, reported German media. IMST has expertise in satellite and communication technology, including 5G technology.
The third batch of Group Purchasing Organization (GPO) in China, covering 55 types of drugs, has commenced nationwide, with the selection results being initiated in Guangdong, Guangxi and Yunnan Provinces, Xinhua News Agency reported.  Based on the agreed procurement amount, the related annual expenses would be slashed to RMB3.7 billion from RMB23.2 billion, saving RMB19.5 billion.
CHINA VANKE (02202.HK)  announced that contracted sales amounted to RMB57.54 billion in November 2020, up 5.5% yearly.
COUNTRY GARDEN (02007.HK) contracted sales amounted to RMB57.14 billion in November 2020, -5% YoY with contracted sales GFA of approximately 6.61 million square meters, -8.98% YoY
BYD COMPANY (01211.HK) sales volume totalled 53,943 vehicles in November 2020, up 30.6% yearly.  During the month, the sales volume of new energy vehicles was 26,690, up 137.9%.


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