Dec 7 HK WRAP HSI -329pts Market cautious about Trump actions vs China and bad debts

07 Dec

HSI -329pts (-1.2%) 26,507 HSCEI -151pts (-1.4%) 10,473  T/O HK$135.27bn (-21.5% DoD vs Friday's increase due to HSI rebalance) 

EUROPE market UK opened higher but DAX and CAC opened lower all initially trended lower. But FSTE reversed to flat and DAX & CAC now trending higher. Brexit still overhanging the market (Sterling is weaker) and concerns about whether the US will agree a new stimulus package.  Most sectors negative except Healthcare and Chemicals +VE
Data Out 
Industrial Production Oct +3.2% MoM vs +2.3% Sept revised (F/cast was +1.2%)
Halifax House Price Index Nov +1.2% MoM vs +0.3% Oct (F/cast was +0.4%)
Halifax House Price Index Nov +7.6% YoY vs +7.5% Oct (F/cast was +7.1%)

US Futures opened slightly higher but eased back in Asian time to flat and now moving lower; now  Dow -100pts with S&P and NDX also -VE.  Markets closed on the highs Friday and now investors are looking to news of a stimulus package to push the market higher.  China Trade data +VE there are worries about more sanctions from Trump before he leaves office and concerns about the Chinese banks.
Data DueConsumer Credit Change.

CHINA CSI 300 Closed -44pts (-0.9%) @ 5,022
CSI 300 opened flat but sold down ahead of the trade data with a small bounce into lunch after the data was released. Opened higher after lunch and worked back to 5,040 level by 1:30pm but unable to break above and then trended lower through the afternoon in choppy trading. Sentiment remains cautious with worries about more sanctions from Trump before he leaves as well as how relations with Australia might turn when Biden takes over.Financials in focus as those banks considered systematically important required to make changes to their Captial Requirements and Loan CAGR. Which comes are there are questions over defaults and bond exposure. Agri stocks were firm.Northbound funds showed an outflow.
Shanghai Comp -28pts (-0.8%) @ 3,417
Shenzhen Comp -53pts (-0.4%) @ 13,974
ChiNext Index -4pts (-0.2%) @ 2,727

CHINA data today 
Pre market 
US trade deficit with China increased US$2.2 billion, +9% MoM to US$26.5 billion in October 2020, according to the statistics released by the Department of Commerce.
During Market Hours
Balance of Trade Nov $75.42bn vs 58.55b Oct (F/cast was $49.6b),
Exports Nov +21.1% vs +11.4% Oct (F/cast was 10%),
Imports Nov +4.5% vs 4.7% Oct (F/cast was +5.2%)
Exports of Medical related items remain strong along with electronics for working from home and season demand.
Among major trade partners, sales were up to the US (46..1%), the EU (8.6%), ASEAN (8.8%), Japan (5.6%), South Korea (9.5%), Taiwan (18.1%) and Australia (22.6%).
In 11M20, China's iron ore imports +10.9% YoY to 1.073 billion tons. The import price +5.8% YoY to RMB694.5 per ton.
Crude oil imports +9.5% YoY to 504 million tons in the period, with an import price of RMB2,262.2 per ton (-31.3% YoY).
Natural gas imports +3.9% YoY to 90.436 million tons, with an import price of RMB2,297.8 per ton (-23.1% YoY).
After market 
Foreign Exchange Reserves Nov $3.178t vs 3.128t Oct (F/cast was 3.11t)

HSI Pre Market Opened at 26,871 +35pts vs +10pts ADR’s but sold down to 26,256 ahead of the China data then bounced back to 26,380 at lunch. PM opened higher and traded very slightly higher through the afternoon Ecommerce and Chinese Financials weak leading the declines but broadly weaker.
Sentiment weak on the new that FTSE Russell would delete the 8 Chinese companies on the US entity list from its indexes and MSCI said it would make a decision this week over what course of action to take. There is also concern that Trump could do more before he leaves office. Covid a concern as more companies revert to 'work from home’ mode.

IPO YUE KAN HLDG (02110.HK) on debut, settled the trade at $0.192, down 3.3 cents or almost 15% against the listing price $0.225, on volume of 1.277 billion shares and turnover of $359 million.  Excluding the handling fees, a book loss of $330 was reported per board lot of 10,000 shares.

PICKs Techtroncs closed +0.2% Again tested HK$98.00 in early trades as recent shorts covered 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.

After Market 
Foreign Exchange Reserves Nov $486b vs $474.9b Oct revised (F/cast was $453b)
Centre for Health Protection said there were 78 new COVID-19 cases in Hong Kong today (vs 95 Sunday)  29 cases with unknown origin and 39 reportedly more severe than in proviso waves with 9 aged below 60

SHORT SELLING Monday 16% vs 14.9% Friday 
Top Shorts  NWD (17) 38%, Ping An (2318) 37%, Hang Seng Bank (11) 34%, AAC Tech (2018) 29%, Bank of China (3988) 29%, Alibaba (9988) 28%, BOC HK (2388) 25%

S HARBOURHOLD (01663.HK) was informed by the Company’s chairman and substantial shareholder, Wong Lam Ping, that he acquired an aggregate of 928,000 ordinary shares of the Company in the open market at an average price of approximately $0.135 per share on 7 December 2020.
XIAOMI-W (01810.HK) Chairman Lei Jun disposed of and subscribed for 1 billion shares at the same price, according to its latest shareholding disclosure at the Stock Exchange. Lei's action involved no personal stake increase or decrease, said insiders. Instead, such shareholding adjustment was made in-line with the group's additional issuance.
CHINA LIFE (02628.HK) will host the 2020 Corporate Day tomorrow (8 December). After boosting its intelligent operation, the insurer's paperless application rate hit 99.85% for the first three quarters of 2020, according to filings.  The Company reorganized the sales team during business reform. As of end-June 2020, the number of productive agents had risen by 37.1%.
GREATWALL MOTOR (02333.HK) auto production volume reached 146,200 units for the month of November 2020, +23.15% yearly.  Sales volume +26.12% YoY to 145,200 units.
GEELY AUTO (00175.HK) total sales volume of the Group in the first eleven months of 2020 was 1.166 million units, -5%YoY, and achieving 88% of the Group’s revised full year sales volume target of 1.32 million units in 2020.  The total sales volume for the month of November 2020 was 150,500 units, +5% YoY and +7% MoM.
MIDEA REAL EST (03990.HK) contracted sales approximated RMB110.28 bn +21.3% yearly, in January-November 2020.
JD HEALTH (06618.HK), to be listed tomorrow, closed at $89.85 in gray market, up $19.27 or 27.3% against the listing price of $70.58, on volume of 6.42 million shares and turnover of $577 million, PhillipMart data showed. Excluding the handling fees, a book gain of $963.5 was reported per board lot of 50 shares.
The Digital Currency Research Institute (DCRI) of the People's Bank of China (PBoC) has recently signed a strategic cooperation deal with China UnionPay Merchant Services Co., Ltd. (China UMS). Accordingly, both sides will explore the innovative e-RMB application in both online and offline payment scenarios under pilot testing.
The creditors of Huachen Automotive Group Holdings are required to report their claims to the managers on behalf of the liquidation team before 24 February 2021, as the group cited the related announcement of the court. The creditors are forbidden to exercise such claiming right during the restructuring if they fails to report so according to law.   Dagong Global Credit Rating separately announced that it decided to downgrade the sovereignty credit rating of Huachen Automotive Group and the related bond rating by Dagong to C as the group could not settle the principal and interest due to bankruptcy restructuring.

*CHINESE BANKS WEAK Bad debt concerns and bond exposure and the need to confirm with being 'systematically important'. CCB (939 HK -2%) ICBC (1398 HK -2.4%) CITIC BANK (998 HK -2%) CMB (3968 HK -4.2%).
*PHARMA MIXED on vaccine news. SINO BIOPHARM (1177 HK +4.8%) taking a 15.03% stake in Sinovac Life Sciences for $515m. A Covid-19 vaccine developed by Sinovac Life Sciences is being tested in phase III trials in several countries outside of China. CANSINO (6185 HK -2%) CSPC (1093 HK -1%) WUXI BIO (2269.HK +2.3%) PHARMARON (3759.HK +2%).
*HK RETAILERS FIRM  I.T (999 HK +44%).on news it is going private in a cash deal worth about HK$1.3b with its business decimated by the pandemic and a shift to online retailing. The deal, which is backed by private equity firm CVC Capital Partners, will see non-founder shares bought at HK$3 a piece in cash, according to HKEX filing; a 55% premium to the stock’s last closing price. GIORDANO (709 HK +2.4%) ESPRIT (330 HK +3%) CHOW TAI FOOK (1929 HK +0.2%) BONJOUR (653 HK +0.7%).
*E-COMMERCE WEAK on US sanction risks.  JD.COM's (9618 HK -2.3%) but JD HEALTH INTL (6618 HK) attracted around 850,000 retail investors and is 422x subscribed to raise HK$560b for its IPO.
ALIBABA (9988 HK -2%) agreed to acquire a 5.26% stake in MANGO EXCELLENT MEDIA for 6.2b yuan. MEITUAN (3690 HK -1.9%) TENCENT (700 HK -0.85%). RAZER (1337.HK -7%) slumped as it failed to obtain a digital banking license in Singapore.
*TECH & COMPONENTS WEAK on US restriction risks. FIH MOBILE (2038 HK -1.2%) on Profit Warning expects a consolidated net loss of around US$124.2m for the first 10 months; compared with a consolidated net loss of around US$48.29 million for the same period of last year. Revenue is estimated -40% YoY to US$7.04b, as of end-October.
AAC (2018 HK -2.4%) HUA HONG (1347 HK -5.1%) TONGDA (698 HK -2%). SMIC (981 H +3.6%) bounced after announcing late Friday that its unit will set up a joint venture with two state-owned funds.
*AUTOS WEAK on credit concerns. The former chairman of Huachen Automotive, parent of BMW AG’s joint venture partner BRILLIANCE CHINA (1114 HK -2.3%), Qi Yumin is under investigation for suspected violation of discipline, Reuters reports.
A Chinese court has accepted an application from a creditor of Huachen seeking the restructuring of the state-owned company, which defaulted on 6.5b yuan in debt obligations.
GREAT WALL (2333 HK -2%) GAC (2238 HK -3.5%) GEELY (175 HK -1%).
*HK PROPERTY FIRM after recent weakness on Covid-19 concerns but having seen good demand.
KAISA GROUP and Choice Holdings received around 200 checks for the first batch of 30 homes at The Concerto in Sham Shui Po. The avg price of the first price list is HK$19,658 psf.
HENDERSON (12 HK +0.6%) launched 17 units in Arbour in Jordan at a minimum price of HK$6.66m. The price of some units is 2% more expensive than the previous batch. SHKP (16 HK +0.3%) SINO LAND (83 HK+1.5%) NWD (17 HK +1.6%).
*SOLAR NAMES rallied. GCL-POLY (3800 HK+24%) GCL NEW ENERGY (451 HK+42%) both surged after it sold a solar power plant for 211m yuan.

Regional Markets
Nikkei 225 opened higher at 26,894 but sold down through morning and first part of the afternoon to 16,500 before finding support around 1pm when the Leading Economic Index and Coincident Index preliminary numbers came out better than expected and prompted a rebound to 26,620 before drifting lower to close -204pts (-0.8%) @ 26,547
Topix traded in a similar patten; closed -15pts (-0.9%) @ 1,761
Tomorrow pre market we get Tankan Index, Household Spending, GDP Growth Rate, GDP Data, Bank Lending, Current Account, and EcoWatchers
Data today
Pre market 

Foreign Exchange Reserves Nov $1384.6bn vs 1384.4b Oct
Leading Economic Index Prelim Oct 93.8 vs 92.5 Sept (F/cast was 93.2)
Coincident Index Premin Oct 89.7 vs 81.1 Sept (F/cast was 80.5)
Kospi opened higher and traded sideways initially in choppy trading but sold down ahead of the China Trade Data and then worked higher after the data was better than expected to close +14pts (+0.5%) @ 2,745
Kosdaq traded in a similar pattern but the rebound was much stronger to close +13pts (+1.4%) @ 92
Opened higher but sold down in the frist hour in choppy trading to 14,140 (Above Friday’s Close) and then traded sideways in the range 14230/150  to close +124pts (+0.9%) @ 14,257

Northbound Rmb 39,775m Buy 19,455m vs 20,320m Sell
Southbound HK$ 13,562m Buy 6,155m vs 7,407m Sell
Northbound Rmb 46,824m Buy 24,425m vs 22,399m Sell
Southbound HK$ 12,356m Buy 5,767m vs 6,589m Sell

Active Heavyweights
BABA (09988.HK) -2.3%
MEITUAN (03690.HK) -2.1%
CCB (00939.HK) -2%
HKEX (00388.HK) -1.9%
PING AN (02318.HK) -1.3%
AIA (01299.HK) -1.2%
TENCENT (00700.HK) -0.8%

HSI & HSCEI Constituents on Move:
SINO BIOPHARM (01177.HK) +4.6%
CM BANK (03968.HK) -4.2%
LONGFOR (00960.HK) -3.7%
CPIC (02601.HK) -3.6%
SMIC (00981.HK) +3.6%
HANSOH PHARMA (03692.HK) -3.3%
SHIMAO GROUP (00813.HK) -.3%
CNOOC (00883.HK) -3.1%
ANTA SPORTS (02020.HK) -3.1%
CHINA RES LAND (01109.HK) -3%
CONCH CEMENT (00914.HK) -3%

HSMI & HSSI Constituents on Move:
GCL-POLY ENERGY (03800.HK) + 24.4%, hitting new high
ZHENGTONGAUTO (01728.HK) -21.3%
AKESO (09926.HK) +12.5%
BJ ENERGY INTL (00686.HK) +11.5%
CBHB (09668.HK) -10.9%
MING YUAN CLOUD (00909.HK) +9.9%, hitting new high
LIFETECH SCI (01302.HK) +6%, hitting new high

As of 30 October 2020, six major real estate developers have a total of 5,011 leftover flats, said Centaline Property. In particular, SHK PPT (00016.HK) with 1,765 units and HENDERSON LAND (00012.HK) with 1,210 leftover.
RAZER (01337.HK)'s Razer Fintech failed to secure a digital banking license in Singapore.  Although RAZER hoped to build a Singapore presence first, the strategy to expand its operation into the digital banking field will remain unchanged, said CEO Lee Li Meng.  Separately, RAZER Founder Min-Liang Tan said the firm is exploring a global launch of Razer Card as soon as possible.
EVERGRANDE (03333.HK) announced that Chairman Hui Ka Yan (also known as Xu Jiayin) had inspected Evergrande's global battery research institute in Shenzhen. The research teams and facilities had come to light for the first time. The research institute is headquartered in Shenzhen, with branches in Japan.
LENOVO GROUP (00992.HK) had inked a strategic cooperation agreement with China Life P&C Insurance earlier to provide the latter with equipment, operations and DaaS, as well as solution services, reported Chinese media.
SINO-OCEAN SERV (06677.HK), a spin-off of SINO-OCEAN GP (03377.HK), recorded full subscription in its international placing on its first day of IPO today, said market rumours.
JD-SW (09618.HK) announced that its JD online store is working on the pilot "red packet" campaign for e-RMB, the digital renminbi launched by PBOC, making it the first online platform to connect to China's digital currency.  From 5 December, RMB20 million worth of e-RMB red packets will be up for grabs for all eligible Suzhou residents as a promotion in collaboration with the "12.12 Suzhou Shopping Festival".

HANG SENG BANK (00011.HK) announced the launch of new business banking remote account opening services.  The paperless, digital and simple account opening process is suitable for all sole proprietors and one-person limited companies registered in Hong Kong. Commercial customers can open an Integrated Business Solutions Account through digital channels in just three simple steps.
Deliveroo announced that it nailed an alliance with DON DON DONKI, the Japanese large supermarket chains, enabling customers to purchase conveniently a variety of delicacies, fresh imported agricultural products, instant meals and daily necessities of DON DON DONKI through online platform.  With immediate effect, DON DON DONKI will hit the Deliveroo platform, and its grocery delivery service will span across numerous districts of Hong Kong Island, Kowloon and New Territories.
Financial Secretary Paul Chan at a Legislative Council meeting said a more notable global economic amelioration will probably be recorded in 2H21, when the market broadly sees effective coronavirus vaccines to be available.  A resurgent economy is anticipated in Hong Kong next year, however subject to an array of external and internal factors, in case of ongoing economic improvements worldwide, opined Chan. In terms of external elements, expected resilient growth in Chinese economy will do the local exports a favor, whereas the coronavirus infections in the rest of the world and the readiness of vaccines will jolt the local tourism and resumption of business trips. As for internal factors, local economic activities should regain more momentum next year as long as the pandemic remains under control and society stays stable.
Overnight HIBOR last posted at 0.04946%, logging a 1-month high, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.21304%, up for 9 days, marking a 1-month high.
The White House is moving to slam asset freezing and financial sanctions on up to 14 officials of Chinese National People’s Congress and members of the CCP for their roles in disqualifying elected opposition legislators in Hong Kong, Reuters learnt from inside sources.  President-elect Joe Biden has promised to take a hardliner move than President Donald Trump against China in human right issues, said the insiders.
Shanghai Stock Exchange and Shenzhen Stock Exchange announced that MING YUAN CLOUD (00909.HK), CBHB (09668.HK) and ARCHOSAUR GAMES (09990.HK) are included under Southbound Trading, effective today (7 December). From the same date, MING YUAN CLOUD and ARCHOSAUR GAMES are included under Hang Seng Tech Index.
BJ ENERGY INTL (00686.HK) announced that its subsidiary Beijing United Rongbang New Energy Technology has acquired 99.2% equity interest in Zhenglanqi State Power Photovoltaic from Suzhou GCL New Energy Investment at RMB211 billion.  Suzhou GCL New Energy Investment is a indirect subsidiary of GCL NEWENERGY (451.HK) and GCL-POLY ENERGY (03800.HK) CHINA EAST AIR (00670.HK) announced that in order to optimize the long-term and short-term debt structure and lower financing cost, CHINA EAST AIR pledged 40 airplanes and planned to apply to ABC (01288.HK), ICBC (01398.HK) and BANKCOMM (03328.HK) for collateralized refinancing of not more than RMB18 billion. The refinancing will be valid for up to 15 years.
RAZER (01337.HK) plans to roll out "Razer Youth Bank", targeting millennials in Malaysia, the Philippines and such other countries, as the Singapore-San Francisco based gaming giant is committed to expanding its digital-banking services, stated Razer Fintech Chief Executive Officer Lee Li Meng.
EVERG VEHICLE (00708.HK)  announced that the company's car model Hengchi 1 was tested at the production base with all sorts of preparation work moving along well, a step closer to the mass production.  Hengchi auto series will have mass production successively from 2H21, the company added.
SINO BIOPHARM (01177.HK) announced that its subsidiary Talent Forward Limited had entered into an agreement in relation to the capital contribution into Sinovac LS in an amount of US$515 million.  Sinovac LS, which is principally engaged in the business of research and development of vaccines for human use, has made significant progress in the development of the COVID-19 vaccine CoronaVac, making it one of the few enterprises in China that has self-developed and produced COVID-19 vaccines.
The US State Department disclosed a list, naming Chinese listed companies that are allegedly involved with the Chinese Army, totaling 230 firms. Quite a number of these companies belong to the constituents of major stock indices, such as MSCI and FTSE Russell.   The UK Financial Times quoted MSCI that the latter may decide whether to drop those stocks within this week.
The Government does not bar the possibility of a tougher penalty for violating gathering ban and mask-wearing order if the compliance situation still comes unsatisfactory even after the penalty was ramped up to $5,000, said Matthew Cheung, Chief Secretary for Administration.
XIAOMI-W (01810.HK)  At the China Entrepreneur Summit, President Wang Xiang mentioned the group's third position in the European market in Q3, while taking top spots across multiple markets. For instance, XIAOMI-W topped the Spanish chart with over 30% market share, outstripping Apple and Samsung.

Not in this mornings report
S&P Global estimated the year-to-date global debt to reach US$200 trillion (around HK$1,560 trillion), representing 265% of the world's annual economic output.
101 new homes were transacted at the weekend, down 70% weekly according to market sources. Of which, MINMETALS LAND (00230.HK)'s Montego Bay sold 65 units in the second log last Saturday (5th).  Some homeowners are willing to axe property prices by 1%-5% to woo home purchases, said Centaline. Hence, the second-hand market has seen lower home prices together with a rising transaction volume
China Foreign Exchange Trade System announced today (7 December) that the central parity of USD/ RMB gained 145 bps from the last trading day to 6.5362, notching an almost-2.5-year high.
DONGZHENG AFC (02718.HK) announced that it had on 20 October 2020 received the Administrative Decision by the CBIRC Shanghai Office which stated that the dealer auto loan business of the Company was carried out in serious violation of the principle of prudent operation; ZHENGTONGAUTO (01728.HK) the controlling shareholder of the Company, obtained the approval for the establishment of Shanghai Dongzheng Automotive Finance Co., Ltd. by improper means; and ZHENGTONGAUTO and its related parties engaged in non-compliant related party transactions with the Company. At present, the operation and financial conditions of the Company remain normal, and the Company is able to carry out its relevant businesses (including the provision of retail auto loans and other businesses) in accordance with the relevant financial licenses and business licenses currently held by it. As far as the directors of the Company are aware, the Board and the audit committee of the Company are of the view that, based on the current operations of the Company, the Company (other than the non-compliance mentioned above) is operating legally in any material respect, complying with the PRC laws and does not exceed the permitted scope of business and has no material illegal operations.
The US government's deadline for the sale of TikTok’s US assets came last Friday without a final deal, Bloomberg citing insiders. However, Washington will not extend the deadline this time. TikTok and the US government are in talks on how to solve national security concerns. The transaction is purportedly close to being finished.
HSBC HOLDINGS (00005.HK)  is slashing 557 positions in France, mainly from the SME and enterprise divisions, said French media, after the London-based lender had earlier dismissed 255 employees from the marketing department in France.

* The email will not be published on the website.