Oct 22 HK WRAP HK+32pts as Ant IPO gets approved
HSI +32pts (+0.1%) 24,696 HSCEI +7pts (+0.1%) 10,085 T/O HK$107.18bn (-2.1% DoD)
EUROPE markets opened lower following Asia and disappointment that a US stimulus plan had not yet been agreed. Rising covid cases a concern and earnings in focus along with US initial and continuing claims. IAG weak as it posted a Q3 loss. Dassault Systemes weak despite the a slight annual rise Q3 net profit But Lifco strong after good Q3 earnings
Good FT article European stocks will be attractive again in world of low yields. By Nick Nelson is head of European equity strategy at UBS
GERMANY GfK Consumer Confidence Nov -3.1% vs -1.7% Oct revised (F/cast was -3)
FRANCE Business Confidence Oct 93 vs 94 Sept Revised (F/cast was 95)
Business Climate Indicator Oct 90 vs 92 Sept (F/cast was 88)
Due later EUROZONE Consumer Confidence Flash
UK CBI Industrial Trends Orders & Business Optimism Index, GfK Consumer Confidence, Speech by Haldane and Baily
US Futures opened flat (-17pts) but weakened to -200pts as the FBI announced about Russian and Iranian interference in the US election. But are currently just Dow -50pts with the S&P and NDX also -VE
Earnings in focus after the bell Wednesday good numbers from Tesla and Las Vegas Sands but weak numbers from Chipotle Mexican Grill.
143 company Earnings due today including American and SouthWest Airlines, AT&T, Coca-Cola, Intel, Kimberly-Clark, Northrop Grumman, Citrix, Dow Inc, Mattel and others.
Data Initial Claims, Initial Claims 4 week Average, Continuing Claims, Existing Home Sales, CB Leading Index, EIA Natural Gas Report, Kansas Fed Manufacturing Index, 5 yr TIPS Auction. Speech by Barkin and Kaplan.
CHINA CSI 300 Closed -15pts (-0.3%) @ 4,778. Having opened lower @ 4,370 and trended lower for the first hour to 4,725 before finding support and rebounding to 4,767 only to ease lower into lunch. OM saw the market work better to 4,792 (Wednesday’s closing level) around 2:30pm but failed to break above and eased lower into the close. Investors cautious as RMB hits highs which could impact exporters, although I think short term medical and electronic exports will not see much impact. China’s Fifth Plenum of the Nineteenth Communist Party Congress kicks off next week (Oct 26 to 29) and investor will be looking for the governments initiatives. Sentiment hurt by news that the US had labelled another 6 Chinese papers as Foreign missions; highlighting the deteriorating relationship with the US.
Shanghai Composite Index -13pts (-0.4%) @ 3,313
Shenzhen Component Index -72pts (-0.5%) @ 13,396
ChiNext Index -27pts (-1%) @ 2,674
HSI Pre Market opened at 24,696 -58pts vs -75pts @ 24,679 ADR’s. With weakness in ECommerce as Ant gets final approval for IPO. Telcos weak also Vinda as revenue dropped but Macau names saw interest after the Las Vegas Sands results and comments. Market sold down to test support below 24,600 few times but eventually bounced off 24,556 and rallied to 24,750 around 11:30 am before easing lower into lunch. PM saw the market work higher to the day high around 4:45pm @ 24,817, it tested above the 24,800 level a number of times but failed to break out and then traded down to 24,735 level before working higher into the close.
Sentiment cautious with rising covid cases in Europe and US (although second wave said to be less lethal as medics have learnt from the first wave). Also with European and US earnings, fading hopes of a stimulus deal pre US election, Ann initial & continuing claims in the US tonight.
IPO FIRST SERVICE (02107.HK), on debut, closed at $1.76, down 64 cents -26.7% vs the listing price $2.4. Excluding the handling fees, a book loss of $1,600 was reported per board lot of 2,500 shares. But that would be larger for those who bought using margin.
HONG KONG DATA
After market Inflation Rate Sept -2.2% YoY vs -0.4% Aug (F/cast was +0.1%)
The decrease was larger than in August 2020, mainly due to the waiver of public housing rentals by Hong Kong Housing Authority in September 2020. Netting out the effects of all Government's one-off relief measures, the year-on-year rate of increase in the Composite CPI (i.e. the underlying inflation rate) in September 2020 was 0.5%, larger than that in August 2020 (0.1%). The larger increase in September was mainly due to the increases in the costs for meals bought away from home and the upward adjustment in public housing rentals.
Centre for Health Protection said there were 11 new COVID-19 cases in Hong Kong today (vs 8 Wednesday) 1 unknown origin, 10 imported.
SHORT SALES Thursday 16.8% vs 16.4% Wednesday
Top Shorts Country Garden (2007) 40%, Mengniu Dairy (2319) 37%, Ping An (2318) 33%, ICBC (1398) 27%, MTRC (66) 25%, Hengan (1044) 25%, HSBC (5) 25%, Hang Seng Bank (11) 25%.
AFTER MARKET NEWS
Spot USD/CNY closed at 6.6689, down 114 bps. As at 16:51, USD/CNY fell 217 bps in the night session. USD/CNH stood at 6.6646, down 204 bps.The overnight USD Index briefly rebounded
LEE & MAN PAPER (02314.HK) announced that substantial shareholder Lee Wan Keung transferred 96.0581 million shares to Lee Man Bun, son of the former and CEO of the Company, for no consideration as a gift. After the transfer, Lee Wan Keung holds 411 million shares (9.5% of company) and Lee Man Bun holds 1.359 billion shares, (31.3% of the Company).
CNOOC (00883.HK) announced that the unaudited oil and gas sales revenue reached approximately RMB35.55 billion for the third quarter of 2020, -26.8% YoY. During the quarter, total net production was 131 million barrels of oil equivalent, + 5.1% YoY.
SUNAC (01918.HK) announced that during the period from 21 October to 11 November, nearly 100 projects from 51 cities will gradually come available at BABA-SW (09988.HK)'s TMall Haofang.
CK ASSET (01113.HK) released the first price list for El Futuro, involving 54 flats with saleable area of 484-1,226 sq.ft. Prices on the list range $9.78-32.415 million. Deducting a maximum discount of 22%, the selling prices range $7.6284-25.2837 million, i.e. $17,730 per sq.ft. on average.
JAPAN opened lower @ 23,525 sold down to 23,460 level and traded sideways into lunch. Pm opened slightly lower and tested 23,435 level then worked higher to 23,511 before easing back to close -0.7% @ 23,474.
Tomorrow pre market we get Inflation data pre market and then flash PMI data an hour later.
S KOREA opened lower as hope of a US stimulus dealing the short term fade; with Tech and Auto’s weak with large caps leading the declines
Kospi opened at 2,355 (vs 2,370 Wednesday’s close) and then traded 2,360 to 2,343 and closed -0.7% @ 2,355
Kosdaq opened lower 827 (vs 830 Wednesday’s close) and has drift lower through the day to close at the day low -2.2% @ 813.
TAIWAN opened lower at 12,855 but rallied in the green and tested 12,890 several times but unable to break out and sold down to 12,827 before rebounding and trading sideways. Tested the 12,840 support around midday and then worked higher to close +0.3% @ 12,917 Market showing resilience as the demand for smartphones and tech seen as remaining good, TSMC closed higher.
After Market Unemployment Sept +3.78% vs 3.83% Aug (F/cast was 3.8%)
Northbound Rmb 32,028m Buy 16,400m vs 15,628m Sell
Southbound Rmb 9,959m Buy 4,608m vs 5,351m Sell
Northbound Rmb 44,387m Buy 23,182m vs 21,205m Sell
Southbound Rmb 8,400m Buy 3,504m vs 4,896m Sell
CCB (00939.HK) +2.3%
AIA (01299.HK) +0.7%
TENCENT (00700.HK) -0.5%
HKEX (00388.HK) -0.4%
PING AN (02318.HK) -0.2%
BABA (09988.HK) -0.1%
MEITUAN (03690.HK) closed at $269, unchanged
HSI & HSCEI Constituents on the move
HINA UNICOM (00762.HK) -11.5%
CHINA TELECOM (00728.HK) -5.4%
PSBC (01658.HK) +5.3%
SANDS CHINA LTD (01928.HK) +5.2%
GALAXY ENT (00027.HK) +5.1%
COUNTRY GARDEN (02007.HK) + 3.6%
CM BANK (03968.HK) +2.6%, hitting new high
HSMI & HSSI Constituents on the move
SUNCITY GROUP (01383.HK) +23%
VINDA INT'L (03331.HK) -15.9%
UNITEDENERGY GP (00467.HK) +12.9%
DEXIN CHINA (02019.HK) +6%, hitting new high
BYD COMPANY (01211.HK) +4.4%, hitting new high
RAZER (01337.HK) +2.5%, hitting new high
CIMC (02039.HK) +2.1%, hitting new high
*CHINESE BANKS STRONG on hopes that quarterly earnings will be good and that the strong strength on the. yuan. Press reported that Chinese banking sector disposed non-performing loans of RMB1.73 trillion for 1-3Q20, an increment of RMB341.4 billion over a year ago. Also that the CBIRC will mount cleaning action in full force against willful bank charges so as to regulate market order and alleviate corporate burden, looking to crack down on chaotic practices in the banking segment in fields of credit, loan assistance, assessment and fee management. For credit, the authority is obliged to clamp down on setting of unreasonable loan conditions.
PSBC (1658 HK +4.7%) CCB (939 HK +2.6%) BOC (3988 HK +2.4%) CMB (3968 HK +2%).
*TELCOS WEAK after yesterday's rally on news they obtained the eSIM technology application services approval, in which they are allowed to develop eSIM technology application services in the Internet of Things and other fields.
CH UNICOM's (762 HK -11%) reported yesterday net profit for the first three quarters +10.19% YoY to 10.82 b yuan. The total revenue +3.79% to 225.36b yuan in the first nine months, and the EBITDA was +0.8% YoY to 73.7b yuan. MOBILE (941 HK -2.7%)
CH TEL (728 HK -5.4%) reported at lunchtime Net profit hit RMB18.706 billion, +1.7% YoY. EBITDA was RMB92.21 billion, +0.3% annually. The decline rate of the broadband access ARPU was further narrowed compared to that of the first half of the year. Stock traded a little lower on the news but the major selling was at the open.
I think telcos may see more selling pressure ahead of the Ant IPO as investors rotate out of what is now a utility play.
*E-COMMERCE WEAK ALIBABA (9988 HK unch) agrees to subscribe for 730m A-shs in ANT offering as part of the placement to strategic investors in the A-shr offering. ANT's IPO will initially comprise 1.67b A shares and 1.67b H shares. It got the green light from CSRC for its IPO in Shanghai STAR board, and HK IPO is expected to open book next Tuesday.
TENCENT (700 HK -0.5%) launches Call of Duty: Mobile in China, with nearly 50m pre- registered users.
*MACAU STRONG as SANDS CHINA (1928 HK +5.2%) management said the firm is achieving slight earnings improvement this month. MELCO (200 HK +4.4%) WYNN (1128 HK +4.6%) GALAXY (27 HK +5%) SJM (880 HK +4.4%). Also Macau Govt said GGR in Oct will be better than Sept.
*CHINA PROPERTY FIRM on hopes that stable China macro data and decent homes sales during the Golden Week will support a recovery in the sector.
CH EVERGRANDE (3333 HK +2.3%) is seeking refinancing on loans worth HK$11.4b. The group is in talks with banks for a 3-year senior secured loan partly to refinance a HK$8b senior loan due in November.
SUNAC (1918 HK +1.5%) VANKE (2202 HK +1.9%) AGILE (3383 HK +2.6%). CH OVS GRAND OCANS (81 HK -5.9%) dropped the most since May after operating profit dropped 17% YoY to 2.45b yuan in 3Q.
*HK PROPERTY WEAK after all three tenders for a commercial site in Tung Chung were rejected as their premiums did not meet the government's reserve price, the second commercial plot withdrawn from government tender in 5 months. The issues that HK Govt uses historic prices and rarely allows for the reality of falling prices. It also reflects the caution of the developers.
Li Ka Shing Founcation continues to buy CK Asset (1113 HK unch); bought a total of 980k shares between Oct 15 to Oct 20.
*PHARMA WEAK as 3SBIO (1530 HK -6.5%) following news of a plan to slash drug price. CANSINO (6185 HK -3.7%) CSPC (1093 HK -1.8%) WUXI BIO (2269 HK -0.8%).
MARKET HOURS NEWS
The Government announced that the Buildings Department had approved 21 building plans in August, with four on Hong Kong Island, 10 in Kowloon and seven in the New Territories. Of the approved plans, 10 were for apartment and apartment/commercial developments, three were for commercial developments, two were for factory and industrial developments, and six were for community services developments.
Starfront Royale, jointly developed by Empire Group and HK FERRY (00050.HK) under the sale agency of HENDERSON LAND (00012.HK), has launched the first price list involving 123 flats in salable area of 208-996 sq. ft. Based on a maximum discount of 9%, the Tuen Mun residential project is priced at $2.9884-13.9521 million, representing an average floor price of $14,585/sq. ft..
Foxconn Technology announced sale of 630,000 BABA-SW (09988.HK) ADSs at US$310.68 each, in a deal of nearly US$196 million (roughly HK$1.529 billion).
Macau's Secretary for Economy and Finance said the casino city's GGR in October will beat September's, yet the improvement magnitude may not be great +VE
Moody's expected China to keep increasing infrastructural investment in next 2-3 years to secure the post-epidemic economic recovery and employment stabilization. Traditional infrastructure, such as critical transportation and water conservancy projects, will become major pillar of China's economy. The Chinese central government had unrolled a slew of stimulus policies to support infrastructure investment growth and economic revitalization, Moody's furthered. With ongoing urbanization and growing passenger and freight volume, transportation will continue to dominate infrastructural investment.
HSBC China quoted China's ambassador to Britain Liu Xiaoming on its WeChat post, in response to HSBC HOLDINGS (00005.HK) Chairman Mark Tucker's earlier remarks at the International Business Leaders' Advisory Council for the Mayor of Shanghai. Liu said China will continue to deepen reform and widen opening-up and optimize business environment to provide more abundant opportunities for global companies, such as HSBC.
CH OVS G OCEANS (00081.HK) announced at lunchtime that for the first nine months of 2020 at lunchtime , the Group revenue was RMB28.082 billion, +36.9% yearly; while the operating profit was RMB6.853 billion, +15.3% annually. Q3 revenue RMB11.973 billion and operating profit of RMB2.451 billion.
CHINA TELECOM (00728.HK) announced the results for the first three quarters of 2020.as lunchtime Net profit hit RMB18.706 billion, +1.7% YoY. EBITDA was RMB92.21 billion, +0.3% annually. The decline rate of the broadband access ARPU was further narrowed compared to that of the first half of the year.
FAST RETAIL-DRS (06288.HK) said that the directors of the Company will consider passing of a written resolution on November 4, 2020 to approve payment of final dividend of the Company for the year ended August 31, 2020.
Harbour City announced that a total of 71 new local and international tenants (53 retail and 18 restaurants) have and will arrive throughout 2020. Operations have already begun for 58 fashion, lifestyle and beauty brand shops and harbor-view restaurants, while the remainder will open later this year, according to the statement.
Rumour Tesla's megafactory (phase 2) in Shanghai will hopefully come into full swing on Model Y production at the early-2021 after the project has earlier passed the phased evaluation, as Chinese media learnt from insiders.
During the third quarter of 2020, the gross mobile game revenue generated in Hong Kong and Taiwan approx US$800 million, up 29% yearly and 6.5% quarterly, according to Sensor Tower's report. Interesting that they group HK and Taiwan together!!
Chinese banking sector disposed non-performing loans of RMB1.73 trillion for 1-3Q20, an increment of RMB341.4 billion over a year ago.
China Banking and Insurance Regulatory Commission (CBIRC) will mount cleaning action in full force against willful bank charges so as to regulate market order and alleviate corporate burden, Shanghai Securities News reported. The CBIRC targets to crack down on chaotic practices of the banking segment in fields of credit, loan assistance, assessment and fee management. For credit, the authority is obliged to clamp down on setting of unreasonable loan conditions.
The State Administration of Foreign Exchange (SAFE) has recently planned to boost Qualified Domestic Institutional Investor (QDII) quotas by roughly US$10 billion by batches, Securities Times citing a person-in-charge.
Cathay Dragon shall hand back its freedom of air to HKSAR Government post service suspension, for which CATHAY PAC AIR (00293.HK) has shown interest to lodge another application, said Transport and Housing Bureau. The Hong Kong flagship airline shall not transfer the returned air rights to other airlines at its own discretion, clarified the watchdog. Local airlines may file for the said rights subject to the allocation mechanism as long stipulated.
U.S. National Security Advisor Robert O’Brien accused China of attempting to steal COVID-19 vaccine research results from the West, while trying to monopolize every significant industry of the 21st Century. China is a predatory power which represses its people and seeks to coerce neighbors and Western powers, as O’Brien told British and American military and intelligence officials at a forum.
PRE MARKET NEWS
Not in this mornings report
China Foreign Exchange Trade System announced today (22 October) that the central parity of USD/ RMB climbed 225 bps from the last trading day to 6.6556, setting a new high since 11 July 2018.
VINDA INT'L (03331.HK) announced that in the three months ended 30 September 2020, total revenue -0.2% (-0.7% at constant exchange rate) yearly to HK$3.83 billion. During the period, operating profit grew by 48.1% to HK$545 million; operating margin expanded by 4.6 ppts to to 14.2%.
Shenzhen Municipal People's Government made publication for certain measures on accelerating e-commerce buildout in the city. There are 19 initiatives on faster development of big e-commerce platforms, promotion of e-commerce application, stepping up cross-border e-commerce edges, and so on. They will be implemented from next Monday (26 October) for five years.
HSBC Hong Kong Chief Executive Diana Cesar extended her appreciation to the staff for their performance during the coronavirus pandemic and announced reopening of the pair of bronze lions at the front of Central headquarters to the public today, following a simple ceremony. The two statues had been cordoned off for maintenance after being sabotaged in social movements.
MEITUAN-W (03690.HK) announced that it issued the US$750 million 2.125% senior notes due 2025 and US$1.25 billion 3.05% senior notes due 2030. The net proceeds of the Notes Issue will be approximately US$1.987 billion. The Company intended to use the net proceeds of the Notes Issue for general corporate purposes and refinancing.
Xuan Changneng, deputy director of State Administration of Foreign Exchange (SAFE), projected lower stability of cross-border capital flows, and more upcoming challenges for the emerging markets. Xuan also saw uncertainties about a global economic revival post-pandemic.
BABA-SW (09988.HK) announced that the affiliate company Ant Group published an announcement regarding the arrangements for its initial public offering and listing. BABA-SW currently holds ordinary shares of Ant Group and Class C shares of Ant International, a subsidiary of Ant Group, that together represent 33% of the equity interest in Ant Group, assuming the completion of the redemption and subscription arrangement. The A Share Offering and H Share Offering will initially comprise 1.671 billion A shares and 1.671 billion H shares, respectively. Alibaba has agreed to subscribe for 730 million A shares as part of the placement to strategic investors in the A Share Offering, subject to receipt of required regulatory approvals and fulfillment of other customary conditions precedent.
China shall adhere to a stable monetary policy flexibly and appropriately, while growing its multi-level capital market vigorously and building a multi-level banking system, said Chinese Vice Premier Liu He at the Annual Conference of Financial Street Forum 2020. It is highly probable that the country can track a positive economic growth this year, opined Liu.
Sheldon G. Adelson, Chairman of SANDS CHINA LTD (01928.HK)'s controlling shareholder LVS, said while the business volumes continue to be impacted by the pandemic, improving operating results, especially in Asia, are seen. In Macao, operating losses reduced sequentially over the second quarter. For the October Golden Week, the group saw meaningful recovery across the different segments of its Macao operations. Importantly, business volumes in the premium mass segment enjoyed the most significant resurgence.
HSBC HOLDINGS (00005.HK) has started restructuring its UK-based commercial banking business, leading to about 300 job losses, Reuters citing insiders. The layoff is part of a wider restructuring plan announced in February.