Oct 16 HK WRAP HSI +228pts but T/O -13.4% DoD Caution ahead of Monday's China data

20 Oct

HK WRAP HSI +228pts but T/O -13.4% DoD  Caution ahead of Monday's China data

HSI +228pts (+0.94%) 24,387  HSCEI +153pts (+1.6%) 9,915  T/O HK$113bn (-13.4% DoD)  

As at 6:45pm HK time
EUROPE Markets opened higher, rebounding from Thursday’s selling but the FTSE and CAC are trending lower with the DAX trading sideways. AUTOs strong on good registration data but Telcos weak. UK under pressure to cede ground to get a Brexit deal.US is offering to remove tariffs on whisky, wine and other products from the European Union if Airbus repays billions of dollars of aid to European governments, Reuters reported. Comes as WTO finds Boeing received aid from the US Govt.Europe’s aviation regulator has said Boeing’s 737 Max aircraft is safe to fly again.Thyssenkrupp +17% in early trade on reports that Liberty Steel may make a takeover bid for it beleaguered steel unit. Getinge -9% Q3 profits good but reported a fall in ventilator orders, Galapagos weak as Credit Suisse and KBC Securities cut it's price target.
Data Eurozone
New Car Registrations Sept +3.1% YoY vs -18.9% Aug (F/cast was -2%), Balance of Trade Aug Euro 14.7b vs 27.7b Jul revised (F/cast was 15.1b)Inflation Rate Final Sept -0.3% YoY vs -0.2% Aug (F/cast was -0.3%)Inflation Rate Final Sept -+0.1% MoM vs -0.4% Aug (F/cast was +0.1%)Core Inflation Rate Final Sept +0.2% YoY vs +0.4% Aug (F/cast was +0.2%)

US Futures opened Dow +30pts but turned lower and worked lower to -50pts with S&P and NDX also -VE. But then reversed aound 630pm HK time.  Still expect caution ahead of the Retail sales data; light on earnings but Schlumberger, State Street and VF Corp due to report among the 15 scheduled companies.
Data Retail Sales, Industrial & Manufacturing Production, Capacity Utilisation, Business Inventories, Michigan Preliminary Data (Inflation Expectations, 5 year Inflation Expectations, Current Conditions, Consumer Sentiment, Consumer Expectations), Baker Hughes Total Oil Rig Count, Net Long-Term Tic Flows, Overall net Capital Flows.

CHINA CSI 300 Closed -7pts (-0.15%) 4,792

Markets continue to consolidate ahead of key data due out Monday and in the face of concerns about the global recovery. Today saw a rotation into Financials as the valuations remain attractive and the recent changes on banks profits.
Shanghai opened higher and traded in a range with resistance at 3,320 level and support at 3,334 until 11:10am when the market sold down heavily into lunch. PM opened higher and worked to 3,340 where it found resistance, sold down to 3,330 and then a small uptick into the close.
Shenzhen opened lower but ticked up to 13,650 but then sold off though the morning, saw some brief support at 13,550 but then sold down again to 13,450. Opened higher after lunch but rangebound with resistance at 13,550 and support 13,485.
I think much of today’s caution was on rising covid cases in Europe and the lack of US stimulus which could impact the global recovery. Also some concern about Monday’s data.
Data due Monday GDP Growth Rate, Industrial Production and Capacity Utilisation, Retail Sales, Unemployment, NBS Press Conference and Fixed Asset Investment.

Shanghai Composite Index +4pts (+0.1%) @ 3,336
Shenzhen Component Index -93pts (-0.7%) @ 13,533
ChiNext Index -13pts (-0.5%) @ 2,725

China FDI (YTD) Sept 5.2% YoY vs 2.6% Aug (F/cast was +3.7%)
That means that in Sept alone FDI rose 25%

HSI Pre Market Opened at 24,194 +35pts vs +24pts @ 24,182 ADR’s with a rebound in E Commerce names, SMIC +6% on revised guidance and handset makers +VE. Market worked ticked higher as recent shorts squeezed, then saw some margin call selling before working higher. Resistance at 24,436, then market eased back to 24,270 before working back to 24,352 at lunch +0.8%. PM saw the market test 24,460 and then ease back and trade sideways into the close. Sold down 23pts in the closing auction.
Chinese Financials leading the market higher, E Commerce firm and weakness in Telcos and Retail.

Centre for Health Protection said there were 7 new COVID-19 cases 
in Hong Kong today (vs 12 Thursday) 1 of unknown origin,

SHORT SALES Friday 20% vs 19.3% Thursday
Top Shorts
Hang Seng Bank (11) 49%, Sunny Optical (2382) 41%, China Res Land (1109) 41%, Ping An (2318) 37%, Galaxy Ent (27) 33%, Bank of China (3988) 32%, Henderson Land (12) 28%, BOC HK (2388) 28%, CSPC Pharma (1093) 28%, HSBC (5) 28%, CCB (939) 26%, Wharf REIC (1997) 26%, Power Asset (6) 26%, Sinopec (386) 25%.

As USD/HKD triggered the Strong-side Convertibility Undertaking
, the HKMA undertook a US$820 million selling order to inject HK$6.355 billion into the market.
The balance of Hong Kong banking system will increase to HK$321.734 billion on 20 October.
At the Legislative Council's internal meeting today, President Starry Lee cited the notification from Frank Chan, Secretary for Transport and Housing, that the Government is pondering over an end to the bill over franchised taxis and first-hand property vacancy tax, which spurred grudges from some lawmakers for its non-written notice, local media reported.
The People's Bank of China announced that it will actively push for amendments to the Commercial Bank Law of PRC by issuing a proposed draft and seeking public opinion. The major revisions include refining market entry conditions for commercial banks.
XTEP INT'L (01368.HK) announced that mid-single digit YoY retail sell-through growth was recorded for the three months ended 30 September 2020. The retail discount level was 30-35%.
CHINA TAIPING (00966.HK) announced that premium income for the first nine months of 2020 reached RMB145.377 billion, up 3.01% year-on-year.
EXCELLENCE CM (06989.HK), to be listed next Monday, opened at $12.48 in gray market, up almost 17% against the listing price $10.68, and last stood at $11.78, up 10% against the listing price, on volume of 2.15 million shares, PhillipMart data showed.
Centa-City Leading Index (CCL) last printed at 175.83 , down 1.25% weekly. Snapping the two-week rally.
CCL (mid-and-small units) slid 0.84% weekly to 176.65;
CCL (large units) slipped 3.42% weekly to 171.55.
Centaline Property, said the index is seeking trough, with the successful completion subject to further confirmation. Looking ahead, housing prices after Mid-Autumn Festival may pick up.

Regional Markets
Opened lower (23,478) but worked higher and into the green at lunch. PM re-opened at 23,400, and traded sideways 23,450/23,400 for the afternoon to close -0.4% @ 23,410
S KOREA Premarket data was weak
Export Prices Sept -6.2% YoY vs -6.8% Aug
Import Prices Sept -11.5% vs -10.5% Aug
Unemployment Rate Sept 3.9% vs +3.2% Aug (F/cast was +3.3%)
Kospi opened slightly higher initial ticked up to 2,370 but then trended lower through the session; to a low of 2,325 around 2pm and then saw some bargain hunting before closing -0.8% @ 2,342
Kosdaq following a similar trading pattern currently, hitting the day low 823 around 2pm and then working higher to close -1.3% @ 834 level.
TAIWAN Market opened lower at 12,814 spiked to 12,850 and sold down to 12,800 the bounced back to 12,850. Eased back to 12,830 level before working higher to day high 12,896 but hit resistance and trended back to 12,836 level and traded sideways until 12:10 when the market sold down heavily to 12,758 around 1pm with just a small bounce to close -0.6% at 12,750

Northbound Rmb 37,070m Buy 18,651m vs 18,419m Sell
Southbound Rmb 9,459m Buy 3,445m vs 6,015m Sell
Northbound Rmb 49,556m Buy 24,914m vs 24,643m Sell
Southbound Rmb 9,586m Buy 3,900m vs 5,686m Sell

Active Heavyweights
CCB (00939.HK) +5.7%
BABA (09988.HK) +3.2%
PING AN (02318.HK) +0.9%
TENCENT (00700.HK) +0.9%
AIA (01299.HK) -0.7%
MEITUAN (03690.HK) +0.3%
HKEX (00388.HK) -0.2%

HSI & HSCEI Constituents on the move
CM BANK (03968.HK) +5.4%
CSPC PHARMA (01093.HK) -5.1%
PSBC (01658.HK) +4.9%
CITIC BANK (00998.HK) +4.8%
ABC (01288.HK) +4.3%
CPIC (02601.HK) +4.3%
ICBC (01398.HK) +4.2%
MINSHENG BANK (01988.HK) +3.9%
BANKCOMM (03328.HK) +3.9%
CHINA LIFE (02628.HK) +3.8%
CITIC (00267.HK) +3.7%
BANK OF CHINA (03988.HK) +3.2%
WANT WANT CHINA (00151.HK) +3.2%
XIAOMI-W (01810.HK) +3.1%

HSMI & HSSI Constituents on the move
NEXTEER (01316.HK) +15.9%
BAIYUNSHAN PH (00874.HK) +13.3%
RAZER (01337.HK) +6.7%, hitting new high
CHINA LIT (00772.HK) +3%, hitting new high

Market Commentary
sector rotation on attractive valuation. The PBOC added more funds than expected to its banking system to support the economic recovery from the pandemic and assist companies to pay taxes due next week. CCB (939 HK +5.7%) ICBC (1398 HK +4.2%) ABC (1288 HK +4.3%) CMB (3968 HK +5.4%) BOC (3988 HK +3.3%). INSURERS CH LIFE (2628 HK +3.8%) NCI (1336 HK +5.4%) CPIC (2601 HK +4.3%).
*E-COMMERCE FIRM as ANT GROUP is lifting the target by at least 12% from a previous estimate of $250b to $280b after initial discussions with investors; ALIBABA (9988 HK +3%).
TENCENT's (700 HK +1.4%) backed MINISO (MNSO US) was +4.4% in its trading debut after its $608 million U.S. initial public offering exceeded the goals of the Chinese budget household and consumer goods retailer.
A U.S. judge said she’s unlikely to allow the U.S. to implement prohibitions on WeChat while the government appeals her earlier ruling blocking them. JD (9618 HK +1.2%) NTES (9999 HK +0.7%).
*TECH & COMPONENTS MIXED. SMIC (981 HK +1%) revised up its Q3 revenue by 14%-16% QoQ vs original guidance of an increase of 1%-3% due to changes in product mix and increase in other operating income. Gross margins were also revised upwards by 23-25% as compared to 19%-21%.
XIAOMI (1810 HK +3.1%) held a core supplier conference today to introduce its new technologies.
*TELCOS WEAK A top Huawei executive said China's 5G network speed is only half that of South Korea's. Ding Yun, the executive director and chief executive of the Carrier BG at Huawei, admitted the speed of China's 5G network is relatively slow, while attending the opening of 2020 PT Expo China on Wednesday. He said download speeds in China were only around 270MBPS on average, while those in South Korea were 600 MBPS.
CH MOBILE (941 HK -0.5%) CH UNICOM (762 HK -1.6%) CH TEL (728 HK -2%).
*AUTO MIXED. Toyota MAY supply hybrid technology to GAC (2238 HK +0.14%), first time to supply core systems to an overseas automaker, according to news. It is reported that Toyota has also reached a broad agreement to sell the systems to GEELY (175 HK -1.6%).
GREAT WALL (2333 HK +3.2%) as industry data shows that GWM was the leader in pickup truck sales in September.
NEXTEER (1316 HK +16%) the most in four months, after saying demand improved in 3Q following pandemic-related impacts.
*HK RETAILERS MIXED after reports of a pickup in sales in China while businesses in HK & Macau further dropped.
CHOW TAI FOOK (1929 HK +0.2%) said 3Q retail sales value +2.6% YoY. Although the total value of retail sales in mainland China soared 21.2%, sales in HK, Macau and other markets -51.6%. The value of mainland same-store sales +11% but -52.5% in Hong Kong and Macau.
SASA's (178 HK -1.5%) retail sales in HK -48.3%, and those in Macau -56.4%, but its retail sales in mainland China +38.7%.
*SPORTWEAR MAKERS FIRM on strong sales during the Golden Week.
ANTA SPORTS (2020 HK +0.11%) said retail sales of Anta-branded products recorded low, single-digit positive YoY growth in 3Q. Fila's branded products recorded a 20-25% YoY growth, and the other branded products saw 50-55% YoY increases. LI NING (2331 HK +2.9%) 361 DEGREES (1361 HK +1%) XTEP (1368 HK +8.4%).
*PHARMA MIXED BAIYUSHAN PHARM (874.HK +13%) after mainland media reported that Zhong Nanshan team said Baiyunshan compound Radix Isatidis was effective for COVID-19 virus.
CH TRAD MED (570 HK +1.8%) INNOVENT (1801 HK +2.7%).
Other drugmakers continued to be weighted by slow vaccine development progress globally. CSPC (1093 HK -5%) SiNOPHARM (1099 HK -3%) CANSINO (6185 HK -1.7%).

The Standing Committee of the National People's Congress is reviewing a draft of the Export Control Law, expecting to pass the bill at the end of meeting tomorrow (17th), reported Bloomberg. Export of sensitive materials and technologies on the control list will be regulated under the Law, which will apply to all firms in China, including foreign-invested enterprises.
Ant Group plans to ramp up the valuation target for its planned IPO to US$280 billion from US$250 billion in light of strong demand, as Bloomberg learnt from people familiar with the matter. The Chinese fintech firm expects to raise roughly US$35 billion from the offering, whose Hong Kong listing hearing has been scheduled next week. ALSO Ant Group expanded the underwriting team for its IPO, adding Barclays, Bank of China International and ICBC International as its book runners, South China Morning Post cited sources. Report also said the company may invite more investment banks to join the coordination work in future. CICC, Citigroup, JPMorgan and Morgan Stanley are sponsors of the HK IPO of Ant Group. EVERGRANDE (03333.HK) held an investors' meeting today, where the management said they will weigh on USD bond repurchase as appropriate to reinforce market confidence, Bloomberg reported. Besides, the management said it will discuss with investors the various payment plans for the HKD18 billion convertible bonds due in February 2021, with options of full repayment, exchange offer and cash repurchase.
Tencent Intelligence Mobility established an innovative strategic partnership with Hyundai CRADLE Beijing in automobile field. Both parties will jointly facilitate stellar Chinese startups to accelerate the industrialization of related innovative technologies and businesses, leveraging the respective advantages and resources of both companies in smart travel and internet ecology.
Urban Renewal Authority (URA) announced to launch the redevelopment project at Shantung Street and Thistle Street in Mong Kok, with a total GFA of around 2,796 sq.m.
The project affects, among others, buildings at the odd number of Nos. 1-27 Shantung Street and Nos. 1-23 Thistle Street.About 170 land titles are involved, affecting around 280 residents and 20 stores. It is expected to offer 300 small-to-medium-sized flats, community facilities measuring 2,850 sq.m., commercial floor space of about 2,490 sq.m., and open space of 780 sq.m. after completion in 2030.
Asset portfolio products, under the management of Penghua Asset Management and agency of ICBC (01398.HK) came under default across the board, Chinese media reported. The 25 products, scheduled to fall expired in August in a total size beyond RMB4.0 billion, carry a funding shortage potentially higher than RMB2 billion after the latest tranche was sold in February.
China's mobile gaming market posted actual sales revenue of RMB50.849 billion from July to September 2020, +3.14% QoQ and nearly 25% YoY according to Gamma Data's report. TENCENT (00700.HK)s Honor of Kings and Game for Peace took the victory royale in terms of gaming revenue.
The tender for the commercial land site at Area 57, Tung Chung, New Territories has been closed at noon today (16 October). According to on-site information, at least three tenders have been received at around noon, including sole tenders respectively from CK ASSET (01113.HK) and SHK PPT (00016.HK) and seemingly joint consortium of SINO LAND (00083.HK)
CATHAY PAC AIR (00293.HK)'s layoffs will begin as early as next week, local media citing inside sources. Level A rank-and-file staff will be entitled to severance payments equal to their monthly salary. Those of Level B or above will receive severance payments equal to three months of salary, subject to reduced retirement benefits. The retained staff will see a 30-40% pay cut.
CMSC (06099.HK) will fold up business of commodities brokerage in London, possibly linked to the political tensions between the UK and China over Hong Kong's issues, or merely meager performance in the city. It was known that the decision came from Hong Kong's office. Customer accounts were expected to be closed by 30 November.
Yiguo, a fresh produce e-commerce platform backed by BABA-SW (09988.HK), is applying for bankruptcy and reorganization, reported 21st Century Business Herald. Yiguo CEO Zhang Ye confirmed the news at an interview yesterday (15th), saying the firm has entered bankruptcy and reorganization without providing more details.
Ant Group's overseas business exposure is below 5%, as Hong Kong Economic Journal learnt from insiders. As the group has not created a U.S. version of Alipay, no U.S. user data collection is involved. It is thus unware of the legal ground behind Washington's intention to put the group into trade blacklist. Asked if its planned IPO will be jolted, the insiders told the press that Ant Group has made sufficient risk disclosures in its prospectus.
OPEC Secretary General Mohammad Barkindo pledged that oil prices will not plunge by the time OPEC+ meets to set policy in November. That said, the market needs to be realistic that demand remains feeble and recovery is not picking up pace at the rate that they had expected earlier in the year.
Indian FM: In Talks with PRC on Border Disputes mid India’s worst border disputes with China in 40 years, military and diplomatic talks on troop disengagement between the two rising Asian economies are “a work in progress,” as Bloomberg learnt from Indian Foreign Minister Subrahmanyam Jaishankar. Their tension is also reflected on trade matters, added Jaishankar.
CATHAY PAC AIR (00293.HK) welcomes the announcement of an in-principle agreement between the authorities in Hong Kong and Singapore to set up an Air Travel Bubble between the two cities. This is a milestone development for Hong Kong and an important first step in facilitating the resumption of regular air travel to and from the financial hub, said Chief Customer and Commercial Officer Ronald Lam. The local flagship airline is looking forward to receiving further information regarding the details of the implementation and will work together with the authorities to ensure a safe and secure environment throughout all stages of travel.
Brazilian President Jair Bolsonaro is considering barring Huawei from supplying equipment to the country's upcoming 5G network, regarding China as a global threat in terms of data privacy and sovereignty, Bloomberg citing a senior Brazilian cabinet member.
Apple is set to embrace the most fierce "smartphone upgrade frenzy" since 2014's iPhone 6, Taiwanese media reported. Suppliers thus expected iPhone 12 shipment to go up to 80 million units by the year-end. TSMC, the sole OEM of A14 processors, may be the biggest beneficiary from Apple's adoption of A14 processor in its latest flagship smartphone, according to the report.
Canada has mounted a national security review order on SD GOLD (01787.HK)’s bid to acquire TMAC Resources, a Canadian gold miner. -VE
Airport Authority Hong Kong (AA) announced extension of the relief package for the airport community for another two months to the end of December 2020, in response to the ongoing challenges arising from the COVID-19 pandemic. The rental relief for retail and catering tenants will also continue.
Japan had informed the US her intention of not joining the latter's The Clean Network Program, under which Chinese telecom gear makers will be banned, such as Huawei, the Yomiuri newspaper cited people with the knowledge of the matter. Japan said she will take her own steps to respond in case of national security concerns, while continuing cooperation with the US, the report said.

Not in this mornings report
COUNTRY GARDEN (02007.HK) announced the proposed issue of US$500 million 3.125% senior notes due 2025 and US$500 million 3.875% senior notes due 2030.
U.S. President Donald Trump expressed concerns over China’s handling of the COVID-19 pandemic, reported Reuters. Trump said he has not spoken with Chinese President Xi Jinping in a while and he does not want to do that. China will continue to order American goods under the phase-one trade deal signed in January, Trump added.
For the first three quarters of 2020, the network retail sales value (RSV) across 832 national-level poverty-stricken counties grew 24.1% YoY to RMB206.88 billion, said Ministry of Commerce, citing third-party big data. RSV of online catering network and lifestyle service network reached RMB34.34 billion +8.1% YoY and RMB5.12 billion, +18% YoY.
EVERGRANDE (03333.HK) had fully repaid two soon-to-expire corporate bonds, namely "Bond 15 Evergrande 04" and "Bond 15 Evergrande 05". The principal and the interest rate totaled RMB11.427 billion, Securities Times reported.
SH ELECTRIC (02727.HK) and SHANGHAI PRIME (02345.HK) jointly announced that SH ELECTRIC proposed privatization of SHANGHAI PRIME by way of merger by absorption. The Offeror will pay the Cancellation Price in the amount of HK$1.6 per SPM H Share to the SPM H Shareholders, representing a premium of 68.42% over the closing price per SPM H Share as quoted on the Stock Exchange on the Last Trading Date. The total cash consideration amounted to approximately HK$1.118 billion. SHANGHAI PRIME applied for a trading resumption with effect from today (16 October).
AIR CHINA (00753.HK) announced key operating data of September 2020. During the month, the number of passengers carried amounted to 7.824 million, -16.6% yearly but up +6.9% MoM; total cargo and mail carried reached 120,400 tons, -2.6% yearly but +23.8% monthly.

* The email will not be published on the website.