Oct 19 HK WRAP HSI +156pts on good China Data but concerns on law changes

22 Oct
Oct 19 HK WRAP HSI +156pts on good China Data but concerns on law changes

HSI +156pts (+0.64%) 24,565  HSCEI +63pts (+0.6%) 9,978  T/O HK$122.82bn (+8.7% DoD)  

As at pm 6:15pm HK time
EUROPE Markets opened higher following Asia and saw an initial spike on US stimulus deal hopes but then eased back and traded sideways. All sectors except Auto in the green. Autos had rallied on Friday. Upside likely to be capped by the rising covid cases although many hope a vaccine will be available by year end. There remain concerns over Brexit -VE for sentiment.Euronext announced the trading suspension for all spot and derivatives products, due to a technical issue and did not know when the trading could be resumed. The stock exchange is putting effort into solving the technical issue, adding there will be 15 minutes of pre-market trading before market resumption.Data out EUROZONE Construction Output Aug -0.9% YoY vs -3.4% Jul revised (F/cast was -4.4%)No other data due.
US Futures opened Dow+101pts and rose to +187pts before trenching back to +100pts with the S&P and NDX positive too. Rising US covid cases dampening sentiment. But there are still hope of a stimulus deal as Pelosi sets a deadline. Earnings in focus with IBM due before the open, Also Powell speaks this morning.Data due NAHB Oct Housing Market Index. Sept was 83, F/cast is 83.,

CHINA CSI 300 Closed -36pts (-0.8%) 4,755 Opened higher and rallied on the GDP and other data but then sold down into lunch. PM the market continued to downward trend, day low was around 2:40pm with a small bounce into the close. News of changes to export laws hurt the ChiNext and the treat of arresting American’s in China will worry investors about more action from the US.
Shanghai Composite Index -24pts (-0.7%) @ 3,313
Shenzhen Component Index -112pts (-0.8%) @ 13,421
ChiNext Index -35pts (-1.3%) @ 2,690
China Data
GDP Growth Rate Q3 +4.9% YoY vs +3.2% Q2 (F/cast was 5.1%)
GDP Growth Q3 +2.7% QoQ vs +11.5% Q2 (F/cast was +3.3%]
Industrial Production Sept +6.9% YoY vs +5.6% Aug (F/cast was 5.7%)
Retail Sales Sept +3.3% YoY vs +0.5% Aug (F/cast was +1.7%)
Unemployment Sept 5.4% vs +5.6% Aug (F/cast was 5.5%)
Fixed Asset Investment (YTD) Sept +0.8% YoY vs -0.3% Aug (F/cast is +0.7%)
Industrial Capacity Utilisation Q3 76.7% vs 74.4% Q2 (F/cast was 75.1%)
Fixed Asset Investment up as Public investment rose at a faster and private investment fell less. Investment in the primary industry expanded 14.5% vs 11.5% prior, while that in the secondary industry shrank less only 3.4% vs -4.8% on the back of manufacturing. Investment in the tertiary industry advanced +2.3% vs 1.4% due to transport, storage & postal industry; education, health and social work; and recreation & culture activities.
Industrial Capacity Utilisation edged higher as China recovered further. The utilization rate rose for both manufacturing (77.2% vs 76.9% in Q3 2019); and electricity, heat, and gas, water production (72.8% vs 72.1%). Meantime, the utilization rate of the mining sector fell mining (73.9% vs 74.7%). Considering the first nine months of the year, industrial capacity utilization was at 73.1 percent, down 3.1 percentage points from the same period of 2019.

HSI Pre Market opened @ 24,565 +179pts vs +16pts @ 24,402 ADR’s market then saw a short squeeze and hit the day high as the China data came out. But then sold down to 24,500 level around 11:30am with a small up tick into lunch. PM opened higher traded sideways. Chinese banks were strong. SunArt Retail rallied as Alibaba bought the controlling stake and proposed a general offer. HK Property strong on good weekend sales. HSBC and Standard Chart were strong despite the threat of sanctions against those the US feel were responsible for undermine the Basic Law. Chinese developers mixed ahead of tomorrow China House Price data.
I think we could see weakness tomorrow as US funds react to the threat than Americans could be arrest in China; which probably means HK too.

IPO EXCELLENCE CM (06989.HK) closed at $11, up 32 cents or +3% against the listing price of $10.68, on volume of 153 million shares and turnover of $1.766 billion. Excluding the handling fees, a book gain of $320 was reported per board lot of 1,000 shares.

After Market Aug Total Exports of Goods -1.2%Further to the external merchandise trade statistics in value terms for August 2020 released earlier on, the Census and Statistics Department (C&SD) released today the volume and price statistics of external merchandise trade for that month.
In August 2020, the volume of Hong Kong's total exports of goods -1.2% YoY and imports of goods -4.5% YoY respectively over August 2019.
Centre for Health Protection said there were 15 new COVID-19 cases in Hong Kong today (vs 4 Sunday) 14 imported, 1 linked to earlier local case.

SHORT SALES Monday 18.7% vs 20% Friday
Top Shorts Henderson Land (12) 36%, Ping An (2318) 36%, ICBC (1398) 29%, Hang Seng Bank (11) 29%, BOC HK (2388) 28%, Sunny Optical (2382) 27%, Wharf REIC (1997) 27%, Mengniu Dairy (2319) 27%, China Res Land (1109) 27%, Galaxy Ent (27) 27%, Bank of China (3988) 25%,
As USD/HKD triggered the Strong-side Convertibility Undertaking, the HKMA undertook a US$2.63 billion selling order to inject HK$20.383 billion into the market. The balance of the banking system of Hong Kong will increase to HK$347.906 billion Wednesday (21 October).
Hong Kong Federation of Trade Unions (HKFTU) conducted a survey, uncovering that 72% respondents had their jobs impacted by epidemic, among which 17% said they were sacked, 33% were suspended/ furloughed and 11% were given wage cut/ basic salary. Only 28% replied their jobs remained untouched. The survey also asked about rental situation. Among 1,749 replies, 45% interviewees were public households, who were imposed higher rents in September. 16% of interviewees said they lived in private properties with intact rents, yet 8% of them had to pay more rents. -VE
SINO BIOPHARM (01177.HK) announced that Vice Chairman Cheng Cheung Ling and Executive Director Tse Hsin had on 16 October acquired an aggregate of 700,000 shares. On the same date, SINO BIOPHARM repurchased 1.628 million shares.
The Hong Kong Monetary Authority (HKMA) announced today (October 19) the composite interest rate at the end of September 2020. The composite interest rate, which is a measure of the average cost of funds of banks, decreased by 5 basis points to 0.36 per cent at the end of September 2020, from 0.41 per cent at the end of August 2020. The decrease in composite interest rate mainly reflected decreases in the weighted funding cost for deposits during the month.
CLP HOLDINGS (00002.HK) announced that the overall electricity sales were 26,426 GWh in Hong Kong for the first three quarters of 2020, -0.6% YoY. The Board of Directors declared the third interim dividend for 2020 of HK$0.63 per share, flattish year-on-year.
Director of Macau Government Tourism Office, told Radio Macau that FY20 tourist volume will potentially slide over 90% yearly, but the government will continue to spare no efforts in plague precautions to guarantee public health in winter. The government will study the establishment of "Air Travel Bubble" in Hong Kong and foreign countries to see if the scheme is feasible in the gambling hub, said the director. At this moment, the city has been in no talks with any governments about such a scheme.
The preliminary visitor arrivals to Hong Kong -99.7% yearly to 9,132 in September, announced by Hong Kong Tourism Board. Visitor arrivals from Mainland declined 99.7% annually to 6,211, while those from non-Mainland countries or regions dropped 99.6% yearly to 2,921.
CHINA TOWER (00788.HK) announced that operating revenue was RMB60.22 billion, +5.6% yearly. EBITDA was RMB44.019 billion, +5.4% yearly. Profit was RMB4.564 billion, +17.8% yearly. In the first three quarters of 2020, a total of 345 thousand 5G sites were built, and more than 97% of 5G demands were fulfilled through sharing the existing site resources.
The Urban Renewal Authority (URA) issued acquisition offers to property owners affected by the Kai Tak Road/ Sa Po Road Development Scheme in Kowloon City. Eligible owner-occupiers of domestic properties of the Project will be offered $17,698 per square foot of saleable area, which is the unit rate of a seven-year old notional replacement flat situated in the same locality (Notional Unit Rate).
The Project covers about 460 property interests. All property owners will have 60 days to consider the URA’s offers. After completion of the property acquisition, the URA will make ex-gratia allowance for the eligible tenants and rehousing arrangement for the eligible domestic tenants.
XIAOMI-W (01810.HK) said via Weibo that the latest Mi Watch "Color" will be introduced at 10am tomorrow.

Regional Markets
Pre market data largely missed estimates but di show an improving trend. Futures had already indicated a higher open, the market rallied on the data and then worked higher through the morning with resistance around 23,700 before easing back into lunch. Pm opened lower but quickly retested 23,700 but unable to break out but traded sideways to close +1.1% +260pts at 23,671
Balance of Trade Sept Yen 675b vs 248.3b Aug (F/cast was 900b)
Exports Sept -4.9% vs -14.8% Aug (Consensus was -2.4%)
Imports Sept -17.2% vs -20.8% Aug (Consensus was -21.4%)
21th straight month of decline. Shipments of transport equipment -23.2%, while exports of machinery -16.8%.
Sales of manufactured goods -14.1% as iron & steel products -27.4%. Exports to the US -21.3%, Western Europe -15.3%, South Korea -13.8%, and Hong Kong -4% BUT sales to China +5.1% although that was down from an 8.2% increase in July.
Imports 16th consecutive month of decline in inbound shipments, as purchases of transport equipment -39.1%, due mainly to aircraft -50.9% & motor vehicles -38.2%.
Purchases of mineral fuels -45.1%, with a 52.5% decline in petroleum.
Imports from China -7%, Hong Kong -26.3%, Thailand -18.3%, South Korea -18.3% and the US -22%.

S KOREA Markets opened higher the Kospi has traded sideways (2,346/2,364) for most of the day but sold down at the end to close +0.2% @ 2,347Kosdaq opened higher but sold down to 825 before rebounding to around the opening level 839 then eased back to flat before trending lower with increased selling in the last house to close just off the day low -1.4% @ 822No data but rising covid cases a concern.

TAIWAN opened higher an worked up to 12,890 in the first two hours and then traded around there testing 12,900 on occasions but without much conviction until the 15 mins when it tested and broker above to close +1.2% @ 12,908

Shanghai Northbound Rmb 37,632m Buy 18,954m vs 18,678m Sell
Southbound Rmb 11,495m Buy 4,927m vs 6,568m Sell
Northbound Rmb 46,984m Buy 24,976m vs 22,008m Sell
Southbound Rmb 10,995m Buy 5,020m vs 5,975m Sell

Active Heavyweights
MEITUAN (03690.HK) -2.6%
CCB (00939.HK) +1.8%
HKEX (00388.HK) +1.7%
BABA (09988.HK) +1.1%
PING AN (02318.HK) +0.9%
TENCENT (00700.HK) +0.8%
AIA (01299.HK) -0.3%

HSI & HSCEI Constituents on the move
ENN ENERGY (02688.HK) +7%
CHINA RES GAS (01193.HK) +4.9%
CHINA GAS HOLD (00384.HK) +4.3%
XIAOMI-W (01810.HK) -4.1%
CPIC (02601.HK) +4.1%
ICBC (01398.HK) +3.6%

HSMI & HSSI Constituents on the move
FIT HON TENG (06088.HK) +19%
ZHENGTONGAUTO (01728.HK) +13.7%
MICROPORT (00853.HK) -1.9%
AK MEDICAL (01789.HK) -11.4%
GCL-POLY ENERGY (03800.HK) +10.4%

Market Commentary 
*SHENZHEN NAMES FIRM after the NDRC published a list of reforms for Shenzhen on Sunday that include steps for financial markets, intellectual property, protection, economic legislation and talent attraction. According to news, the supporting policies for Shenzhen are more than those given to the free trade zone in Hainan. C
HINA SOUTH CITY (1668 HK +3.9%) SHZ INVEST (604 HK +2%) SHZ EXPRESSWAY (548 HK +1.7%).
CHINESE BANKS on speculation bank's earnings to improve after 3Q GDP improved from 2Q. CCB (939 HK +1.8%) ICBC (1398 HK +3.6%) ABC (1288 HK +2.6%).
INSURERS higher on hopes for a strong recovery in Q1 2021 to boost returns. CH LIFE (2628 HK +1.5%) PING AN (2318 HK +0.9%) CPIC (2601 HK +4%).
CHINA TAIPING (966 HK -0.3%) reported gross premium income of the subsidiaries of the company in the first nine months this year was RMB4,405.27 million, +18.95% YoY.
*E-COMMERCE FIRM as news reported that ANT has received approval from China for its HK and Shanghai listing plan. ALIBABA (9988 HK +1%) to pay US$3.6b to acquire controlling stake in SUN ART RETAIL (6808 HK +19%). TENCENT (700 HK +0.8%) NETEASE (9999 HK +0.6%) JD (9618 HK +0.6%). But XIAOMI (01810 HK -4.1%)
*PHARMA WEAK amid speculation on vaccine development. GZ BAIYUNSHAN PHARMA (874 HK -7.1%) whose stock surged last Friday on reports one of its medicines could potentially inhibit Covid-19, said more studies are needed on the treatment. CANSINO (6185 HK +4.4%) INNOVENT (1801 HK -3.3%) FOSUN PHARM (2196 HK -2.6%) CSPC PHARM (1093 HK -3.1%).
FT article notes that makers are having problems supplying flu vaccines implying that supplying a covid vaccine could also encounter production issues.
*MEDICAL EQUIP MAKERS WEAK concerns about sharp price cuts, after the release of Chinese government purchase policy for coronary stents, with some analyst predicting that prices will plunge as much as 74%. MICROPORT (853 HK -12%) WEIGAO (1066 HK -5.3%) AK MEDICAL (1789 HK -11.4%).
*HK PROPERTY FIRM after HK homebuyers bought all 391 flats on offer at The Pavilia Farm in Tai Wai by NEW WORLD DEV (17 HK +0.5%). SHKP (16 HK +0.3%) SINO (83 HK +0.7%) HENDERSON LD (12 HK +0.5%).
*CHINESE DEVELOPERS MIXED after NBS data shows home sales by volume in the Jan-Sept +6.2% YoY. China to release Loan Prime Rate and House Price Data tomorrow.
PROP MGMT WEAK speculation of fund rotating into new listings, EVERSUNSHINE (1995 HK -7.3%) A-LIVING (3319 HK -7.4%). KWG PROP's (1813 HK -2%).
SHIMAO's (813 HK -0.8%) as property mgmt arms kicked off IPO bookbuilding, while EXCELLENCE COMMERCIAL (6989 HK +3%) on debut today
*SPORTSWEAR MAKERS WEAK as XTEP INTL (1368 HK -1.7%) reported a mid-single-digit growth in retail sales, including offline and online channels, in mainland China for 3Q 2020. LI NING (2331 HK -1.8%) PO SHENG (3813 HK -1%).

 Fitch Ratings initiated MEITUAN-W (03690.HK)'s long-term issuer default rating at BBB, with the outlook Stable. The ratings agency attributed its rating to MEITUAN-W's leadership in e-commerce for consumer services, paired with strong branding.
CATHAY PAC AIR (00293.HK) announced that Cathay Pacific and Cathay Dragon carried a total of 47,100 passengers last month, - 98.1% YoY. After carefully studying numerous scenarios facing the industry and its airlines, the group expects it will be operating only 10% of its pre-pandemic passenger flight capacity for the rest of 2020 and under 50% for overall 2021, said Chief Customer and Commercial Officer Ronald Lam.
Chief Executive Carrie Lam, in a Hong Kong Economic Times interview, said she had not heard of Beijing's intention to reclaim land in Guishan Island for allocation to Hong Kong. She found this very daunting as Beijing is focused on environmental protection. Compared with Mainland waters, Hong Kong lands (e.g. Lantau Island and Kau Yi Chau) would be better options for reclamation, Lam pointed out. She also revealed that the framework of Wealth Management Connect was outlined and will be coming soon. Seeing no need of the announcement by the Policy Address, Lam said details will be unfolded at anytime once finalized. Lam furthered China and Hong Kong are still discussing the quota of Wealth Management Connect and the types of products under early and pilot implementation. Looking ahead, there will be new initiatives around equities and insurances too.
Macao Financial Services Bureau announced that during the first nine months of 2020, betting duty revenue amounted to MOP23.41 billion, down 72.7% yearly. As of September 2020, Macao's fiscal surplus reached MOP16.3 billion.NBS says China's total retail sales of social consumer goods saw a positive QoQ growth for the first time in 1-3Q20, said Liu Aihua, spokeswoman at National Bureau of Statistics (NBS). Given effective plague prevention and control, residents' demand for both material and service consumption was reviving, she added.
NBS says China's electricity generation by industries above designated size reached 631.5 billion kWh in September, up 5.3% yearly. The growth rate was 1.5 ppts slower than that in August. The accumulated electricity generation rose 0.9% annually to 5.4086 trillion kWh for the first three quarters of 2020.
NBS says China's economy was on track of sequential and steady recovery in the first three quarters of this year, while its anti-plague measures were remarkably effective, commented National Bureau of Statistics (NBS). That said, the international environment remains complicated and acute with increasing instabilities and insecurities. As the Chinese Government still needs to put much more efforts in preventing internal and external epidemic resurgence, the economy is still in the process of resumption. The fundamentals for ongoing solid revival of China's economy thus requires further consolidation, the NBS opined.
HKSAR Government is looking at possible imploration at the Chinese government for lifelines to the city, as Chief Executive Carrie Lam told Wen Wei Po. That may potentially include support on the local aviation sector for faster recovery, giving full play to Hong Kong International Airport's function, and relaxed requirements to local vehicles' northbound travels as Tuen Mun-Chek Lap Kok Link is coming into operation by the year end via Hong Kong-Zhuhai-Macao Bridge. The financial hub does value Hong Kong International Airport despite the devastating pandemic blow on the aviation industry, explained the city leader.
Hong Kong International Airport announced that it had in September 2020 handled 100,000 passengers -97.9% YoY and 10,500 flight movements, -68.5% YoY During the month, cargo throughput was 388,000 tons, -4.4% YoY, whereas freighter movements +25.0% yearly to 6,020.
CATHAY PAC AIR (00293.HK)'s executive is expected to announce layoff this week, as South China Morning Post learnt from insiders. Nevertheless, the Government is pressuring the local flagship airline to offer more generous redundancy packages.
More than 460 new homes were transacted at the weekend, over 3.6 times higher weekly, according to market sources. The Pavilia Farm I, a project on top of Tai Wai Station co-developed by NEW WORLD DEV (00017.HK) and MTR CORPORATION (00066.HK), sold out all 391 units in the first log to cash in over $4.27 billion.China Foreign Exchange Trade System announced today (19 October) that the central parity of USD/ RMB surged 322 bps from the last trading day to 6.7010, setting a new high since 18 April 2019.

Not in this mornings report

Ant Group's HK IPO was approved by China Securities Regulatory Commission (CSRC), Reuters' IFR reported. The report also said the CSRC is expected to greenlight Ant Group's Shanghai IPO this week as well, and allow its flotation in the new few days following the US Presidential Election.

BABA-SW (09988.HK) to invest a total of HK$28billion (US$3.6 billion) to acquire, through its subsidiary, Taobao China, from Auchan Retail International S.A. and its subsidiary an aggregate of 70.94% of the equity interest in A-RT Retail Holdings, which holds approximately 51% of the equity interest in SUNART RETAIL (06808.HK). Under the Hong Kong Code on Takeovers and Mergers, after the completion of the Share Purchase, Taobao China will be required to extend a mandatory unconditional general offer in cash for all of Sun Art’s issued shares at the offer price of HK$8.1 per share, i.e. around 2.14% premium to the closing price on the last trading day.

Chinese National Development and Reform Commission has issued a guidance for Shenzhen's reform. The guidance includes introduction of stock index futures and commencement of domestic share issue or CDR trials for innovative companies.

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