Sept 22 HK WRAP HSI -234pts T/O -27% DoD, Shorts 18.5%


24 Sep
Sept 22 HK WRAP HSI -234pts T/O -27% DoD, Shorts 18.5%
Hope you find it useful; feedback welcome
Andrew SullivanOpen for jobs

HSI -234pts (-1%) 23,717 HSCEI -64pts (-0.7%) 9,577 T/O HK$106.04bn (-26.8% DoD)

EUROPE Markets opened higher in line with the futures and are now trading sideways. Data due Eurozone Consumer Confidence (Flash). Watch for earnings from Kingfisher as others.
US Futures opened flat had risen to +100pts but now back to flat with S&P and NDX mixed. US stocks have been down for 4 days so may see a bounce but the fundamentals have not changed; trade tensions and covid remain. Data due Existing Home Sales, Richmond Fed Manufacturing Index, Fed Chair Powell & Treasury Sec Mnuchin Testimony, API Crude Oil Stock Change. Nike Q1 earnings due.

INDEXES
CSI 300 Closed -56pts (-1.2%) @ 4,636
opened lower at 4,654 but worked higher during the morning session in choppy trading, briefly touching 4,700 before easing back into lunch flat. PM opened lower and trended lower to 4,625 where is found support and saw a small tick up from there in the last 20 minutes. I would imagine team China active today as investors worry about deteriorating international relations and the global rise in covid cases that could impact exporters. Medical and brokers were the only sectors in green.
Shanghai Composite Index -43pts (-1.3%) @ 3,274.
Shenzhen Component Index -126pts, (-1%) @ 13,023
ChiNext Index -33pts (-1.1%) @ 2,988

HSI Pre Market Opened -111pts @ 23,840 vs -94pts ADR’s @ 23,856, following Monday’s 505pt fall. E commerce names mixed, HSBC continued weakness and other financials also weak. Initially bounced but then trended lower 23,760; I think on margin call selling. Then reversed and worked higher into lunch but only managed to achieve 23,900; still 50pts shorts of Monday’s close. PM open lower and tracking lower finding support around 23,680, it then traded around there for the last 90mins. Bound 60points in the last 20 minutes only to tick 32pts lower in the closing auction. Turnover was higher in the morning due to the IPO and margin call selling but very thin in the PM session. No signs of capitulation but equally no signs of bargain hunting. Suggests that sentiment is very cautious. HSBC continued to slump hit by suggestions it was on the Unreliable Entity List and concerns over revelations about historic money laundering. Macau names weak along with Airlines and Gold/Silver plays under pressure as USD strengthened.

IPO HUAZHU-S (01179.HK), finished the day at $311, up $14 or 4.7% against the listing price of $297, on volume of 3.11 million shares and turnover of $960 million. Excluding the handling fees, a book gain of $700 was reported per board lot of 50 shares. Despite a short selling report saying it controls more of the hotels than it admits too. The company issued a denial.
JOY SPREADER (06988.HK), to be listed tomorrow, opened @ $3.6 in grey market, up 25% against the listing price $2.88, and last stood at $2.91, up 1% against the listing price, on volume of 5.69 million shares, PhillipMart data showed.

PICK T
echtronics (669 HK) A long time favourite of mine as readers will know. Opened at HK$98.50 and popped to 99.50 briefly and tired again later in the morning but sold down in the PM. I still think the outlook is +VE and would slowly accumulate here or lower.

SHORT SALES Tuesday 18.5% vs 19.6% Monday T
op Shorts China Res Land (1109) 43%, CCB (939) 33%, CITIC (267) 33%, Petrochina (857) 33%, Ping an (2318) 33%, BoC HK(2388) 33%, CLP (2) 32%, Power Assets (6) 31%, Hang Seng Bank (11) 29%, ICBC (1398) 29%, Henderson Land (12) 29%, Country Garden (2007) 28%, Swire Pac A (19) 27%, Bank of China (3988) 27%, Sinopec (386) 26%, HKEX (388) 26%.

AFTER MARKET NEWS 
CHINA OVERSEAS (00688.HK) repurchased 500,000 shares of the company through the Stock Exchange today (22 September) at $19.9-19.94 per share, involving $9.962 million. The repurchase represented the first buy-back of the company within the year.
CHINA COMM CONS (01800.HK) Moody's has downgraded to Baa1 from A3, and the outlook revised to "Stable" from "Negative”. The ratings agency expected CHINA COMM CONS's leverage to remain elevated over the one to two years ahead, mainly driven by PPP investments.
TENCENT (00700.HK) said the assembly of Tencent Maps and car-hailing is indeed an in-depth cooperation with DiDi, where the latter will offer mobility service and safety scheduling, while Tencent Maps will provide its platform, reported Sina Tech. Already piloting in Xi'an, Dongguan, Zhuhai, Shenzhen and Shaoxing, the taxi-hailing service will be launched in other cities sequentially.
ND PAPER (02689.HK) announced annual results ended 30 June 2020. Revenue declined 6% yearly to RMB51.341 billion. Net profit amounted to RMB4.168 billion, up 7.5% yearly. EPS. equaled RMB0.89. Final DPS was 22 fen, as compared with 18 fen for the period last year.
Wellcome announced a Give-Back program of over $120 million to support Hong Kong’s community, including 1 million cash vouchers and 1 million meal vouchers to be distributed to those most in need, worth over $80 million in total. On top of $5 million in donations to help vulnerable groups, the supermarket chain will also be freezing prices on more than 300 everyday essential items for at least 6 months, from the end of September, to protect its customers from price fluctuations.
ParkNShop stated that it has lodged an application for the second tranche of Employment Support Scheme and that its proposal to spare a helping hand to the underprivileged has been accepted by the Government. $200 in cash coupons will be distributed in October to each low-income household member, elderly and disabled person. The coupon scheme, in a size of over $40 million in total, is set to benefit over 200,000 coronavirus-hit individuals and families, said the supermarket chain, who extended its appreciation to 20 welfare organizations for their assistance.

Regional Markets
JAPAN 
Closed until Wednesday
S KOREA Kosdaq opened flat sold down over the morning to 838 level. In the PM it traded sideways from there; to close -2.8%
Kospi opened slightly lower but followed the same pattern as the Kosdaq; but drifted lower in the last hour to close -2.4%.
PPI data out pre market had little impact
PPI Aug -0.5% YoY vs -0.8% Jul (F/cast was -0.7%)
PPI Aug +0.5% MoM vs +0.2% Jul (F/cast was +0.3%)
TAIWAN opened lower, despite the good export data out aftermarket Monday, concerns about the tension with China worrying investors, as Taiwan said it had the right to retaliate as China said there was no 'mid line as Taiwan was part of China'. Quickly sold down to 12,650 level, bounced to 12,725. Trade sideways for a couple of hours and then trended lower into the close ending -1.2%
After market Unemployment Aug 3.83% vs 3.9% Jul (F/cast was 3.9%).

CONNECT FLOWS (down DoD)
Shanghai
Northbound Rmb 33,890m Sell 17,873m : 16,017m Buy
Southbound HK$ 11,385m Sell 6,322m : 5,063m Buy

Shenzhen
Northbound Rmb 46,997m Sell 23,571m : 23,425m Buy
Southbound HK$ 8,552m Sell 3,947m : 4,605m Buy


DATA
CHINA No data.
HONG KONG Centre for Health Protection said there were 8 additional COVID-19 cases 
in Hong Kong today (vs 3 Monday) 3 of unknown origin.

Hong Kong recorded a Balance of Payments (BoP) deficit of $15.5 billion (as a ratio of 2.4% to GDP) inQ2 of 2020, as against a surplus of $25.8 billion (as a ratio of 3.9% to GDP) in Q1 of 2020.
Reserve assets correspondingly decreased by the same amount ($15.5 billion) in the second quarter of 2020.


Active Heavyweights
AIA (1299.HK) -1.1%
BABA (9988.HK) +1.1%
TENCENT (700.HK) -1%
HKEX (388.HK) -0.8%
PING AN (2318.HK) -0.6%
MEITUAN (3690.HK) +0.4%
CCB (939.HK) -0.4%
HSI & HSCEI Constituents on the move
GEELY AUTO (00175.HK) -4.4%
GALAXY ENT (00027.HK) -.3%
SWIRE PACIFIC A (00019.HK) -3.3%
CITIC (00267.HK) -3.2%
HSMI & HSSI Constituents on the move
GENSCRIPT BIO (01548.HK) -17.3%

Market Commentary
*E-COMMERCE MIXED 
with uncertainty over the TikTok deal. Media reports China won't approve the agreement in its current form, calling it an affront to the country's national security, interests and dignity, while Trump said he will not approve the deal if ByteDance retains control of the app.
ALIBABA (9988 HK +1%) ANT reportedly seeking to raise at least US$35b in its IPO after assessing early inestor interest. JD.COM (9618 HK +0.8%) plans to spin off its health business in Hong Kong, to raise approx US$2b.
Trump Administration will challenge an order issued over the weekend that halted the Commerce Department’s ban on downloads of TENCENT's (700 HK -1.3%) WeChat.
*TECH & COMPONENTS MIXED Beijing reportedly has prepared the Unreliable Entity List but Chinese leaders are hesitant to pull the trigger; some want to wait until after the U.S. election in November.
Semi names +VE as ASM PACIFIC (522 HK +6%) is said to be in talks with investors to go private. HUA HONG (1347 HK +5%) SMIC (981 HK +0.7%) as recently listed in Shanghai so little chance of privatisation.
*HK PROPERTY WEAK rumours of increased housing supply, after the Hong Kong Real Property Federation proposed a reclamation and development plan for Zhuhai's Guishan Island, which is located southwest of Lantau Island, to accommodate 800,000 people. The plan estimates providing a total of 753.47m squ ft of land and 280,000 residential flats.
SHKP (16 HK -1.3%) HENDERSON LD (12 HK -1.4%) CK ASSET (1113 HK -1%).
*AUTO WEAK as recent gains amid improved car sales in August.
GREAT WALL AUTO's (2333 HK -6.5%) controlling shareholder, Innovation Great Wall, pledged 116m A-shs for loans.
GAC (2238 HK -5.5%) DONGFENG (489 HK -1.5%) GEELY (175 HK -4.4%).
BYD (1211 HK +3.9%) is partnering with Didi to make customized EVs.
*PHARMA WEAK after GENESCRIPT (1548 HK -17%), but was -37% as the company's chairman has been placed under “residential surveillance” in China; connection with an investigation into suspected violations of import and export regulations, the company said.
China was absent from the WHO-backed global coronavirus vaccine program, COVAX, where 156 countries and regions have already joined the plan. INNOVENT (1801 HK -4.7%) 3SBIO (1530 HK -3.2%) SINOPHARM (1099 HK -2.8%).
*TELCOS WEAK after poor subs data in August;
CH TEL (728 HK -2%) mobile subs +1.62mn MoM to 348m in Aug, slower than a 2.6-million addition last month.
CH UNICOM (762 HK -2.1%) said that it had 308.7m subscribers in August, which is slightly down from 309.6m in July.
CH MOBILE (941 HK -0.78%) and CH GAS (384 HK +0.9%) announced they entered into a strategic cooperation framework agreement after market yesterday
*CHINA AIRLINES WEAK after recent gains as USD rebounded. -VE for their debt and paying for fuel; CEA (670 HK -4.8%) CSA (1055 HK -5.3%) AIR CHINA (753 HK -6%).
*MACAU CASINOS WEAK as some channel checks showed that gross gaming sales for the previous seven days came lower than the week before . MELCO (200 HK -7%) SJM (880 HK -5.5%).
MARKET HOURS NEWS 
Alibaba Cloud announced that it has executed a strategic cooperation agreement with NCI (01336.HK), under which both parties will take forward NCI's digital transformation.
Tmall Supermarket announced to upgrade the strategic partnership with Taoxianda, Ele.me and Fulinmen, reported Chinese media. The parties will achieve in-depth cooperation in omni-channel user operation, brand marketing and supply chain, while highlighting their service to deliver goods within an hour. They expect to track a transaction value of RMB5 billion in the coming three years.
Qualcomm (QCOM.US)'s management paid visits at wafer foundry factories in Taiwan, including those of TSMC (TSM.US), UMC and VIS, Taiwan media reported. Qualcomm hoped to lock on Taiwan's productivity in advance in case SMIC (00981.HK)'s delivery is disrupted by the US sanction. Qualcomm is reportedly one of the three biggest customers of SMIC, contributing 13% of the overall wafer revenue.
The Thai cabinet approved cash handout programs worth THB51 billion (around US$1.6 billion) in order to boost domestic spending and help counter the economic shock from the pandemic.
Xiaoman Technology introduced BABA-SW (09988.HK) as its shareholder, with a 12.5% growth in registered capital, according to business registration. Xiaoman introduced Qin Fen as a director, Wang Xiaojie as a supervisor, and Zhang Kuo as chairman.
PRC Approves 65 Game Edition No.; Tencent has one game listed, NTES has two games on List
The office rental decline at Grade A buildings in Hong Kong narrowed in August with the third wave of epidemic subsiding, JLL commented. The office rental decline at Grade A buildings -1.7% monthly in August, narrowing from the over 2% monthly decrease in 1H20 on average. The rental pullback was believed to be an incentive for individual enterprises to move their offices to better ones in Central, JLL opined, who forecast the trend to persist in next few months and in 2021. JLL also observed that the overall shop leasing market remained stagnated, where the shop vacancy rate at core districts kept rising, which weighed down the rents.
Mox, the new virtual bank co-created by Standard Chartered Hong Kong, PCCW, HKT and Trip.com, is officially launched in Hong Kong today. It provides its suite of retail banking services entirely digitally over its app. Mox also took the lead to launch Asia's first all-in-one numberless bank card, further enhancing privacy and security for customers. Mox is also the first virtual bank in Hong Kong to support both Apple Pay and Google Pay.
ASM PACIFIC (00522.HK) is in talks with potential investors for proposed privatization, aiming to be relisted on Shanghai’s STAR Market with sharply higher valuations, as Reuters learnt from people with knowledge of the matter. ASM PACIFIC has denied the news, whereas ASM International remains yet to respond.
JD-SW (09618.HK) announced that the Company plans to spin-off and list JD Health on the Main Board. The timing of such spin-off and listing will depend on market conditions, among other factors, and there is no assurance as to when such spin-off and listing will be completed.
Hong Kong Disneyland park announced that it will officially reopen to the public on Sep 25, 2020. In alignment with the latest guidance from health and government authorities, the resort will continue its measured approach with health and safety measures such as capacity control, health screenings, temperature checks, requiring face masks, social distancing, and increased cleaning and sanitization.
PING AN (02318.HK)'s investor seminar, Co-CEO Tan Sin Yin disclosed that the group had bet on the promising outlook of online healthcare seven to eight years ago, with relevant strategies being ramped up this year given at least 3-5 years faster development during the coronavirus pandemic. While online healthcare only accounts for 3-4% of the overall medical diagnosis market, Tan cited health experts that the figure will potentially climb to over 30% in future. As PA GOODDOCTOR (01833.HK) has topped the market flow, more money will be pumped into this segment. It also announced the group unveiled its healthcare ecosystem strategy and cutting-edge scientific research results.The insurer created a healthcare ecosystem after factoring in three points, including the immense size of healthcare market, overwhelming strategic synergistic effects from the ecosystem and leading global medical technology,
JD-SW (09618.HK) declared the formation of a mobile eSports team called "JD Esports", aiming to speed up the development of its JD Esports program. The Chinese e-commerce firm had earlier announced the launch of JD Esports with TENCENT (00700.HK)'s Tencent Games, Black Shark, Red Magic, ROG, LENOVO GROUP (00992.HK), as well as operators, hardware supply chain and live game streaming platforms.
TSMC (TSM.US) achieved a major breakthrough in its 2nm process R&D, reported Taiwanese media. The firm will adopt a new multi-bridge channel field-effect transistor (MBCFET) architecture for its 2nm, with R&D progress ahead of the sector, according to the supply chain. The industry predicts a 90% yield rate of risk trial production for 2H23, conducive to TSMC's securing of big orders from manufactures like Apple (AAPL.US) and NVIDIA. The Taiwanese semiconductor maker will likely overtake its rival Samsung.
1-Month HIBOR Up to 0.53%, Hiking for 6 Days Logging 1-month High. Overnight HIBOR last posted at 0.09631%, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.53714%, up for 6 days, marking a 1-month high.
SA SA INT'L Leases Partial Building at CWB; Rent/ Sq.ft. Recedes 35% from Peak.The property (G/F-4/F) at No. 12 Kai Chiu Road, Causeway Bay, which is held by Angela Leong, the fourth wife of Macau casino king Stanley Ho, was partially leased to SA SA INT'L (00178.HK) +0.010 (+0.769%) Short selling $792.94K; Ratio 11.003% with a monthly rent of approximately $600,000, Ming Pao reported. The rent per sq.ft. was $130, around 35% below the peak at $200 ten years ago.Chief Executive Carrie Lam told media ahead of ExCo meeting this morning that the Government is unlikely to further unwind the social distancing measures this week as there are still invisible transmission chains in the community given diagnosed cases without specific origins still existing. The previous relaxation will remain effective until 1 October.
HKEX (00388.HK) CEO Charles Li, at an online forum, said it is now a decisive moment for Hong Kong as to whether it could sustain its position as an international financial hub amidst the political tussles between the US and China. While the USD liquidity in the world is unprecedently high, Li cast doubt of whether the greenback could keep dominating currencies. He believed China will and must propel the internalization of RMB. The progress of RMB internalization will go on, Li said, who opined HKEX should be well-positioned for large amount of works ahead. More products will debut under Bond Connect, and Hong Kong will hail its first China Offshore Treasury Bond Futures, Li foretold.
The PBoC started 7-day (RMB200 billion) and 14-day (RMB150 billion) reverse repurchase operation on open market today. The interest rates were flattish at 2.2% and 2.35%.
Intel (INTC.US) has secured a license to continue its supply to Huawei, making it among the first enterprises to be licensed, Chinese media reported. AMD has also obtained the license to supply goods to the Chinese tech giant, according to foreign press.
Shenzhen Stock Exchange announced that NONGFU SPRING (09633.HK) will be added to the Southbound Trading list, effective today, pursuant to the related regulation, due to constituent adjustment of Hang Seng Composite LargeCap Index.

PRE MARKET NEWS
Not in this mornings report
AMVIG HOLDINGS (02300.HK) has been halted with effect from 9:00 a.m. on 22 September 2020 pending the release of an announcement in relation to the Hong Kong Code on Takeovers and Mergers, which is inside information of the Company.

China Foreign Exchange Trade System announced today (22 September) that the central parity of USD/ RMB slipped 277 bps from the last trading day to 6.7872.

The People's Bank of China (PBOC) conducted RMB200 billion of 7-day reverse repos and RMB150 billion of 14-day reverse repos on the open market today (22 September), foreign media reported. Without reverse repos expiring, the net injection reached RMB350 billion today.

Huawei plans to continue its layoff and investment downsizing in Australia in light of strained relations between Beijing and Canberra. In 2018, Australia banned the Chinese tech giant from her local 5G mobile network projects citing national security concerns.

BYD COMPANY (01211.HK) received last month an approval for selling its D1 electric sedans, Reuters citing China's MIIT documents. The model is built for ride hailing services developed by the BYD-Didi joint venture, according to sources. The EVs will likely be delivered to Didi's fleet within this year.

HUAZHU-S (01179.HK) listing its stock in Hong Kong this morning, was blasted by the short seller Bonitas Research. The report alleged the hotelier of spoofing its ownership in the hotel investment portfolio to fabricate false financial report. The short seller hence estimated the actual financial performance of the company to knock down its own share price immensely. Its ADS in the US once tumbled over 6% to US$39.17 on Monday, before closing the market lower by 3.7% to US$40.48. After conducting field trip study in Beijing and Shanghai, Bonitas Research uncovered that HUAZHU-S has been secretly funding the operating cost of franchised hotels, which are owned by undisclosed existing staff of the company and other undisclosed affiliates. A hotel license seen by the short seller showed that the hotelier sneakily controls 1,952 hotels, against what it claimed to be 688 hotels.

The Company responded that it has been made aware of the short seller report published by Bonitas Research on September 22, 2020. Based upon its preliminary review and evaluation of the report, the Company believes the report is without merit and that it contains numerous errors, unsubstantiated statements, and misleading conclusions regarding the Company’s business and operations. The Company emphasized its commitment to maintaining the highest standards of corporate governance, as well as transparent and timely disclosure in compliance with the applicable rules and regulations of the United States Securities and Exchange Commission and the Nasdaq Global Select Market.

STO (002468.SZ)  (ZTO Express), a Chinese delivery giant, announced that the controlling shareholder and the actual controller of the company entered into a revised and reshaped share option agreement with BABA-SW (09988.HK). Pursuant to which, BABA-SW proposed to invest RMB3.295 billion, which would as a result make BABA-SW obtain 10.35% stake of STO indirectly. In accumulation, BABA-SW would indirectly hold 25% of STO.

HKMA announced that as USD/HKD triggered the Strong-side Convertibility Undertaking during New York trading hours, it had undertaken a US$277-million selling order to inject HK$2.147 billion into the market. The balance of the banking system of Hong Kong will increase to HK$241.525 billion on Wednesday (23 September).

GENSCRIPT BIO (1548.HK) announced that on 17 September, the Customs Anti-Smuggling Department of the PRC inspected the Group’s places of business in Nanjing and Zhenjiang.  The inspections are in connection with what the Company understands to be an investigation relating to suspected violations of import and export regulations under the laws of the PRC.  So far, the Group’s business operations remain normal. Application has been made for the resumption of trading of the Shares with effect from Tuesday (22 September).

Comments
* The email will not be published on the website.