Aug 3 HK WRAP HSI -137pts as HSBC misses Sentiment weak on US/China tensions
HSI -137pts (-0.6%) 24,458 HSCEI -7pts (-0.1%) 10,033 T/O HK$130.45bn (+9.5% DoD)
EUROPE Markets opened mixed DAX and CAC +VE as PMI’s beat but FTSE slightly lower as PMI missed and poor results from HSBC. Earnings in focus along with Covid.
US Futures opened +30pts in Asian time but then reversed to -53pts before easing back to flat before dipping again current -60pts S&P flat NDX slightly +VE. I would expect a slightly lower open with covid and earnings in focus.
EARNINGS AIG, Clorox, Cirrus Logic, KLA, Rambus, Virgin Galactica, Take-Two Interactive, Mosaic, Vornado, Eastman Chemical, Leggett and Platt, Hyatt Hotels, McKesson, Tyson Foods, Tenet Healthcare, Ingersoll-Rand, Marathon Petroleum,
CSI 300 Closed +76pts (+1.6%) @ 4,771 Market opened higher on a strong Caixin Manufacturing PMI and traders sideways in choppy trading for the first hour before working higher to the morning high 4,760 level. Pharma +VE on vaccine optimism and hopes of a deal for ByteDance’s Tik Tok with Microsoft. Markets eased back into lunch. PM initially saw sideways trading before working higher into the close. Increased turnover today, suggests Team China in action.
Shanghai Composite Index +57pts +1.8% to 3,367. T/O RMB572.4 billion
Shenzhen Component Index +326 pts, +2.4%, to 13,964. T/O RMB761.5 billion.
ChiNext Index +73 pts 2.6% to 2,868.
HSI Pre Market -29pts @ 24,567 vs -155pts ADR’s @ 24,440 With Meituan +4.2% with Tencent & Xiaomi +VE but Alibaba -0.5%, Financial were mixed. There was an initial tick up to 24,650 level but unable to hold and sold down into the red. Tried to regain Friday’s closing level a couple of times without success and then sold down to 24,250 level (day low) before bouncing back to 24,465 level. But then eased lower into lunch. PM market traded sideways got the first 90 minutes then saw a small rally into the China close. Then sold down to the afternoon low of 24,340 before working higher into the close. Sentiment cautious after the HK government postponed the HK Elections which may mean further US sanctions on Hong Kong if the administration does not reconsider as requested by US Sec State Pompeo.
SKYWORTH GROUP (751.HK) announced that in relation to a proposed spin-off and separate listing of the business of Shenzhen Coocaa Network Technology, the Listing Committee of the Stock Exchange had on 31 July 2020 agreed that the Company may proceed with the Spin-off under Practice Note 15 of the Listing Rules. The Company’s management is currently reviewing the market conditions and the proposal for the Spin-off.
WHARF HOLDINGS (4.HK) interim result ended June 2020. Revenue -31.2% YoY to HK$5.551 bn. The profit swung into loss of HK$1.741 bn. LPS was HK$0.57. The first interim dividend of HK$0.2 was declared against a dividend of HK$0.25 in the corresponding period of the previous year.
The Hong Kong Polytechnic University announced that a breakthrough has been achieved in the novel coronavirus vaccine, which was co-developed with Macau University of Science and Technology and other Chinese colleges. The research team expected the vaccine to be put into clinical trials very soon, whose production cost came in lower than others. By far, no serious side effects were noted in animal tests.
Market and Pre Market News at bottom of page.
JAPAN opened higher, pre market GDP was in line and there was initial bargain hunting after Fridays sell off. Market worked high for most of the morning and eased slightly into lunch. PM market worked a little higher but sold off to close +2.2%.
S KOREA Kospi opened higher but initially sold down to test the lows in the first hour then rebound back into the green but eased back into the red and now trading sideways and then worked slightly higher for the last two hour to close +0.1%
Kosdaq opened higher tested Friday’s closed and then worked higher through the day to close +1.5%.
TAIWAN opened lower, rallied to test Friday’s close but unable to break above and then trended lower to the day low around 11am and then traded sideways to close -1.2%
Short Selling HSI Monday 19.8% vs 18.7% Friday
Top Shorts Hang Seng Bank (11) 53%, SHKP (16) 39%, MTRC (66) 39%, BoC HK (2388) 37%, HK & China Gas (3) 34%, Galaxy (27) 33%, Want Want (151) 33%, CLP (2) 32%, CCB (939) 30%, AAC Tech (2018) 30%, Bank of China (3988) 29%, Power Assets (6) 27%, Hang Lung PPTY (101) 27%, HSBC (5) 25%.
Northbound Rmb 52,734m Sell 27,452m : 25,282m Buy
Southbound HK$ 14,327m Sell 5,734m : 8,592m Buy
Northbound Rmb 75,658m Sell 36,841m : 38,816m Buy
Southbound HK$ 15,421m Sell 6,784m : 8,637m Buy
CHINA Pre Market
Caixin Manufacturing PMI Jul 52.8 vs 51.2 Jun (F/cast was 51.6)
The third consecutive expansion in factory activity and the sharpest in nearly a decade, as consumer demand continued to improve following the COVID-19 crisis. Both output and new orders grew the most since January 2011, while buying level expanded for the third month in a row and at the steepest pace since January 2013. Meantime, both export orders and employment remained in contraction territory for the seventh successive month. On the price front, input prices rose driven by higher cost of raw material and output charges increased at the fastest pace in nearly two years. Finally, sentiment held in positive territory. "Overall, flare-ups of the epidemic in some regions did not hurt the improving trend of the manufacturing economy," said Wang Zhe, senior economist at Caixin Group.
Centre for Health Protection said there were 80 additional COVID-19 cases in Hong Kong today; with 14 of unknown source.
AIA (1299.HK) -1%
PING AN (2318.HK) -1%
TENCENT (700.HK) +0.9%
HKEX (388.HK) +0.3%
CCB (939.HK) unch
HSI & HSCEI Constituents on the move
HSBC HOLDINGS (5.HK) -4.4% (intraday hit an 11 year low)
CONCH CEMENT (914.HK) +4.3%
SUNAC (1918.HK) -3%
HSMI & HSSI Constituents on the move
CHINAGRANDPHARM (512.HK) +21.9%, hits new highs
SH PHARMA (2607.HK) +18.3%
AVICHINA (2357.HK) +12.4%, hits new highs
CHINA HUARONG (2799.HK) +11.4%
HOPSON DEV HOLD (754.HK) +11.2%, hits new highs
FIRST PACIFIC (142.HK) +11.1%
COSCO SHIP HOLD (1919.HK) +10.6%
BYD ELECTRONIC (285.HK) +8.5%, hits new highs
WISDOM EDU INTL (6068.HK) +5.7%, hits new highs
*E-COMMERCE FIRM after initial weakness as media reported that Microsoft would continue discussions to acquire TikTok from ByteDance, and aims to conclude the negotiations by Sept 15. ALIBABA (9988 HK -0.2%), E-House, and Leju building online real estate platform with a view to listing shortly.
NTES (9999 HK +2.1%) JD (9618 HK +2.7%) said Chinese regulators are considering
launching an antitrust investigation into ANT's Alipay and TENCENT's (700 HK+0.9%) WeChat Pay.
Software names advanced amid earnings optimism, even after Mike Pompeo said US to take further action on Chinese software names beyond TikTok. APPLE removed 29,800 apps from its Chinese app store on Saturday, including more than 26,000 games, according to news. KINGSOFT (3888 HK +6%) NETDRAGON (777 HK +4.7%).
*TECH & COMPONENTS FIRM on earnings optimism after good results from NOKIA profit +22% to 316m euros in Q2 despite quarterly revenues -11% to 5b Euros. AAC TECH (2018 HK +0.5%%) TONGDA (698 HK +3%) SUNNY OPT (2382 HK +1%) BYDE (285 HK +8.5%) HUA HONG (1347 HK +4.2%). SMIC (981 HK +4.8%) and BDAC to enter JV on circuit production. Estimated investment and initial registered capital of the first phase of the project will be $7.6b and $5b, respectively.
*HK BANKS WEAK after disappointing results from HSBC (5 HK -4.4%) 1H adjusted profit before tax was US$5.64b, a YoY decrease of 54% and warned loan losses may reach $13b this year as it battles the economic fallout from the coronavirus pandemic. HANG SENG BK (11 HK -2.8%) said 1H net profit -33% to HK$9,143m.
*HK PROPERTY WEAK as home viewing activities dropped due to social distancing rule and tensions between China/US plus the postponement of local elections weighted on investors' confidence on the city. HANG LUNG (101 HK -2.7%) SINO (83 HK -1.4%) WHARF (4 HK -1.2%) HENDERSON (12 HK -1.4%).
*MACAU WEAK as GGR -94.5% YoY in July, with casinos reeling from a lack of visitors in the world’s biggest casino hub despite a loosening of quarantine restrictions. July’s figure of 1.3b patacas was within expectations. SANDS (1928 HK -1%) GALAXY (27 HK -0.7%) MGM (2282 HK -1%).
*RETAILERS WEAK CH DONGXIANG (3818 HK -1%) said its subsidiary Phoenix Co., Ltd has agreed to sell the Kappa Japan trademarks and the IP miscellaneous assets for a consideration of US$13m. CHOW SANG SANG (116 HK -0.6%) profit warning sees a 65-70% YoY decrease in interim net to HK$200m. HENGDELI(3389 HK -3%) sees 1H net loss of at least 70m yuan.
*DAIRY FIRM on M&A hopes, after ZHONGDI DAIRY (1492.HK +113%) but off the 150% intra day high following news that Yili's wholly-owned HK Golden Port Trading, will buy 433m shares at HK$0.47/shr, a discount of approximately 18.97% from the previous close, and the proceeds are approximately HK$203m. CH MODERN (1117 HK -4.6%) CHINA MENGNIU (2319 HK -0.4%).
*FILM SECTOR FIRM as the industry starts to release new films following the pandemic lockdown; ALI PICTURES (1060 HK +3.7%) IMAX (1970 HK +3.9%).
AVICHINA (2357 HK +13%) hopes of sector growth after the BeiDou Satellite Navigation becomes fully operational.
COSCO SHIP (1919 HK +10.3%) earnings optimism after the strong PMI.
HYGEIA HEALTH (6078 HK +8.7%) maybe included in the Stock Connect list soon.
CH GRAND PHARM (512 HK +22%) rallied on its plan to sell 172m shares at HK$5.9 per share, a discount of 1.962%.
HSBC HOLDINGS (5.HK) as expected it did not declare any interim dividend. The Group Chief Financial Officer Ewen Stevenson said during a conference call that the group hopes to resume dividend pay as soon as the situation permits given its resilient capital level. That said, a flurry of uncertainties are still at sight in next six months, the CFO said. HSBC will continue to maintain stable operation and show the regulatory body its capability to return to shareholders through dividend distribution.
Zhang Yiming: In Preliminary Talks with Tech Firm to Keep TikTok Service Available in US. Over the past year, ByteDance has been actively cooperating with Committee on Foreign Investment in the United States over the investigation about its acquisition of musical.ly at end-2017, as Chinese media cited an internal letter written by ByteDance founder Zhang Yiming. ByteDance had once been in preliminary talks with a tech firm in relation to cooperation solution that will allow TikTok to serve US users on an ongoing basis, said Zhang. While the solution remains yet to be finalized, the external concerns and rumors surrounding the social media app may rage on for a while.
At Lunch HSBC, Hang Seng Bank and CLP announced earnings
HSBC Interim Adjusted PBT Sags 54% YoY to US$5.635B, Missed forecasts
CEO Noel Quinn said, the bank had announced on 18 February a substantial transformation programme to reshape underperforming businesses, simplify its complex organisation and reduce its costs. The bank is moving forward with these plans wherever it can. It has already begun combining its wholesale back office operations, and brought its retail, wealth and private banking businesses together into a single global business – Wealth and Personal Banking. Its US business has reduced its branch footprint, and Global Banking and Markets has made good early progress in reducing its risk-weighted assets. The operational risks posed by the Covid-19 outbreak meant that it had to move more slowly in some areas than others. In March, the redundancy programme was paused. Now, many countries have slowed the spread of the virus and are emerging from lockdown, and it has adapted to new ways of working. The CEO therefore decided in June to lift the pause on redundancies, proceeding thoughtfully but purposefully, while taking local considerations into account.
HANG SENG BANK Interim NP -33% to $9.143B, Second Interim DPS $0.8. Adjusted Earnings -34% to $8.864B, Lower End of Forecast.. NIM was expected to remain pressured in 2H20 in wake of low rate environment, said Louisa Cheang, Vice-Chairman and Chief Executive of the bank. As to earlier report that Cheang is under medical treatment, she replied on the conference call that she is now in good condition.
CLP (2.HK) interim results ended June 2020. The revenue -11.7% yearly to HK$38.701 billion. Profit HK$6.01 billion, vs a loss of HK$907 million recorded last year following the impairment of goodwill in EnergyAustralia. EPS equaled HK$2.38. Interim DPS was HK$0.63, flattish yearly.
HKEX (388.HK) today announced the launch of the latest batch of futures contracts as part of its new index licensing agreement with MSCI to further expand HKEX’s derivatives product suite. The eight MSCI index futures contracts, which are denominated in US dollars (USD) and track underlying equities in markets such as Mainland China, India, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam, were successfully listed on HKEX’s derivatives market this morning. On 17 August, HKEX will launch a further eight USD-denominated futures contracts.
Samsung Electronics is launching budget devices and boosting online sales in India to regain lost ground riding on the anti-China sentiment, reported Reuters. Samsung's Indian smartphone market share reached 26% in the second quarter, up 10 ppts quarterly, according to Counterpoint.
HAIER ELEC (1169.HK) was proposed privatisation by its controlling shareholder Haier Smart Home (600690.SH) by way of a scheme of arrangement. Haier Smart Home is seeking a listing of the Haier Smart Home H Shares by way of introduction on the Main Board of the Stock Exchange. It is a Pre-Condition to the making of the Privatisation Proposal that the Listing Committee of the Stock Exchange approves the listing of, and permission to deal in, the Haier Smart Home H Shares on the Stock Exchange and it is a condition to the Introduction that the Scheme becomes effective.
The US is faced with a new phase of novel coronavirus outbreak with widespread infections in rural as well as urban areas, as White House Task Force Coordinator Deborah Birx told CNN. Residents from multigenerational households in an area experiencing rampant outspread should wear a mask even at home to protect the elderly.
JD-SW (9618.HK) announced the launch of JD Esports with operators like TENCENT (700.HK)'s Tencent Games, Black Shark, Red Magic, ROG and LENOVO GROUP (992.HK), hardware supply chains and live game streaming platforms. The program aims to foster mobile game sector development and deepen the upstream and downstream layouts for gaming gear and e-sports tournaments.
Q2 Global mobile game revenue ballooned to US$19.3 billion +27% YoY and +10.3% QoQ according to Sensor Tower's report. By titles, TENCENT (700.HK)'s PUBG Mobile was the world's top-grossing game in the quarter, garnering US$621 million in revenue, -8% QoQ. It was followed by TENCENT's Honor of Kings.
Matthew Cheung: wrote on his blog that it is a tough decision for the government to make in regards of postponing the election for the next Legislative Council. The postponement of the election is an absolute decision with sufficient grounds for the sake of public safety, protection for people's health and assurance of the openness and fairness of the election. Implying that the Election Delay was Free from Political Concerns.
Samsung announced the shutdown of its last computer factory in China, under which around half the 1,700 contract employees will be affected, excluding R&D staff.
BABA-SW (9988.HK), a major shareholder of Ant Group, told Goldman Sachs and Bank of America that they should drop out from Ant Group's planned IPO in Hong Kong and Shanghai, as the two global banks had done deals for its competitors, Bloomberg citing insiders. Chinese firms tend to be much more cautious than their counterparts in the US or Europe when it comes to non-compete commitments, said the report.
The Australian state of Victoria reported 671 additional COVID-19 cases and 7 more deaths on Sunday, reported BBC. Victoria Premier Daniel Andrews declared a state of disaster and adopted new lockdown measures afterwards.
Neel Kashkari, President of the Minneapolis Fed told CBS that the American economy would only mount a robust recovery when the epidemic is brought under control. The local economy can benefit if the US is to "lock down really hard" for 4-6 weeks, he added. Otherwise, the virus would be spreading across the country with flare-ups and local lockdown for the coming year or two. Washington will then see more and more business bankruptcies and notably slower economic revival.
On Saturday, Apple had removed 29,800 apps from Chinese App Store, covering over 26,000 games, as Reuters quoted the data from China's Qimai. Apple had in February noticed the game developers that it would execute Chinese request to put down any non-approved games by the PRC from August.
Macau DICJ announced that gross revenue from games of fortune amounted to MOP1.344 billion in July, -94.5% YoY but +87.7% MoM
GENSCRIPT BIO (1548.HK) PROFIT WARNING -VE expects to record an interim loss of US$153 million to US$177 million, expanding from a loss of US$33.3 million in the corresponding period in 2019.
EVERSUNSHINE LS (1995.HK) PROFIT WARNING +VE expecting the unaudited consolidated net profit and the profit attributable to owners of the Company for the six months ended 30 June 2020 to increase by more than 80% and 60%, respectively, as compared to that for the corresponding period in 2019.
US Republican senators backed an American firm's purchase of ByteDance's US operations of TikTok, which would resolve the local ban on the popular short-video app. US President Donald Trump will make an announcement on TikTok as late as today (3 August), said White House trade adviser Peter Navarro in a Fox News interview.
TENCENT (700.HK) Video maintained sturdy monthly active user number in 1H20, with February's figure setting a new high since 2018, Vice President Sun Zhonghuai was quoted as saying by Shanghai Securities News. Sun also revealed that TENCENT Video will unfold three supportive measures for premium contents, including opening up access to its abundant operation experience, technical tools and data; upgrading profit sharing mechanism for contents; and attaching importance to video ecology in short and long run.
Chinese Ministry of Commerce (MOC) said a meeting had been convened earlier in Beijing for mid-2020, where works for 1H20 had been drawn conclusions and study had been conducted for 2H20 jobs. The meeting stressed that China should bend over backwards to stabilize foreign capital this year by further expansion of opening up and optimization of business environment.
National Development and Reform Commission (NDRC) specified the economic work deployment for the second half of year. Pursuant to which, China aims to expand her domestic demand in a detailed manner, and facilitate policies for building a robust domestic market.
LEGEND HOLDING (3396.HK) PROFIT WARNING -VE. The Group expected to record a net profit of RMB300 million to RMB1 billion For the six months ended June 30, 2020, down -62%-89% from the net profit of approximately RMB2.665 billion for the same period last year.