3 July HK WRAP HSI +249pts, Remains High, Shorts rise to 20%


09 Jul

HSI +249pts (+1%) 25,373  HSCEI +186pts (+1.9%) 10,243 T/O HK$164bn (-6.8%)  

EUROPE opened higher but tended lower despite improving PMI data; investors seemed to focus on the rise in US covid-19 cases and the implications for global growth.

US Markets closed re-open Monday


INDEXES      

CSI 300 Closed +84pts (+2%) @ 4,419.  Markets opened higher despite the increasing tensions with US, UK, Australia and India and initial trended higher for the first 10 mins but then sold down to the opening level ahead of the Caixin data. It came out better and market rallied to a morning high of 4,385 which it tested a couple of times before trended lower into lunch. Choppy trading was the hallmark of the morning session. PM saw a brief period of selling before the market rallied to regain the morning high and then continued to rally to close at the day high. Market saw some rotation with Tech, CHiNext and Liquor names seeing weakness.  With gains for Brokers, Property Developers and Cyclicals.
Sentiment helped by the good macro data but covid and International relationship concerns still overhang the market for retail investors whilst government funds look to support the government.

HSI Pre Market +195pts (+0.8%) @ 25,319 vs  -17pts ADR’s @ 25,107, Led by HKEX,  MOBILE, AIA, HSBC and Chinese Financials. CITIC SEC strong despite saying no knowledge of any merger plans.  Then after the initial short squeeze the market sold down to 25,200 level still significantly above whether the ADR’s indicates then trended higher into lunch.  After lunch there was some initial selling, HSI dropped 90pts but then rallied and worked higher to the day high 25,453 just after China closed. Having tested the 25,450 level a number of time without breaking above the market then sold down to the 25,300 level before a last run up into the close and a 20pt uptick in the closing auction.

With turnover elevated from normal levels; especially considering that the US markets are closed and many US night traders are off, I think it shows Team China is at work.  The recent norm for Friday’s has been for the market to sell down into the close as investors are cautious ahead of the weekend end which looked likely but then the rally to the day high.  I still think a lot of local and international investors are concerned about the potential sanctions on Hong Kong from the imposition of the new security law.  Until we see the formal response from the US that is likely to overhang the market.


AFTER MARKET 
The Lands Department announced that a total of nine tenders had been received for the industrial site at the junction of Tsung Tau Ha Road and Kwei Tei Street, Fo Tan. Bidders included Chinachem Group; CK ASSET (1113.HK)   and CHINESE EST H on a sole basis; and a consortium formed by Billion Development, SINO LAND (83.HK), CSI PROPERTIES (497.HK) and ASIA STANDARD (129.HK) 
FIN STREET PPT (1502.HK), to be listed next Monday, opened at $8.6 in
gray market, +16.84% against the listing price of $7.36, and last stood at $9.2, up 25% against the listing price, on volume of 8.84 million shares, PhillipMart data showed.
TENCENT (700.HK)'s PUBG Mobile doubled its total revenue to over US$3 billion in only  seven months, announced by Sensor Tower. The sum comes from combined spending for both the Chinese and overseas versions of the title.
Centa-City Leading Index (CCL) last printed at 178.48, -1.46% WoW
CCL softened sharply after two weeks of rally, reflecting concerns over an escalation in social unrest.  The four major CCL indices rose for two weeks and fell for two weeks altogether, where home prices struggled to climb under greater near-term volatility. Wong anticipated a CCL upturn to 190 by autumn.

Market and Pre Market News at bottom of page.

Short Selling HSI Friday 19.8% vs 18.9% Thursday

Top Shorts Ping An (2318) 48%, Hang Lug PPT (101) 41%, MTRC (66) 41%, Hang Seng Bank (11) 40%, Sino Land (83) 40%, Henderson Land (12) 38%, Galaxy (27) 36%, Wharf REIC (1997) 31%, Country Garden (2007) 30%, BoC HK (2388) 29%, Mengniu Dairy (2319) 29%, CLP (2) 28%, Want Want (151) 25%.


COMMENT

*BROKERAGES STRONG despite CITIC SEC (6030 HK +8.4%) denying a market rumour that its parent Citic Group, will act as the main buyer of a stake in CSC FINANCIAL (6066 HK +17%) from Central Hujin Investment. This sparked a wave of consolidation rumours among the country's more than 130 brokers as Sino-US tensions escalates and Chinese companies have a hard time in the US capital market. HAITONG (6837 HK +6.3%) CGS (6881 HK +8.5%) HTSC (6886 HK +6.4%).

*HK PROPERTY WEAK as sentiment on the housing market remain cautious following the new security law legislation.

Li Ka Shing Foundation continues to buy; bought a total 2.6m shares in CK ASSET (1113 HK +1.3%) on June 24, 26, 29, 30. Average price of purchases were between HK$46.18 - 47.55/shr.

SHKP (16 HK -0.3%) NWD (17 HK -1.9%) KERRY (683 HK -0.25%).

LANDLORDS WEAK on news GAP had terminated the lease for its HK flagship store; follows Victoria Secrets earlier in the week: SWIRE PROP (1972 HK -1.9%) WHARF (4 HK -1.8%) HANG LUNG (101 HK -1%).

*CHINA PROPERTY MIXED with some rotation PROP MGMT names weak some profit-taking after the recent rally; A-LIVING (3319 HK -5.2%) POLY PROP (6049 HK -5.5%) CH OVS PROP (2669 HK -5.8%).

While DEVELOPERS rallied especially recent laggards, following satisfactory sales data.

GZ R&F (2777 HK +1.5%) announced that its contracted sales +37% MoM to 14.51b yuan in June. Although Fitch downgraded its issuers rating

CH VANKE (2202 HK +2%) June contracted sales +10.5% YoY to 73.37b yuan. KWG (1813 +4.4%) total pre-sale +6.7% YoY in June to 8.061b yuan.

CH AOYUAN (3883 HK +4.4%) said its contracted sales in June +72% MoM to 17.59b yuan, a 15% increase YoY.

EVERGRAMDE (3333 HK +7.5%) SUNAC (1918 HK +3.5%).

*AUTOS FIRM on news China vehicle sales rose 11% YoY or 4% MoM in June to 2.28m units CAAM said, GEELY (175 HK +12%) BRILLIANCE (1114 HK +13%) BYD (1211HK +13%).

DEALERSHIP FIRM on sales recovery optimism, Tesla has cut the starting price of its Model S and Model X in China: Model S in China from 764,900 yuan to 756,900 yuan. Model X in China from 780,900 yuan to 772,900 yuan. ZHONGSHENG(881 HK +5.3%) ZHENGTONG (1728 HK +16%).

*PHARMA FIRM to consolidate amid continuous speculations.

SINO BIOPHARM’s (1177 HK unch) Clopidogrel gets approval for drug registration. VIVA BIO (1873 HK -4%) is selling 130m shares, or 7.9% of its capital, in an accelerated placement at HK$8.15 to HK$8.4 apiece, at a discount of 7.1%-9.9% to yesterday's close of HK$9.04/shr.

CANSINO (6185 HK +4%) 3SBIO (1530 HK +6.1%) INNOVENT (1801 HK +3.9%).

*MATERIALS/RESOURCES FIRM led higher by COAL MINERS, as coal prices recover from the virus hit, expect to see support in the 2H with demand rising and out-pacing supply. CHINA COAL (1898 HK +4.8%) YZ COAL (1171 HK +4.3%) CH SHENHUA (1088 HK +4%) CHALCO (2600 HK +3.3%) MAANSHAN (323 HK +1.4%).


CONNECT  FLOWS 

Shanghai

Northbound Rmb60,697m Sell 26,328m : 34,369m Buy

Southbound HK$ 20,256m Sell 9,055m : 11,201m Buy

Shenzhen

Northbound Rmb75,415m Sell 35,131m : 40,284m Buy

Southbound HK$ 18,525m Sell 8,626m : 9,898m Buy


DATA 

CHINA 

Caixin Services PMI Jun 58.4 vs 55.0 May (F/cast was 53.6)

Composite PMI Jun 55.7 vs 54.5 May (F/cast was 52.9)


Composite was the strongest growth in private sector activity since November 2010 amid the relaxation of COVID-19 measures.

Services activity grew the most in over a decade, while the manufacturing sector expanded at the fastest pace since December last year.

New orders rose faster, with the rate of increase the steepest since January 2011. Meantime, new orders continued to grow as overseas demand mainly recovered for the service sector.

Employment, at the same time, remained on a downward trend, On the price front, input costs rose slightly, while prices charged increased at a fractional pace. Looking ahead, sentiment businesses were optimistic about the economic outlook.

But worth noting the survey was before the spike in new cases in the US and the recent outbreak in Beijing.


HONG KONG

No data 

Centre for Health Protection said there were no new local covid-19 cases today

The Land Registry said that the number of sale and purchase agreements for all building units received for registration in June was 8,254 (+19.9% MoM and +32.9% YoY). During the month, the total consideration for sale and purchase agreements was $70.3 billion (+16.7% MoM and +30.6% YoY).


Active Heavyweights
PING AN (2318.HK) +1.4%
HKEX (388.HK) -1.3%
TENCENT (700.HK) +1.2% hits new high
CCB (939.HK) +0.8%
AIA (1299.HK) +0.3% 

HSI & HSCEI Constituents on the move
BYD COMPANY (1211.HK) +13.5%, hits new high
GEELY AUTO (175.HK) +12.6%
CITIC SEC (6030.HK) +8.1%
CHINA TOWER (788.HK) +6.8%
AAC TECH (2018.HK) +6.6%
SUNNY OPTICAL (2382.HK) +6.2%
CHINA GAS HOLD (384.HK) +5.3%
CM BANK (3968.HK) +4.3%
CHINA SHENHUA (1088.HK) +4.1%
COUNTRY GARDEN (2007.HK) +3.8%
SANDS CHINA LTD (1928.HK) +3.4%
SUNAC (1918.HK) +3.2%

HSMI & HSSI Constituents on the move
CSC (6066.HK) +18%, hits new high
ZA ONLINE (6060.HK) +16%, hits new high
ZHENGTONGAUTO (1728.HK) +15.8%
BRILLIANCE CHI (1114.HK) +12.8%
SWHY (6806.HK) +12.7%
POWERLONG (1238.HK) +12.2%
ZTE (763.HK) +10.9%
HUABAO INTL (336.HK) +10%, hits new high


REGIONAL MARKETS 

JAPAN Market opened higher, helped by good Services and Composite PMI data but drifted lower to almost flat with the normal caution ahead of the weekend but rallied at the end to close +0.7%

S KOREA Markets opened higher, saw some initial selling before the Kosdaq worked higher to close +1.3% whilst the Kospi traded sideways to close +0.8%

TAIWAN Opened higher saw a slight dip but worked back and then sideways, The positive outlook for Tech remains a key driver Market closed +0.9%

NEWS
MARKET HOURS

Mark Six Lottery Draw to Resume 21 Jul, Open for Betting from 16 Jul Noon Noting improvements in the COVID-19 situation, the Hong Kong Jockey Club rannounced re-opening of its Off-Course Betting Branches  on non-race days to provide betting services for races and customer services.  Upon reviewing the operations of OCBBs after the re-opening, and in response to customer expectations, the Club decided to resume the Mark Six lottery draws from 21 July. Besides, football betting services will be resumed at all OCBBs and Telebet from 16 July.  Just in time for people to spend their government handout money!

HSBC HOLDINGS (5.HK) announced today the expanded investments in its wealth management and insurance operations in mainland China, despite blasts from British lawmakers and its shareholders for its support for Hong Kong National Security Law.
The Government announced that there has been over 5.5 million registrations for the $10,000 Cash Payout Scheme as of 5pm on 2 July. Given higher-than-expected registration rates via online banking channels.  Roughly 4.3 million eligible citizens, who had submitted their e-applications during 21-30 June, will hence receive their payout in two or three days starting from 6 July.
MEITUAN-W Refreshes Organization Structure; Confirms No Change in Co-founder Wang Huiwen's Retirement. Wang will resign from his management position in December 2020, according to CEO Wang Xing's email notice.
BABA-SW (09988.HK) announced that its cloud computing platform, Alibaba Cloud, will open the second data center in Indonesia to double its local service capability. The two Indonesian data centers will offer higher availability and stronger disaster recovery, allowing clients to arrange critical tasks across different regions, the Chinese tech behemoth expected.  It also announced Alibaba Cloud struck a partnership with BMW China regarding the establishment of a joint innovation base at the Shanghai Jinqiao Economic and Technological Development Zone,
TENCENT (700.HK) rose 1.35% to $525, taking its market capitalization aloft $5 trillion.  The Chinese tech giant also announced the establishment of a new studio, LightSpeed LA, in California  in attempt to expand its overseas presence and focus on developing and publishing AAA titles, Reuters reported.
Nokia has filed a patent-infringement suit against LENOVO GROUP (992.HK) at the US International Trade Commission, seeking a ban on the latter's laptop, tablet and desktop imports to the country, foreign media reported.
Beyond Meat Taps Into CN Mkt, to Hit BABA-SW (9988.HK)'s Freshippo Stores from Tomorrow its signature animal-free burger products will be available in Shanghai across 50 Freshippo stores under BABA-SW (09988.HK) 
JD-SW (9618.HK) announced that its JD Health and Siemens Healthineers entered into a cooperation agreement. Leveraging JD-SW's medical e-commerce, "Internet+Healthcare" mode, financial and logistics abilities and Siemens' product and service resources, both parties aim to create a comprehensive non-public healthcare ecosystem.
The tender for an industrial site at the junction of Tsung Tau Ha Road and Kwei Tei Street, Sha Tin was closed in the afternoon. At least seven tenders have been received, involving Chinachem; CK ASSET (1113.HK) and CHINESE EST H (127.HK) on a sole basis; and a consortium formed by Billion Development, SINO LAND (83.HK), CSI PROPERTIES (497.HK) and ASIA STANDARD (00129.HK)
By 11am HK saw Over RMB10B Net Inflow from Northbound Trading
China had on 2 July confirmed five additional cases of novel coronavirus infection, among which two were local transmission in Beijing, National Health Commission of the PRC reported.
China Buys More US Corn, Soy; Last Week's US Pork Purchase Logs 2-mth High On 2 July, China purchased 202,000 tonnes of corn and 126,000 tonnes of soybeans from the U.S. for delivery during Year 20/21 beginning September, Reuters citing the U.S. Agriculture Department. In the week ended June 25, China acquired 21,639 tonnes of American pork, the largest weekly total since late April, furthered the report.
FWD announced it has completed the acquisition of MetLife Limited and Metropolitan Life Insurance Company of Hong Kong Limited from MetLife, Inc.. 

Huynh Thanh Phong, FWD Group Chief Executive Officer, said this acquisition is a firm testament to its confidence in the long-term growth and potential of the Hong Kong insurance market and enhances its reach and platform in the flagship market.

SFC in its review report on HKEX (388.HK)'s performance in its regulation of listing matters, the SFC stated that the “Chinese Wall” between the sales division and listing department of the exchange is insufficient and that HKEX Chief Executive Charles Li had once invited Head of Listing to be present at the briefing of potential IPO applicants, which may undermine the perceived independence of the Listing Department. The exchange has promised that its departments will no longer send such invitations.
Luckin Coffee, whose Nasdaq delisting is underway, announced internal investigation results that its net income had been exaggerated by roughly RMB2.12 billion since April 2019, aside inflated costs and expenses of RMB1.34 billion. Its former Chief Executive Jenny Qian and COO Liu Jian had been involved in the figure forging, in accordance with the results.
ATV HOLDINGS (707.HK) announced that on 10 June 2020, the Company received a notice from Deng Junjie, the Co-Chairman, a non-executive Director and a substantial shareholder, in respect of the transfer of Convertible Bonds with an aggregate principal amount of HK$200 million to Build Rise, a company wholly-owned by Ma Fai. The Convertible Bonds had been converted yesterday (2 July), pursuant to which a total number of 2 billion Conversion Shares had been allotted and issued to China Special Economic Zone Development Limited (CSEZD), a nominee of Build Rise. This represented approximately 21.22% of the issued share capital of the Company as enlarged. Shing Hiu Yu, the mother of Ma Fai, holds 40% of CSEZD's shares.
CN Goods Detained in India, Disrupts Foxconn Supply Chain: Report An additional Indian scrutiny of Chinese imports has disrupted the local plant production of Foxconn, a supplier to Apple, Reuters citing insiders. Over 150 batches of Foxconn goods (including smartphones and electronic parts) are stuck at India's Chennai Port, though some are being cleared very slowly, a source said.

PRE MARKET
Sony is working with a broker on the potential offer for LEYOU TECH
H (1089.HK) Bloomberg citing insiders. The Japanese tech giant expects to win the bidding war for LEYOU TECH H, whose controlling shareholder Charles Yuk Kwok-cheung hopes to pick a buyer and ink a deal as soon as this month.

Britain will make a prudent decision on Huawei's role in local 5G projects as it does not want any key infrastructure to be controlled by “potentially hostile state vendors”, said Prime Minister Boris Johnson.

CSC (6066.HK)(601066.SH) announced that the Company noticed that it is reported in the news that the Party Committee of the Company has approved a plan in relation to the acquisition by CITIC Group Corporation Ltd. of the shares of the Company held by Central Huijin Investment, the second largest shareholder of the Company, in order to facilitate the merger of CITIC SEC (6030.HK) (600030.SH) and the Company. As of now, the Company has not convened any meeting of the Party Committee to consider and approve the relevant plan as alleged above, nor has it received written or verbal information from any shareholders on the aforesaid rumor, and the Company does not have any undisclosed information that should be disclosed.

US House of Representatives, following the Senate has also unanimously cleared the Hong Kong Autonomy Act, which will be passed to President Donald Trump for approval or denial.

XIAOMI-W (1810.HK) announced the grant of 3 million share options The options are valid for 10 years and carry an exercise price of $13.60 per Share.

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