6 July HK WRAP HSI +966pts T/O +53% DoD Shorts 19% Don't fight Team China


09 Jul

6 July HK WRAP  HSI +966pts T/O +53% DoD Shorts 19%  Don't fight Team China


HSI +966pts (+3.8%) 26,339  HSCEI +484pts (+4.7%) 10,762 T/O HK$250.79bn (+53% DoD to a 2 year high)  
EUROPE opened higher
with Banks and Autos leading the rally as macro data generally good.

US Futures opened flat in Asian time but now +380pts slightly off earlier highs. S&P and NDX both currently +1.2%


INDEXES      

CSI 300 Closed +251pts (+5.8%) @ 4,670  Bull market on high turnover (a 5 year high). Markets opened higher and worked higher through the day to close just of the day high with all sectors in the green.  Broker, Insurance, Banking, Tourism, Semiconductor, Property Airlines, Coal, Construction and Nonferrous Metal names rose most, while Pharmaceutical and Food & Beverage were relative laggards.   The index is now +14% in five days; the fastest rise since Dec 2014, with turnover higher at level not seen since 2015.  Increase retail participation as some wealth management products have delivered losses.  The front page of the China Securities Journal said ’that fostering a healthy bull market after the pandemic is now more important to the economy than ever’.  Social media searches for ‘open a stock account’ exploded.  Back in 2014/15 before the market  collapsed a useful indicator of market strength was the number of new accounts being opened daily.  Media says the difference this time is that the market is at a lower starting point for valuations and traders are taking on debt to buy shares with leverage at 50% of what is was back then. Hence there is more confidence the market will not go bust this time.  
HSI Pre Market +172 pts (+0.7%) @ 25,546 on T/O of HK$2.15b squeezing recent shorts  Pre Market the Jun PMI was better than forecast the market worked steadily higher through the morning breezing through 26,000 on huge T/O.  PM saw some initial selling as Europe came in but after dropping 170pts the market reversed and continued to rise.  Day high 26,453 (+1,035pts) just after the China markets closed and then drifted lower into the close and ticked 35pts lower in the closing auction.  All this with a record number of daily covid-19 cases over the weekend and we still await Trump’s formal response to China imposing a new security law on Hong Kong.  The high T/O was all the more remarkable since US markets were closed on Friday.  It could be that everyone who got HK$10,000 today from the HK Government in their bank account decided to invest but that would still leave a significant shortfall.  I still think that 'Team China’ is active in the market. Whilst it is nice to see Beijing’s support I don’t think it is based on good fundamentals which increases the market risk for investors.  Interesting that Tencent and Meituan closed lower today. 

AFTER MARKET 
PW MEDTECH (1358.HK) PROFIT WARNING expects a significant decrease in the revenue from the Group’s infusion set business for the six months ended June 30, 2020 in the range of 35% to 45% as compared with RMB172 million for the same period of last year.  -VE
As USD/ HKD triggered the Strong-side Convertibility Undertaking at 7.75 during Hong Kong trading hours, the HKMA undertook a selling order of US$700 million to inject HK$5.425 billion in the market.  The balance of the banking system of Hong Kong will increase to HK$137.042 billion on Wednesday (8 July).
Li Ka-shing and Victor Li acquired a total of 1.1255 million shares of CK ASSET (1113.HK) further by a wholly-owned subsidiary of Li Ka Shing (Global) Foundation at the average price of HK$47.0373 per share on 2 July 2020.  As a result, the deemed interests of Li Ka-shing and Victor Li in CK Asset increased from 35.27% to 35.3%, and from 35.34% to 35.37%, respectively.
GEELY AUTO (175.HK) unaudited total sales volume for the month of June 110,100 units, +21% YoY  and 1% MoM.
FIN STREET PPT (1502.HK) IPO debut closed at $9.46, up $2.1 +28.5% against the listing price of $7.36, on volume of 77.54 million shares and turnover of nearly $724 million. Excluding the handling fees, a book gain of $2,100 was reported per board lot of 1,000 shares.

Market and Pre Market News at bottom of page.


Short Selling HSI
Monday 18.9% vs 19.8% Friday

Top Shorts Ping An (2318) 44%, Hang Lug PPT (101) 41%, Sino Land (83) 37%, Mengniu Dairy (2319) 36%, Wharf REIC (1997) 36%, Galaxy (27) 32%, MTRC (66) 31%, CLP (2) 29%, Hang Seng Bank (11) 29%, China Res Land (1109) 27%, Sunny Optical (2382) 26%, Country Garden (2007) 25%.


COMMENT 

*BANKS, INSURERS and BROKERS STRONG Mainland media talking about 'fostering a healthy bull market’. Local banks helped by the Government handouts bing paid into customer accounts today. ABC (1288 HK +7.4%) CMB (3968 HK +12%) CH LIFE (2628 HK +14%) CH TAIPING (966 HK +17%) CITIC SEC (6030 HK +17.3%) HAITONG (6837 HK +17.4%) CGS (6881 HK +22.6%).

*E-COMMERCE MIXED ZHONGAN ONLINE (6060 HK +17%) led sector higher, company expects 1H net to rise by no less than 100% YoY, also expects to attract a lot of the government hand out money. ALIBABA (9988 HK +2%) JD (9816 HK +3.9%) CH LIT (772 HK +8.3%) NTES (9999 HK +2%).

BUT TENCENT (700 HK -0.86%) possible on Indian restrictions, MEITUAN (3690.HK -0.4%) after co-founder Wang Huiwen disposed of 1 mn shares on June 30 in the open market and cashed in $172 million,

*TECH & COMPONENTS STRONG as SMIC (981 HK +18%) on its plan to raising as much as 53.2b yuan in stock offering in Shanghai, China's largest stock sale in a decade;

HUA HONG (1347 HK +12%) FIT HONG TENG (6088 HK +8%). AAC TECH (2018 HK +10%) SUNNY OPT (2382 HK +6.9%) BYDE (285 HK +9.5%)

TRULY's (732 HK +14%) reported June turnover +7.8% YoY to HK$1,934m. Tunover for the first 6 months +0.9% YoY to HK$10,240m.

*HK PROPERTY FIRM on satisfactory new project weekend sales. CK ASSET (1113 HK +3.1%) sold 189 out of 336 units on offer at Sea to Sky in Lohas Park on Saturday.K Wah Int (173 HK +3.7%) sold 27 out of 206 flats at K Summit in Kai Tak on Saturday.SHKP (16 HK +3.3%) HENDERSON LD (12 HK +3.2%) SINO LAND (83 HK +3.7%).

*CHINA PROPERTY STRONG News that new that land sales in 300 Chinese cities declined 6% YoY during 1H due to pressure from the epidemic in the mainland, according to the China Index Academy. Prompting hopes that supply shortages will squeeze prices higher. But as most developers are working on pre-sales the impact is minimal.

EVERGRANDE (3333 HK +7.5%) VANKE (2202 HK +7.2%) SUNAC (1918 HK +6.4%) COUNTRY GARDEN (2007 HK +7.5%).

SHIMAO (813 HK +6.7%) June contracted sales +6.41% YoY to 30.2b yuan, and 1H contracted sales +10.1% YoY to 110.4b yuan.

MODERN LAND (1107 HK +3.7%) June contracted sales -21.2% YoY to 3.7b yuan. 1H contracted sales -14.7% to 14.2b yuan.

CH JINMAO (817 HK -0.3%) to raise US$700m via 602.3m shs placement, with a price of HK$5.7/shr, representing 6.6% discount from the previous close.

*AUTOS STRONG on buyback hopes as SAIC MOTOR said it will repurchase as many as 116.8m shares at up to 25.97 yuan apiece, according to an exchange filing, to be carried out within 6 months after approved by shareholders.

GEELY (175 HK +14%) GREATWALL (2333 HK +8%) GAC (2238 HK +13.8%) DONGFENG (489 HK +7.4%).

*AIRLINES STRONG on tourism recovery hopes after Beijing residents allowed to buy train and plane tickets out of the Chinese capital after the local govt began easing travel restrictions for the first time since an outbreak that was discovered in mid-June.

CEA (670 HK +5%) CSA (1055 HK +7.2%) AC (753 HK +5.2%).

*CYCLICAL/RESOURCES STRONG Hopes of stimulus spending, being market laggards and attractive valuations. ANGANG (347 HK +11%) CHALCO (2600 HK +14%).

*COAL MINERS STRONG as China slows reduction in coal use due to the virus outbreak, and aims to boost local coal production and cuts imports. YZ COAL (1171 HK +6.8%) CH COAL (1898 HK +7.7%).

*OTHER MOVERS: 

CH MODERN DAIRY (1117 HK +13%) expects 1H net profit to increase substantially by ~ 40%. ENN (2688 HK-5%) and CH GAS (384 HK-1.6%) after NDRC issues plans to lower gas px. ZOOMLION (1157 HK +8.1%) to bring in strategic investors including CH TAIPING.



CONNECT  FLOWS (significant increase in flows)

Shanghai

Northbound Rmb85,139m Sell 40,019m : 45,120m Buy

Southbound HK$ 31,947m Sell 13,100m : 18,847m Buy

Shenzhen

Northbound Rmb87,514m Sell 39,481m : 48,033m Buy

Southbound HK$ 28,219m Sell 12,470m : 15,749m Buy


DATA CHINA No data
HONG KONG Pre Market PMI
Jun 49.6 vs 43.9 May F/cast was 48)

Output fell at the slowest rate since April 2018 and New orders shrank the least in over two years.

Buying activity rose for the first time since March 2018 (pre US/China trade dispute).

BUT New export business declined at a marked pace, led by a substantial decline in orders from mainland China.

Labour market conditions were largely stable, with the level of backlogs depleting at the weakest rate in 16 months.

On the price front, overall costs rose due to a rise in prices for paid purchases more than the fall in staff costs.

Firms reduced selling prices with reports of discounting to stimulate sales. Overall though sentiment hit a five-month high.

Centre for Health Protection said there were 2 new local covid-19 cases today


Active Heavyweights
PING AN (2318.HK) +6.2%
CCB (939.HK) +6.2%
ICBC (1398 HK) +5.5%
HSBC (5 HK) +4.9%
AIA (1299.HK) +3.3% 
HKEX (388.HK) +2.3%
TENCENT (700.HK) -0.9% hits new high

HSI & HSCEI Constituents on the move
Up between 3% and 17.4%

HSMI & HSSI Constituents on the move
Up between 10% and 28%

REGIONAL MARKETS 

JAPAN Opened higher and has traded higher through the session, Nikkei closed +1.8%

S KOREA Kosdaq and Kospi both opened higher in new stimulus package and have trended higher. Closed Kosdaq +1% and Kospi +1.7%

TAIWAN Opened higher and has worked higher Closed +1.7%


NEWS
MARKET HOURS 

HKEX (388.HK) today launched the first futures contracts as part of its new index licensing agreement with MSCI  announced on 27 May 2020. This represents a major step forward in the expansion of HKEX’s derivatives product suite and significantly adds to the breadth and depth of the Hong Kong markets. The 10 MSCI index futures contracts, which are denominated in US dollars (USD) and track underlying equities in markets such as Australia, China, India, Indonesia, Japan, Malaysia, Taiwan and Thailand, were successfully listed on HKEX’s derivatives market earlier today.

HK Express revised the flight operations resumption date to 2 August 2020, in response to the travel restrictions imposed by governments around Asia Pacific due to the on-going COVID-19 situation.  Subject to market developments, the airline plans to gradually resume flight operations from 2 August 2020 onwards, while schedule adjustments will also be made to the network. Customers are advised to visit HK Express’ official website for the latest updates. HK Express will continue to provide flexibility to customers whose travel plans have been affected, or those who are booked on flights departing on or before 31 August. Customers can opt to change their travel date, travel route, refund in the form of credit vouchers or cash.

HSBC said customers may encounter temporary delay or intermittent connection problems upon using or logging in the bank's online or mobile banking due to higher network traffic.  The bank apologized for the inconvenience caused and pledged to resume their services as soon as possible.  Everyone checking to see if they got their money from the government!

China's General Administration of Customs has suspended imports from two Brazilian pork factories without explanation, reported Reuters. Beijing had halted pork imports from four Brazilian plants earlier, likely linked to the former's concerns over the COVID-19 pandemic.

Apple may debut at least three smartphone models by end-September, including the iPhone 12 series purportedly powered by A14 Bionic SoC, reported foreign media.  TSMC will be manufacturing 80 million A14 Bionic chips, meaning Apple could produce up to 80 million units of iPhone 12 this year, according to supply chain sources.

HSBC (5 HK) the US Federal Reserve is running the annual stress tests to review impact on banks from the incessant COVID-19 pandemic. HSBC's US credit card business may reportedly have lost 26.4% of its total loan balance, the highest loss rate among the 33 lenders analyzed. In other words, the loss could reach US$3.9 billion. However, the bank replied that the sum was only US$400 million in value terms.


PRE MARKET
SMIC (981.HK) announced 
that the offer price for listing on the Sci-Tech Board was fixed at RMB27.46 per share, representing over 9.7% discount to the HK share closing price last Friday (3 July). The shares will be publicly offered to individual investors from Tuesday.

SUNAC (1918.HK) 1H 2020 the Group contracted sales value RMB195.27 bn, -8.82% YoY. Contracted sales area 14.034 million sq.m., with contracted average selling price of RMB13,910 per sq.m..

CITIC SEC (6030.HK) made a clarification on certain press speculation regarding the possible merger between the Company and CSC (6066.HK) As confirmed with CITIC Group, up till now, CITIC Group has not discussed any proposal in relation to the reorganization and merger between CITIC SEC and CSC, and CITIC Group has not entered into any agreement with Central Huijin in relation to acquisition of the shares of CSC.

Paul Chan: Foreign Sanctions to Bring Little Uncertainty in Near Term Western society has recently taken advantage of the Hong Kong National Security Law to slap sanctions on the territory, said Financial Secretary Paul Chan in a speech last Saturday (4th). This, coupled with China-US political and economic tensions, will bring a little uncertainty to Hong Kong in the short run. Foreseeing huge near-term pressure on Hong Kong firms, the Government is to unroll relief measures of the largest scale ever and ensure they are implemented as soon as possible, Chan added.

FE CONSORT INTL (35.HK) said the company manifested promising sales in overseas property markets amid pandemic. Taking Queen’s Wharf project as an example, MD Hoong said 80-90% of the project has been sold in recent month. Meanwhile projects situated in London also reaped better-than-expected sales. More buyers were attracted to the company's projects in Manchester, Hoong said, who attributed the phenomenon to "insurance policy" of Hong Kong people by buying properties in the UK.

HUARONG INT FIN (993.HK) announced the Proposal regarding the privatization of HUARONG INV (2277.HK) by way of a scheme of arrangement. Under the Proposal, HRIF will make a conditional share exchange offer to the Scheme Shareholders for the cancellation of all the Scheme Shares by way of every one Scheme Share held for 2.82 HRIF Shares. Subject to the Scheme becoming effective, HRIF will allot and issue a total of 5.121 billion HRIF Shares to the Scheme Shareholders, representing 58.8% of the enlarged issued share capital of HRIF upon completion of the Proposal.

XIAOMI-W (1810.HK) and MediaTek are ready for a stronger partnership to develop custom 5G smartphone processors, reported foreign media. To recall, XIAOMI-W's Redmi 10X 5G phone is equipped with MediaTek's Dimensity 820 processor.

CH MODERN D (1117.HK) Positive profit alert. As a result of a near double-digit growth in both the raw milk production and sales volume as compared to the same period in 2019; continued decline in costs; and the average market price of raw milk remaining stable with a slight increase as compared to the corresponding period in 2019, during the first half of 2020, it is expected that the Group will record a profit of not less than RMB190 million for the six months ended 30 June 2020, representing a year-on-year increase of not less than 40%.

ZA ONLINE (6060.HK) Positive profit alert. The Group expected its net profit for the six months ended June 30, 2020 to increase by no less than 100% as compared to a net profit of RMB94.538 million for the corresponding period in 2019. The improvement in the performance of the Group is mainly due to the decrease in the underwriting loss. As the Company continued to pursue the growth with quality, the combined ratio further improved accompanied by the steady increase in the gross written premiums.

NEWOCEAN ENERGY (342.HK) Profit warning, expecting to record a net loss for the six months ended 30 June 2020, as compared to a net profit of $301 million for the six months ended 30 June 2019.

HAOHAI BIOTEC (6826.HK) said it had from 27 March to 8 May repurchased 638,700 H-shares, involving $24.72 million.

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