July 22 HSI -578 pts Late Selling on news Chinese Consulate in Houston to close


24 Jul

July 22 HSI -578 pts Late Selling on news Chinese Consulate in Houston to close


HSI -578pts (-2.3%) 25,057  HSCEI -202pts (-1.9%) 10,244  T/O HK$155.58bn (-3.8% DoD)  


EUROPE Expect market opened lower on covid-19 concerns asTrump admits its going to get worse before gets better. Also the deterioration in the US/China relations as the US orders China to close its Houston Consulate. No data so market focus will be results, covid and US/China relations.

US Futures Opened flat (-6pts ) but moved higher through the day to +128pts before selling off on news of rising US/China tensions. Currently indicating -100pts with the S&P and NDX moving lower too. Pre market reports from Biogen, Baker Hughes and Nasdaq. Then after the bell Microsoft, Tesla, Chipotle Mexican Grill, CSX and Las Vegas Sands report today.



INDEXES 

CSI 300 Closed +23pts (+0.5%) @ 4,715 Opened lower but was driven higher through the morning to the day high 4,790 shortly before lunch. President Xi said at am entrepreneurs forum that China will make additional proactive, flexible fiscal and monetary policy, and continue to cut tax, fees, rates to strengthen the nation's economy. President Xi's also called for the promoting of innovation and the speeding up of the development of key technologies as the world grapples with rising protectionism coupled with the economic slowdown. Upside capped as investors remain concern about the flood alerts and damage together with the deteriorating international relationship. Fintech firms still outperformed on media reports that PBOC has issued a notice regarding blockchain rules. The selling pressure in the afternoon saw the CSI 300 give up most of those gains. Team China in action I think in the morning to dispell concerns of China being excluded from the US Swift payments system or any other troublesome issues.

Market closed before the news of the Chinese Consulate in Houston being ordered to close.


HSI Pre Market -60pts @ 25,575 vs -11 pts ADRs @ 25,524 With weakness in E commerce names after yesterday’s strong rally. Petrocehms firm as oil rallied. Market saw initial weakness but then rallied through the morning following China, hit resistance at 25,760 despite trying a couple of times. Sold back down to flat at lunchtime. PM saw more selling the market is trending lower. Significant selling in the last 40 minutes and ticked lower by 60pts in the closing auction on the news the US Consulate in Houston was being forced to close by the US administration.


AFTER MARKET
US Department of State confirmed that it notified China to shut down its consulate in Houston in three days
as the US must protect her intellectual property and information in wake of aggravated tensions between the two countries, Reuters reported. China condemned vigorously to the decision of the US, threatening to revenge. It was known that China is considering to close the US consulate in Wuhan City.

BISON FINANCE (888.HK) announced that during the period from 17 June 2020 to 22 July 2020, the Trustee purchased a total number of 5 million Shares on the market for the purpose of the Share Award Scheme, involving $1.5256 million.

Shanghai Municipal Government held a contract signing ceremony today for foreign capital projects for the city, by which HSBC (China) inked a cooperation with Lingang New Zone, Shanghai, cs.com.cn reported. HSBC Bank (China) President and Chief Executive Officer Wang Yunfeng said the bank plans to establish a fintech services company in Shanghai, as the latest move of sequential investment in China, and an onset of digital-empowering wealth planning services, to provide technology and data services to the group's licensed financial institutions.

AAC TECH (2018.HK) announced that its subsidiary AAC Communication (engaging in optical business) introduced four strategic investors, namely Hubei Xiaomi Changjiang Industrial Fund (its controlling shareholder was Xiaomi Industry Investment Management Co., Ltd., ultimately controlled by XIAOMI-W (1810.HK) Chair Jun Lei), OPPO Guangdong Mobile Communication, Shenzhen Huiyou Haochuang Technology Investment and Nanjing Huarui Ruijun Entrepreneurship Investment Center. The parties agreed that the Strategic Investors will make a capital increase of RMB1.15 billion in aggregate to AAC Communication. The Strategic Investors will obtain a total of approximately 9.58% of the enlarged equity interest in the Target Company after the Capital Increase.

3SBIO (1530.HK) announced that the Proposed Spin-off Listing of Sunshine Guojian on the STAR Market and the Offering have been completed; and the dealings in the ordinary shares of Sunshine Guojian on the STAR Market commenced on 22 July 2020.

Empire Group, HK FERRY (50.HK) and HENDERSON LAND (12.HK) , released its first price list for phase one of Seacoast Royale, involving 123 standard units with saleable area of 207-548 sq.ft.. Prices on the list range $3.098-6.982 million. Deducting the maximum discount of 6%, the selling prices range $2.9121-6.5631 million, i.e. $13,578 per sq.ft. on average. The General Manager of Sales (1) Department at Henderson Land, said he remains slightly bullish on 2H20 property market, which may tend to stabilise. When asked about the tender for Tai Po residential site, the company stated that it is interested in all land parcels rich in potentials, subject to the price level.

Centaline Property, said the price list of Seacoast Royale Phase 1 represents 15% discount to the leftover first-hand units from the same districts for coronavirus factors. The project is very competitive as there are only 18 private homes priced below $3 million in Hong Kong now, according to Centaline's findings.

Midland's Residential Division Chief Executive. Said that being discounted by over 10% to the market level, the new project is set to be a new benchmark and spotlight, opined Po.

CATHAY PAC AIR (293.HK) announced in its rights issue circular that a + or - 5% in price of jet fuel would have increased/ decreased the Cathay Pacific Group’s other equity components by approximately HK$620 million. This is on the assumption that all other variables remain constant. The scale of reduced flights due to the COVID-19 pandemic means that the Cathay Pacific Group is in an over-hedged position with respect to expected fuel consumption. The marked to market losses as at 31 December 2020 could be significant. Despite all measures to produce cash savings, the drop in passenger revenue to around only 1% of prior year levels meant that Cathay Pacific was initially losing cash at the operating level at a rate of HK$2.5 to 3 billion per month as it serviced a high level of customer refunds. This has subsequently reduced and is expected to remain at a rate of approximately HK$1.5 billion per month whilst minimal passenger services are in place. While such passenger capacity cuts and cost management measures have helped to reduce expenditure, many costs are unavoidable regardless of the number of flights mounted. Accordingly, such measures will not fully offset the contraction in passenger revenue.


Market and Pre Market News at bottom of page.


Short Selling HSI Wednesday 16.9% vs 18.5% Tuesday 

Top Shorts China Res land (1109) 41%, CCB (939) 31%, Want Want (151) 31%, Ping An (2318) 29%, BoC HK (2388) 29%, China Shenhua (1088) 28%, Country Garden (2007) 26%, Wharf REIC (1997) 25%.


CONNECT FLOWS 

Shanghai

Northbound Rmb 62,409m Sell 32,134m : 30,276m Buy

Southbound HK$ 14,672m Sell 7,007m : 7,665m Buy

Shenzhen

Northbound Rmb 78,806m Sell 36,389m : 42,417m Buy

Southbound HK$ 15,648m Sell 6,461m : 9,186m Buy


DATA
CHINA No data

HONG KONG Centre for Health Protection said there were 113 additional COVID-19 cases in Hong Kong today; 105 were locally transmitted.


Active Heavyweights
HKEX (388.HK) -4.9% 
TENCENT (700.HK) -4.4% 
AIA (1299.HK) -1.8% 
PING AN (2318.HK) -1.6%
CCB (939 HK) -1%

HSI & HSCEI Constituents on the move
AAC TECH (2018.HK) -7%
BYD COMPANY (1211.HK) -5.6%
SUNAC (1918.HK) -5.4%
GEELY AUTO (175.HK) -5.1%
CHINA LIFE (2628.HK) -4.7%
SINOPEC CORP (386.HK) +4.5%
PETROCHINA (857.HK) +4.1%
CHINA RES LAND (1109.HK) -4%
SHIMAO GROUP (813.HK) -3.7%
CPIC (2601.HK) -3.6%
SUNNY OPTICAL (2382.HK) -3.5%
SHENZHOU INTL (2313.HK) -3.4%
SINO BIOPHARM (1177.HK) -3.2%
WH GROUP (288.HK) -3.1%
CHINA OVERSEAS (688.HK) -3%

HSMI & HSSI Constituents on the move

CG SERVICES (6098.HK) +1.3%, hits new high


COMMENT

*PETROCHEM STRONG on the news SINOPEC KANTONS (934 HK +4.2%) plans to sell its entire equity interest in Sinopec Yu Ji Pipeline for 3.2b yuan. Also helped byil surged to its highest level since early March in London on signals of economic recovery, while analysts expect U.S. inventories to tighten. SINOPEC (386 HK +4.5%) CNOOC (883 HK +2.4%) KULUN ENERGY (135 HK +10%) PETROCHINA (857 HK +4.5%).

*TECH & E-COMMERCE WEAK after yesterday's rally on Hang Seng Tech Board optimism. AAC (2018 HK -5.4%) HUA HONG (1347 HK -2.9%) QTECH (1478 HK -2.2%).

FIH (2038 HK unchg) reported prelim 1H loss $105m vs $83.8m loss a year earlier. It expects revenues for 1H of 2020 at USD 3.66 billion, vs 6.39b year ago.

O NET (877 HK unch) expect net profit to decline 40% to 50% in 1H, due to order-shipment delays and labour shortages.

E-COMMERCE investors de-risk from uncertainties; BABA (9988 HK -3.4%) JD.COM (9618 HK -4.6%) MEITUAN (3690 HK -6.2%) NTES (9999 HK -2.8%).

*HK PROPERTY WEAK as Covid cases surged TO over 2000 in HK, without ANY signs of slowing or the authorities identifying the sources.

HENDERSON LAND (12 HK -1.8%) has uploaded a sales brochure for 611 units at Seacoast Royale in Tuen Mun, jointly developed by HK FERRY and Imperium Group.

SHKP (16 HK -1.3%) confirmed its sales launch for 108 flats at Regency Bay in Tuen Mun this Saturday.

CKA (1113 HK -2.3%) SINO LAND (83 HK -2.4%).

*CHINA PROPERTY WEAK on profit-taking.

A-LIVING (3319 HK -0.8%) expects 1H net profit to rise at least 35% YoY.

SUNAC (1918 HK -5%) after it rallied on its plan to spin-off its property mgmt business for separate listing.

EVERGRANDE (3333 HK -3.2%) SHIMAO PROP (813 HK -3.5%) CIFI (884 HK -3.8%).

*PHARMA MIXED after mixed vaccine news and speculation of increased health care demand.

CANSINO (6185 HK +10%) shows promise in mid-stage vaccine studies.

CSPC (1093 HK -0.9%) announce that the “Memantine Hydrochloride Tablets (5mg, 10mg)”, a nervous system drug for the treatment of dementia, has obtained drug registration approval in China.

SINO BIOPHARM (1099 HK -2.2%) ASCENTAGE (6855 HK -4.5%) 3SBIO (1530 HK -7%) GENSCRIPT (1548 HK +9%) SHANDONG WEIGAO (1066 HK +6.2%) UNITED LAB (3933 HK +7.3%).

*LUXURY BRANDS WEAK . L'OCCITANE INTL (973 HK -4%) said net sales for 2Q fell 22.2% YoY to €274.2m, due to lockdowns and store closures. Sales in Hong Kong -60.9% YoY to €9.32m in the quarter, while sales in China +22.9% to €43.91m. PRADA (1913 HK -3.9%) SAMSONITE (1910 HK -1.6%).

*GOLD MINERS FIRM as Gold breaks and holds above US$1,800 level. Increasingly people are worrying about inflation ahead. ZHAOJIN (1818 HK +1.1%) ZIJIN (2899 HK +1.5%) CHINAGOLD (2099 HK +7.2%).


REGIONAL MARKETS 

JAPAN Market opened lower as expected PMI data was slightly better than forecast. Covid concerns remain. Market then traded sideways/lower through the day Nikkei closed -0.6%

S KOREA Markets opened around flat. Kospi trade sideways around yesterday’s closing level and closed -0.01%. The Kosdaq initially dipped but rebounded and then traded sideways lower above yesterdays closing level. Saw a small bounce at the end to close +0.6%

TAIWAN Opened higher and traded sideways just above yesterday’s closing level to finish +0.6%


NEWS
MARKET HOURS
Chinese Foreign Ministry Spokesperson reprimanded the US of politically provoking China by telling China on 21 July to shut down her Houston Embassy.
Beijing vigorously accused Washington of the wrongful decision, said the spokesperson, and Washington should revoke this decision immediately, or Beijing will make rightful and necessary responses.

PING AN (2318.HK) backed Lufax (Shanghai Lujiazui International Financial Asset Exchange) may float on the US stock market as soon as this year, Reuters cited several sources. The company has so far engaged Bank of America, Goldman Sachs, HSBC, JP Morgan and so on to deal with the listing work. The IPO fund-raising amount and share offer scale remain undecided.

SUNNY OPTICAL (2382.HK) and South Korea's Semco will in 2H20 and 2021 become a part of Apple's supply chain, Ming-Chi Kuo, a prominent Apple analyst at TF International Securities, wrote in a report.

TENCENT (700.HK)'s subsidiary Tencent Dadi Tongtu entered into a cooperation agreement with MapKing, a tech firm in Hong Kong. Under which, both parties will develop internet of vehicles (IoV) and unmanned driving technology together. MapKing will render immediate traffic condition services for the IoV system integrated by TENCENT. MapKing CEO Stanley Ng Wing Fai said an advanced GPS and transport mapping information system will help develop a driverless vehicle model that fits safety standards.

MEITUAN-W (3690.HK) chief scientist Xia Huaxia told Bloomberg that the company is now handling with millions of food orders a day, and expecting the orders to increase 3-4 times in coming five years. Xia said the company wished to cope with the spiking orders by means of AI and robots. At present, an automatic delivery technology is under trial in Beijing. In 3-5 years, the technology is expected to be mature for launch, the chief scientist said.

Singapore Exchange (SGX) and NASDAQ inked a framework document to expand cooperation, facilitating smoother second listing of companies on SGX, Bloomberg reported. Under the new framework, the filings required for second listing on SGX could be based on those contained in the US listing and subsequent filing documents to the US SEC and/ or Nasdaq, contingent on compliance with Singapore's disclosure regulation. The strengthened alliance between the two exchanges amid US-China tensions will intensify competition between Hong Kong and Singapore. Analysis said the tie-up will woo techs' flotation on SGX.

Overnight HIBOR last posted at 0.05012%, logging a 1-month low, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.25679%, down for 9 days, marking a 1-month low.

CATHAY PAC AIR (293.HK) has entered into an agreement with Airbus to hold off the delivery of A350s and A321neos and is in advanced talks with Boeing over putting off its 777-9 shipment.

Volvo Cars announced that its planned merger with Geely has been shelved briefly as GEELY AUTO (175.HK) proposes to list on Shanghai's Sci-tech Innovation Board. The merger talks were expected to resume this fall.

VIVA CHINA (8032.HK) and BOSSINI INT'L (592.HK) jointly announced that all the conditions precedent under the Share Purchase Agreement have been fulfilled. Pursuant to the Share Purchase Agreement, the Offeror acquired a total of 1.093 billion Bossini Shares, representing approximately 66.60% of the entire issued share capital of Bossini, at the Consideration of HK$46.62 million.


PreMarket
China is going to sell rice and wheat from her state reserves to animal feed producers,
Reuters citing insiders. Beijing is doing so in response to high corn prices, said the insiders.

Philips was in talks with Haier, Midea and other Chinese rivals to gauge their interest in buying its home appliance business, Bloomberg citing insiders. The Amsterdam-based appliance giant is also reaching out to Turkey's Arcelik AS and Vestel, as well as Blackstone, CVC Capital and KKR.

CATHAY PAC AIR (293.HK) announced that the Rights Issue Documents will be despatched to the Qualifying Shareholders and Overseas Shareholders who satisfy relevant requirements to its satisfaction on 22 July 2020. However, the Hong Kong government had announced the latest special working arrangements for government employees to combat COVID-19 on 19 July 2020. The Hongkong Post decided that mail delivery services are only being provided twice a week. As a result, mail delivery services may be subject to delay, which could lead to a delay in the receipt by Qualifying Shareholders and Overseas Shareholders of the Rights Issue Documents.

ESPRIT (330 HK) Karen Lo Ki-yan, a substantial shareholder further increased her stake in the latter by adding 12.83 million shares in ESPRIT HOLDINGS on open market on 20 July for $14.2 million. Upon completion, Lo's stake increased to 20.19% from 19.51%. The company also announced yesterday that it received a letter from Lo to withdraw the Requisition to remove the CEO and CFO. Marc Andreas Tschirner, Chiu Su Yi Christin and Wong Hung Wai were appointed as Executive Directors of the Company.

PROSPERITY REIT (808.HK) due to the pandemic outbreak of COVID-19 and its impact on the global and local economy, the appraised value of its investment properties as at 30 June 2020 is expected to be approximately HK$560 million lower than their appraised value of HK$11.13 billion as at 31 December 2019. As a result, the REIT Manager expects PROSPERITY REIT to record a net loss for the six months ended 30 June 2020, as compared to a profit for the corresponding period in 2019.

ZHENGTONG AUTO (1728.HK) has noted certain financial media reports of a default in the repayment of an outstanding instalment of a term loan facility in the principal amount of US$380 million owing by the Company as borrower. The company clarified that the Company has duly repaid 30% of the principal amount of the Loan and interest accrued thereon by two instalments and that due to the outbreak of COVID-19, the Company proposed in advance to the lenders of the Loan to revise the due date for payment of the third instalment in the sum of 25% of the principal amount of the Loan to 19 January 2021. The discussion is in constructive progress, and the parties target to revise the July Instalment repayment date within the next few weeks

President Xi Jinping said China should put forward a more active and productive financial policy and a more solid and flexible monetary policy, Xinhua News Agency cited Xi's speech at a CEO seminar in Beijing yesterday afternoon. The country should also continue to cut taxes and fees, rents and interest rates, to ensure government alleviation showering grass-root households directly, benefiting the market-oriented finance, and supporting export commodities.

China Re entered into a strategic cooperation agreement with CCB (939.HK) (601939.SH) in Beijing. Both parties will commence business innovation and alliance in fintech application, asset management and fund custody, insurance and reinsurance risk protection, and "One Belt, One Road" services and so on, harnessing their respective resources and channel edges, based on mutual benefits.

SINOPEC KANTONS (934.HK) connected transaction for the disposal of its natural gas pipeline business assets to its controlling shareholder, Yu Ji Pipeline Company, for a cash consideration of RMB179 million (HK$195 million). It is estimated that the Group will record a profit before taxation from the Disposal of RMB33.78 million (HK$36.82 million). It also announced that it sold 100% equity interest in Sinopec Yu Ji Pipeline Company Limited to an independent third party, China Oil & Gas Pipeline Network Corporation, for a cash consideration of RMB3.22 billion. It is estimated that the Group will record a profit before taxation from the Disposal of approximately RMB966 million (HK$1.053 billion).

LUK FOOK HOLD (590.HK) sales performance of retail business for Q1 impacted by COVID-19 pandemic, the Group’s overall SSSG was -71%. The SSSG of gold products 067% and fixed price jewellery products -77%.  It is expected to take time for the Mainland tourists arrival to Hong Kong and for retail atmosphere to recover. The Group will net reduce 5 shops in Hong Kong in the coming year, and seek opportunities for opening 2 more shops in Macau during FY2021.   The target for net addition of “Lukfook” shops in Mainland will be not less than 150 shops, while the target for new brands’ stores in Mainland is 50 shops, most of which will be licensed shops.

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