July 29 HK WRAP HSI +110pts T/O -7% Rising covid cases an overhang


31 Jul

July 29 HK WRAP  HSI +110pts T/O -7%   Rising covid cases an overhang

HSI +110pts (+0.5%) 24,883  HSCEI +33pts (+0.3%) 10,184  T/O HK$104.44bn (-7.1% DoD)  

EUROPE Markets opened mixed DAX weak CAC and FTSE +VE Concerns over the next US stimulus and rising covid cases along with earnings and the FOMC announcement to come.
US Futures opened flat and have remained flat as I expected on Earnings, Covid, FOMC and Tech CEO’s in front of Congress.

INDEXES
CSI 300 Closed +110pts (+2.4%) @ 4,679
Market opened lower but rallied hard for the first hour before some consolidation and then a attempt to break higher before lunch which stalled at 4,660 and then eased back into lunch. PM saw the market continue to work higher to close at the day high. Following to weak performance of the New Third Board Select on Monday and Tuesday Team China keen to reinforce a positive market signal, ChiNext and Star Board were strong. Healthcare stocks strong as new covid cases rise in China and other countries. US China tension still fraught as Foreign Minister Wang Yi called out Mike Pompeo for trying to start a new Cold War. See FT Editorial on the subject, a good read.

HSI Pre Market -62pts @ 24,710 vs -174pts ADRs @ 24, 595 With weakness in E Commerce and Tech after the US weakness overnight. HSBC was up +0.6% after yesterday’s weakness. Market then rallied, first tot 24,840 and then to test 24,900, which it tried a couple of times before trending lower into lunch. PM saw an initial sell down of 75pts before working back up to test 24,900 a couple of times in the PM but failed to break above, a final attempt into the close stalled at 24,890 and ticked lower in the closing auction.
Covid in focus as Hong Kong goes into tighter social distancing. Turnover continues to drop as investors turn more cautious over earnings and US/China tensions.


AFTER MARKET
Vanke Property (HK), CNQC Win Residential Land at Ma Wo Rd
at $3.7B, In Line
The Lands Department announced that the tender for a site, Tai Po Town Lot No. 243 at Ma Wo Road, Tai Po, New Territories, was awarded to the highest tenderer, Wealth Honour Limited (parent companies: Vanke Property (Hong Kong) Company Limited and CNQC International Holdings Limited), on a 50-year land grant at a premium of $3.705 billion. The market valuation ranged $2.7-4.57 billion.
HENLIUS-B (2696.HK) announced that the first patient was dosed in a Phase 2 clinical trial of Recombinant Humanised Anti-PD-1 Monoclonal Antibody Injection (HLX10) in combination with Recombinant Anti-EGFR Humanised Monoclonal Antibody Injection (HLX07) as therapy for recurrent or metastatic head and neck squamous cell carcinoma (HNSCC) in mainland China.
Thailand's True and ZTE (763.HK) have recently entered into a commercial 5G contract. Pursuant to which, True will adopt ZTE's 5G RAN products and services to build a commercial 5G network in Thailand.
CITIC BANK (998.HK) announced that its subsidiary CNCB Investment had entered into the limited partnership agreement with Xingcheng Special Steel and other parties through Shenzhen Dingxin and Xinyin Hengtai, establishing Jiaxing Goldstone Pengheng Equity Investment Partnership to make equity investment in the target company Xuzhou Construction Machinery. CNCB Investment and Xinyin Hengtai will respectively contribute RMB277mn and RMB202mn.
Tencent 'Biped' on PRC 3rd Domestic Online Game Approval List for July China has approved the third batch of 57 domestic game edition numbers for July, including 7 online games, announced by National Press and Publication Administration. Biped, a title developed by TENCENT (700.HK)'s NExT Studios, was on the approval list. +VE
TAO HEUNG HLDGS (573.HK) Profit Warning -VE supplementary announcement, expecting a loss attributable to equity holders of HK$100 mn to HK$110 mn for the six months ended June 2020 as compared to a profit attributable to equity holders of HK$72 million for the corresponding period last year. -VE
Chinese Foreign Minister Wang Yi spoke with his Japanese counterpart Toshimitsu Motegi, saying China and Japan must stay on the right track of developing their relations. Both sides shall strengthen cooperation in fighting the epidemic, fostering economic revival and protecting regional stability. Particularly, Wang suggested building a two-way fast and convenient channel for personnel interaction.
Centa-Salesman Index (CSI) last printed at 44.58, -2.62 pts weekly.
CSI busted below 45 on a narrower decline, neutral for market sentiment and a panic-stricken home market slide, reported Centaline Property. They expect the index to struggle at around 45, which is not a signal of a market slump.

Market and Pre Market News at bottom of page.

Regional Markets
JAPAN 
opened lower after news that there were 980 new covid cases Tuesday. It trended lower thought out to close -1.2%
S KOREA opened flat Kospi initial rallied but then sold back down to flat and has traded sideways Kosdaq just traded sideways Kosdaq closed +0.1% and the Kospi +0.3%.
TAIWAN opened lower after yesterdays record day. Worked higher, then eased back to flat and trading sideways before selling down late in the session Closed -0.4%

Short Selling HSI Wednesday 17.9% vs 23% Tuesday
Top Shorts
Hang Seng Bank (11) 47%, Mengniu Dairy (2319) 39%, Ping An (2318) 38%, CCB (939) 34%, MTRC (66) 28%, Bank of China (3988) 27%, Henderson Land (12) 25%.

CONNECT FLOWS
Shanghai
Northbound Rmb 52,244m Sell 25,914m : 26,329m Buy
Southbound HK$ 11,361m Sell 4,698m : 6,663m Buy

Shenzhen
Northbound Rmb 75,590m Sell 34,137m : 41,453m Buy
Southbound HK$ 10,967m Sell 4,635m : 6,332m Buy


DATA
CHINA No data

HONG KONG
Centre for Health Protection said there were 118 additional COVID-19 
cases in Hong Kong today; 113 were locally transmitted. 46 with unknown source.
After Market GDP Growth Rate Q2 Adv -0.1% QoQ vs -5.3% prior (F/cast was -0.5%)
GDP Growth Rate Q2 Adv -9% You vs -9.1% prior (F/cast was -2.2%)
As the coronavirus pandemic was largely under control in Hong Kong in May and June, and the recovery of the Chinese economy also helped partly offset the external headwinds facing Hong Kong's exports of goods, the overall economic situation showed signs of stabilisation during the quarter. However, the COVID-19 pandemic remains a threat to the economy as it constrains exports while the recent surge in cases in Hong Kong impacts local activities.

Active Heavyweights
HKEX (388.HK) +1.2%
TENCENT (700.HK) -0.4%
PING AN (2318.HK) +0.4%
AIA (1299.HK) -0.3%

HSI & HSCEI Constituents on the move
SHIMAO GROUP (813.HK) +4.3%
CITIC SEC (6030.HK) +4.3%

HSMI & HSSI Constituents on the move
51 CREDIT CARD (2051.HK) +17.5%
HUA HONG SEMI (1347.HK) +13.3%
CNBM (3323.HK) +5.8%, hits new high
CG SERVICES (6098.HK) +1.3%, hits new high
BYD ELECTRONIC (0285.HK) +0.6%, hits new high


COMMENT
*IPO's: HKEX (388 HK +1.2%) 
thanks to a long list of forthcoming IPOs, including ANT GROUP.
HANGZHOU TIGER MED CONSULTING (3347 HK), a mainland clinical research service provider, saw the retail portion of its Hong Kong secondary listing oversubscribed by at least 50 times on the first day of its public offering.
SZ DJI TECH The world's largest maker of non-military drones, is said to be considering a HK IPO. DJI was valued at around US$16b after the latest round of financing worth of US$1b in April 2018.
*MACAU STRONG on news that Guangdong will expand the quarantine exemption to Macau residents crossing the border to the whole province from 9 major cities. GALAXY (27 HK +1.5%) MELCO INTL (200 HK +1.9%) MGM CHINA (2282 HK +3%).
SJM (880 HK +3.5%) recorded a net loss of HK$1.41b during the first half this year with an over 70% drop in revenue, as the sector was hard hit by the pandemic.
*HEALTHCARE/PHARMA STRONG  as China reported a rise in covid cases.
CANSINO (6185 HK +10%) jumped amid vaccine speculation.
WUXI BIO (2269 HK +3.9%) expects unaudited consolidated interim net profit will increase more than 58% YoY.
WUXI APPTECH (2359 HK -1%) after placing 68m new shares with a 5.2% disc at $108/shr.
*AIRLINES MIXED  CATHAY PACIFIC (293 HK -2.8%) to transfer a third of its passenger aircraft from HK in for parking the Australia to save money.
CSA (1055 HK +0.6%) offering a ‘all you can fly promotion.
AIR CHINA (753 HK +1%) CEA (670 HK unch) after news that Japan and China agree to take steps soon toward resuming travel.
*HOME APPLIANCES FIRM on recovery hopes, air conditioner sales and output continues to improve which may be on covid concerns; as seen in Japan and S Korea. GOME (493 HK +1.8%) HISENSE (921 HK +4.5%) SKYWORTH GROUP (751 HK +1.6%).
*DAIRY MAKERS STRONG on M&A news.
CH SHENGMU ORGANIC MILK (1432 HK +77%) after the firm said industry giant CH MENGNIU (2319 HK +1%) will become its largest shareholder after exercising warrants. CH MODERN DAIRY (1117 HK +6.9%).
*OTHER
HUTCHISON TEL HK (215 HK -4.4%) reported a 22.3% YoY decline in interim net profit to HK$146m.
KOOLEARN (1797 HK -7.6%) expects to record a substantial net loss of between RMB700m and RMB800m for the year ended 31 May 2020.

NEWS
MARKET HOURS
HSBC and Microsoft Hong Kong announced the start of their "Tech Me Up" 
partnership to boost Hong Kong SMEs' operating resilience. Through multi-dimensional support and technological resources, the service will help SMEs speed up their digital transformation to cope with new norms. Particularly, Microsoft Hong Kong will provide HSBC SME customers with remote office devices, cloud solutions, and technical support and training.
S&P: APAC Tech Firms May Lose US$25B on Huawei Sanctions opined S&P Global Ratings. Of which, OEMs like TSMC and SMIC (981.HK) may suffer a 15%-20% revenue loss, i.e. nearly US$7 billion.
TAO HEUNG HLDGS (573.HK)'s Ringer Hut announced via social media the shutdown of its Tseung Kwan O branch. The closure of its last branch in Hong Kong meant the Japanese noodle restaurant has dropped out of Hong Kong market.
World Bank wrote in its July report that Chinese economic growth will slow sharply to 1.6% this year, the slowest growth since 1976, followed by 7.9% growth in 2021.
ASM PACIFIC: No Guidance for 3Q New Orders given Uncertainties The economic performance, consumer sentiment and semiconductor demand were impacted by lockdown measures worldwide in wake of pandemic, said CEO Robin Gerard Ng Cher Tat. As a result, customers of semiconductor industry become more cautious in investment, while some of them even postpone or cancel their orders. Under murky environment, the group decided not to outline guidance for its 3Q20 new orders, whilst that of 3Q20 revenue ranges US$480-560 million. New orders in 2H20 may accelerate given higher 5G demand, although traditionally it will reduce in 2H20 from 1H20 for seasonal factors. The long-term sustainable development of 5G was believed to become the key driver to the group's three pillar segment in future.
China Three Gorges plans to sell its overseas asset portfolio in an amount up to US$4 bn, Bloomberg citing insiders. The group was in talks with Singapore's GIC and China Investment Corporation for potential disposal of 10-20% stakes in the group's international assets, said the report.
GAC GROUP (2238.HK) said that it has gained mastery of the next-generation power battery technology. EVs equipped with this battery will have a driving range of over 1,000 km.
The United Nations World Tourism Organization stated that the coronavirus lockdown restrictions resulted a 98% YoY slump in the global tourist figure in May 2020. International tourism receipts lost US$320 billion, over "three times the loss during the Global Economic Crisis of 2009".
A group of top US Senate Republicans have pressed Washington to assess threats of Beijing's electoral interference via TikTok. The lawmakers are very concerned about Chinese Communist Party may distort or manipulate political conversations using TikTok, hence sowing contradiction and discord among Americans, according to their letter to the Office of Director of National Intelligence, the acting secretary of the Department of Homeland Security, and the director of the Federal Bureau of Investigation (FBI).
Huawei is mulling over actions to "explore all evidence and remedies against HSBC" for allegedly presenting "misleading evidence" which led to the arrest of its Deputy Chairwoman Sabrina Meng Wanzhou, SCMP citing sources. The Chinese firm has hired five law firms to work on Meng's case, according to the report.
Apple was the fastest growing smartphone maker in China in 2Q20, with iPhone sales of 7.4 million units, up 32% yearly, as revealed by the data of Counterpoint Research. Last quarter, Huawei's sales grew 14% to 36.6 million units.
At a high-level discussion on China matters, Australian Foreign Minister Marise Payne told U.S. Secretary of State Mike Pompeo and Defense Secretary Mark Esper that Australia has no intention of hurting her relationship with China as their tie is important. Pompeo praised Australia for shouldering pressure from China. He said Washington and Canberra would jointly reassert the rule of law in the South China Sea.

PRE MARKET
China confirmed 101 additional COVID-19 cases yesterday (28 July), 
including 3 imported cases and 98 local infections, National Health Commission reported. 89 of the local cases came from Xinjiang.
GOLDIN FIN HOLD (530.HK) announced that it entered into an agreement on 27 July to sell the entire issued share capital of Rich Fast International, a subsidiary holding a residential site at Kai Tak Area 4B Site 4, to the new Purchaser Yan You for a consideration of around HK$3.477 billion. The Vendor, the Purchaser and the Property Company entered into a Profit Sharing Agreement in relation to the profit sharing arrangement for the future sale of the Units and Car Parks to be developed at the Property. GOLDIN FIN HOLD applied for a trading resumption with effect from today.
ASM PACIFIC (522.HK) interim results ended 30 June 2020. Net profit +116.9% yearly to $389 million with EPS of $0.95. An interim dividend of $0.7 was declared, against $1.3 in the same period a year ago.
IMAX CHINA (1970.HK) results for the six months to end 30 June 2020. Loss was US$35.248 million, against US$23.965 million of profit in a year ago's period. LPS equaled US$0.1. Interim DPS was HK15.5 cents.
WUXI APPTEC (2359.HK) announced a plan to place 68.2054 million new H shares at a placing price of $108 per share, representing 5.2% discount to the closing price yesterday. The net proceeds from the Placing are expected to be HK$7.29 billion.
At Asian Infrastructure Investment Bank's online briefing held yesterday, Chinese President Xi Jinping stated that the bank should act as a new platform that encourages its members to co-develop and take forward a "community with shared future for mankind", Xinhua News Agency reported. China remains unswerving in supporting and implementing multilateralism by going on to bolster and facilitate AIIB with other members in an open-minded, cooperative and win-win manner, in hopes of better preparing the world for risks and challenges and making more contribution in the path of co-development, added Xi.
China was alerted by the US Department of Commerce of naming 11 Chinese entities onto the "entity list" under export ban, Xinhua News Agency cited the spokesman of Chinese Ministry of Commerce. In response, China expressed staunch opposition. The spokesman stated that the US suppression on China is neither conductive to the US nor China nor the world, urging the US to stop such wrong behavior. Moreover, China will take all necessary actions to defend legitimate interests of Chinese companies.
Chinese Vice Premier Liu He exchanged dialogue with European Commission Vice President Valdis Dombrovskis in the 8th meeting through conference call, Xinhua News Agency reported. Both parties reaped fruitful consensus on cooperation in combating coronavirus pandemic, global economic governance, supply chain security, China-EU investment agreement negotiations, WTO reform, expanding market opening, digital economy, internet, finance and taxation.
CHINA SHENGMU (1432.HK) announced that on 27 July 2020, MENGNIU DAIRY (2319.HK) exercised all 1.197 billion Warrants of CHINA SHENGMU to subscribe for 1.197 billion Warrant Shares at the exercise price of HK$0.33 per Warrant Share, representing a premium of 37.5% over the closing price as quoted last trading day (28 July). Upon completion, MENGNIU DAIRY will hold in aggregate 1.467 billion Shares of CHINA SHENGMU, representing 17.8% of the total number of issued Shares and will become the single largest shareholder of CHINA SHENGMU.

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