July 8 HK WRAP HSI +154pts T/O -18% DoD, Shorts back to 20%


10 Jul

July 8 HK WRAP  HSI +154pts T/O -18% DoD, Shorts back to 20%


HSI +154pts (+0.6%) 26,129  HSCEI +148pts (+1.4%) 10,748 T/O HK$196.2bn (-18.3% DoD)  


EUROPE opened lower on concerns about the rise on covid-19 cases as the WHO says there is evidence of airborne spread of covid-19. No data out from Europe. Some caution ahead of the UK Finance Minister laying out the governments latest recovery plans.

US Futures opened flat and are little changed indicating a flat open.


INDEXES      

CSI 300 Closed +76pts (+1.6%) @ 4,774. Market opened higher and traded slightly higher before selling down the day low, 4,670 around 10am small bounce before re-testing the support. Then worked higher into lunch.  PM saw an initial uptick but then selling but then from around 1:30pm the market worked higher to the day high 4,803 at around 2:45pm.  But unable to hold and sold down into the close.   Government must be happy that the ‘managed bull market’ is going so well.  As I wrote earlier I remain concerned for the distortion being created.  Most investors I imagine should concerned by the rise in covid-19 globally and the stringency with which China is examining imports to suggest that there is a real concern.  Tensions with the US, running high along with a number of other countries which again is a -VE overhang. 
HSI Pre Market  Pre market +103pts (+0.4%) @ 26,079 vs -85pts ADR's at 25,890. Pre market T/O was HK$ 6.11B vs HK$6.56b Tuesday which suggests Team China involved. Tencent was weak on news Martin Lau had sold another 500k shares, Alibaba and Meituan also weak.  Chinese banks weak on possible sanctions.  Tech was mixed.  Market then squeeze higher to the day high 26,300 but then collapsed over the next 30 mins to the day low 25,850.  From there it worked higher back to 26,145 before easing back into lunch. PM saw choppy trading but trended higher but upside capped at 26,180 ten minutes before the close.  Market still trading on liquidity rather than fundamentals.  Property Developers and Investors saw weakness on concerns of a local outbreak of covid-19.  E-Commerce names worked stronger through the day.


AFTER MARKET 
HANG SENG BANK (11.HK) said that Louisa Cheang, the Bank’s Vice-Chairman and Chief Executive, is undergoing treatment for a recently diagnosed medical condition.  The Board and Cheang are confident that Cheang can continue to perform her duties for the Bank while she undergoes treatment, and the bank will keep this under review as her treatment progresses.  The Board also has every confidence in its executive leadership team to manage the business and execute its strategic priorities.
SOLOMON SYSTECH (02878.HK) Positive Profit alert. The Group is expected to record a consolidated profit of approximately US$4 million for the six months ended 30 June 2020, which compares to a consolidated loss of approximately US$9.6 million for the same period in 2019. The turnaround in performance was mainly due to, among others, increases in the average gross profit margin and gross profit amount attributable to a change in its product type mix recorded in revenue.
POLY PROPERTY (119.HK) 1H contracted sales of RMB19.6 billion -1.5% YoY to year ended 30 June 2020. 
POWERLONG (1238.HK) 1H total contracted sales value RMB31.529bn +8% YoY and total contracted sales area for the six months ended 30 June 2020 amounted to 2.0473 million square meters, +14.8% YoY.
Ant Group plans to go public in Hong Kong as soon as this year and targets more than US$200 billion in valuation, sources with knowledge of the matter were quoted as saying by Reuters.
As USD/ HKD triggered the Strong-side Convertibility Undertaking during Hong Kong trading hours, the HKMA undertook a selling order of US$1.48 billion to inject HK$11.47 billion into the market.  The balance of the banking system of Hong Kong will increase to HK$160.596 billion on Friday (10 July).
GREATWALL MOTOR (2333.HK)  announced that June sales volume totaled 82,000 units +29.6% YoY and production volume was 83,500 vehicles, +32.59% YoY
The Secretary for Financial Services and the Treasury, said any move to relax demand-side management measures or to lower stamp duty rates may be speculated by the market as a signal for adjustments to the Government's policies on the property market.  It may also stimulate demand for local residential properties from some citizens, and lead to a counter-productive result of pushing up property prices when the current housing supply still lags behind demand. Therefore, the Government must act prudently.
Hong Kong Federation of Railway Trade Unions in a statement expressed its extreme disappointment with MTR CORP (66.HK)’s decision to freeze salary of all non-managerial level staff this year, despite over $10 bn in surplus last year. The union reprimanded the railway operator of focusing only on profit-making and turning a blind eye to workers' efforts.
IPO  MBV INTL (1957.HK) Closed at $0.345, -45.5 cents or  -57% against the listing price $0.8, on volume of almost 192 million shares and turnover of $77.78 million. Excluding the handling fees, a book loss of $1,137.5 was reported per board lot of 2,500 shares.
IPO HEPALINK (09989.HK)  Closed at t $17.66, -74 cents or -4% against the listing price $18.4, on volume of 103 million shares and turnover of $1.873 billion. Excluding the handling fees, a book loss of $370 was reported per board lot of 500 shares.

Centa-Salesman Index (CSI) last printed at 61.88, -0.7 pts WoW. The latent second spike of coronavirus outbreak amid a surging number of local cases may weigh on the frontline sentiment and reflect on the index next week.

Market and Pre Market News at bottom of page.


Short Selling HSI Wednesday 19.6% vs 17.5% Tuesday

Top Shorts MTRC (66) 57%, Wharf REIC (1997) 49%, Henderson Land(12) 40%, Hang Seng Bank (11) 38%, China Res Land (1109) 38%, Ping An (2318) 36%, BoC HK (2388) 35%, HSBC (5) 35%, Hang Lung PPT (101) 35%, CK Asset (1113) 31%, CCB (939) 30%, Sino Land (83) 29%, China Mobile (941) 25%.


CONNECT FLOWS 

Shanghai

Northbound Rmb75,878m Sell 37,766m : 38,112m Buy

Southbound HK$ 24,225m Sell 9,267m : 14,958m Buy

Shenzhen

Northbound Rmb86,794m Sell 42,994m : 43,801m Buy

Southbound HK$ 19,992m Sell 8,443m : 11,549m Buy


DATA
CHINA No data
HONG KONG Centre for Health Protection 
said there were 24 new COVID-19 Cases today, 19 by local transmission and 5 imported. At least five staff members and three residents at Kong Tai Care for the Aged Centre in Tsz Wan Shan had initially tested positive for the virus.


Active Heavyweights
TENCENT (700.HK) +5.2% hits new high
HSBC (5 HK) -4.3%
HKEX (388.HK) +2.9%
PING AN (2318.HK) +2.3%
AIA (1299.HK) +0.3% 
CCB (939.HK) +0.2%
ICBC (1398 HK) unchaining

HSI & HSCEI Constituents on the move
CITIC SEC (6030.HK) +7.6%
CHINA LIFE (2628.HK) +7%
MENGNIU DAIRY (2319.HK) +6%
CHINA TAIPING (966.HK) +5.6%
ANTA SPORTS (2020.HK) +4.7%
CPIC (2601.HK) +4.4%
AAC TECH (2018.HK) +4.3%
HANG LUNG PPT (101.HK) +4.3%, hits new high
BYD COMPANY (1211.HK) +3.9%
SUNNY OPTICAL (2382.HK) +3%

HSMI & HSSI Constituents on the move
COMEC (00317.HK) +55.8%, hits new high
HUIFU PAYMENT (1806.HK) +26.7%
AVICHINA (02357.HK) +21.7%, hits new high
DC HOLDINGS (861.HK) +15.7%, hits new high
MICROPORT (853.HK) +14.2%, hits new high
SD GOLD (1787.HK) +12.3%, hits new high
KINGSOFT (3888.HK) +11.6%, hits new high
ZIJIN MINING (2899.HK) +11.5%, hits new high
ANGANG STEEL (347.HK) +11.3%
SINOPEC KANTONS (934.HK) +10.8%, hits new high


REGIONAL MARKETS 

JAPAN opened lower after mixed pre market data. Trended higher to flat but then sold down through the pm session Closed -0.8%

S KOREA market’s opened slightly higher but dipped into the red Kospi then traded sideways bein the red just below the flat level for most the session. Closed -0.2%. Kosdaq opened higher, dipped but tested the support at yesterday’s closing level a couple of time before trending higher. Kosdaq Closed +0.9%

TAIWAN opened higher and trended higher through the day. Closed +0.6%


NEWS
MARKET HOURS 

Savills published the 2Q20 residential leasing report, suggesting local demand has become the key driver for luxury residential leasing market due to cross-border curbs, where entrants are required to self-quarantine for 14 days.

Hong Kong's luxury home leasing market stabilized in 2Q, given resumed business activity and rebooted government bodies. Luxury home rent plunged 2.6%, 3.7% and 3.1% in Hong Kong Island, Kowloon and New Territories during the quarter.

CBRE: 2020E Shop Rent To Slip 20-25% As fashion labels and luxury retailers revised their leasing strategy, the overall availability of main street shops at core retail districts had climbed to a four-year high of 13.5%, according to CBRE's report. With a challenging retail outlook for the rest of 2020, CBRE modeled a 5-10% shop rent slide for 2H20, and a 20-25% decline for the whole year. Hong Kong's Grade A offices tracked a negative net absorption of 1.28 million sq.ft. for the first half of year, marking the weakest-ever moment for the leasing market, according to CBRE's report. It projected a 5-10% office rent downturn in the second half of year, and a 20% YoY rental slide for the year. Tenants were still cautious despite resurgent office viewing recently.

GOGOVAN announced to officially re-brand as GOGOX today, in order to develop diversified logistics services. The local truck-hailing platform launched GOGOBUSINESS to provide MSME and e-commerce customers with surrogate shopping, urgent item delivery and same-day delivery. In 2017, GOGOVAN had merged with TENCENT (700.HK)'s 58 Express, and introduced Alibaba Entrepreneurs Fund for Hong Kong etc..

MTR CORP (66.HK) announced salary freeze to all non-managerial level staff this year, while certain qualified employees are entitled to special bonus as compensation. The railway operator had made its last salary freeze arrangement in 2003.

CHINA FEIHE (6186.HK) Profit Alert expecting a significant increase of more than 40% in its revenue for the six months ended 30 June 2020 as compared with the six months ended 30 June 2019, mainly attributable to the substantial increase in the sales volume of high-end infant milk formula. The Board noted that Blue Orca Capital published a report which included certain allegations in respect of the Company’s financial performance, stated CHINA FEIHE. The Board vigorously denied the Relevant Allegations contained in the Report and considered them to be inaccurate and misleading.

Top 30 CN Mobile Game Issuers Gross US$1.65B Revenue in Jun, Making up 26% of Global Revenue n June 2020, the top 30 Chinese mobile game operators grossed US$1.65 billion revenue at App Store and Google Play worldwide, making up 26% of the total revenue of global mobile games, according to the report of Sensor Tower. The survey showed that TENCENT (700.HK) topped the revenue chart in June as a mobile game issuer. Its self-developed game The Outcast continued to reap promising revenue, with the amount just behind its Honor of Kings, Game for Peace and PUBG Mobile.

ARCHOSAUR GAMES (9990.HK) plans to fix its offer price at $11.6, the upper end

of the price range ($9.8-11.6), foreign media citing insiders. The online game developer, backed by TENCENT (700.HK) intends to issue 187 million shares for $2.17 billion. The company is expected to be listed on 15 July.

Overnight HIBOR last posted at 0.12357%, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.39179%, marking a 1-month low.

As USD/ HKD re-hit the Strong-side Convertibility Undertaking, the HKMA injected capital into the market during Hong Kong and New York trading hours for two days. The exchange rate remained strong this morning (8 July), and the spot USD T/T rate was last at 7.7502. The balance of the banking system of Hong Kong will increase to HK$149.126 billion tomorrow (9 July).

Shortseller Blue Orca Blasts CHINA FEIHE (6186.HK) for Number Massaging, Shr Value $5.67 Only. Saying the company claimed itself to be a highly-profitable and fast-expanding infant milk formula (IMF) manufacturer in China, with 2019 reported EBITDA and net income margins even higher than Apple, TENCENT (700.HK) and BABA-SW (9988.HK). The shortseller cited the findings from Nielsen and Chinese Ministry of Commerce Data that CHINA FEIHE had overstated its revenues. The IMF producer’s actual revenues are 49% less than what it had reported during 2018-2019. It valued the stock at $5.67 only, representing a 64% downside to its closing price $15.82 yesterday.

Sophia Chan, Secretary for Food and Health, announced last night that the Hospital Authority will from 9 July suspend all special visit arrangements to non-acute patients at hospitals, in light of the latest plague development in Hong Kong. Discretionary arrangements or visual visits will be available where feasible. Regarding gathering ban, the restriction number of participants will be held steady at this moment, said Chan, but the Government will further look at the conditions for exemption and review the restrictions on catering premises when necessary.

JXR (1951.HK) placed 208 million shares at $11.15-11.3 each, representing 5.5-6.8% discount to its closing price yesterday, said market rumours. The stock bottomed at $11.02 and last traded at $11.14, down 6.8%, following three non-auto matched trades on board, involving roughly 245 million shares, before market open.

CHINA GAS HOLD (384.HK)'s Executive Chairman Liu Ming Hui had on 6 July further acquired 800,000 shares, involving $20.53 million, according to shareholding disclosures at the Stock Exchange.

HSBC (5.HK) plans to slash around 255, or 37.6%, of the 678 positions in the global banking and marketing divisions in France, the New York Times citing a French union.

TikTok Generates US$90.7M Revenue in Jun, Topping World Among all non-game apps worldwide, TikTok was the top grossing one in June 2020 with over US$90.7 million in user spending, up 8.3 times yearly, according to Sensor Tower. YouTube (US$73 million) and Tinder closely followed.

PRE MARKET

China Foreign Exchange Trade Center announced, on 8 July, the central parities in the interbank forex market of transaction currencies, including the dollar against CNY, are as follows: USD/CNY = 7.0207, up 103 bps from yesterday's central parity, hitting a new high since 17 March.

Several U.S. Federal Reserve policymakers have expressed worries about the hindrance from another surge in coronavirus cases on economic recovery, Reuters reported. Cleveland Fed President Loretta Mester told CNBC that the recovery was leveling off over the past week, probably due to an increase in the case number.

The construction of 5G network is now in full swing in China, Economic Information Daily reported. CHINA TELECOM (728.HK), CHINA UNICOM (762.HK), CHINA MOBILE (941.HK) and CHINA TOWER (788.HK) are outlining more detailed solution after having achieved phased progression in 5G construction. China will hopefully build over 600,000 5G bases by the end of 2020, said the report. +VE for the equipment makers.

US State Department Explores Limiting HKD Peg, Talks Not Elevated to White House Level Yet: Rumors Some top advisers to US President Trump suggested undermining Hong Kong’s linked exchange rate system in response to China's push for the national security law, Bloomberg citing sources.  While some advisers had proposed limiting the ability of Hong Kong lenders to buy US dollars, others voiced objection on concerns that Hong Kong banks and the US, rather than China, would be hurt by such a move. The discussions among US State Department advisers had not been elevated to the levels of the White House, meaning it had not gained serious traction yet, according to sources.

HAIDILAO (6862.HK) Profit warning supplementary announcement, expecting a net loss ranging from RMB900 million to RMB1 billion for the six months ended June 30, 2020.




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