18 June HK WRAP HSI -17pts JD-SW closed +3.5%. Beijing says everything under control


18 June HK WRAP  HSI -17pts  JD-SW closed +3.5%.  Beijing says everything under control


HSI -17pts (-0.1%) 24,465  HSCEI +7pts (+0.1%) 9,917 T/O HK$121.6bn (+16.7% DoD but taking excluding the JD-SW debut T/O was only +9%).   

Warrants were 8.46% of the market turnover (vs 8.41% Wednesday)


Europe Markets opened weaker but rallied but then revised and are trending lower. Expect caution ahead of the BoE rate decision.

US Futures Opened -120pts are trended lower to -385pts mid morning but recovered and now indicate a flat open.


INDEXES      

CSI 300 closed +27pts (+0.7%) @ 4,044 Market opened lower but worked higher for the first 30 minutes to test yesterday’s closing level which it did several times for the next hour and then around 11am rallied through, and at lunchtime was 4,036.  On news of credit easing plans and more financing opening policies at the LJZ Forum in Shanghai.  PM saw the market initially rally but then sell down on weak FDI data but then bounce back into the close.

HSI Pre Market -95pts @ 24,386 vs -125 pts ADR’s @ 24,356 with Dotcom names strong on the debut of JS-SW(9618 HK) +5.8%.  Geely +7% on news of possible listing on the Sci-Tech board.  Market initial sold off (maybe some margin calls) to the day low (24,122) but then rebounded 120pts and traded sideways around the 24,250 level for an hour. Then another wave of selling (again I think margin calls) but a strong rally of 250pts into lunch.  PM saw an initial tick up but then selling for the next hour and gave up 100pts before rallying back as China closed.  Then traded sideways around the 24,410 level into the close.  Ticked up 50pts in the closing auction. 
UBS hiked Techtronics (669 HK) Target Price to HK$91.00 today

IPO JD-SW (9618.HK) closed at $234, up $8  or +3.5% vs listing price of $226, on volume of 29.789 million shares and turnover of $7 billion. Excluding the handling fees, a book gain of $400 was reported per board lot of 50 shares.
AFTER MARKET 
KANGJI MEDICAL (9997.HK), to close its IPO at noon tomorrow, registered over $101.8 billion of margin granted by 14 brokers in three days as at around 6 pm today.
BABA-SW (9988.HK) said that Tmall's overall turnover had ballooned 100% YoY in  the first hour of 18 June, the day of "618 Shopping Festival".
Hong Kong Airlines was asking Hong Kong Government for a bailout plan after the latter had earlier offered to rescue CATHAY PAC AIR (293.HK) South China Morning Post reported.
PRU (2378.HK) reached agreement with Athene Holding, a leading retirement services company, for its subsidiary Athene Life Re Ltd to invest US$500mn in Prudential’s US business in return for an 11.1% economic interest with  voting interest is 9.9%.  Athene’s investment will be deployed in Jackson, strengthening its capital base.  Athene Life Re Ltd has also fully reinsured a US$27.6 bn in-force portfolio of Jackson’s US fixed and fixed indexed annuity liabilities under a long-term arrangement.
Citibank announced the launch of Citi HKTVmall Card which entitles cardholders to a 7% rebate when shopping on HKTVmall. The team-up enables HKTVmall users to apply for the credit card and make purchases and payment with reward points via the HKTVmall app
PACIFIC TEXTILES (1382.HK)  announced annual results ended March 2020. Net profit HK$743mn, -13.7% YoY with EPS of HK$0.51. Final DPS was HK18 cents, as compared with HK25 cents last year.
SA SA INT'L (178.HK) stated that month-on-month sales recovery was recorded upon growing footfall as a result of the eased gathering ban. With 99% of it's Hong Kong T/O was contributed by local customers in June, after a raft of promotions to lure local buyers. They witnessed a faster recovery in Mainland business. Despite closing ten stores amid the plague, SA SA INT'L had opened four to five stores over the past two months, while expecting to see at least ten shop openings this year. He also stressed the upbeat view on the Mainland market for the second half of year, especially online business.  Among the 37 HK outlets up for lease renewal this year, the cosmetic chain has renewed lease for six on a long term basis, with rent trim averaging 40%; and for another seven, leases are on a 3-6 month basis, with rent trim over 50%.  They estimate to shut down no fewer than ten outlets this year as he does not see resurgent business volume in the tourist spots in the near future as political events and the epidemic in Hong Kong have reshaped consumers' outdoor shopping patterns.  It decided not to distribute final dividend this year for the first time. They hoped minority shareholders will understand the firm's intention to keep cash on hand under the current environment. They pledged to resume payout when the business takes a turn for the better.
Meeting with six local major catering associations today (18 June), Financial Secretary Paul Chan said the industry will offer discounts and promotions to stimulate local consumption. The catering industry will launch discount dinner offers from 15 July, with 30% off dinners for July and 20% off meals for August, revealed LegCo's catering representative Tommy Cheung, who expected thousands of eateries to partake in the program. The list of participating restaurants will be unveiled on website in early July.
Hong Kong Jockey Club stated that taking note of recent improvements in the COVID situation, it has decided to re-open its Off-Course Betting Branches (OCBBs) on non-racedays from 22 June to the end of the current racing season to provide betting services for races and customer services.  Betting services for football will not be available at OCBBs, and the Mark Six lottery will remain suspended
I-CABLE COMM (1097.HK) For the first time in 7 years recorded positive cash flow in 3-4 months in a row, meaning that the group has stopped "bleeding" in cash although depreciation is yet to be priced in, said Chairman David Chiu. The TV platform has recently reported a surging number of subscribers, 40% rise in advertising revenue for its free TV channel and over 500,000 installs for its OTT app. Chiu voiced his delight with the high click rate of their app and Facebook page.  While I-CABLE COMM has recently strategically teamed up with CHINA MOBILE (941.HK), the chairman disclosed that they are not considering investment plans from the telecom carrier, but there are many other possibilities.
LH GROUP (1978.HK)  Chairman Simon Wong disclosed that the industry performance is dependent on the number of infection cases, rather than HSI, and that the group has recovered 70-80% of its business. During the hardest time in March, the eatery chain had closed all its hotpot restaurants for roughly three weeks, added Wong. However, no severance was done while they do not hope to cut costs by means of job cuts in the future. The chairman disclosed that the group will slow down on expansion plans. Some leases have been nailed down for new restaurant opening in 2H20, following none in 1H20.
Centa Valuation Index (Major Banks) (CVI) last printed at 75.52, -6.51 pts WoW.  The index plunged from 90 to 75 in three straight weeks amid the re-emergence of social movements. The steeper slide this week meant banks were turning less proactive on mortgages. -VE

Market and Pre Market News at bottom of page.


Short Selling HSI
Thursday 26% vs 21.2% Wednesday

Top Shorts Wharf REIC (1997) 61%, Hang Lung PPY (101) 52%, Hang Seng Bank (11) 49%, HSBC (5) 48%, Mengniu Dairy (2319) 48%, Want Want (151) 45%, NWD (17) 39%, ICBC (1398) 38%, Bank of China (3988) 36%, MTRC (66) 35%, Shenzhou (2313) 34%, CCB (939) 31%, AIA (1299) 30%, Ping An (2318) 30%, CK Asset (1113) 29%, Sunny Optical (2382) 29%, Henderson Land (12) 29%, BankComm (3328) 27%.


COMMENT 

*RESOURCES STRONG after the state planner said it would cap capacity at coal miners and steel smelting firms. ANGANG (347 HK +6.8%) MAANSHAN (323 HK +8.4%) YZC (1171 HK +2.2%)  CH COAL (1898 HK +2.1%). HENHUA (1088 HK +2.9%) reported coal sales volume for May -10.1% to 37.2m tons; May coal production volume falls 0.4% to 24.7m tons.Slight -VE for BHO and Rio
*CHINA BANKS WEAK but off initial lows after China’s financial regulator asked banks to keep profit growth below 10% this year. Regulators urge financial institutions to sacrifice 1.5t yuan in profits this year to support enterprises by offering lower lending rates, deferring loan repayments and cutting fees. ICBC (1398 HK -0.2%) BOC (3988 HK -0.7%) CCB (939 HK -0.6%) CMB (3968 HK -1.2%).
*DOTCOMS FIRM with focus on JD.COM (9618 HK) debut, stock closed 3.5% above  its IPO price HK$226 but off the initial highs.  
ALIBABA (9988 HK) and JD are expected to release final results of sales data for the "618" shopping festival which begin in June.
RAZER (1337 HK +5.3%) repurchased 1m shs on June 17 between HK$1.31-1.32/shr. TENCENT (700 HK +1.6%) NETDRAGON (777 HK +2%).
CH LIT (772 HK +7.5%) jumped again amid positive outlook that improved contract terms would attract quality writers to the platform.
*HK PROPERTY FIRM one-month HIBOR fell for the 15th consecutive trading day to 0.49714%, the lowest in three years and the longest decline for more than a year.
Li Ka Shing Foundation continued buying; it bought 1.66m shs CK ASSET (1113 HK -0.4%) between June 11-15, with avg px HK45.2807 HK$46.4676.
HENDERSON (12 HK +0.5%) SHKP (16 HK +0.7%).
*AUTOS FIRM as GEELY (175 HK +5.9%), board  approved a preliminary  proposal for a listing on the STAR Board in Shanghai. BYD (1211 HK +4.8%) said it established a new company in Shenzhen, business scope involves drones and VR glasses.GAC GROUP (2238 HK +1.4%) GREATWALL (2333 HK +1%).
*SPORTWEAR MAKERS MIXED optimism on a strong recovery but off-set by the new covid-19 cases in Beijing. CH DONGXIANG (3818 HK -1.5%) net profit  -14.7% to 366.33m yuan for the year ended March. LI NING (2331 HK +3.7%) ANTA SPORTS (2020 HK +2%) XTEP (1368 HK -2.2%).
*TECH & COMPONENTS STRONG  ZTE (763 HK+22%) as stock surged on importing 5nm chips technology, showcased ZTE’s R&D capabilities in high-end chip design.  Sector also traded strong amid speculation China-US tension may ease following Pompeo and Yan's meeting in Hawaii. XIAOMI (1810 HK +1.3%) AAC (2018 HK +2%) TONGDA (698 HK +3.5%) HUA HONG (1357 HK +7.3%).
*SHIPPING COMPANIES FIRM as Baltic Dry Index indicating freight rates surged by record 18% on Wed. SITC (1308 HK +5%) COSCO SHIP (1919 HK +3%) PACIFIC BASIN (2342 HK +3.6%).
*OTHER MOVERS:
SKYWORTH (751 HK +10.8%) seeks to buy as many as 392.8m shares at HK$2.8 each. The company said the potential HK$1.1b cost of the buyback would be “funded by internal resources”.
SUN ART RETAIL (6808 HK +9.3%) on Beijng lockdown and closure of local food markets; seen as to boost sales in supermarkets and online channels.
ASCENTAGE (6855 HK +11.1%) continue to be strong amid drug development.

CONNECT  FLOWS

Shanghai

Northbound RMB 29,125m Sell 13,057m : 16,068m Buy

Southbound HK$ 9,696m Sell 4,176m : 5,520m Buy

Shenzhen

Northbound RMB 48,204m Sell 23,129m : 25,074m Buy

Southbound HK$ 10,525m Sell 4,744m : 5,781m Buy


DATA 

CHINA FDI (YTD) May -3.8% vs -6.1% (F/cast was -2%)

China’s CDC’s chief epidemiologist, Wu Zunyou, said at a news conference Thursday that a coronavirus outbreak in Beijing, which saw 21 new cases confirmed on Wednesday and 31 the day before, was now under control.

HONG KONG 

No macro data

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


Active Heavyweights
TENCENT (700.HK) +1.6% hits a new high
HSBC HOLDINGS (5.HK) -1.6%
HKEX (388.HK) +0.8%
CCB (939.HK) -0.6%
PING AN (2318.HK) -0.6%
ICBC (1398) -0.2%
AIA (1299.HK) +0.1%

HSI & HSCEI Constituents on the move
GEELY AUTO (175.HK) +5.9%
CSPC PHARMA (1093.HK) +5.4%
BYD COMPANY (1211.HK) +4.8%, hits new high

HSMI & HSSI Constituents on the move
ZTE (763.HK) +22%
CHINA AOYUAN (3883.HK) +10.9%
SKYWORTH (751.HK) +10.8%
CHINA LIT (772.HK) +7.5%, hits new high
SMIC (981.HK) +6.9%, hits new high
MAN WAH HLDGS (1999.HK) +4.6%, hits new high

REGIONAL MARKETS  

JAPAN opened lower and trended lower in the morning but rebounded from the day lows and then traded sideways slightly below yesterday’s closing level. Closed -0.45%

S KOREA Kosdaq opened slightly +VE tested yesterday’s closing price before trending higher but then rolled over and trading sideways around flat for most of the day. Closed +0.3%.  Kospi opened lower, sold down, bounced to test yesterday closing level but failed to break above despite testing it a number of times; Closed  -0.4%

TAIWAN opened higher but moved lower, traded sideways around yesterday’s level to close +0.1%.


NEWS
MARKET HOURS 

India's Department of Telecommunications will ask state-owned Bharat Sanchar Nigam Ltd (BSNL) to shun away from Chinese telecom gear in 4G upgradation, Indian media citing insiders. India admitted at least 20 soldiers were killed in a face-off with Chinese troops, stirring anti-China sentiment in the country with protesters and some trade groups calling for a boycott of Chinese goods.
The bill of HKSAR National Security Law has been floated at the National People's Congress meeting held today. The bill clarified the definition and criminal responsibilities for secession, subversion of state power, terrorism and collusion with foreign forces, aiming at preventing, prohibiting and punishing such illegal behaviour in the territory.
HKEX (388.HK) plans to launch Sustainable and Green Exchange "STAGE".  This pioneering new information platform is the first-of-its kind in Asia, and will act as a central hub for data and information on sustainable and green finance investments in the region.
CK ASSET (1113.HK)  first price list for SEA TO SKY, involving a total of 285 units mainly in Tower 1 and Tower 2. Based on up to 22% discount, the flats, with salable area of 434-1,077 sq. ft., are priced at $6.428-18.176 million.  Under the Stage Payment Plan, offered by the developer, homebuyers are entitled to a 19% discount at most.  
CEO (Residential) of Asia Pacific at Centaline expects it to ‘lure enthusiastic subscription and challenge the position of "subscription king" of the year,’  But he is an agent and may be talking up his own book.
At lunchtime FUJIKON IND (927.HK) annual results ended March 2020. Net profit  $28.991mn, -28.4% YoY EPS of 6.8 cents. Final DPS was 3 cents, against 5 cents in the corresponding period of the previous year.
Also SA SA INT'L (178.HK)  Annual Results year ended 31 March 2020. The Group’s Turnover for the continuing operations -29.9% YoY to HK$5.717 billion. Loss for the year was HK$516mn, vs  profit of HK$47mn recorded in the same period last year. No final dividend was declared. 
The PBoC Governor Yi Gang said Chinese macro economy has been recovering since 2Q20, expecting FY20 new loans and aggregate financing to real economy (flow) to approximate RMB20 trillion and exceed RMB30 trillion respectively.
XIAOMI-W (1810.HK) said that its 618 platform registered over RMB1 billion of payment as of 10:29 am today.
MoFA: PRC Strives to Forge Non-Conflicting, Non-Confronting Relation with US 
During the meeting with US Sec State Pompeo in Hawaii, Chinese politburo member Yang Jiechi had articulated China's essential attitude towards Sino-US relations and stance towards sensitive issues involving Taiwan, Hong Kong and Xinjiang, according to Chinese Foreign Ministry Spokesman Zhao Lijian. Beijing strives to make concerted efforts with Washington to forge a non-conflicting and non-confrontational relationship on the basis of mutual respect and win-win cooperation, Zhao added.  He also said that Yang Jiechi pointed out that Hong Kong affairs, ranging from law enactment to enforcement mechanism about national security law, fall within China's internal affair and that China is adamant on the legislation. Beijing called on Washington to show respect to her sovereign authority and look at Hong Kong National Security Law legislation on a level and unbiased basis, thus putting an end to any form of intervention in Hong Kong affairs.
TENCENT's Brawl Stars Logs 4.8M Installs in 1st Week of Launch in CN, Generates US$17.5M Revenue says Sensor Tower The game, developed by TENCENT's Supercell, recorded US$28.8 million in revenue and logged 6.7 million installs worldwide during the period.
Overnight HIBOR last posted at 0.10155%, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.43506%, down for 15 days, marking a 1-month low.
The US allows Huawei to discuss 5G standard with US enterprises, as Commerce Secretary Wilbur Ross clarified at an interview with Fox Business Network. However, Washington opposes the use of Huawei technology in 5G networks due to lingering concerns about latent spying threats, added Ross.
Canalys reports during the first quarter of 2020, worldwide smartwatch shipments reached 14.3 million, up 12% yearly. The biggest share went to Apple.  It anticipated China to be the key smartwatch growth driver in 2020, riding on resurgent economy and a greater push from local players.
ZTE (763.HK) mentioned its chip design and development capabilities on an interactive platform yesterday, adding the 7nm chips are under mass production and being utilized in global 5G networks, reported Chinese media. The firm is also importing the 5nm process technology.
JD-SW (9618.HK) said that its 6.18 Shopping Festival has grossed more than RMB228.46 billion of orders so far.
Hong Kong banks are set to meet with Secretary for Financial Services and the Treasury Christopher Hui next Tuesday (23 June) to express their anticipations and concerns about "Wealth Management Connect Scheme", as they hope Hui to report their thoughts to Beijing, HK Economic Journal reported. Bankers are concerned about the actual operation of the scheme, roughly 20 local, Chinese and foreign banks engaged in retail banking businesses in the local market have been invited to join the discussion.
LINK REIT (823.HK) announced that the Manager is proposing to amend the scope of permitted investments under Link’s Investment Policy. The Manager considers that the exclusion of certain asset classes from Link’s investment portfolio even if they are income-producing; and have the potential for long-term income and capital growth, overly limits the range of global real estate market opportunities which the Manager may otherwise pursue in delivery of Link’s strategy to maintain a large and diversified portfolio of real estate assets for long-term growth. Accordingly, in continuation of the execution of Link’s strategy and for the reasons set out in the section headed “2. REASONS FOR, AND EXPECTED BENEFITS OF, THE AMENDED SCOPE OF PERMITTED INVESTMENTS”, the Manager proposes to allow investments in all real  estate classes by removing the restriction on investments in the Currently Excluded Properties.
ICBC (1398.HK), ABC (1288.HK), BANK OF CHINA (3988.HK) and CCB (939.HK) had on 15 June taken the initiative to revise down 3- and 5-year large-denomination deposit certificate rates, bringing them down to 1.45x of the benchmark deposit interest rates as compared with 1.5x in the past, Shanghai Securities News reported.

PRE MARKET
Beijing confirmed 21 new local COVID-19 
infections and three probable cases yesterday (17 June), announced by Beijing Municipal Health Commission.

Hubei Health Commission reported two more COVID-19 cases in the province. Both patients are operators of the Xinfadi wholesale market.

Macao will reclaim tourism scale and model as it used to be not until 2023, as Maria Helena de Senna Fernandes, Director of Macao Government Tourism Office, told Macao Daily. A schedule is yet to be nailed down over the consolidation of the office into Secretariat for Economy and Finance. With inbound travel restriction likely to persist in a near future, residents may be exposed to hindrance to a certain extent when it comes to travel, furthered the director, disclosing that the government may join forces with hotels and resorts to roll out discounts and offers in August.

STANCHART (2888.HK) intent to issue US$1bn Fixed Rate Resetting Perpetual Subordinated Contingent Convertible Securities next Friday (26 June). The Initial Fixed Interest Rate for the first six years is 6%. The net proceeds from the issuance, expected to be US$990mn, will be used for general business purposes and to strengthen further the regulatory capital base.

MENGNIU DAIRY (2319.HK) announced the issuance of exchangeable bonds exchangeable into shares of CH MODERN D (1117.HK) in the aggregate principal amount of US$100 million. The bonds will be mature in three years at the rate of 1.5% per annum. Assuming the bonds are fully exchanged into CH MODERN D shares at the exchange price of HK$1.2625, the bonds will be exchangeable into 614 million shares, representing 9.58% of the issued share capital of CH MODERN D.

GEELY AUTO (175.HK) a proposal for the possible issue of RMB Shares and listing on the Science and Technology Innovation Board of the Shanghai Stock Exchange. The proceeds of the Proposed Issue are intended to be used for business development and general working capital.

GOLDEN MEDITECH (801.HK)  that Kam Yuen, a founder and controlling shareholder of the company, proposed privatization of the company by way of a scheme of arrangement at $0.88 per Disinterested Scheme Share, involving about $425mn. Upon the Scheme becoming effective, it is anticipated that listing of the Shares on the Stock Exchange will be withdrawn. The company applied for a trading resumption with effect from this morning

SKYWORTH GROUP (751.HK) proposed a conditional cash offer to buy-back up to392.8 million shares, representing 12.83% of the issued Shares at the price of HK$2.8 per Share, a premium of 32.08% over the closing price as quoted on the Stock Exchange on the Last Half Trading Day. The consideration for the Offer amounted to up to about HK$1.1 billion.  The business & management of the Group will remain unchanged and the Company’s listing on the Stock Exchange will be maintained upon completion of the Offer. The company applied for a trading resumption with effect from this morning

REALORD GROUP (01196.HK) the offer price is adjusted upwards to the Final Offer Price of HK$0.3935 per SINCERE (244.HK) Share based on the amount of the February 2020 NAV

HKR INT'L (480.HK) Final Results Year Ended 31 March 2020. Net profit -26.4% YoY to $1.625 bn. The basic EPS was HK109.4 cents.  The Board recommended the a final dividend of HK7 cents per share. The proposed final dividend together with the interim dividend of HK5 cents per share for the six months ended 30 September 2019 makes up a total dividend of HK12 cents per share for the year ended 31 March 2020.


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