Aug 13 HK WRAP HSI closes flat having opened +246pts T/O -19% DoD

17 Aug

Aug 13 HK WRAP HSI closes flat having opened +246pts  T/O -19% DoD

HSI -13pts (-0.1%) 25,231 HSCEI +29pts (+0.3%) 10,245 T/O HK$116.45bn (-19.2% DoD)

EUROPE markets opened lower with caution ahead of the US Initial claims data and news that t Democrats and the Trump administration are “miles apart” on negotiations for the next pandemic relief package. GERMAN Wholesale Prices were better than forecast and the Inflation Rate was inline. FRENCH Unemployment Rate was better than expected.
US Futures opened flat but initially edge lower; expect a cautious opening with traders watching the initial claims report. Other data due Export Prices, Import Prices, EIA Gas Report. Sentiment weak as Republicans and Democrats still have no deal in sight.  US earnings now effectively complete more attention now on data and covid.

CSI 300 Closed -12pts (-0.3%) @ 4,636
Market opened higher but sold down from the open to 4,626 level before bouncing back into the green but unable to hold and sold down again to the 4,626 level at lunch. PM saw a similar pattern with and initially rally back to test 4,660 but with heavy resistance there despite testing around 4 times, it then sold down to the support at 4,626 before a bounce, then back to the support and then a small bounce and traded sideways for the last 15 minutes into the close. Team China looking to support the market ahead of tomorrows data and with increasing investor concerns over US/Chinese relations.

HSI Pre Market Pre market Opened +246pts vs +192pt ADR’s with Tencent+1.4% after result beat and outlines US sanction only on WeChat and US accounted for only 2% of revenues. Other E commerce names +VE. TELCO’s +VE after China Unicoms results. Techtronics was +8% after good earnings released premarket.
The open was the high it then trended lower in choppy trading, finding support around 25,190 after about an hour and then traded sideways into lunch, effectively for the rest of the day. There was a sharp sell off around 3:30pm to the day low (25,145) but it worked back to the and continued sideways into the close. Results out at lunchtime included Swire and SwireProperties, Lenovo, Galaxy, Mobile.
FINANCIAL were weak but TELCO’s were strong with UNICOM +26% post earnings and TELCOM +11% and MOBILE +3.6% post results.
Lighter volumes today especially in the northbound connect flows I think reflects investor caution over tomorrows data out from China (House Price Index, NBSPress Conference, Fixed Asset Investment (YTD), Industrial Production, Retail Sales, Unemployment Rate) and the potential for an extension of the sanctions on China by Trump.

EARNINGS Friday in Hong Kong include; Wanda Hotel Development (169), Goldlion (533), Wynn Macau (1128), Sands China (1928), China Gold Int (2099), Aoyuan Healthy Life Group (3662), China Aoyuan Group (3883).

CHI KAN HOLDINGS (9913.HK), whose shares will be listed tomorrow,
closed at $0.47 in gray market, down 5 cents or -9.6% against the listing price of $0.52, on volume of 13.7mn shares and $6.35 million, PhillipMart data showed. That was an improvement from earlier. It had opened +vbe then dropped to -19%.
Yi Gang, the governor of the People's Bank of China, held a meeting with Macau's Chief Executive Ho Iat Seng. During the meeting, they conducted deep discussions about financial cooperation between Mainland China and Macau.
A Sino-U.S. video conference is going to be held soon. The Ministry of Commerce stated that they will publish any confirmed news in real time with regard to this conference. Chinese Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer will have a meeting around this Saturday (15th).
The Ministry of Commerce stated that China has been seriously implementing the first phase of Sino-U.S. economic and trade agreements with relevant departments having completed lots of work for the execution of these agreements. Under the current situation, the two sides need to step up collaboration and go through the difficult time with concerted effort, it emphasised.
LEE'S PHARM (950.HK) PROFIT ALERT +VE anticipating that the net profit attributable to the shareholders for the six months ended 30 June 2020 will increase by about 150% on a yearly basis. The improvement of the group’s interim results was mainly due to an one-off compensation income recognised by the company upon the early termination of the product license of Zanidip; and the absence of considerable intangible assets impairment during the period under review.
SWIRE PACIFIC A (19.HK) and SWIREPROPERTIES (1972.HK) Chairman Merlin Swire stressed that he would stay optimistic about Hong Kong's future with considerable commitment and investment. The group has no plan to sell its Hong Kong operations, added Swire. Although the city is experiencing turmoil, the company holds a long-term vision that the assets it is holding in the city are of high quality and that it will maintain its focus on China and Hong Kong. The company had committed to providing rental support to its tenants for up to twelve months and will continue doing so in the future, Guy Bradley, Chief Executive of SWIREPROPERTIES (1972.HK) said, adding that he is confident tenants will renew their contracts. It is now moving forward again with the medium-term residential property market development in Hong Kong; it has 3-4 residential development projects in the pipeline, which will debut in next 3-4 years.
CHINA MOBILE (941.HK) has a solid mobile subscriber target this year, anticipating net addition of over 100 million 5G package customers and narrower mobile ARPU slide, said the CEO Dong Xin at the conference call. Also they expected the company to build 300,000 5G base stations this year, providing commercial services at all above-prefecture-level cities nationwide. He also hoped to put the guidance made at early year on hold, and maintained a sturdy DPS this year.
TOWNGAS CHINA (1083.HK) interim results ended June 2020. Net profit amounted to HK$581 million, down 23.1% yearly. EPS equaled HK20.23 cents. No dividend was declared.
LENOVO GROUP (992.HK)'s Chairman cum CEO Yang Yuanqing said, in response to US restrictions imposed upon TikTok and TENCENT (700.HK)'s WeChat, that the business development of multinational companies would be affected by strained Sino-U.S. relations. Yet, Yang is not worried about the related risk because the group's diversified businesses cover many countries. The group has no intention to spin off its U.S. operations in order to avert risk. Quarterly results of the group beat estimates, reflecting the pandemic's impact has sort of dissipated, Yang also pointed out.
The Hong Kong Monetary Authority published the results of the tenders of the People's Bank of China RMB bills. 86% over-subscription in terms of value for three-month RMB bills was recorded with an average accepted coupon rate of 2.58%. 1.5 times over-subscription in terms of value for the one-year RMB bills was recorded with an average accepted coupon rate of 2.45%.
NTES-S 2Q Net Income of Continuing Operations at RMB4.5B; Non-GAAP Net Income of Continuing Operations at RMB5.2B
GALAXY ENT (27.HK)'s third and fourth phases of the new project would proceed as planned given that it was no easy task to change the project schedule, Chairman Lui Che Woo said at a press conference. The company will continue to maintain its solid financial position and look out for overseas business development opportunities, including Japan, Lui also mentioned.
China Banking and Insurance Regulatory Commission (CBIRC) revealed that they are going to beef up extensively the medium to long-term funding support for innovative manufacturing and strategic emerging industries, CCTV reported. CBIRC will also enhance coordination among finance, employment, industry and regional policies to achieve the best outcome.
Zhao Lijian, a spokesman for China's Ministry of Foreign Affairs, said at the regular press conference that China will continue opening up to the outside world and proactively foster economic and trade collaboration with other countries, in an effort to boost the global demand as well as international trade development. In 1H20, lots of foreign companies were still expanding their footprints in China with the number of foreign investment projects with a size of over US$100 million reaching 320. China is also resolved to improving the business environment.
The White House is turning a blind eye to facts by requesting Hong Kong imports to bear a "Made in China" tag, which does not comply with the WTO's guidance on product origin introduction, said Edward Yau, HK Secretary for Commerce and Economic Development. While there are no immediate tariff impacts therefrom, tariff adjustments may be inevitable in the future subject to Washington's policies, added Yau, who stressed corresponding actions will be taken under the WTO practice framework.

Market and Pre Market News at bottom of page.

Regional Markets
opened higher and has worked slowly higher through the day to they high around 1;40pm and then drifted slightly lower to close +1.8%PPI data was stronger than expected as prices fell at a slower pace for petroleum & coal (-19.3 percent vs -26 percent in June), and chemicals (-5 percent vs -5.9 percent). Meanwhile, prices of nonferrous metals rebounded 2.7 percent after falling 1.3 percent. Food inflation edged down to 0.6 percent from 0.7 percent. On a monthly basis, producer prices climbed 0.6 percent for the second month, well above market expectations of a 0.3 percent increase.
S KOREA Kosdaq opened higher and trended higher to a high (863 +1.9%) around 1pm. Then drifted slightly lower before seeing significant selling around 2:30pm down to the day low 852 then a small bounce to close +1.1%Kospi opened higher but saw initial selling pressure and sold down to 2,440 before finding support but then rallied back to the opening level then drifting lower before also seeing selling pressure around 2:40pm, down to 2,412, still above the important 2,400 level, then bounced to close +0.2% Data out in the PM showed South Korean banks 1H net profit -17.5YoY due to increased loan-loss provisions.
TAIWAN opened higher and initially rallied to 12,800 in the first 15 minutes but then trended lower to close +0.7% just off the day low. Talk of a bilateral traded agreement with the US and the rebound in the NDX overnight helping currently.

Short Selling HSI Thursday 18.9% vs 18% Wednesday
Top Shorts
HK & China Gas (3) 46%, China Res Land (1109) 44%, CLP (2) 44%, CCB (939) 43%, Sino Land (83) 43%, Shenzhou (2313) 42%, Mengniu Dairy (2319) 41%, Petrochina (857) 38%, Hang Lung PPTY (101) 36%, Bank of China (3988) 33%, ICBC (1398) 30%, Sinopec (386) 30%, NWD (17) 30%, MTRC (66) 29%, Hengan (1044) 26%, Ping An (2318) 25%.

CONNECT FLOWS Northbound flows drop significantly particularly the buy side
Northbound Rmb 41,084m Sell 21,054m : 20.031m Buy
Southbound HK$ 8,635m Sell 4,418m : 4,216m Buy

Northbound Rmb 56,808m Sell 28,934m : 27,874m Buy
Southbound HK$ 10,087m Sell 4,912m : 5,176m Buy

CHINA After Market

FDI (YTD) Jul +0.5% YoY vs -1.3% Jun (F/cast was -0.4%)
Considering July only, FDI jumped 15.8% to CNY 63.47 billion.

Friday we are due to get House Price Index, NBSPress Conference, Fixed Asset Investment (YTD), Industrial Production, Retail Sales, Unemployment Rate

Centre for Health Protection said there were 62 additional COVID-19 cases 
in Hong Kong today; (vs 62 cases Wednesday). 33 of those cases was from unknown origin.
Census and Statistics Department today (August 13), the provisional estimate of the Hong Kong population was 7.5092 million at mid-2020. The population remained virtually unchanged, as compared with that at mid-2019. The revised figure for the year-end population for 2019 was 7.5208 million. The number of Usual Residents was revised to 7.3653 million and the number of Mobile Residents to 155,500. The population growth rate from end-2018 to end-2019 was also revised to 0.5%.

Active Heavyweights
TENCENT (700.HK) -2%
CCB (939.HK) -0.9%
AIA (1299.HK) -0.7%
HKEX (388.HK) +0.6%
PING AN (2318.HK) -0.4%

HSI & HSCEI Constituents on the move
CHINA UNICOM (762.HK) + 25.6%
CHINA TELECOM (728.HK) +11.1%
TECHTRONIC IND (669.HK) +10.9%, hitting new high
SHENZHOU INTL (2313.HK) +3.6%
CHINA MOBILE (941.HK) +3.6%
CHINA RES GAS (1193.HK) +3.2%
ANTA SPORTS (2020.HK) +3.2%, hitting new high

HSMI & HSSI Constituents on the move
TYSAN (687.HK) +181%
HAICHANG HLDG (2255.HK) -11.3%

US President Donald Trump’s ban on TikTok and WeChat could be extended
beyond those two apps, as CNBC quoted from US Secretary of State Mike Pompeo. Which means, the orders can hit TikTok’s parent ByteDance, and WeChat's owner TENCENT (700.HK) That could have a larger impact on Tencent -VE
CanSino Biologics’ stock was +127% early on its first day of trading on Shanghai’s Nasdaq-like Star Market on Thursday after the company raised Rmb5.2bn ($748.9m) in a secondary share offering. The shares later pared some of that initial enthusiasm to trade +85%
The world's top ten semiconductor companies saw sales value +17% YoY in 1H20, compared with 5% growth sector-wide, data from research institute IC Insights revealed. HiSilicon, a company belonging to Huawei, has become one of the world's top ten semiconductor companies for the first time. Its 1H20 sales value +49% YoY
Foxconn, which had reportedly alleged era of China being the world's factory was over, made a clarification. It said the firm's remark was merely a depiction of industrial trends worldwide, instead of pinpointing a single customer. Thus, such comment was over-interpreted by Bloomberg's report with a misleading headline. Foxconn Chairman Young Liu said China's time as the world's factory was done, as Bloomberg had reported earlier.
The Chinese People's Liberation Army has recently switched on military exercise along Taiwan straits, according to the website of Chinese Ministry of National Defense. Some major countries have been taking negative actions on Taiwan matters and delivering wrong messages to "Taiwan Independence" said Chinese People's Liberation Army. This in my view is a significant increase in the threat against Taiwan and with Chinese international relations at a low due to its actions in Hong Kong it may take the view that taking additional action against Taiwan has limited downside in terms of international relations. -VE
The Government announced today (August 13) that the special work arrangement for government employees will be extended for one week until August 23. Save for those involved in the provision of emergency services and essential public services, all other government employees will continue to work from home.
CBIRC Chair: CN Banks' NPL May Bulge to RMB3.4T This Year. As Chinese economy remains yet to fully recover from the coronavirus crisis, financial risks may rage on for a while, as CBIRC Chairman Guo Shuqing told Xinhua News Agency. NPL pressures will likely bulge in the future along with gradually surfacing loan risks. Guo expected Chinese banks to book RMB3.4 trillion in NPL this year, as compared with RMB2.3 trillion in the previous year, and to handle even more NPL next year.
ByteDance is mobilising RMB500 million to wholly acquire "Baikemingyi", a Chinese medical knowledge platform, Mainland news media reported. After the acquisition, ByteDance will be able to create more comprehensive contents in its platforms.
The Legislative Affairs Commission of the Standing Committee of the National People's Congress has decided to set up a group to work on the legislation of prohibiting the waste of food and beverage with a view to establishing a long-term and effective system to tame such behaviours, CCTV reported.
The PBoC announced that it had issued three-month notes and one-year notes, in respective amount of RMB20 billion and RMB10 billion, in Hong Kong today. The successful tender rate was 2.7%.
At lunch SWIREPROPERTIES (1972.HK) interim net profit dived 88.5% yearly to $1.029 billion. During the period, underlying profit plummeted 79.8% yearly to $3.753 billion; recurring underlying profit fell 8.6% yearly to $3.702 billion.
At lunch LENOVO GROUP (992.HK) results for the first fiscal quarter ended June 2020. The net profit amounted to US$213 million, up 31.2% yearly. EPS was US1.8 cents.
At lunch CHINA MOBILE (941.HK) interim results ended June 2020. EBITDA eroded 3.6% yearly to RMB145.7 billion. Net profit amounted to RMB55.765 billion, -0.5% yearly and in-line with RMB54.245-57.25 billion in consensus. EPS equaled RMB2.72. Interim DPS was HKD1.53. The Mobile ARPU during 1H20 slid to RMB50.3 from RMB52.2 in 1H19. During the period, the CAPEX was RMB101 billion. The budget for full year was RMB179.8 billion. It also announced Dong Xin has been appointed as CEO of the Company with effect from 13 August 2020 and that he ceased to be the CFO.
At lunch GALAXY ENT (27.HK) swung into loss of HK$2.856 billion for the six months ended 30 June 2020, versus profit of HK$6.68 billion in the same period of 2019. LPS equaled HK65.9 cents. No interim dividend was declared. Adjusted EBITDA was negative HK$1.087 billion, against adjusted EBITDA of around HK$8.315 billion in the same period of 2019. Brokers' forecasts for GALAXY ENT's 1H20 adjusted EBITDA was negative HK$1.185 billion.
SUNART RETAIL (6808.HK) Engaged in livelihood staples it managed to deliver 3-4 times of growth in online results thanks to fierce online demands amid the coronavirus pandemic, said CEO Huang Ming-Tuan at an online conference. As of June 2020, the company owns 481 hypermarkets and three supermarkets, said CFO Hsu Sheng-Yu. Looking ahead, it plans to open around 10 hypermarkets, 2-3 supermarkets and 30-50 mini stores in 2H20.
At Lunch SWIRE PACIFIC A (19.HK) and SWIRE PACIFIC B (87.HK) interim results ended June 2020. The revenue -8.9% year on year to HK$39.056 billion. The profit swung into loss of HK$7.737 billion. LPS were HK$5.15 and HK$1.03 for A and B shares. The Directors declared first interim dividends of HK$0.7 per A share and HK$0.14 per B share. The underlying loss was HK$5.485 billion, compared with a profit of HK$15.846 billion in the same period of 2019. Disregarding significant non-recurring items in both years, the recurring underlying loss for the first half of 2020 was HK$123 million, compared with a profit of HK$4.226 billion in the first half of 2019. The recurring loss was mainly due to losses at CATHAY PAC AIR (293.HK)
George Soros: Mkt Stuck in Fed Liquidity Bubble, Trump Only Transitory; While the US market has been caught up in a bubble fueled by the Federal Reserve liquidity, it is sustained by anticipated fiscal stimulus along with hopes that President Donald Trump will introduce an effective vaccine by November, said investment guru George Soros. Soros opined that Trump will turn out only a transitory phenomenon, whose presidency may be ending in November.
HSBC announced the extension of merchant network of PayMe for Business to OK convenient stores. Effective today, over 2 million individual users are able to shop with the PayMe App at more than 330 OK convenient stores in Hong Kong. Meanwhile, PayMe for Business unfolds a brand new QR code function, allowing merchants to collect PayMe payment through the existing POS terminal systems in their shops.
TECHTRONIC IND (669.HK) CEO Joseph Galli said at the online conference that he noted fears among some competitors under the epidemic, and expected a double-digit sales slide. However, the firm has seized the opportunity to capture market share and proactively expand its sales team, leading to sales outperformance in 1H20. Galli suggested the momentum will last into 2H20. Shares were up strongly today (part short squeeze) next big resistance likely at HK$100. A number of broker upgrades. I have liked this stock for many years; difficult to recommend chasing here but certainly accumulate on pull backs. Also see todays FT Lex on Home Depot and Lowe’s which is again encouraging for the stock.
China consumed 682.4 billion KWh of electricity in July, +2.3% yearly, according to the data of National Energy Administration (NEA). Question is whether that was from increased domestic consumption with people stuck at home and running aircons or from a recovery in Industry?
Worldwide crude oil demand is set to slide more steeply in 2020 than its previous forecast under the coronavirus crisis, as OPEC wrote in a monthly report, who expected more overhangs in 2021's demand recovery. The uncertainties include unpredictable air travel demands, growing fuel-efficient vehicle market and escalating competition from other fuels, said the report.
The Confederation of All India Traders wrote for a proposed ban against Huawei and ZTE (763.HK) from the local 5G network development, said Indian report. The chamber has been strongly opposing any form of participation of Chinese enterprise in the Indian market.
China’s Ministry of Commerce announced to extend the anti-dumping duty on single-mode optical fiber imports from India from tomorrow (14th) for a period of five years.
TENCENT (700.HK)'s call conference, the executives stated that US President Donald Trump's executive order targets at WeChat only, instead of other American divisions of the company. The Chinese tech giant accentuated that WeChat in US is different from WeChat in China, while it is seeking further clarification on the order from the White House.

MSCI Index Changes
China A Index, announced addition of CH (601816.SH), Maxscend (300782.SZ) and PSBC (601658.SH) and the deletion of SHUI ON LAND (272.HK) and
MSCI Hong Kong Index announced addition of MICROPORT (853.HK) and deletion of NWS HOLDINGS (659.HK) therefrom, plus
MSCI Global Micro Cap Indexes quarterly review. Hong Kong Micro Cap Index did not add any stock, BUT deleted one, WAI HUNG GROUP (3321.HK) .
All the changes will take place as of the close of August 31, 2020.
CK ASSET (1113.HK) offered a bridging loan to GOLDIN FIN HOLD (530.HK), enabling the latter to refinance in mid-September for its $3.5 billion mezzanine loan due in April, Debtwire cited people familiar with the matter. The two companies have not responded to the relevant report.
MTR CORPORATION (66.HK) announced that it issued the US$1.2 billion 10-year Green Bond, carrying a coupon rate of 1.625% per annum. The issuance was well over-subscribed with an order book of over US$3.75 billion, allowing the final issue price to be tightened by 42 basis points from initial price guidance. Strong demand was seen from a diverse group of institutional investors and green investors in Hong Kong, Asia and Europe.
Hong Kong banks will see earnings pressure in 2020-21 under the COVID-19 epidemic, says Fitch Ratings. Except for OCBC Wing Hang Bank, Hong Kong lenders posted an operating profit slide of 20%-30% YoY in 1H20, given lower income and higher expected credit loss. Hong Kong saw sturdy capital and liquidity in the banking system, according to the report.
RUSAL (486.HK) interim results ended June 2020. Loss amounted to US$124 million, against US$625 million profit a year ago. LPS equaled US0.82 cents. No dividend was declared.
PSBC (01658.HK) (601658.SH) and MEITUAN-W (03690.HK) held a signing ceremony for their comprehensive strategic cooperation agreement in Beijing, whereby both sides debuted a PSBC-Meituan co-branded debit card.
ANTON OILFIELD (3337.HK) PROFIT WARNING supplemental announcement, expecting a loss attributable to the equity holders of RMB79.9-109 million for the six months ended 30 June 2020.
ESPRIT HOLDINGS (330.HK) PROFIT WARNING -VE The Company is expected to record a loss before interest and tax of approximately HK$3.4 billion and a net loss of HK$3.9 billion for the financial year ended 30 June 2020, against HK$2.08 billion and HK$2.144 billion for the same period of 2019.
QILU EXPRESSWAY (01576.HK) announced that the Company received a notification from Qilu Transportation, its controlling shareholder, that pursuant to the relevant requirements from Shandong SASAC on the Joint Restructuring, Qilu Transportation shall be merged and absorbed by Shandong Hi-Speed Group. After the Joint Restructuring, Qilu Transportation, a controlling Shareholder, will be changed to Shandong Hi-Speed Group, while Shandong SASAC shall remain the ultimate control entity.The company applied for a trading resumption with effect from this morning (13 August).
CMS (867.HK) results for the six months ended June 2020. Net profit amounted to RMB1.279 billion, up 9.4% yearly. EPS equaled 51.74 fen. Interim DPS was 21.05 fen, as compared with 18.83 fen a year ago.
CHINA RES LAND (1109.HK) announced that in July 2020, the Company and its subsidiaries achieved gross contracted sales of approximately RMB23.97 billion with contracted GFA of approximately 1.1338 million square meters, up by 89.5% and 57.4% YoY respectively. ALSO the Group acquired 7 land parcels in Hohhot, Xi'an, Shenyang, Ji'ning, Wuxi and Nanning with total gross floor area of approximately 1.4671 million square meters. The attributable land premium payable by the Group of the land acquisition amounted to approximately RMB8.07 billion.
CPIC (2601.HK) accumulated primary insurance premiums of China Pacific Life Insurance and China Pacific Property Insurance, both of which are subsidiaries of the Company, for the first seven months of 2020 was RMB148.543 billion and RMB88.911 billion, a change of -0.9% and +13.3% from the same period in 2019, respectively.
S-ENJOY SERVICE (1755.HK) interim results ended June 2020. Revenue was RMB1.222 billion, +42.7% yearly. Net profit amounted to RMB189 million, up 61.1% yearly.  EPS equaled 23 fen. No interim dividend was declared.GTJA (2611.HK) interim results for the six months ended 30 June 2019. Net profit grew 8.6% yearly to RMB5.454 billion. EPS equaled 58 fen. No interim dividend was declared.
TECHTRONIC IND (669.HK) results for the six months ended June 2020. Revenue was US$4.206 billion, +12.8% YoY. Net profit amounted to US$332 million, +16.3%. EPS equaled US18.14 cents. Interim DPS was HK53 cents, as compared with HK45 cents a year ago.

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