Aug 7 HK WRAP HSI -399pts @ 24,532. T/O +30% DoD

11 Aug

Aug 7 HK WRAP HSI -399pts @ 24,532. T/O +30% DoD

HSI -399pts (-1.6%) 24,532  HSCEI -139pts (-1.4%) 10,063  T/O HK$177.82bn (+30.8% DoD)  

EUROPE mixed open but initially trending lower; currently in the red; caution on Trumps latest escalation vs China and the jobs report.
US Futures opened flat but then sold down (Dow -175pts) after Trump moved to ban TikTok and WeChat in the US. expect a weak open ahead of jobs and wholesale inventories data.

EARNINGS Noble Energy, Virtu Financial, Berkshire Hathaway

CSI 300 Closed -55pts (-1.2%) @ 4,708
Market opened lower as US/China tensions increase and traded sideways for the first 30 mins then sold down ahead of the Trade data. It was better than expected and prompted more selling into lunch; probably as it reduces the expectations of more stimulus. PM saw initial selling down to 4,640 level but then bounced but short of the morning opening level and then eased into the close. Yuan weaker, dropped as much as 0.3%, the most in two weeks.

HSI Pre Market Opened -21pts @ 24,909 vs -109pts ADR's at 24,821 with Tencent +VE but other E-Commerce names weak. Cheung Kong names weak after earnings disappointed. PCCW strong. Market initially traded sideways around 24,800 level for 40 minutes but then sold down and traded around 24,500 level. Sold down to 24,170 after the China traded data.
PM seeing the market work slightly higher and traded sideways through the afternoon. T/O increased significantly +30% DoD a negative indicator. Expect margin call selling on Monday. Key for HK is that 25k is now becoming a serious resistance. Trumps move on Tencent and his comments about the HK market may mean more sanctions are coming Hong Kong’s way -VE. Tencent was -5% today but off lows after Trump said WeChat to be banned in US in 45 days time.

ByteDance expressed that it is astounded by US President Donald Trump's latest executive order, 
which it claims not to be executed under legal procedures, and that it will file a lawsuit in the US in case of any unfair treatment. Trump has recently signed an order, beginning in 45 days, to ban transactions of US companies with TikTok's parent ByteDance and TENCENT (700.HK)'s WeChat.
TENCENT (700.HK) is looking at the latest executive order signed by US President Trump, which will in 45 days ban transactions of US companies with TikTok's parent ByteDance and WeChat, said a spokesperson. On the news, TENCENT -5.04% today to $527.5 at close.
Centa-City Leading Index (CCL) last printed at 180.74, down 0.52% weekly. The index shed 0.57% in two weeks.
CCL Mass sagged 0.8% weekly to 183.52.
CCL (small-and-medium units) sank 0.71% weekly to 181.03, reflecting the new anti-plague measures for the week as in mid-July.
CCL (large units) climbed 0.47% weekly to 179.24, setting a 36-week high.

Market and Pre Market News at bottom of page.

Regional Markets
opened lower despite good Household spending data pre market. It has trended lower into lunch. Average cash earnings missed but Foreign Exchange Reserves, Coincident Index and Leading Economic index all beat. PM saw seen a small uptick in the PM session to close -0.4% Market closed Monday so there was general caution ahead of the long weekend and tonights US data.
S KOREA markets opened higher Kosdaq initial sold down into the red, rebounded but couldn’t break above yesterday’s close. Retested support and then worked higher to close +0.4%. Kospi initially rallied before trending lower, sold down into the red but the worked back to close +0.4%.
TAIWAN opened lower saw some early selling then drifted sideways for the rest of the day with caution ahead of the weekend to close -0.7%

Short Selling HSI Friday 14.8% vs 17.9% Thursday
Top Shorts 
Hang Seng Bank (11) 48%, CLP (2) 47%, MTRC (66) 37%, HK & China Gas (3) 36%, China Mobile (941) 34%, Petrochina (857) 33%, China Res Land (1109) 33%, Sunny Optical (2382) 32%, Mengniu Dairy (2319) 31%, CK Assets (1113) 30%, Swire Pac A (19) 29%, CCB (939) 28%, China Shenhua (1088) 28%, Power Assets (6) 28%,CKI (1038) 28%, Bank of China (3988) 27%, Ping An (2318) 25%.

CONNECT FLOWS (Northbound little change DoD, increase was in the Southbound)
Northbound Rmb 52,923m Sell 27,726m : 25,198m Buy
Southbound HK$ 18,791m Sell 6,855m : 7,728m Buy

Northbound Rmb 72,227m Sell 35,781m : 36,447m Buy
Southbound HK$ 16,040m Sell 7,167m : 8,873m Buy

CHINA At 11am

Balance of Trade Jul $62.33b vs 46.42b Jun (F/cast was $41.9b)
Exports Jul +7.2% vs +0.5% Jun (F/cast was 1%)
Imports Jul -1.4% vs +2.7% Jun (F/cast was +1.5%
It was the fastest growth in exports in seven months, amid further improvement in global demand as more countries lifted COVID-19 lockdown restrictions. Demand for virus-related medical products, and electronic products, has helped China sell more products overseas.
After market Foreign Exchange Reserves Jul $3.154tn vs 3.112t Jun (F/cast was 3.12t)

After market
Foreign Exchange Reserves Jul $450b vs 445.9b Jun (F/cast was 447.5b)
Centre for Health Protection said there were 89 additional COVID-19 cases in Hong Kong today; (vs 95 cases Thursday).
81 of which were local infections, in addition to 50 initially diagnosed cases.

Active Heavyweights

TENCENT (700.HK) -5%
CCB (939.HK) -1.2%
HKEX (388.HK) -0.9%
PING AN (2318.HK) -0.7%
AIA (1299.HK) -0.6%

HSI & HSCEI Constituents on the move
CK ASSET (1113.HK) -7%
SUNAC (1918.HK) +4.4%
CITIC SEC (6030.HK) -3.8%

HSMI & HSSI Constituents on the move
HAICHANG HLDG (2255.HK) +19.3%
PCCW (8.HK) +9.1%, hitting new high
CNBM (3323.HK) +8%, hitting new high
IGG (799.HK) +6.5%, hitting new high
BYD ELECTRONIC (285.HK) +5%, hitting new high
CHINA EDU GROUP (839.HK) +4.8%, hitting new high

after recent gains as uncertain economic outlook overshadowed signs of recovery. Iraq will cut output in August by an additional 400,000 barrels a day, while Saudi Arabia cut pricing for its main oil grade, Arab Light, to Asia for the first time in four months as OPEC+ supplies rose. CNOOC (883 HK +1.6%) PETROCHINA (857 HK -2.1%) SINOPEC (386 HK -1.1%) CH OILFIELD (2883 HK -2.5%).
*CHINESE FINANCIALS WEAK as the virus-hit economy faces its slowest expansion in four decades. Baoshang Bank to be liquidated the fist time in 20 years -VE for smaller lenders. It is also reported that authorities are doubling down on pressure to get the nation’s biggest state-owned financial groups to reduce salaries in a bid to boost returns, although the banks said no intention to cut salaries at present. ICBC (1398 HK -0.9%) CCB (939 HK -1.2%) CMB (3968 HK -1%) BOCOM (3328 HK -1.4%).
INSURERS weak as the market sold down, CH LIFE (2628 HK -1.7%) NCI (1336 HK -1.1%).
*E-COMMERCE/SOFTWEARS WEAK as TENCENT (700 HK -5%) but off the -10% intraday after the news of WeChat ban hurt confidence. Microsoft plans to offer US$30b to acquire TikTok is below a market valuation of US$40b, according to news.
ALIBABA (9988 HK -3%) KINGSOFT (3888 HK -4.2%) JD.COM (9618 HK -3%). BUT IGG (799 HK +6.5%) after strong earnings beat.
*TECH & COMPONENTS WEAK as investors' de-risk ahead of fresh China/US tension related to the banning of Chinese tech companies doing business in the US.SMIC (981 HK -8.7%) despite record earnings of US$138m in 2Q, while revenue +3.7% QoQ to US$938.5m, slightly lacked estimates. HUA HONG (1347 HK -6.1%) FIT HONG TENG (6088 HK -4.8%) XIAOMI (1810 HK -3.1%) ZTE (763 HK -2.8%).
PCCW (8 HK +9%) reported 1H loss HK$584m, but Chairman Richard Li makes conditional voluntary cash partial offer to qualifying shareholders to buy 154.6m shares at HK$5.20 each, and co. declares special dividend of 85 PCPD shares for every 1,000 PCCW shares.
SUNAC (1918 HK +4.4%) proposes spinoff, separate HK listing of SUNAC SERVICES, which provides prop mgmt and value-added services. CK ASSET (1113 HK -7%) after 35% dividend cut after reported 1H underlying net profit -35.5% YoY to HK$8.37b. CKH (1 HK -2%) after 1H net profit fell 29% to HK$13b.
HANGZHOU TIGERMED (3347 HK) +13.3% on debut vs IPO HK$100.

Chief Executive Carrie Lam said a universal COVID-19 test may be mounted within two weeks the quickest
. Given the enormous scale covering million of residents, Hong Kong government had requested the Chinese government to provide assistance. Three national-level testing services will be rendered through BGI, KingMed and Hybribio. The site for testing is set at Sun Yat Sen Memorial Park Sports Centre, where a laboratory will be set up for mainland personnel to conduct testing. The universal COVID-19 test will be run based on five principles: protecting people's privacy, ensuring social distancing, facilitating the public, assuring safety and order of the procedure and completing procedure within a short duration. The public could choose to take the test voluntarily.
Yum China, the biggest caterer in China, is seeking regulatory approval for a second listing in Hong Kong as soon as September, Bloomberg reported. The company runs outlets in the country of U.S. brands including KFC, Pizza Hut and so on. Expected to raise US$2 billion in second listing in Hong Kong, Yum China has submitted a listing application secretly.
TikTok said the company is working with engineers on the methods of splitting off user data for protection as concerns about consumer services and national security are bubbling up. The company said it keeps paying heed to and restricting types of data collection, and believed it may ally with third party(ies) for reliable services to cater social and government demand.
TikTok's four major competitors saw their collective U.S. market installs up by 361% weekly in the last week in July while the Chinese video-sharing app was maneuvering to avoid the U.S. ban, Sensor Tower wrote in a report. Triller, Zynn, Dubsmash and Byte collectively saw nearly 1.5 million downloads during the week.
USD/ CNY dived 235 bps or 0.34% to last at 6.9676, compered to the closing price of 6.9441 yesterday, as US President Donald Trump signed an executive order to ban Chinese tech firms which aroused market concern. USD/ CNH slumped over 300 bps to last at 6.9676 after bottoming at 6.9747.
Beijing has warned Tokyo that a ban on TikTok will cast a large impact on bilateral relations, TBS citing insiders. Lawmakers in Japan’s ruling Liberal Democratic Party have decided to take steps to restrict TikTok for concerns that user data may end up in the hands of Chinese government, according to the report.
US President Trump on 6 August executed an executive order, beginning in 45 days, to ban transactions of US companies with TikTok's parent ByteDance and WeChat's parent TENCENT (700.HK), foreign media reported. -VE. He also signed an executive order fostering production of American drugs and medical equipment as well as drug price cut, reported Reuters. The order aims to prevent shortage of medicines in the pandemic going ahead.
A group led by China Resources Capital Management (CR Capital) is to acquire 65% of City’super, reported Bloomberg. CR Capital and a private equity firm will buy a 65% stake in City’super from vendors including The Fenix Group and The Lane Crawford Joyce Group (owned by Wheelock Chair Peter Woo), according to an email statement. The consideration has not been disclosed.

The Government announced that a series of measures will be implemented promptly to reduce the health risks faced by foreign domestic helpers
(FDHs) staying in boarding facilities of employment agencies (EAs) and reduce the risk of transmission of COVID-19 in the community.
SMIC (981.HK) raised its 2020E capex guidance from US$4.3 billion to US$6.7 billion mainly for boosting production capacity of advanced industries and capacity expansion of mature sectors, revealed CFO Gao Yonggang at a conference call. SMIC projected a higher GPM year-on-year, aside an EBITDA of US$1.8 billion.
BEIGENE (6160.HK) interim results ended June 2020. Loss deepened to US$699 million from US$253 million a year ago. LPS equaled US$0.69. No dividend was declared.
Financial Services and the Treasury Bureau (FSTB) said Hong Kong has always been and will continue to be the top fundraising platform for global enterprises as well as a competitive international financial hub. It furthered that the metropolitan city has topped the world's fundraising markets for seven times in last 11 years. The remarks came after US President Donald Trump's earlier statement that the US stock exchanges will recapture more businesses after ceasing special treatment to Hong Kong. For 7M20, Hong Kong pooled funds of $132.1 billion, the Bureau said. The ADT of Hong Kong stocks surged over 40% yearly to $124.8 billion, displaying recognition and confidence of international investors to Hong Kong's financial regime. The key here is that Hong Kong success is heavily dependant on US funds having access to the market and to Chinese companies. IF Trump were to impose restrictions on US funds investing in Chinese companies that would have a significant impact on Hong Kong’s market and status.
PCCW (8.HK) announced that Li Tzar Kai, Richard proposed conditional voluntary cash partial offer to qualifying shareholders through his Trade Champion to acquire approximately 155 million shares of the company, representing approx 2% of the issued share capital. The aggregate cash consideration payable by the Offeror under the Partial Offer will amount to approximately $803 million. Each Qualifying Shareholder will receive a payment of $5.2 in cash for every Share, a premium of 15.81% over the closing price as quoted on the Stock Exchange on the Last Trading Day. A key rationale for the Partial Offer is to provide the Company with greater flexibility to manage its capital structure.
A consortium led by HENDERSON LAND (12.HK) is seeking further funding for a Yau Tong Bay residential project, Bloomberg citing sources. The group comprises Wheelock, NEW WORLD DEV (17.HK), SHK PPT (16.HK), HANG LUNG PPT (101.HK and Central Development. The consortium is seeking a 5-year non-recourse loan of around $20 billion for Yau Tong Bay Comprehensive Development Area.
WYNN MACAU (1128.HK)'s controlling shareholder, Wynn Resorts, Limited, announced the results for the first half ended 30 June 2020. Operating revenues for Macau Operations declined 78.99% year-on-year to US$510 million.
China Banks Say No Plan to Cut Wages; ICBC (1398.HK) (601398.SH), ABC (1288.HK) (601288.SH), BANK OF CHINA (3988.HK) (601988.SH) and CCB (00939.HK) (601939.SH) said they have not had plan to cut salaries of its staff so far, in response to wage problem.
In the financial policy execution report for 1H20, Chinese Ministry of Finance (MOF) said China will encourage expansion of equipment upgrade and investment in technology innovation; prompt optimization of traditional manufacturing industry; support strategic construction of key sectors; draw capital and resources to strategic industries and move industrial chains towards mid-to-high end.
CSC (6066.HK) noticed that in the afternoon of August 6, there was market rumor with regard to the change in the duties of key person-in-charge of the Company and the merger of the Company with other securities companies. The company clarified in an announcement that the aforementioned rumor is false, and currently, there is no information that should have been disclosed but has not been disclosed.
MGM CHINA (2282.HK) interim results for the six months ended June 30, 2020. Loss decreased significantly from a profit of HK$1.022 billion for the six months ended June 30, 2019 to a loss of HK$2.86 billion for the six months ended June 30, 2020. This decrease was attributable to the substantial reduction in activity in the first half of 2020 as a result of the COVID-19 pandemic related closures and restrictions. LPS equaled HK75.3 cents. Adjusted EBITDA loss was HK$1.008 billion. The Board does not recommend an interim dividend payment for the six months ended June 30, 2020.
SUNAC (1918.HK) proposed to spin-off and separately list the shares of Sunac Services, a property management subsidiary, on the Main Board of the Stock Exchange by way of the Global Offering and the Distribution of a minor portion of the Sunac Services Shares to the Shareholders. The Stock Exchange has confirmed that the Company may proceed with the Proposed Spin-off.
COWELL (1415.HK) results for the six months ended June 2020. Net profit reached US$28.16 million, up 33.6 times yearly. EPS equaled 3.4 cents. No interim dividend was declared.
GEELY AUTO (175.HK) total sales volume of the Group for the month of July 2020 was 105,218 units, an +15% YoY but -4% MoM The total sales volume in the first seven months of 2020 was 635,664 units, a decrease of 14% from the same period last year, and achieving 45% of the Group’s full year sales volume target of 1.41 million units in 2020.
CCB (939.HK) recently received the Approval from the China Banking and Insurance Regulatory Commission in respect of the Issuance of Tier-2 Capital Bonds by China Construction Bank, pursuant to which the Bank has been approved to publicly issue tier-2 capital bonds of an amount not exceeding RMB66 billion in the domestic inter-bank bond market.

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