HK WRAP 15 June HSI -524pts SwireProps provision, Pony Ma sells more Tencent


HK WRAP 15 June HSI -524pts   SwireProps provision, Pony Ma sells more Tencent


HSI -524pts (-2.2%) 23,777  HSCEI -177pts (-1.8%) 9,656 T/O HK$128bn (-10.9% DoD).

Europe Markets opened down over 1.5% saw a bounce back but now look to be rolling over.

US Futures Opened -300pts but sold down mid day -922pts (Asian time) and are currently -624pts


INDEXES      

CSI 300 closed  -48pts (-1.2%) @ 3,955 Market opened lower on news of a Covid-19 outbreak in China and intially sold down as House Price Data came out in line with forecasts.  Markets then worked higher into the next data release which was mixed Retail Sales & Fixed Asset Investment missed small. Industrial Production and Unemployment were slightly better; the market after a small pull back worked better into lunch.  PM saw a huge sell off following the sell down in US futures; with initial support at 3,975 with a small bounce but unable to hold and then sold down to 3,960 bounced back to the 3,975 but again unable to sold a so continued selling;  to close at the day low.
Sentiment very cautious on the news of a new outbreak in Beijing, with the Chinese Global Times saying the virus was detected on cutting boards used for imported salmon; fuelling the idea the virus did not originated in China and was brought in by foreigners; another spin story?  Also of concern are the lack of fiscal schemes from the Government and news that the IMF intends to lower its forecasts at its upcoming report on June 24.  All that combined with news of increased tensions with India put investors on the back foot.

HSI Pre Market -310pts @ 23,991 vs -37pts ADR’s @ 24263 with a broad based sell off as US futures opened lower and sold down. News that the IMF intends to lower its forecasts further a concern for the implications on China’s exports.  The index then saw an initial rebound and worked higher in choppy trading to 24,232 around 10:20am; helped by the generally inline China data.  But then it sold down 240pts to 24,000 which may have been margin call selling because then it worked back to 24,150 at lunchtime.  PM saw another wave of selling; nearly 470pts in an hour to the day low of 23,685 as European traders awoke to the news which may have prompted some further margin selling.  Market then traded sideways into the close with a small 20pt uptick into the close.  There will probably be more margin selling on the open in Tuesday.
Sentiment for HK slightly hurt by news that another Global Advertising agency has withdraw from tendering for the job of re-launching HK on the international stage -VE

AHEAD After Swireproperties has warned about taking a provision for negative property revaluation expect the others to as well -VE.

Pony Ma continuing to sell down his stake in Tencent will the seen as -VE but he may just be diversifying his personal investment portfolio.


Short Selling HSI Monday 21.4% vs 20.7% Friday

Top Shorts Wharf REIC (1997) 38%, HSBC (5) 35%, Hang Seng Bank (11) 33%, MTRC (66) 33%, ICBC (1398) 31%, CLP (2) 31%, Ping An (2318) 29%, Want Want (151) 27%, CCB (939) 27%, China Shenhua (1088) 27%, Hang Lung Ppty (101) 27%, Sunny Optical (2382) 26%, NWD (17) 26%, Galaxy (27) 26%, China Res land (1109) 25%, Mengniu Dairy (2319) 25%


COMMENT 

*HK BANKS WEAK Concerns about the impact of the National Security Law on HK, despite Financial Secretary Paul Chan saying HK is seeing more capital inflows than outflows and has no plans to review its currency peg to the USD. Those inflows could just be due to current large IPO’s and companies repatriating money ahead of paying dividends. For me the more worrying aspect is individuals looking to diversify assets out of Hong Kong.HSBC (5 HK -2.1%) STAN CHARTERED (2888 HK -2.9%) HANG SENG (11 HK -0.2%) BOCHK (2388 HK -1.5%).

*FINANCIALS/BROKERAGES WEAK despite news after market Friday that the HSI Company would scrap a weighting limit for dual-class shares on some of its gauges, in a move seen as paving the way for more tech stocks to eventually join the benchmark. HKEX (388 HK -2.8%) CITIC SEC (6030 HK -3.2%) CGS (6881 HK -2%).

*HK PROPERTY WEAK A lack of primary launches over the weekend. Although the secondary market rose to a four-week high with 22 deals in 10 major housing estates over the weekend, +37.5% WoW. The fundamentals remain +VE with the low-interest-rate environment expected to continue to the foreseeable future. The 1-mth HIBOR slid for a 10th consecutive day to 0.56071%, the lowest since October 2017. An covid-19 concerns and protests also seem to have eased. But today I think was less about that and more just about selling liquid positions. HENDERSON LAND (12 HK -1%) CKA (1113 HK -2.8%) SHKP (16 HK -2%) NWD (17 HK -2.1%).

KERRY PROP (683 HK +0.2%) is reported to have pocketed around HK$580m from sales at its luxury project The Bloomsway in Tuen Mun; where it sold two units at the weekend

*CHINA PROPERTY WEAK despite China May home prices +0.49% MoM, compared to April’s +0.42% MoM; the news of a covid-19 outbreak prompted selling.

EVERGRANDE (3333 HK -2%) despite buying back 13.1m shs for HK$249.8m on June 12, paid HK$18.20-HK$19.42 a piece.

SUNAC CHINA (1918 HK -2.5%) CIFI (884 HK -2.9%) VANKE (2202 HK -2.6%) CH JINMAO (817 HK -4%).

*INSURERS WEAK after premium data and concerns about the wider investment environment.

PING AN (2318 HK -1.7%) gross premium income in the first 5 months -1% YoY to 382.8b yuan. YTD. Property & casualty insurance premium income of 119.7b yuan, and YTD Life and health insurance premium income 263.1b yuan.

CPIC (2601 HK -2.8%)/(601601 CH) confirms GDR offering price range on the LSE of $17.60 to $19.00 per GDR.

CH LIFE (2628 HK -2.6%) CH TAIPING (966 HK -3.3%) NCI (1336 HK -2.5%).

*AVIATION WEAK as China's civil aviation administration has issued first circuit-breaker to Southern Airline's route from Dhaka to Guangzhou for 4 weeks after 17 passenger were found to have positive nucleic acid test on the flight on Jun.11.

CEA (670 HK -2.7%) CSA (1055 HK -5.1%) AIR CHINA (753 HK -3.7%).

Airports also traded weak. BEIJING AIRPORTS (694 HK -4.3%) MEILAN AIRPORTS (357 HK -4.4%).

*OTHER MOVERS: 

CAFE DE CORAL (341 HK -3.5%) at lunchtime said profit attributable to shareholders -87.1% to HK$73.6m for the year ended 31 March 2020.

EVERGRANDE HEALTH (708.HK +37%) announced that it will purchase ~17.6% of the remaining equity of NEVS at a total consideration of US$379.5m, to wholly own NEVS, a subsidiary of the company located in Sweden, focusing on the fields of electric smart vehicle manufacturing, electric motor control, smart charging, and shared travel. JINMAO HOTEL (6139 HK +30%) after its parent China Jinmao Holdings offers to take it private at HK$4.80/unit.


CONNECT 

Shanghai

Northbound RMB 32,931m Sell 19,028m : 18,532m Buy

Southbound HK$ 8,672m Sell 4,072m : 5,048m Buy

Shenzhen

Northbound RMB 51,156m Sell 25,051m : 26,105m Buy

Southbound HK$ 8,171m Sell 3,226m : 4,945m Buy


DATA 

CHINA House Price Index May +4.9% YoY vs 5.1% Apr (F/cast was 4.9%)

Fixed Asset Investment (YTD) May -6.3% YoY vs -10.3% Apr (F/cast was -6.2%),

Industrial Production May +4.4% YoY vs +3.9% Apr (F/cast was +4.5%)

Retail Sales May -2.8% YoY vs -7.5% Apr (F/cast was -2.6%)

Unemployment May +5.9% vs 6% Apr (F/cast was 6.2%)

The fall in retail sales to me is a concern and will be watched closely. Also employment as a number of jobs may only be short term to deal with the back log of orders and may also be lower paid positions rather than more substantial positions


HONG KONG 

No data tomorrow after market Unemployment data

Centre for Health Protection said that as of 4pm today (June 15), the CHP was investigating three additional confirmed cases of coronavirus disease 2019 (COVID-19), taking the number of cases to 1,113 in Hong Kong so far (comprising 1,112 confirmed cases and one probable case).


Active Heavyweights
AIA (1299.HK) -3.1%
HKEX (388.HK) -3%
HSBC HOLDINGS (5.HK) -2.1%
TENCENT (700.HK) -1.7%
PING AN (2318.HK) -1.5%
ICBC (1398.HK) -1.4%
CCB (939.HK) -1%

HSI & HSCEI Constituents on the move
TECHTRONIC IND (669.HK) -4.9%
GALAXY ENT (27.HK) -4.8%
GUANGDONG INV (270.HK) -4.5%
SANDS CHINA LTD (1928.HK) -4.3%
SHENZHOU INTL (2313.HK) -4.2%
ANTA SPORTS (2020.HK) -4%
GEELY AUTO (175.HK) -3.7%
CITIC (267.HK) -3.6%
BYD COMPANY (1211.HK) +3.5%
CHINA RES BEER (291.HK) -3.3%
SHIMAO PROPERTY (813.HK) -3.3%
CHINA TAIPING (966.HK) -3.3%
MTR CORPORATION (66.HK) -3.2%
COUNTRY GARDEN (2007.HK) -3%

HSMI & HSSI Constituents on the move
MAOYAN ENT (1896.HK) -11.9%
XIABUXIABU (520.HK) -10.5%

REGIONAL MARKETS  

JAPAN Opened lower and initially traded sideways but sold down from midday as US futures dropped further.  The Tertiary Industry Index Apr-6% vs -4.2% Mar (F/cast was -14.3%) was better than forecast but had little impact on the market.

S KOREA Markets opened lower saw small bounce mid morning but then reverting and are trending lower.

TAIWAN Opened flat and sold down slightly before rebounding to flat and traded sideways but selling down; following the regional trend and US futures.


NEWS 

AFTER MARKET 
TENCENT (700.HK) Chairman Pony Ma Huateng reduced his stake further this year. According to the Stock Exchange, Ma unloaded a total of 9.6478 mn shares on market between 9-12 June, cashing in over $4.269 bn. His shareholding in the company cut to 8.42% from 8.52%.
Chief Executive Carrie Lam called for support for the Hong Kong National Security Law in a video clip, which is a minute and 10 seconds long. The clip will be played as an announcement in the public interest from tomorrow (16 June).  Lam stressed the legislation is aimed at punishing an extremely small amount of national security offenders. The law will neither undermine Hongkongers' rights and freedom in accordance with law, nor affect the city's business environment.  As the text of the law has not been revealed how can she say with certainty and if she does know the text why hasn’t it been revealed?
CAFE DE CORAL H (341.HK) to suspend dividend payment due to covid-19. CEO Lo said the COVID-19 outbreak, had eaten into past earnings and slashed annual earnings to around $74 million. Hong Kong has been seeing a weak consumer sentiment so far, without sales improvement during April and May.  Lo depicted the epidemic as the gravest challenge since listing, much worse than the SARS episode.  He also said it spends roughly $200 million per month on salary payment, and had signed up for the Employment Support Scheme, and the group may receive $80 million of monthly subsidy during the first three months. Staff wages have been frozen and his wage was cut by 36% while some workers were furloughed. As at end-March, average meal prices were brought down by $0.5, mainly attributable to various discounts offered at their menus.
CHINA SOUTH AIR (1055.HK)  in May 2020, the passenger capacity (measured by available seat kilometres) -52.94% YoY.  During the month, passenger traffic (measured by revenue passenger kilometres) -61.38% YoY.
CHINA TAIPING (966.HK)  gross premium income of its subsidiaries for the period from 1 January 2020 to 31 May 2020.  The income generated from Taiping Life Insurance was RMB 76.755bn, -0.83% YoY.  Taiping General Insurance RMB11.273bn +0.79% YoY and Taiping Pension RMB2.414bn,  +0.96% YoY
Beijing has been reporting additional COVID-19 infections since 11 June, Beijing Daily citing the municipal government's spokesman. The capital has quickly suspended the Xinfadi wholesale market and enforced closed-off supervision in neighboring communities. Beijing has also put the Yuquandong market and nearby communities under closed-off management, while activating the wartime emergency mode in the territory.
BABA-SW (9988.HK)'s Alipay said it will be distributing nationally applicable vouchers for 17 straight days beginning 1 July, totaling RMB10 billion.
SWIRE PACIFIC A (19.HK) May take a HK$4.3b provision It made an announcement to give further information about the financial performance of certain Swire Pacific group companies in the first half of 2020. Demand for oil has fallen significantly this year, principally as a result of COVID-19. Business conditions in the offshore supply industry and the outlook for the industry have deteriorated substantially. All this has a significant influence on the value of Swire Pacific Offshore’s fleet. Accordingly, a review of the carrying value of the fleet has been undertaken. As a result of the review, impairment charges currently estimated at approximately HK$4.3 billion are expected to be made against the consolidated profits of Swire Pacific for the first half of 2020. Swire Pacific Offshore is also expected to continue to make a recurring loss during the period.
SWIRE PROPERTIES (1972.HK) PROFIT WARNING expected a substantial decrease in the profit  for the six months ending 30th June 2020, as compared to the same period in 2019. It is expected that there will be a loss on revaluation of investment properties, net of deferred tax, of HK$2.6 bn in the first six months of 2020, compared with a profit on revaluation of investment properties, net of deferred tax, of approximately HK$3.6 billion in the first six months of 2019.
KEY expect other property investment companies and even the developers to be considering taking provisions against negative property revaluations

MARKET HOURS 

Hong Kong Tourism Board announced the preliminary tourist figures for May. The number of arrivals totaled 8,139, down 99.9% YoY and equivalent to roughly 260 in daily average. -VE for the Hotel Sector.
Jockey Club Mulls Resuming 1 Mark Six Draw/Week in Mid-Jul  That would be a significant sign that the government believes the worst is over, as Mark Six is known to be a tax on the lower income earners who spend more, as a proportion of their earnings ,on Mark Six, its early cancellation was seen as a way of helping lower income groups save money.   
HSBC has so far approved over 10,000 cases of principal moratorium and other deferred repayment measures for enterprises, aggregating $120 billion of loan amount, Terence Chiu, Head of Commercial Banking for Hong Kong at HSBC.  The deposit and loan businesses of commercial banking of the bank has been relatively sturdy with healthy asset quality, Chiu stated.
CAFE DE CORAL H (341.HK) results for the year ended 31 March 2020. Net profit -87.1% YoY to HK$73.634mn with EPS of HK$0.13. No final dividend was declared.
TENCENT (700.HK)'s mobile game PUBG Mobile reaped US$106 million of revenue in American region in May, up 33% yearly or 14% monthly, according to the surveyor report of Sensor Tower. The scale of overseas users whopped nearly 600 million.
Manulife Hong Kong  launched  a ‘Virtual Face-to-Face’ agency sales platform for all Manulife individual insurance products in Hong Kong, except investment-linked assurance schemes, making it among the first wave of insurers approved to do this in the market. The sales process requires no physical meeting or wet-ink signature, offering unparalleled convenience and security.  Starting from June 15, Manulife’s individual insurance products ranging from life insurance, savings and retirement plans, to critical illness and other medical protection will be available to customers through this insurtech solution.
HUTCHTEL HK (215.HK) CEO Koo Sing Fai told Hong Kong Economic Journal that 3HK plans to introduce 5G network-based 4K live broadcast solution. While the solution will not turn out a major income source for this year, it will be one of the growth drivers for HUTCHTEL HK in the future, furthered Koo.
Overnight HIBOR last posted at 0.12018%, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.55%, down for 12 days, marking a 1-month low.
HKEX (388.HK). On the 20th listing anniversary revealed that the listed company market capitalisation burgeoned from $4.86 trillion in 2000 to $33.98 trillion at a 10% CAGR.   The number of listed companies ballooned from 790 to 2,482 during the period. Cash market ADT increased from $12.7 billion to $115.9 billion at a 12% CAGR. Derivatives market ADV surged from 37,500 contracts to 1.1832 million contracts.
Charles Li praised on his blog that the Stock Exchange has made its foray out of Hong Kong and Asia, and cemented its top three position among global exchanges in terms of total market cap.  Although the dualization of US-China tussles seems to reach a point of no return, both the world and China cannot detach from each other nowadays, in particular the investment market. Li envisaged that the liberalization of Chinese capital market will not alter no matter how the US-China row pans out. Moreover, the free exchange of RMB and progression of RMB internalization will not stall and reverse.  Let's hope he’s right.  
CHINA MER PORT (144.HK) after the shareholders' meeting, Chairman Deng Renjie disclosed that the performance during the first five months of 2020 remained flattish yearly, mainly attributable to the contribution from newly acquired portals, and anticipated FY20 performance to stay stable. The company has never considered privatization, furthered Deng, and he has no clue where the news is sourced from. Listed in Hong Kong for long, CHINA MER PORT will go on fully leveraging on the capital platform here to develop and expand.
Airport Authority Hong Kong (AA) announced the traffic figures for Hong Kong International Airport (HKIA) for May 2020.  During the month, freighter movements continued to surge, +29.3% YoY. Cargo throughput -6.8% to 377,000 tonnes YoY  The COVID-19 pandemic continued to impact passenger volume -99.4% YoY to 35k and flight movements -68.7% YoY to 11,355 flight movements.
HNA had in 2015 acquired a high-rise duplex at 39 Conduit Road from HENDERSON LAND (12.HK) with $430 million, Ming Pao reported. Yet, the property was recently taken over by PwC. Besides, HNA Chairman Chen Feng resigned as the director of Sihon Company Limited, which held the said property. The above incidents proved that HNA may be unable to repay the second mortgage, so that the property has to be retrieved by the mortgagee.
NTES-S (9999.HK) has 2.049 bn shares in CCASS in Hong Kong, representing 59.75% of the issued share capital of the company, as revealed by the CCASS. The market cap of the stock in Hong Kong was valued at least $263.3 billion based on its shareholding in CCASS and closing price of $128.5 last Friday. By harboring a large batch of stocks in Hong Kong, NTES-S can not only convert more ADS into ordinary H shares, but can also amplify its market cap in Hong Kong, making the stock eligible to join blue chip family as soon as possible, as the market perceived.
Hong Kong Disneyland theme park announced that it will officially reopen to the public on June 18, 2020. The park reopening will demonstrate a deliberate approach with new and enhanced health and safety measures, reflecting the guidance of health and government authorities. During this initial reopening phase, all guests, including park ticket holders, Magic Access members and complimentary ticket holders, will be required to make a reservation for their visit date with their valid tickets or membership cards through the Hong Kong Disneyland Park Visit Reservation website.
Former CHINA LIT (772.HK) Co-CEO Wu Wenhui dumped 10mn shares of the company off the market last Friday (12 June), cashing in about $455 million, revealed by HKEX. His shareholding in the company fell from 2.67% to 1.68% afterwards.
The US is in talks with Brazil and its local telecoms firms on funding their purchases of 5G equipment produced by Ericsson and Nokia, in attempt to impede Huawei's entrance, according to foreign reports.The subsidies are a matter of national security to Washington, who hopes to protect data, intellectual property and sensitive information linked to nation security, the US Ambassador to Brazil was quoted as saying.
MTR CORPORATION (66.HK) said that the domestic service patronage totaled 97mn passengers in May 2020, +30.1% MoM but -32% YoY which extended the losing streak to the 11th month.
Secretary for Food and Health, wrote on her blog that the public should get prepared for the coexistence of novel coronavirus for a protracted period as epidemiology experts expected the fatal respiratory disease not to fade away soon. Yet, the Government may conditionally relax the gathering ban on a gradual basis, such as revising up the upper limit on the number of group participants, should the situation go on muted, added Chan.
Bitauto, the parent company of YIXIN (2858.HK) said that it entered into a privatization agreement with a buyer consortium formed by TENCENT (700.HK) and Hammer Capital. The consortium would acquire Bitauto share at a cash price of US$16 per ADS with the transaction amount of US$1.1 billion. Upon completion, Bitauto will exit the New York Stock Exchange.  Trading in the shares of YIXIN on The Stock Exchange of Hong Kong Limited has been halted with effect from 9:00 a.m. on June 15, 2020 pending the release of an announcement pursuant to The Hong Kong Code on Takeovers and Mergers and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.
The People's Bank of China (PBOC) announced that it commenced the Medium-term Lending Facility (MLF) of RMB200 billion today with a bidding interest rate of 2.95%.

PRE MARKET

C TRANSMISSION (658.HK) said Non-executive Director Yuen Chi Ping is currently under an investigation in relation to an alleged offence or offences under the Prevention of Bribery Ordinance by the Independent Commission Against Corruption of Hong Kong (ICAC).

ZHONG AO HOME (1538.HK) to place 36.928mn shares, representing 4.32% of the share capital of the Company as enlarged. The subscription price of HK$0.98 per share represented a discount of 16.24% to the closing price last Friday (12 June). The aggregate net proceeds are estimated to be approximately HK$36 million.

China Securities Regulatory Commission announced amendments to the shareholding regulation on securities firms, whereby the qualification threshold on major shareholders is lowered and the valuation adjustment mechanism is prohibted. In particular, the definition for key shareholders is changed to "a shareholder with 5% or more shareholdings in a broker", versus the previous "the shareholder with more than 25% stake in a broker or  the first substantial shareholder with more than 5%".  Meanwhile, a key shareholder is no longer required to show sustainable profitability.

CSA to Halt Dhaka-Guangzhou Flight from Next Mon; 17 Passengers Tested Positive for COVID-19  The 17 passengers on a China Southern Airlines flight CZ392 from the Bangladeshi capital of Dhaka to Guangzhou had tested positive for COVID-19 on 11 June, meeting the "circuit breaker" conditions for flight suspension, reported Xinhua. Civil Aviation Administration of China decided to halt the route for four weeks from 22 June.

CHINA SHENGMU (1432.HK)  +VE PROFIT ALERT  expecting a profit attributable to equityowners for the six months ending 30 June 2020 of not less than RMB130 million (the unaudited net loss attributable to equity owners for the six months ended 30 June 2019 was RMB73.5 million).

Hong Kong unemployment rate is set to climb higher from April's 5.2% and very possibly beyond the peak set during Financial Tsunami 2009, Financial Secretary Paul Chan wrote on his blog. While the $10,000 cash distribution is opening for registration from 21 June, Chan reminded the public that it is not necessary to register on the first day as all residents successfully registered on 21-30 June will receive the monies on 8 July.

Huawei Forgoes Handset Mkt Shr for Samsung Chips: Rumors.  A further US ban on Huawei has cut off TSMC's chip supply to the Chinese telecom company, reported foreign media. Hence, Huawei intends to give up its smartphone market share to Samsung in exchange for the latter's 5G base station chipsets. Huawei opts for saving its telecom business by sacrificing the smartphone unit, given its contracts to deliver 600,000 5G base stations, according to the report.

CHOW TAI FOOK (1929.HK) announced that Chow Tai Fook (Holding) Limited (CTFH) had on 12 June 2020 distributed all its shares in the Company by way of a distribution in specie. As a result, CTFH has ceased to hold any shares in the Company and Chow Tai Fook Capital (CTFC), the immediate holding company of CTFH, now holds approximately 72.4% of the total number of issued shares in the Company.

ICBC (01398.HK) (601398.SH) announced that the bank had signed a strategic partnership  agreement with Vestate Group in Beijing, aiming to further deepen their collaboration in serving national strategies and supporting SOE reform.

CN Health Expert: Beijing Not Need Lockdown; Virus Allegedly Mutated from Europe's Virus.  The virus samples from two diagnosed patients who had been to Xinfadi market were found seemingly not to be a local virus, said Zeng Guang, a senior member of National Health Commission.Instead, it should according to preliminary findings to be mutated from Europe's coronavirus. However, Beijing will not escalate into another Wuhan or need any lockdown measures, as its virus will unlikely spread rampantly across the country, opined Zeng.


Feedback and questions welcomed