June 12 WRAP HSI -179pts, T/O -19%, Shorts rise to 21%


June 12 WRAP HSI -179pts, T/O -19%, Shorts rise to 21%


HSI -179pts (-0.7%) 24,301  HSCEI -112pts (-1.1%) 9,833 T/O HK$115.43bn (-19% DoD).

Europe Markets opened lower and have trended higher and now trading in the green

US futures opened higher and have gradually worked higher through the day, currently +480pts with the S&P and Nasdaq also indicating a higher open


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Shanghai

Northbound RMB 37,795m Sell 19,263m : 18,532m Buy

Southbound HK$ 9,342m Sell 4,293m : 5,048m Buy

Shenzhen

Northbound RMB 49,811m Sell 24,987m : 24,824m Buy

Southbound HK$ 7,820m Sell 3,400m : 4,421m Buy


Short Selling HSI Friday 20.7% vs 19.3% Thursday

Top Shorts Hang Seng Bank (11) 42%, Wharf REIC (1997) 38%, Hang Lung Ppty (101) 38%, HSBC (5) 34%, Sino BioPharm (1177) 34%, ICBC (1398) 33%, HK & China Gas (11) 33%, China Res land (1109) 31%, Link REIT (823) 29%, Bank of China (3988) 29%, Country Garden (2007) 27%, NWD (17) 24%.


DATA CHINA 

No data but on Monday we get House Price Index on the open, then at 10am; NBS press conference, Fixed Asset Investment (YTD), Industrial Production, Retail Sales and Unemployment; all expected to show MoM improvements.

HONG KONG After Market 

Industrial Production Q1 -4.6% YoY vs -0.5% Q4 (F/cast was -1.5%)

It was the largest decline in manufacturing activity since the last quarter of 2009, amid the coronavirus pandemic. Output dropped in paper products, printing & reproduction of recorded media (-4.2% vs 1% in Q4 2019); Miscellaneous manufacturing industries (-1.8% vs 0.7%). Production of food, beverages and tobacco fell further (-10.1% vs -1.9%). In contrast, output decreased less for metals, computers, electronics & machinery (-3.2% vs -0.8%) while rose at a faster pace for textiles and wearing apparel (0.8%vs 0.5%).

Centre for Health Protection said there was 1 new local COVID-19 case


INDEXES      

CSI 300 closed  +7pts (+0.2%) @ 4,003 Opened lower but worked steadily higher through the day to the day high around of 4,008 around 2pm. Then eased back before rallying into the close.  No data today but concerns about China/India border dispute as China sends more troop to the area which adds to worries about US/China tensions. I think Team China was active today ahead of Monday’s data House Price Index on the open, then at 10am; NBS press conference, Fixed Asset Investment (YTD), Industrial Production, Retail Sales and Unemployment; all expected to show MoM improvements.

HSI Pre Market -559pts @ 23,920 vs -589pts ADR’s @ 23,891 with a broad based sell off. Market then worked higher to the 24,250 level and effectively traded sideways for the rest of the day.  Interesting not see see significant margin call selling which reflects that a lot of margin is tied up in forth coming IPO’s and that traders are being far more cautious.
Talk by US Treasury Sec Mnuchin about possible curbs capital flow I think should be rising warning flags about Trumps next action regarding the Chinese imposing a national security law on China and the secondary listing of Nasdaq listed Chinese companies; I would suggest that investors hedge their positions.

Active Heavyweights
HSBC HOLDINGS (5.HK) -1.5%
CCB (939.HK) -1.3%
ICBC (1398.HK) -0.8%
PING AN (2318.HK) -0.6%
HKEX (388.HK) +0.6%
TENCENT (700.HK) -0.3%
AIA (1299.HK) +0.1%

HSI & HSCEI Constituents on the move
CNOOC (883.HK) -4.6%
BYD COMPANY (1211.HK) -3.5%

HSMI & HSSI Constituents on the move
NEW HIGHER EDU (2001.HK) +5%, hits new high
WEIGAO GROUP (01066.HK) +4.3%, hits new high


REGIONAL MARKETS
  Weak but saw buying/bargain hunting from investors that have been waiting for a pull back.

JAPAN opened lower and initial traded sideways. Data out mid morning was weak and missed but the index saw buying; and worked higher for the rest of the day to close -0.75%

S KOREA Markets Kospi opened lower but worked higher; closed Kosdaq -1.45%, Kospi -2%

TAIWAN opened lower and worked higher through the day closed at -0.9%


AFTER MARKET 
The listing review committee of Sci-tech Innovation Board in Shanghai passed the IPO application of Ninebot on the Board, with XIAOMI-W (1810.HK) as one of the substantial shareholders through People Better. Upon the effectiveness of the registration at China Securities Regulatory Commission (CSRC), Ninebot will become first red-chip CDR (Chinese Depositary Receipt) of the Board and A shares.
JD-SW (9618.HK)'s self-owned automobile brand, Jauto, logged an all-time high in turnover again in June by growing 77% yearly.  The brand had earlier launched ten new products, including motor oil, start-stop battery and tire, to further enrich its product lines. 
PHOENIX TV (2008.HK) said  that Liu Changle, the chairman and substantial shareholder of the Company, through Today’s Asia, bought in the market an aggregate of 2.2 mn shares between 9-11 June 2020.
China's mobile game market in May, grew 11.9% MoM to a scale of RMB17.68 billion, meaning the YTD growth momentum is continuing, according to Gamma Data's report.  TENCENT (700.HK)'s Honor of Kings remained the top-grossing title during the month, followed by PUBG Mobile. BABA-SW (9988.HK)'s Three Kingdoms Strategic came as the third. 
NTES-S (9999.HK) Hang Seng Indexes said it meets the Fast Entry Rule of the Hang Seng Composite Index, it will be included to Hang Seng Composite Industry Index - Information Technology, Hang Seng Composite LargeCap Index and Hang Seng Composite LargeCap & MidCap Index under Hang Seng Composite Index; as well as Hang Seng Internet & Information Technology Index.  The changes of relevant indexes will be made after market close on 24 June 2020. All changes will come into effect on 26 June 2020.
SUCCESS UNIVERSE (487.HK) business tumbled at least 90% since the COVID-19 outbreak, said Deputy Chairman Ma Ho Man, Hoffman. However, it started improving last month and had returned to around 20% of normal levels. It is paying roughly tens of million dollars of monthly expenses with barely any revenue. Still, Ma emphasized that the firm's cash flows are healthy and free of pressure.  Regarding is relationship with SJM (880.HK) it has worked smoothly for more than a decade, without any impact or change in arrangement at the moment. He expects the Macao government to reopen its border in phases, hence seeing little chance of reviving last year's results. However, he was confident in the market improvement in the second half of year, adding health code would be the first step towards the Guangdong-Hong Kong-Macao border reopening.
PROPERTY All of the four major CCL indices declined this week following a two-week uptrend, as  sentiment towards the housing market was briefly undermined by the flare-ups of social unrest.  Looking ahead, they expect an upswing struggle of home price trend. The ramifications from the Fed's unchanged interest rate decision and easing policy until end-2022 will impact Hong Kong's housing prices and begin to be reflect on the CCL in early July 2020.
CCL last posted at 178.64, down 0.89% weekly. 
CCL Mass last stood at 182.23, down 0.89% weekly. 
CCL (small-and-medium units) last reported at 179.84, down 0.82% weekly. 
CCL, CCL Mass and CCL (small-and-medium units) eased back after a four-week upswing. CCL (large units) last printed at 172.30, down 1.3% weekly, which also softened after two-week rise. 

MARKET HOURS 

SA SA INT'L (178.HK) handed back a 5,400 sq. ft. double-storey store at Percival Street, Causeway Bay, Ming Pao reported. The cosmetic retailer had at the end of May shut down another branch, in a floor area of 7,000 sq. ft., in Tsim Sha Tsui.
HKMA clarified via Facebook that HKD has strengthened mainly due to IPO fundraising, dividend payment of companies and semi-annual settlement. Capital influx has inflated market demands for HKD. Speculators will find it hard to repeat bilateral rigging strategy as they did during Financial Tornado in 1997-98, underscored the authority, because HKD monetary base has more than doubled the size two decades ago. It is merely possible to shore up interest rates by shorting USD. Aware of certain funds speaking out loud to put their odds on the collapse of linked exchange rate, the authority stated that investors can get a clear picture by looking at the scale and record of the funds and accentuated that it is capable and confident of retaining the system which has been running for 36 years.
My thought is that is all true but if the US government weaponises US pension money then the USD/HKD peg could become a political pawn rather than a purely economic issue.
MIRAMAR HOTEL (71.HK)1H 2020 had its hotel room prices slashed by roughly a half. At the worst days, the occupancy rates approximated 20% only. In terms of retail & shopping malls, rental concession has been in placed for eight months. The discretionary trim ranged 10-50%, depending on the industry nature. The coronavirus crisis has hit its tourism business harder than the catering segment, said the chairman.
CATHAY PAC AIR (00293.HK) plans to operate approx 3.5% capacity in June and 9.4% in July. In May, the carrier carried less than 1% of the number of passengers it had carried in the same month last year; passenger volume averaged some 600 passengers per day. Given the already significant drop in passengers carried and revenue passenger kilometres over the first five months of this year, it continues to anticipate a substantial loss in the first half of 2020. In May, Cathay Pacific & Cathay Dragon carried a total of 18,473 passengers, -99.4% YoY.
BABA-SW (9988.HK) said Tmall Global has amassed over 25,000 brands from across 92 countries and regions year-to-date. During Tmall's 618 Shopping Festival, the number of newcomer brands increased 64% from the same period of 2019.
Japan is going to recruit Hong Kong talents engaged in financial activities and other specialized fields as China moves to slam national security laws on the territory, said Shinzo Abe.
Hang Seng Indexes Company will hike the number of HSI constituents upon market need as more Chinese-concept stocks come to stage second listings in Hong Kong. When 50 constituents are not sufficient to reflect the market, the company will consider an increase. Yet there is now no urgency for any adjustment. The previous HSI adjustment was in 2006 when 33 constituents were lifted to 50. It also announced handling of Weighted Voting Right Companies (WVRs) and Secondary-listed Companies in the Hang Seng Family of Indexes.  As to Secondary-listed Companies, unless otherwise specified in the individual index methodology, the number of shares and freefloat-adjusted factor (FAF) of secondary-listed companies coming from the Greater China region (i.e. Hong Kong, mainland China, Macau and Taiwan) will be assessed across the Hang Seng Family of Indexes based on the company’s market capitalisation upon solely on the Hong Kong-registered portion of its shares. On top of the existing non-freefloat share classes, any of the HK Shares that are held by a depositary or its custodian as underlying for overseas depositary receipts will also be considered as non-freefloat shares and deducted from the total number of HK Shares as defined above for FAF calculation. As to WVRs, the existing aggregate weighting cap of 10% on WVR constituents will be removed from the Hang Seng Composite Index and other relevant indexes.  The above changes will be implemented starting from the August 2020 index review. FAFs of newly listed securities will be calculated using the above definition with immediate effect. 
TENCENT (700.HK)'s PUBG Mobile was the second most downloaded mobile game worldwide (34.2 million downloads) in May, up 91% yearly, Sensor Tower reported. The top spot went to Crazy Labs' ASMR Slicing (36.5 million installs) during the month.
Twitter has deleted over 170,000 malicious accounts likely backed by Chinese influence operation. These accounts deceptively spread messages favorable to Beijing, including the coronavirus pandemic.
ZHONGCHANG INTL (859.HK) halted trading with effect from 9:00 a.m. on 12 June 2020 pending the release of an announcement in relation to inside information of the Company.
CPIC entered into a strategic cooperation agreement with the construction office of an technology innovation and promotion center in Shanghai yesterday (11 June). Both parties will actively explore and leverage their respective advantages surrounding areas of fintech innovation in arenas of services mode, integration of industry and finance, technological capability and resources consolidation. 
MACAU Many Chinese departments will co-ordinate with each other to raise the effectiveness of financial regulation on combating cross-border gambling, Xinhua reported  Slight -VE MACAU names 
US Agriculture Department said American exporters sold 720,000 tonnes of soybeans to China last week, the biggest weekly purchases in at least 16 months. China had bought US soy for the second straight week. Beijing has been ramping up American soy purchases given tightened supplies in Brazil, the top soy supplier to China, and higher Brazilian soy prices under Brazilian real strength.

PRE MARKET

US Treasury Secretary  Mnuchin may explore curbs on capital flows through the territory in response to the Hong Kong National Security Law.  As I have been saying there is an increased risk for those Chinese Nasdaq stocks doing secondary listings in HK; watch for more on this theme.

HKD remained on the Strong-side Convertibility Undertaking despite falling back slightly, USD/ HKD was last at 7.7508.

ALPHAMAB-B (09966.HK) on 12 June, its controlling shareholder Rubymab intended to unload 14.5 million shares, representing 1.55% of the issued share capital of the Company, at a price of HK$16.5 per share, roughly 4% discount to yesterday's closing price of HK$17.2. Rubymab expected to cash in HK$239 million.

MGM CHINA (2282.HK) announced that it proposed to issue US$500 million 5.25% senior notes due 2025. The Company estimates that the net proceeds from the offering of the Notes will be approximately US$493 million, and intends to use the net proceeds from the offering of the Notes to repay a portion of the amounts outstanding under the Revolving Credit Facility and for general corporate purposes.

Covid-19 One more resident of Luk Cheun House, Lek Yuen Estate has initially tested positive for COVID-19, according to sources.  The woman is the sister-in-law of the first patient of the Luk Cheun House cluster, sharing the same flat with the couple and also working at a Kerry warehouse in Kwai Chung. Accordingly, there will be eight diagnosed cases in Luk Cheun House.

TENCENT (700.HK) proactively pushing for a merger between DouYu (a game live-streaming platform) and Huya (a game-centric video live-streaming website), but the details have not been finalized yet, Chinese media citing insiders.

XIAOMI-W (1810.HK) and Oppo are forced to partially import smartphones into India as their local plants failed to restore their output to normal levels, Reuters citing sources familiar with matter.


COMMENT 

*PETROCHEMS WEAK on demand concerns if a second covid-19 wave prompts more lockdowns. CH OILFIELD (2883 HK -5.6%) CNOOC (883 HK -4.6%) PETROCHINA (857 HK -2.9%) SINOPEC (386 HK -2.8%).

*ECOMMERCE PLATFORMS STABLE  JD.COM (9618 HK) priced at HK$226/shr, representing a 3.9% discount to last closing ADR price on June 10. The HKEX said JD will be included in the exchange's designated securities eligible for short selling on its listing date June 18. Its HKPO was reported to be ~179x oversubscribed.

Nasdaq-listed 360 FINANCE (QFIN US) may kick off its HK listing process in December, news said.

ALIABABA (9998 HK -0.4%) TENCENT (700 HK unch) MEITUAN DIAPING (3690 HK +0.7%). NETEASE (9999 HK -1.1%) but off the initial lows on the second day of listing.

PA GOOD DOC (1833 HK +8.5%) on increased demand speculation

*PHARM/MEDICAL MIXED  vaccines speculation increased, as signs of a 2nd wave of COVID-19 outbreak in US and some other countries. ASCENTAGE (6855 HK +17%)  3SBIO (1530 HK +3.2%) CASINO (6185 HK -3%).

ALPHAMA ONCOLOGY (9966 HK +4.2%) shareholders sold a combined 26.7m shs at HK$16.5, at 4.1% discount to last closing price.

*MACAU CASINOS FIRM on border reopening hopes.

WYNN MACAU (1128 HK -1.6%) reported the two months ending May 31, the average monthly adjusted property Ebitda loss was about $61m, compared to an avg gain of $107.6m same period last year. SANDS (1928 HK -0.6%) SJM (880 HK +1.9%) GALAXY (27 HK +1.7%).

*HK PROPERTY STRONG  as the one-month HIBOR slid for a 10th day to 0.56071%, the lowest since October 2017. HENDERSON's (12 HK -0.3%)  general manager Thomas Lam expects the low-interest-rate to sustain and to positively affect the market, as there is still rigid demand. CKA (1113 HK +1.6%) SHKP (16  HK +1%) NWD (17 HK +1.5%) HANG LUNG PROP (101 HK +2.8%).

Office vacancy rates in Central rose to 8.5%, the highest since December 2009, according to CBRE slight -VE BUT news that Mainland tech giants, ByteDance and Alibaba, took up office space in Causeway Bay a slight +VE

*JEWELLERS FIRM on recovery hopes.  CHOW TAI FOOK (1929 HK +5.8%) said net profit for the year ending March 31 -36.6 % to HK$2.9b. In April and May, same-store sales in HK and Macau -80.2% YoY, while the mainland stores -15.4%.

CHOW SANG SANG (116 HK +2.8%) same-store sales -40% plus in the first two months this year. The jeweller said it will close at least 4-5 stores in HK and will shift its focus to the mainland, which has reported a sales recovery since March.

*INSURERS WEAK after premium data release.

CH LIFE (2628 HK -1.8%) said the accumulated premium income for the first five months this year was about 369.8b yuan, + 14.98% YoY growth.

NCI (1336 HK -2%) gross premium income for the first five months this year +32.1% YoY to about 79.01b.

PICC GROUP (1339 HK -1.2%) original premium income for the first five months this year +3.27% YoY to 280.72bn yuan.

PICC P&C (2328 H K-0.6%) original premium income for the first five months this year +3.5% YoY to 200.63b yuan.