June 16 HK WRAP HSI +541pts after mkt Indian/China clash dead on both sides
HSI +567pts (+2.4%) 24,344 HSCEI +212pts (+2.2%) 9,868 T/O HK$114.62bn (-10.5% DoD).
Europe Markets opened higher; DAX saw an early set off but has rallied back and trending higher, CAC opened higher and tick higher but then saw some selling, now rebounding. FTSE opened higher rallied and then traded sideways.
US futures indicating +450pts (off the earlier +500pts) with S&P and NDX also indicating higher on news Trump is planning US$1th infrastructure building plan. Some easing on news of N Korea blowing up the inter Korean liaison building. I would expect some more weakness of the border clash between China and India with deaths on both sides.
CSI 300 closed +60pts (+1.5%) @ 4,015 Market opened higher following the US rebound on news that the Fed would buy individual corporate debt +VE for Exporters and news the US Sec State Pompeo will meet Yan Jiechi in Hawaii helped sentiment. Although concerns about more covid-19 outbreaks overhangs the market. Essentially after the higher open the market traded sideways in the morning. PM saw the market work slightly higher, with improved sentiment on news that Trump was proposing a US$1tn infrastructure programme although it will probably have difficulty getting passed. Reuters reported that PBoC was going to start auctions for the 1t yuan of special sovereign bonds this week which could raise liquidity issues.
HSI Pre Market +541pts @ 24,318 vs+298 pts ADR’s @ 24,074 and ticked higher in initial trading as recent shorts squeezed. Then traded sideways around the 24,400 level. Around 10am some margin call selling after yesterday’s sell off and but later bounced back as US futures rallied on reports of Trump’s proposed US$1tn infrastructure programme. But upside limited and market continue to trade sideways round the 24,450 level. That continued into the PM session until around 2:30pm when the market eased lower on reports that N Korea had blown up the inter-Korean office; which South Korean later confirmed. HSI ticked lower in the closing auction. Turnover -10% for a second day which I think illustrates increased investor caution.
After market news
GCL-POLY ENERGY (3800.HK) is placing 1.3 billion new shares, representing 6.15% of the enlarged share capital of the company, according to market sources. The placing prices reportedly range $0.203-0.208 per share, a 15.1-17.1% discount against the closing price of $0.245 today. The company plans to raise $264-270.4 million.
INDIA/CHINA Border Clash: Loss of Life on Both Sides Three Indian soldiers were killed in a violent clash with the Chinese military along the countries' shared border in the Himalayas on Monday (15 June), foreign media citing a statement from the Indian army. Chinese media Global Times yet said the face-off had killed five Chinese People's Liberation Army soldiers and wounded eleven.
There was loss of lives on both sides according to the Indian army statement, including one Indian officer and two Indian soldiers.
CLP HOLDINGS (2.HK)'s Castle Peak Power Company Limited (CAPCO) announced that it has successfully priced the issuance, through its wholly-owned subsidiary Castle Peak Power Finance Company Limited, of a US$350 million Energy Transition Bond (the Bond) under the Climate Action Finance Framework (CAFF) of its parent company CLP Holdings Limited (CLP). The transaction was well-supported by institutional investors, with a coupon of 2.2%, recognising the growing importance of energy transition bonds to enable meaningful action on climate change in Asia.
RAZER (1337.HK) its founder Min-Liang Tan will promote goods on BABA-SW (09988.HK)'s Tmall platform via live broadcast on 18 June. On the listing day (11 June), NTES-S (9999.HK) CEO William Ding had made a debut on Kuaishou's live-streaming platform, setting the trend for senior management to go live for good recommendations recently.
TENCENT (700.HK) is interested in becoming iQIYI's largest shareholder for cost saving and less market competition, Reuters citing insiders. The giant strives to have a bite of the fast-growing mobile video market during the quarantine period. TENCENT would like to acquire iQIYI shares from Baidu, which owns 56.2% of the online video platform, according to the report.
NTES-S (9999.HK) announced the debut of "Sound Street”, a tailor-made karaoke app for youngsters. The firm expected to invest RMB200 million of funds and resources in the app, where a hundred of music stars will be born in three years.
HK Administration said the upper limit of gathering participants in public premises is to be relaxed to 50, effective 00:00 on 19 June, as the Government hopes to reboot economic and social activities as much as possible. The Executive Council has meanwhile decided to stretch the gathering ban waiver to catering premises, so that people from all walks of life may hold different banquets or weddings, also with effect from 00:00 on 19 June, added Chan.
While caterers are set for a waiver in terms of patron entry, they still need to set their tables 1.5 m apart or with partitions in between as stipulated in the guidelines and restrictions under Prevention and Control of Disease.Market and Pre Market News at bottom of page.
Short Selling HSI Tuesday 21.6% vs 21.4% Monday
Top Shorts Wharf REIC (1997) 51%, MTRC (66) 38%, CCB (939) 38%, ICBC (1398) 35%, China Res land (1109) 34%, Mengniu Dairy (2319) 33%, Want Want (151) 31%, Sands China (1928) 31%, Hang Seng Bank (11) 31%, Bank of China (3988) 29%, Country Garden (2007) 29%, NWD (17) 28%, Ping An (2318) 28%, Hengan (1044) 27%, Galaxy (27) 26%, CNOOC (883) 25%.
*EXPORTERS STRONG on short covering and stimulus hopes as both the FED’s new corporate bond purchases and Trumps's potential US$1t infrastructure fund should improve the outlook for the US economy. VTECH (303 HK +2.6%) TECHTRONIC (669 HK +6%) MAN WAH (1999 HK +4.2%) MINTH (425 HK +3%).
*PETROCHEMS STRONG as overnight WTI +2.2% BRENT +2.7% on signs of improving demand as long as there isn’t a second name of covid-19 and OPEC+ maintaining agreed production. The OPEC+ deal will bring prices back to "normal" within a year or two as cuts approaching 10 million barrels a day drain excess from the market, UAE Oil Minister said. Iraq has told some refiners that it will make deep cuts to their supplies for July, according to news. Although worth noting that last week Iran delivered oil to Venezuela. The outlook is improving but by no means certain. CNOOC (883 HK +4.6%) CH OIFIELD (2883 HK +4%) PETROCHINA (386 HK +5.8%).
*ECOMMERCE FIRM. Sector in focus with more possible lock-downs in China after new covid-19 cases and ahead of 618 shopping festival Plus the listing of JD.COM this week. TENCENT (700 HK +3.5%) despite chairman Pony Ma selling a total of 9.65m shares in the market between June 9-12, average price HK$433.41 to HK$450.27. Also news its signed cooperation agreements with State Grid for digital infrastructure construction. ALIBABA (9988 HK +3.3%), MEITUAN (3690 HK +7.8%) NETEASE (9999 HK +3.8%).
*HK PROPERTY INVESTORS STRONG Market seemingly unfazed by SWIRE PROP (1972 HK +1.6%)’s profit warning as it expects a loss of HK$2.6b on revaluation of investment properties excluding deferred tax, compared with HK$3.6b profit year earlier. HYSAN (14 HK +2.1%), WHARF REIC (1997 +5.3), HANG LUNG (101 HK +3.5%)
*HK PROPERTY DEVELOPERS STRONG with HIBOR rate staying low and expected to do so for some time +VE, CK ASSET (1113 HK +2.7%) will open a show flat of Sea To Sky in Lohas Park today offering 1,422 units. SHKP (16 HK +1.7%) plans to launch its new Hoi Wong Road project in Tuen Mun this month, offering 669 units.
*INSURERS STRONG on improving May insurance premiums and recovery in the markets. CHINA TAIPING (966 HK +4.6%) said consolidated premium in the first 5 months of the year -0.6% YoY to 90.42b yuan. CH LIFE (2628 HK +3.5%) NCI (1336 HK +2.6%) PICC (1339 HK +3%).
*TECH & COMPONENTS STRONG Helped by news that the US will allow interaction between US companies and Huawei in the development of international 5G standards. Huawei suppliers jumped, AAC (2018 HK +5.1%) SUNNY OPT (2382 HK +8.4%) TONGDA (698 HK +7%).
Although the purpose is to ensure that China does not get carte blanche to set the specifications for 5 and 6G. Remember China lost out when its 2G was designed along a different specification to the US/Global one. Now it is trying to reset the playing field by being the one to set the standard and the US has lost out but not allowing interaction with Huawei in several international bodies that are writing the specifications because of the ban on working with Huawei. This move is only to try a dilute Huawei’s influence.
INVESTECH (1087 HK +9.3%) said its subsidiary was granted by IBO the exclusive right of the sales and distribution of products to the telecom operators in Sichuan province of China under a 3-year agreement. SMIC (981 HK +12%) jumped on A-shs listing speculation. The Shanghai STAR Board listing committee will review SMIC's (981.HK) initial application on June 19.
*HK RETAILERS STRONG on hopes HK may reopen ‘travel bubbles’ in the near future to allow tourist from some cities/countries that are COVID-19 safe to travel to HK quarantine free. Also speculation that the HK administration is expected to announce further easing of the distancing rules this afternoon. SASA (178 HK +3.9%) CHOW TAI FOOK (1929 HK +4.6%) LUK FOOK (590 HK +4.4%) I.T. (999 HK +5.3%).
WANT WANT (151 HK +9%) reported today FY net profit 3.65bn yuan, vs CNY3.48b last year (Stoker’s has been a popular short recently).
CMOC (3993 HK+9%) on reports that Telsla is to buy cobalt for use in its Shanghai factory and planned Berlin plant.
Northbound RMB 27,484m Sell 12,692m : 14,792m Buy
Southbound HK$ 10,564m Sell 4,672m : 5,892m Buy
Northbound RMB 48,022m Sell 23,076m : 24,946m Buy
Southbound HK$ 9,043m Sell 4,119m : 4,924m Buy
CHINA PBOC registered RMB21.18 trillion of foreign exchange reserves for China in May, down RMB11.22 billion monthly, representing a reduction for four straight months. Such figure indicated the epidemic continued to pose impact on the cross-border capital of China.
HONG KONG Data after market Unemployment May 5.9% vs 5.2% Apr (F/cast was 5%) A fifteen year high and with expectations that it could go higher.
Centre for Health Protection said that as of 4pm today there were no new covid-19 cases
TENCENT (700.HK) +3.5%
HKEX (388.HK) +2.9%
HSBC HOLDINGS (5.HK) +2.5%
AIA (1299.HK) +2.1%
ICBC (1398.HK) +1.4%
CCB (939.HK) +1.3%
PING AN (2318.HK) -0.5%
HSI & HSCEI Constituents on the move
WANT WANT CHINA (151.HK) +8.7%
SUNNY OPTICAL (2382.HK) +8.1%
CITIC (267.HK) +7.8%
PETROCHINA (857.HK) +6.2%
TECHTRONIC IND (669.HK) +5.5%
WHARF REIC (1997.HK) +5.2%
SHENZHOU INTL (2313.HK) +5.2%
AAC TECH (2018.HK) +5.2%
CHINA TAIPING (966.HK) +4.4%
CNOOC (883.HK) +4.2%
WH GROUP (288.HK) +4.1%
CHINA OVERSEAS (688.HK) +4%
SINO BIOPHARM (1177.HK) +4%
HANG LUNG PPT (101.HK) +3.5%
CKI HOLDINGS (1038.HK) +3.4%
PICC P&C (2328.HK) +3.3%
HENGAN INT'L (1044.HK) +3.2%
CHINA UNICOM (762.HK) +3.1%
HSMI & HSSI Constituents on the move
CHINA TRAVEL HK (308.HK) +16.3%
ZTE (763.HK) +15.3%
WISDOM EDU INTL (6068.HK) +15%
SMIC (981.HK) +11.9%, hits new high
CMGE (302.HK) +10.6%
VPOWER GROUP (1608.HK) +7.8%, hits new high
YADEA (1585.HK) +6.8%, hits new high
CNLP (1589.HK) +5.5%, hits new high
KINGDEE INT'L (268.HK) +5.3%, hits new high
JAPAN opened higher and worked higher currently +4.4%. BoJ kept rates unchanged along with current policies. It expects to inject around JPY 110 trillion to the economy via its market operations and lending facilities aimed at mitigating the impact of the pandemic. Market closed around the highs +4.9%
S KOREA Opened higher and has worked higher through to mid day then traded sideways but sold down around 1pm on news N Korea blew up the inter Korean Liaison office but then resume trading higher to close at the highs. Kosdaq +6.1%, Kospi +5.3% TAIWAN Opened higher initially dipped but rebounded and then traded sideways for most of the day but drifted higher late in the session Closed +1.8%
MTR CORPORATION (66.HK) plans to roll out a series of service upgrades to Airport Express (AEL), including self-service ticket machines, enhanced passenger waiting information and refurbished train seats in Q3 this year. Following changes in customer behavior, the Corporation has also decided to change the mode of AEL feeder services to enhance flexibility to passengers. Customers can soon use MTR Mobile to hail taxis and enjoy fare discounts for their airport-bound trips on AEL.
HKTDC is revising down Hong Kong's 2020 export growth forecast to -10% from -2%, pricing in ongoing trade protectionism whereas the coronavirus crisis has sent economy into a steep slide, said Director of Research Nicholas Kwan at a press conference. According to the latest survey done with 500 exporters, 82% disclosed that they recorded over 10% year-on-year sales decline. 97.5% of them expressed that their business was overshadowed by the plague.
North Korea has blown up Inter-Korean Liaison Office located in Kaesong, said Yonhap News Agency. Pyongyang had repeatedly threatened Seoul of sabotaging the liaison office established in 2018.
TENCENT (700.HK)'s WeChat Pay announced the debut of a "Shenzhen Shopping Festival" WeChat mini-program on 16 June in cooperation with Commerce Bureau of Shenzhen Municipality. Multiple merchants will make an appearance at live broadcast rooms, including JD-SW (09618.HK), Suning.com, Miniso, Watsons and LY.com. In addition to live-streaming promotions, there will be RMB2 bn worth of vouchers available on the mini-program.
HSBC announced that individual customers who apply for Cash Payout Scheme of the government through the bank can enjoy HKD preferential deposit rates and the chance to win rich prizes. Clients who register on or before 31 August via the bank and obtain the distributed cash from their accounts on or before 17 September will be entitled to 10% p.a. of HKD deposit rates for a month with the maximum principal amount of $10,000. Customers should complete at least one designated digital procedure or transaction within the offering period.
BABA-SW (9988.HK)'s Alibaba Cloud announced that it has injected special funds in an amount of RMB2 bn this fiscal year to help 50 partners accelerate their innovation. Alibaba Cloud anticipates to bring more opportunities to its cooperation partners.
NTES-S (9999.HK) forged a strategic partnership with Warner Bros Interactive Entertainment to develop a new "Lord of the Rings" mobile title, reported Reuters. The new licensed strategy game, "The Lord of the Rings: Rise to War", is based on the LOTR movie trilogy.
US Department of Transportation has amended its order that would allow a total of four round-trip flights per week by Chinese airlines, cited the Wall Street Journal.
TENCENT A first batch of 55 domestic game edition numbers have been approved by China for June, according to the website of State Administration of Press, Publication, Radio, Film and Television. Crown Trick, a Switch game developed by TENCENT (700.HK)'s Next Studios, was on the approval list. +VE also for Nintendo
WANT WANT CHINA (151.HK) At lunch annual results ended March 2020. Net profit RMB3.649 billion, +5% yearly. EPS 29.38 fen. Final DPS was US2.42 cents. Together with special DPS of US1.1 cents, the total DPS was US3.52 cents. During the year, operating profit +4.8% yearly to RMB4.806 billion.
Govt Economist: said HK 2Q GDP Unlikely to Improve A Lot; HK National Security Law Favours the Economy. The consumption sentiment in Hong Kong is getting warmer as the Government has partially relaxed social distancing measures and given waiver to certain business activities upon the gradually muted coronavirus situation, said Government Economic Advisor Andrew Au. However, a sharp rebound in 2Q20 GDP is hardly possible amid still lackluster tourism businesses and global market pullback. The local social unrest has fretted the city further, opined Au, who thus deemed the national security law legislation favorable to economic landscape and salubrious to business and investment environments. The economist also opined that the significance of "Belt-and-Road Initiative" has been magnified by ongoing de-globalizaton, which had emerged well before the coronavirus crisis.
WHEELOCK (20.HK) After the shareholders' meeting, Vice Chairman Stewart Leung said he is upbeat on Hong Kong's prospect as the city is recovering bit by bit although the coronavirus pandemic has gone rampant across the world. Asked if the latent emigration tide will take toll of property prices, Leung stated that people kept coming back to their motherland on the uniqueness of the city after Hong Kong had been through a couple of migratory flows. While home prices have ebbed back 5-7% year to date, they may progressively grow back healthily in a short period of time, likely followed by a few percentage of rise in early-21, estimated the vice chairman.
US President Donald Trump is working on a US$1 trillion infrastructure investment project, including roads and bridges, Bloomberg citing insider sources. The Democrats have also provided a proposal in an amount of US$500 billion, said the insiders.
Overnight HIBOR last posted at 0.12393%, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.51863%, down for 13 days, marking a 1-month low.
HNA Group held a contract signing ceremony at HNA Building in Haikou today for the strategic cooperation agreement with TENCENT and DONICA. Pursuant to which, the three parties will mold an "intelligent aviation + free trade port" and propel comprehensive application of new and high technology, through construction and operation of high standard and high quality. The cooperation represents the onset of build-out of intelligent aviation.
Strategy Analytics released a 1Q20 smartphone revenue report for Western Europe. Despite ASP hike, smartphone revenue receded 10% YoY to US$10 billion in the region given limited handset supply amid the pandemic. Particularly, XIAOMI-W (1810.HK) and OnePlus both shared 2% of the handset market, with rising sales volumeand value.
The HKSAR government will relax the prohibition on group gathering to boost local economy and address citizens' wishes, Chief Executive Carrie Lam said. Nevertheless, the ban will not be lifted completely due to ongoing epidemic in the city and nearby regions. Lam furthered Food and Health Bureau will make the related announcement this afternoon.
COUNTRY GARDEN (2007.HK) announced the first cross-sector alliance with BABA-SW (9988.HK) for online property selling. Opening an official flagship store on Tmall, COUNTRY GARDEN will sell 618 suites in the first batch, involving around 60 key projects across 19 cities in Zhejiang Province and Fujian Province.
Despite the coronavirus crisis, Chinese cloud infrastructure service market grew 67% yearly during the first quarter, driving the spending up to US$3.9 billion, according to a research report from Canalys. China remained the second largest market in world, accounting for 12.5% of the total, up 2.5 ppts yearly.
Former Huawei employee Li Hongyuan posted a group chat screenshot on his "leedeson" Weibo account last Sunday (14th), saying the US sanctions on Huawei are taking effect, reported Chinese media. Depicting Huawei as "cutting off its arm to exist", Li foretold a substantial reform by the Chinese giant in mid-July. This will likely involve stake changes and layoff of 90,000 workers from the headcount of 190,000.
COSCO SHIP PORT (1199.HK) announced that its throughput -3.7% yearly in May 2020 to 8.2803 million TEUs.
Zhejiang Geely Holding Group's "Blue Ocean Initiative" has led to sharp pay cut for some employees, raising doubts that it is indeed a layoff plan, Chinese media citing sources. 20% of general staff members will be cut and 30% of management members will be streamlined. The initiative has been launched since May, requiring all staff with a "C" grade in appraisals to receive roughly a one-month training from mid-May. Employees are not entitled to merit pay during the training, facing huge uncertainty in sustaining their positions in the future. Hence, a majority of workers decided to quit under the initiative.
NTES-S (09999.HK) said that the Joint Global Coordinators had on June 15, 2020 fully exercised the Over-allotment option, in respect of an aggregate of 25.722 million shares. The company expected to receive additional net proceeds of approximately HK$3.155 billion from the issue.
US government confirmed a Reuters report that it will amend the ban on American firms doing business with Huawei, in order to allow them to work together on next-generation 5G network standards.
HSBC British Foreign Secretary Dominic Raab took to task HSBC’s support on the national security bill in Hong Kong, adding that the government will not sacrifice Hong Kong residents for banker bonuses. The former British Foreign Secretary Malcolm Rifkind also castigated the London-based lender for its cowardice after its Top Asia Executive Peter Wong had signed up to support the bill. Personally I think it had no option
Tencent Games Annual Release will be convened on 27 June with heavy feature on cloud games. Under the backdrop of accelerated progression of 5G commercial use, cloud games will penetrate to users briskly, Shanghai Securities News cited an institution, which was sanguine about the current window period for the game deployment amid expedited commercialization of cloud games.
Ministry of Finance announced to issue the first batch of the RMB100-billion anti-epidemic special treasury bonds by tender on Thursday (18th), half being five-year bonds and the rest being seven-year bonds. The bonds comprise of the first and second tranches of 2020 anti-epidemic special treasury bonds, to be traded on market from 23 June.
SWIRE PROPERTIES (1972)’ spokesperson said overall performance of the company's investment portfolios remain solid despite the impact brought by COVID-19. With its balanced portfolio and strong balance sheet, it is well placed to withstand the effects of this difficult time and to benefit from improved conditions in the future.
BYD COMPANY (1211.HK) said BYD Semiconductor, a subsidiary of the Company, entered into the second Investment Agreement with 30 investors, pursuant to which, the Investors will make a capital increase of around RMB800 million in aggregate to BYD Semiconductor for a total of approximately 7.843% of equity interest in BYD Semiconductor. After the completion of the Capital Increase, the Company will hold diluted equity interest of approximately 72.301% in BYD Semiconductor.
AIR CHINA (753.HK) operating data of May 2020; number of passengers carried totaled 4.0702 million, -57.1% YoY but +52.7% MoM. Cargo and mail carried totaled 83,600 tonnes, -30.3% YoY but +27.8% MoM