June 2 HK WRAP HSI +263pts, T/O -24% DoD, Shorts 18.2%


June 2 HK WRAP HSI +263pts, T/O -24% DoD, Shorts 18.2%

HSI +263pts (+1.1%) 23,996  HSCEI +42pts (+0.4%) 9,876 T/O HK$114.02bn (-24.4% DoD). The Netease IPO drew HK$29bn in margin financing which will limit the money available for retail trading until the IPO results are announced.

Europe opened higher as re-opening hopes out-weigh US riot concerns. Covid-19 becoming less of a factor (second wave discounted on the ability current knowledge will be effective in containing outbreaks) but US/China issues still overhang markets.
US futures opened indicting a lower open but through the day have reversed and are now indicating a higher open.
US 41 companies due to reporting tonight incl Build-a-bear, Abraxas Petroleum, Zoom, Tiffany, Lands End and others(for full list https://finance.yahoo.com/calendar/earnings/ )

CONNECT 
Shanghai
Northbound RMB 32,249m Sell 14,275m : 17,992m Buy
Southbound HK$ 7,501m Sell 3,670m : 3,831m Buy
Shenzhen
Northbound RMB 50,282m Sell 26,045m : 24,238m Buy
Southbound HK$ 7,523m Sell 3,619m : 3,904m Buy

IPO On debut, SMC ELECTRIC (2381.HK) settled the trade at $0.141, down 10.9 cents or -43.6% avs listing price of $0.25, on volume of 1.217 billion shares and T/O of $186 million. Excluding handling fees, a book loss of $1,090 was reported per board lot of 10,000 shares.

Short Selling HSI Tuesday 18.2% vs 18.3% Monday
Top Shorts Geely Auto (175) 46%, Wharf REIC (1997) 43%, ICBC (1398) 38%, Want Want (151) 36%, Country Garden (2007) 34%, Galaxy Ent (27) 33%, Petrochina (857) 32%, HK & ChinaGas (3) 32%, Shenzhou Int (2313) 29%, HSBC (5) 27%, MTRC (66) 26%, China Shenhua (1088) 25%.

DATA 
CHINA No data
HONG KONG No data
Centre for Health Protection said there were at least 6 new COVID-19 cases today; including four residents living in Luk Cheun House, Lek Yuen Estate, Sha Tin. The rest are imported cases.

INDEXES      
China CSI 300 +12pts (+0.3%) @ 3,984 Opened lower but worked higher in choppy trading on concerns of more US action as China ‘pauses’ some US agri product purchases.  PM saw a steep rally for the first hour to the day high of 3,991 but unable to break out and the market reversed to 3,980 level then saw choppy sideways trading with a small uptick into the close. Investors cautious over US/China tension and Gove stimulus.

HSI Pre Market +59pts @ 23,792 vs +13pts ADR’s @ 23,745 Market opened higher and then saw an initial squeeze to 23,950 with shorts under pressure before trending lower into lunch in choppy trading.  PM saw the market trend higher but with initial resistance around the 23,920 level, which was tested a number of times before the HSI broke above at around 3:30pm but then hit resistance at 23,960 level which it tested a few times going into the close but failed to breakthrough. Then saw a 45pt tick higher in the closing auction.
Market now back at early April level.  Next major technical resistance will be 24,600 level. 
Sentiment remains muted; relative calm on the protest front although concerns that the refusal by the police to allow the June 4 vigil go ahead could cause an issue.  Also still concerns about the detail of the national security law; as Carrie Lam and a delegation will travel to Beijing tomorrow to discuss it.  News that the US might open its borders to Hong Kong citizens; following the UK’s declaration also a cause for concern.  Carrie Lam says US have double standards in the way it treats its riots compared to its support for HK protests.  I would say that the difference between the riots being seen in the US and Hong Kong’s peaceful protests raises questions about her views.  Hong Kong did not see the destruction of any police vehicles, no buildings were burnt and shops were not widely looted. 

Active Heavyweights
AIA (1299.HK) +3.2%
HKEX (388.HK) +1.8%, hits new high
HSBC (5.HK) +1.6%
PING AN (2318.HK) +1.3%
ICBC (1398.HK) +0.8%
TENCENT (700.HK) +0.3%
CCB (939.HK) +0.3%

HSI & HSCEI Constituents on the move
LINK REIT (823.HK) +6.4%
CHINA RES BEER (291.HK) +5.2%
CSPC PHARMA (1093.HK) +4.6%

HSMI & HSSI Constituents on the move
HUADIAN FUXIN (816.HK) +60.3%, hits new high
GOME RETAIL (493.HK) +19%, hits new high
AGRITRADE RES (1131.HK) +17.3%
KASEN (496.HK) +11.1%
TONGRENTANGCM (3613.HK) +10.6%
CHINA LESSO (2128.HK) +10.2%
LI NING (2331.HK) +5.8%, hits new high
WEIGAO GROUP (1066.HK) +5%, hits new high

REGIONAL MARKETS 
Japan opened higher and trade higher on hopes of more stimulus as parliament debates a second extra budget. Closed +1.2%
S Korea opened higher working higher on the “New Deal’ stimulus plan announced Monday. Kospi +1.1%, Kosdaq +1.1%
Taiwan opened higher but tracked slightly lower from its initial open but closed above the key 11,000 level Closed +0.4%

AFTER MARKET 
NTES-S (9999.HK) recorded around $29bn in margin from 15 brokers as of around 6pm today, representing roughly 43.8 times of over-subscription in the public offering based on the fundraising amount of $648.9m.  It also announced that Cloud Music has reached a KRW7.5 bn (roughly HKD48.65m) cooperation agreement with a Koran agency firm CUBE Entertainment, which will fall due on 30 September 2023, Yonhap News Agency reported.
YIP'S CHEMICAL (408.HK) aims to spin off its ink business for listing in Shenzhen as the firm's capital is mainly used for its Mainland development, opined Deputy CEO Ip Kwan. In addition, the launch of registration-based IPO system on ChiNext is conducive to the firm's listing, which is expected to wrap up by the end of 2021. Ip has not weighed up special dividend payment to shareholders upon a successful spin-off.
HKEX (388.HK) announced the launch of Silver Futures contracts settled in US dollars (USD) and Offshore Renminbi (CNH), starting 8 June 2020, further expanding its commodities product suite. The new Silver Futures will be physically settled in Hong Kong with its contract months covering the spot month and the following 11 calendar months.
Li Ka-shing and Victor T K Li further acquired shares of CK ASSET (1113.HK)  Through a wholly-owned subsidiary of Li Ka Shing (Global) Foundation, they acquired a total of 1.3525m shares in CK Asset at the average price of HK$42.2112, HK$41.9428 and HK$43.2819 per share on 27 May 2020, 29 May 2020 and 1 June 2020 respectively. As a result, the deemed interests of Li Ka-shing and Victor T K Li in CK Asset increased from 35.04% to 35.08% and from 35.11% to 35.14%.
Chinese Foreign Ministry criticized Trump's action, regrading delaying Septembers G7 meeting and inviting more countries but not China saying it is cliquey and unpopular for the US to pick on China.
Govt said Group gathering ban extended for two weeks to 18 June. Also that HK needs to maintain its restrictions around population flow between Hong Kong and rest of the world. Mandatory quarantine measures need to uphold as well to shield any imported cases, yet relaxations can be introduced on individual countries after assessing the related public hygiene risks. By resuming personnel exchanges between Hong Kong and the related countries in a certain extent, economic activities can be reactivated.  The FHB could categorize designated regions into two groups. The first category would be designated regions that are required to accept the mandatory quarantine upon arrival in Hong Kong, whereas the second one would be those meeting certain requirements for exemption. At the initial stage, convenience could be offered to personnel who must travel between Guangdong-Hong Kong and Hong Kong-Macau. 
David Webb told Bloomberg that the city is suffering a talent outflow. Along with local talents migrating overseas, international firms find it harder to attract professionals. Upon the legislation of National Security Law, Hong Kong is set to see an accelerated "brain drain", said Webb.


MARKET HOURS 
The Land Registry announced that the number of sale and purchase agreements for all building units received for registration in May was 6,885 (+41.5% MoM but -33.5% YoY). Among the sale and purchase agreements, 5,984 were for residential units (+45.9% MoM but -27.1% YoY).
JD.com is launching the 6.18 Shopping Festival between 1 June and 18 June. As of this morning, RAZER (1337.HK) topped the sales chart of gaming equipment during the festival, followed by Microsoft and Nintendo Switch, according to RAZER co-founder Min-Liang Tan's Facebook post.
BABA-SW (9988.HK) "618 Shopping Frenzy" held from 1 June, delivered over RMB5.1 bn in turnover on the first day under Taobao live broadcast.The Executive Council resolved to extend the duration of anti-epidemic measures due to resurgence of local COVID-19 infection in cluster, as local media cited sources.  The extension will involve the group gathering ban to be expired on 4 June, restaurant operation restrictions and immigration curbs.  It also decided to freeze salaries for all civil servants this year.
BANK OF E ASIA (23.HK) gave a notice, clarifing that it has had no external discussions regarding the disposal of either the Hong Kong or Mainland China banking businesses, and that no decisions have been made with respect to any strategic alternatives for the Bank’s businesses and assets under the comprehensive strategic review.
GEELY Polestar, the premium EV maker under Geely, plans to expand its Chinese stores as it prepares for launching models to compete with Tesla's locally-made Model 3, Reuters citing sources. EV makers are lining up new model launches, making showroom the key factor for their operation in Mainland China. Unlike most carmakers relying on sales through dealers, Polestar will sell directly to customers and be on a par with Tesla, Nio Inc and Xpeng Motors.
Octopus Card has teamed up with Apple's iPhone and Apple Watch, applicable to both On-Loan Adult Octopus and Elderly Octopus, said CEO Sunny Cheung.While the stored value ceiling is set at $3,000, the top-up function is free of service charges.
PlayStation decided to postpone the PlayStation 5 event slated for June 4, according to its post on a social networking site.  While the firm understands gamers worldwide are all excited to see PS5 games, it is not a time for celebration right now and PlayStation wants to stand back and allow more important voices to be heard.
Apple will begin the mass production of its 6.1-inch flagship iPhone in July or August, reported Taiwan's DigiTimes. The giant reportedly plans to launch four new iPhone models in October 2020, including a 5G iPhone. The new iPhones are expected to come in three sizes.
HKD strengthened this morning (2 June), leading the spot USD T/T rate to 7.7510.  The balance of the banking system is expected to be $94.77 billion on Thursday (4 June).
IDC said 1Q20 global shipments of wearable devices +29.7% YoY to 72.6m devices, when strong growth in wristbands and earwears offset the decline in smart and basic watches.
HANG LUNG PPT (101.HK) welcomed the series of relief and job retention measures unrolled by the HKSAR Government amid the pandemic. Despite heavier operating pressure, the company has no intention of layoff or salary cut and will not apply for the Employment Support Scheme.  It hoped the plague-inflicted sectors would put wage subsidies to good use.
Carrie Lam around 10:30am announced Govt concerned about the recent community outspread of novel coronavirus, which may involve nine patients and miscellaneous groups. An array of plague precautions are die to expired this week after the measures were eased a few weeks ago. Her administration is going to review the measures with prudence and announce their decisions as soon as possible. Sterilization was conducted last night at Luk Cheun House, furthered Sophia Chan, Sec for Food and Health, reminding residents from the building to stay vigilant on personal hygiene. Carrie Lam also said the USs' possible sanctions or deprivation of Hong Kong's special status would harm others without benefiting itself.  The US had the biggest trade surplus with Hong Kong in over a decade, while the latter has granted visa-free access to US passport holders and offered 1,300 American firms preferential access to the Mainland market under CEPA. US investment and financial firms account for roughly one-fifth of Hong Kong's security market volume.  Given the above actual benefits for the US in Hong Kong, Lam hoped both sides to show mutual respect when dealing with bilateral relations.

PRE MARKET 
S&P Global Ratings said Hong Kong's credit rating may be downgraded if the United States imposes sanctions on the city's financial industry and hence trigger a material economic downturn.  Hong Kong's "AA+" credit rating is on a par with some triple A nations, but is held back by development uncertainty, opined S&P sovereign  analyst Kim Eng Tan.
Ping An Group switched on the strategic reform of banking and insurance businesses from 1 June in a bid to meet the regulatory requirement, nudge the healthy development of banking and insurance and explore new business model. Under the reform, the group will ramp up its capability in products and technologies at HQ, upgrading "product + technology + channel".
China Life Insurance (Group) revealed that it had increased 6 million H shares of ABC (1288.HK) on 26 May. The average price was $3.1093 per share, according to the information of the Stock Exchange. It involved approximately $18.65m.
CIMC (2039.HK) (000039.SZ) announced that CITIC-Prudential Life Insurance Co Ltd increased 7.1375m shares in the Company by means of centralised bidding transaction.
HUADIAN FUXIN (816.HK) announced that Huadian (offeror) proposed privatization by way of absorption to the company at $2.5 per H share in cash, representing a premium of 65.56% over the price before trading halt; and RMB2.29995 per Domestic Share; involving approximately $6.426bn and RMB1.725bn. Upon completion, the Company will apply to the Stock Exchange for voluntary withdrawal of the listing of the H Shares from the Stock Exchange. VIRSCEND EDU (1565.HK) shareholders Happy Venus and Lucky Sign had on 29 May acquired 500,000 and 5.468 million shares at $1.5546-1.5900 each.
HILONG (1623.HK) announced withdrawal of recommendation to distribute a final dividend of HK2.0 cents per share for the year ended 31 December 2019, having taken into consideration of the operation, financial conditions and short-term capital needs of the group.
BG BLUE SKY (6828.HK) a total of 26.968 million Shares held by Co-Chairman Cheng Ming Kit were sold on the market as a result of forced sale by certain stock brokers under margin financing arrangements from 28 May 2020 to 1 June 2020. As a result of the forced sales, the percentage interest of Cheng in the Company was reduced from 8.05% to approximately 7.84% of the total issued share capital of the Company. Separately, the Company is in negotiation with SK E&S in relation to a possible disposal of non-controlling stake in certain indirect wholly-owned subsidiaries of  the Company. SK E&S is a subsidiary of SK Holdings Co., Ltd., a large conglomerate in South Korea. The Possible Transactions, if materialized, may constitute notifiable transactions of the Company.
SANDS CHINA LTD (1928.HK) recorded an operating loss of US$164m and a net loss of US$180m in April 2020, as compared to operating income of US$166m and net income of US$148m in the same period in the prior year. The company recorded an aggregate adjusted property EBITDA loss of US$105 million in April 2020, compared to an aggregate adjusted property EBITDA of approximately US$239 million in April 2019.
SMIC (981.HK) said that it has received a letter issued by the SSE confirming acceptance of its application materials in respect of the RMB share issue.  The RMB Share Issue is subject to obtaining the necessary Regulatory Approvals and may or may not proceed, accentuated  the company.

COMMENT 
*HK BANKS STRONG led higher by BANK OF EAST ASIA (23 HK +17.6%) on rumours it held talks about the sale of its banking operations in Hong Kong and China.  I think unlikely as the strategic review is underway and the deadline was recently extended to Sept.  See FT article today.  Also Daivd Li Chairman, I think still opposed to any breakup.  I also don’t think Elliott would allow any sale without the complete review and strategy.  Remember he has held off court action against the directors subject to the review being carried out and the directors know the risks of messing with him. HSBC (5 HK +1.6%) STAN CHART (2888 HK +3.7%).
*CHINA BANKS FIRM after PBOC said to purchase loans made to small businesses from some banks. It will use 400b yuan from a separate program to buy 40% of un-collateralised loans to SMEs with maturities of at least six months that are made between March 1 and Dec. 31, 2020. KEY this may help the smaller banks which means the larger banks won’t have to ‘merge’ them because they failed.  The large SOE banks tend not to deal with the SME’s but with the SOE’s.  
ICBC (1398 HK +0.8%) CCB (939 HK +0.3%) BOC (3988 HK +1%).
*TECH & COMPONENTS FIRM on 5G roll out optimism. AAC (2018 HK +0.2%) TRULY (732 HK +2.6%) ZTE (763 HK +1.9%) TONGDA (698 HK +3.4%).
SMIC (981 HK +2.8%) plans to raise 20b yuan in STAR board in Shanghai.
*CHINA PROPERTY FIRM  on recovery hopes after PBoC said policy on property would remain stable.
GZ R&F (2777 HK -1.3%) said contracted sales grew +15% MoM to 10.62 billion yuan in May.
CHINA JINMAO (817 HK +7%) said contracted sales for the first 5 mths +19.8% YoY to 65.23b yuan.
EVERGRANDE (3333 HK +1.4%) LONGFOR (960 HK +1.6%) CIFI (884 HK +2.5%).
*HK LANDLORDS STRONG as LINK REIT (823 HK +6.4%) on brokers upgrades after inline results and signs of recovery as it negotiates with tenants.
HYSAN (14 HK +5.5%) SHKP (16 HK +1.9%), WHARF (4 HK +1.7%) HENDERSON LAND (12 HK -1.7%).
*MACAU FIRM  after SANDS (1928 HK +0.8%) reported adjusted property Ebitda loss of ~$105m in April, compared with adjusted property  Ebitda of $239m a year ago. Lack of visitors continues to hurt but there are still hopes of a swift recovery once China lifts travel restrictions.  MELCO (200 HK +2%) MGM (2282HK +2.1%).  
SJM (880 HK +0.9%) still concerns over possible family in-fighting after Stanley Ho’s death.
*AUTOS FIRM on stimulus measures. China's capital city Beijing will add another 20,000 license plates for new energy vehicles in the 2H this year, among a series of measures aiming to boost car market. GEELY (175 HK +1.6%) GAC (2238 HK +3%) BYD (1211 HK +2.8%) DONGFENG (489 HK +2%).
*HK RETAILERS MIXED after yesterday’s Retail Sales dropped for the 15th month but some sectors saw easing of the declines. Sales value of jewellry, watches and clocks, as well as valuable gifts, fell by 76.6% YoY, vs 75.3% in March. CHOW TAI FOOK (1929 HK +3.25) LUK FOOK (590 HK +2.9%) I.T. (999 HK +4.1%).
SOGO HK's operator, LIFESTYLE INTL (1212 HK +0.8%) warned that despite local consumption fully resuming, record revenue drops may still be recorded due to a reliance on mainland tourists.
*ALTERNATIVE ENERGY STRONG as  NDRC sets this year’s China power consumption from renewable energy sources at 28.2% of the total power use. This marks a YoY growth of +0.3 percentage points.
HUADIAN FUXIN (816 HK +60%) on privatization plan at an almost 66% premium. Huadian Fuxin shareholders will be offered HK$2.50/HK share, compared with the last closing of HK$1.51.
DATANG RENEW (1798 HK +13.6%) RUIFENG (527 HK +5.3%) CH RENEW (987 HK +6%) LONGYUAN (916 HK +9.4%).


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