June 22 HK WRAP HSI -132pts, T/O light and Shorts rise to 20%


June 22 HK WRAP HSI -132pts, T/O light and Shorts rise to 20%


HSI -132pts (-0.5%) 24,511  HSCEI -96pts (-1%) 9,879 T/O HK$119bn (-21% DoD due to FSTE reweight On Friday's close).  


Europe Markets opened lower but initially trended higher but currently seem to be stalling.

US DOW futures choppy; opened (-230pts) but worked higher before easing back and then moving higher again; currently +150pts; S&P and NDX also indicating higher. We get Existing Home Sales but people will be watching the Covid cases and any comments from the White House over HK.


INDEXES      

CSI 300 closed +3pts (+0.1%) @ 4,102 Market opened lower but worked higher despite the Loan rates being left unchanged when most had expected them to be cut.  It would appear China feels the need to protect the currency rather than ease them to help the economy.  It worked to the day high (4,127) around 10:30am before trending lower in choppy trading into lunch 4,116.  Pm saw initial selling to the day low around 2pm (4,089) before working higher into the close. 
SHCOMP was weak but the ChiNext remained strong on the hopes of restructuring. 
Investors seem to be more focused on the hope of improving US relations following the meeting in Hawaii with Pompeo and the commitment to buying more US Farm goods than on the potential fall out from the National Security Law to be imposed on Hong Kong.
Tension with India seems to have eased as Modi said Chinese troops are not occupying Indian territory after the clash.

HSI Pre Market -115pts @ 24,528 vs -313pts ADR’s @ 24,330 opened lower with ZTE -8% after clarifying it had no chip production capacity.  Xiaomi was -1%, Tencent flat and NTES, BABA & MEITUAN up small. Market tested higher despite China leaving the Prime Loan rates unchanged but hit resistance at 24,600 and sold down with support 24,480.  Not then trended higher to the day high of 24,630 around 10:40am.  Ot then sold down again before drifting back to 24,565 at lunchtime.  PM saw initial selling for an hour; down to the day low 24,390. After which is worked slowly higher into the close.  
There was little reported about the new National Security Law and quite a number of broker upgrades.  T/O was low as there were a number of 'late trades' pre market after Friday’s re-weight.  I think a number of investors and protestors have been caught by surprise at the speed with which China has pushed the new National Security Law.  Investors will wait to see if there is a substantive reaction from the US. Key is how Trump want to play this going into the election.  Go easy and play up the trade deal or go hard and show he is tough on China.  Biden will be watching closely and the Bolton book is unlikely to help.  On that, an interesting point; by saying that Bolton has released classified material Trump is substantiating the content of the book; because if an event  did not happen it could not be classified…makes you think.
It will be interesting to see whether the protests will resurge.  The very hot weather and the draining effect of covid could have sapped their enthusiasm but I would remain wary at this stage July 1 is likely to be eventful. 

IPO LITIAN PICTURES (9958.HK) closed at $1.59  -38% against the listing price of $2.56, on volume of 32.27mm shares and turnover of HK$64.04m

AFTER MARKET 
Standard Chartered announced the launch with Hong Kong Trade Development Council (HKTDC) of the “Standard Chartered GBA Business Confidence Index”, the first forward-looking quarterly survey in the market that looks at the business sentiment and synergistic effects across cities and industries in the Guangdong-Hong Kong-Macao Greater Bay Area, to provide the latest business intelligence for those who are keen to grow their presence in the Greater Bay Area.
Moodys said the coronavirus crisis will drive up the government debt/GDP ratios by around 19 percentage points in America, Japan, Italy, Britain and ten other richest countries, nearly twice as much as that in 2009's Financial Tsunami, according to a report by Moody’s. Compared with the financial crisis in 2009, the rise in debt burdens will turn out more immediate and pervasive, reflecting the acuteness and breadth of the pandemic-inflicted shock.
RAZER (1337.HK) said that Tinder, a dating app, debuted on the company's Razer Gold, a virtual points platform.  Users can upgrade their Tinder accounts to Tinder Plus and Tinder Gold by making consumption on Razer Gold to enjoy a basket of advanced functions and increase matching success rate. 
MTR CORPORATION (66.HK) stated, it had earlier announced a new series of relief measures, including a substantial increase of the current “3.3% Rebate for Every Octopus Trip” to “20% Rebate for Every Octopus Trip”, and a price reduction for Frequent User Tickets for six months. The “20% Rebate for Every Octopus Trip” will take effect on 1 July 2020 and last until 1 January  Combining this new offer together with the existing “Early Bird Discount”, adult Octopus users can enjoy fare discounts of as much as about 55%. Frequent MTR travelers will also enjoy a $100 reduction for every purchase of “Monthly Pass Extra” and “MTR City Saver” for use from July to December 2020. Passengers may purchase “Monthly Pass Extra” for July at the discounted price starting from 24 June.2021.
China Securities Index Co., Ltd. announced that it will launch the CSI Shanghai-Hong Kong-Shenzhen Leading Technology Index on 16 July to enrich the index system and provide investors with the latest analysis tools and investment subjects. 

HKMA Chief Executive Eddie Yue wrote on inSight that as the COVID-19 situation eases, local economic activities are showing signs of picking up. Nevertheless, economic recovery will take time and many small and medium-sized enterprises (SMEs) are still in dire straits.  It is therefore crucial to continue to support SMEs, enabling them to carry on their business and, by so doing, protect the jobs of employees. Among the various support initiatives, the SME Financing Guarantee Scheme operated by the HKMC Insurance Limited (HKMCI) on behalf of the Government is playing an indispensable role. SMEs form an important pillar and driving force supporting the economic development of Hong Kong. The authority will continue to closely monitor market developments and provide timely support to help SMEs overcome the difficulties ahead, furthered Yue.


Market and Pre Market News at bottom of page.
Short Selling HSI 
Monday 20.2% vs 18.7% Friday

Top Shorts Henderson Land (12) 49%, Wharf REIC (1997) 39%, MTR (66 HK) 36%, Hang Seng Bank (11) 35%, Mengniu Dairy (2319) 34%, Country Garden (2007) 31%, Sands China (1928) 30%, Sunny Optical (2382) 30%, CCB (939) 28%, China Overseas (688) 28%, SHKP (16) 25%, Galaxy (27) 25%.


COMMENT 

*PETROCHEMS WEAK despite oil rising as US drillers idled another 10 rigs and Saudi Arabia said OPEC+ is on the right track to rebalancing the global market. BUT concerns that a second-wave of covid-19  may occur in some countries may impact oil demand which hurt sentiment. CNOOC (883 HK -0.8%) PETROCHINA (857 HK -1.4%) SINOPEC (386 HK -0.9%).
*CHINESE FINANCIALS MIXED. CHINA BANKS WEAK after China kept the 1 an 5 year loan rates unchanged. CCB (939 HK -1.3%) ICBC (1398 HK -0.5%) CMB (3968 HK -1.6%). BROKERAGES STRONG as the Shanghai Stock Exchange said it will revise the compilation rules for its benchmark measure from July 22. CITIC SEC (6030 HK +2%) CGS (6881 HK +4%) HAITONG SEC (6837 HK +1.7%) HUATAI SEC (6886 HK +2.4%).
*E-COMMERCE PLATFORMS WEAK  despite Hang Seng Indexes saying that said JD.COM (9618 HK -2.2%) will be added to the Hang Seng Composite Index, Hang Seng Internet & IT Index and other sub-indexes from July 6; ALIBABA (9988 HK -2.8%) NETEASE (9999 HK +0.4%). GAMING PLATFORMS FIRM after Nintendo said it is retreating from the $77 billion mobile gaming arena to focus on its own platform after disappointing results from its mobile efforts. NETDRAGON (777 HK +0.4%)  TENCENT (700 HK +3%) RAZOR (1337 HK +5%).
*EDUCATION PROVIDERS MIXED selective interest on M&A speculations. CHINA MAPLE LEAF (1317 HK +11.4%) said it is close to acquiring Singapore Canadian International School one of the largest international schools in Singapore, in a deal valued at about US$500m.  VIRSCEND EDU (1565 HK +13.8%), JH EDU (1935 HK +10%).
*TECH & COMPONENTS MIXED  Huawei Tech expecting to receive planning permission this week to construct a GBP 400mn R&D centre near Cambridge UK,  Also FT article about dominating the Russian 5G area which could lead to more emerging market business. AAC TECH (2018 HK +2%) SUNNY OPTICAL (2382 HK +1.5%) BYDE (285 HK +3.2%). SMIC (981 HK +5.7%) got approval from Shanghai Stock Exchange to list on its STAR board for high-technology companies, in which SMIC plans to raise 20b yuan. ZTE (763 HK -7%) clarified that media misread the report about scale production of 7nm chips and import for 5nm chips. ZTE focuses on chip design and it does not have the ability for chip production.
*HK PROPERTY WEAK  in reaction to the announced outlines of the national security law for HK and that Beijing plans to establish a “national security bureau” in Hong Kong with Chinese authorities having jurisdiction on national security crimes in the city. CK ASSET (1113 HK -1.1%) despite seeing 13x over subscription for its first release of units at Sea to Sky and yesterday releasing another 285 flats under the second price list at an average price of HK$16,531 psf after discounts, +4.47% than the first price list. HENDERSON (12 HK -1.9%) SHKP (16 HK -1.7%).
*AUTOS WEAK  despite CAAM revising up it's projection for this year's China car sales to only drop 10-20% YoY, (was previously down 15-25%). GWM (2333 HK -0.2%) said it has agreed to sell 100% of the equity interest in its leasing business Chongqing Chuangban to Chongqing Lingkan at a consideration of 656.65m yuan.
GEELY AUTO (175 HK-1.9%) said it has no intention to participate in bidding for Mahindra’s stake in the South Korean auto brand Ssangyong.
DONGFENG (489 HK +2.1%) GAC (2238 HK -2.9%).
*AIRLINES WEAK as US officials rejected the additional flights proposed by Chinese airlines but said they would reconsider if the Beijing govt adjusts its policies affecting  American passenger carriers. CEA (670 HK -3%) CSA (1055 HK -3.8%) AIR  CHINA (753 HK -2.2%).
*OTHER MOVERS:
AIA (1299 HK +1.8%) is among the index top gainers after China approves its Shanghai branch becoming a subsidiary, paving the way for expansion in China.

CONNECT  FLOWS

Shanghai

Northbound RMB 33,827m Sell 16,276m : 17,551m Buy

Southbound HK$ 13,886m Sell 6,987m : 6,900m Buy

Shenzhen

Northbound RMB 50,918m Sell 25,006m : 25,912m Buy

Southbound HK$ 12,957m Sell 6,046m : 6,911m Buy


DATA CHINA 

Loan Prime Rate 1yr 3.85 unchanged (F/cast was a cut to 3.7%)

5 yr 4.65% unchanged (F/cast was a cut to 4.5%).


HONG KONG 

After Market

Current Account Q1 HK$-9bn vs +41.7b prior (revised (F/cast was +15bn

Inflation Rate May +1.5% YoY vs +1.9% Apr (F/cast was 2%)


Current Account The secondary income gap widened to HKD 7.0 billion from HKD 5.11 billion in Q1 2019 and the primary income surplus narrowed sharply to HKD 16.0 billion from HKD 61.02 billion. Also, the services surplus fell to HKD 32.15 billion from HKD 49.49 billion while the goods deficit dropped to HKD 50.18 billion from HKD 71.93 billion.

Inflation Prices slowed for food (4.8% vs 6% in April), namely pork and fresh vegetables;

Housing (1.6% vs 1.8%), in particular private housing rentals; Miscellaneous goods (2.9% vs 3.5%); and miscellaneous services (0.7% vs 0.9%).

Additionally, cost declined further for electricity, gas & water (-19.4% vs -18.8%); and clothing & footwear (-5.4% vs -4.4%).

In contrast, prices rose at a faster pace for transport (0.6% vs 0.1%) while cost of durable goods fell less (-2.8% vs -3.1%).

On a monthly basis, consumer prices went down 0.4 percent, after a 0.3 percent increase in the prior month.

Census and Statistics Department (C&SD) said March total employment in the private sector surveyed -3.8% YoY or 110,000 persons. The total number of vacancies was 42,300, -47% YoY or 37,300.

Centre for Health Protection said that there were No new local covid-19 cases today.

On Sunday there were 3 new imported cases.


Active Heavyweights
HKEX (388.HK) +3.7% hit new high
TENCENT (700.HK) +3% hits a new high
AIA (1299.HK) +1.8%
HSBC (5.HK) -1.7%
CCB (939.HK) -1%
ICBC (1398) -0.7%
PING AN (2318.HK) -0.4%

HSI & HSCEI Constituents on the move
SINOPHARM (1099.HK) -3.9%
GALAXY ENT (27.HK) -3.7%
SINO LAND (83.HK) -3.5%
CHINA VANKE (2202.HK) -3.3%
WANT WANT CHINA (151.HK) -3.2%
TECHTRONIC IND (669.HK) -3.1%

HSMI & HSSI Constituents on the move
FIT HON TENG (6088.HK) +12.8%
WEIMOB INC (2013.HK) -11.8%
HUIFU PAYMENT (1806.HK) -11.1%
SMIC (981.HK) +5.7%, hits new high
KINGSOFT (3888.HK) +5.1%, hits new high
VINDA INT'L (3331.HK) +2.8%, hits new high

REGIONAL MARKETS  

JAPAN opened lower in the red but worked higher until mid afternoon when it eased lower into the close; Finished -0.2%.  

S KOREA Markets opened mixed; Kosdaq in flat, worked higher for most of the session but sold down at the end top close +1.3%, Kospi opened in the red about worked back to flat but unable to break above and sold off into the close to finish -0.7%

TAIWAN Opened slightly higher, after and initial uptick it eased back to flat and traded traded sideways for the rest of the day. Closed +0.2%%


NEWS
MARKET HOURS 

Taobao announced that it is officially setting foot in the education sector by launching "100 Million New Student Program” Leveraging on its 800 million active users and capabilities in live streaming, marketing and mobile apps, the Chinese e-commerce platform will in the next three years help more than 1,000 education institutes and learning establishments win over 100,000 new students each.
Archosaur Games, a Chinese online game operator with TENCENT (700.HK) as the substantial shareholder, has kick-started an international roadshow, and is expected to have public offering in Hong Kong at end-June, or not early July, mainland media cited source The company will fetch around US$200 million fund from the IPO, according to earlier sources.
WEIMOB INC (2013.HK) was under pressure this morning, -12.6% to $8.57. The company was sued for deleting database, and trialed today (22 June) at a Shanghai court.  Stock closed -11.8%
European Commission President Ursula von der Leyen and European Council President Charles Michel will have a video conference today with Chinese Premier Li Keqiang and President Xi Jinping as they try to cool their tensions. No issue of joint statement was expected following the summit.
EVERGRANDE (3333.HK) announced that it had on 19 June repurchased 16.865 million shares through the Stock Exchange, involving $342 million.
Hong Kong's housing market saw 68 first-hand transactions + 36% WoW. Among which, OCEAN MARINI by Wheelock Properties, sold 22 flats. 

PRE MARKET

Trump said the coronavirus outbreak in the US is coming to an end, as he lashed out at China for spreading the virus across the world by stalling on pandemic handling. Trump added his optimistic forecast that the latest unemployment and retail figures implied potential fierce economic rebound.

CHINA MOBILE (941.HK) May data the number of 4G customers reached 757.5 mn, with a net addition of 3.809 mn (Apr: +1.772 mn);  5G hit 55.609 mn, with a net increment of 11.864 mn.

AIA China Banking and Insurance Regulatory Commission said that AIA was allowed to revamp its Shanghai subsidiary into its wholly-owned life insurance arm, to be chaired by Lee Yuan Siong and as the first wholly foreign-owned life insurer in China.

CH BAOFENG INTL (3966.HK) East Step International, held by a controlling shareholder and as the offeror, has proposed privatization at an offer price of $2.6 per share, circa 27.5% in premium to the closing price before share trading suspension. The company has made an application to resume trading in its shares today (22 June).

US President Trump told Axios that the imposition of stiffer sanctions against Chinese officials involved in the crackdown of Uighur Muslim minority was held off to shun latent impacts on trade talks with China.

Sunday

GOLDEN PONDER (1783.HK) Annual Results Announcement For the Year Ended 31 March 2020. Loss was HK$2.05 million versus profit of HK$16.82 million for the year prior. LPS was HK0.26 cents. The board recommended the payment of a final dividend of HK1 cent per share for the year.

CHINA LNG (931.HK)  issued profit warning. The Group is expected to record an increase in loss for the year ended 31 March 2020 as compared to the fifteen months ended 31 March 2019.