June 30 HK WRAP HSI +126pts T/O -8.% , Shorts 17.5% MKT CLOSED WEDNESDAY


June 30 HK WRAP HSI +126pts T/O -8.% , Shorts 17.5%                 MKT CLOSED WEDNESDAY


HSI +126pts (+0.5%) 24,427  HSCEI +1pts (Unch) 9,759 T/O HK$122.49bn (-8% DoD)  


EUROPE opened slightly higher in the good China data but then sold off on covid-19 concerns, heeding the WHO warning that the pandemic was accelerating.

US Futures Opened +60pts in Asian time but eased back through the day and currently indicate -75pts.


INDEXES      

CSI 300 Closed +54pts (+1.3%) @ 4,164.  Markets opened higher after the improving China PMI data beat expectations. It then worked higher through the morning to 4,154 at lunch.  PM them saw an initial rally to the day high of 4,174 around 1:30pm before selling down to 4,144 where it found support.  From there it worked higher into the close but failed to regain the day highs.  Markets moving higher despite increased tensions with US, India and EU suggests that Team China is active in the market.

HSI Pre Market +167pts @ 24,627 vs +100pts ADR’s @ 24,401 lead by ecommerce names and local banks after better than expected China PMI data and prompted some shorts to cover pushing the HSI to the day high of 24,598 but unable to break out, the market reversed and sold down to the morning low 24,440 and then traded sideways into lunch.  PM saw initial selling down the day low 24,270 level, slightly below yesterday’s close, on news that China’s NPC had passed the HK national security law.  From there is worked slightly higher into the close but failed to regain the lunchtime level.  The details of the new law are due to be released tomorrow (July 1) which is a holiday in HK and many expect widespread protests against the new legislation.

AFTER MARKET 
The Government announced an extension to the social distancing measures for catering businesses, listed premises and public gatherings and continual inbound travel restrictions. The patronage ceiling on restaurants, bars and other premises will be relaxed from 50% to 80% of their normal seat numbers. Other rules and restrictions shall remain in place. Regarding the gathering ban, the maximum number of gathering participants in public premises is kept at 50, except for those granted with a waiver. The guidance, to last for 14 days, shall come into effect from 3 July 2020 till 16 July 2020.
Government announced that expenditure for the period April to May 2020 was HK$90.5 billion and revenue HK$45.8 billion, resulting in a cumulative year-to-date deficit of HK$44.7 billion.
HK Retail Sales data out May -32.8% improved MoM but missed f/cast
The Hong Kong Monetary Authority announced that the number of mortgage applications in May +38.4% MoM to 15,019.  Mortgage loans approved in May +26% MoM vs April to HK$41 billion.
 

Market and Pre Market News at bottom of page.


Short Selling HSI
Tuesday 17.5% vs 16.5% Monday

Top Shorts Wharf REIC (1997) 58%, Hang Seng Bank (11) 43%, CCB (939) 40%, Henderson Land (12) 39%, Hang Lug PPT (101) 32%, HK & China Gas (3) 31%, MTR (66 HK) 29%, CLP (2) 24%.


COMMENT 

*INSURERS STRONG China says it will allow two-way cross border purchases of wealth products with Hong Kong and Macau, deepening economic ties. Flows under Wealth Management Connect will be handled in a "closed-loop" through the bundling of designated remittance and investment accounts, and will be subject to quotas. CH LIFE (2628 HK +0.4%) CH TAIPING (966 HK +2.6%) NCI (1336 HK +0.8%).

*CHINESE BROKERS STRONG rebounding from yesterday's selloff on concern large commercial banks maybe granted brokerage licenses. HAITONG (6837 HK +2.3%) CITIC SEC (6030 HK +1.2%) GF (1776 HK +1%).

*HKEX (388 HK +3%) after 7 companies launched HK IPOs yesterday and a further eight test the waters today. Together, the 15 firms are looking to raise a total of ~HK$34b, making it the busiest week for the bourse so far this year.

*E-COMMERCE MIXED after India banned a number of Chinese apps on security fears. TENCENT (700 HK +2.4%) has partnered with CICC (3908 HK +0.8%) to establish a technological JV which was proposed last September. This is the first JV for the two firms after Tencent became a strategic investor of the investment bank in 2017 by buying a 4.95% stake. Meanwhile, sector continue to consolidate following recent volatility. ALIBABA (9988 HK unch) JD (9618 HK +0.3%) NTES (9999 HK -1.4%) MEITUAN (3690 HK +0.6%) NETDRAGON (777 HK -0.9%).

*TECH & COMPONENTS FIRM COWELL (1415 HK +47%) it revised higher its interim net profit forecast to be USD25m to USD30m, due to higher camera-modules sales and production yield. SEMICONDUCTOR makers in focus on STAR Board listing rumours; HUA HONG (1347 HK +2.1%) FIT HON TENG (6088 HK +4.5%) SMIC (981 HK +1.7%).

*HK PROPERTY MIXED following China passing of the national security law

NWD (17 HK +0.3%) announced the disposal of two non-core assets in HK, generating HK$3.6b in cash.

CK ASSET (1113 HK -1.2%) released another 143 flats in the fourth price list of Sea to Sky in Lohas Park at an average price of HK$17,295 psf after discounts.

SINO (83 HK +0.8%) SHKP (16 HK +0.7%) HYSAN (14 HK +1.2%) WHARF (4 HK -2.5%).

*LUXURY BRANDS FIRM after L'OCCITANE (973 HK +3.3%) reported FY net profit -1.6% YoY as virus hurt sales. Net profit for year ended March 31 fell to 116.3m euros, while net sales +15% to 1.64b euros at reported exchange rates.

SAMSONITE (1910 HK +0.6%) PRADA (1913 HK +1.5%).

*OTHER MOVERS:

TRAVEKSKY (696 HK -5.5%) PROFIT WARNING 1H profit could drop by 100% amid pandemic.

CHINESE TRADITIONAL MED Sector advanced as laggard, playing catch up amid increase demand on traditional med during the pandemic; TRAD CHI MED (570 HK +6.9%) TONG REN TANG (3613 HK +3.1%).CH GRAND PHARM (512 HK +3.8%).


CONNECT  FLOWS (No Northbound flows with HK closed Wednesday)

Shanghai Northbound

Southbound HK$14,596m Sell 6,536m : 8,060m Buy

Shenzhen

Northbound

Southbound HK$13,774m Sell 5,039m : 8,735m Buy


DATA 

CHINA data Manufacturing PMI Jun 50.9 vs 50.6 May (F/cast was 50.2)

Non Manufacturing PMI Jun 54.4 vs 53.6 May (F/cast was 52.1)

Manufacturing Better than expected a government lifted covid-19 restrictions

Output grew the most in three months (53.9 vs 53.2 in May)

Improving New orders (51.4 vs 50.9) and buying levels (51.8 vs 50.8) went up for the fourth month in a row and at a faster pace.

Export sales (42.6 vs 35.3) and employment shrank at softer rates (49.1 vs 49.4), with supplier's delivery time was unchanged (at 50.5). Prices data showed input cost advanced for the second month running and at a faster pace (56.8 vs 51.6), while selling prices rose following a fall in May (52.4 vs 48.7). Looking ahead, sentiment eased but remained solid (57.5 vs 57.9).

Non Manufacturing This marked the fourth consecutive month of growth in the service sector and the strongest since January.

New business expanded further (52.7 vs 52.6 in May), amid softer declines in both overseas sales (43.3 vs 41.3) and employment (48.7 vs 48.5). Meantime, suppliers' delivery time shortened (52.1 vs 52.9).

On the price front, input cost increased for the second time in four months (52.9 vs 52.0), while selling prices decreased the least since January (49.5 vs 48.6).

Finally, sentiment weakened but remained noticeably solid (60.3 vs 63.9).

China's services trade deficit May US$9.9 billion +9.1% MoM according to data from State Administration of Foreign Exchange.

China yesterday (29 June) confirmed 19 additional cases of coronavirus infection, among which eight were local transmission in Beijing and Shanghai, National Health Commission of the PRC reported.

HONG KONG 

Centre for Health Protection said there were no new local covid-19 cases today but it was investigating four additional confirmed cases

After Market RETAIL SALES May -33.9% YoY vs -37.5% Apr revised (F/cast was -30%)

The revised estimate of the value of total retail sales in April 2020 decreased by 36.1% compared with a year earlier. A government spokesman said that retail sales continued to fall sharply in May from a year earlier, as inbound tourism remained at a standstill and job and income conditions were weak. Nonetheless, the decline narrowed further from that in April thanks to the stabilised local epidemic situation and consequential easing of social distancing measures.


Active Heavyweights
HKEX (388.HK) +3.1% hits new high
TENCENT (700.HK) +2.6% 
ICBC (1398) -1.1%
CCB (939.HK) +0.6%
HSBC (5.HK) +0.4%
PING AN (2318.HK) -0.4%
AIA (1299.HK) -0.1%

HSI & HSCEI Constituents on the move
GALAXY ENT (27.HK) +3.8%
CHINA GAS HOLD (384.HK)-3.4%
PSBC (1658.HK) -3.1%

HSMI & HSSI Constituents on the move
VIVA BIOTECH (1873.HK) +15.7%, hits new high
LIFETECH SCI (1302.HK) +14.6%, hits new high
TCL ELECTRONICS (1070.HK) +13.8%
JXR (1951.HK) +12%
HUABAO INTL (336.HK) +10%
MICROPORT (853.HK) +7%, hits new high
KINGDEE INT'L (268.HK) +6%, hits new high

REGIONAL MARKETS 

JAPAN Opened higher Unemployment data was in-line but Industrial Production remained weak and missed forecasts. Markets trades sideways for most of the day and dipped at the end to close +1.3%

S KOREA Opened higher despite the weak pre market data. Kosdaq initially sold down into the red before rebounding back to its opening level but then dipped at the end to close +0.5%. Kospi trended higher all day before selling off to close +0.7%.

TAIWAN Opened higher and initially drifted lower but from mid morning worked higher. Closed +0.7%


NEWS
MARKET HOURS 

Wheelock Properties had yesterday uploaded sales brochures for KOKO HILLS, said Managing Director Ricky Wong.  Show flats will be available to the media as soon as tomorrow, while a price list will be issued this week the soonest.
Macao Government Tourism Office (MGTO) had formulated a "three-speed" tourism recovery plan, under which it will team up with BABA-SW (9988.HK)'s Alipay and Fliggy to lure residents from neighboring Mainland cities through live-streaming and prepaid travel packages.
People's Court of Nanshan District of Shenzhen has ruled for the plaintiff TENCENT (700.HK)'s suit to seize and freeze RMB16.2406 million worth of assets under Lao Gan Ma, Chinese media reported.  TENCENT said the Chinese chili sauce manufacturer has put advertisements worth tens of millions of RMB on the media but turned a blind eye to the money in arrears under the contract for a protracted term.
At lunchtime  TSUI WAH HLDG (1314.HK) annual results ended March 2020. Loss amounted to $317 million vs net profit of $4.741 million in the previous year. Basic LPS equaled 22.49 cents. No final dividend was declared, against last year's 1 cent.
Yang Zhao, head of BABA-SW (9988.HK)'s Taobao Live Operations, had allegedly received improper benefits (e.g. catering, accommodation and gifts) from multiple live-streamers during 2018 and 2019, as Chinese media cited the group's internal memo.  Hence, Zhao was dismissed over rule-breaking and would be ineligible for rehire.
At Lunch FAIRWOOD HOLD (52.HK) annual results ended March 2020. Net profit HK$60.867 million, -66.2% YoY, EPS equaled HK47.03 cents. Final DPS was HK50 cents. Full-year DPS was HK73 cents, equivalent to a payout ratio of 155%.
TENCENT (700.HK) Releasing some 40 game products and brands together with an interactive entertainment setup, Tencent Games has showcased its comprehensive business layout and understanding and pursuit of game diversity.
The published titles include PUBG Mobile, Craz3 Match, and Street Fighter: Duel.
Chinese General Administration of Customs has slammed a temporary ban against the meat import from three plants in Brazil due to concerns about the coronavirus pandemic, Reuters citing Brazilian Agriculture Ministry.
Rating and Valuation Department announced that private domestic price index printed at the six-month high 384.8 in May 2020, +1.9% MoM but -3% YoY. During the first five months of 2020, the index has grossed nearly 1.48% of growth.
The Government will at the beginning of next week disburse wage subsidy to the fourth batch of employers under the first tranche of Employment Support Scheme, involving 11,000 employers and 274,000 employees and a sum of $6.3 billion, said Chief Executive Carrie Lam. The Government will hopefully complete the review of filings for the first tranche of Employment Support Scheme by mid-July, while filings from 60,000 employers and 30,000 self-employed individuals are still pending handling at this moment, added Lam.
Construction of
The Londoner Macao is speeding up instead of slowing down given zero visitor arrival, Macao Daily quoting from SANDS CHINA LTD (01928.HK) President Wilfred Wong. The project will have phased openings in 2020 and 2021 as scheduled.  Wong suggested the 2H20 gaming outlook would depend heavily on the timing of visitor arrivals to Macao. He would be confident of the gaming sector if visitors are coming to the city. Otherwise, casino operators will be faced with tougher time.
The Kowloon Motor Bus (KMB) has decided to extend the interchange discount schemes with Hong Kong Tramways (HKT) and AMS Public Transport (AMS) for one year till 30 June 2021. All terms and conditions remain unchanged.
RUMOUR The "Hong Kong National Security Law" bill has been unanimously passed at the Standing Committee of the National People's Congress.
NEW WORLD DEV (17.HK) announced the disposal of two non-core assets in Hong Kong, generating HK$3.6 billion in cash.  The assets were a 45% interest in certain properties at Shun Tak Centre, Sheung Wan, together with EIGHT KWAI FONG, a serviced apartment located in Happy Valley.

PRE MARKET
FITCH In Global Economic Outlook
, predicted the global economic growth to slide 4.6% this year. The ratings agency moved up China's 2020E economic growth from 0.7% to 1.2%.

CHINA PMI DATA was out at 9am

WUXI BIO (2269.HK) said the Company and the Placing Agent entered into an agreement to place 45 million Primary Placing Shares at HK$137 per Share, representing a discount of 7.9% to the closing price of HK$148.7 per Share yesterday (June 29). The Company expected the net proceeds to be HK$6.123 billion.

China's rollout of the Hong Kong national security law will undermine the territory’s autonomy and heighten the risk of sensitive US technology being diverted to the People’s Liberation Army or China's Ministry of State Security, foreign media citing US Commerce Secretary Wilbur Ross' statement. The US Commerce Department is hence evaluating further actions to eliminate special treatments to Hong Kong. The US will halt exports of defense equipment and dual-use technologies to Hong Kong, said Secretary of State Mike Pompeo.

China Securities Regulatory Commission stated that it has approved the applications from SMIC and Earth-Panda for IPO registration on Sci-tech Innovation Board.

China's tourism deficit shrank to US$6.2 billion, logging a new low since the service trade statistics were reported in 2015, State Administration of Foreign Exchange reported. During the month, deficit from intellectual property right usage reached US$2.9 billion, logging 13-month high and accounting for 28.9% of the total, which surpassed logistics deficit to be the second largest source of service trade deficit.