June 5 HK WRAP HSI +404pts T/O +7.5% Shorts drop to 14%


June 5 HK WRAP  HSI +404pts T/O +7.5% Shorts drop to 14%


HSI +404pts (+1.7%) 24,770 HSCEI +98pts (+1%) 10,066 T/O HK$134.86bn (+7.5% DoD). 


Europe Markets opened higher and initially rallied before easing back, I think some caution ahead of the US jobs data although rumours of more US stimulus may offset any weakness from the jobs data.

US futures indicating a higher open, Dow mini’s +362pts on rumours the Trump administration will roll out a new round of economic stimulus worth as much as US$1 trillion,


CONNECT 

Shanghai

Northbound RMB 25,290m Sell 11,153m : 14,137m Buy

Southbound HK$ 9,306m Sell 5,135m : 4,171m Buy

Shenzhen

Northbound RMB 34,607m Sell 16,626m : 17,981m Buy

Southbound HK$ 8,176m Sell 3,849m : 4,327m Buy


Short Selling HSI Friday 14% vs 20.8% Thursday the first significant drop in a while

Top Shorts Wharf REIC (1997) 40%, Shenzhou (2313) 38%, China Res Land (1109) 31%, Ping An (2318) 25%, China Unicom (762) 23%, MTRC (66) 23%, Henderson Land (12) 23%, CSPC Pharma (1093) 22%, Galaxy Ent (27) 22%, ICBC (1398) 21%, Want Want (151) 21%.


DATA
CHINA None
but due Sunday Balance of Trade, Exports, Imports, Foreign Exchange Reserves

HONG KONG After Market Foreign Exchange Reserves May US$442.3bn vs 441.2b Apr. +0.23% MoM; includes unsettled foreign exchange contracts. The growth curve in reserves looks to be flattening; slight -VE

Centre for Health Protection said there were no new COVID-19 cases today;


INDEXES      

CSI 300 closed  +19pts (+0.5%) @ 4,001 Opened flat but saw initial selling for the first 30 minutes to the day low (3,968) but then rebounded to the morning high 3,987, slightly above yesterday’s close but failed to hold and sold down into lunch.  PM after a choppy start market trended higher and broke through yesterday’s closing level and continued to climb, saw some resistance at it approached 4,0000 but after several attempts broker through and closed just above. A positive move but difficult to know if it was Team China or wider buying.  I had expected caution ahead of the weekend especially with the US jobs data tonight and China Trade data out on Sunday. Sentiment helped by comments from US Trade Rep Lighthizer said he feels “very good” about the progress of the phase one trade agreement with China.  AIRLINES in focus after  the dispute over bilateral rights seems to be resolved and news of more airlines globally looking re-start services.

HSI Pre Market +21pts @ 24,388 vs -70pts ADR’s @ 24,296 with AIA and HSBC +VE but weakness in China Mobile and the property names.  HSI saw selling pressure for the first 20 minutes down to the day low (24,254) but then bounced back to flat and traded sideways for the rest of the morning and the first 45 minutes of the PM session.  Then it saw a 200pt uptick as China rallied.  Then a further 190pt uptick around 3pm and then traded sideways into the close.
HSI rebalance on the close had little impact. T/O relatively light with a lot of margin money tied up in Netease IPO.  Sentiment helped by the fact that Thursday’s Tiananmen Sq vigils passed off peacefully and the good public demand for the forth coming IPO’s.  Financial Sec said the government is ready to defend the peg. A number of stocks today I think saw long term shorts throwing in the towel and deciding to go long; some of the Macau names saw increased volume as UBS turned more positive. Samsonite was another beneficiary and my favourite Techtonics broke out on good volume too, having been a popular short recently.
All this comes as the FT reports that US hedge funds are increasingly expecting another sell off because markets at these levels are not pricing in the fundamental risks and trading on optimism in the face of weak economic data.  US employment data tonight could inject some realty. For Hong Kong profit warnings after market from Foxconn and Hang Lung may prompt weakness in those sectors on Monday.

Active Heavyweights
HSBC HOLDINGS (5.HK) +4.2%
ICBC (1398.HK) +1.2%
PING AN (2318.HK) +1%
AIA (1299.HK) +0.8%
CCB (939.HK) +0.8%
HKEX (388.HK) +0.8%
TENCENT (700.HK) -0.2%

HSI & HSCEI Constituents on the move
ANG SENG BANK (11.HK) +8.4%
BYD COMPANY (1211.HK) +7.4%
WHARF REIC (1997.HK) +6.2%
SWIRE PACIFIC A (19.HK) +6.2%
NEW WORLD DEV (17.HK) +5.4%
CK ASSET (1113.HK) +5.2%
CKH HOLDINGS (1.HK) +4.5%
NCI (1336.HK) +4.4%
HAITONG SEC (6837.HK) +4.3%
SHK PPT (16.HK) +4.1%
AAC TECH (2018.HK) +4%
HENDERSON LAND (12.HK) +3.9%
CHINA UNICOM (762.HK)  +3.8%
SUNNY OPTICAL (2382.HK) +3.7%
BOC HONG KONG (2388.HK) +3.4%
TECHTRONIC IND (669.HK) +3.4%, hits new high
CHINA TAIPING (966.HK) +3.3%
WH GROUP (288.HK) +3.3%
PICC P&C (2328.HK) +3.3%
SINO LAND (83.HK) +3.2%
SINO BIOPHARM (1177.HK) +1.5%, hits new high

HSMI & HSSI Constituents on the move
HINASOUTHCITY (1668.HK) +20.3%
CR MEDICAL (1515.HK) +15.2%
BEIJING AIRPORT (694.HK) +11.6%
SAMSONITE (1910.HK) +11.4%
CHINA SOUTH AIR (1055.HK) +10.7%
REGAL REIT (1881.HK) +10.3%
GCL-POLY ENERGY (3800.HK) +10.2%
TIANNENG POWER (819.HK) +5.7%, hits new high
CSC (6066.HK) +3.7%, hits new high
VPOWER GROUP (1608.HK) +3.1%, hits new high

REGIONAL MARKETS 

JAPAN Opened lower;  Household spending weakened but was not weak as forecast. Market traded sideways slightly below yesterday’s close for most of the morning but moved above that around lunchtime and ticked higher at the end Nikkei +0.74%

S KOREA Opened slightly higher but initially dipped into the red before reversing and then working higher for the rest of the day to close around the day highs Kosdaq +0.9%, Kospi +1.4%

TAIWAN Opened slightly higher and worked slowly higher through the day to end at if high Taiex +0.76%


AFTER MARKET 
FIH (2038.HK) PROFIT WARNING expecting the Group’s revenue for the four months ended 30 April 2020 (YTD April 2020) is likely to be around US$2.4 billion, -42.86% YoY. Further, the Company expects the Group to record a consolidated net loss of around US$75.1 million for YTD April 2020, -13.08% YoY;   I don’t think this will come as a total surprise but expect weakness in the stock and Hon Hai in Taiwan
HANG LUNG PPT (101.HK) and HANG LUNG GROUP (10.HK) PROFIT WARNING jointly announced that due to COVID-19, the 2020 financial results may be adversely affected by a revaluation loss of the investment properties in Hong Kong and Mainland China and the granting of support measures (including rent relief) to the Group’s tenants in Hong Kong and Mainland China. The Group expected to report a loss attributable to shareholders in the 2020 financial statements, mainly caused by a revaluation loss of the investment properties.   I would expect more warnings from the other Property investors in the near future. 
CLP HOLDINGS (2.HK) and HK&S HOTELS (45.HK) Chairman expressed support for the Hong Kong national security law in an SCMP interview, but urged the government to ease the public's fears by revealing the details and secure their backing. Kadoorie is the latest local business tycoon to advocate Beijing's push for the legislation.
HK & CHINA GAS (3.HK) will likely record a single-digit fall in Hong Kong's 1H20 gas sales volume due to a plunge in the visitor number and a less frequent dinning-out  amid the coronavirus pandemic, said Managing Director Alfred Chan. Hong Kong's FY20 gas sales volume was expected to slide about 2-3% along with a slowing outspread of plague, added Executive Director Peter Wong Wai-yee, assuming China's FY20 gas sales volume to grow 4-5% despite a 12% slump in 1Q20.
Chinese Ministry of Foreign Affairs news conference, spokesperson Geng Shuang stated that China as always holds zero tolerance against any shoddy financial practice behavior among listed companies and that the U.S. is wrong to accuse Chinese firms of not abiding by relevant US regulations. Washington's remark against Beijing is purely political manipulation of scrutiny issues, opined Geng, and she is going to undermine US investors' interest by kicking Chinese firms out from US bourses.
BYD COMPANY (1211.HK) said sales volume during the first five months of 2020 totaled 124,900 vehicles, -34.03% YoY
HENDERSON LAND (12.HK)'s "Double Cove" has sold ten specialty flats by way of tender within a month, cashing in over $350 million, revealed Thomas Lam, General Manager of Sales (1) Department at HENDERSON LAND. Of which, two specialty units with private parking space were sold at $42.259 million and $51.036 million, respectively, over the week.
JD.com on the first day of its 618 anniversary celebration (1 June), recorded a 266% YoY sales turnover growth in Hong Kong, and a 370% YoY spike in the number of Hong Kong users, setting a historical high.
Spot USD/CNY closed at 7.0866, up 357 bps. As at 16:48, USD/CNY rose 212 bps in the night session. USD/CNH stood at 7.0860, up 222 bps. 
Centa-City Leading Index (CCL) last printed at 180.26, surpassing 178.84 in February to a YTD peak and logging a 27-week high. The index +0.96% this week, the sharpest rise in 29 weeks.  Home price rally ran on after the May Day holiday.  CCL surged 2.45% in three weeks, with magnifying weekly growth of 0.91%, 0.56% and 0.96%. The impact of renewed social incident and local COVID-19 infection will be factored in CCL in the coming weeks.

MARKET HOURS 

CHINESE EST H (127.HK) rallied late afternoon, up around 56%, after skyrocketing 77% to peak at $6.42.
Singapore's non-resident deposits grew 44% to a record SGD62.14 bn (US$44.37 bn) in April, the fourth consecutive monthly rise. This could be tied to escalating political upswing in Hong Kong and the pandemic, Reuters citing analysts.
LOGAN PPT-1000 (3380.HK) contract sales for the five months to 31 May 2020, RMB37.25 bn, 12.3% YoY, the gross floor area of contract sales was 2.417 million sq.m.. 
Li & Fung started issuing dismissal notices to around 70% staff at the procurement department last week, affecting hundreds of people, Apple Daily quoted Li & Fung's staff. While there are also layoffs in Shanghai and Shenzhen, the actual number of people involved remains unknown.  People familiar with the matter assumed that the group would like to outsource the procedure to mainland China to streamline cost.  Li & Fung responded that the staff adjustment was made due to pandemic hit, yet did not disclose further details on the job cut.  
Overnight HIBOR last posted at 0.17286%, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.80571%, down for 6 days.
As HKD re-hit the Strong-side Convertibility Undertaking, the HKMA announced that it undertook USD126 million during Asian trading session this morning (5 June), equivalent to a selling  HKD977 million.  At around 11:20 am, HKD remained resilient, leading to the spot USD T/T rate to 7.7502. The balance of the banking system was expected to rise to HKD95.768 billion next Monday (8 June). 
WeChat Pay announced the launch of "WeChat Pay Bonus Points". Users may rent portable power banks, umbrellas and other tools free of deposits and enjoy ride hailing ahead of payment in advance when they gross 600 bonus points.
WULING MOTORS (305.HK) +30% to $0.65, on volume of 321 million shares and turnover of $209 million. Amassing 2.7-time surges in three days, the stock peaked at $0.74 this morning, setting a new high since March 2017.  300 stall trucks manufactured by the automaker and sold on Pinduoduo at over RMB50,000 per unit were in quick sell-off. China  Passenger Car Association (CPCA) Secretary-General Cui Dongshu called on Chinese automakers to make contribution for "stall economy”.
CHINA LIT (772.HK) said that since the copyrighted online literature alliance was established in 2016, 4,364 illegal copy removals have been done associated with third-party right infringement. In future, the Chinese online literature platform will team up with industry partners to further combat copyright infringement behavior, adding that it will cover all costs related to right protection for its writers.
JD.com plans to issue around 133 million shares in Hong Kong offering to raise roughly $3.75 billion, Bloomberg citing insiders.  The Chinese online shopping platform will have its offering on 8-1 June and go public on 18 June. TENCENT (700.HK) holds 17.8%, Walmart 9.8% and Chairman and CEO Richard Qiangdong Liu 4.7% of JD's total issued and outstanding shares, according to preliminary offering document.
Pinduoduo (PDD), a Chinese concept stock listed in the US, has on 3 June confidentially submitted information for listing in Hong Kong at the Stock Exchange, a Chinese media cited people familiar with the matter.
TikTok delivered a gross revenue of US$95.7 million in May, rallying 10.6 times yearly, topping the chart of non-game apps worldwide, according to the report of Sensor Tower. Approximately 89% of TikTok’s revenue was from China, and 6.2% from the United States.  YouTube came as the second with gross revenue of US$78.4 million in May, up 77.3% yearly, preceding Tinder in the third place.
BYD COMPANY (1211.HK) revealed that, given better-than-expected market feedback, the automaker has decided to expand the annual capacity of "blade battery" production line at Chongqing Fudi Battery Factory from 2GWh to 12GWh by end-2020, cited by Chinese media.  The firm aims to reach the maximum capacity target of 20GWh by end-2021.
The PBOC conducted a seven-day RMB150 billion reverse repos today with a bidding interest rate flattish at 2.2%.  People's Bank of China firmly advocated the establishment of a legal system and enforcement mechanism safeguarding national security in HKSAR.  The central bank also showed unswerving support for the city's development as an international financial hub, striving to protect its economic and financial stability and prosperity.

PRE MARKET 

SEAZEN (1030.HK) May contracted sales achieved in May 2020  RMB22.412 bn, -9.5% YoY


COMMENT 

*PETROCHEMS FIRM on demand recovery in China, despite oil price fluctuations on various issues including the long-running feud between Iraq and other laggards’ re production cuts the and the fact that OPEC+ alliance hasn't confirmed a date for its June meeting.PETROCHINA (857 HK +2.2%) CNOOC (883 HK +2%) CH OILFIELD (2883 HK +2.6%)

*E-COMMERCE WEAK I think some selling ahead of the Netease IPO and other potential listings.  NETEASET (9999 HK) saw the retail portion of its HK secondary listing oversubscribed by at least 133x, it priced HK stock sale HK$123, a 2% discount to last closing price in the US

JD.COM is expected to launch its HK IPO today.

Sentiment also slightly hurt by news of TENCENT's (700 HK -0.2%) president Martin Lau selling a total 600,000 shares of the company on May 29 at avg HK$423.9732 and avg HK$409.6218 on June 1. I think that should serve as an indicator to long term investors to take some money off the table and look for alternatives.

CH LIT (772 HK -1%) and MEITUAN (3690 HK -2.8%) I think as investor lock in recent gains and raise cash for the new IPO's.

*HK PROPERTY FIRM after a weak open; after HK Financial Secretary Paul Chan reiterate the Govt's commitment to keeping the HKD/USD peg system, while PBOC also vowed to ensure that Hong Kong’s economy and financial markets are stable.

I mentioned on CNBC yesterday how these stocks were attractive trading around 5 year lows and the recent social tensions local demand remains good as most residents cannot just leave HK.

CKA (1113 HK +5.3%), HENDERSON (12 HK +3.8%) SHKP (16 HK +4%) NWD (17 HK +5.4%).

CH ESTATE (127 HK +60%) but off afternoon highs; no obvious news reported.

*CHINA PROPERTY FIRM on continued good May sales data; hopefully indicating a wider recovery in China

COLI (688 HK +1.4%) May contracted sales -5.4% YoY to 26.78b yuan,

COUNTRY GARDEN (2007 HK +2.3%) +3.29% YoY to 56.11b yuan,

SHIMAO PROP (813 HK +1.6%) +37% YoY to 22.02b yuan,

GREENTOWN (3900 HK +0.4%) -14% YoY to 12.2b yuan.

YUZHOU PROP (1628+0.8%) said contracted sales of 30.7b yuan for the first 5 months of the year is close to 95% of the sales target this year.

*AUTOS FIRM after CAAM said sales of passenger cars saw a 3% YoY improvement in April, while automobile sales overall grew by 5% YoY, the first positive year-on-year growth for the sector in 21 months.

BYD (1211 HK +7.3%) reports May vehicle sales of 31,821 units.

QINGLING MOTORS (1122 HK +13.7%) on news of cooperation with Chongqing Auto Inspection to conduct extensive cooperation in the fields of new energy, autonomous driving, intelligent network-connected commercial vehicle technology R&D.

*AIRLINES STRONG as China says it will ease its ban on foreign airlines starting June 8. Foreign airlines excluded from an earlier pact will be able to operate one commercial passenger  flight to China a week. The US is reported to revise it ban on Chinese airlines as a result. A rebound in RMB also helps to support the airline sector which has heavy US debts and has to pay for overseas fuel in USD. CEA (670 HK +7.7%) CSA (1055 HK +10.7%) AIR CHINA (753 HK +8.6%).

AIRPORTS also strong on re-opening hopes , BEIJING AIRPORT (694 HK +11.6%) MEILAN AIRPORT (357 HK +16%). Along with travel related stocks like Samsonite (1910 HK +11.4%).


I hope you found it useful feedback and comment welcomed