June 9 HSI Closes above 25k T/O -4% DoD, Shorts drop to 17%


HK WRAP 9 June HSI Closes above 25k T/O -4% DoD, Shorts drop to 17%


HSI +280pts (+1.1%) 25,057  HSCEI +112pts (+1.1%) 10,121 T/O HK$124.25bn (-4% DoD).


Europe Markets opened lower as investors turn cautious after World Bank cuts forecasts and German trade data comes in worse than forecast.

US futures having opened flat and eased back during the day sold down and indicate DOW opening -350pts. S&P and NDX also guiding lower


CONNECT 

Shanghai

Northbound RMB 27,413m Sell 12,460m : 14,953m Buy

Southbound HK$ 9,979m Sell 5,051m : 4,928m Buy

Shenzhen

Northbound RMB 37,653m Sell 17,759m : 19,894m Buy

Southbound HK$ 8,741m Sell 3,950m : 4,791m Buy


Short Selling HSI Tuesday 16.9% vs 18.9% Monday

Top Shorts Hang Lung Ppty (101) 36%, Wharf REIC (1997) 35%, Ping An (2318) 33%, Hang Seng Bank (11) 31%, ICBC (1398) 29%, MTRC (66) 25%.


DATA 

CHINA None but tomorrow on market open Inflation and PPI data.

HONG KONG 

Govt announced support package for Cathay Pac

Centre for Health Protection said there were no new local COVID-19 case


INDEXES      

CSI 300 closed  +25 pts (+0.6%) @ 4,047 Opened lower but worked through the morning. Initial resistance at 4,042, then eased back, next 4,045 and again eased back then back to 4,045 at lunch.  PM saw the market test higher to 4,052 but unable to break out, eased back the then a last rally to close at 4,047.  Markets struggling to move higher with concerns over US/China tensions and ahead of inflation and PPI data due out tomorrow.  News of a deterioration in North/South Korean relations also a dampener on sentiment.

HSI Pre Market +129pts @ 24,906 vs +180pts ADR’s @ 24,956 with a broad based rally and even Mengniu Dairy up despite a pre market profit warning. Markets then worked higher  briefly paying as they passed 25k but first real resistance was at 25,130 which prompted a pull back to 25k before working slowly higher into lunch at 25,100 level.  PM saw the market continue to work higher to the day high of 25,254 around 3pm before selling off in the last hour with support at 25,025 level. Saw a 20pt uptick in the closing auction.
T/O dropped again with some liquidity concerns ahead of the listings of Netease and JD.Com

Active Heavyweights
AIA (1299.HK) +2.7%
HSBC(5.HK) -1.6%
ICBC (1398.HK) +1%
TENCENT (700.HK) +0.9%
CCB (939.HK) +0.8%
HKEX (388.HK) -0.7%
PING AN (2318.HK) +0.5%

HSI & HSCEI Constituents on the move
WHARF REIC (1997.HK) +5.7%
MENGNIU DAIRY (2319.HK) +5.5%
CHINA LIFE (2628.HK) +4.5%
GEELY AUTO (175.HK) +3.8%
LINK REIT (823.HK) +3.6%
CHINA MOBILE (941.HK) +3.6%
WH GROUP (288.HK) +3.6%
MTR CORPORATION (66.HK) +3.5%
SANDS CHINA LTD (1928.HK) +3.5%
ANTA SPORTS (2020.HK) -3.5%
CHINA GAS HOLD (384.HK) +3.1%
CITIC (267.HK) +3%

HSMI & HSSI Constituents on the move
ZHENGTONGAUTO (1728.HK) +32.3%
GRAND BAOXIN (1293.HK) +28.7%
UNITED LAB (3933.HK) +12.3%, hits new high
YADEA (1585.HK) +11.6%, hits new high
HEC PHARM (1558.HK) +10%
HUADIAN FUXIN (816.HK) unchanged at high

REGIONAL MARKETS 

JAPAN opened flat but initially trended lower and then traded sideways for the morning and worked slightly higher in the PM.  Pre market April Average Cash Earnings came in much lower than expected at -0.6% YoY vs +0.1% March (F/cast was +0.5%). Closed -0.38%  Out Wednesday PPI and Machinery orders.

S KOREA opened higher but again the markets had trended lower initially after 7 days of gains;  news it's top 100 companies posted a 10% QoQ  decline in their overseas earnings Jan-Mar, period due to covid-19 impact on industries did not help neither did news that North Korea has pulled the plug on all communication channels with South Korea, including the hotline between the Central Committee of the Workers' Party of Korea headquarter and the Blue House.  Markets bounced back to flat mid morning but then trended lower again but saw a rally at the end back to +VE Kosdaq +0.1%, Kospi +0.2%.  Unemployment data out Wednesday

TAIWAN opened lower but worked into the green and then traded sideways around flat for the day. Closed +0.23%


AFTER MARKET 
SUNNY OPTICAL (2382.HK) said the shipment of handset lens sets -8.6% YoY to 97.478 mn units in May under epidemic impact; that of vehicle lens sets  -35% YoY to 2.547 mn units. 
CLP HOLDINGS (2.HK)'s wholly-owned subsidiary CLP Innovation Enterprises Limited formed a partnership with CYZone, a leading provider of event and information services supporting the growth of technology innovators in Mainland China, to help scout the most promising smart energy technologies amid growing demand for more digitally-connected and sustainable energy services. CLP and CYZone will identify outstanding Chinese companies with innovative technologies and business models in areas including energy management, e-mobility, smart buildings and storage applications. Selected companies will work on pilot projects for potential deployment by CLP in Mainland China and other markets in Asia Pacific. 
AIR CHINA undertakes to Cathay Pac rights issues

MARKET HOURS
SJM HOLDINGS 
(880.HK) after the shareholders' meeting, Chairman Daisy Ho told reporters that the entire group is disheartened over the decease of the founder Stanley Ho and that his spirit will linger on. Amid the coronavirus pandemic, losses were expected sector-wide for the first half of 2020 as the turnover now only accounted for 10% of last year's, CEO So Shu Fai disclosed, who remained downbeat on the full-year performance despite anticipation to regain business momentum in the second half. Daisy Ho made no comment as to her sister Deborah Ho's filing at the court for a caveat about Stanley Ho's will.

A survey of broker forecasts JD-SW (9618.HK), to carry a higher PE ratio valuation than BABA-SW (9988.HK). JD-SW is set to leverage on its self-operating model and benefit from the rapid growth in tier-3 cities or below, whose future EPS growth may outstrip BABA-SW’s.

Brokers highlighted C2M business with relatively higher gross margin (i.e. tailor-made manufacturing), whose CAGR may reach 21% from 2020 to 2023.

The Government, in order to solidify Hong Kong's presence as an aviation hub, is pumping $27.3 billion into CATHAY PAC AIR through the exchange fund capital under Land Fund, said Financial Secretary Paul Chan. It is making the investment in hopes for reasonable return, rather than long-term stake holding in the flagship carrier or involvement in its daily operation. The investment, according to advisory feedback, carries an internal rate of return as high as 4%-7.5%, added the financial secretary.

CATHAY PAC AIR (293.HK) said no prospects for a return to normal international travel arrangements any time soon. In the first four months of 2020, the number of passengers carried was -64.4% with capacity -49.9% and revenue passenger kilometres was -59.1% YoY. Although it is the Cathay Pacific Group’s intention to increase slightly its passenger flight capacity from 3% in May to 5% in June of total capacity, this is still subject to a potential relaxation in government health measures. Furthermore, in the first four months of 2020, the tonnage carried by the Cathay Pacific Group fell by 26.6% against a 25.4% drop in capacity and a 20.6% decrease in revenue freight tonne kilometres, as compared to the same period in 2019. Despite all measures, the drop in passenger revenue to around only 1% of prior year levels has meant that Cathay Pacific has been losing cash at a rate of HK$2.5 to 3.0 billion per month since February 2020. In the short term, the Board intends to implement a further round of executive pay cuts and a second voluntary special leave scheme for employees. In the longer term, all aspects of the Cathay Pacific Group’s business model will be re-evaluated. By the fourth quarter of 2020, Cathay Pacific’s management team will recommend to the Board the optimum size and shape of the Cathay Pacific Group to meet the air travel needs of Hong Kong while keeping Cathay Pacific’s

financial status at a healthy level and meeting its responsibilities to Shareholders. Inevitably this will involve rationalisation of future planned capacity compared to the pre-crisis plans, taking into account the market outlook and cost structure at that time.

SWIRE PACIFIC A (19.HK) announced that it fully supported CATHAY PAC AIR (293.HK)’s proposed recapitalisation. In wake of unprecedented challenges in the global market, the company said the related proposal may maintain the group's competitiveness and operation. The company will fully subscribe for the allotted shares. The subscription price payable by Swire Pacific in respect of its subscription for the Cathay Pacific Rights Shares is expected to be HK$5.3 billion, which Swire Pacific intends to fund with its internal resources. Assuming full exercise of the warrants proposed to be issued by Cathay Pacific, Swire Pacific’s percentage holding of shares in Cathay Pacific would reduce to 42.26% from 45%.

Ren Huichuan has recently joined TENCENT (700.HK) as a senior adviser to explore the internet insurance business after he had earlier stepped down as Vice-Chairman from PING AN (2318.HK), Chinese media citing insiders.

Overnight HIBOR last posted at 0.16214%, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.7856%, down for 8 days.

HKD remained near the Strong-side Convertibility Undertaking this morning (9 June), and the spot USD T/T rate was last at 7.7503, after the HKMA had undertaken USD selling orders for two times during New York trading hours and injected over HKD5 billion into the market. The balance of Hong Kong's banking system was expected to increase to HKD113.817 billion this Wednesday

LINK REIT (823.HK) oriented its development in China in four tier 1 cities, namely Beijing, Shanghai, Guangzhou and Shenzhen, where the company owns properties, said Chief Strategy Officer Eric Yau after radio interview. The company's team is now looking at any more potential projects, regardless of commercial buildings or shopping malls.


PRE MARKET
New Oriental Education & Technology Group and TAL Education Group
, the Chinese online educators listed in the US, are pondering to stage a second listing in Hong Kong, and exploring the relevant possibility with investment banks, while the final decisions remain unsettled, Reuters' IFR cited sources. Both New Oriental and TAL declined to comment on the matter. Their respective market caps are approximately US$21 billion and US$39 billion, totaling approximately HK$468 billion.

Folli Follie has tapped Deloitte to be in charge of its voluntary liquidation due to insolvency in Hong Kong businesses, local media reported. The winding-up will affect at least five physical stores and 60 workers of the FOSUN INTL (656.HK)-backed Greek jewelry brand. -VE

NTES-S (9999.HK) was blasted by its players of "率土之濱", a mobile game of country battle of the Three Kingdoms. They complained about the new game system of selling expensive treasures, sparking extensive protests among players who declared to lodge complaints at the State Administration for Industry and Commerce. They also claimed to petition online when CEO William Ding runs live broadcast on Hong Kong's stock debut. The official site of the mobile game apologized for the matter, saying the incident will be settled by way of system ratification.

SWIRE PACIFIC A (19.HK), SWIRE PACIFIC B (87.HK), AIR CHINA (753.HK) and CATHAY PAC AIR (293.HK) Trading halted with effect from this morning, pending release of an announcement relating to the inside information.

MENGNIU DAIRY (2319.HK) PROFIT WARNING It expected to record a growth in revenue in the first half of 2020 compared to the same period in 2019 (excluding the impact of disposal of JLB and acquisition of Bellamy). However, the Group expected to record a decrease of between 45% to 60% in profit attributable to owners of the Company in the first half of 2020 compared to the same period in 2019, mainly attributable to an increase in the costs incurred from additional expenses on epidemic prevention and control to safeguard the health and safety of the employees, and to ensure the resumption of work and production. That was smaller than expected; Slight +VE

China Passenger Car Association disclosed that the nationwide sales volume totaled 1.609 million vehicles in May, +1.8% YoY marking the first positive growth since the coronavirus outbreak. Looking into June, the association expected the recovery to go on along with the reopening of vehicle exhibitions across the country.

As HKD re-hit the Strong-side Convertibility Undertaking, the HKMA announced that it undertook the USD selling orders for two times during New York trading hours with the amounts of USD184mn and USD472 mn, equivalent to HKD1.426 bn and HKD3.658 bn. The balance of banking system was expected to increase to HKD113.817 billion this Wednesday (10 June).

CST GROUP (985.HK) said on 8 June it acquired a total of 3.0975mn CHINA SHENHUA (1088.HK) shares on the open market at an aggregate consideration of $40.70 million.Q TECH (1478.HK) said sales volume of camera modules totaled 34.128 million units in May, -5.3% YoY and -12.9% MoM.


COMMENT 

*PETROCHEMS FIRM on demand recovery in China, despite oil dropping overnight as Saudi Arabia said it wouldn't continue its additional, deeper output curbs after June and Libya said it would resume exports from its largest fields. PETROCHINA (857 HK +1.4%) CH OILFIELD (2883 HK +3%) SINOPEC (386 HK +2.2%).
*AIRLINES STRONG as HK govt's to support CATHAY PACIFIC (293 HK suspend). The HK flagship airline announced a HK$39b govt-led rescue plan, as it tries to weather a near-freeze in int'l flying. CSA (1055 HK +4.8%) CEA (670 HK +2.9%).
*E-COMMERCE PLATFORMS WEAK ahead of major new listings. JD.COM (9618 HK) HK Listing retail offer so far 26x oversubscribed, and NETEASE (9999 HK) to debut on Thurs. ALIBABA (9988 HK unch) TENCENT (700 HK +0.9%) MEITUAN (3690 HK -2.1%).
*HK PROPERTY STRONG as HK home prices remain resilient, and Li Ka-shing and Victor Li continuing buying CK ASSET (1113 HK +2.2%). HENDERSON LAND (12 HK +2.9%) said its overall rental business -10% YoY in the first quarter and the  rental business in China only -2%. SHKP (16 HK +2.3%) NWD (17 HK +2.7%), KERRY (683 HK +1.9%).
*CHINA PROPERTY MIXED following more placement deals in the sector. KAISA PROSPERITY (2168 HK -6.9%) share placement, to raise  around HK$468m, selling 14m shs at HK$32.55, 10% disc from last closing price.EVERGRANDE (3333 HK +3.7%) R&F (2777 HK +3.4%) GREENTOWN (3900 HK -8.7%)  CIFI  (884 HK -1%) KAISA (1638 HK -0.9%).
*MACAU CASINOS FIRM on boarder opening hopes, despite Macau's tax revenue from the gambling industry -56.5% YoY to 21b patacas during the first five months this year. GALAXY (27 HK +1.9%) SJM (880 HK +1.7%) SANDS (1928 HK +3.5%).
*AUTOS MIXED  as retail sales of cars, SUVs and multiple-purpose vehicles +1.9% YoY to 1.64m units in May. That’s the first gain since June 2019. GEELY (175 HK +3.8%) GREATWALL (2333 HK +2.2%) GAC (2238 HK unch) BYD (1211 HK -0.5%).
DEALERSHIPS STRONG  ZHENGTONG (1728 HK +32.3%) and BAOXIN (1293 HK +29%) surged after BMW is said to be providing more aggressive incentives to encourage sales.
*EDUCATION PROVIDERS FIRM reported that NYSE-listed New Oriental  Education & Technology Group (EDU US) and TAL Education (TAL US) are in discussions with banks about potential secondary listings in Hong Kong. MAPLELEAF (1317 HK +3.8%) CH EAST (667 HK +2.2%) WISDOM (6068 HK +2%).
*PHARM/MED STRONG on talk of new drugs and vaccines. LUYE (2186 HK +8.5%) osteoporosis drug gets FDA trial approval. SSY (2005 HK +4.4%) SINOPHARM (1177 HK +2.2%)  SH PHARM (2607 HK +3.6%) INNOVENT (1801 HK+4%).
*PROFIT-ALERTS: MENGNIU DAIRY (2319 HK +5.5%) expects 1H net to drop 45%-60% on year; smaller than expected.
XINYI SOLAR (968 HK +1.3%) expects 1H net profit increase of as much as 50%.