Sept 15 HK WRAP HSI +93pts, T/O +16% Shorts drop to 18%

17 Sep

Sept 15 HK WRAP  HSI +93pts, T/O +16% Shorts drop to 18%

HSI +93pts (+0.4%) 24,733  HSCEI +22pts (+0.2%) 9,829 T/O HK$115.93bn (+16.3% DoD)  

EUROPE markets opened flat/slight positive; after some initial weakness now trending higher. UK employment data beat f/casts, French Inflation in-line, German and Eurozone ZEW data beat f/casts
US Futures currently indicating a higher open Dow Futures +160pts, S&P and NDX also positive. Expect cautious trading into the close ahead of Wednesday Retail Sales numbers and the FOMC announcement. Data due today Export & Import Prices, NY Empire State Manufacturing, Redbook, Industrial Production, Manufacturing Production, Capacity Utilisation, API Crude Oil Stock Change

CSI 300 Closed +37pts (+0.8%) @ 4,689 
opened lower and sold down ahead of the data release; which was better than forecast. Market traded sideways on the news but then rallied in the last 30 minutes before lunch. PM basically traded sideways 4,678 to 4,690.
Yuan strengthened past 6.8vs USD for the first time since May 2019 as the PBoC offers 600bn one year MLF cash injection and good Industrial, Retail and FAI data
Shanghai Composite Index +16pts (+0.5%) @ 3,295 T/O Rmb 251.8bn (vs 269.2bn Monday)
Shenzhen Component Index +121pts, (+0.9%) @ 13,143 T/O Rmb 4737bn (vs 500.2bn (Monday)
ChiNext Index +22pts (+0.9%) @ 2,595. T/O Rmb 258.2bn (vs 270.5bn Monday)

HSI Pre Market Opened -19pts @ 24,622 vs -81pts ADR’s @ 24,558 E Commerce firm but Xiaomi -4.5% on placement, Financials were mixed. HSI then worked higher in early trades before pulling back to flat ahead of the China data. Rallied on the better than forecast China data to 24,780 and then worked slightly higher again to 24,825 (day high) before easing back lower into lunch. PM basically traded sideways with Chinese consumer & Pharma names seeing interest but financials & Petrochems weak. Market Initially trended lower to 24,685 the afternoon low and then sideways/slightly higher into the close. Increased T/O but still caution ahead of US FOMC and Retail Sales data. Also because of companies and shareholders raising funds. On the positive side no new local covid cases only 4 imported ones.

Techtronics (669 HK)
A long time favourite of mine as readers will know.; continued to work higher +4.2% on the day.  Hit a new high.

FOURACE IND GP (1455.HK), on debut, closed at $1.32, up 92 cents
or 2.3 times against the listing price $0.4, on volume of 147.7 million shares and turnover of $145 million.
Excluding the handling fees, a book gain of $4,600 was reported per board lot of 5,000 shares.

SHORT SALES Tuesday 18.4% vs 22.3% Monday
Top Shorts
Ping An (2318) 47%, BABA (9988) 39%, Mengnui Dairy (2319) 36%, Bank of China (3988) 29%, Sunny Optical (2382) 27%, Hang Seng Bank (11) 26%, ICBC (1398) 24%.

MIDLAND IC&I Estimates Over 4,000 Idle Shops in HK; Vacancy Rate at 4 Key Districts Hits 12.6% Record-high.
The number of idle shops in four key core districts (Tsim Sha Tsui, Mong Kok, Causeway Bay and Central) hiked to 945 between July and August, up 37% from 1Q20 or 96% yearly, MIDLAND IC&I (00459.HK)'s data showed. The shop vacancy rate of these districts hit 12.6%, setting an all-time high. The vacancy rate of Causeway Bay even peaked at 18%, being the highest among districts. The property agency forecast that there may be more than 4,000 vacant shops now in Hong Kong. As there are so many idle shops that take time to digest, paired with structural change of shops, the vacancy rate was expected to linger at high level looking forward.
In Hong Kong a lot of these are owned by individual landlords, many have held them for a long and only have small mortgages others have leveraged them and are now facing a very difficult time with a number looking to sell.
BABA-SW (09988.HK)'s "Xunxi" (Chinese name: 迅犀) is going to hit the market. It is a smart manufacturing platform that has been internally sneaking for three years, as Chinese media learnt from inside sources. hosted a month-long procurement event in September. During the first week of launch, the number of online transaction orders soared 125% yearly with transaction amount rallying 160% yearly.

Regional Markets
opened lower and after an initial uptick sold down to test the day lows, with support at 23,350 level. Then saw a slight rally into lunch. PM opened flat and trading sideways slightly higher but saw resistance at 23,466 and eased back to close -0.4%
I think we are seeing caution ahead of the Suga announcing his cabinet and the possibility of a snap election.
S KOREA Kosdaq opened higher but sold down to test yesterday’s closing support and briefly dropped below. But then reversed and has worked higher from 10:15am to midday and then traded sideways, to close +0.6%
Kospi followed a similar pattern currently +0.7%.
TAIWAN opened flat but worked higher through the day in choppy trading to close just off the day high +0.5%

Northbound Rmb 33,222m Sell 16,522m : 16,700m Buy
Southbound HK$ 8,798m Sell 3,854m : 4,945m Buy

Northbound Rmb 49,339m Sell 23,098m : 26,241m Buy
Southbound HK$ 9,163m Sell 3,793m : 5,370m Buy


Fixed Asset Investment (YTD) Aug -0.3% YoY vs -1.6% Jul (F/cast -0.5% YoY),
Industrial Production Aug +5.6% YoY vs +4.8% Jul (F/cast +4.5% YoY)
Retail Sales Aug +0.5% YoY vs -11% Jul (F/cast +0.2% YoY)
Unemployment Rate Aug 5.6% vs +5.7% Jul (F/cast was 5.6%)
Better than expected data showing the recovery is continuing in China +VE but the good data means that it is unlikely that there will be any further significant government stimulus in the short term. Beijing is likely to maintain the current policies. Slight -VE for investors.
It is interesting to note that the heavy rains and flooding reported in August do not seem to have had a marked impact on the data at this stage.
Fixed Asset Investment Improving as the Govt lifted covid restrictions but private investment still decreased and public investment eased from 3.8% to 3.2%.
Investment in the primary industry +11.5% (vs 7.7% prior), while that in the secondary industry was -4.8% (vs -7.4% prior) on the back of manufacturing.
Investment in the tertiary industry advanced more (1.4% vs 0.8%) due to transport, storage & postal industry; education, health and social work; and recreation & culture activities.
Industrial Production the fifth month of increase and the sharpest yet.
Retail Sales reversing last months fall. It is encouraging that people are increasing their spending again; I take that to be a sign that people are confident in the recovery and that their jobs are secure. But it is still significantly behind the monthly increases in spending seen at the end of last year.

Centre for Health Protection said there were 4 additional COVID-19 cases
in Hong Kong today; (vs 14 Monday). All imported.
Hong Kong's Gross National Income (GNI), which denotes the total income earned by Hong Kong residents from engaging in various economic activities,  Q2 -7.5% YoY to $698.7 billion at current market prices. The Gross Domestic Product (GDP), estimated at $637.9 billion at current market prices in the same quarter, recorded a 8.1% decrease over the same period. The value of GNI was larger than
GDP by $60.8 billion in the second quarter of 2020, which was equivalent to 9.5% of GDP in that quarter, mainly attributable to a net inflow of investment income.
Government announced Eatery Service Hours extended to Midnight from Fri; Bars, Pubs May Re-open including theme parks
Paul Chan said SME Financing Guarantee Scheme Boosts Max. Loan Quota to $5M
That Fiscal Reserve to Shed to about $800B, Equivalent to 12-13 Months of Govt Expenses and that the Anti-epidemic Fund Involves Cost of $300B, Approx. 5% Econ Boost

Active Heavyweights
AIA (1299.HK) +1.6%
PING AN (2318.HK) +1.3%
MEITUAN (3690.HK) -0.4%
BABA (9988.HK) -0.3%
HKEX (388.HK) -0.2%
CCB (939.HK) +0.2%
TENCENT (700.HK) Inch

HSI & HSCEI Constituents on the move
XIAOMI-W (01810.HK) -5.1%
WHARF REIC (01997.HK) +5%
LONGFOR (00960.HK) +4.5%
SHIMAO GROUP (00813.HK) +3.8%
SHENZHOU INTL (02313.HK) +3.5%
WUXI BIO (02269.HK) +3.4%
TECHTRONIC IND (00669.HK) +1.5%, hitting new high

HSMI & HSSI Constituents on the move
HUABAO INTL (00336.HK) +12.8%
BYD COMPANY (01211.HK) +12.6%, hitting new high
POWERLONG (01238.HK) +10.8%, hitting new high
GREATWALL MOTOR (02333.HK) +3.1%, hitting new high
VSTECS (00856.HK) +2.3%, hitting new high

Market Commentary 
*PETROCHEMS WEAK as OPEC added its warning about a deteriorating demand outlook. It has cut global oil demand forecasts for each quarter to the end of 2021 by an avg of 768,000 barrels a day. Consumption is on track to collapse by an unprecedented 9.46m barrels/day. CNOOC (883 HK -0.6%) CH OILFIELD (2883 HK -0.4%) SINOPEC (386 HK unch).
*E-COMMERCE FIRM after TikTok agreed a partnership agreement with Oracle and confirmed it's part of ByteDance's proposal to the US., which now need US national security approvals If approved it would allow the US administration to monitor TikTok operations while Bytedance does not need to sell its business or most importantly it algorithm.
ALIBABA (9988 HK -0.3%) in talks to invest US$3b in SE Asian ride-hailing giant GRAB.TENCENT (700 HK +0.6%) JD (9618 HK +3.1%) NTES (9999 HK +1.2%).
*TECH & COMPONENTS FIRM sector found support following although concerns about US sanctions still overhang the market.
Semi names rebound, SMIC (981 HK +2%) HUA HONG (1347 HK +4.4%) FIT HON TENG (6088 HK +6.8%).
XIAOMI (1810 HK -5.3%) after vice chairman Lin Bin sold shares to raise as much as US$1b at HK$22.55 each, a 4.4% discount, cashing in on a stock surge that sent its shares to new highs. He promised not to sell shares again for 5 yrs
*AUTOS MIXED CH EVERGRANDE NEV (708 HK -11.5%) Pre Market announced top-up placement to raise HK$4b @ HK$22.65; a 20% discount to yesterday's close. The company said investors include Tencent and Didi Chuxing.
BYD (1211 HK +9.5%) on news that BYD ELECTRONICS (285 HK+1%) becomes APPLE's new iPad supplier, and after overnight bounce in Tesla shares ahead of its “Battery Day” event next week.
*HK PROPERTY FIRM especially retail landlords, as the latest round of Covid outbreak seems to be contained, after HK reported no infected case today and Government further eased social distancing restrictions
Li Ka Shing Foundation bought 460,000 CK ASSET (1113 HK+1.2%) shares recently. NWD (17 HK +1%) HANG LUNG (101 HK +3%) WHARF (4 HK +3.8%).
*CHINA PROPERTY FIRM after China Jan.-Aug. Property Development Investment +4.6% YoY, and mainland home-price growth accelerated in August after a brief slowdown in July as credit growth rebounded. TIMES CHINA (1233 HK +5.8%) SUNAC (1918 HK +2.8%) SHIMAO PROP (813 HK +3.8%) CH EVERGRANDE (3333 HK +8%) rose on EV unit's new investors, including Tencent and Didi.
*AIRLINES STRONG yuan strengthen reduces overseas fuel and debt costs. Plus optimism that a Covid vaccine may be available to the public as early as November this year. AIR CHINA (753 HK +3%) CH EASTERN (670 HK +2.8%) CH SOUTHERN (1055 HK +2.8%).

Hong Kong Airlines disclosed that 99.5% of its pilots have agreed to join the extended no-pay leave program,
starting from October 2020 through March 2021. During the period, pilots and co-pilots will have their monthly fixed income and allowance axed by 60%. In order to guarantee the overall employment, the Hong Kong-based airline has also lodged an application for the second round of Employment Support Scheme as it seeks to water down its business burden. The no-pay leave program may be adjusted or cancelled subject to changes of the situation.
HSBC announced that the insurance department has established a fintech company in Shanghai's free trade area, with operation to start as soon as the end of the year. The new company will initially provide assistance to mobile wealth management business in China, and subsequently serve other functions.
The Hong Kong Housing Authority (HA) announced today (September 15) that the selling prices of the new flats and rescinded flats for resale under the Sale of Home Ownership Scheme Flats 2020 (HOS 2020) have been finalised at a 40 per cent discount from the assessed market value, i.e. for sale at 60 per cent of assessed market value.
TENCENT's PUBG Mobile, Honor of Kings Top World's Mobile Games Revenue in Aug
The top two grossing mobile games worldwide for August went to TENCENT (00700.HK)'s PUBG Mobile and Honor of Kings, as revealed by the report of Sensor Tower.
PUBG Mobile grossed revenue of US$221 million, up 25.5% yearly. Honor of Kings garnered revenue of US$205 million, +25.5% YoY
Knives Out from NTES-S (09999.HK) generated US$79.5 million, hitting a record high.
China in August consumed electricity of 723.8 billion KWh, +6.8% YoY National Bureau of Statistics (NBS) reported. For 8M20, the power consumption added 0.3% yearly to 4.77 trillion KWh.
BYD ELECTRONIC (00285.HK) has become the OEM of the new iPad products,  Chinese media reported.
China says ordinary people could be dosed with COVID-19 vaccine in November or December, Chinese Center for Disease Control and Prevention Chief Expert of Bio-safety Wu Guizhen was quoted as saying by CCTV. Based on the phase three clinical trial results, the progress was promising. Wu said she had been dosed with the new vaccine in April and has been feeling good in recent few months.
Moody's affirmed China's A1 ratings with the outlook "Stable", attributable to the strength of Chinese institutions and governance and the effectiveness of Beijing's policies. The ratings agency expected Chinese economy to grow just 1.9% this year.

Not in this mornings report
US private exporters have reported the sale of 350,000 tonnes of corn to China for shipment during the 2020/21 marketing year, as Reuters learnt from the Agriculture Department. This marked the biggest sale of U.S. corn to China since the deal for 596,000 tonnes struck on September 1.
During a video conference, European Union leaders called on Chinese President Xi Jinping to open up the market, accord respect to the Xinjiang minorities and put an end to his crackdown on Hong Kong. Europe will no longer be taken advantage of in trade issues, accentuated European Council President Charles Michel.
HKMA announced that as USD/HKD triggered the Strong-side Convertibility Undertaking during New York trading hours, it undertook a US$50 million selling order to inject HK$388 million into the market. The balance of the banking system of Hong Kong will increase to HK$206.696 billion tomorrow (16 September).
Anbang Insurance Group resolved at the shareholders' meeting to dissolve the company and formed a liquidation team, reported Shanghai Securities News. As the next step, the Group will apply for dissolution to the China Banking and Insurance Regulatory Commission (CBIRC) pursuant to laws and regulations, the announcement said.
CITIC Group, Alibaba Group and Ant Group inked a comprehensive strategic cooperation agreement in Hangzhou yesterday (14 September). Pursuant to which, the three parties will integrate their respective edges and resources to enhance business alliance. They will jointly build a new ecology for inclusive finance and industrial internet cooperation oriented in the concept of co-living, co-sharing, equality and openness.

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