Sept 3 HK WRAP HSI manages to hold 25k ... just but shorts rise to 21.6%

07 Sep

Sept 3 HK WRAP HSI manages to hold 25k ... just but shorts rise to 21.6%

HSI -112pts (-0.5%) 25,008  HSCEI -61pts (-0.6%) 9,940 T/O HK$146.56bn (-8.2% DoD)  

Markets opened higher following most of Asia as PMI data was largely in line or better than F/cast except for the UK. But retail sales in the Eurozone and France were weaker than expected.
US Futures traded around flat +/- 30pts, S&P and NDX currently slightly weaker. Data due today Challenger Job Cuts, Balance of Trade, Exports, Imports, Unit Labour Costs, Initial Claims and 4 week ave Initial Claims, Services and Composite PMI’s, ISM Non Manufacturing Data (Business Activity, New Orders, Prices, Employment and PMI), EIA Natural Gas Report.

CSI 300 Closed -27pts (-0.6%) @ 4,817
Opened lower but the Caixin PMI data was better than expected, although the Services data was still down MoM it was better than forecast which prompted the market to move higher into the green and then trade sideways before selling down to 4,825 and then saw a small bounce into lunch. PM saw the market continue to sell down to 4,800 level with a small bounce into the close.
Sentiment cautious a international relations with India, Australia and the US weigh on investors minds. US imposed restrictions on Chinese diplomats that are similar to the ones US experience in China. Some rotational trading seen with money taken off the table from Packaged Food and Military Names and buying in Airlines, Pharm and White Liquors.
Shanghai Composite Index -20pts (-0.5%) @ 3,385
Shenzhen Component Index -115pts, (-0.8%) @ 13,772
ChiNext Index -25pts (-0.9%) @ 2,747

HSI Pre Market opened -91pts @ 25,085 vs -157pts ADRs @ 25,020 with T/O was HK$3.16b back to normal levels. Pre Market PMI missed and said sentiment remains severely pessimistic. E commerce names opened lower. The market initially dipped to 24,900 level but then bounced back above 25k on the better than expected China Caixin data. It tested 25,200 several times but without success and then sold back down before a small bounce into lunch to close flat. PM saw the market sell down to 24,900 again and then rally back to and trade around the 25,000 level. There is caution ahead of the HSI rebalance and still concerns on Chinese international relations.
I still think 25k is a key level that China will seek to hold with so many Chinese secondary listings coming up.

COVID TESTING. Fully underway, from reports it is efficient but there are queues of people lining up to get into the test centres. KEY is that is should give the administration as snap shot of immunity levels and that may prompt more easing of social distancing restrictions.

SHORT SALES Thursday 21.6% vs 21% Wednesday
Top Shorts
MTRC (66) 41%, HK & China Gas (3) 39%, China Res Land (1109) 27%, NWD (17) 38%, HSBC (5) 38%, Want Want (151) 37%, Sino Land (83) 33%, Bank of China (3988) 32%, Petrochina (857) 32%, AIA (1299) 30%, ICBC (1398) 30%, Ping An (2318 28%, China Unicom (762) 28%, China Mobile (941) 27%, Sinopec (386) 26%, CCB (939) 25%, Sunny Optical (2382) 24%.

SANAI HEALTH GP (1889.HK) The Listing Committee of The Stock Exchange of Hong Kong Limited censured 
the company for breaching Rule 13.49 (1) of the Exchange Listing Rules for failing to publish its preliminary results of the financial year ended 31 December 2017 not later than three months after the end of the financial year.
The Securities and Futures Commission (SFC) has issued a restriction notice to Shenwan Hongyuan Securities (H.K.) Limited (Shenwan Hongyuan), prohibiting it from dealing with or processing certain assets held in four trading accounts, which are related to suspected market manipulation in the shares of a company listed on the Stock Exchange of Hong Kong Limited.
RONSHINE CHINA (3301.HK) contracted sales in August +10.09% YoY to RMB12.031 billion with contracted gross floor area being around 611,600 sq.m. In the first eight months of 2020, contracted sales totalled RMB84.533 billion, +5.02% YoY with total contracted gross floor amounting to 3.7911 million sq.m.
EVERGRANDE (3333.HK) group's property contracted sales +7.7% YoY to RMB51.48 billion with contracted gross floor area being 5.324 million sq.m, +18.5% yearly. In the first eight months of 2020, the group's property contracted sales +21.8% YoY to around RMB450.62 billion with contracted gross floor area of 49.343 million sq.m, +42.9% yearly.
Centa Valuation Index (Major Banks) (CVI) last printed @ 34.11, -0.78 pts WoW
The index narrowed its slide this week from last week's 8.59 pts; Centaline Property, said banks are being prudent in mortgages given low transaction prices of individual cases, while not staying in bearish sentiment continuously.
Chinese Ministry of Commerce (MOC) and Ministry of Technology (MOT) have recently made adjustment to the Catalogue of China's Restricted Export Technologies. As to whether the adjustment aimed to drag the ByteDance's disposal of Tiktok US, MOC spokesman Gao Feng responded that the adjustment was based on the need of technological development and international technology cooperation. Pursuant to international practices, the ministries conducted regular adjustment to the 2018's Catalogue, not targeting any specific companies.

Regional Markets
opened higher and effective traded sideways in the AM session. Opened slightly lower in the PM and drifted lower to close +0.9%
PMI Services data was in-line but the composite reading was up MoM and beat forecasts.
S KOREA opened higher; the Kosdaq traded sideways for most of the session but trended higher in the pm session close +0.9% and the Kospi trended slightly higher the AM and then traded sideways to close +1.3%.
TAIWAN opened higher but initial tested for support at 12,750 then rallied to 12,850 resistance. Then trended lower for the rest of the day dipping below 12,750 in the last hour which then became the resistance. Closed +0.5% at 12,744

Northbound Rmb 42,138m Sell 20,610m : 21,527m Buy
Southbound HK$ 12,296m Sell 6,108m : 6,188m Buy

Northbound Rmb 58,718m Sell 30,319m : 28,398m Buy
Southbound HK$ 11,534m Sell 5,032m : 6,502m Buy


Caixin Services PMI Aug 54 vs 54.1 Jul (Forecast was 53.7)
Caixin Composite PMI Aug 55.1 vs 54.5 Jul (Forecast was 54)

Centre for Health Protection said there were 8 additional COVID-19 cases 
in Hong Kong today; 4 from unknown sources.
Hong Kong PMAug 44 vs 44.5 Jul (F/cast was 45)
Key finding I think was that Sentiment remained severely pessimistic.
Amid stricter COVID-19 rules, which adversely impacted the private sector. Both output and new orders declined at sharper rates, while new sales from abroad, including mainland China, fell substantially.
Also, firms consequently scaled back purchasing activity and reduced inventories due to an uncertain economic outlook. Meantime, the employment levels remained broadly stable, while the level of backlogs fell further as spare capacity persisted. Survey data pointed average lead times lengthened to the greatest extent for four months.
Prices data showed overall input prices were broadly unchanged, with selling prices falling further as part of efforts to stimulate sale.

Active Heavyweights
TENCENT (700.HK) -2%
HKEX (388.HK) -1.9%
AIA (1299.HK) +0.6%
PING AN (2318.HK) -0.5%
CCB (939.HK) unch

HSI & HSCEI Constituents on the move
GEELY AUTO (175.HK) -6.5%
CHINA GAS HOLD (384.HK) +3.3%
LONGFOR (960.HK) +1.5%, hitting new high

HSMI & HSSI Constituents on the move
TYSAN (687.HK) +14%
SHOUCHENG (697.HK) +11.7%, hitting new high
CR HOLDINGS (1911.HK) +5%, hitting new high
CHINARES CEMENT (1313.HK) +4.7%, hitting new high
VSTECS (856.HK) +3.6%, hitting new high

Market Commentary
After several days of weakness post results. China said that it will not flood the economy with liquidity. It will continue to pursue a prudent and flexible monetary policy, according to a State Council document citing a meeting at which Premier Li presided. CCB (939 HK unch) ABC (1288 HK unch) ICBC (1398 HK -0.2%) BOC (3988 HK +0.4%).
*E-COMMERCE WEAK hurt by news that India banned over a hundred Chinese apps including from Tencent's popular game PUBG, search engine leader Baidu Inc., and online payments giant Ant Group Co.’s Alipay, as tensions escalated on the nations’ disputed border. Also news that ANT GROUP plans to raise more funds on Shanghai's STAR Board than in Hong Kong hurt local sector's sentiment. I think we are also seeing some money being raised ahead of the Ant Group IPO.
BABA (9988 HK -2.4%) TENCENT (700 HK -2%) JD (9618 HK -2.6%) MEITUAN (3690 HK -4.5%).
*TECH & COMPONONETS FIRM Not much reaction to news that China is planning a broad chip sector support to counter US restrictions. It has been working on this for some time and it will not be a quick fix. Also it will still face restrictions on using US tech.
SMIC (981 HK -0.4%) will mean more competition. HUA HONG (1347 HK +2%) BYDE (285 HK +2.6%) FIT HON TENG (6088 HK -4.4%) ASM (522 HK +0.7%).
*EDUCATION WEAK after China announced policy changes with President Xi calling for standardizing private compulsory education and ensuring the public benefit. WISDOM (6068 HK -4%) MAPLELEAF (1317 HK -3%) YUHUA (6169 HK -5%) CH EAST (667 HK -2.7%) CH NEW HIGHER EDU (2001 HK -2.4%).
*CHINA PROPERTY STRONG on good sales data.
COUNTRY GARDEN (2007 HK +3%) Aug contract sales +30.1% YoY to 60.93b yuan.
MIDEAL REAL ESTATE (3990 HK +1%) Aug contract sales +96% YoY to 13.1b yuan.
AOYUAN (3883 HK +0.5%) Aug contract sales +41% YoY to 10.85b yuan.
GEMDALE (535 HK +2.9%) Aug contract sales +28% YoY to 6.41b yuan.
*AIRLINES STRONG China to restart international flights directly into Beijing; CEA (670 HK +2.2%) CSA (1055 HK +2.6%) AIR CHINA (753 HK +2.6%).
There was also news that showed that China has some of the busiest airports globally after allowing internal flights to resume.
Retailer I.T. (999 HK -2%) has received 24 lawsuits from landlords since May over overdue rental payments involving amounts ranging from HK$340,000 to HK$1.4m. XINYI SOLAR (968 HK -6.3%) sold 210m shares in an accelerated placement at HK$9.44, an 8% discount to Wednesday's close.
SINOTRUK (3808 HK +6.9%) after industry data showed sales of heavy duty cars rose 75% YoY in August to 128,000 units.
CANSIBO (6185 HK +9.5%) following its initiation Covid-19 vaccine phase 3 clinical trial.

Ant Financial (Hang Zhou) Network Technology has reported business changes
, according to a Chinese website BABA-SW (9988.HK)'s partner Hu Xi resigned as the company's legal representative, replaced by Ant Group CTO Ni Xingjun.
BOC Life Chief Executive Wilson Tang said during a teleconference that business revival was notable in 3Q20, yet challenges will linger in the long run as low rate environment is affecting the product setting and balance sheet management of the insurance company. Moreover, BOC Life will magnify cooperation within Greater Bay Area by identifying partners and investment opportunities, mainly in elderly care, Tang added. Announcement will be made when appropriate.
A.S. Watson Group announced that the group manifested a global eCommerce growth of over 90% in the second quarter of 2020. Many people have become more comfortable with eCommerce, which will give eCommerce a boost in the long term.
NEXT DIGITAL (00282.HK) West Kowloon Magistrates' Courts today ruled Jimmy Lai Chee Ying, the founder of Next Digital not guilty of criminal intimidation charges, in which he allegedly intimidated a reporter of Oriental Daily News during Victoria Park 4th June Rally in 2017.
The Chinese government is working on a series of new policies to develop its domestic semiconductor industry as she seeks to counter restrictions imposed by the Trump administration, Bloomberg citing insider sources. Beijing is preparing broad-based support for the so-called third-generation semiconductors in five years through 2025, said the insiders.
Sino-Indian tension has flared up recently with conflicts bursting again at the borders of the two countries. China and India have deployed tanks at the borders with tanks within each others' shooting range, India media agency reported. It was said that the two sides are having dialogue at the same time in an effort to ease the situation.
Verizon (VZ.US) and Amazon (AMZN.US) may pump over US$4 billion for a stake in India's telecom carrier Vodafone Idea, Indian press reported.
The Bank of Japan needs to take bolder monetary easing policies to tackle the heightening deflation risks, said the board member Goushi Kataoka. The Japanese central bank must aggressively buy government bonds and inform the market that it stands ready to cut interest rates further to water down the burden on families and firms, opined Kataoka.
The removal of Epic Games' Fortnite from the App Store and Google Play has left a US$1.2-billion hole in the battle royale market, reported Sensor Tower. The majority of Fortnite's revenue was from the App Store, garnering over US$1.2 billion of player spending since March 2018, according to Sensor Tower's statistics.
XIAOMI-W (1810.HK) Founder Lei Jun posted on Weibo that the handset business of the company harvested stellar progress in the last few years as its products rooted at high-end arenas. In recent two years, the company has been targeting European market with smartphone shipment growth of 65% YoY in 2Q20, marking top three in the market shares.
Micron (MU.US) will stop shipments to Huawei starting from 14 September 2020, as the first memory card supplier to do so, a press learnt from the group management's speech. Micron is the largest DRAM and NAND Flash manufacturer in the U.S.

Not in this mornings report
GOLDIN FIN HOLD (530.HK) Trading in the shares was halted this morning, pending release of reasons.
Zoom (ZM.US)'s shares skyrocketed 40.8% following result release on Tuesday. Li Ka-shing holds 8.5% stakes of Zoom through Horizons Ventures, with a market cap as much as roughly $80 billion, according to local reports. The relevant investment gain is said to be transferred to Li Ka Shing Foundation.
TikTok’s potential buyers are discussing four possible ways to acquire the social media app after the Chinese government had amended rules on technology exports, Reuters citing sources. One possible way is buying its U.S. operations without the key algorithm, said the insiders.
I.T Apparels Limited, owned by I.T (999.HK) Chairman Sham Kar Wai, has faced 24 lawsuits from its landlords since mid-May for its arrear of rental payments, ranging from $340,000 to $1.4 million monthly, the local media citing the court filings. HANG LUNG PPT (101.HK), one of the said landlords, will go on discussing solution with the boutique chain, on top of rental breaks thereto, as its spokesperson replied to the media.
FTSE Russell announced the quarterly review results for FTSE China 50 Index.
Adding BYD COMPANY (1211.HK), SMIC (981.HK) and WUXI BIO (2269.HK)
Out are CHINA GAS HOLD (384.HK), CHINA RAIL CONS (1186.HK) and PICC P&C (2328.HK).
For the FTSE China A50 Index.
Adds Wanhua (600309.SH), OFFCN EDU (002607.SZ), LONGi (601012.SH), ZHIFEI-BIOL (300122.SZ) and Eastmoney (300059.SZ)
Out are ZTE (000063.SZ), Willsemi (603501.SH), GTJA (601211.SH), CRRC (601766.SH) and Wens Foodstuff (300498.SZ)
The above changes will take effect after market close on 18 September (Friday).
Starting from 3 September, Beijing has gradually restored international direct flights, Xinhua News Agency reported. At the beginning stage, direct flights from Cambodia, Greece, Denmark, Thailand, Pakistan, Austria, Canada and Sweden will be resumed. Inbound passengers shall be subject to 14-day quarantine at designated spots and two nucleic acid tests.
XINYI SOLAR (968.HK) plans to place 282 million shares at $9.44 each, representing an 8% discount to the closing price yesterday. The estimated net proceeds approximate $2.645 billion.
At a Chinese State Council meeting, Premier Li Keqiang restated that monetary policies shall be kept stable and flexible to guarantee the policy strength and sustainability, while more capital shall be channelled to the real economy to facilitate stable and smooth operation.
Beijing also gave green light to the implementation of entry scrutiny on financial holding companies (FHCs), which clarified the entry thresholds thereon.
The research report about the cause of atmosphere pollution and relevant governance projects was also heard at the meeting.

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