SEPT 7 HK WRAP HSI -106pts T/O drops as US closed and Shorts muted

09 Sep

SEPT 7 HK WRAP HSI -106pts  T/O drops as US closed and Shorts muted

HSI -106pts (-0.4%) 24,590  HSCEI -119pts (-1.2%) 9,765 T/O HK$158.24bn (+25.8% DoD but if you exclude the late trades from Friday T/O was close to HK$139b)  

EUROPE markets opened higher with covid vaccine progress in focus as well as the fact that the US market recovered Friday after the European markets closed.
US Markets closed re-open Tuesday. Signs of increased covid cases in 22 States over the labour day weekend

CSI 300 Closed -101pts (-2.1%) @ 4,669
Opened lower, initially rallied into the green but then sold down ahead of the Trade data and bounced on its release but failed to get back into the green. PM opened lower and trended lower then at 2pm saw heavy selling into the close.
Shanghai Composite Index -63pts (-1.9%) @ 3,293. (Dropping below the 50 day MA)
Shenzhen Component Index -373pts, (-2.7%) @ 13,284
ChiNext Index -91pts (-3.3%) @ 2,641

HSI Pre Market opened -74pts @ 24,24,621 vs -76pts ADRs @ 24,619 with pre market T/O HK$19b with late trades from HSI rebalance on Friday.  E commerce names weak although Meituan rose. Tech weak as SMCI (981) -15% on the worry about possible US sanctions. After the weak pre market the HSI initially rallied but then sold back down to just below Friday’s closing level ahead of the China data as margin call selling kicked in after Friday’s sell off. Small bounce after the China trade data but basically flat at lunchtime. PM opened and traded flat until 2pm when the market sold off following China. Found support at 24,500 and saw a bounce and then traded sideways into the close.

SHORT SALES Monday 12.9% vs 11.3% Friday
Top Shorts
Bank of China (3988) 33%, CLP (2) 28%, Hengan (1044) 21%

Li Ka-shing and Victor T K Li through Li Ka Shing Foundation Limited acquired a total of 1.3565 million shares in CK ASSET (1113.HK) 
at the average price of HK$41.7750, HK$41.6166, HK$41.5991 and HK$41.2020 per share on 1 September, 2 September, 3 September and 4 September 2020 respectively. As a result, the deemed interests of Li Ka-shing and Victor T K Li in CK Asset have increased from 35.49% to 35.53% and from 35.56% to 35.60% respectively.
While the US is pondering on sanctioning SMIC (981.HK), the biggest chip maker in China, Chinese Foreign Ministry Spokesperson Zhao Lijian responded that the US is misusing her power to target Chinese firms without any evidence, imploring the US to stop devouring foreign companies.
BYD COMPANY (1211.HK) total sales volume for August reached 36,800 units, up 2.15% year-on-year.
SINO-OCEAN GP (3377.HK) announced proposed spin-off and separate listing of shares of Sino-Ocean Service, a subsidiary of the Company, on the main board of the Stock Exchange. Sino-Ocean Service has submitted a listing application form (Form A1) to the Stock Exchange.
IPO NONGFU SPRING (9633.HK), whose shares will be listed tomorrow, opened at $38 in gray market, rocketing 76.7% against the listing price of $21.5, and last stood at $43.7, spiking 103% against the listing price, on volume of 1.3 million shares and turnover of $56.7 million, PhillipMart data showed.
BABA-SW (9988.HK)announced that the "2020 Computing Conference" will be held online between 17 and 18 September, at which breakthroughs of cloud computing and robot will be showcased. The company expected more than 10,000 developers to participate.
Alibaba (Shanghai) Network Technology Co., Ltd.has been established with registered capital of RMB10 million, Chinese media reported. The company is mainly engaged in technological services in internet technology sector, software development, information system integration services and so on.

Regional Markets
opened lower but worked back to flat only to sell down into lunch as the China trade data came out. PM re-opened a little higher but trended lower and closed just off the day low at -0.5%.
Softbank closed -7.2% off its intraday lows
S KOREA opened slightly higher as the Govt proposes another budget (worth Won 7tn) and covid cases ease. Initially sold down to Fridays closing level but then worked higher. Kosdaq closed around its highs +1.5% and the Kospi followed a similar pattern but trading was a bit more choppy; closed +0.7%.
TAIWAN opened higher and has traded in a tight range (12,650 - 12,725) for the first 4 hours but dipped below Friday’s close around midday and trended lower to 12,575 before a small uptick; to close -0.3%

Northbound Rmb 43,671m Sell 22,937m : 20,734m Buy
Southbound HK$ 16,806m Sell 8,193m : 8,614m Buy

Northbound Rmb 63,907m Sell 33,585m : 30,322m Buy
Southbound HK$ 15,968m Sell 6,210m : 9,758m Buy


Balance of Trade Aug $58.93B vs $62.33b Jul (F/cast was for $47b)Exports Aug +9.5% vs +7.2% July (F/cast was +6.5%)Imports Aug -2.1% vs -1.4% July (F/cast was +0.1%)
Foreign Exchange Reserves Aug $3.165T vs 3.154T Jul (F/cast was 3.17T)
The acceleration in Exports will be seen as an endorsement that demand is returning globally as more countries lift covid lockdown restrictions. BUT much of the boost will have been from medical related exports and robust demand for electronics. The data indicates that exports for major commodities were down; refined products, unwrought aluminium and products, steel products, rare earths and grains.
Which seems to indicate that the recovery is only progressing slowly. That could mean extra pressure on the Chinese exporters. Imports falling, would also suggest that companies are running down inventories; a sign that confidence in the recovery is waning.
Imports falling was a surprise; second month of falls and demonstrates the fall in domestic consumption. Imports MoM fell for major commodities including crude oil, iron ore, copper and soybeans but they were up YoY. Interestingly purchases from the US were +2% but were -30% from Europe (slight -VE for Germany I would think).

Centre for Health Protection said there were 11 additional COVID-19 cases 
in Hong Kong today; (vs 21Sunday). 4 from unknown sources

Foreign Exchange Reserves Aug $450b vs 450b Jul (F/cast was 448b)

Active Heavyweights
AIA (1299.HK) +6%
MEITUAN (3690.HK) -5.2%
BABA (9988.HK) -3.1%
HKEX (388.HK) -2.8%
TENCENT (700.HK) -1.4%
CCB (939.HK) -0.4%
PING AN (2318.HK) -0.2%

HSI & HSCEI Constituents on the move
WUXI BIO (2269.HK) -3.6%
ENN ENERGY (2688.HK) -3.5%
CHINA RES BEER (291.HK) -3.4%
HENGAN INT'L (1044.HK) -3.2%

HSMI & HSSI Constituents on the move
CMBC CAPITAL (1141.HK) +15.8%, hitting new high
TIANLI EDU (1773.HK) +15.7%
HUA HONG SEMI (1347.HK) -14.4%
INNOVENT BIO (1801.HK) +11%
TCL ELECTRONICS (1070.HK) +10.9%
COFCO MEAT (1610.HK) -10.1%
COSCO SHIP HOLD (1919.HK) +8.9%, hitting new high
HYGEIA HEALTH (6078.HK) +7.9%, hitting new high
JS GLOBAL LIFE (1691.HK) +5.5%, hitting new high
GREATWALL MOTOR (2333.HK) +5.5%, hitting new high

Market Commentary 
*POST-REBALANCE MOVES: ALIBABA (9988 HK -3%), XIAOMI (1810 HK -1.4%), and WUXI BIO (2269 HK -3.6%) joined HSI as of Friday but MEITUAN DIANPING (3690 HK -5.2%)
*BANKS WEAK on regulatory concerns, after CH MINSHENG BANK (1988 HK -0.6%) was fined 107.8m yuan by the CBIRC illegally financing property developers; among other things. Also news that the are planning record bond sales this month.
CCB (939 HK -0.2%) ICBC (1398 HK -1.1%) ABC (1288 HK -0.4%).
*TECH & COMPONENT WEAK on sanction fears SMIC (981 HK -23%) denied looks top the military use after Reuters reported the Trump admin was considering adding it to a trade blacklist. If Washington makes the move against SMIC, it could force US suppliers to seek a special license before shipping to the company.
TRULY (732 HK -4%) net consolidated turnover in Aug +0.2% YoY to HK$1.99b.
Q TECH (1478 HK -9%) BYDE (285 HK -7.4%) ZTE (763 HK -4.3%) HUA HONG (1347 HK -14%).
*E-COMMERCE PLATFORMS WEAK on news that China plans to put a cap consumer lending rates (as per the ceiling imposed by a China Supreme Court ruling last month) to curb risk. Loans made by Ant Group and others will impacted: TENCENT (700 HK -1.3%) NTES (9999 HK -2.1%) JD.COM (9618 H K-0.7%).
*HK PROPERTY FIRM with home viewings and sales are expected to pick up as the latest virus outbreak seems to have been brought under control.
CKA (1113 HK +1.4%) plans to sell two projects in Beijing and Shanghai at a total of 50b yuan. HENDERSON (12 HK +0.3%) NWD (17 HK +0.4%) KERRY (683 HK +1.7%).
*CHINA PROPERTY WEAK consolidation following the latest August sales data.
COLI (688 HK -1.4%) Aug sales +17.6% YoY to 28.79b yuan,
COGO (81 HK -3.2%) Aug sales -13.1% YoY to 4.45b yuan,
SHIMAO (813 HK -1.3%) Aug Sales +37.33% YoY to 29.56b yuan,
MODERN LAND (1107 HK -1.9%) Aug Sales +52% YoY to 4.14b yuan.
*AUTO FIRM extended recent strength amid sector rotation and solid August sales; which increased 10% YoY (+7% MoM), according to CPCA.
GEELY AUTO (175 HK +0.12%) Aug vehicles sales in China +9% YoY to 107,121 units.
BYD (1211 HK +3.7%) GREATWALL (2333 HK+5.5%).
INNOVENT BIO (1801 HK +11%) added to the stock-connect eligible list on Friday.
TIANLI EDU (1773 HK +15.7%) saw a block trade of 1.94m shs traded at HK$8.03/shr, market value of HK$15.6m, at a premium of 13% from today's open price.

The Indian government approved iPhone OEMs Foxconn, Pegatron and Wistron, as well as Samsung, Karbonn, Lava and Dixon to apply for exporting cellphones 
worth around US$100 billion from India under the production-linked incentive scheme, local media citing insiders.
At the launching ceremony of 11.11 Shopping Craze for 2020, Tmall Global announced that more than 25,000 overseas brands will partake in the shopping festival this year, over 2,600 of which are joining for the first time. Tmall Global General Manager Liu Yiman forecast that the number of brands that will realize over hundreds of millions of yuan at the Shopping Craze will double up.
XINYI GLASS (868.HK) announced that CEO Tan Sri Datuk Tung Ching Sai had on 3 September purchased a total of 1.12 million shares at an average price of $13.8772 each.
Former CTO Zhang Xuefeng had resigned from BABA-SW (9988.HK) in the first week of September, according to Chinese media. In August, Zhang had been re-designated to be the CEO assistant of a local life service company of BABA-SW.
According to Hong Kong Housing Society's 2019/20 annual report, the annual revenue -3.59% YoY to HK$1.862 billion. The Housing Society recorded operating loss of HK$143 million and overall net loss of HK$1.03 billion, against earnings of HK$1.085 billion over a year ago.
SMIC (981.HK) wrote in a solemn statement that the company strictly abides by the respective laws and regulations in relevant countries or jurisdictions and that it will go on lawfully operating its business on this basis. It has neither involved in operation related to military application nor been tied with Chinese army. Astonished and amazed by false reports about its alleged ties with Chinese military, the Chinese chipmaker stated that it is willing to communicate with U.S. regulators in a sincere and transparent fashion as it seeks to mend all latent rifts and misunderstandings with Washington. Reuters had reported earlier that the Trump administration is weighing addition of SMIC into her trade blacklist.
North American wearables market size was flattish YoY at US$2 billion, while shipment surged by 10% YoY, reported Canalys. Average selling price -11% to US$235, given a boom in low-end activity trackers and a +30% YoY growth for Apple (APPL.US) Watch Series 3.
Richard Yu, CEO of Huawei Consumer Business Group, was quoted by Chinese media as saying that the company's self-developed smartphone system "Harmony OS" was pumped hundreds of millions of yuan with an aim to improve user experience. The system is now reaching 70-80% of Android's capability. Since the US sanction on Huawei last year, the handset shipment of the company slid 60-70 million units to 240 million units, versus the original target of 300-350 million units.
Huawei has recently notified its suppliers that the shipment of Mate 40 will be slashed by as much as 30%, as the Taiwanese media cited industry sources. The supply chain foresaw a deeper slash in shipment as the Huawei's chip supply chain is snapped by the Trump administration.
The US FCC estimated that American telecom carriers may need to spend over US$1.8 bn to remove and replace their gear due to US ban on Huawei and ZTE (763.HK). Although most of them (over US$1.6 billion) may be eligible for the reimbursement, the Congress has not yet made the appropriation, which may in turn snowball the debts of small carriers.
Chinese financial watchdog plans to cap the interest rate that Ant Group could charge on borrowers' quick consumer loans, Bloomberg cited sources. Such move may restrict the biggest revenue driver of the group. People with the knowledge of the matter said the consumer loans granted by Ant Group and other lenders will be subject to the above curb of a China Supreme Court ruling last month. The interest rate is now capped at 15.4%. The Court said the new rule will not be applicable to licensed financial institutions. Yet, there has not been clear specification on whether fintech companies, such as Ant Group, will be impacted.
XIAOMI-W (1810.HK) announced that a total of 218 million share options have been granted under the Post-IPO Share Option. Scheme at an exercise price of $24.5 per share.
mReferral: 2020E Mortgage Loans Drawn Down May Slip 20% to $270B. Mortgage applications and mortgage loans drawn down for the year will plunge to 66,000 cases and $270 billion, down around 20% to a four-year low, predicted Eric Tso, Senior Vice President at mReferral Mortgage.
HNA Group announced the strategic partnership with BABA-SW (9988.HK)'s Fliggy. Pursuant to which, both sides will boost their cooperation in affiliate marketing on online platforms, as well as live-streaming, membership, product marketing and data empowerment by leveraging their resources and edges.
CHINA MOBILE (941.HK) disclosed that almost 300,000 5G bases have been built, while the number of 5G subscribers has exceeded 84 million.

Not in this mornings report
EVERGRANDE (3333.HK) Chairman Hui Ka Yan, at the marketing conference of the group, revealed that the company will launch 30% discount to all of its properties nationwide from 7 September to 8 October, 21st Century Business Herald reported. Hui also laid out the sales target of the company at RMB100 billion per month respectively in September and October.
TENCENT (700.HK)'s Weibo announced that its services and operation will be stopped from 23:59 on 28 September under business adjustments.
Samsung Electronics' American unit won an order worth KRW7.9 trillion (US$6.7 billion) to provide US telco Verizon with network equipment. It is unclear whether 5G equipment will be included.
LOGAN GROUP (3380.HK) contract sales were RMB13.02 billion in August 2020, +64% YoY

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