HK China Wrap China rallies, HK remains subdued

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HSI 
-35pts (-0.1%) 27,225 HSCEI -33pts (-0.3%) 9,831 T/O HK$156.85bn (+12.4% DoD) 

Europe
Markets opened higher for the first couple of hours before trading sideways into lunch. All sectors in the green. Earnings in focus from Daimler, SAP, Julius Baer and Novartis, while Royal Mail released a trading update.
SAP shares fell 3.2% in early trade despite raising its outlook for the second time this year, as a strategic push toward cloud computing began to bear fruit.
Next surged after smashing second-quarter sales forecasts.
Future also climbed 9% after raising its full-year guidance.
Daimler weak after keeping its profit margin outlook unchanged but warned that the global semiconductor shortage will continue to dent car sales into 2022.
US Futures 
Opened in Asian time Dow +40pts. S&P 500 +0.15% and Nasdaq + 0.1%, Now Dow +184pts, S&P +0.4% and NDXjust +VE
AHEAD MBA Mortgage Applications and 30yr Mortgage Rate, EIA Oil Report, 20yr Bond Auction

US Futures
Opened  in Asian time

CHINA CSI 300 closed +35pts (+0.7%) @ 5,144
CSI 300 opened higher despite concerns over covid surging, power shortages and international relations. Seems Team China active. Market rallied to 5,159 in the first 30 mins before easing back to 5,130 level and then worked higher into lunch @ 5,144. PM saw the market grind higher but reistance at 5,160 and drifted lower into the close.
Investors attention turning to forthcoming earnings.
The ChiNext Index rose as much as 3%, setting a new high.
Leaders were associated with the lithium battery industry, semiconductors, rare earths, and photovoltaics were actively traded; Laggards were consumption and financials.
Sector wise Leaders were; salt lake, lithium extraction, MCU chip, MiniLED
Laggards were the airport & freight, tourism, and coal mining Foreigners bought net 3.1b yuan of Chinese shares via stock connect.

Shanghai Composite +26pts (+0.7%) @ 3,563
Shenzhen Composite +201pts (+1.3%) @ 15,213
ChiNext Composite Index +99pts (+2.8%) @ 3,677

CHINA DATA
China's National Health Commission reported 22 additional COVID-19 cases yesterday (20th), with 20 of them being imported cases and 2 of them being local cases (all located in Yunnan).


HONG KONG

HSI Pre market opened @ 27,339 +80pts vs +79pts ADR’s but market trended lower until around 11am when the market bouncedback to 27,200 before easing into lunch. PM initially drifted lower but then worked higher for the last 90 minutes.
Healthcare and Telco’s weak. Ecommerce/Internet names weak headlines about being fined for Child Pornography. Tech and Auto’s +VE  Education in focus as China aims to make rearing children cheaper.


HONG KONG DATA
HK reported no new local covid cases and 7 imported cases.


Short Selling Tuesday 17.% vs 17.4% Monday
Top Shorts 
Country Garden (2007) 62%, Hengan (1044) 53%, Ali Health (241) 44%, Sino Bippharm (1177) 41%, Bank of China (3988) 41%, Ping An (2318) 37%,  AIA (1299) 35%, Bud Apac (1876) 32%, Haidilao (6862) 30%, Sands China (1928) 26%, China Overseas (688) 25%.

AFTER MARKET NEWS

HSBC suspends mortgages on Evergrande Projects in HK; other banks may follow suit

PING AN (02318.HK) has received more than 20,000 insurance claims linked with Henan's flooding up to now, with estimated payout of over RMB600 million as reported by Chinese media.

SHENZHEN INVEST (00604.HK) announced that the contracted sales for June amounted to approximately RMB1.418 billion
, representing a decrease of 52.6% YoY.

Brisbane in Australia has been confirmed to be the host city for the 2032 Summer Olympic Games,
according to the announcement made by the International Olympic Committee delegates during the 138th IOC meeting in Tokyo.

To maintain commodity price stability, China's National Development and Reform Commission (NDRC) and National Food and Strategic Reserves Administration (NFSA) decided to release copper, aluminum and zinc from national reserves in batches, reported Xinhua. The second batch of 30,000 tons of copper, 90,000 tons of aluminum and 50,000 tons of zinc will be released in late July.

HSBC HOLDINGS (00005.HK) announced that a meeting of a committee of the Board of Directors of the company will be held on 2 August 2021
to consider the announcement of the interim results for the six month period ended 30 June 2021 and to consider the payment of an interim dividend on the ordinary shares for the 2021 half year.

Nanjing city revealed during a press conference that the city government will endeavor to carry out nucleic acid tests for the entire city within a short period of time,
reported Xinhua News Agency.
Nanjing has found a total of 17 people tested positive for COVID-19, with 9 of them being confirmed cases, 5 of them asymptomatic cases and the remaining three awaiting further diagnosis after testing positive in the nucleic acid test.

Centa-Salesman Index (CSI) last posted at 72.62, down 0.91 pts from last week's 73.53. CSI has gained a firm foothold at around the level of 75 for eight consecutive weeks but has been showing signs of weakening over the past five weeks, remarked the research department of Centaline Property. They contended that if CSI continues to soften, it might foreshadow certain prolonged struggle in the property price before reaching its historical high and that the trajectory of CSI in the coming few weeks will be a critical indicator.

MARKETS COMMENTARY
*PHARMA/BIOTECH WEAK
after WUXI BIO (2269 HK) sold 80m shs at a discount of 6.5% at HK$129 apiece.
CANSINO (6185 HK -3.2%) INNOVENT (1801 HK -2.6%) GENESCRIPT (1548 HK -4.5%).
KINTOR PHARM (9939 HK +10%) after its proxalutamide to treat Covid-19 infections gets emergency use authorization from Paraguay’s govt recently.
*EDUCATION WEAK after Beijing said it would “strictly regulate” the after-school tutoring sector as part of stepped-up efforts to cut the cost of having children and help raise China’s birth rate. BOJUN EDU (1758 HK -16%) CHINA EDU (839 HK -1.1%) CH XINHUA EDU (2779 HK +3.6%) NEW ORIENTAL EDU (9901 HK +4.5%) CH YUHUA ED (6169 HK -0.7%).
*E-COMMERCE/INTERNET WEAK on regulatory worries. Beijing’s cyber watchdog has fined and warned several of China’s biggest technology groups including ALIBABA (9988 HK unch) and TENCENT (700 HK -0.8%) over explicit contents; KUAISHOU (1024 HK -2.2%) MEITUAN (3690 HK -1.8%).
*TECH & COMPONENTS STRONG as mini LED manufacturing in China is said to be entering a mass production phase. TRULY (732 HK +9%) SUNNY OPTICAL (2382 HK +6.4%) TONGDA (698 HK +5%) AAC (2018 HK +1.8%).
*TELCOS FIRM following release of subscriber data in June, showing stable growth in 5G subscription. CH MOBILE (941 HK +1.2%) CH UNICOM (762 HK +0.2%) CH TEL (728 HK unch).
*AUTO STRONG on positive news. GREAT WALL (2333 HK +16%) reported preliminary 1H net income soared 205% to 3.5b yuan.
BYD (1211 HK +6%) signed a deal with a chemical unit of Yanan Bicon Pharma to buy at least 7,870 tons of lithium hexafluorophosphate which is used in lithium ion battery production, supplies will be made between 2021-2023.
*MACAU CASINOS FIRM. Macau's visitor arrivals in June hiked 22.4 times YoY to 528,500, but down 39% vs May. The same-day visitor arrivals and overnight visitor arrivals recorded a decrease of 20.1% and 54.6% respectively. SANDS (1928 HK +0.8%) MELCO (200 HK +0.8%) MGM (2282 HK +1.4%).
*RENEWABLE ENERGY STRONG on renewed interest in clan energy. CR POWER (836 HK +6.7%) LONGYUAN ((916 HK +6%) DATANG RENEW (1798 HK +8%) COMTEC SOLAR (712 HK +5%).

Regional Markets
Australia
.
Market opened higher with blue chips in demand but saw resistance around 7,350 and eased back to 7,319 as Retail Sales data missed. Market bounced from that level and working better but only to 7,343 before drifting lower; to close +57pts (+0.8%) @ 7,309. Covid cases remain a concern with NSW reporting 110 new cases. Autodesk dropped its bid for Altium
Data
Leading Index Jun -0.07% MoM vs -0.06% May 
Retail Sales Jun -1.8% MoM vs +0.4% May (F/cast was -0.6%)
Japan 
Pre marketTraded data was mixed. After lunch Suzuki announced a joint briefing with Toyota at 3:30pm. Markets will be closed Thursday and Friday; re-open Monday. Toshiro Muto, head of the Tokyo Olympics organising committee, did not rule out a last-minute cancellation of the games. Keeping close tabs on the Covid tally, Muto said he will hold discussions with organisers when necessary. Tokyo reported 1,832 new covid cases.
Nikkei opened higher and traded sideways for the first two hours before selling down into lunch. PM opened lower but trading sideways
Currently +160pts (+0.6%) @ 27,548
Similar pattern for the Topix closed +16pts (+0.8%) @ 1,904  
Data Pre Market
Balance of Trade Jun ¥383.2b vs ¥-187.1B May (F/cast is ¥400B)
Export Jun +48.6% vs 49.6% May (Consensus was +46.2%)
Imports Jun +32.7% vs +27.9% May (Consensus was +29%)
BoJ minutes
The Japanese government recently launched the vaccination passport program with over 30 countries estimated to adopt it, excepting the U.S. and China, reported Kyodo News, citing sources. The list of the participating countries could be released as soon as today. Markets now closed until Monday
S Korea
PPI pre market was stronger than expected and first 20 day Export/Import data was good. But new covid cases hit a new high @ 1,784  
Kospi opened higher but sold down through the morning to 3,216 and then traded sideways. Closed -17% (-0.5%) @ 3,216.
Kosdaq traded in a similar pattern closed -2pts (-0.2%) @ 1,042 
Data pre market
PPI Jun +0.4% MoM vs +0.5% May revised from+0.4% (F/cast was +0.1%)
PPI Jun +6.4% YoY vs +6.6% May revised from +6.4% (F/cast was +6.7%)
Taiwan
Taiex opened higher after good export data out after market Tuesday and the US rebound but has trended lower until 1pm and then it rallied to close -70pts (-0.4%) @ 17,459 T/O was US$21.84bn vs US$16.74bn Tuesday
Rains increasing and could see Typhoon warnings being raised.


CONNECT FLOWS   
Shanghai
Northbound RMB 54,840m Sell 27,120m vs 27,720m Buy
Southbound HK$ 18,949m Sell 10,443m vs 8,506m Buy
Shenzhen
Northbound RMB 70,988m Sell 34,235m vs 36,753m Buy
Southbound HK$ 22,,234m Sell 11,973m vs 10.260m Buy

Active Heavyweights
HKEX (00388.HK) Short selling Ratio 18.521% closed +2.7%
MEITUAN (03690.HK) Short selling Ratio 11.143% closed -1.8%
PING AN (02318.HK) Short selling Ratio 37.434% closed -0.8%
TENCENT (00700.HK) Short selling Ratio 5.778% closed -0.8%
CCB (00939.HK) Short selling Ratio 22.630% closed -0.5%
AIA (01299.HK) Short selling Ratio 34.901% closed +0.5%
BABA (09988.HK) Short selling Ratio 22.994% closed +0.1%

HSI & HSCEI Constituents on Move:
SUNNY OPTICAL (02382.HK) Short selling Ratio 24.308% +6.4%
BYD COMPANY (01211.HK) Short selling Ratio 13.701% +6.1%
HANSOH PHARMA (03692.HK) Short sellingRatio 37.130% -5.7%
WUXI BIO (02269.HK) Short selling Ratio 3.380% closed -4.5%
HAIDILAO (06862.HK) Short selling $125.93M; Ratio 30.031% closed -4.5%


HSMI & HSSI Constituents on Move:



MARKET HOURS NEWS
.

China's completed software business recorded revenue of RMB4.42 trillion in 1H, up 23.2% YoY, achieving a CAGR of 14.7% in around two years, according to Ministry of Industry and Information Technology (MIIT).

Volvo Car announced that the company has signed an agreement with its parent Geely Holding to acquire Geely Holding’s stake in the companies’ joint ventures in China, with the aim of taking full ownership of its car manufacturing plants and sales operations in the country.

According to Nanjing's vice mayor Hu Wanjin, a total of 17 COVID-19 patients were identified at Nanjing Lukou International Airport.
Nine of them tested positive for the virus, while another five were asymptomatic patients. The remaining three cases were pending further diagnosis.

Apple's major production site located in Zhengzhou, Henan suffered from record-breaking heavy rains.
The tech giant's OEM Foxconn expressed that all employees within the Zhengzhou production site are safe and that the group will adjust the mode of operation accordingly.

HANISON (00896.HK) 's residential project located in Sheung Wan will be named as "HOLLYWOOD HILL", which supplies 48 units in total, with an area of approximately 400 square feet each, said Matthew Chow, executive director of the company. Chow added that the sales brochures will be released next week, with completed model flats and price list also to be open to the public by next week at the earliest.

GEELY AUTO (00175.HK) announced officially last night (20th) its premium CMA series named "Star", marking the company's venture into the high-end market with the aim to popularize high-quality premium products. In addition, GEELY launched the flagship SUV model of the "Star" series -- Xingyue L, which will be equipped with 2.0T turbo engine from the Drive-E series. The model are offered in six different configurations and priced at RMB137,200-185,200.


Apple will fully incorporate the 5G technology in next year's iPhone lineup, reported Nikkei, citing people familiar with the matter.
The sources suggested that 5G iPhones with Apple's self-developed A15 processors will hit the market in the first half of next year at the earliest.

China's Office of the Central Cyberspace Affairs Commission decided to mount network rectification for adolescents with immediate effect, according to the Office's report. Addressing cyber issues, such as circulating soft pornography emoji packs and streaming short video with pornography implications using teenagers, the Office interviewed the responsible people of KUAISHOU-W (01024.HK), TENCENT (00700.HK)'s QQ, Taobao, Sina Weibo and so on, instructing them to rectify the situation within limited timeframe. Such platforms should remove the illegal information and accounts, and be imposed penalty.

Overnight HIBOR last posted at 0.03602%, according to HKAB. Meanwhile, the 1-Month HIBOR related to mortgage rate last stood at 0.07357%, down for 8 days, marking a 1-month low.

China's photovoltaic sector has basically satisfied the global supply chains, said Cao Renxian, Chairman of China Photovoltaic Industry Association (CPIA), at the 2021 PV industry chain supply forum.
In addition, Cao said the vast majority of China's PV industry chain have essentially achieved localization in silicon material production, silicon wafer processing, cell chip production, etc.

GEELY AUTO (00175.HK) announced to target to realize an architectural production mode for all models under the company by 2024.

The residential project in Southwest Kowloon jointly developed by five major developers including Wheelock and SINO LAND (00083.HK) "Grand Victoria III" has released its third price list, launching an additional of 39 units, which are estimated to be able to cash in approximately $350 million after discount. The discounted prices of the additionally launched units range $8.094-12.199 million with salable areas ranging 312-449 square feet. In addition, the developers announced the sales arrangement, confirming to commence selling a total of 89 units this Saturday (24th).

The U.K. government has cut off subsidy for the largest local chip factory, Newport, after the wafer fab has been acquired by Chinese-owned Nexperia, reported The Daily Telegraph. The U.K. prime minister Boris Johnson expressed previously when asked about relevant acquisition, that he does not wish to drive Chinese investment away from the U.K. due to anti-China sentiment.

PRE MARKET HOURS NEWS

Amid days of rainstorm and floods in Zhengzhou City, Henan Province, Tencent Charity Foundation announced to donate the first batch of RMB100 million to the joint front-line of relief agencies and charitable organizations.
The money will be used to ensure personal safety of local people and urgently purchase disaster relief supplies. XIAOMI-W (01810.HK) Founder Lei Jun said on Weibo that Xiaomi Foundation will donate RMB50 million as urgent bailout for the city. BABA-SW (09988.HK)’s MMC business unit expressed that its Hema's Henan warehouse will be utilizing its over 1,000 types of goods as disaster relief resources, while dispatching the first batch of relief resources containing 450,000 units of food and household goods to the 7,000 communities in Zhengzhou. Meituan Charity Foundation has donated RMB100 million today (21st) to aid the affected people in Henan province in regards of disaster relief arrangement, along with Red Cross Society of China, according to MEITUAN-W's official Weixin account. MEITUAN-W announced to open its retail warehouse in Zhengzhou area to the public, supplying 630,000 units of goods including water and food, covering the 12 administrative regions of Zhengzhou.


Institute of Microelectronics (IME) researches have achieved a technology breakthrough to stack up to four semiconductor layers, reported Tom's Hardware.
This new technology could save up to 50% costs compared with traditional 2D fabrication techniques, likely to be used in CPUs and GPUs in the future. In other words, the true next-generation 3D chip-stacking technology may be just around the corner.

Silver Bonds recorded heated reactions on its first day of subscription yesterday (20th). ICBC Asia expressed that the total number of subscribers and the total subscription amount both hiked nearly 2x on the first day compared to last year. The bank recorded the highest subscription amount at over $2.5 million, implying 250 lots. The average subscription amount per person amounted to approximately $340,000.

US Commerce Secretary Gina Raimondo expressed that the global chip shortage is already showing signs of easing as semiconductor manufacturers are committing to produce more chips for carmakers.

Raimondo remarked that the chip supply for carmakers has already seen certain improvement with the higher transparency in semiconductor production and shipment.

XIAOMI-W (01810.HK)'s latest flagship smartphone MI MIX secured network access license in China,
reported Chinese media. With a model number of 2106118C, the phone may be named as MI MIX 4. MI MIX 4 adopts under-screen camera technology, representing the first true full-screen flagship model equipping Snapdragon 888 Plus amongst the industry, according to previous disclosure.

The Government announced that it will gazette amendments, directions and specifications under the Relevant Regulations to maintain most of the social distancing measures currently in place, and introduce a new type of scheduled premises, namely "event premises", with a view to specifying restrictions and requirements applicable to certain events with greater clarity so that social and economic activities can be resumed gradually in a controlled manner.
The above directions and specifications will take effect from 0.00am tomorrow (July 22), for a period of 14 days till August 4.

China's State Council unveiled the key missions of the reform of "streamlining the administration, enhancing the supervision and optimizing the service"
nationwide, aiming to investigate into platform companies' monopolistic cases according to the law.
Accordingly, the authority will enforce antitrust laws and maintain fair competition and market order surrounding pharmaceutical, public utilities, construction material, education and training as well as other key livelihood sectors.

WUXI BIO (02269.HK) announced that on July 20, 2021, the company was informed by Biologics Holdings, one of the substantial shareholders of the company, that it has entered into a block trade agreement to place 80 million existing shares
(representing approximately 1.89% of the total issued share capital of the company) at a price of $129 each, which reflects a 6.52% discount compared to the closing price of $138 yesterday, cashing in $10.32 billion. Assuming the placing will be completed as contemplated, the shareholding held by Biologics Holdings in the company will decrease from approximately 17.22% to 15.34%, and Biologics Holdings will remain as a substantial shareholder of the company.

Between 18:00 on 18th and 00:00 on 21st, Zhengzhou City, Henan Province reported rarely and consistently heavy rainfall, accumulating an average precipitation of 449 mm, as Xinhua News Agency cited Henan provincial party committee.
About 100,000 folks have been transferred so far to avert the danger amid extreme weather, according to the report. The flood has wreaked 12 deaths in Zhengzhou's urban area.

During a visit to the National Natural Science Foundation of China, Chinese Premier Li Keqiang stressed basic research as the cornerstone to propel original innovation as well as development of science and technology and industry. China is in a critical period to vigorously step up its basic research efforts, he added. Li also called for solid financial investment boost in basic research, companies' enthusiasm for basic research and applied basic research by means of tax incentives, and stronger research on basic theoretical problems to rein in industrial buildout.

CHINARES PHARMA (03320.HK) announced to buy a 10% stake of IMMUNOTECH-B (06978.HK) (i.e. 51.5484 million shares) from four independent third parties at a total consideration of approximately HK$800 million.
The purchase price of HK$15.54 per share represented an 18.89% discount to the closing price of IMMUNOTECH-B on 20 July.

BLUE MOON GROUP (06993.HK) Profit warning. The Group expects to record a loss of approximately HK$44 million for the six months ended 30 June 2021 as compared to the profit of approximately HK$302 million for the six months ended 30 June 2020.
The loss was mainly attributable to the Group noticing the oversupply of lower-priced products by platforms, which are not the Group’s clients, in the market which had led to disruption to the Group’s pricing strategy and the pricing structure of the Group’s products in the market; the increase in raw material cost; certain Supreme-branded concentrated liquid laundry detergent returned were bundled with other products and sold at a discount, with a negative impact on gross profit margin by approximately 1%; and the loss of approximately HK$67 million as incurred by the laundry business of the Group which has been under development since 4th quarter of 2020.

GREATWALL MOTOR (02333.HK) announced the preliminary financial data for the interim period ended on 30 June 2021,
in accordance with the China Accounting Standards. The operating revenue for period amounted to RMB62.159 billion, up 73% YoY. Due to the increase in sales volume and gross profit of automobiles, the net profit for the period surged 205.2% to RMB3.498 billion.

COSCO SHIP ENGY (01138.HK) Profit Warning expects to record a net profit for the six months ended 30 June 2021 in the range of RMB503 million to RMB603 million,
as compared to a net profit of RMB2.955 billion for the same period of 2020, representing a decline of 79.6%-83%.