14 Jul


Covid-19 Globally over 12m cases, 550k deaths

US Futures open flat +18pts but have trended higher; currently +60pts (7:30am HK time) S&P & NDX just positive too

DOW -1.39%, NDX +0.53%, S&P -0.56%, Russel 2K -2% Markets opened higher on improving initial claims, although that was before the latest uptick in US cases. But then sold down initially until around 11am. Then the S&P and NDX worked higher for the rest of the day and the DOW traded sideways; Boeing -3.7%. NDX hit another high with at home names initially rallying but some gave back some of the gains over the day. Netflix +1%, Microsoft +0.7%, Apple +0.4%, Facebook +0.4%, Amazon +3.3% (new high), Alphabet +1%

Re opening names weak again United Airlines -7.3%, Delta -5.1% and American +6.8%. Carnival Corp -4.8%, Royal Caribbean -5.9%. Kohl’s -7.3%.

Gilead Sciences -1.2% Wednesday began testing an inhalable form of its antiviral Covid-19 drug remdesivir which can be administered outside hospitals.

Moderna’s +5.5% coronavirus vaccine candidate will likely enter phase 3 trials by the end of July.

Meanwhile Reuters reported, the European Commission has secured deals for experimental treatments from Merck -1.6% and Roche +0.5%

Walgreens 7.7% swings to an unexpected quarterly loss as coronavirus drives up costs , and lowers doctor visits. To cut 4,000 plus jobs in UK suspending share buybacks.

Supreme Court says Manhattan district attorney can look at Trumps tax records as part of an investigation; rejecting his presidential immunity claim. That could hurt his re-election chances.


Initial Claims 1.314m vs 1.413m prior (F/cast was 1.38m)

Initial Claims 4 week Ave 14.3725m vs 15.0025m prior (F/cast was 14.57m)

Continuing Claims 18.062m vs 18.76m prior (F/cast was 19.2m)

Wholesale Inventories May -1.2% MoM vs +0.2% Apr (F/cast was -1.2%)

EIA Natural Gas Stocks Change 56 Bcf vs 65 Bcf (Consensus was 58 Bcf)

USD was steady vs Yen & Euro. Bitcoin -2% @ 9246.71, VIX +4.2% @ 29.26,

US T10 0.614% yield falls despite improving initial claims

OIL Brent -2%, WTI -3.1% concerns that rising covid-19 cases will again hurt demand.

Gold spot -0.6% to $1,799.23 but futures remained above $1,800, Silver -0.9%, Copper +0.5%

AHEAD PPI, Core PPI, WASDE Report, Baker Hughes Total Oil Rig Count.

DAX -0.03%, CAC -1.15%, FTSE -1.67% opened mixed. FTSE flat but initially traded lower into the red. CAC opened higher but sold down found support at yesterday’s close and traded sideways around flat. DAX opened higher on improving trade data and then traded sideways higher BUT all markets sold down in the last hour to close at day lows. Concerns over the rise in Covid-19 cases globally off-setting optimism on re-opening. As the EU reportedly has soured deals with Merck and Roche for experimental treatments.

Airbus -4% despite deliveries +50% from May to June but the 1H was a 16 year low, stock open higher but sold down in last hour

SAP +4.6% as Q2 recovered faster than forecast and confirmed FY outlook

Carnival UK +0.8% off mid day highs, on news cruises will resume in August.

Persimmon +6.4% as forward sales recovered

Idorsia -12% on news Johnson & Johnson’s Cilag will sell up to 11.8m of the company’s shares.



Balance of Trade May Euro 7.1b vs 3.4b Apr (revised (F/cast was 21.1b)

Balance of Trade s.a May Euro 7.6b vs 3.4b Apr (revised (consensus was 5.2b)

Exports s.a. May +9% MoM vs -24% Apr (Consensus was +13.8%)

Imports s.a. May +3.5% MoM vs -16.6% Apr revised (Consensus was +12%)

Current Account May Euro 6.5b vs 9.1b Apr revised (F/cast was 14.9%)


GERMANY No data due

FRANCE Industrial Production, IEA Oil Report

UK No data due

JAPAN Expect Nikkei to open slightly lower on the rising covid-19 cases. Key will be the PPI data but I would expect the market to see selling ahead of the weekend. Yen currently 107.20
Data due 
PPI Jun (May was -0.4% MoM (F/cast is +0.2%) [May -2.7% YoY (F/cast is -2%)]

Covid-19 Tokyo confirmed 224 new cases of coronavirus infection on Thursday, marking a record high for the Japanese capital in a single day as authorities focused testing on the city’s night-life districts. -VE for sentiment

Tokyo will pay subsidies for nightclubs to close.

European Parliament urged Japan to comply with international rules on child protection and to allow for joint parental custody after a number of EU citizens were denied access to their children by Japanese mothers.

US Envoy arrives in Japan for discussions on N Korea and Hong Kong.

Government on Thursday said it will tighten state-backed financing criteria for overseas coal-fired power plants after facing criticism over its support for the dirtiest fossil fuel

Prime Minister Shinzo Abe and his Australian counterpart, Scott Morrison, shared serious concerns over various moves in the East and South China Seas in their video meeting on Thursday, a Japanese government spokesman said. “They expressed serious concern about recent negative developments in the South China Sea, including the continuing militarisation of disputed features, the dangerous and coercive use of coastguard vessels and ‘maritime militia’,” an Australian government statement read.

US Bain Capital said on Thursday it had extended its deadline for a $1 bn buyout offer for Japanese nursing home operator Nichiigakkan Co for a second time; its now due to expire on Aug. 3 from Thursday as the company’s stock is trading above Bain’s offer of 1,500 yen per share. Hong Kong-based investment fund Lim Advisors has said Nichiigakkan’s fair price is around 2,400 yen per share. It has said Bain’ offer “substantially” undervalued thecompany and appeared to take advantage of COVID-19 related weakness in the share price.

Offshore wind farms Nikkei reports that Industry Minister Hiroshi Kajiyama is expected to announce policy measures soon to target the goal of wind farms at 30 sites in 10 years, the paper said, without identifying sources.

Fast Retailing Co (9983.T), owner of casual clothing brand Uniqlo, lowered its outlook for the year as the coronavirus pandemic wreaked havoc on its global fashion business. -VE But it also reported a strong rebound in Uniqlo’s domestic same-store sales for June and said business in China was recovering faster than previously expected, suggesting it may weather the crisis better than many global peers. +VE

NTT Docomo Inc. will begin marketing lower-priced smartphones later this year to promote its fifth-generation, or 5G, advanced wireless service Slight +VE but expect others to follow

SOUTH KOREA Expect markets to open lower following the US but to see support from Tech names.
No data due
US envoy stressed the importance of resuming talks
with North Korea, according to South Korea and the United States on Thursday, even as North Korea has said it has no intention of returning to the negotiating table.

National Pension Service unloaded its 0.6% stake in NCSoft to acquire a 0.28% stake Naver, government data showed Thursday.

Mayor of Seoul found dead had been reported missing earlier amid a criminal probe of an alleged impropriety. Slight -VE

Samsung Electronics, said Thursday it has selected 12 research projects to help the country's efforts to secure future science technologies. It said it will provide 12.35 billion won ($10.3 million) to 12 research projects in six areas. Since 2014, the company has been naming research themes that require more research for South Korea's technological competitive edge.

Hanwha Energy said Thursday it has won a solar power plant deal with 50 megawatt capacity in Spain. +VE

South Korea will inject over 5 trillion won ($4.1 billion) in the materials, parts and equipment industries to ensure stable supplies for the nation’s key exports, officials said Thursday.

South Korea's major cosmetics makers are forecast to have seen their operating profits fall nearly 20% YoY in Q2 as sales at duty-free shops faltered amid the coronavirus pandemic, a poll showed Thursday. The combined operating profits of Amorepacific, LG Household & Health Care Ltd. and Aekyung Industrial Co. are estimated to have reached 319.2 billion won ($267.4 million) in the April-June period, down 19.3% from the previous year, according to the survey by Yonhap Infomax, the financial news arm of Yonhap News Agency.

TAIWAN Expect market to open lower but down side limited with continued interest in Tech names. I would expect some caution ahead of the weekend.
No data due
The Ministry of Justice is to hold a meeting today 
with representatives of tech firms at the Hsinchu Science Park to counteract Beijing’s efforts to recruit industrial spies and steal technological know-how. “Chinese companies offer high salaries through headhunting agencies to entice Taiwanese working in high tech to work as corporate spies, resulting in financial losses for many Taiwanese enterprises and affecting the nation’s economic competitiveness,” he said.

The Taiwan Research Institute yesterday cut its forecast for the nation’s GDP growth this year to 1.55 percent, from the 2.63 percent it predicted in December last year, saying that the COVID-19 pandemic is hurting exports and consumer spending. -VE

Largan Precision yesterday posted last quarter Net Profit -25.77% to NT$4.99 billion (US$168.7 million), reaching its weakest level in nine quarters due to sagging demand. Largan CEO Adam Lin gave conservative projections. “I think July and August are going to be about the same as June,” Lin said. Largan last month posted monthly revenue growth of 6.98 percent to NT$4.14 billion, ending two straight months of declines. Regarding the company’s revenue outlook for September and October, Lin said: “I cannot see that far.” Lin blamed softening demand rather than market share loss to competitors for the drop, saying: “Demand is down. Demand for high-specification products, especially” was down, Lin said. -VE

The Financial Supervisory Commission has reported Tatung Co chairwoman Lin Kuo Wen-yen to prosecutors for breach of trust, after a controversial shareholders’ meeting last week that led to impairment losses, the commission said yesterday. -VE

CHINA Expect market to open lower on news of a new virus in Kazakhstan. It will be interesting to see if Team China is as active supporting the market today. KEY concern will be the recent rise in the opening of margin accounts by Chinese retail investors; big losses today could scare new investors away.
No data due
China warns of ‘unknown pneumonia’ more deadly
than coronavirus in Kazakhstan Statement from embassy warns that death rate is ‘much higher’ than coronavirus and says local authorities have yet to identify cause. Kazakh authorities have reimposed Covid-19 lockdown in some parts of the country amid a spike in pneumonia cases last month.

US sanctions Chinese government officials over treatment of Uygurs in Xinjiang Those barred from entering the US include Xinjiang party secretary Chen Quanguo and Xinjiang Public Security Bureau director Wang Mingshan. Likely to see a tit for tat response from China.

Huawei -VE as Telecom Italia has excluded China's Huawei from a tender for 5G equipment for the core network it is preparing to build in Italy and Brasil, two sources familiar with the matter said on Thursday. Also  US inches closer to federal contract ban for firms that use Huawei, others. Any company that uses products from the five Chinese firms will no longer be able to sell to the US government without getting a federal waiver. -VE

Ford Motor Co said its China vehicle sales increased 3% YoY in April-June, its first quarterly sales rise in the world's biggest auto market in almost three years.

US regulator says oversight of Chinese companies remains futile as authorities refuse American ‘principles and practice’. Discussions are unlikely to be productive unless ‘Chinese authorities are willing to embrace certain principles,’ says US regulator. US markets have increased exposure to companies with significant operations in China and passive American investors are bearing the brunt of the risks -VE

China is considering mandatory in-car air quality regulations to protect the health of drivers, in a move that could jack up costs for automakers importing vehicles from markets without such rules, sources with knowledge of the matter told Reuters. Slight -VE

As schools reopened in China after the COVID-19 outbreak, they have thrown themselves into a nationwide exercise to remove books deemed politically incorrect, deepening Chinese President Xi Jinping’s push to instil patriotism and ideological purity in the education system.

HONG KONG ADR’s -307pts to open at 25,903 but expect more down side with initial margin calls. Also increased local covid-19 cases and news of a new virus in China -VE for sentiment.
It will be interesting to see if Team China is there to support the market. Today’s 6 IPO’s may struggle. Tik Tok closed in HK last night a sign of Beijing’s tightening grip. Watch the connect flows to see if mainland flows remain as high as they have been recently.
Normally on Friday’s HK sees selling into the close as investors turn cautious ahead the weekend. It didn’t happen last Friday but watch to see if the trend resumes today.

No data due

Short Selling HSI 
Thursday 20.5% vs 19.6% Wednesday

Top Shorts MTRC (66) 50%, Wharf REIC (1997) 38%, Ping An (2318) 34%, China Res Land (1109) 33%, CCB (939) 32%, HSBC (5) 29%, Hang Lung PPT (101) 28%, Want Want (151) 27%, AIA (1299) 26%, SunnyOptical (2382) 26%, Henderson Land(12) 25%.


SMOORE INTL (6969.HK), debut, opened at $15.06 in the gray market, +21.45% vs the listing price $12.4, and last stood at $22.4, +80.6%, on volume of roughly 13.80 million shares, PhillipMart data showed.

OCUMENSION-B (1477.HK), debut, opened at $28 in gray market, up 91% vs the listing price $14.66, and closed at $43.9 in up $29.24 or 199.5% against the listing price of $14.66, on volume of 7.65 million shares, PhillipMart data showed. Excluding the handling fees, that  would equate to a book gain of $14,620 was reported per board lot of 500 shares.

IMMUNOTECH-B (6978.HK), debut , closed at $13.4 in gray market, up $2.4 or 21.8% against the listing price, on volume of 6.11 mn shares, PhillipMart data showed. Excluding the handling fees, a book gain of $2,400 was reported per board lot of 1,000 shares.

ZHENRO SERVICES (6958.HK), debut, opened at $5.37 ingray market, up 18.02% against the listing price $4.55, and last stood at $5, up 9.89% against the listing price, on volume of around 2.88 million shares, PhillipMart data showed.

GREENTOWN MGMT (9979.HK), debut, closed at $2.7 in gray market, up $0.2 or 8% against the listing price, on volume of 6.35 million shares, PhillipMart data showed. Excluding the handling fees, a book gain of $200 was reported per board lot of 1,000 shares.

ADTIGER CORP (1163.HK), debut, opened at $0.86 in gray market, flattish the listing price, and last stood at $1.1, +27.9% against the listing price, on volume of 397,000 shares, PhillipMart data showed.


CHINA GAS HOLD (384.HK)'s Executive Chairman Liu Ming Hui had on 7 July further acquired 621,200 shares, involving $15.907 million, according to shareholding disclosures at the Stock Exchange.

NATIONAL SECURITY LAW Local press reports the pro-democracy camp is pressing ahead with primaries for the Legislative Council election despite warnings that these may breach the national security law. Secretary for Constitutional and Mainland Affairs Erick Tsang Kwok-wai said the primaries could breach the clauses on secession, subversion and collusion with foreign forces. But one of the organizers of the primaries, Benny Tai Yiu-ting, was unconvinced, saying Tsang interpreted the law arbitrarily to serve a political purpose. It will raise concerns the new law is about stifling the forthcoming local elections which pro Beijing parties were expected to lose.

TIK TOK closed its HK operations overnight.
  I think the administration in HK and Beijing may have underestimated the power of the youth.

FT reports that the  US and European banks in Hong Kong are carrying out emergency audits of their clients to identify Chinese and Hong Kong officials and corporates that could face possible US sanctions over a new national security law. -VE. Could spread to the international fund managers too -VE

There is a dilemma because the new HK National Security law makes it illegal for Hong Kong institutions to comply with US sanctions against Hong Kong or China according to some lawyers. Little real impact until we see the list of those to be sanctioned.

As USD/ HKD triggered the Strong-side Convertibility Undertaking during Hong Kong trading hours, the HKMA undertook a selling order of US$1.73 billion to inject HK$13.408 billion into the market.  The balance of the banking system of Hong Kong will increase to HK$178.297 billion next Monday (13 July).

FAST RETAIL-DRS (6288.HK) announced that, for the first three quarters ended May 2020, net profit -42.9% annually to JPY90.64 billion. The company applied for a trading resumption with effect from today (10 July).

PICC GROUP (1339.HK) said that National Council for Social Security Fund of the People’s Republic of China (NSSF), the second largest shareholder of the Company, has recently informed the Company that due to the need for asset allocation and investment business, it plans to sell down not exceeding 885 million unrestricted A shares (representing not exceeding 2% of the current number of total issued shares of the Company) by way of call auction or block trade transfer within a six-month period commencing from 15 trading days after 9 July. -VE

KERRY PPT (683.HK) PROFIT WARNING said that the Group expects that there will be a substantial year-on-year decrease, between 70% and 75%, in profit attributable to its shareholders for the six months ended 30 June 2020.

The Group expects a lower contribution from sales from development properties for the first half of year; significantly reduced income from the hotel assets held by the Group in the first six months of 2020 as compared to that of the first six months of 2019; and the absence of revaluation gains for the Group as compared to a net gain of HK$452 million during the same period in 2019.

WHEELOCK received 1,200 subscriptions (6.5X over subscribed) for the first batch of KoKo Hills in Kwun Tong; subscriptions end to day and sales of the first 160 units will open tomorrow.

EMPIRE GROUP, HK FERRY (HOLD) (50.HK) and HENDERSON LAND (12.HK) named their phase 1 residential project at Castle Peak Road (Castle Peak Bay) as "Seacoast Royale”.  It will offer 611 units in total, measuring 185-1,267 sq.m. each. Thomas Lam, General Manager of Sales (1) Department at HENDERSON LAND, said the sales brochure may be made available as soon as next week, and the project could be launched this month.

CK ASSET (1113) gets approval for its mega project Convoys Wharf in Deptford London +VE. It will be a major rejuvenation project for the area.

Macau Chief Executive Ho Iat Seng forewarned that the city's economy will still be under grave pressure in 2H20 in wake of intensified external uncertainties. While the epidemic is relatively contained in the city, driving economic recovery becomes a pivotal task of the SAR government at present.  The CE furthered that the epidemic exposed again the casino-dominant industry structure of Macau with inadequate economic resilience. The government should expedite the mapping of its economic direction and initiatives to better the situation.

Savills: Retail Shop Rent Stabilizing, HSI Rebound Spurs Commercial Building Demand The 2004-2013 retailing golden period no longer exists, as shop rents have been stabilizing and property prices continue to recede, opined Sharon Fong, Savills' Senior Director of Investment - Retail Sales. She saw room for further correction in the third quarter.  Hong Kong bourses surged 3.5% in the second quarter, aside multiple IPO filings. Fong expected this to shore up office demand in the short run.

Centa Valuation Index (Major Banks) (CVI) last printed at 52.99, -3.13 pts WoW and -37.11 pts in six weeks. Hong Kong saw resurgent local COVID-19 cases this week, facing a crisis of another community outbreak, they suggested paying attention to next week's CVI, which will reflect the epidemic impact on banks' mortgage stance.

The index has not busted below the range of 40-60, implying lenders' conservative stance towards mortgage valuation without turning bearish on the market. +VE

WULING MOTORS (305.HK) CFO Lai Shi Hong, Edward revealed at a press conference that the company's street-stall trucks were extremely desirable driven by the heat of street-stall economy in China, with enormous orders flooding in within a short period of time. Nevertheless, the popularity has been calmed, for which the CFO perceived to be a positive as competition may be fiercer if the response gets too overwhelming.

At World Artificial Intelligence Conference 2020, BABA-SW (9988.HK) founder Jack Ma stated that the coronavirus pandemic is rewriting the worldwide social and economic development during the first half of 2020. While bettering the living standard as it did in the past, digital technology will in future help people improve survival, furthered Ma, who did not deem the coronavirus crisis a derailer to the trend of technological reform, instead a driver to the reform of digital technology, as plights usually press the world to go innovative. Looking ahead, Ma anticipated the digitalization process to complete within 1-2 decades, as compared with 3-5 decades in the original blueprint.

The Legislative Council has at the Third Reading cleared the bill that extends statutory maternity leave to 14 weeks by a vote of 54 to 2, which may be put into practice by the end of the year. The definition of "miscarriage" shall be shortened to "24 weeks" from "28 weeks" of pregnancy, so that female employees suffering miscarriage at the 24th week or beyond may be entitled to maternity leave, proposed the bill.

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