July 13 Asian Macro Initial Thoughts Dow Futures +100pts
Covid-19 Globally over 12.8m cases, 566k deaths
WHO warns that the virus is getting worse. Florida reported 15,299 cases and the total US cases was 60k+ for a third day.
DOW Futures opened +130pts but have eased back to +100pts, But S&P Futures are still +0.5% where they opened and NDX rose to +0.5% from +0.4% earlier.
Kazakhstan health ministry rejects Chinese claim of ‘unknown, deadlier pneumonia’. Ministry says Chinese embassy misunderstood official count, which includes unspecified cases
Singapore PAP wins again but their majority slipped again; they got 61.24% down from 69.9% last time
Q2 Earnings Season kicks off with Pepsi pre market and on Tuesday JPM, Citi and Wells Fargo
DOW +1.44%, NDX +0.66%, S&P +1.05%, Russel 2K +1.7% Markets opened flat (after DOW futures bounced before the open) and after some initial weakness trended higher to close at day highs. NDX continued to hit new highs with Amazon +0.5% and Netflix +8%, NDX is now +18% YTD, DOW is -8.6% and S&P -1.4%; which many are saying signals a decoupling from the historic relationship with the S&P 500.
US reported 63,000 new covid-19 cases and the 7 day average is 53k but it was off-set by Gilead +2.2% saying its covid-19 treatment showed an improvement in clinical recovery and a 62% reduction in the risk of mortality compared with standard care. BioNTech’s +7.2% said a coronavirus vaccine candidate could be ready for approval by December.
BANKS JPMorgan +5.4%, Goldman Sachs +4.4%, Citigroup +6.4% and Wells Fargo +5.9%. Banks start Q2 reporting on Tuesday
RE-Opening Stocks American Airlines +6.8%, United +8.2%, Delta +5.6%. Carnival +10.8% after the company said it can break even in cash flow with capacity between 30% and 50%.
Stay at Home Stocks Netflix +8%; Goldman’s adds to conviction list, said it now sees a 30% rally over the next 12 months for the company. Amazon +0.5% after Citi raised its target price $3,550 per share.
Beyond Meat -4.4% on broker downgrade.
Trump said a phase-two trade deal with China isn’t under consideration, saying the relationship between Washington and Beijing has deteriorated too much.
US government announced to slap a 25% levy on French handbags and cosmetics worth of US$1.3 billion to retaliate the latter's digital service tax on the US internet companies. Nevertheless, the US postpones the related initiative for six months to bide time for talks with France.
Facebook +0.2% rumoured to be going to ban all political advertisements ahead of the US Presidential Election in November, Bloomberg cited people familiar with the matter. Sources said the relevant ban is still under negotiation with nothing set in stone, yet believed the rule to apply to all regions around the world once effective.
PPI Jun -0.2% MoM vs +0.4% May (F/cast was +0.3%) [Jun -0.8% YoY vs -0.8% May (F/cast was -0.3%)]
Core PPI Jun -0.3% MoM vs -0.1% May (F/cast was +0.2%) [Jun +0.1% YoY vs +0.3% May (F/cast was +0.5%)]
Baker Hughes Total Oil Rig count 258 vs 263 prior
USD was vs Yen & Euro. Bitcoin flat @ 9262.46, VIX -6.7% @ 27.3,
US T10 0.643% a two month low. Re-opening delays concerns vs +VE news from Gilead on its drug trials.
OIL Brent +2.2%, WTI +2.3% as the IEA raised its 2020 demand forecast although the rise in US covid-19 cases might temper that.
Futures Gold -0.3% to $1,797.89, Silver +0.6%, Copper +2.6%. T10 yields declining more that inflation expectations which seems to be driving gold.
AHEAD Consumer Inflation Expectations
DAX +1.15%, CAC +1.01%, FTSE +0.76% Market opened lower but worked higher on better than expected French and Italian industrial data. Closing at day highs. AUTOs lead the gains with all sectors in the green except Healthcare.
Sentiment remains cautious with US covid-19 cases rising although there was encouraging news from Gilead over the performance of its treatment and BioNTech said a vaccine could be ready by for approval by December. There is also concern about potential US retaliatory action against France over Digital Services Tax. After market US government announced to slap a 25% levy on French handbags and cosmetics worth of US$1.3 billion to retaliate the digital service tax on the US internet companies. BUT the US postpones the related initiative for six months to bide time for talks with France.
SES +8% as GS turns +VE on the stock. Network International +6.3%
Carlsberg +6.4% as the slump in beer sales in Europe is slowing
FRANCE Industrial Production May 19.6% vs -20.6% Apr (F/cast was +15.2%).
IEA Oil report published raised 2020 demand forecast +VE
EUROZONE No data due
GERMANY Wholesale Prices
FRANCE No data due
UK No data due
JAPAN Expect Nikkei to open higher following the US but with caution over rising covid cases and US reporting season starting. Yen closed 106.89
Data due at 12:30pm Tertiary Index
Tokyo reported 206 new covid-19 cases on Sunday a fourth day of over 200 cases -VE Most Retail although some supermarkets and drugstore operators have seen increases in business; Life Corp, Welcia, Nitori
Govt may ask Tokyo, Kanagawa, Saitama and Chiba to make business suspension requests.
Government is set to start negotiations to relaunch business travel between 10 Asian countries including China and South Korea, government sources said Friday. It will also begin negotiations in July with Brunei, Cambodia, Laos, Malaysia, Mongolia, Myanmar, Singapore and Taiwan.
Japan may still build Aegis Ashore missile defense systems to defend against attacks by North Korea and other regional rivals, including China, a source told Reuters just weeks after reports that the proposal had been killed. Key is that it has not cancelled the radar element of the project; which could be repurposed.
Big four Japanese brewers post 1H sales drop However, sales of low-priced "third-category beer" made from malt alternatives or a mixture of spirits grew in the January-June period. By volume, Kirin Brewery -4% Sapporo Breweries -7% and Suntory Beer -11%. Asahi Breweries -17% in sales by value, did not release figures by volume. -VE
Toyota Motor Corp. will resume automobile production in all of its manufacturing bases around the world for the first time since February +VE
Honda Motor Co Ltd (7267.T) will buy a 1% stake in Chinese electric vehicle (EV) battery maker Contemporary Amperex Technology (CATL) (300750.SZ) and the two will jointly develop EV batteries, the companies said on Friday. +VE
Japan Display Inc (6740.T) aims to bring some automotive panel production back to Japan after the novel coronavirus outbreak disrupted its supply chain in China, a company executive said on Friday. +VE
Fujifilm Holdings Corp’s Avigan drug clinical trial yielded inconclusive results as a treatment of COVID-19, Japanese researchers said on Friday. -VE
Minimalist lifestyle brand Muji’s US subsidiary has filed for Chapter 11 bankruptcy protection, its Japanese owner Ryohin Keikaku Co said on Friday, joining the list of casualties from the coronavirus pandemic. -VE
ANA has massively scaled back its new hires for FY2021 as it see no swift recovery for air travel +VE
SOUTH KOREA Expect markets to open higher with focus on Tech and IT. Covid-19 concerns remain elevated. T/O on Friday was high so expect to see some initial bargain hunting. This week, the key will be the ’New Deal’ package scheduled to be unveiled on Tuesday with many expecting the Kospi to regain the 2,200 level.
No data due
South Korea is in talks with China to increase the number of flights to the country to 10 a week mainly to meet travel demand from businessmen, the transport ministry said Sunday. Slight +VE BUT analysts say covid-19 hit to the sector means it is unlikely to recover to 2019 levels until 2023 -VE
The government on Friday unveiled a set of new real estate regulations centered on raising taxes on owners of multiple homes, as part of a move to rein in soaring housing prices. Comes as the amount of credit loans taken out by individuals sharply increased in June due to the government’s tough regulations on mortgage loans and the recent stock market rallies.
Hyundai Motor Group’s sales of specific models -- hybrid, plug-in, electric and hydrogen-powered -- in the local market jumped over 36% in the first half of this year, indicating a growing preference for eco-friendly cars. Slight +VE
Coupang is buying the software of Hooq Digital, the South-east Asian video streaming service owned by Singapore Telecommunications (Singtel), Sony and Warner Bros that's filed for liquidation, according to people familiar with the deal. The deal ushers SoftBank-backed Coupang into a competitive over-the-top video streaming arena and pits it against the likes of Amazon.com and Netflix. It also marks growing consolidation in the segment, after Tencent Holdings recently agreed to buy the assets of Malaysian streaming platform iflix.
Samsung Electronics has been named Asia’s most popular brand for the ninth consecutive year, according to an international market report Friday.
TAIWAN Expect market to open high with Tech in focus after TSMC’s monthly revenue released Friday beat estimates and good numbers from Nanya Tech
No Data due
The Central Epidemic Command Center yesterday announced two imported cases of COVID-19, bringing the total number of confirmed cases in the nation to 451. The CECC said that the so-called “unknown pneumonia” outbreak in Kazakhstan reported by the Chinese embassy there might be related to COVID-19, but more details are needed.
Combined arms battalions to debut in military drill The annual Han Kuang military exercises that begin today are to feature the debut of Taiwan’s combined arms battalions. The exercises, aimed at honing the nation’s ability to repel a Chinese invasion, are to last five days and consist of live-fire drills and computer-assisted tabletop training.
Taiwan might be China’s next target after it has “walled off” Hong Kong from the rest of the world with its new national security legislation, Academia Sinica Institute of Sociology fellow Wu Jieh-min said. Reflects growing concerns about China’s actions in the region.
TSMC monthly revenue suggests Q2 sales beat analysts’ estimates, shows its technological lead is helping beat the COVID-19 pandemic and US sanctions Huawei. June Sales +40.8% YoY and with Q2 revenue NT$310.7 billion. It is still expecting robust demand for semiconductors used in data centers, which were hosting an unprecedented surge in online activity during the COVID-19 pandemic. +VE and follows good results from UMC and Vanguard.
Nanya Tech Friday said that its net profit surged to the highest level in five quarters last quarter, as work-from-home and remote learning helped buoy demand for DRAM chips used in PCs and servers. Amid the COVID-19 pandemic, the company’s growth momentum is expected to extend into this quarter, it said. Combined with a seasonal uptick in demand for smartphones, TVs and game consoles, DRAM prices and shipments are forecast to at least remain flat this quarter, compared with last quarter, it added. +VE
The Ministry of Economic Affairs on Friday approved nine SMEs to participate in its Invest in Taiwan initiative, with the companies pledging to spend a combined NT$3.6 billion (US$121.6 million) to construct new plants and add automated production lines. +VE
Domestic gasoline prices are this week to increase by NT$0.1 per liter, rising for the 11th consecutive week as global crude oil prices continued to grow. BUT premium diesel prices would remain unchanged.
Formosa Plastics Group on Friday posted Q2 combined losses of NT$6 billion (US$202.61 million) down substantially from combined losses of NT$13.99 billion in the first quarter, due to rising market demand as the spread of COVID-19 slowed. Nan Ya Plastics Corp was the only one of the four to report a profit last quarter, and its net income rose 114.8% QoQ to NT$2.16 billion
BES Engineering is to start construction on an urban renewal project in Taipei and a high-tech industrial park later this year. With 23 projects costing NT$100.48 billion (US$3.39 billion) under way, BES won two public works contracts this year to strengthen the local infrastructure in Changhua County and to revamp Taipei’s First Fruits and Vegetables Wholesale Market. The company is also seeking to expand in Southeast Asia, specifically Vietnam and Myanmar, she said, adding that the company is in talks to develop industrial facilities in Vietnam which could soon bear fruit. +VE
Foxconn (Hon Hai) is weighing an investment of US$1 billion to build a factory in Southern India for iPhone assembly, Reuters cited sources. There is a strong request from Apple to its clients to move part of the iPhone production out of China, according to sources.
CHINA Expect market to open higher but upside muted as Trump says Phase II traded deal not being considered and US/China relations bad; raising fears of more sanctions. Plus Friday’s loans data was mixed. Covid-19 still overhangs the markets. Heavy flooding in Jiangsu and Jiangxi -VE for companies with operations there.
No data due but may get FDI
After Market Friday
New Yuan Loans Jun CNY 1810b vs 1480b May (F/cast was 1800b)
Outstanding Loan Growth Jun 13.2% YoY vs 13.2% May (F/cast was 13.3%)
Total Social Financing Jun CNY 3430b vs 3190b May (F/cast was 3250b)
M2 Money Supply Jun 11.1% YoY vs 11.1% May (F/cast was 11.2%)
Trump said a phase-two trade deal with China isn’t under consideration, saying the relationship between Washington and Beijing has deteriorated too much. -VE
US warned its citizens about heightened detention risks in China -VE
US Congreeman Michael McCaul, said the US does not want to go to war with China, but it must compete with it and also stand up for human rights and democracy and that recognizing Taiwan as an independent country would be the most punitive measure the US could take against Beijing’s aggressiveness. Likely to increase tensions.
WHO starts covid-19 origin quest; two WHO animal health specialist and an epidemiologist, are expected to arrive in Beijing this weekend to meet Chinese scientists and doctors to discuss the terms of a WHO-led mission to trace the origin of the coronavirus. +VE
China has started tracking down some of its citizens living abroad to collect taxes, surprising expatriates who never had to pay levies back home on overseas income, people familiar with the matter said. State-owned enterprises operating in Hong Kong, have told Chinese expats to declare their income for last year so that they can pay taxes at home, said the people, who asked not be named because they are not authorized to speak publicly on the matter.
I think shows the financial strain that Beijing is under.
Kazakhstan health ministry rejects Chinese claim of ‘unknown, deadlier pneumonia’. Ministry says Chinese embassy misunderstood official count, which includes unspecified cases
HUAWEI -VE UK press reports that the British government plans to remove all 5G gear of Huawei within the country by 2025, reported The Telegraph. Yet, some conservative lawmakers implored to move the timeline faster to 2023.
On Sunday the Sunday Times reported that Huawei had requested a meeting with the PM to work out a deal to delay its potential removal -VE
China suspends imports of Ecuador shrimp on coronavirus risk “The test results suggested that the container environment and the outer packaging of the goods of the three companies were at risk of contamination ... and the companies’ food safety management system was not in order,” the General Administration of Customs said in a statement on its website. Two of the Ecuadorean companies involved issued sharply worded statements noting that the virus was found only within the walls of the container, adding that China was exaggerating the potential risks. Suggests that the Chinese propaganda machine is looking at ways to deflect the recent outbreak of cases on ‘overseas’ factors.
FT Beijing-backed rally entices retail traders to ‘fickle’ stocks. Rapid jump in retail margin accounts brings back troubling memories of China’s 2015 bubble and its spectacular pop
FT Big Read ’Taking in the World’ looks at whether China has over played its hand with taking on battles with various other countries. A good read; see my FT Weekend Thoughts.
HONG KONG ADR’s +101pts to open at 25,828 most ADR’s closed higher but Tencent and some Chinese Financials Weak. Expect an initial short squeeze. After that expect upside to be limited as US companies start reporting Q2 earnings this week. The wild card remains Team China.
No data due
Covid-19 Sunday saw 38 new cases reported following Saturday’s 20 reported cases -VE
IPO HONLIV HEALTH (9906.HK), Debut Monday, opened at $1.98, -5.7% against the listing price of $2.1, and last stood at $3.15, up 50% against the listing price, on volume of 860,000 shares, PhillipMart data showed.
Short Selling HSI Friday 20.4% vs 20.5% Thursday (High considering it was a falling market and the uptick only rule)
Top Shorts Hang Seng Bank (11) 54%, China Res Land (1109) 34%, MTRC (66) 34%, Wharf REIC (1997) 33%, HSBC (5) 31%, Ping An (2318) 31%, HK & China Gas (3) 30%, Petrochina (857) 30%, Henderson Land(12) 30%, AAC Tech (2018) 29%, NWD-New(17) 29%, AIA (1299) 27%, China Overseas (688) 27%, CCB (939) 27%, CNOOC (883) 27%, BoC HK (2388) 27%, SunnyOptical (2382) 26%, Mengniu Dairy (2319) 26%, China Unicom (762) 25%.
NEW SECURITY LAW Hong Kong's pro-democracy primaries were delayed but took place with over 580,000 people taking part despite the threat that they may breach the new security law. The delay was from police officers from the Cyber Security and Technology Crime Bureau searching the Public Opinion Resetarch Institute’s office, in Wong Chuk Hang Friday afternoon. They said they received reports about a suspected data leak of citizens information, including that of police officers. They suspected the organizations' computers may have been hacked. It forced the Organisers to pushed back voting till noon Saturday, citing the police operation which continued overnight had led to delays in preparatory work.
Many feel the action came as the HK SAR administration tried to suppress the polls warning that they may breach the new security law.
I think it illustrates how worried Beijing is about losing the local elections in September. The further worry will be that if there are concerns about interference or tampering with the elections; it could trigger significant public opposition. The threat of that could impact international businesses decisions about investment in Hong Kong. -VE
HKs Lennon Wall which was forced to remove all the written notes has seen new notes appear…. all blank, the new symbol of resistance to the new security law. I suspect it will be difficult to use even the vagaries with in the new national security law to prosecute against blank placards and 'post it’ notes.
FOUNTAIN SET (420.HK) -VE PROFIT WARNING -VE expects to record an imbalance of profit and loss for six months ended 30 June 2020 as compared to the net profit of HKD90.597 million for the six months ended 30 June 2019. The imbalance of profit and loss is mainly due to the outbreak of the COVID-19 pandemic globally which resulted in the downturn in the business environment and production operation. -VE
CHINA MER PORT (144.HK) -VE PROFIT WARNING -VE for the six months ended 30 June 2020 Profit to drop by more than 70% YoY -VE
KINGDEE INT'L (268.HK) -VE PROFIT WARNING -VE It is expected that the Group will record a loss for the interim period ended 30 June 2020 ranging from RMB200 million to RMB300 million, against RMB110 million in the same period last year. -VE
DIT GROUP (726.HK) +VE PROFIT WARNING expects to record a profit attributable to the Shareholders of approximately HK$8 million for the six months ended 30 June 2020 as compared to a loss attributable to the Shareholders of HK$13 million for the six months ended 30 June 2019. +VE
GAC GROUP (2238.HK) June sales volume 186,600 units, -1.26% YoY; production volume 97,900 units, +25.27% YoY. Slight -VE
LEYOU TECH H (1089.HK) said its controlling shareholder Yuk Kwok Cheung Charles and the Company entered into an exclusivity agreement with Tencent Mobility Limited, a wholly-owned subsidiary of TENCENT (700.HK), regarding a possible acquisition and privatization of the Company. Negotiations are still in progress and there is no certainty as to the terms of the Possible Privatization will proceed or that it will result in a binding agreement. Trading in the Shares of the Company was halted with effect from today (10 July). The trading of the Shares on the Stock Exchange will be resumed with effect from next Monday (13 July). +VE
In a joint declaration, TENCENT (700.HK) and Lao Gan Ma clarified that their misunderstanding over an alleged advertising fraud has been resolved after in-depth communication. TENCENT has given an apology in person, said the Chinese chili sauce maker, and the two parties will explore opportunities and embark on a series of cooperations. +VE
SUNNY OPTICAL (2382.HK) said that the June spherical glass lenses shipments were 1.153 mn -53.7% YoY and handset lens shipments were 18 mn sets +16.5% yearly. Slight -VE
PROPERTY SALES showed some caution; WHEELOCK sold 85 of 165 units offered on Saturday, CK Asset (1113) sold 97 of the 285 units offered at Sky to Sea in Tweung Kwan O on Saturday, Road King Infrastructure (1098) sold 8 units at Crescent Green and Centraline reported secondary transactions were +40% WoW.
EVERGRANDE (3333.HK) sold out all 54 available units under THE VERTEX, its first residential project in Hong Kong, as of 4pm today (10th), cashing in more than $470 million. Over 100 flats have been launched under the project, generating over $810 million. As two-bedroom units are particularly sought after and completely sold out, the developer plans to launch more flats in the short run.
Centa-City Leading Index (CCL) last printed at a 19-week high 176.14, 1.21% WoW, the sharpest in 22 weeks. CCL (large units) surged 2.32% weekly over the past eight weeks, posting the biggest rally among the four major CCL indices. During the period, CCL +1.71%, CCL Mass +1.62%, and CCL (small-and-medium units) +1.6%. Luxury home prices stood out recently, likely chasing laggard.
BROKERS Huatai International, the Hong Kong arm of China's third-largest broker, is no longer charging commissions and platform fees for stock trades, but just a HK$8 monthly fee, as of last month, in a move set to deepen the pain for the city's many hard-pressed trading houses. -VE
PING AN Insurance (2318) has agreed to subscribe 223 mn non-public shares in Shenzhen-listed China Merchants Shekou Industrial Zone for 3.52 billion yuan (HK$3.9 billion). The move is aiming to help Merchants Shekou to buy a 24% stake in Shenzhen Nanyou (Holding) for 7 billion yuan, through cash, share, and convertible bond issues. Shenzhen Nanyou indirectly owns the equity of the Qianhai Free Trade Zone, with high-quality land resources.