July 15 ASIAN MACRO INITIAL THOUGHTS Dow Futures +300pts: KEY Team China action


17 Jul

July 15 ASIAN MACRO INITIAL THOUGHTS  Dow Futures +300pts:  KEY Team China action

Covid-19 Globally over 13.2m cases, 575k deaths
WHO warns too many countries are going in the wrong direction
DOW Futures +300pts as Moderna after hours, says early trial results show its vaccine produces antibodies to coronavirus. S&P +0.7%, NDX +0.5%

DOW +2.13%, NDX +0.94%, S&P +1.34%, Russel 2K +1.76% US markets opened mixed Dow and S&P higher as JP Morgan kicked off banks earning with better than expected earnings but NDX was lower. Data was better. Markets then worked their way higher through the day to close at their highs. The fact that JPM, Citi and Wells Fargo have set aside US$28 billion for loan losses, is a key insight into the economic pain they think could still happen despite this the markets traded higher.
President Trump said Tuesday after market that he signed legislation to impose sanctions on China in response to its interference with Hong Kong’s autonomy. It ends Hong Kong’s special treatment. He also said that Hong Kong would lose its position as a competitive financial hub because of the crackdown -VE
Sentiment during the day helped as Florida announced a drop in the new covid-19 cases.
Caterpillar 4.8%, Exxon Mobil +3.3%, Chevron +3.5%, Boeing closed 2.5%.
JP Morgan +0.6% as trading revenues +79% QoQ
CITI -3.9% as increased trading revenues off-set weaker consumer banking
Wells Fargo -4.6% reported a loss and cut dividend
Delta Airlines -2.7% reported a US$5.7bn loss and said growth stalled. They estimate it will take over 2 years for the airline to make a sustainable recovery -VE cross read to other airlines and Cathay Pac (293 HK)
Re-Opening Stocks weak in normal trading American Airlines -0.5%, United Airlines -0.1%, Royal Caribbean Cruise -2.8% BUT bounced in after hours after Moderna +4.5% (+13% in after hours) announced +VE vaccine news.
Facebook +0.3%, Amazon -0.6%, Netflix -0.1% (broker downgrade), Alphabet +0.6%, Microsoft +0.6%
Apple +1.7% despite news from Mac Rumours that it may have to pay Samsung Display around US$950 million for failure to buy enough OLED panels to fulfill its contract; suggesting reduced iPhone production numbers.
DATA
NFIB Business Optimism Index Jun 100.6 vs 94.4 May (F/cast was 92)
Inflation Rate Jun +0.6% MoM vs -0.1% May (F/cast was +0.4%) [Jun +0.6% YoY vs +0.1% May (F/cast was +0.2%)]
Core inflation Rate Jun +0.2% MoM vs -0.1% May (F/cast was +0.2%) [Jun +1.2% YoY vs +1.2% May (F/cast was +1.2%)]
Redbook +3% MoM vs -0.3% prior (-5.5% YoY vs -6.9% prior)
API Crude Oil Stocks -8.322m vs 2m prior (out late afternoon)
USD was stronger vs Yen & Euro. Bitcoin +0.2% @ 9254.54, VIX -8.3% @ 29.52, US T10 0.625% slight decline on concerns over the economy.
OIL Brent +0.42%, WTI +0.47% ahead of OPEC+ meeting but with demand concerns still weighing on the market
Futures Gold unchanged @ $1,813.40, Silver +0.4%, Copper -0.56%
AHEAD MBA Mortgage Applications, NY Empire State Manufacturing, Import Prices, Export Prices, Industrial Production, Manufacturing Production, Capacity Utilisation, EIA Oil Report, Beige Book.
Results due from Goldman Sachs, UnitedHealth, Bank of NY Mellon, U.S. Bancorp and PNC Financial all set to report before the bell.

DAX -0.8%, CAC -0.97%, FTSE +0.06% Markets opened lower following the trend from Asia as Covid case rise globally and traded sideways for most of the day but worked slightly higher into the close as the US opened higher on good Bank numbers. UK GDP expanded but slower than expected. German inflation was in-line and Eurozone Industrial Production and Sentiment were better than expected.
BT +4% and Vodafone +1.7% as UK announced the Huawei would be stripped out of the UK 5G network. Nokia +0.1%, Ericsson -0.4%
HeidelbergCement +3.1% gained after bringing forward its second-quarter earnings.
DATA
EUROZONE
ECB Bank Lending Survey
Industrial Production May +12.4% MoM vs -18.2% Apr (Revised) (F/cast was +10.7%) [May -20.9% MoM vs -28.7% Apr (Revised) (F/cast was -20.2%)]
ZEW Economic Sentiment Index Jul +59.6 vs +58.6 May (F/cast was +51)
GERMANY
Inflation Rate Jun +0.6% MoM vs -0.1% May (F/cast was +0.6%) [Jun +0.9% YoY vs +0.6% May (F/cast was +0.(%)]
ZEW Economic Sentiment Index Jul +59.3 vs +63.4 Jun (F/cast was +61)
ZEW Current Conditions Jul -80.9 vs -83.1 Jun (F/cast was -60)
FRANCE
UK
Balance of Trade May GBP 4.3b vs 2.3b Apr (Revised) (F/cast was -0.8b)
Industrial Production May +6% MoM vs -20.2% Apr (Revised) (F/cast was +5.2%) [May -20% YoY vs -23.8% Apr (Revised) (F/cast was -20.3%)]
Manufacturing Production May +8.4% MoM vs -24.4% Apr (Revised) (F/cast was +7.5%) [May -22.8% YoY vs -28.2% Apr (Revised) (F/cast was -22.9%)]
GDP 3 month average May -19.1% vs -10.8% Apr (Revised) (F/cast was -17%)
GDP May +1.8% MoM vs -20.3% Apr (Revised) (F/cast was +5.1%) [May -24% MoM vs -25.3% Apr (Revised) (F/cast was -22%)}
Construction Output May -39.7% YoY vs -44.3% Apr (Revised) (F/cast was -34%)
Goods Trade Balance May GBP -2.81b vs -7.49b Apr (Revised) (F/cast was -8.7b)
NIESR monthly GDP Tracker Q2 -21.2% vs -19.1% prior (Revised) (F/cast was -20%)
AHEAD
EUROZONE No data due
GERMANY No data due
FRANCE No data due
UK Inflation Rate, Core Inflation Rate, PPI Core Output, PPI Input, PPI Output, Retail Price Index.

JAPAN Expect Nikkei to open higher following the US and +VE news that Moderna vaccine produces antibodies to coronavirus. BUT upside tempered by news of more US sanctions on China and the weak Tankan Index. Yen currently 107.29 Sentiment also helped by the number of new covid cases dropped again on Monday to 143 cases.
Data OUT 
Tankan Index Jul -44 vs -46 Jun (F/cast was -40)
Due BoJ Interest Rate Decision and Quarterly Outlook Report
Tokyo health officials appealed on Tuesday for more than 800 theatregoers to get tested for the novel coronavirus after a production starring Japanese boy-band members was found to be the source of at least 20 cases.
Japan's environment ministry warned on Tuesday that the electricity industry, which accounts for 40% of its carbon emissions, will miss its target for cutting carbon dioxide (CO2) by 2030, calling for it to take further measures.
Japan's annual defence review accuses China of pushing its territorial claims amid the coronavirus pandemic and suspects Beijing of spreading propaganda and disinformation as it provides medical aid to nations battling the disease.
ANA to operate 88% of domestic flights in August , increasing to 92% between 7-17 Aug to meeting increased summer holiday demand +VE

SOUTH KOREA Expect markets to open higher as new $95bn 'New Deal' to boost the economy announced and with the positive Moderna vaccine news. Also premarket data a positive.
Data OUT 
Unemployment Rate Jun 4.3% vs 4.5% May (F/cast was +4.7%)
Export Jun -6% YoY vs -8.2% May (Consensus was -8%)
Import Prices Jun -7.3% YoY vs -12.8% May (Consensus was -4.5%)
Govt New Deal a 6 year plan with a number of ‘green’ investments and ’smart’ grids, work from home support polices, 5G net works (with tax breaks for telcos who instal the systems.
Land Minister Kim Hyun-mee on Tuesday refuted growing criticism over the government’s focus on raising taxes rather than dealing with housing supply shortage.
Samsung Display +VE as Apple may have to pay around US$950 million for failure to buy enough OLED panels to fulfill its contract, MacRumors said citing filings. This could mean that Apple had failed to meet the projected iPhone sales volume.
LG Chem said Tuesday that it has filed a criminal complaint with the prosecution against SK Innovation, accusing it of stealing trade secrets concerning electric vehicle batteries. The SK Group affiliate is already being probed by the South Korean police and the US International Trade Commission. -VE
ALSO LG Chem says it has Won150tn ($125bn) worth of orders that will keep it busy for the next five years and help the world’s largest electric vehicle battery maker ride out the coronavirus pandemic. +VE
LG Electronics has launched a global expert group for the purpose of developing insights on new technologies and discovering new business opportunities, the company announced Tuesday.
The legal minimum wage will rise 1.5% to 8,720 won per hour next year, the smallest gain since the system was introduced, as the country braces for a pandemic-triggered economic contraction.

TAIWAN Expect market to open higher following the US and news from Moderna over its vaccine but upside limited as Tech names struggled overnight in the US. Expect some initial bargain hunting after the index closed lower on Tuesday. Watch TSMC ahead of earnings conference tomorrow.
No data due

FSC yesterday announced that it would bar Tatung Co’s stock affairs division from serving shareholders, as the home appliance maker severely breached shareholders’ rights at its annual general meeting on June 30. In the next two months, the company must assign a third party, such as a securities firm, to handle the company’s shareholder services
AU Optronics Corp and Innolux Corp should swing back into the black this quarter, joining their peers in benefiting from a V-shaped recovery as panel prices surged up to 40% QoQ consulting group Omdia said yesterday. Comes as AUO and Innolux, have been struggling to eke out a profit over the past five to six quarters as Chinese panel makers ramped up capacity and locked prices into a downward spiral. The COVID-19 pandemic unexpectedly stimulated TV sales in the first half of this year, especially in North America, Europe and China, Omdia senior director David Hsieh told reporters on the sidelines of an annual display forum in Taipei. +VE
Record heat is bringing record electricity use this month, after peak electricity consumption yesterday broke all historical records, Taiwan Power Co said.
Makalot Industrial yesterday posted pretax profit of NT$301.31 million for June +40.6% YoY thanks to increased shipments of high-margin products such as protective gowns. Shipments of higher-margin products are forecast to make up 5% to 10% of sales in Q3. In the first six months of the year, pretax profit -2.28% to NT$1.09 billion, or earnings per share of NT$4.94, from NT$1.11 billion in the same period last year. Cumulative revenue was NT$10.86 billion, down 15.84% YoY

CHINA Expect market to open higher despite the news the Trump signed the order to penalise Banks doing business with sanctioned officials in China and removed Hong Kong’s special status as Team China supports the market.
No data due
China's Ministry of Foreign Affairs would impose sanctions on Lockheed Martin, 
the American arms producer. Lockheed Martin is said to be the major contractor for a US$620-million upgrade for Taiwan's Patriot surface-to-air missiles.
FT REPORTS Offshore investors cashed out of Chinese stocks at a record pace yesterday, bagging profits after the market’s world-beating rally.
Tesla Vice President Tao Lin has met with Chongqing officials to discuss accelerating projects, said the Liangjiang New Area without providing more details. The partnership may involve the establishment of sales and maintenance centers instead of plants, China Securities Journal citing sources.
Huawei banned from the UK National 5G network reverses the early decision to allow partial access. Possible cross read would be that Hong Kong companies investing in the UK could come under more scrutiny possibly -VE for Cheung Kong Asset (1113) and CK Infrastructure (1038 HK)
Fortune Fountain Capital FT reports the wealth management platform is struggling to keep control of French glass group Bacccarat Crystal but the problems point to a broader trend -VE
Wanda Film said on Tuesday it expects to report a net loss of 1.5 to 1.6 billion yuan (214 to 228 million dollars) in the first half of this year, after the coronavirus kept its cinemas shut for almost the entire period.
China's mask production and gaming markets in the first half - two beneficiaries of the Covid-19 pandemic - but some mask producers are considering exiting the market recently as mask prices fall steeply, business newspaper 21st Century Business Herald reported, citing sources. Wholesale prices of masks in the mainland have plunged by around 90% to 0.12-0.18 yuan from the peak of 1.6 yuan in March due to expanded production capacity.
A Beijing law professor who has been an outspoken critic of China's President Xi and the ruling Communist Party was fired by his university after being released from a nearly week-long detention, his friends said.

HONG KONG ADR’s +159pts to open at 25,636 but expect an initial squeeze to push market higher. Wild card remains the action of Team China to support the market as Trump announces Hong Kong loses special status and is treated the same as China and sanctions on banks doing business with certain Chinese officials. He also said that Hong Kong would lose its position as a competitive financial hub because of the crackdown -VE There is still the overhang of more US sanctions and actions ahead.
Local sentiment weak as the HKMAO accuse pro democrats of seeking undermine HK and appear to infer that if they win the local elections that Beijing will not recognise the results which could kick off huge protests in Hong Kong.
No data due


Short Selling HSI Tuesday 17.7% vs 17.9% Monday
Top Shorts Wharf REIC (1997) 44%, Want Want (151) 42%, HSBC (5) 41%, Hang Seng Bank (11) 39%, MTRC (66) 37%, China Shenhua (1088) 30%, China Res Land (1109) 29%, Sunny Optical (2382) 28%, CCB (939) 27%, Ping An (2318) 25%.
New National Security Law Hong Kong and Macau Affairs Office (HKMAO) said thepro-democracy camp's primaries, held at the weekend, were an "illegal manipulation" of the upcoming Legco elections. It said that law professor Benny Tai, is an agent of foreign forces and one of those hurting Hong Kong having earlier accused him of trying to seize power in Hong Kong and launch a colour revolution. It said any attempt by opposition lawmakers to seek to control of the legislature to oppose and paralyse the government would amount to subversion.
Effectively saying the if the Pro Democrats win a majority in the Legco elections in September and try and pass policies that Beijing doesn’t like, then pro democrats become subversives and will no doubt be prosecuted under the new law. Very negative for sentiment BUT also reveals how worried Beijing is about the fact that Hong Kongers could overcome the rigged electoral system that it put in place in the handover agreement.
Mike Pompeo urges ‘free and fair’ Hong Kong vote after China’s national security law warning. He also expressed ‘grave concern’ over Chief Executive Carrie Lam’s comment that unofficial poll may have violated national security law

IPOs
GANGLONG CHINA (6968.HK), Debut listing price $3.93, and last stood at $3.01, -23.4% against the listing price, on slender volume of 3,000 shares, PhillipMart data showed. The retail tranche of Ganglong China was only covered by 28% so may see more weakness.
DASHAN EDU (9986.HK), Debut listing price HK$1.25, and last stood at $1.1, -12% against the listing price, on volume of 170,000 shares, PhillipMart data showed.
TENCENT (700.HK)-backed  ARCHOSAUR GAMES (9990.HK), Debut the listing price of $11.6, and last stood at $15, +29% against the listing price, on volume of 940,000 shares, PhillipMart data showed.
CHINA NEW ENERGY  (1156 HK), Debut rose 28.6% in the Bright Smart gray market last night, while it ended flat at HK$0.98 on Phillip Securities' platform.
CATHAY MEDIA  (1981 HK), which attracted PCCW (8) chairman Richard Li Tzar-kai as a cornerstone investor, saw its price rise more than 30% in gray markets according to press reports
SINO ENTERTAINMENT  TECH (6933 HK), a mobile game publisher, rose more than 6% according to press reports

WATCH
National Social Security Fund (NSSF)'s board of directors unloaded 42.325 million A shares of BANKCOMM (3328.HK) 
at an average price of $5.44 per share today (14 July), involving $230 million, as revealed by the Stock Exchange.
CK Asset (1113) released the eighth price list of 117 units at Seaside Sonata in Sham Shui Po and will launch the sale of 180 units this Friday.
Sun Hung Kai Properties (16) meanwhile opened a two-bedroom show flat at Regency Bay in Tuen Mun.
Midland said the number of mainland buyers in the local market and transactions both hit a record second-quarter low due to the pandemic.
BRILLIANCE CHI (1114.HK) said that it was informed by Huachen, the controlling shareholder of the Company, that in consideration of the strategic cooperation arrangement with the Purchaser to facilitate further business expansion through the development of upstream and downstream industry and supply chains, Huachen entered into a strategic investment agreement with Liaoning Transportation Investment Co., Ltd..
Pursuant to the Agreement, Huachen shall dispose of 400 million ordinary shares of a par value of US$0.01 each of the Company, representing approximately 7.93% of the total issued share capital of the Company to the Purchaser. Immediately following the Disposal, Huachen will hold 1.535 billion Shares, representing approximately 30.43% of the issued share capital of the Company, and will remain as the controlling shareholder of the Company.
MCC (1618.HK) said that the value of newly signed contracts from January to June in 2020 amounted to RMB465.17 billion, +21.9% YoY.
Wheelock Properties continued to see satisfactory sales for its LOHAS Park projects. Under which, MARINI, GRAND MARINI and OCEAN MARINI have sold 1,538 units in total since launch, representing over 95% of the 1,615 available units. The developer has cashed in more than $14 billion.
CK ASSET (1113.HK)'s announced that SEA TO SKY's sales office at Fortune Metropolis will be subject to footfall restrictions. From today, up to four people are allowed at each queue.
The Government announced that Carlson Tong and Rimsky Yuen have been designated as the observers of the Board of CATHAY PAC AIR (293.HK) with immediate effect. The observers designated by the Government have no voting rights at Board meetings.
CHOW TAI FOOK (1929.HK) fiscal Q1ended 30 June 2020, same store sales -11.2% YoY for Mainland China, -75.5% YoY for Hong Kong and Macau. The COVID-19 situation and the volatile macro environment continued to weigh on the business. A sequential improvement in SSS was shown in Mainland China when compared to last quarter as business resumed.
CHINA LIFE (2628.HK) accumulated premium income for the period from 1 January 2020 to 30 June 2020 was RMB428.0 billion, +13.17% YoY



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