July 20 Asian Macro Initial Thoughts US Futures open flat +45pts
Covid-19 Globally over 14.3m cases, 603k deaths
US Futures opened +45pts with S&P and NDX futures +0.2% as US covid-19 cases surge and ahead of US reporting getting into full swing but investors are likely to be watching medical reports on vaccine studies with even more interest. Reporting this week includes. (In date order): IBM, Lockheed Martin, Coca-Cola, Texas Instruments, Snap, United Airlines, Lockheed Martin, Coca-Cola, Texas Instruments, Snap, United Airlines, AT&T, Union Pacific, Tractor Supply, Twitter, Southwest Airlines, American Airlines, Intel, Skyworks, Boston Beer, Honeywell International, American Express, Verizon.
G20 Finance ministers vow to extend debt relief for developed nations and new tax rules for Amazon, Apple Facebook and Google.
EU leaders are struggling to agree over the Recovery Fund for Europe -VE
Expect Asian markets to open flat or lower with rising concerns over Covid-19, China’s deteriorating relations with most countries except maybe Russia.
JAPAN Expect Nikkei to open lower as Government under pressure from rising covid case with more than 660 new cases nation-wide on Saturday following Tokyo reporting 286 on Friday and remarks from Tourism Minister. Yen strengthen closed Friday US at 106.99
Data due Balance of Trade Jun (May was Yen -833.4bn F/cast -40b)
Exports Jun (May was -28.3%YoY Consesnus is -24.9%)
Imports Jun (May was -26.2% YoY Consensus is -16.8%)
Also BoJ meeting notes
Tensions with China rising Press reports that China complained to Japan early in July about Japanese fishing boats allegedly "trespassing" in its territorial waters near a group of disputed islands in the East China Sea, it was learned Sunday. Press also reports that airforce jets are constantly patrolling to stop Chinese aircraft from entering Japanese airspace -VE
Government to pay firms for relocating out of China; with back to Japan or to other Asian countries -VE for Japan/China relations
Tourism minister Kazuyoshi Akaba urged young people and seniors in large group tours not to use the campaign, citing the risk they may spread the coronavirus and, in the case of the elderly, develop severe symptoms. Comes after the Govt revised the travel initiative on Wednesday to exclude Tokyo. That change prompted mass cancellations but the government says it has no plans to reimburse people for their loss. Over the weekend more governors asked for flexibility to adapt the programme as covid-19 cases rise.
British government asks Japan to help build its 5G wireless networks without Huawei Technologies, the Nikkei said on Sunday, a further step in a global technology and security war between the United States and China. +VE for NEC Corp (6701.T) and Fujitsu Ltd (6702.T) as potential alternative suppliers to Huawei
Japan will look closer into whether to issue central bank digital currencies (CBDCs), the government said in its annual policy road map, a sign that Tokyo may be warming to the idea as the coronavirus heightens demand for cashless payments. I
Ootoya Holdings said it would oppose a takeover offer from its top shareholder, Colowide Co. turning the bid into the Japan's latest hostile deal.
Tokyo Olympics looks increasingly likely to be postponed again with a poll showing 36% this it should be postponed and 34% cancelled.
SOUTH KOREA Expect markets to open flat with consolidation expected with the index now at the 2,200 level. Some are hopeful that the market will move higher on the expectation of a big stimulus package from the US.
No data due
South Korea's new virus cases fell back to below 40 on Saturday, (28 imported cases) but health authorities are keeping their guards up as imported cases and sporadic outbreaks in the country continue to put a strain on their efforts to contain the deadly virus.
South Korea on Friday approved an early stage clinical trial of Celltrion Inc's experimental COVID-19 treatment drug, making it the country's first such antibody drug to be tested on humans. +VE
SK Biopharmaceuticals., (part of SK Group), is likely to be added to the list of 200 major stocks listed on the main bourse in September, as its market capitalization has run high for a certain period after its market debut, industry sources said Saturday.
SK Group’s investment-focused subsidiary SK Holdings will invest an additional 100 billion won ($82.9 million) in Wason, a Chinese manufacturer of copper foil. Copper foil is a core ingredient in anodes, one of the main components of electric vehicle batteries.
Government said Friday it will build more wind farms off the southwestern coast of the country in line with its efforts to stay away from fossil fuel-powered energy generation and boost the virus-ravaged economy.
The Ministry of Land, Infrastructure and Transport said Friday it has ordered a recall of 34,268 vehicles -- sold by Hyundai Motor, Kia Motors, Renault Samsung Motors, Toyota, Mercedes-Benz Korea, Hanbul Motors and BMW Korea -- for faulty components.
Government under pressure from investors after a series of hedge fund miss-selling/fraud allegations. -VE for sentiment
Some K-Pop stars' accounts on TikTok's sister app in China, Douyin, blocked from view comes after S Korea fined the app on Wednesday for data privacy noncompliance.
TAIWAN Expect market to open flat with concerns over the impact of covid -19 on the global recovery but with large Tech still in focus.
Data due after market Exports Orders and Unemployment.
The government is considering expanding its stimulus initiative for local industries affected by the COVID-19 pandemic, and its so-called “Stimulus 3.0” program is on the way, Minister of Economic Affairs Wang Mei-hua said Friday. +VE
The Belgian parliament’s Chamber of Representatives on Thursday overwhelmingly passed a resolution that called on the country’s government to support Taiwan’s democratic development and its meaningful participation in international organizations. +VE
The Central Epidemic Command Center (CECC) Friday reported two new imported cases of COVID-19, a woman and a man returning from months-long work in the Philippines.
China’s Peoples Daily accuses Taiwan’s freely elected DPP of meddling in Hong Kong and of being a ‘Black hand’ in the unrest, with pro-independence forces colluding to undermine China’s national security. It said Hong Kong’s national security law, which has prompted widespread international criticism, meant the “collusion between Taiwan and Hong Kong’s separatist forces” would be “to no avail”. It would appear the government is seeking to stir up anti-Taiwan sentiment. Which will raise concerns about possible military action -VE
TAIWAN Representative of the Taiwan Affairs Office in Hong Kong forced to leave as the HK administration would not renew their visa’s unless they signed a statement saying they would uphold the ‘one China’ policy.
Pegatron to open plant in India. Last month, the Indian government set out a US$6.6 billion plan to woo the world’s top smartphone manufacturers, offering financial incentives and ready-to-use manufacturing clusters. Pegatron is now setting up a local subsidiary and joining fellow Taiwanese electronics assemblers Hon Hai Precision and Wistron Corp, who have already been making some iPhone handsets in southern India. +VE and a slight -VE to China.
China Steel Corp raising steel prices for September delivery by an average of 1.49% MoM as COVID-19 economic stimulus packages and reopening markets boost demand worldwide.
Wistron Corp on Friday said that its agreed to sell two of the firm’s wholly owned subsidiaries to China’s Luxshare Group as part of its plans to better integrate group resources and improve its smartphone assembly profitability. +VE
Northern Taiwan’s presale and new housing market picked up 5.5% annually to NT$565.23 billion (US$19.1 billion) in the first half of the year, holding resilient amid the COVID-19 pandemic on the back of low interest rates and ample liquidity, the Chinese-language My Housing Monthly reported yesterday.
Domestic gasoline prices are to fall by NT$0.1 per liter today, ending 11 consecutive weeks of hikes, CPC Corp, Taiwan and Formosa Petrochemical Corp announced separately yesterday. Premium diesel prices remain unchanged for the second straight week at NT$19.6 per liter at CPC stations and NT$19.4 per liter at Formosa’s pumps, the companies said.
CHINA Expect market to open lower with increased international pressure and rising covid-19 cases both domestically (Xinjiang in the spotlight) and globally.
Data due Loan Prime Rate 1 year (Currently 3.85% no change expected)
Loan Prime Rate 5 year (Currently 4.65% no change expected)
Mainland China reports 16 cases Saturday following 22 new coronavirus cases, including 16 in Xinjiang on Friday, up from 10 cases Thursday, the health authority said on Saturday. -VE for sentiment
UK to retract extradition agreement with China over the new security law in Hong Kong, but press reports it is unlikely to impose sanctions at this stage -VE
The government said it has taken control of Huaxia Life Insurance, Tianan Life Insurance, Tianan Property Insurance and Yi’an Property Insurance, according to a statement by the China Banking and Regulatory Commission (CBIRC) Along with New Times Trust, and New China Trust were also taken over, effective immediately. All linked to Xiao Jianhua the founder of Tomorrow Group who was ‘escorted’ out of Hong Kong in 2017 and has not been seen since but is reported as awaiting trial on charges of bribery and corruption. Comes as the Insurance company’s in China become so large the the government cannot allow them to fail. The government worries that their debt fuelled growth could hurt the nation’s financial system. Expect weakness in the Financials -VE.
Large parts of China were reeling on Friday from the worst floods in decades, as disruption mounted for supply chains, including for personal protective equipment (PPE), vital in the fight against the novel coronavirus. Expect more reconstruction spending +VE Zoomlion, Sany etc and for Resources. It will raise questions about the need for structures such as the Three Gorges Dam and other dams on the Yangtze Riiver.
China to connect its interbank and exchange bond markets, the People's Bank of China said Sunday, a move aimed at unifying segregated bond markets and facilitating monetary policy transmission and macro economic management. Qualified investors will be allowed to buy and sell bonds traded in each other's markets via the "connect" infrastructure.
The United States on Friday announced sanctions against four China-based individuals and one company run by alleged Chinese drug kingpin Fujing Zheng for links to trafficking in fentanyl. It named the individuals as Songyan Ji, Longbao Zhang, Guifeng Cheng and Guangfu Zheng, and the firm as Global United Biotechnology Inc, which it said was owned and operated by the Zheng Drug Trafficking Organization (DTO) run by Fujing Zheng. Likely to irate China as it does not to admit having a drugs issue.
China's embassy in Myanmar on Sunday accused the US of “outrageously smearing” the country and driving a wedge with its Southeast Asian neighbors over the contested South China Sea and Hong Kong, as tensions mount between the superpowers.
US-China relations worsen as : Beijing says banning 92 million Communist Party members from America ‘ridiculous’. That’s about 6.6% of the Chinese population although Beijing says it would put the US at odds with all 1.4bn Chinese citizens. The proposal is just one of many being considered.
US may place sanctions on Chinese State companies over ‘bullying’ in the South China Sea; possibly on China Communications Construction Company and CNOOC -VE
US has deployed two aircraft carriers to the South China Sea, for the second time in two weeks, the US Navy said on Friday, as China and the United States accuse each other of stoking tensions in the region. -VE for sentiment.
UK accuses China of ‘gross abuses against Uighurs’ press reports of growing calls for a boycott of the Beijing Winter Olympics over the issue. China’s UK Ambassador denied reports that China was carrying out a programme of sterilisation of Uighur women and other accusations with video footages from the British press -VE
HONG KONG ADR’s +20pts to open at 25,109 But expect market to open lower on rising covid 19 cases (108 announced on Sunday) with increased lockdown measures and weakness due to the possibility of sanctions on some SOE’s and weakness in Chinese financials as China announces taking over more of Xiao Jianhua’s Tomorrow Group. There were also arrests in Yuen Long at the anniversary of the assaults that occurred there in 2109 allegedly between triads and locals with the police accused of ’turning a blind eye’.
No data due
But after market Friday Business Confidence Q3 -11 vs -37 Q2 (F/cast was -32)
AFTER MARKET WARNINGS
BILLION IND (2299.HK) PROFIT WARNING -VE expected to record a significant decline in the profit for the six months ended 30 June 2020 of not more than 50% as compared to the same period in 2019.
CHENGDU EXPWAY (01785.HK) PROFIT WARNING -VE expected that profit attributable to the shareholders of the Company for the six months ended 30 June 2020 will fall to be within the range of RMB50 million to RMB70 million, as compared to RMB232 million for the same period of 2019, down about 70%-78%.
SUNSHINE PAPER (2002.HK) PROFIT WARNING +VE expected that the Group will record an increase of not less than 70% in its net profit attributable to the shareholders for the six months ended 30 June 2020 as compared to that for the corresponding period in 2019. This was due to the decrease in purchase cost of raw materials, which in turn led to a significant increase in gross profit and gross profit margin.
SUNFONDA GP (1771.HK) PROFIT WARNING -VE expected to record a decrease of no more than 40% in the profit attributable to owners for the six months ended 30 June 2020 as compared to the six months ended 30 June 2019, while the profit attributable to owners was RMB74.82 million.
TOMO HOLDINGS (6928.HK) PROFIT WARNING -VE expected to record significant decreases in revenue by approximately 67.8% and gross profit by 81.6% for the six months ended 30 June 2020 as compared to the corresponding period in 2019.
SC HOLDINGS (413.HK) PROFIT WARNING -VE expected to report a loss for the six months ended 30 June 2020 as compared with a profit of HK$26.81 million for the corresponding period in 2019.
BEXCELLENT GP (1775.HK) PROFIT WARNING The Group is anticipated to record a loss for the year ending 31 July 2020 of not less than HK$16 million as compared to the profit of HK$11.9 million for the year ended 31 July 2019.
Short Selling HSI Friday 22.3% vs 19.1% Thursday
Top Shorts Mengniu Dairy (2319) 46%, MTRC (66) 45%, BoC HK (2388) 40%, CCB (939) 39%, China Shenhua (1088) 38%, PetroChina (857) 34%, Hang Seng Bank (11) 34%, HK & China Gas (3) 33%, China Res Land (1109) 32%, Sands China (1928) 29%, SHKP (16) 29%, Henderson Land (12) 28%, HSBC (5) 27%, Tencent (700) 27%, ICBC (1398) 27%.
NEW SECURITY LAW. SFC’s CEO Ashley Alder sought on Sunday to reassure global banks in the city that China’s new national security laws for the financial hub would not harm their operations; saying the free flow of information is not expected to change. He said he 'would like to clarify that it is not aware of any aspect of the (new laws) which would affect or alter the existing ways in which firms and listed companies originate, access, disseminate and transmit financial market and related business information under the regulatory regime it administers,” But many doubt that, especially the freedom with which analysts were able to write with regards to China policy. The fact that he made such a statement shows the level of concern there is over Hong Kong’s future by investors.
SHKP (16 HK) released another 50 units at Regency Bay in Tuen Mun Sunday Priced 4% higher than the initial release
Press reports Home Buyers have forfeited over HK$250m in deposits in 1H 2020 +10% YoY. -VE for sentiment
NAGA CORP (3918 HK) gets permission to re-open its Cambodian Casino’s in Phnom Penh. +VE
SOLOMON SYSTECH (2878.HK) after the market close on 17 July 2020, the Company granted share options to certain employees of the Group to subscribe for a total of 2 million ordinary shares of HK$0.1 each in the capital of the Co
Head of Taiwan’s Hong Kong office, two colleagues forced to leave after refusing to sign document supporting ‘one-China’ principle as a condition of their visa’s being renewed. The declaration reads. “While in Hong Kong, [you should] rigorously abide by the one-China principle and Hong Kong’s Basic Law, as well as the rule of law in Hong Kong,” Another sign of Hong Kong’s freedoms being removed. -VE
Airport Authority Hong Kong announced that for June, the Hong Kong International Airport recorded year-on-year decreases in passengers and flight movements of 99.1% and 71.8% to 59,000 and 9,945, respectively. Cargo throughput saw a decrease of 7.7% to 357,000 tonnes compared to the same month last year.
CHINA SOUTH AIR (01055.HK) announced that in June 2020, passenger capacity measured by available seat kilometres of the Group -43.92% YoY In terms of cargo operations, in June 2020, cargo capacity (measured by available tonne kilometres - Cargo and Mail) +12.16% YoY
Lands Department announced today (July 17) that a site, Lot No. 1003 in Demarcation District No. 214 at Hiram's Highway near Heung Chung Road, Ho Chung, Sai Kung, New Territories, in the 2020-21 Land Sale Programme will be disposed of by public tender. The tender invitation for the lot will commence on July 24 (next Friday) and close on August 21. It has a site area of about 3,563 square metres and is designated for private residential purposes.
HKMA announced that the composite interest rate, which is a measure of the average cost of funds of banks, decreased by 10 basis points monthly to 0.71 per cent at the end of June 2020.
Hang Seng Indexes Company Limited announced that it will host an online press conference on Monday's afternoon (20 July) to unfold the details on a new technology index.
More than 10 million small shops and merchants have applied for Alipay's nationwide coupon handout this month, giving the incentive to 1 billion shoppers for consumption, reported Chinese media.
Centa-City Leading Index (CCL) last printed at 180.81, +1.04% WoW CCL Mass last stood at 183.65, +1.11% WoW. CCL (small-and-medium units) last posted at 181.33, +1.02% WoW CCL and CCL (small-and-medium units) +1.31% and +1.12% in two weeks, regaining lost ground and nearly hitting a nine-week high. Given ballooning local infections, Centaline Property, foresaw CCL choppiness in the near term with an unchanged uptrend. The index will likely reach 190 in autumn.
On Friday the US closed with the
DOW -0.23%, NDX -0.28%, S&P +0.28%, Russel 2K +0.39% Markets had opened slightly higher but the Dow dipped into the red initially but then like the S&P and NDX traded sideways through the day. Netflix -6.5% after poor results after market Thursday Amazon -1.2%, Microsoft -0.5% and Apple -0.2%.
Re-Opening Names United -1.7%, Delta -0.8%, American -4.3%, Carnival -2%, Royal Caribbean -1.5%, Kohls -3.2%, GAP -1.4%, Simons Property -0.8%
DR Horton +1.5% and Pulte Group +1.5% as Housing starts beat forecasts
Boeing -1.7% as BA retires its 747 fleet
Housing Starts Jun +17.3% MoM vs +8.2% May (F/cast was +12.9%)
Building Permits Jun +2.1% MoM vs +14.1% May (F/cast was +2.5%)
Michigan Consumer Sentiment Data preliminary
Consumer Expectations Jul 66.2 vs 72.3 Jun (F/cast was 73.4)
Current Conditions Jul 84.2 vs 87.1 Jun (F/cast was 86.4)
Inflation Expectations Jul +3.1% vs 3% Jun (F/cast was 3.1%)
5 year Inflation Expectations Jul +2.7% vs 2.5% Jun (F/cast was 2.5%)
Consumer Sentiment Jul 73.2 vs 78.1 Jun (F/cast was 79.1)
Baker Hughes Total Oil Rig Count 253 vs 258 prior.
USD was weaker vs Yen & Euro. Bitcoin % @ , VIX -8.3% @ 25.7,
US T10 0.623% but did dip below 0.6% intraday as covid-19 cases continue to rise
OIL Brent -0.55%, WTI -0.44%
Gold +0.66%, Silver +0.88%, Copper unch
AHEAD No data due.
DAX +0.35%, CAC -0.31%, FTSE +0.63% Markets opened flat. DAX traded sideways just above flat, CAC just below. FTSE initially dipped into the red but then rebounded into the green and traded sideways. AUTO’s +VE as Daimler +4.3% said it would report a smaller operating loss that previously forecast. BANKs were weak. But markets cautious as EU leaders discussed the Euro750bn stimulus fund with the ‘four frugal’ states remaining opposed to some proposals and could be vetoed.
AstraZeneca +3.9% positiive sentiment on possible covid-19 vaccine.
IAG -2.3% as British Airways retired its entire Boeing 747 fleet
RioTinto +2.3% reported strong Iron Ore Demand with increasing orders from China
Danske Bank -1% despite Q2 net profit beating; it warned of further job cuts and cost cutting.
Ericsson +11% as profit beat estimates and it confirmed its 2020 and 2022 guidance.
Hexpol -8.8% (Chemicals) and Samhallsbyggnadsbolaget -7% property company (must be one of the most difficult stock names!) as results disappointed .
Natixis +4.1% on rumours its major shareholder could be interested in buying the remainder.
EUROZONE Construction Output May -11.9% YoY vs -31% Apr revised (F/cast was -23%)
Core Inflation Rate Jun +0.8% YoY vs +0.9% May (F/cast was +0.8%)
Inflation Rate Jun +0.3% YoY vs +0.1% May (F/cast was +0.3%) [Jun +0.3% MoM vs -0.1% May (F/cast was +0.3%)]
EUROZONE Current Account
FRANCE No data due
UK No data due