July 22 ASIAN MACRO INITIAL THOUGHTS Dow futures moving slightly +VE
Covid-19 Globally over 14.7m cases, 611k deaths
Trump says it will get worse before it gets better to resume nightly briefings
DOW Futures Opened flat (-6pts ) but have moved slightly higher now +20pts with the S&P and NDX moving from slightly -VE to slightly positive. Microsoft and Tesla report today.
The United States is conducting two military exercises in Asian waters this week involving allies Japan, Australia and India, the U.S. navy said on Tuesday; expected to annoy China. The US is also calling for a global coalition against China.
Debate on whether US will bar China from the Swift financial system continues, a -VE overhang for China and Hong Kong
DOW +0.6%, NDX -0.81%, S&P +0.17%, Russel 2K +1.33% US markets opened higher, Dow worked higher as IBM and Coca-Cola gained after announcing earnings after the bell Tuesday. S&P traded sideways but NDX sold off to flat. Trader are watching for clues on the next stimulus package. But the trend seemed to be rotation out of Tech into cyclicals.
Chevron +7% and Exxon Mobil +5%
Reopening names were JPMorgan Chase +2.2%, Citigroup +3.2%, Bank of America +3.5%. Delta +0.8%, Southwest +2%, Carnival +1.3%, Simons Property +0.9%, Kohls +5.2% GAP +2.9%
Stay at Home Facebook -1.5%, Amazon -1.8%, Alphabet -0.5%, Apple -1.4%, Microsoft -1.4% and Netflix -2.5%
Tapestry +4% as CEO resigns over an incident that occurred over 10 years ago.
Worth noting that 81% of companies have beaten analysts estimates which must rise some concerns about the quality of information/guidance coming out of the Wall Street firms.
AFTER MARKET EARNINGS
SNAP -6.4% after market (was -2.1% in normal hours) reported fewer that expected daily users but said sales rebounded in July.
United Airlines +0.3% after volatile trading (was +2.3% in normal hours) reported Q2 Net Loss of $1.62bn (-87% YoY)
Chicago Fed National Activity Index Jun 4.11 vs 4.5 May revised ((F/cast was 3.2)
Redbook 18 July +1.9% MoM vs 3% prior (-7.5% YoY vs -5.5% prior)
API Crude Oil Stock Change 17 Jul 7.544m vs -8.322m prior
USD was weaker vs Yen & Euro. Bitcoin +2.3% @ 9383.29, VIX +1.6% @ 24.84, US T10 @ 0.605%
OIL Brent +3.2%, WTI +2.8% with +VE news on vaccines and the EU Recovery Fund deal improving the recovery outlook.
Gold +1.5% (both spot and Futures), Silver +6.4% following the Gold trend. Copper +0.2%
AHEAD MBA Mortgage Applications and 30 year Mortgage Rate, House Price Index, Existing Home Sales, EIA Oil and Gasoline Report.
REPORTING Pre market Biogen, Baker Hughes and Nasdaq.
After market Microsoft, Tesla, Chipotle Mexican Grill, CSX and Las Vegas Sands
DAX +0.96%, CAC +0.22%, FTSE +0.13% Markets opened higher on news of a deal over the EU recovery fund. DAX and CAC initially traded higher but then sold down into the close.
FTSE opened higher but trended lower all day.
BANKS leading as UBS +2.6% announced earnings that beat estimates. Resources were weak.
Novartis -1.9% as Q2 earnings saw profit and sales fall and it cut its 2020 guidance
Volvo -1.4% reported 1H operating loss but expected business to recover as lockdowns eased and reported good recovery in China as that economy re-opened.
Adevinta +28% announced acquiring eBays classified unit for US$9.2bn. Denmark’s Schibsted +22% it has a stake in Adevinta.
GVC -7.3% on news of a probe into its Turkish gambling unit.
UK Public Sector Net Borrowing in GBP Jun -34.8b vs -44.7b (F/cast was -37.8b)
EUROZONE No data due
GERMANY No data due
FRANCE No data due
UK No data due
JAPAN Expect Nikkei to open lower with some Tech names under pressure but market to consolidate. PMI data could influence the market moves. Yen currently 106.82 Tokyo reported 237 new covid cases on Tuesday and other regions areas saw a rise in cases -VE for sentiment.
Data due PMI Flash Manufacturing Jul (Jun was 40.1 and F/cast is 42.4)
PMI Service Jul (Jun was 45 and F/cast is 47.2)
PMI Composite Jul (Jun was 40.8 and F/cast is 46.4)
Govt to pay Tokyoites ‘GoTo’ cancellation fees +VE but survey shows people expect to spend less YoY -VE
Toyota Motor Corp will make 2% fewer vehicles globally in August than
originally planned, the Japanese automaker said on Tuesday, as output recovers gradually from a steep drop because of the coronavirus pandemic.
Nissan Motor Co. is proposing to postpone the closure of its three Barcelona plants to June 2021 from December 2020, the head of the carmaker's industrial operations in Spain, Frank Torres, said on Tuesday
JAL says it will not recruit in fiscal 2021 except for pilots and certain key positions +VE for the airline but a slight -VE for the economy.
Carlyle Group Inc. is eyeing large-scale business acquisitions, on top of investment in midsize firms, in Japan, planning to spend hundreds of billions of yen on each target, it was learned Tuesday. +VE
SOUTH KOREA Expect markets to open lower and trade sideways
No data due
Samsung, Hyundai Motor to cooperate on future cars beyond batteries +VE
SK Bioscience, the vaccines business unit of SK Group, signed a trilateral memorandum of understanding with Korea’s Health Ministry and global biopharma AstraZeneca, to contract manufacture the latter’s COVID-19 vaccine candidate. +VE
Korean Air said Tuesday it has closed its regional headquarters in Europe and Southeast Asia in an effort to “streamline” business operations as the coronavirus pandemic continues. +VE
Samsung Biologics reached a milestone in the first half of the year by clocking the biggest revenue and operating profit in the January-June period since it was founded in 2011.
Seegene, a Korean diagnostics company acclaimed for having preemptively developed COVID-19 test kits before the pandemic even reached Korea, has since risen to the second rank on the Kosdaq bourse.
LS Cable & System said Tuesday it has launched a local area network cable that can send data and power as far as 200 meters at the same time. The cable called SimpleWide is double the limits of current LAN cables in the market that can only transmit about 100 meters, the company said. +VE
TAIWAN Expect market to open flat and consolidate.
Data due After market Unemployment Rate Jun (May was 4.16% (F/cast is 4.2%)
Paraguayan Ambassador to Taiwan Marcial Bobadilla Guillen yesterday said that his country resolutely opposes the establishment of ties with Beijing, despite increasing pressure from China. +VE
Powertech Technology yesterday said that its revenue would slide slightly this quarter, due to sagging demand for chips used in data centers and smartphones due to covid. However, revenue this quarter is forecast to surpass the NT$17.71 billion the company made in the third quarter last year, he said.
Wistron Group yesterday announced a strategic partnership with Microsoft Corp Taiwan’s artificial intelligence research and development center, whereby the two firms would create an office in Kaohsiung for artificial intelligence and big data-related products and services. +VE
Beijing’s national security legislation has forced technology firms to reconsider their presence in Hong Kong. The nimblest among them; the territory’s start-ups are already moving data and people out, or are devising plans to do so. The polarizing legislation has upended Hong Kong’s technology scene just as it seemed on a path to becoming a regional hub. -VE for HK
CHINA Expect market to slightly lower. Concerns about the deterioration in China US and other countries a concern. Key today will be the support for Team China as investors worry about China being cut off from the US dollar payment system.
No data due.
Will the US cut China off from the US dollar payment system Swift? Analysts and officials continue to say it is highly unlikely United States will cut off China or Hong Kong from US dollar payment system Swift. It is one of the major threats that the US could use against China as it has against Iran and N Korea. Comes as China modestly increased its holdings of US Treasury securities in May, the first in three months.
China, denies that action will be taken to bar Nokia or Ericsson but says Chinese firms should be treated fairly in Europe. Which rather misses the point on two issues; one being the security of Huawei equipment if it uses Chinese made chips and second that EU and other counties companies have never been allowed as free access to China as China has had to the rest of the world.
US Justice Department on Tuesday indicted two Chinese nationals over their role in what the agency called a decade-long cyber espionage campaign that targeted defense contractors, COVID researchers and hundreds of other victims worldwide.
Shanghai appoints new mayor, who talks of turning crisis into opportunity. According to analysts, an immediate task will be dealing with the severe floods in the Yangtze River basin. Longer term, they said his background in economics would be put to the test to push the city’s development and growth while trying to limit fallout from the pandemic.
Huizhou to benefit from the tighter rules and sky-high prices in Shenzhen say analysts. It is in southern Guangdong province, and has seen home prices soar but it is remains far more affordable than nearby Shenzhen where new restrictions have made buying harder. The journey time between the two bay area cities is set to be halved next year, making Huizhou’s booming property market an even more attractive option for Shenzhen investors.
HONG KONG ADR’s -111pts to open at 25,524 across the board weakness except the Petrochems. Covid cases have risen above 2,000 and that continues to overhang the market But administration denies the rumour that Hong Kong could be locked down. Rumours that the US will exclude China from the Swift system likely to prompt further concerns. Key is that despite what local officials may say the US still has a large number of potential weapons to threaten China with. HK EX may see pressure having surged to a new high yesterday.
No data due
After market Tuesday
Inflation Rate Jun +0.7% YoY vs +1.5% May (F/cast was +1.7%)
Lowest since March 2017.
Prices slowed for food, in particular pork; housing and miscellaneous goods. Additionally, cost of durable goods dropped further while transport prices were unchanged, BUT the cost of miscellaneous services advanced at a faster pace. Also, prices declined less for electricity, gas & water and clothing & footwear. On a monthly basis, consumer prices went down
Short Selling HSI Tuesday 18.5% vs 21.3% Monday
Top Shorts China Res land (1109) 53%, Want Want (151) 43%, China Shenhua (1088) 38%, CCB (939) 36%, Ping An (2318) 32%, Hang Seng Bank (11) 32%, BoC (3988) 29%, Citic (257) 29%, Link REIT (823) 27%, Mengniu Dairy (2319) 27%, China Life (2628) 26%, Country Garden (2007) 26%, Petrochina (857) 26%, New World New (17) 25%.
ALIBABA FT report on how its live streaming model is helping to fend off rivals +VE and worth a read mentions Lazada that was commented on yesterday too.
MEITUAN-W (3690.HK) announced that on July 20, 2020, 1.255 million Options were granted to certain employees of the Company pursuant to the Post-IPO Share Option Scheme. The exercise price of the Options granted was HK$195.98 per Share.
XTEP INT'L (1368.HK) -VE Profit Warning announced that the Group is expected to record an approximately 45% to 55% YoY decrease in its consolidated profit for the six months ended 30 June 2020, as compared to that for the corresponding period in 2019. Said that the core Xtep brand reported retail sell-through growth (including offline and online channels) for the three months ended 30 June 2020 at low-single digit decline year on year. The retail discount level was at 30% - 35%, and the retailinventory turnover was 5 - 5.5 months.
A-LIVING (3319.HK) +VE Profit Alert. The consolidated net profit and the unaudited consolidated net profit attributable to the Shareholders for the six months ended 30 June 2020 are expected to record a significant increase of not less than 50% and 35%, respectively, as compared to that for the corresponding period in 2019. Also announced a proposed change of company name from “A-Living Services Co., Ltd.” to “A-Living Smart City Services Co., Ltd".
SHK PPT (00016.HK) Having unveiled the first two price lists of Regency Bay, announced to launch the Tuen Mun residential project at 10am this Saturday (25 July). A total of 108 flats will be offered, measuring saleable area of 261-437 sq.ft each. The discounted selling prices range $4.6888-7.3004 million sq.ft., i.e. an average of $17,498 per sq.ft.
FIH (2038.HK) announced additional inside information to its Profit Warning, expecting 1H20 revenue to exceed US$3.66 billion, down 42.7% yearly, and 1H20 consolidated net loss to approximate, or below, US$105 million, against US$83.839 million for 1H19.
L'OCCITANE (973.HK) announced that total net sales amounted to EUR274 mn during the three months ended 31 December 2020, down 22.2% on both reported and constant rates. In particular, Hong Kong net sales slid 62.1% on constant rates, the gravest in all markets.
HSBC clarified that the layoff plan as rumoured on the social media is groundless. Netizens circulated news recently that roughly 400 workers of the bank will be notified of redundancy.
Protesters gather again at Yuen Long MTR station last night with a number arrested under the new security law including a local district councillor. Some residents say the police are over reacting to the chanting of slogans. It is telling that after 12 months the police say they are still investigating the original incident despite them saying its been accorded high priority.
Confidence in freedom, democracy and the rule of law dropped to the lowest since 1997, the Hong Kong Public Opinion Research Institute has found.
And the rating for prosperity also dropped to its lowest point since July 2003 as the SAR continues to struggle against the pandemic. Eighteen of 25 indicators dropped to their lowest since the survey began in 1997. Degrees of democracy, freedom, the rule of law and and stability scored below five. The freedom rating saw the biggest drop, going from 5.58 three months ago to 4.84. Of 10 freedom sub-indicators eight were below five, including academic freedom, free speech and a free press. But freedom for the right to demonstrate scored the lowest at 3.31.