July 24 ASIAN MACRO INITIAL THOUGHTS Dow futures Flat Japan closed

27 Jul

July 24 ASIAN MACRO INITIAL THOUGHTS  Dow futures Flat  Japan closed

Covid-19 Globally over 15.3m cases, 625k deaths
US Futures opened flat (-2pts) but S&P and NDX were slightly higher

DOW -1.3%, NDX -2.29%, S&P -1.23%, Russel 2K unch markets opened lower and sold down initially. Microsoft -4.4% despite largely positive results, Tesla -5% also giving back early gains both despite generally good results other Tech also traded Apple -4.6%, Amazon -3.7%, Facebook -3%, Netflix -2.5%. The view being that they are 'overbought, over owned and overvalued.' Also adding to the initial weakness was the disappointing unemployment data which showed claims rising. Concerns that the rising covid cases will curtail the economic rebound.
Markets saw a small bounce back after the initial weakness and then traded sideways, the sold down in the PM and traded sideways into the close.
Traders still watching for insight into the next stimulus package as Treasury Sec say next extension of unemployment benefit will be based on circa 70% of wage replacement. Republicans considering extending the current $600 per week unemployment benefit at a reduced rate of $100 per week.
INTEL -10.6% after hours (was -1% in normal trading) says its relying the planned launch of its next generation of chips by six months, raising questions about its attempt to regain the manufacturing edge it lost to TSMC.
Initial Claims 1.416m vs 1.307m prior (F/cast was 1.295m)
Jobless 4 week average 1.36025m vs 1.37675m prior (revised) (F/cast was 1.995m)
CB Leading Index Jun +2% MoM vs +3.2% May revised (F/cast was +2.5%)
EIA Natural Gas Change 37Bcf vs 45 Bcf prior. (Consensus was 36Bcf)
Kansas Fed Manufacturing Jul 7 vs 2 Jun (F/cast was 5)
10 yr TIPS Auction -0.93% vs -0.47% prior
USD was weaker vs Yen & Euro. Bitcoin +1% @ 9,619.46, VIX +7.2% @ 26.1,
US T10 0.577% on poor jobs data
OIL Brent -2.3%, WTI -2% concerns that rising covid cases and worsening US/China relations will hurt demand.
Gold Futures +1.3%, Silver -2.2%, Copper -0.5%. Gold push higher on weak USD.
AHEAD PMI Flash (Manufacturing, Service and Composite), New Home Sales, Baker Hughes Total Rig Count

DAX +0.07%, CAC -0.06%, FTSE +0.11% Markets opened slightly higher and initially rallied but then drifted lower for the rest of the session. Investors watching US data and covid cases along with earnings.
Roche -2.8% 1H net profit -5% as covid and a strong Swiss franc weighed on earnings. Sales -4%, but it maintained its 2020 outlook. Closed just off the lows of the day.
Unilever +8.9% reported a much smaller-than-expected 0.3% fall in quarterly sales vs expectations of -4.3%
Daimler +4.3% Q2 loss 1.68 billion euros ($1.9 billion) but projected a rise in profit this year for its Mercedes-Benz cars and vans division as sales begin to rebound.
Publicis Groupe +8% after beating profit expectations.
Neste +11.4% after reporting a smaller-than-expected 31% fall in Q2 profit.
IG Group -9.6% as the company flagged a return to normal in markets after volatile trading caused profits to surge in the last quarter.
EUROZONE Consume Confidence Flash Jul -15 vs -14.7 Jun (F/cast was -12)
GERMANY Consumer Confidence Aug -0.3% vs -9.4% Jul revised (F/cast was -4)
FRANCE Business Confidence Jul 82 vs 78 Jun revised (F/cast was 83)
Business Climate Indicator Jul 85 vs 78 Jun (F/cast was 84)
UK CBI Business Optimism Index Q3 -1 vs -87 prior (F/cast was -38)
CBI Industrial Trends Orders Jul -46 vs -58 Jun (f/cast was -34)
EUROZONE PMI Flash (Manufacturing, Service and Composite)
GERMANY PMI Flash (Manufacturing, Service and Composite)
FRANCE PMI Flash (Manufacturing, Service and Composite)
UK Consumer Confidence, Retail Sales

JAPAN Market closed, re-opens on Monday
No data due
Japan's capital has reported 366 new coronavirus cases, 
Yuriko Koike, the governor of Tokyo, said on Thursday, a new daily record fuelling fears of a second round of infections.-VE
The United States has begun talks with Japan about deploying mobile U.S. Marine units in Okinawa armed with anti-ship and air defense missiles that would work closely with Japanese forces on islands that prevent easy access to the Pacific for China's military, the Marine Corps commandant said on Thursday. +VE
SONY Associated Press says it has reached a deal with Sony Electronics to exclusively equip its photojournalists with new video and still cameras over the next two years. +VE
The Bank of Kyoto, a regional lender based in the ancient Japanese city, has a unique buffer against the hit to tourism from the coronavirus - dividends from local high-tech heavyweights; they include Nintendo, and electronics makers Nidec and Omron. +VE

SOUTH KOREA Expect markets to open lower and look to consolidate ahead of the weekend. Tech to see interest after good results from Hynix
No data due
SK Hynix Inc, yesterday posted a big jump
in quarterly profit thanks to higher chip prices, but warned of uncertainty for the rest of the year.
Hyundai Motor and Kia Motors on Thursday reported a sharp drop in their Q2 earnings as the new coronavirus outbreak drove down overseas demand for their vehicles. But on their home turf, Hyundai and Kia performed well helped by new models and tax cuts. -VE
LG Display on Thursday heralded the much-awaited opening of its new organic light-emitting diode (OLED) panel manufacturing plant in Guangzhou, which enables full-fledged mass-production of 8.5-generation OLED panels for LG Display, and increases the company’s monthly OLED production capacity to 130,000 panels. +VE
Dyson has introduced two new cordless vacuum cleaners in South Korea, intent to test the marketability of the newest products with lower price tags here first. +VE Dysin slight -VE existing manufacturers in S Korea.
Smilegate said Thursday that it has officially launched its mobile tank battle game Super Tank Blitz in 142 countries. +VE

TAIWAN Expect market to open lower and trade sideways; good industrial production data after market to help. Retail sales improved but missed f/casts
TSMC likely to see interest and support the market after Intel says after market US time that its delaying its new chip release by six months.
Data due
After market M2 Money Supply
After Market Thursday
Industrial Production Jun +7.34% YoY vs +1.68% May revised (F/cast was +2.5%)
Retail Sales Jun -1.3% YoY vs -5.7% May (F/cast was 2.5%)
Industrial production snapped a three month of decline, as strong demand for 5G-related applications and work-from-home and distance-learning trends boosted production of electronic components to a record high. But Automotive, pretrochems, and textiles were weak.
Retail weakness eased but not by as much as expected.
The central bank has raised its cap on special loans to SMEs suffering due to the COVID-19 pandemic, after companies called for more funds to weather the downturn. +VE

CHINA Expect market to open lower as relations with the US worsen and concern about rising covid cases put the global recover in question. As ever the wild card is Team China’s activities.
No data due
A review of the Greater Bay Area has identified shortcomings 
that have slowed progress on Beijing’s plan for the region to become a hi-tech hub, including not enough research facilities and poor coordination and flow of talent and capital between the cities. In my view not surprising when you try and force an unnatural situation rather than allowing market forces to work.
China is going to consider BNO as an invalid passport and reserves her right to take further actions as Britain has breached her promise, said Chinese Foreign Ministry Spokesperson Wang Wenbin. London has broken her word and violated international laws by politically manipulating BNO matters despite Beijing's solemn negotiation, stated Wang. Will raise tensions as a lot of people outside China feel that the imposition of the national security law on Hong Kong was the triggering breech!
China’s French embassy on Thursday hit back at French criticism of Beijing’s treatment of Uighur Muslims, saying French politicians were being misled by a slanderous American, Australian and British campaign. The French responded that if Beijing wanted to avoid criticism it should allow observers into Xinjiang. Seems a very simple solution if China has nothing to hide.
China-EU investment treaty talks hit crunch time, as Europeans bemoan seven years of ‘promise fatigue’ from Beijing SCMP article says that negotiations have so far yielded few concessions from China, and with each round of talks the impression builds among Europeans that China wants the perks of multilateralism without making any of the required domestic reforms.
The head of the Chinese consulate in Houston will not commit to closing the office a direct threat of defiance to the State Department’s demand that it be shut down by Friday.
US diplomats have left the US to restaff its mission in China a day after an American order to close the Chinese consulate in Houston sharply escalated tensions.
US Secretary of State Mike Pompeo urges China’s citizens to help ‘change the behaviour’ of their government. “1.4 billion people who are surveilled, oppressed, and scared to speak out” and Asia-Pacific countries like Vietnam and Australia – Pompeo proposed “a new alliance of democracies” to push back against “the Chinese Communist Party’s designs on hegemony”. Further pressure on China to retaliate but it is finding that it has fewer options that that do not impact its won economic outlook.
PetroChina, China’s state-owned oil and gas firm, said on Thursday it would sell its major oil and gas pipelines and storage facilities to the newly launched China Oil and Gas Pipeline Network for 268.7 billion yuan ($38.36 billion). The creation of the new company, also called PipeChina, marks the largest industry reshuffle in the country in the past two decades, aimed at providing fair market access to infrastructure and boost investment in oil and gas production.
Ren Zhiqiang has been ousted from China’s ruling Communist Party. The former chairman of state-controlled property developer Huayuan Real Estate Group, had called Xi a “clown” over a speech he made in February about government efforts to battle the coronavirus. He also said the lack of a free press prevented to covid outbreak to be tackled sooner, causing the situation to worsen. He’s not been seen since March. The notice accused Ren of “losing faith”, “not being aligned with the party on important matters of principle”, “vilifying the image of party and country” and being disloyal and dishonest to the party. According to the notice, Ren also used official funds on golf expenses, used office and residential spaces provided for free by businessmen, and unlawfully earned huge profits which have been confiscated.

HONG KONG ADR’s -166pts to open at 25,097 most ADRs traded lower. Plus the rising covid cases and ahead of the weekend I would expect more downside.
MACAU names weeks Las Vegas Sands loss was bigger than expected. As with China the wild card is Team China but with US/Chinese tensions rising I think local investors will err on the side of caution. IF the initial selling accelerates expect some margin call selling in the PM session.
No data due

Short Selling HSI Thursday 20.2% vs 16.9% Wednesday
Top Shorts
Hang Seng Bank (11) 34%, Want Want (151) 34%, HSBC 95) 32%, Mengniu Dairy (2319) 31%, Ping An (2318) 31%, Hengan (1044) 29%, CCB (939) 29%, China Res land (1109) 28%, BoC (3988) 28%, Petrochina (857) 27%, Citic (267) 26%, CNOOC (883) 26%, HK & China Gas (3) 25%, Henderson Land (12) 25%.

ICBC (1398.HK)'s new RMB loans in 1H 2020 carry average interest rates 
of 4.31%, down 45 bps yearly and below the market average, said President Gu Shu at CBIRC's press conference. During the period, the bank delivered additional inclusive loans of RMB168.4 billion, up 35.7%, added Gu.
HKT-SS (6823.HK) announced the launch of HEYPARK, a one-stop digital food ordering platform for dine-in and takeaway that accepts mobile payments. From now until August 31, HKT-SS is offering a promotion to support SMEs. Those who register now can enjoy free set-up and a 4-month waiver on monthly subscription fees.
ZDDC (600633.SH) stated that it had during 1H 2020 confirmed intended partnership with BABA-SW (9988.HK) over a new batch of data centre cabinet leasehold, Securities Times reported. By which, the company will also foster business ties with Huawei and TENCENT (700.HK) on marketing and e-sports business.
GREATWALL MOTOR (2333.HK) announced preliminary financial data for the interim period of 2020 prepared in accordance with the China Accounting Standards for Business Enterprises. Net profit -24.02% yearly to RMB1.153 billion. EPS equaled RMB0.12495.
Eu Yan Sang, HUNGFOOKTONG (1446.HK) and HKBN (1310.HK) announced a strategic partnership. With this partnership, they will gain exposure at each other’s extensive customer touchpoints, to further expand their sales channels and customer reach. Customers and employees of Eu Yan Sang, HUNGFOOKTONG and HKBN will get to enjoy exclusive membership/customers and employee discounts on a diversified range of product offerings at all three companies, starting from the end of July.
Centa Valuation Index (Major Banks) (CVI) last printed at 48.18 this week, +2.08 pts from 46.09 in the previous week.  Centaline Property, elaborated that the index did not move itself deeper to the lower end of the critical point at 40 after breaking below 50, despite epidemic flare-up in Hong Kong. The turnaround of the index reversed the seven-week downswing, signaling a stabilization.

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