July 27 ASIAN MACRO INITIAL THOUGHTS Japan Re-opens
Covid-19 Globally over 16m cases, 645k deaths
Dow Futures opened -60pts with S&P and NDX also lower.
Earnings this week include McDonald’s, Pfizer, Alphabet, Apple and AMD
Market hopes for new US stimulus package; Treasury Secretary Steven Mnuchin said Republicans had finalized a bill for about $1 tn in coronavirus relief funds. Mnuchin added he hopes the proposal can find bipartisan support. But that may be hopefully as there is a wide gap between the GOP and Democrats. Closing the gap will probably take more than a week, which means that an agreement is unlikely to be reached before July 31.
JAPAN Expect the market to reopen significantly lower on increased US/China tensions and the rising number of covid cases. Tokyo reported 239 new cases on Sunday. Chipmakers +VE after the Intel news of delays. Yen last traded on Friday 106.12 as its safe haven status seems to come back into fashion; worth watching
Data due BoJ Summary of opinions, Capital Spending Q1 (Prior was -3.5% F/cast is +4.3%). Later we get All Industry Activity Index, Coincident Index, Leading Economic Index.
Fujifilm Corp said Friday its biotechnology subsidiary and US vaccine maker Novavax Inc have agreed to manufacture bulk drug substance for the latter's vaccine candidate against the coronavirus disease.
SOUTH KOREA Expect markets to open lower but work higher with good interest in Tech. Traders watching for the next US stimulus package/
No data due
Hyundai Development Co. on Sunday called for an additional round of due diligence on Asiana Airlines as it reaffirmed its interest to close the $2.2 billion deal to take over the country’s second-largest full-service airline. However, this move is casting doubts over the successful closure of the mega-deal to acquire Asiana considering the aggravating financial situation of the airline amid the protracted COVID-19 impact on the aviation industry. Slight -VE
The Fair Trade Commission said Friday it has decided to impose a fine of 970 mn won ($808,000) on Hyundai Heavy Industries for misappropriating technical data from a subcontractor. -VE
Homplus is speeding up its asset securitization plan to sell physical stores in order to secure liquidity. On Friday, Hompeplus said it has decided to securitize a store branch in Daejeon, one week after the retailer announced plans to sell another branch in Ansan, Gyeonggi Province. The company’s move comes after it recorded the net loss of 532.2 billion won ($442.8 million) during the period between March 2019 and February this year. SLIGHT +VE
Nexon on Friday announced the launch of its open-world MMORPG game V4 in 150 countries. Standing for “Victory For,” V4 is a mobile MMORPG made using Unreal Engine 4. It boasts high-end graphics, a vast virtual combat field and character customizing features. +VE
Smilegate said Friday that its 36-episode drama series based on its first-person shooter game CrossFire has recorded 100 million views in China. According to the South Korean game company, the drama series, also named as CrossFire, recorded the milestone on China’s biggest over-the-top platform Tencent Video as of Thursday. +VE
S-Oil on Friday said Q2 operating loss 164.3 billion won ($136.7 million) getting back on its feet after suffering its worst-ever operating loss of 1 trillion won in the previous quarter. +VE
Samsung SDS said Friday Q2 earnings were dented due to the COVID-19 pandemic. Sales -7.5% YOY to 2.56 trillion won ($2.1 billion), while operating profit -24% to 196 billion won.
Korea Investment Corp., South Korea's $157 billion sovereign wealth fund, is seeking to buy commercial properties in Europe and China, the company's top executive has said, in what could be its latest alternative investments.
North Korean leader Kim Jong Un declared an emergency and a lockdown in a border town after a person suspected of being infected with the novel coronavirus returned from South Korea after illegally crossing the border, state media said on Sunday.
TAIWAN Expect market to open flat with continued interest in TSMC which benefits from Intels delay.
Data due M2 Money Supply Jun 5.42% vs 4.18% (F/cast was 5.2%)
The Taiwan Institute for Economic Research Friday raised its forecast for the nation’s GDP growth this year from 1.58% to 1.83% on improving private consumption and investment as countries begin reopening their economies amid the global COVID-19 pandemic. +VE
Domestic gasoline prices are to increase by NT$0.1 per liter today, after a reduction of NT$0.1 per liter last week, CPC Corp, Taiwan and Formosa Petrochemical Corp announced separately yesterday. However, premium diesel prices are to remain unchanged for a third straight week at NT$19.6 per liter at CPC stations and NT$19.4 per liter at Formosa stations, the companies said.
CHINA Expect market to open lower as staff leave the Houston Consulate and US closes its Chengdu Consulate. Flooding along with Covid-19 remain concerns as well.
Data due on the open Industrial Profits Jun YTD (May was -19.3% YoY F/cast is -17%)
Australia has joined the United States in stating that China’s claims in the South China Sea do not comply with international law in a declaration likely to anger China and put more strain on their deteriorating relations.
India to restrict Chinese companies from bidding for government contracts, on “national security” concerns part of a process as New Delhi looks to loosen economic ties with its neighbour after a fatal border brawl. -VE China
Alibaba, Jack Ma summoned by Indian court over former employee’s complaint who said he was wrongfully fired after objecting to what he saw as censorship and fake news on company apps, documents seen by Reuters showed. Slight -VE
FT article Chinese listings surge on Wall Street despite tensions. IPOs more than double this year even as Beijing’s relations with Washington plummet. The rush to list in American seems at odds with the current threat that some Chinese firms will be forced to delist due to auditing standards. To my mind it highlights how China knows it needs the US capital fro its companies to grow and that the way currently relations are that source of funds is under threat of being cut off. The US is th biggest source of liquidity and they want to tap it while they can. For investors I think they should be seeking a higher risk premium to reflect the political risk that should be added to the mix. Trump has ‘advised’ government funds not to invest in Chinese companies; ‘advising’ private money to do the same is only a small step further down that line and can be done without time consuming legislation, under the banner of saving US jobs.
HONG KONG ADR’s +44pts to open at 24,749 although after Friday's 560pts sell off I would expect for the open to BE lower with the prospect of early margin selling. ADR’s showed weakness in Mobile, Petrochina, ICBC, BoC and Hutch. COVID cases show little sign of easing with 128 cases on Sunday and 133 on Saturday. Government says it is clamping down on loopholes
Data due after market Balance of Trade, Exports and Imports
Short Selling HSI Friday 18.4%vs 20.2% Thursday
Top Shorts Hang Seng Bank (11) 55%, MTRC (66) 45%, Ping An (2318) 34%, CCB (939) 34%, China Res land (1109) 31%, BoC HK (2388) 31%, Galaxy (27) 28%, HSBC (5) 27%, Sands China (1928) 27%, HK & China Gas (3) 26%, Country Garden (2007) 25%.
HSBC may see weakness as Chinese media says HSBC Set up Huawei’s Sabrina Meng to get rid of a US's money laundry suit. After the Canadian Court moved on to make public the evidence for the next trial of Huawei CFO Sabrina Meng's extradition case, People.com.cn wrote in an editorial that this is purely a political rigging case conspired by the US. HSBC had colluded in malicious evidence fabrication to frame Meng who is indeed innocent. Claiming to have been deceived by Meng in the case, the London-based bank had suffered no actual loss. HSBC cooperated with Washington to set Huawei up for a hidden interest exchange behind, opined the Chinese official press, as it was trying to get remission from the US Department of Justice's lawsuit over money laundry.
CHAOWEI POWER (951.HK) +VE Profit Alert +VE , expecting profit attributable to shareholders of no less than RMB400 million for the six months ended June 2020, up around 40% yearly.
LIFESTYLE CHI (2136.HK) Profit Warnings -VE For the six months ended 30 June 2020, it expects profit to fall 50% YoY. Mainly due to the pervasive business disruptions to department store and retail businesses caused by the outbreak of the novel coronavirus (COVID-19) since early 2020, which resulted in a decline in sales revenue and hence profit of the Group’s department store operations; and a drop in share of profit from the Beiren Group, associate of the Group based in Hebei Province, the People’s Republic of China.
LAI SUN DEV (488.HK) Profit Warning -VE expected to record a loss for the year ending 31 July 2020 vs a profit for the year ended 31 July 2019. Such decline in the Group’s results is primarily due to the absence of the net gain from the one-off bargain purchase on acquisition of subsidiaries of approximately HK$3.737 billion recorded during the year ended 31 July 2019 and decrease in valuations of properties owned by the Group. -VE
GIORDANO INT'L (709.HK) Profit Warning -VE announced that as compared to the profit attributable to shareholders of HK$161 million for the corresponding period in 2019, the Group expects to record a net loss attributable to shareholders for the six months ended June 30, 2020 of between HK$170 million to HK$180 million.
SHKP (16 HK) sold 105 units of 108 units offered at Regency Bay in Tuen Mun on Saturday and intends to launch another 50 units this weekend.
Henderson Land Development (12) released the second price list for Seacoast Royale in Tuen Mun, comprising 62 flats at an average price of HK$13,748 per sq ft after discounts. The project, jointly developed with Hong Kong Ferry Holdings (0050) and Empire Group, has received 2,630 subscriptions for the first batch of 185 units and the developers plan to release a new price list shortly.
LINK REIT (823 HK) has agreed to buy the Cabot in London for HK$3.68bn in a move to diversify its portfolio.
Beike the TENCENT (700.HK) backed Chinese online property platform intends to raise up to US$2 billion according to its US filing.
Centaline said 409 groups of clients have made flat viewing bookings for the ten major housing estates of Centaline, -4.4% weekly to a 23-week low. Hong Kong is facing towering COVID-19 infections amid the 3rd wave of epidemic, said Louis Chan, Asia-Pacific Vice Chairman and Managing Director for Residential Sales at Centaline. Citizens may stay home at the weekend under tighter gathering ban, affecting flat viewings.
GALAXY ENT (27.HK) will not shower senior managers and workers ranked below with summer special discretionary bonus this year, as Deputy Chairman Francis Lui told Macao Daily. The next salary review will be done in April 2021, subject to the results performance by then.
ESPRIT The Standard has an article on the company and looks at Karen Lo Ki-yan’s possible intentions for the company.
Centa-City Leading Index (CCL) last printed at 181.77, +0.53% WoW to a 36-week peak. CCL (small-and-medium units) +0.64% WoW to 182.49; CCL Mass +0.73% WoW to 184.98; CCL (large units) -0.04% WoW to 178.05. Centaline Property, mentioned the outstanding performance of New Territories. CCL Mass for New Territories East climbed 1.59% weekly to 194.78; and that for New Territories West surged 1.61% weekly to 167.24.
DOW -0.68%, NDX -0.94%, S&P -0.62%, Russel 2K -1.52% Market opened lower with Tech weak after news that Intel -16.2% was delaying its next release of chips (AMD +16.5% on the news) and the escalation in US/China tensions as Chinese agents left the Houston Consulate. Also weighing on investors are the ongoing concerns of covid’s impact on the markets, with US deaths surpassing 1,000 for a fourth day. It seems the downside it limited by hopes of the next stimulus package. Markets initially trended higher PMI was a little light but New Home Sales were strong but market hit resistance just below Thursdays closing levels. They then trended lower until around 1pm after which they reversed but again encountered resistance just below Thursday’s closing level and dipped lower into the close. Gold was the big winner today hitting US$1,900 with talk now of US$2,000.
Data saw PMI miss small but New Home Sales were strong but had little impact DR Horton -0.2% but off early lows, Lennar -0.4%,
Facebook -0.8%, Alphabet -0.6%, Apple -0.3% and Microsoft -0.6% and Tesla -0.6% Amazon +0.8% and Netflix +0.6%. But as the group they closed lower with concerns that they are overvalued and over owned and the possibility that there is a tech
Re Open stocks United Airlines -1.1%, Delta -3%, American -3.2% Carnival unch, Royal Caribbean +0.8% Simon Property -1.9%, Kohls -5.4% and GAP -3.2%
To see both stay at home and re-open stocks trading lower Think indicates that investors are starting think that the hoped for V shaped recovery is becoming increasingly unlikely as seen in the results from American Express -1.4% Q2 net profit US$238 million, -86% YoY but beating the consensus for a loss. But shows consumers and businesses are cutting back on spending.
Banks were weak JPM -0.7%, GS -0.8%, MS -0.7%, Citi -0.8%, Wells Fargo -0.3%. Bell weather mixed Caterpillar +0.7%, Boeing -1.5% plans to delay its delivery of 777X airline by several months or up to a year, in response to dropping demands for jetliners amid the coronavirus crisis, as Reuters learnt from three people familiar with the plan.
PMI Data Flash
Manufacturing Jul 51.3 vs 49.8 Jun (F/cast was 51.5)
Services Jul 49.6 vs 47.9 Jun (F/cast was 50.8)
Composite Jul 50 vs 47.9 Jun (F/cast was 50.4)
New Home Sales Jun +13.8% MoM vs 19.4% May (F/cast was 3.2%)
Baker Hughes Total Rig Count 251 vs 253 prior
USD was weaker vs Yen & Euro. Bitcoin +0.5% @ 9603.00, VIX -0.92% @ 25.84,
US T10 @ 0.591% small gains after the mixed data after 4 days of declines.
OIL Brent +0.07%, WTI +0.54%
Gold +0.55% to US$1,900 topping its 2011 high, with people talking of US$2,000 soon, Silver -0.06%, Copper -1.5%
AHEAD Durable Goods (Orders, Ex Transport, Ex Defence), Dallas Fed Manufacturing Index
DAX -2.02%, CAC -1.54%, FTSE -1.41% markets opened lower following Asia and the news that China had revoked the US Chengdu Consulate licence. They worked better into lunch but failed to break higher and then drift lower in the afternoon session. PMI flash data was generally better than F/cast and and UK retail sales were much stronger. But prospects of a UK/EU deal remain small as the parties Puch back the deadline top September.
The European Union has drafted a bill that will limit technology exports to Hong Kong which can be used for repression or surveillance, Reuters reported, and the bill will hopefully come into effect on Tuesday.
Centrica +16% on agreeing to sell its US business Direct Energy for US$3.8bn
Dialog Semi -7% STMicro -2.7% and Infineon -4% on the Intel news
Thales -6.3% after1H earrings showed operating income -57%
EUROZONE PMI Data Flash
Manufacturing Jul 51.1 vs 47.4 Jun (F/cast was 49.8)
Services Jul 55.1 vs 48.3 Jun (F/cast was 50.8)
Composite Jul 54.8 vs 48.5 Jun (F/cast was 50.7)
GERMANY PMI Data Flash
Manufacturing Jul 50 vs 45.2 Jun (F/cast was 49.5)
Services Jul 56.7 vs 47.3 Jun (F/cast was 50.5)
Composite Jul 55.5 vs 47 Jun (F/cast was 50.1)
FRANCE PMI Data Flash
Manufacturing Jul 52 vs 52.3 Jun (F/cast was 52.7)
Services Jul 57.8 vs 50.7 Jun (F/cast was 51.8)
Composite Jul 57.6 vs 51.7 Jun (F/cast was 52.3)
UK Consumer Confidence Jul -27 vs -30 Jun (F/cast was -26)
Retail Sales Jun +13.9% MoM vs +12.3% May revised (f/cast was +7.4%) [Jun -1.6% YoY vs -12.9% May revised (f/cast was -7%)]
Retail Sales ex Fuel Jun +13.5% MoM vs +10.6% May revised (f/cast was +6.6%) [Jun -1.7% YoY vs -9.6% May revised (f/cast was -4.4%)]
PMI Data Flash
Manufacturing Jul 53.6 vs 50.1 Jun (F/cast was 51.5)
Services Jul 56.6 vs 47.1 Jun (F/cast was 50.5)
Composite Jul 57.1 vs 49.8 Jun (F/cast was 51.5)
EUROZONE Loans to Households, Companies and M3 Money Supply.
GERMANY Ifo data Business Climate, Current Conditions and Expectations, Bundesbank Monthly Report.
FRANCE Unemployment Benefit Claims and Jobseekers Total
UK No data due