July 6 ASIAN MACRO INITIAL THOUGHTS US Futures creeping higher
Covid-19 Globally over 11.3m cases, 532k deaths. (6.4m recoveries and 4.3m currently infected)
US Futures opened flat as covid-19 cases continue to surge, but have risen. Dow was +14pts but now +42pts, S&P was flat now +01%, NDX was +0.2% now +0.4% as at 7:45AM HK Time
US Markets closed Friday. Re-open Monday
AHEAD Services & Composite PMI, ISM Non Manufacturing Data (Business Activity, Prices, New Orders, Employment and PMI)
US posts a record number o covid-19 cases ahead of the July 4 weekend, which is likely to see a big increase in social gathering and the potential for another spike in covid-19 cases. Plus Dr Fauci’s warning that it has mutated and become more infectious -VE for the prospects of a V shaped recovery in my view.
Berkshire Hathaway buys Dominion Energy Transmission for $4bn cash and including debt its almost US$10bn, increasing its footprint in utilities. Dominion will reduce its dividend payout to be more inline with the norm and use some of the money for share buybacks +VE
Peterson Institute for International Economics says delisting Chinese companies is pointless. It points out the delisting then is pointless because US investors can still buy then in Hong Kong and via the private equity market and so the action will not hurt their growth or China’s. It notes that there are 230 Chinese companies listed in the US and that private equity companies have be actively buying out a number of these companies. It also notes that a number of US companies have been increasing their exposure to China; like GS and MS via securities ventures and Amex via a JV. It is some thing I have said for a while BUT what the report does not consider is Trump further weaponising US pension money as he has done with the Federal pension money. There he only put pressure on them not to invest in Chinese companies that were not allowed to operate in the US. But if he went further, and banned US pension and investment money in buying them in Hong Kong that would be devastating for China. Even if he only banned new investment money that would have huge repercussions for China. The question that Trump will ask himself, I think is what does this do for my re-election hopes. Will that money then be re-invested in the US and help the US markets move higher? Can he spin it that money invested in China is taking away US investment and jobs. Further weaponising of the USD via pension money is the next logical step for Trump I think.
USD slightly weaker vs Yen & Euro.
OIL Brent +1.6%, Gold -0.04%, Silver +0.37%
DAX -0.64%, CAC -0.84%, FTSE -1.33% Markets opened slightly higher following the positive momentum from Asia and improving PMI data but trended lower as concerns over the record daily number of new covid-19 cases in the US worried investors. This followed a statement Thursday from Dr Fauci that the virus may have mutated and become more infectious; which just ahead fo the July 4 long weekend is an increased concern. UK Retail names weak as GS downgraded Next to sell and turned cautious on AB Foods saying it was trading close to fair value.
UK Pubs re-open +VE for Brewers but investors will be watching to see if it has an impact on the number of covid cases. British Government announced that starting from 10 July, inbound travellers from 59 countries or regions will no longer be subject to 14-day isolation, including Hong Kong, Macau and Taiwan.
German Auto sales plunged to a 30year low according the a Tagesspiegel -EV from sentiment. A survey from Make UK showed 46% of UK manufacturers are expecting to layoff workers within the next 6 months, up from 25% in May.
Rolls Royce -9% on Fitch downgrade.
Delivery Hero +5% hit a new high reported almost doubling of orders in Q2
Telecom Plus +VE on broker upgrade who said Covid-19 crisis was “hastening the end of financially irresponsible competition in the energy market and accelerating Telecom Plus’s recruitment of motivated partners” along with final proposals frm Ofgem that should be +VE.
EUROZONE Services Final PMI Jun 48.3 vs 30.5 May (F/cast was 47.3)
Composite Final PMI Jun 48.5 vs 31.9 May (F/cast was 47.5)
GERMANY Services Final PMI Jun 47.3 vs 32.6 May (F/cast was 45.8)
Composite Final PMI Jun 47 vs 32.3 May (F/cast was 45.8)
FRANCE Services Final PMI Jun 50.7 vs 31.1 May (F/cast was 50.3)
Composite Final PMI 51.7 vs 32.1 May (F/cast was 51.3)
UK Services Final PMI Jun 47.1 vs 29.0 May (F/cast was 47)
Composite Final PMI Jun 47.7 vs 30 May (F/cast was 47.6)
EURZONE Construction PMI, Retail Sales
GERMANY Factory Orders Construction PMI, Retail Sales
FRANCE Construction PMI, Retail Sales
UK New Car Sales Construction PMI
JAPAN Expect Nikkei to open flat on concerns over the rising covid-19 cases in Tokyo. Yen currently 107.52
No data due
Tokyo confirmed 111 new covid-19 cases Sunday following 131 new cases on Saturday, a third consecutive day with more than 100 new cases, public broadcaster NHK reported. Cases in Tokyo have risen to a two-month high, driven by the spread of the virus in the capital's night spots. -VE
Yuriko Koike was re-elected Tokyo governor on Sunday, according to an exit poll released by public broadcaster NHK, after winning over voters with her handling of the COVID-19 pandemic in the Japanese capital. +VE
Two Chinese Coast Guard ships entered Japanese territorial waters near disputed islands in the East China Sea and remained for another record length of time, the Japan Coast Guard said Sunday. The Japanese coast guard urged the Chinese ships not to approach a Japanese fishing boat and to leave the waters immediately. -VE
The death toll from floods and landslides unleashed by torrential rains on Japan’s southern island of Kyushu rose to 21 on Sunday, with 14 people missing, NHK public TV said. -VE INSURERS
Japan's Government Pension Investment Fund (GPIF), the world's largest pension fund, has reported a record quarterly loss of 17.71 trillion yen in January-March after global stock markets plunged during the COVID-19 pandemic. GPIF posted a return of -10.71% on its overall assets during the three months, compared with +4.61% in the previous quarter, it said in a statement. Worth noting the Nikkei was -18% over the period and the DOW -24% so a good relative performance and markets have bounced.
JR Central gives up on 2027 maglev launch as Shizuoka backs farmers -VE
Toshiba and Effissimo (a secretive Singapore-based activist fund) could be a test case of Japan’s new national security law on foreign investment. The row is over Effissim’s (Toshiba’s largest shareholder with a 15% cent stake) proposal to have its founder on the board of Toshiba. Last month Toshiba rejected Effissimo’s request to add its founder and two other non-executives to the board. Effissimo said it wanted to changes to strengthen compliance after recent financial irregularities at one of Toshiba’s second tier subsidiaries. Toshiba was demoted in 2015 to the secondary board for five years after an accounting scandal, so it is currently able to re-apply. Toshiba has said the the board had “no intention of clashing with our shareholders” and that it has an “extremely progressive” and balanced board. It seems as often with Japan those are only words. -VE
Sharp Corp (6753.T) said on Saturday it is sticking to an original plan to list its laptop making unit in the business year from next April, denying a media report that it may take the unit public this year.
SOUTH KOREA Expect markets to open higher on news the Govt will execute its third and largest extra budget bill ever. The outlook for the week is choppy with economic recovery hopes vs increased covid cases.
No data due
Ministry of Economy and Finance said Sunday. South Korea will execute its third supplementary budget of 35.1 trillion won ($29.3 billion) on Monday as part of a move to minimize the economic impact of the ongoing coronavirus pandemic. +VE
President Moon Jae-in on Friday tapped officials known for advocating inter-Korean engagement as chiefs of national security, intelligence and unification policy in a bid to revive relations and stalled projects with North Korea. He appointed Suh Hoon, director of the National Intelligence Service (NIS), as his national security adviser, and nominated Park Jie-won, a former lawmaker and special envoy to Pyongyang, to succeed Suh as NIS head. Lee In-young, a four-term lawmaker, was nominated to oversee inter-Korean ties as unification minister, after the current minister resigned over worsening relations with the North. Moon also named his national security adviser Chung Eui-yong and former chief of staff Im Jong-seok as special advisers on foreign policy and security.
US Deputy Secretary of State Stephen Biegun, who led working level negotiations with the North Koreans, will be among several State Department officials holding talks with South Korean counterparts on Tuesday, a government official told Reuters, speaking on condition of anonymity as the trip has not been announced. Slight +VE
Hyundai Motor Group Executive Vice Chairman Chung Euisun and SK Group Chairman Chey Tae-won are expected to meet next week to discuss further cooperation in the electric vehicle battery business, according to industry sources Sunday. +VE
Samsung Electronics may face tougher competition in the global 5G smartphone market starting in the second half this year when Apple launches its new smartphone that supports the fifth generation network, latest report showed Sunday. -VE
SK Telecom has launched an application that provides recommendations for restaurants by using big data analysis, the company said Sunday. It noted that the new application utilizes only data coming from actual visits that users have made instead of online reviews -- which may not be written by actual customers. +VE
Japanese firms doing business in S Korea have seen sales plunge as Japan’s export restrictions on Korea led to a boycott of products, the latest data showed Sunday.
The leading duty-free operators are considering an exit from Incheon International Airport as the number of international passengers plunged 97.8 percent on-year in the second quarter. According to Korea Civil Aviation Association Sunday, South Korea’s nine airlines witnessed international flight passengers plummet to 328,345 from 15.2 million people, -97.8% YoY, in Q2 -VE
Gen2 Partners, a Hong Kong-based hedge fund, has notified South Korean financial institutions of a fund freeze regardless of the deadlines for fund redemption, according to news reports Sunday. This comes as its flagship fund using a leveraged scheme suffered losses due to the coronavirus outbreak, facing a liquidity crunch. -VE
RETAIL +VE as major outlets hold big events in line with a state-led sales festival designed to boost spending amid the pandemic. The 17-day sales festival, called the "Korea Donghaeng Sale" campaign, started on June 26 in an effort to boost faltering domestic demand amid the new coronavirus outbreak. "Donghaeng" means going along together in Korean.
POSCO has again pushed back the resumption date of its third blast furnace due to the global recession sparked by the coronavirus pandemic, a company official said Saturday. -VE
South Korea will likely increase the minimum amount of investment for private equity funds from the current 100 million won ($83,373) to 300 million won as early as next month in its efforts to protect individual investors on the heels of a series of alleged fraud cases linked to funds in South Korea, according to news reports on Sunday. Slight -VE
TAIWAN Expect market to open higher with Tech still support the market.
Data due Foreign Exchange Reserves
A former top disease control official has urged the government to issue emergency use authorizations (EUAs) to speed up the development of COVID-19 vaccine candidates, saying that plans to hold clinical trials before the end of the year are “simply too slow.”
The government should extend relief programs by another three months for all businesses other than urban hotels and travel agencies that continue to struggle due to the nation’s border controls, the General Chamber of Commerce said Friday.
Former president Ma Ying-jeou Sunday called on critics of the so-called “1992 consensus” to propose a feasible alternative, and urged Beijing to accept the “complete” version of the “consensus” if it is to advocate it. Recently, the “1992 consensus” has been a popular topic within the Chinese Nationalist Party (KMT), Ma said, calling the discussion a “healthy sign” of the party’s willingness to reflect. While many people have said they want Beijing to face the reality of the Republic of China’s (ROC) existence, it would be “impossible” for Beijing to “hold a press conference announcing that the Republic of China really exists,” Ma said.
The Ministry of Economic Affairs on Thursday asked Tatung to submit the minutes of a controversial shareholders’ meeting within five days as a dispute over the legality of its board election on Tuesday raged on. Tatung has applied to the ministry to register its new board members, but the ministry cannot decide whether to approve it, as the company did not provide the minutes of the meeting Slight -VE
Largan Precision Sunday posted a +1.48% YoY in revenue for last month, ending two consecutive months of annual declines. Consolidated revenue was NT$4.14 billion (US$139.82 million), compared with NT$4.08 billion a year earlier. The figure was a 6.98 percent increase from NT$3.87 billion in May, company data showed. Despite last month’s growth in sales, Largan’s Q2 revenue was -4.09% to NT$12.69 billion, vs NT$13.23 billion in Q1, marking its lowest in the past five quarters and showing that the world’s largest handset camera lens supplier could not avoid the effects of the COVID-19 pandemic. But it beat some estimates +VE
Far EasTone Telecomms Friday said it plans to spend up to NT$30 billion (US$1.01 billion) on 5G network deployment over the next three years as it expects half of its mobile subscribers to migrate to 5G services by 2023. That implies about 3.54 million subscribers switching to 5G, based on the company’s 7.08 million subscribers as of the end of February. +VE
Nanya Tech Friday reported that revenue contracted for a second straight month as the US-China trade dispute created greater uncertainty for manufacturers. Consolidated revenue Jun -4.15% to NT$5.32 bn (US$179.7 mn) vs NT$5.55 bn in May. However, on an annual basis, revenue +30.21% from NT$4.09 bn. Slight -VE
Charoen Pokphand Enterprise (Taiwan) plans to invest more than NT$800 mn (US$27.02 mn) domestically in accordance with its global strategy, the Ministry of Economic Affairs said on Thursday. The investment is also a demonstration of its efforts to meet changing market trends, the ministry said. +VE
CHINA Expect market to open higher as Team China continues to support the market whilst investors worry about US/China relations and covid-19 cases rising globally.
No data due
China’s Semiconductor Manufacturing International Corp (SMIC)(981.HK) will raise 46.29 billion yuan ($6.55 billion) in a Shanghai share sale, more than double its initial target, pricing its offering following a surge in its Hong Kong-listed stock. The company, which had originally sought to raise about 20 billion yuan, set the sale price of its shares to be traded in Shanghai at 27.46 yuan each, it said in a filing to the Shanghai Stock Exchange on Sunday.
Iran’s foreign minister told parliament that they are ‘negotiating a 25-year strategic accord with China’. He said details will be made available once the deal has been struck. Likely to put further strain on US/China relationship. -VE
Confucius Institutes to rebrand after overseas propaganda rows. The Ministry of Education said the Confucius Institute Headquarters, or Hanban, had changed its name to the Ministry of Education Centre for Language Education and Cooperation. New organisation aims to keep up cooperation with international partners, particularly in the United States.
Senior official says Time for China to decouple the yuan from US dollar, former diplomat urges, says US will pose ‘increasingly severe threat’ to future Chinese development through dollar’s global monopoly. Preparations for gradual decoupling and internationalisation of the yuan should begin ‘now’. Follows the Hong Kong Autonomy Act, passed by Congress last week, requires the administration to punish foreign banks if they continue to do business with sanctioned officials, including possibly denying them access to the global US dollar payment system.
China and the United States have accused each other of stoking tension in the strategic waterway at a time of strained relations over everything from the new coronavirus to trade to Hong Kong. The USS Nimitz and USS Ronald Reagan were carrying out operations and exercises in the South China Sea “to support a free and open Indo-Pacific,” the navy said in a statement. China also carried out military drills that have been criticised by the Pentagon and neighbouring states. Vietnam and Philippines also condemned the Chinese drills in waters that they claim as their sovereign territory
Rainstorms are expected for large parts of China over the weekend, the state weather bureau said on Friday, forecasting of even more extreme weather a day after some regions suffered more than 200 mm of rainfall. The middle reaches of the Yangtze river were expected to exceed warning levels, raising risks of geological disasters and urban waterlogging in central and southwest regions. -VE for sentiment
China’s Ministry of Agriculture and Rural Affairs said on Saturday that the so-called “G4” strain of swine flu virus is not new and does not infect or sicken humans and animals easily, rebuffing a study published earlier this week.
Friday's Caixin data was good but there are still concerns especially in the light of the outbreak in Beijing and the rising cases in the US. Some also pointing out that the survey may be misleading as many services in China remain closed and the jobs element was below 50 and inline with the rise in Chinese unemployment. A key element to note will be new school and university graduates entering the job market which will make things worse. Also the survey was prior to the recent increase in covid-19 cases in China, The US and elsewhere.
Huawei -VE as UK set to phase out Huawei’s 5G role within months, The Daily Telegraph story claims officials are drawing up proposals to stop installing new Huawei Technologies equipment in the 5G network
BEIJING appointed Guangdong-born Cantonese speaker Zheng Yanxiong to spearhead the national security law in Hong Kong. A hardliner with a background in propaganda. It may raise concerns for the media; in December 2011, a leaked video showed him telling an internal meeting that “pigs will fly before the foreign press can be trusted”. He also accused Wukan villagers of “colluding with foreign media to create trouble” and referred to some foreign press as “rotten”. He was in charge when Shanwei’s administration made international headlines in 2011 by mounting a series of protests against land acquisition by the local government. After months of unrest and the arrest of village leaders, the authorities reached a rare deal with the protesters and the villagers directly elected their own community leader, only for him to be jailed five years later on corruption charges when the villagers planned to stage another protest.
Also in the team are Li Jiangzhou and Sun Qingye. The former is a veteran public security officer and has worked in the central government’s liaison office in Hong Kong since 2016. Sun is a senior official from China’s intelligence agency; China’s equivalent of the CIA or MI6.
SCMP article National security law: does Hong Kong’s Journey to the West have a happy ending? Likens Hong Kong to the Monkey King Sun Wukong and the new security law to the golden constrictive headband. Suggests that Beijing should use the new law with caution if it wants Hong Kong to survive. The Journey to the West which tells the story of the Monkey King ends with him achieving his goal of ascending to the Buddhahood, rising above the Jade Emperor and the Heavens; one wonders if that will happen for Hong Kong? Also whether the media will have to adapt to analogies for expressing their views.
Britain may offer citizenship to BN(O) Hongkongers but what happens if China refuses to recognise it? SCMP article looks at the fact that China does not recognise its citizens taking up other nationalities; it still views them as Chinese. The net result I think is that Hong Kong and China slowly become ostracised by people based on the fear of what might happen if they live or travel there. China has tried to put fear into the people of Hong Kong before to make them ’take the knee’ to China to use a currently popular phrase, but the result here is more likely to be the opposite; with people taking a stand. Most Hong Kong people do not want independence and love their country but they want their views to be heard. Beijing’s action this week I think shows the paranoia of those in power who know they lack the legitimacy to be there. Early in his presidency President Xi told cadres they and the party needed to earn the right in the eyes of the people to lead. I think realising that was not going to happen Beijing has resorted to force. It is a shame because with more understanding on both sides there could have been a different outcome.
HONG KONG US markets closed so no ADR’s. The guide from Europe suggests a lower open but I think Team China will remain active and support the market again. So the market opens flat/higher prompting more short covering and then works higher. Local investors remain cautious as the US has not really issued a detailed response. HK had two new local Covid-19 cases Sunday and 8 imported cases.Sentiment may be helped by the early release of the Govt handout which the Govt hopes will result in more domestic consumption but I think most will save the money.
Data due Pre Market Jun PMI (May was 43.9 F/cast is 48)
Short Selling HSI Friday 19.8% vs 18.9% Thursday
Top Shorts Ping An (2318) 48%, Hang Lug PPT (101) 41%, MTRC (66) 41%, Hang Seng Bank (11) 40%, Sino Land (83) 40%, Henderson Land (12) 38%, Galaxy (27) 36%, Wharf REIC (1997) 31%, Country Garden (2007) 30%, BoC HK (2388) 29%, Mengniu Dairy (2319) 29%, CLP (2) 28%, Want Want (151) 25%.
IPO FIN STREET PPT (1502.HK), debut Monday, listing price of $7.36, and last stood at $9.2, +25% against the listing price, on volume of 8.84 million shares, PhillipMart data showed.
OCUMENSION-B (1477.HK) has recorded $90.66 billion margin subscription, equivalent to 582.8 times of over-subscription, local media reported.
BUYBACKS/SELLING and INSIDERS
CHINA GAS HOLD (00384.HK) Executive Chairman Liu Ming Hui acquired 443,200 shares through China Gas Group Limited, on July 2 according to shareholding disclosures at the Stock Exchange. +VE
MEITUAN-W (3690.HK) 's co-founder Wang Huiwen disposed of 1mn shares on June 30 in the open market and cashed in $172 million, according to shareholding disclosures at the Stock Exchange. Slight -VE
GTJA (2611.HK) announced that as of 30 June, it has repurchased 68 mn A shares, involving an aggregate of roughly RMB1.124 bn.
PROFIT WARNING CHINA LUDAO (2023.HK) POSITIVE profit alert, expecting to record a significant increase in profit of more than 100% for the six months ended 30 June 2020 as compared to that for the corresponding period in 2019, mainly attributable to the increase in revenue amount due to the high demand on disinfecting products. But the stock is already trading around 12 month highs; suggests good news already priced in.
NEW LAW IMPACT Canada suspends its extradition treaty with Hong Kong, eyes immigration boost. Additionally will not permit the export of sensitive military items to Hong Kong.
Hong Kong pro-democracy activists are discussing a plan to create an unofficial parliament-in-exile to keep the flame of democracy alive and send a message to China that freedom cannot be crushed, Reuters reports
Germany fears that Hong Kong’s autonomy is being “eroded” and Berlin will raise issues such as human rights with China during its presidency of the EU that began this month, Chancellor Angela Merkel said on Friday.
China to send 200 - 300 paramilitary armed police to Hong Kong as ‘observers’ media reports Slight -VE for sentiment
CK Asset, sold 200 flats, or 60% of the 336 flats on offer at its Sea To Sky project, as of 6pm, sales agents said. The developer raised the average price by 5 per cent to HK$16,694 per square foot after selling out all 462 flats – most single-bedroom units – last weekend in the first batch
K WAH (173) sold 27 of 206 units at K Summit in Kai Tak on Saturday
WHEELOCK released 80 units in the secondary price list for Koko Hills in Lam Tin at an average of HK$20,933 per sq ft after discounts. The cheapest, 366 sq ft unit was HK$7.93m. Th first two price lists were 2.7x over subscribed.
Centaline reported 10 secondary transactions -33% WoW
Far East Consortium (35) says it has seen increased interest inits property projects in Manchester. Slight +VE
HSBC HOLDINGS (5.HK) is set to shut down its industrial metals business, as the bank pushes ahead with its plan to slash 35,000 positions across the world, Reuters citing insiders. Slight +VE
CENTRAL CHINA (832.HK) June 2020, the Group contracted sales of RMB13.577 bn, -0.9% YoY
TikTok Chief Executive Kevin Mayer wrote to the Indian government that the Chinese government had never requested user data from them, nor would they turn the information over even if asked, Reuters reported. Its the same assurance Huawei has given but most people know that China can still force companies to hand over data, and it would appear from the terms of the Hong Kong New Security Law; to do so in secret with the company being unable to tell others it has done so. So the news is largely irrelevant.
The Lands Department announced that a total of nine tenders had been received for the industrial site at the junction of Tsung Tau Ha Road and Kwei Tei Street, Fo Tan. Bidders included Chinachem Group; CK ASSET (1113.HK) and CHINESE EST H on a sole basis; and a consortium formed by Billion Development, SINO LAND (83.HK), CSI PROPERTIES (497.HK) and ASIA STANDARD (129.HK)
TENCENT (700.HK)'s PUBG Mobile doubled its total revenue to over US$3 billion in only seven months, announced by Sensor Tower. The sum comes from combined spending for both the Chinese and overseas versions of the title.
Centa-City Leading Index (CCL) last printed at 178.48, -1.46% WoW
CCL softened sharply after two weeks of rally, reflecting concerns over an escalation in social unrest. The four major CCL indices rose for two weeks and fell for two weeks altogether, where home prices struggled to climb under greater near-term volatility. Wong anticipated a CCL upturn to 190 by autumn.