09 Jul


Covid-19 Globally over 11.5m cases, 535k deaths
US FUTURES opened -30pts but now +25pts (@ 7:30 HK time) S&P flat & NDX +0.3%.

DOW +1.78%, NDX +2.21%, S&P +1.59%, Russel 2K +0.77% Dow & S&P opened higher but traded sideways thought the day. NDX opened higher and initially climbed hitting a new all time high as Amazon +5.7% and Netflix +3.5% hit new highs but then drifts lower before seeing a small rally into the close.
PMI and ISM Non manufacturing data continued to show signs of recovery; some now worry that if the data continues to be positive the government stimulus will ease. Apple +2.7%, Microsoft +2.2%, Alphabet +2% and Facebook +2.9%. Market accepting the rise in new covid-19 cases as acceptable, despite hospitalisations growing by 5%plus on Sunday. United Airlines +3%, Delta +2.6%, Royal Caribbean +1% (but was in the red at lunchtime) Carnival -1.7% (opened higher but sold down through the day).
Dominion Energy weak after agreeing to sell its natural gas pipeline and storage assets to Berkshire Hathaway for an enterprise value of $9.7bn. It also said it would cut its Q4 dividend and scrapped the Atlantic Coast Pipeline project, citing delays and permitting issues.
Services PMI Final Jun 47.9 vs 37.5 (F/cast was 46.7)
Composite PMI Final Jun 47.9 vs 37 (F/cast was 46.8)
ISM Non Manufacturing Data
Business Activity Jun 66.0 vs 41 May (F/cast was 50.6)
Prices Jun 62.4 vs 55.6 May (F/cast was 50.6)
New Orders Jun 61.6 vs 41.9 May (F/cast was 45)
Employment Jun 43.1 vs 31.8 May (F/cast was 42)
PMI Jun 57.1 vs 45.4 May (F/cast was 49)
USD was weaker vs Yen & Euro. Bitcoin +2.2% @ 9281.29, VIX +0.9% @ 27.94, US T10 0.678% but did tase about 0.7% as the good data was released.
OIL Brent +1.7%, WTI +0.7% on tighter supply and positive data.
Gold +0.5%, Silver +1.1%, Copper +0.5% Gold strong on rising covid-19 cases.
AHEAD Redbook, IBD/TIPP Economic Optimism, JOLT’s Job Openings, API Crude Oil Stock Changes

DAX +1.64%, CAC +1.49%, FTSE +2.09% Markets opened higher following the momentum from Asian but with mixed macro data the markets traded sideways lower. Concerns remain over the number of covid-19 cases and China’s relations with US, India, EU , UK and others. News that the EU had granted Gilead’s antiviral drug remdesivir to be used in the EU, making it the first authorized treatment for the virus in the region was seen as encouraging. Also the good ISM non manufacturing data in the US which showed expansion.
Commerzbank +7.5% CEO and Chairman ousted on Friday so a search for replacements is underway. HSBC London +6.6% despite concerns over the US Fed tests.
Housebuilders Barratts +8%, Vistry +6.8% and Persimmon +6.2% following reports that the UK chancellor was contemplating cutting stamp duty this week.
EUROZONE Construction PMI Jun 48.3 vs 39.5 May (F/cast was 46)
Retail Sales May +17.7% MoM vs -12.1% (Revised) (F/cast was +14.8%) [May -5.1% YoY vs -19.6% Apr (F/cast was -8.6%)]
GERMANY Factory Orders May +10.4% MoM vs -26.2% Apr (F/cast was +14.5%)
Construction PMI May 41.3 vs 40.1 May (F/cast was 45)
FRANCE Construction PMI Jun 53.8 vs 32.4 May (F/cast was 47)
Retail Sale May +25.6% MoM vs -19% (Revised) (F/cast was +15.5%) [May -12% YoY vs -30.1% Apr (F/cast was -20%)]
UK Construction PMI Jun 55.3 vs 28.9 May (F/cast was 45)
EUROZONE No data due
GERMANY Industrial Production
FRANCE Balance of Trade, Current Account
UK Labour Productivity, Halifax House Price Index

JAPAN Expect Nikkei to open higher following the US but rising covid-19 cases likely to limit the upside after 111 new cases reported in Monday. Yen currently 107.36
Data due 
Household Spending, Ave Cash Earnings, Foreign Exchange Reserves, Prelim Coincident Index and Leading Economic Index.
A new government subcommittee on the novel coronavirus held its first meeting Monday, with the Abe administration and public health officials attempting to renew their cooperation in fighting the pandemic by offering a clean slate after recent incidents had triggered mutual distrust.
Regeneron on Monday announced it was entering the late stages of its human clinical trials investigating a drug to both treat and prevent COVID-19. The drug, called REGN-COV2, is a combination of two antibodies that block the coronavirus' "spike protein" which it uses to invade human cells. The company is moving to the final Phase 3 stage of a trial to determine if its drug can prevent infection among people recently exposed to the virus -- for example through a person in their household. +VE
More heavy rain expected with 250k encouraged to evacuate which raises the potential for the spread of covid-19 cases. -VE
Fujitsu Ltd (6702.T) said on Monday it would halve its office space in three years as it rewrites the way employees work under a “new normal” amid the coronavirus pandemic. -VE for Property Investment companies
Blackstone Group Inc. will consider investing in tourism-linked companies in Japan, expecting inbound travel demand to recover after the coronavirus crisis, sources said Monday.
Takeda Pharmaceutical Co. is considering selling its over-the-counter medicine unit for around ¥400 billion ($3.7 billion) to focus on developing cancer treatments and other advanced medical-use drugs that can generate higher profits

SOUTH KOREA Expect markets to open higher with a falling number of new covid-19 cases but may start to see some caution ahead of company results. Current account data +VE
Data out
Current Account May $2.29b vs -3.12b (F/cast was -0.5b)
North Korea has no intention to sit down with the United States and urged South Korea to "stop meddling," a senior diplomat said on Tuesday, just as a U.S. envoy was due to visit Seoul in an effort to renew stalled nuclear talks with Pyongyang. -VE
South Korea and Uzbekistan held ministerial talks in Seoul on Monday, where they agreed to accelerate discussions on business projects and push forward a bilateral free trade agreement +VE
The leaders of South Korea’s leading IT firms have called on lawmakers to change regulations for fair competition with foreign tech companies at the National Assembly on Monday +VE
A professor at the Korea Advanced Institute of Science and Technology is currently being investigated by the prosecution for allegedly handing over technology related to autonomous driving to China for financial gain, according to news reports and the ICT Ministry on Monday. -VE

TAIWAN Expect market to open higher following the US
Data due 
Balance of Trade, Exports, Imports, Inflation Rate, Wholesale Prices
After Market Monday
Foreign Exchange Reserves Jun $488.69b vs 484.51b (F/cast was 475b)
The increase was due to returns from the bank’s management of foreign-exchange reserves, and the appreciation of foreign-exchange reserves denominated in euro and other reserve currencies that appreciated against the US dollar, it said. The bank said it last month intervened to keep order in the nation’s foreign-exchange market after large capital inflows caused excessive volatility.
Minister of Economic Affairs Wang Mei-hua Monday announced a draw to encourage people to claim their Triple Stimulus Vouchers digitally. The prizes include movie tickets and 25 electric scooters donated by Gogoro, Wang said. They will hold a scooter draw every day for the next 10 days, beginning yesterday, after which there would be a draw every week for 15 weeks.
Taiwan recorded net foreign fund inflow of US$4.135 bn last month, ending four consecutive months of outflows, Financial Supervisory Commission data showed yesterday. +VE
The Securities and Futures Investors Protection Center would file a lawsuit for an order to dismiss Tatung Co as the firm has severely breached shareholders’ rights, agency chairman Chiou Chin-ting said yesterday.
Hon Hai Precision Monday reported consolidated revenue -9.08% YoY to NT$360.53 bn (US$12.20 bn) last month, ending two consecutive months of annual increases. Last month’s figure was down 6.83% from May, after rising three months in a row on a monthly basis, company data showed. A sales breakdown showed that cloud and Internet products were the largest contributors to revenue last month for the leading assembler of Apple Inc’s iPhones, while consumer electronics provided the least support.-VE
HTC Corp Monday reported revenue of NT$649.25 million for last month, +63.55% MoM and marking the highest monthly revenue this year. But was -55.57% YoY. In Q2 revenue +1.1% QoQ but -52.2% YoY. Cumulative revenue from January to last month was NT$2.67 billion, -53.52% YoY.
Adata Technology Co Monday said revenue last quarter +32% YoY to NT$7.33 bn (US$248.05 million), hitting the highest level in seven quarters, due to strong demand for personal computers and solid-state drives (SSD). That was a 2.04% QoQ quarterly from NT$7.18 billion in the first quarter, the company said.
Yageo Corp Monday said revenue last month +48% to NT$4.54 bn, from NT$3.07 bn in June last year, which represented +1.2% MoM from NT$4.49 bn. Yageo said the growth was supported by improving production capacity utilization in China and robust customer demand.

CHINA Expect market to open higher following the US and with Chinese state media encouraging a ‘healthy bull market’. Yuan stronger over night; slight +VE for companies with overseas debt.
Data due Foreign Exchange Reserves
China said on Monday it reserved the right to take more action after Canada suspended its extradition treaty with Hong Kong and said efforts to pressure Beijing were “doomed to fail like kicking against the pricks”. Reuters said that “Kicking against the pricks” is an English expression meaning “to hurt oneself by struggling against something in vain,” according to the Collins dictionary. China also issued a Canada travel warning, as ties sour over Hong Kong national security law
Beijing police arrested an outspoken critic of Chinese President Xi Jinping on Monday morning as his administration took steps to crack down on potential threats to the Communist Party stemming from the economic fallout of the pandemic. Xu Zhangrun, a law professor at Tsinghua University, was taken away by police from his house at a Beijing suburb. Xu’s arrest is likely linked to a book he published in New York last month, a collection of 10 political essays with scathing criticisms of Xi and the Communist Party’s rule. It comes as the official Legal Daily reported that a special working group on political security was added to a law enforcement task force first established in April to defuse any social unrest stemming from the government’s response to the virus. The group "recently” convened its first meeting in Beijing, the article said. At the gathering, it was emphasized that "protecting the safety of the political system” and "safeguarding the regime’s security” should be the first priority. Officials also vowed to take strict precautions against and move to stop activities including infiltration, subversion, terrorism, ethnic secession and extreme religious activities.
China's ambassador to London accused Britain on Monday of gross interference and making irresponsible remarks over Beijing's imposition of new security legislation in Hong Kong that he said could damage future Chinese investment.Beijing ‘is ready to counter US’ as both navies hold drills in South China Sea
US military says exercises are a response to Beijing’s rising assertiveness and it will not be intimidated by China. Retired PLA naval officer says China will not waver in safeguarding its interests, while Global Times says the sea is fully in the PLA’s grasp

HONG KONG ADR’s +127pts to open at 26,465, key remains the actions of ’Team China’ in the market. Expect initial short covering and then for the market to trade sideways.
Data due
Foreign Exchange Reserves

New Security Law More details; security forces had overriding authority to enter and search properties for evidence (without a warrant) and stop people from leaving the city. It may also allow for confiscation of the proceeds related to any offence endangering national security. It will require foreign and Taiwan political organisations and agents to provide information on activities concerning Hong Kong. Failure to comply with new regulations decided at meeting of Committee for Safeguarding National Security will lead to HK$100,000 fine, up to two years in jail. Also anyone who knows that a property is related to an offence under the national security law is obliged to report to police “as soon as is reasonably practicable, and must not disclose to any other person any information which is likely to prejudice any investigation”. -VE for long term sentiment
Facebook, WhatsApp to suspend user information requests from Hong Kong authorities The pause will take place ‘pending further assessment’ of a new national security law, Facebook says. Since the law was passed, some Hongkongers have been scrubbing their social media accounts and deleting chat histories.
Hong Kong police chief tells CCTV in rare state television appearance that the National security law: legislation already having deterrent effect.

Short Selling HSI Monday 18.9% vs 19.8% Friday
Top Shorts Ping An (2318) 44%, Hang Lug PPT (101) 41%, Sino Land (83) 37%, Mengniu Dairy (2319) 36%, Wharf REIC (1997) 36%, Galaxy (27) 32%, MTRC (66) 31%, CLP (2) 29%, Hang Seng Bank (11) 29%, China Res Land (1109) 27%, Sunny Optical (2382) 26%, Country Garden (2007) 25%.

Li Ka-shing and Victor Li acquired a total of 1.1255 million shares of CK ASSET (1113.HK) further by a wholly-owned subsidiary of Li Ka Shing (Global) Foundation at the average price of HK$47.0373 per share on 2 July 2020. As a result, the deemed interests of Li Ka-shing and Victor Li in CK Asset increased from 35.27% to 35.3%, and from 35.34% to 35.37%, respectively.

expects a significant decrease in the revenue from the Group’s infusion set business for the six months ended June 30, 2020 in the range of 35% to 45% as compared with RMB172 million for the same period of last year.  -VE
As USD/ HKD triggered the Strong-side Convertibility Undertaking at 7.75 during Hong Kong trading hours, the HKMA undertook a selling order of US$700 million to inject HK$5.425 billion in the market.  The balance of the banking system of Hong Kong will increase to HK$137.042 billion on Wednesday (8 July).
GEELY AUTO (175.HK) unaudited total sales volume for the month of June 110,100 units, +21% YoY  and 1% MoM.

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