July 9 ASIAN MACRO INITIAL THOUGHTS 10 July US Futures slightly higher
Covid-19 Globally over 11.9m cases, 545k deaths
US FUTURES Opened +50pts but have eased back to +24pts with S&P and NDX also higher as at 7:30am HK time
GOLD breaks through US$1,800 +VE outlook
DOW +0.68%, NDX +1.44% (new high), S&P +0.78%, Russel 2K +0.81% US markets opened slightly higher and saw small initial rally before sell off the testing the support of Tuesday’s closing level before trading sideways around flat for most of the session before working higher in the last hour to close just off the initial highs lead by Tech; with a number of new highs. Trump under fire for insisting schools re-open despite the rising covid-19 cases
Re-opening stocks under pressure United Airlines -0.1% warned of more job cuts and closed off mid day lows, Delta flat, American +0.1%, Carnival +5.2%, Royal Caribbean +2.5%
Kohls +9.5% on broker upgrade. But Amex -0.1% on downgrade
Shutdown stocks; Microsoft +2.2%, Apple +2.3%, Amazon +3.5%, Alphabet +0.9%, Facebook +1.1%, Netflix +2%, Nvidia +3.5%.
Brooke Brothers (privately owned) filed for Chapter 11
Press reviews on Trump’s niece’s book about him are not flattering but he is labelling it a book of lies but it does seem to bear out a number of things the John Bolton has also said about him….. no smoke without fire.
MBA Mortgage Applications +2.2% vs -1.8% prior
MBA 30 yr Mortgage Rate 3.26% vs 3.19% prior
EIA Gasoline Stocks Change -4.839m vs +1.199m prior (F/cast was +0.6m)
EIA Crude Stocks Change +5.654m vs -7.195m prior (F/cast was +3m)
Consumer Credit Change May $ -18.2b vs -70.2b Apr (revised from -68.78b) (F/cast was -17b)
USD was weaker vs Yen & Euro. Bitcoin +1.9% @ 9432.04, VIX -4.6% @ 28.1, US T10 0.666%
OIL Brent +0.58%, WTI +0.69% signs of a recovery in US gasoline consumption, but rising crude inventories and an increase in coronavirus infections limited gains.
Gold Spot +0.9% @ $1,811, Silver +1.9%, Copper +1%
AHEAD Initial Claims, Initial Claims 4 week Ave, Continuing Claims, Wholesale Inventories, EIA Natural Gas Stocks Change
DAX -0.97%, CAC -1.24%, FTSE -0.55% Markets opened lower, with no macro data in Europe and initially traded higher but hit resistance at Tuesday closing level (or lower for the CAC). They then traded sideways lower as rising covid-19 cases in the US and other parts of the world worry investors. All three indexes sold down into the close.
News the the US had started to the formal process of leaving the WHO seen as another -VE. WHO acknowledged there is evidence of airborne transmission and also said there is likely to be an increase in covid-19 deaths.
IMF Chief Economist warned that many countries would need to restructure their debts post covid as borrowing has surged.
UK Finance Minister announced ‘back to work’ bonus schemes, a 50% restaurant discount for citizens in August and a easing of the stamp duty threshold but didn’t cut it Slight -VE for Builders that had rallied on the expectation of a cut.
Deutsche Bank -1.1% after being fined US$150m by the New York regulator for its relationship with Jeffrey Epstein.
Deutsche Post +0.8% as Q2 profit +16% beat f/casts and vowed to grant workers bonuses for their efforts during the crisis.
Nokia -8% on fears it could lose the Verizon business to Samsung.
Technip FMC +4.6% on signing a $1bn deal with Egypt’s ANOPC
EUROZONE No data due, EU Group Meeting
GERMANY Balance fo Trade, Exports and Imports
FRANCE No data due
UK No data due
JAPAN Expect Nikkei to open higher following the US and falling new covid-19 cases +VE. Pre market data could limit initial upside.
Yen currently 107.27
Data due Machinery Orders, Foreign Bond and Stock Investments, Machine Tool Orders.
More heavy rains to hit southwestern and central Japan -VE at least 58 dead. Non-Life Insurers to raise premiums by 6-8% in wake of recent disasters -VE
Earthquake with a preliminary magnitude of 4.7 jolted the Kanto region on Thursday morning.
New covid-19 cases drop below 100 for the first time in 7 days +VE
Covid Supercomputer-driven models simulated in Japan suggested that operating commuter trains with windows open and limiting the number of passengers may help reduce the risk of coronavirus infections, as scientists warn of airborne spread of the virus.
Bankruptcies among Japanese companies in the 1H 2020 rose +0.2% YoY for the first time in 11 years due partly to the coronavirus pandemic which has hit hotel and restaurant businesses, according to data compiled by a research firm. It said 240 firms went bankrupt due to the coronavirus pandemic; other reasons cites were the increase sales tax and rising about costs.
Itochu Corp (8001.T) on Wednesday announced a 588 billion yen ($5.5 billion) tender offer for the rest of convenience store FamilyMart Co (8028.T), seeking full control of a business facing slow growth and tough competition.
Restaurant Chains expect a severe downturn in the event of a second wave of infections. -VE
BANKS -VE concerns rising that some smaller banks are too weak to withstand the covid-19 crisis may need to delist or be rescued -VE
SOUTH KOREA Expect markets to open higher following the US. Trading volumes remained high Wednesday.
No data due
US top nuclear envoy says the US strongly supports inter-Korean cooperation and that Trump open to another summit with Kim. As think tank suggests the north maybe preparing for a submarine launched ballistic test.
The Ministry of SMEs and Startups has selected seven zones across the country to benefit from the government’s exemptions from regulations to create more jobs and attract more investments. This is the third instalment of the designation for the ministry’s Regulation Free Special Zone. There are now a total of 21 zones under the category.
South Korea has asked Gilead Sciences to supply enough of its anti-viral drug remdesivir to treat more than 5,000 COVID-19 patients in preparation for a potential second wave of infections, an opposition lawmaker said on Wednesday.
LG CHEM -VE as Indian police have arrested 12 LG Polymers officials, including its South Korean Chief Executive Sunkey Jeong, an officer said on Wednesday, two months after a gas leak at the company’s south Indian chemical plant killed 12. The arrests were made under a case of culpable homicide filed against the company.
Celltrion, said on Wednesday that its new antibody treatment showed some promise in treating a mutated version of the new coronavirus in recent tests. +VE
STX Offshore called Wednesday on its unionized workers to stop their general strike. They went on general strike starting on June 1, calling for a stop to six-month unpaid furloughs, which half of about 500 unionized workers have taken in rotation since June 2018. -VE
The South Korean game industry propelled the nation’s content exports last year, clocking $6.9 billion, more than 10 times that of the music industry’s $640 million, according to a report released by the Ministry of Culture and Korea Creative Content Agency on Tuesday. +VE
Netmarble on Wednesday launched the three-inning mobile baseball gameMagumagu 2020 on Google Play and Apple’s App Store, targeting local baseball fans staying home due to concerns over the coronavirus outbreak.
Samsung Electronics on Wednesday unveiled an ultraviolet sterilizer with wireless charging for mobile gadgets like smartphones as hygiene awareness is growing amid the COVID-19 pandemic.
Samsung Electronics will throw its signature Unpacked show for new Galaxy products online for the first time on Aug. 5, according to the company’s invitation sent to global media and partners on Wednesday +VE
Doosan Group’s holding firm said Wednesday it has signed a memorandum of understanding with local private equity firm SkyLake Investment to sell a majority stake in its battery foil maker unit. +VE
TAIWAN Expect market to open led by Tech following the US rally overnight
No Data due
The Central Epidemic Command Center (CECC) yesterday announced a loosening of regulations for people under quarantine who need to apply for compassionate leave, as it reiterated warnings not to become complacent about COVID-19, given the increase in case numbers in some nations after they lifted lockdowns or stay-at-home orders.
Phison Electronics, a designer of NAND flash memory controllers and modules, yesterday reported that revenue last quarter +11% YoY on the back of new orders from Japan’s largest pachinko maker. However, on a quarterly basis, revenue was -15.62%. The Miaoli-based company said that it is benefiting from growing demand for solid-state drives (SSDs) used in devices beyond computers, which is stimulating growth for the NAND flash memory industry. +VE
Polytronics Technology yesterday announced that it is buying Henkel AG’s thermal clad dielectric material (TCLAD) business division for US$26 million as the Taiwanese firm aims to improve its technology, product portfolio and revenue performance.
Offices Vacancy rates for grade A offices in Taipei -2.36% last quarter as robust demand and a lack of new supply helped the market avoid the effects of the COVID-19 pandemic, Jones Lang LaSalle Inc (JLL) said on Tuesday.
CHINA Expect market to open higher. On the open we get inflation and PPI data but Team China I expect to be looking to support the market.
Data due Inflation Rate Jun (F/cast +2.5% YoY vs +2.4% in May (F/cast -0.8% MoM vs 0% May). PPI Jun (F//cast -3.1% vs -3.7% May)
Xi Jinping tells Vladimir Putin: China and Russia should stand firm against unilateralism. Chinese leader calls for two countries to strengthen cooperation amid a fast-changing global situation. Telephone conversation follows growing tensions between China and India, which both have long-standing strategic partnerships with Moscow
Chris Patton says China has set out to destroy Hong Kong by implementing the National Security Law which undermines the rule of law. Patten said that China’s “rule by fear” rather than “rule of law” is like an anaconda in the chandelier — a metaphor referring to the power of self-censorship in China. “You never knew quite when it was going to drop but you knew there was always a danger of it dropping on you,” Patten added.
Chinese consumers less willing spend casting shadow over Q2 rebound new survey shows -VE
TikTok’s launch on Wednesday of a new platform to court small business advertisers is fraught with challenges, especially after the Trump administration’s threat this week to impose a ban on China-based social media apps.
China’s car sales still showing signs of growth as world’s largest market recovers from coronavirus impact. June sales -6.5% YoY although sales in June 2019 were boosted by discounts to push models that risked becoming redundant by new emission standards. Sales +2.6% MoM, offering some encouragement after demand had slumped amid the coronavirus outbreak.
China vows to ban US officials who ‘act abominably’ over Tibet. (I wonder if any pun was intended?) Foreign ministry spokesman Zhao Lijian says Americans will face visa restrictions in retaliation for US sanctions. US Secretary of State Mike Pompeo attacked travel curbs on American visitors to region and accused Beijing of human rights abuses.
WHO team heading to China as politics weigh on search for Covid-19 origin. They will meet officials from Chinese science and technology ministry and National Health Commission this weekend. Talks will be a precursor to international inquiry that has been a point of contention.
HONG KONG ADR’s +209pts to open at 26,338; expect an initial squeeze higher. Trading likely to be influenced by the China data on the open and the potential threat to the HKD/USD peg from US sanctions; HSBC -2.9% in London on the news (although +VE in US trading but the volumes in the US are much lighter)
No data due
Short Selling HSI Wednesday 19.6% vs 17.5% Tuesday
Top Shorts MTRC (66) 57%, Wharf REIC (1997) 49%, Henderson Land(12) 40%, Hang Seng Bank (11) 38%, China Res Land (1109) 38%, Ping An (2318) 36%, BoC HK (2388) 35%, HSBC (5) 35%, Hang Lung PPT (101) 35%, CK Asset (1113) 31%, CCB (939) 30%, Sino Land (83) 29%, China Mobile (941) 25%.
New Security Law. All civil servants to be required to pledge allegiance to the Basic Law and SAR administration said the Civil Service Bureau. Press reports that some say this is to silence opposition and threaten civil servants with their jobs. It certainly appears to compromise individual freedom and revokes the historic norm of them being politically neutral. Civil servant unions are concerned over the matter.
HKD/USD peg being considered by some in the US as a possible tool for the US to respond to China’s imposition of the New Security law on Hong Kong. Press report suggests the discussion have not reached White House level yet.
Hong Kong actor Nicholas Tse’s former home sells for US$1.8 million loss, casts shadow on city’s luxury housing market House in The Redhill Peninsula sells for ‘shocking price’ of HK$60 million The national security law and social unrest have cooled the market, agent says. -VE for Developers
HANG SENG BANK (11.HK) said that Louisa Cheang, the Bank’s Vice-Chairman and Chief Executive, is undergoing treatment for a recently diagnosed medical condition. The Board and Cheang are confident that Cheang can continue to perform her duties for the Bank while she undergoes treatment, and the bank will keep this under review as her treatment progresses. The Board also has every confidence in its executive leadership team to manage the business and execute its strategic priorities. Slight -VE
SOLOMON SYSTECH (02878.HK) Positive Profit alert. The Group is expected to record a consolidated profit of approximately US$4 million for the six months ended 30 June 2020, which compares to a consolidated loss of approximately US$9.6 million for the same period in 2019. The turnaround in performance was mainly due to, among others, increases in the average gross profit margin and gross profit amount attributable to a change in its product type mix recorded in revenue. +VE
POLY PROPERTY (119.HK) 1H contracted sales of RMB19.6 billion -1.5% YoY to year ended 30 June 2020.
POWERLONG (1238.HK) 1H total contracted sales value RMB31.529bn +8% YoY and total contracted sales area for the six months ended 30 June 2020 amounted to 2.0473 million square meters, +14.8% YoY.
Ant Group plans to go public in Hong Kong as soon as this year and targets more than US$200 billion in valuation, sources with knowledge of the matter were quoted as saying by Reuters. +VE HK EX
As USD/ HKD triggered the Strong-side Convertibility Undertaking during Hong Kong trading hours, the HKMA undertook a selling order of US$1.48 billion to inject HK$11.47 billion into the market. The balance of the banking system of Hong Kong will increase to HK$160.596 billion on Friday (10 July).
GREATWALL MOTOR (2333.HK) announced that June sales volume totaled 82,000 units +29.6% YoY and production volume was 83,500 vehicles, +32.59% YoY
TOPSHOP to exit Hong Kong when lease expires in October -VE for Property Investors
ESPRIT (330 HK) Karen Lo (descendant of Vitasoy Int founder) becomes its largest shareholder on increasing her stake to 12.89%. +VE
The Secretary for Financial Services and the Treasury, said any move to relax demand-side management measures or to lower stamp duty rates may be speculated by the market as a signal for adjustments to the Government's policies on the property market. It may also stimulate demand for local residential properties from some citizens, and lead to a counter-productive result of pushing up property prices when the current housing supply still lags behind demand. Therefore, the Government must act prudently. -VE for DEVELOPERS
Hong Kong Federation of Railway Trade Unions in a statement expressed its extreme disappointment with MTR CORP (66.HK)’s decision to freeze salary of all non-managerial level staff this year, despite over $10 bn in surplus last year. The union reprimanded the railway operator of focusing only on profit-making and turning a blind eye to workers' efforts.
Centa-Salesman Index (CSI) last printed at 61.88, -0.7 pts WoW. The latent second spike of coronavirus outbreak amid a surging number of local cases may weigh on the frontline sentiment and reflect on the index next week.