Aug 3 Asian Macro Initial Thoughts Dow futures now -VE HSBC results today
Covid-19 Globally over 18m cases, 686k deaths
DOW Futures opened +30pts but then reversed currently -53pts with S&P and NDX lower too. As at 7:30am Monday. Earnings continue but with the Tech heavyweights out of the way focus will be on the next stimulus package and this weeks jobs report.
Asian Manufacturing PMI data in focus today.
HSBC Q2 earnings due
JAPAN Expect Nikkei to open higher following the US and after Friday’s dramatic sell off on high volumes. Pre market data and continued concerns on the number of covid cases likely to cap the upside, There were 1,557 cases reported Friday but the numbers eased on Sunday. Yen eased slightly to close Friday at 105.88 but the recent strengthening is of concern said Finance Minister Taro Aso.
Data due GDP Data (Growth Rate, Annualised, Cap Ex, Ex Demand, Private Consumption, Price Index), Manufacturing PMI.
Gov. Yuriko Koike on Friday said Tokyo may need to declare its own state of emergency after announcing a record-breaking 463 coronavirus cases. THE number of cases dropped to 292 on Sunday, under 300 for the first time in four days
Government pension fund keeping eye on global macro-economic policy amid pandemic, president says. But no changes announced.
Japan-South Korea relations -VE as a South Korean court is scheduled to complete proceedings Tuesday to seize the assets of a Japanese company, in accordance with the ruling that ordered Japanese companies to pay compensation to former requisitioned workers. If the seized assets are converted to cash, the Japanese government intends to implement countermeasures -VE
Pacifist Japan took a step closer to acquiring weapons able to strike North Korea on Friday after a ruling party committee approved proposals to consider acquiring strike capability to halt ballistic missile attacks.
Nvidia in talks to buy Arm from Soft-Bank, whilst details not available it is believed to be for more than $32bn. Good news for Softbank and Nvidia but may raise concerns for Arm’s big licensees Apple, Broad-com and Qualcomm who see Nvidia as a competitor.
Asics Corp. and Mizuno Corp. have followed suit with Descente Inc. to release new models of long-distance running shoes that incorporate sophisticated technology. With the new models, Japanese makers hope to take advantage of the one-year postponement of the Tokyo Olympics to catch up with the world’s top manufacturer Nike Inc., which dominates the global market with its thick-soled shoes integrated with carbon fiber plates.
Japan's stately traditional kabuki theatre resumed performances on Saturday after a five-month break due to the novel coronavirus, with musicians in masks, actors farther apart on stage and only half the usual number of seats.
SOUTH KOREA Expect markets to open higher with good interest in Tech names.
Markets are expected to range trade as investors watch for the next US stimulus package. Kospi expected to remain above 2,200 level. PMI data today for S Korea, China, Japan and other will be a key indicator.
Data Due Manufacturing PMI (Jun was 43.4 F/cast is 49)
Balance of Trade Jul $4.27b vs 3.67b Jun (F/cast was 3.3b)
Exports Jul -7% vs -10.9% Jun (Consensus was -9.7%)
Imports Jul -11.9% vs -11.4% Jun (Concensus was -11.5%)
The largest since October last year, following the reopening of the economy, a preliminary estimate showed. Considering the first seven months of 2020, the surplus narrowed to USD 15.30 billion from USD 20.90 billion.
South Korean authorities arrested Lee Man-hee the powerful head of the Shincheonji Church of Jesus which is linked to more than 5,200 coronavirus infections, or 36% of South Korea’s total cases. The secretive Christian sect is at the centre of the country’s largest outbreak of COVID-19 infections on Saturday. He was arrested for allegedly hiding crucial information from contact-tracers and other offences.
SK Biopharmaceuticals Shares held by institutional investors will be up for sale Monday after a lockup period ends drawing attention to its impact on bio equities that are zooming. On Monday, 262,500 shares will be newly available for trading which could put pressure on the stock. -VE
LG Chem on Friday posted a record quarterly revenue and operating profit of 2.8 trillion won ($2.3 billion) and 155.5 billion won, respectively, in its battery business. The news came as a surprise not only because LG Chem recorded all-time high earnings in battery business but because it turned profit particularly in EV battery business while local competitors Samsung SDI and SK Innovation failed to do so. +VE
South Korea generates relatively little power from renewable energy, lagging behind most of the world’s countries, a report compiled by France-based energy consulting firm Enerdata, renewable energy-based power generation accounted for only 4.8 percent of the nation’s net power generation, putting Korea 40th among 44 nations.
Surge in damaged cash as worried South Koreans try to microwave and wash the virus. Just shows how worried people are about covid and how little understanding about the virus there is. -VE
Seoul plans to phase out diesel cars from public sector and mass transit fleets by 2025 as part of efforts to accelerate its transition to green mobility.
Samsung Electronics is projected to see further growth in its foundry business in the second half of the year, analysts here said Saturday, with growing expectations for receiving orders from Intel Corp.
Uniqlo said Friday it will close nine of its stores in South Korea next month amid a sharp fall in sales stemming from the new coronavirus outbreak and a trade dispute between Seoul and Tokyo.
LG Chem posted a second quarter revenue of 6.9 trillion won ($5.8 billion) and an operating profit of 571.6 billion won on Friday, marking an earnings surprise on the back of its electric vehicle batteries.
Daewoo Engineering and Construction said Friday it is launching a new commercial facility brand “arcloud,” and open its first shopping center in Hanam, Gyeonggi Province, under that name. The construction company said the brand name combines the words ‘arc” and “cloud,” carrying the meaning of connecting people and cultural content.
TAIWAN Expect market to open flat after the weak GDP data on Friday but with US tech still doing well the downside is limited.
Data due pre market Manufacturing PMI (Jun was 46.2 F/cast is 52)
After Market Friday GDP Growth Rate Adv Q2 -0.73% vs +1.59% prior (F/cast was +1%)
Taiwan hit a technical recession as Overseas tourism, retail and dining dwindled, but strong high-tech exports and infrastructure spending eased the COVID-19 effect.
Times of India reports that an Apple Inc vendor is looking at shifting six production lines to India from China, which could result in US$5 billion of iPhone exports from the South Asian nation. It did not name the company but said the establishment of the facility would create about 55,000 jobs over about a year. Taiwan’s Foxconn Technology Group, Wistron Corp and Pegatron Corp, all iPhone assemblers, are among companies picked to make smartphones under a production-linked incentive plan, Indian Minister of Electronics and Information Technology Ravi Shankar Prasad told a news conference in New Delhi on Saturday.
Domestic gasoline and diesel prices are to increase by NT$0.1 per liter today, even though international crude oil prices dropped last week, CPC Corp, Taiwan and Formosa Petrochemical announced separately yesterday.
Lite-On Technology last week reported better-than-expected profit margins and earnings per share for last quarter, thanks to a better product mix, strict operating expense control and effective inventory management, the company said.
ASE Technology the world’s biggest chip tester and packager, Friday reported Q2 earnings of NT$1.63 per share, the highest since the Q2 of 2018 thanks to strong contributions from its IC assembly, testing and materials (ICATM) business, as well as its electronics manufacturing services (EMS) business.
Advantech Co the world’s largest industrial computer manufacturer, Friday said that it benefited from strong COVID-19-related demand last quarter, but holds a conservative outlook for this quarter. “The business impact of the virus is broad-based and continuous, but we experienced a significant rebound in revenue and profitability in the second quarter,” president of general management Eric Chen said in a statement. However, he is conservative in his outlook for the third quarter, as some customers have postponed their shipment schedule since June.
Nankang says blaze did not hurt tire operations. The cause of a fire late on Saturday at a Nankang Rubber Tire Corp plant in Hsinchu County’s Sinfeng Township is under investigation, but the blaze is not expected to have a major effect on operations, the company said yesterday.
Parade Technologies said Thursday that the work-from-home trend is expected to continue supporting the company’s business in the second half of this year. Parade expects revenue to rise to between US$135 million and US$149 million this quarter, compared with last quarter’s US$121.54 million, a company statement said.
CHINA Expect market to open higher but retail investors remain cautious as US/China relations deteriorate and the number of new covid cases is a concern. Continued flooding also a concern although that is likely to be positive for heavy machinery makers and constructions names.
Data due pre market Manufacturing PMI (Jun was 51.2 F/cast is 51.6)
China lockdowns Xinjiang in an effort to contain the latest outbreaks there -VE for sentiment
The US condemns the decision to postpone the HK local elections saying its “the most recent in a growing list of broken promises by Beijing”. Worth noting that at least 24 countries have postponed national votes during the pandemic, while more than 30 national elections have gone ahead, according to research firm IDEA.
Trump vows to ban Tik Tok via and ExecutIve Order on Saturday despite news that Mircosoft and others are looking to buy the video app. SCMP reports that Trump will take action against TikTok, WeChat and “countless” Chinese software companies that pose a national security threat to America, US Secretary of State Mike Pompeo said on Sunday,
China’s embassy in Germany condemned Berlin’s suspension of its extradition treaty with Hong Kong, a move Germany said was a response to the postponement of an election in the Chinese city. Additionally over the weekend German minister Michael Roth urges EU to resist China’s ‘divide-and-rule tactics’. He urged fellow EU nations not to “be afraid to lock horns” with Beijing. -VE for sentiment
United States intensified its economic pressure on China’s Xinjiang province on Friday, imposing sanctions on the Xinjiang Production and Construction Corps, also known as XPCC, along with Sun Jinlong, former party secretary of XPCC, and Peng Jiarui, XPCC’s deputy party secretary and commander, over accusations they are connected to serious human rights abuse against ethnic minorities in Xinjiang.
China’s soaring corn prices prove fertile ground for speculators. FT report that corn futures in Dalian have risen 20% since February whereas they have fallen 12% in the US. It’s putting pressure on food inflation and Beijing has limited options apart from buying more abroad as it is run down its government stockpiles in recent year to try and reduce the state’s influence on the crop prices. To quote FT 'The Ministry of Agriculture and Rural Affairs said this month that it was “not appropriate” for traders to hoard the commodity. State media has also urged authorities to crack down “severely” on speculation.’ -VE
Coronavirus: Chinese customs have prevented CanSino injection test vaccine samples from being shipped for trials in Canada -VE
Beijing reclassifies a stretch of water between Hainan province and the Paracels Islands in the South China Sea as a “coastal” rather than “offshore” navigation area. Changing the regulation drawn up in 1974 indicative of Beijing’s drive to bring as much of the disputed waterway under its control as possible. -VE
FT reports that Australia's Syrah Resources fired up a graphite processing facility in July in the US state of Louisiana to turn the mineral mined in Mozambique into the precursor for EV battery anodes. It means that graphite, vital to electric vehicle batteries is no longer under China's near-exclusive control.
HONG KONG ADR’s -155pts to open at 24,440 with all ADR’s in the red except HSBC which is due to report earnings today.
News of the postponement of HK local elections -VE for sentiment. Also news that the Head of public prosecutions is resigned having been sidelined from cases under the new security law.
No data due
Short Selling HSI Friday 18.7% vs 20.7% Thursday
Top Shorts Hang Seng Bank (11) 44%, Wharf REIC (1997) 33%, SHKP (16) 32%, HSBC (5) 32%, Power Assets (6) 32%, CLP (2) 31%, Bank of China (3988) 29%, Sino Land (83) 28%, Swire Pac A (19) 27%, Galaxy (27) 26%, HK & China Gas (3) 25%, Ping An (2318) 25%, Petrochina (857) 25%.
New Security Law David Leung Hong Kong’s head of public prosecutions quit this week, citing differences with the city’s top legal official, and after being sidelined from cases under new China-imposed national security legislation, according to an email obtained by Reuters.It is a sign of discomfort within the government regarding the new arrangements. He had led a high-profile public prosecution against pro-democracy leaders involved with the city’s 2014 Occupy Central protests, wrote in the email that he could no longer work with Hong Kong’s justice secretary Teresa Cheng. It suggests a rift between pro Beijing hardlners and more moderate ordinary Hong Kong citizens. -VE general sentiment.
Hong Kong police seek activist Nathan Law and 5 others for inciting secession and collusion, insider says. Law and others deny charges, which would be first issued against individuals outside Hong Kong
HK Administration says it is delaying the local elections by 12 months due to covid but no one is convinced. Carrie Lam says she believes public opinion is on her side in the decision. Many doubt that, huge -VE for public sentiment. A survey released on Friday by the Hong Kong Public Opinion Research Institute, a pollster for the opposition’s primary election, showed that 36 per cent of 9,000 respondents supported a delay while 55 per cent wanted it to proceed as planned.
HSBC (5) Q2 earnings due today, most analysts expect its pretax profit to fall around 60% YoY due to bad loan provisions for Covid-19. Investors will also be watching for any updates on the company restructuring.
SOUTH CHINA FIN (619.HK) Profit Warning -VE expecting to record a loss of HK$170m for the six months ended 30 June 2020 as compared with a profit of HK$25.2m for the corresponding period in 2019. -VE
SWSI (812.HK) Profit Warning -VE expected to record an increase in the net loss of 119% for the six months ended 30 June 2020 as compared to the six months ended 30 June 2019. -VE
CHOW SANG SANG (116.HK) Profit Warning -VE . The Group is expected to record a decrease in its net profit to HK$200 million,-65% to -70% as compared to the corresponding period in 2019. Such decrease is mainly attributable to temporary closure of some stores or reduced opening hours of the Group’s jewellery retail network, a sharp decline in visitor arrivals to Hong Kong as well as weak consumer sentiment, caused by the outbreak of the coronavirus disease (COVID-19).
SMIC (981.HK) announced that it and Beijing Economic-Technological Development Area Management Committee (BDAC) intend to jointly establish the Joint Venture Company in the PRC in respect of the development and operation of the Project. The Project will focus on the production of 28 nanometer and above integrated circuits. +VE
Centaline Property Agency recorded only five secondary transactions at ten blue-chip housing estates over the past weekend, down by 37.5% WoW to a six month low.
Empire Group and Hong Kong Ferry (50) collected about HK$870mn after selling out 185 units in the first two price lists of Seacoast Royale in Tuen Mun.
Wheelock Properties sold a 1,211-sq-ft special unit at Koko Hills by tender for HK$29.68 million, or HK$24,509 per sq ft.
CATHAY PAC (293 HK) to offer early retirement to those on old contracts and pilots aged 50 and above. They will be paid three months basic salary for each year remaining before normal retirement age plus an extra month’s salary up to a maximum of 12 months, in the special retirement scheme. Cathay Dragon offered identical terms to pilots over the age of 58.
SINOPEC CORP (386.HK) unveiled the operational statistics for the first half of 2020. The production of oil and gas reached 226 million boe, down 0.4% yearly. The refinery throughput sank 10.5% yearly to 111 million tonnes in 1H20.
SWIREPROPERTIES (1972.HK) said that the occupancy of overall Hong Kong office reached 97% as at 30 June 2020, down 2 ppts from that in end-2019. Retail sales at Pacific Place -47.1%, Cityplaza -20.3%, and Citygate Outlets -25.6% in the first half of 2020.
The HKMA announced that as USD/ HKD triggered the Strong-side Convertibility Undertaking during Hong Kong trading hours, it undertook a selling order of US$150 million to inject HK$1.163 billion into the market. The balance of the banking system of Hong Kong will increase to HK$186.068 billion next Tuesday (4 August).
HKMA residential mortgage survey for June 2020 saw the number of mortgage applications in June -7.9% MoM to 13,829. Mortgage loans approved in June +16.3% MoM to HK$47.6 billion.
HKMA Exchange Fund total assets HK$4,195.3 billion as at June 30, 2020, HK$113.4 billion higher than that at the end of May 2020. Hong Kong dollar assets increased by HK$87.2 billion and foreign currency assets increased by HK$26.2 billion.
HKMA Total deposits with authorised institutions +1.6% in June 2020. Among the total, Hong Kong dollar deposits +2% and overall foreign currency deposits +1.2%. Renminbi deposits in Hong Kong -7.9% to RMB639.9 billion at the end of June. The total remittance of renminbi for cross-border trade settlement amounted to RMB542.8 billion in June, compared with RMB521.5 billion in May.
CHINA DONGXIANG (3818.HK) announced to sell the Kappa Japan Trademarks and the IP Miscellaneous Assets to Basic Trademark S.r.l. con socio unico, a subsidiary of the Italian firm BasicNet S.p.A, for a consideration of US$13 million (equivalent to approximately RMB91.26 million). The Group is expected to record an unaudited estimated gain on the Disposal of approximately US$10.93 million (equivalent to approximately RMB76.73 million).
The HK Government announced its financial results for the three months ended June 30, 2020. Expenditure for the period April to June 2020 amounted to HK$176.8 billion and revenue HK$67.8 billion, resulting in a cumulative year-to-date deficit of HK$109 billion.
Centa-City Leading Index (CCL) last printed at 181.69, -0.04% WoW after a three-week rally. The reading reflected the market condition for the week following COVID-19 resurgence in early July, said Centaline Property. They expected CCL to struggle at high levels in the near term with swelling volatility
DOW +0.44%, NDX +1.49%, S&P +0.77%, Russel 2K -0.98% Markets opened higher but sold down hitting the lows around lunchtime and then rebounded to close at day highs.
Good results from Amazon +3.7%, Apple +10.5% and Facebook +8.2% leading the markets.
Alphabet -3.3% earnings beat but revenue fell for the first time; with Cloud revenue just below forecasts.
Overhanging the market is the next stimulus package as unemployment benefits expire Friday. Also the weaker University of Michigan data. Gold saw good interest and hit a new intraday day high of US$2,005
Dr Fauci tells Congress that the covid surge is because a number fo US states did not follow official guidance. The hearing also saw evidence that refuted Trumps claims that the virus would disappear and that the US was duding no worse than other countries.
Chevron -2.7% Q2 loss of US$8.3bn as pandemic reduced demand.
Personal Spending Jun +5.6% MoM vs +8.2% prior (F/cast was +5.3%)
Personal Income Jun -1.1% MoM vs -4.2% prior (F/cast was -0.3%)
PCE Price Index Jun +0.4% MoM vs +0.1% May (F/cast was +0.4%) [Jun +0.8% YoY vs +0.5% May (F/cast was +0.6%)]
Employment Cost Index Benefits Q2 +0.8% QoQ vs +0.4% prior.
Employment Cost Index Wages Q2 +0.4% QoQ vs +0.9% prior.
Core PCE Price Index Jun +0.9% YoY vs +1% May (F/cast was +1.1%) [Jun +0.2% MoM vs +0.1% May (F/cast was +0.2%)
Chicago PMI Jul 51.9 vs 36.6 Jun (F/cast was 42)
University of Michigan Data Final
Inflation Expectations Jul +3% vs +3% Jun (F/cast was +3.1%)
Consumer Expectations Jul 65.9 vs 72.3 Jun (F/cast was 66.2 )
5yr Inflation Expectations Jul 2.6% vs 2.5% Jun (F/cast was +2.7%)
Current Conditions Jul 82.8 vs 87.1 Jun (F/cast was 84.2)
Consumer Sentiment Jul 72.5 vs 78.1 Jun (F/cast was 73.2 )
Baker Hughes Total Rig Count 251 vs 251 prior
USD was slightly stronger vs Yen & weaker Euro. Bitcoin +0.2% @ 11,350.00, VIX -1.2% @ 24.46,
US T10 0.533% With three and five year rates hitting all time lows.
OIL Brent +0.7%, WTI -0.9% on news output cuts in May were largest on record.
Gold Futures +1% having broker above US$2,000 intraday to new high, Silver +4.2%, Copper -1.9%
AHEAD Manufacturing PMI, ISM Manufacturing Data (Prices, New Orders, Employment, Manufacturing PMI) Construction Spending
DAX -0.54%, CAC -1.43%, FTSE -1.54% Markets opened slightly higher on good Eurozone data. Then trades sideways lower for much of the day before selling off in the last hour to close at the day lows on rising covid concerns. Travel stocks were weak.
BNP Paribas -0.8% off initial highs as Q2 net income -7% YoY beat f/casts thanks to higher trading volumes.
Nokia +12.5% after beating profit expectations in the second quarter. The CEO said that the firm is seeing concrete midterm opportunities on the back of geopolitical trends. +VE
UBI Banca +4.4% on news that Intesa Sanpaolo -1.6% has secured 90.2% of its target shares in a bid for the former.
EUROZONE GDP Growth Rate Flash Q2 -12.1% QoQ vs -3.6% prior (F/cast was -12.5%)
GDP Growth Rate Flash Q2 -15% YoY vs -3.1% prior (F/cast was -14.7%)
Inflation Rate Flash Jul +0.4% YoY vs +0.3% Jun (F/cast was +0.2%)
Inflation Rate Flash Jul -0.3% MoM vs +0.3% Jun (F/cast was -0.5%)
Core Inflation Rate Flash Jul +1.2% vs +0.8% Jun (F/cast was +0.7%)
GERMANY Retail Sales Jun -1.6% MoM vs +12.7% May revised (F/cast was -3%) [Jun -5.9% YoY vs +3.8% May (F/cast was +2.6%)]
FRANCE GDP Growth Rate Prel Q2 -13.8% QoQ vs -5.9% Prior (F/cast was -16.2%)
Inflation Rate Prel Jul +0.8% YoY vs +0.2% Jun (F/cast was +0.2%) [Jul +0.4% MoM vs +0.1% Jun (F/cast was -0.2%)]
Household Consumption Jun +9% MoM vs +37.4% May revised (F/cast was +3.2%)
UK Nationwide Housing Prices Jul +1.5% YoY vs -0.1% Jun (F/cast was -0.8%) [Jul +1.7% MoM vs -1.6% Jun revised (F/cast was -0.2%)]
EUROZONE Manufacturing PMI
GERMANY Manufacturing PMI
FRANCE Manufacturing PMI
UK Manufacturing PMI