Oct 7 Asian Macro Initial Thoughts Expect an initial rally and bargain hunting

07 Oct

This and previous notes can be found at Substack ( Asian Market Sense )
Check out ERI-C.com for  interesting research and trading analysis

Biden and Xi to hold a virtual summit this year Slight +VE for relations between the two.
FT reports that the US is considering releasings emergency oil reserves to tame fuel price surge; Energy secretary Jennifer Granholm says ‘all tools are on the table’
Gas markets whipsaw after Russia offers to stabilise energy prices
UK gas contracts for November delivery soar almost 40% before falling back after Putin’s comments about increasing supply.

Australia Market opened higher with Energy names -VE as OIL prices eases as Russia may increase gas supplies. Miners +VE as Iron Ore Futures stronger in Singapore and Gold +VE too.  Banks & Housing in focus on new APRA serviceability rules.  Insurers weak as Deloitte warns about risk of natural disasters.
Data out
Services Index Sept 45.7 vs 45.6 Aug (F/cast was 49.8); slight -VE
Due later Weekly Payrolls, Jobs & Wages data.
Japan Nikkei futures indicate a higher open +170pts following the rebound in the US.  
S Korea Expect markets to open higher following the US rebound with bargain hunting in large Tech as SEC and Hynix hit annual lows yesterday.  
Taiwan Market to open higher following the US with interest in Tech China Market closed re-opens Friday
HK ADR’s +26pts @ 23,992 weakness in Chinese Financials but HSBC +VE, ECommerce mixed, Energy weak.   Increased short selling yesterday means that an initial short squeeze likely.
US Futures 
Opened Dow +42pts, S&P and NDX +0.1%, Ahead the Initial claims data which will be watched closely ahead of Friday’s payrolls data.

DOW +0.3%, NDX +0.47%, S&P +0.4%, Russel 2K -0.6%
US markets opened lower, initially dipped but then rebounded as the ADP report was better than expected and then traded sideways as markets remain volatile. Then from early afternoon worked higher on news of a short terrm deal (to December) from Mitch McConnell on the debt ceiling; eased recession concerns.
Airlines weak on higher fuel costs. But Tech which had been weak reversed and saw buying. But there was weakness in growth and re-opening.
Banks JPMorgan Chase +0.2%, Citigroup -1.47% Wells Fargo -0.2%, Amex -0.8%
Work from home names: Facebook +0.2%, Apple +0.63%, Amazon +1.27%, Netflix +0.68%,  Disney +0.5%, Zoom Video -1.35%, Alphabet +1.13% and Microsoft +1.5%,
Tech NXP Semi -0.4%, Nvidia +1.2%, Micron -0.8%, AMD +1.8%, Skyworks +0.5%
Re-opening stocks  Boeing +0.25%, Caterpillar -0.33%, Simon Property +0.9%, Kohl’s -3.8%, Nordstrom +2%, Gap +2.2%, United Airlines -1.3%, Carnival -2.1%, Wynn Resorts -0.94%, Chevron -0.9%, Exxon Mobil -1.83%,  
Lock down names Campbell Soup +0.73% General Mills +0.96%, JM Smucker +1.53%
MBA Mortgage Applications -6.9% vs -1.1% prior and 30 yr Mortgage Rate 3.14% vs 3.1%
ADP Employment Change Sept 568k vs 340k Aug revised (F/cast was 415k)
EIA Gasoline Stocks Change 3.256m vs 0.193m prior (Consensus was 3.256m)
EIA Crude Oil Stocks Change 2.346m vs 4.578m prior (Consensus was -0.418m)
USD stronger on inflation worries. Bitcoin +8.2% @ 55,174.07, VIX -1.4% @ 21.00, US T10 @ 1.528% on strong ADP report.
OIL Brent -2.19%, WTI -2.52%
Gold +0.16%, Silver +0.16%, Copper -0.47% Platinum +2.65%, Palladium -1.15%.
AHEAD Initial Claims, 4 week Average Claims, Continuing Claims, EIA Natural Gas Report, Consumer Credit Change.

DAX -1.46%, CAC -1.27%, FTSE -1.15%
Markets opened lower with rising energy cost raising inflation / stagflation fears and trended lower through the morning but worked better from late morning as US ADP jobs report was stronger than F/cast. German Industrial orders were weaker than expected.
Laggards were Retail, Auto and Travel/Leisure stocks.
Tesco +6% after upgrading its outlook following strong first-half results.
TeamViewer -25% after it cut full-year guidance and reported weaker-than-expected quarterly results.
Construction PMI Sept 50 vs 49.5 Aug (F/cast was 50)
Retail Sales Aug +0.3% MoM vs -2.6% Jul (F/cast was +1%)
Retail Sales Aug 0% YoY vs +3.1% Jul (F/cast was +0.6%)
Factory Orders Aug -7.7% MoM vs +4.9% Jul (F/cast was -1.6%)
Construction PMI Sept 47.1 vs 44.6 Aug (F/cast was 48.6)
Construction PMI Sept 48.9 vs 44.9 Aug (F/cast was 48.6)
Retail Sales Aug -2.1% YoY vs 7.8% Jul (F/cast was +6.5%)
Retail Sales Aug -1.2% MoM vs -0.7% Jul (F/cast was +0.9%)
New Car Registrations Sept +2.63% YoY vs -15% Aug (F/cast was -8.6%)
Construction PMI Sept 52.6 vs 55.2 Aug (F/cast was 54.9)
Eurozone ECB Policy Meeting
Germany  Industrial Production
France Balance of Trade, Current Account
UK  Halifax House Price Index, Labour Productivity, BBA Mortgage Rate

Nikkei futures indicate a higher open +170pts following the rebound in the US.  
Yen currently 111.40
Data due pre market Foreign Stock and Bond Investment
Later Coincident Index and Leading Economic Index.
Belc Co. (9974 JP)
Lawson Inc. (2651 JP)
Life Corp. (8194 JP)
Nomura Co. (9716 JP)
Onward Holdings Co. (8016 JP)
Seven & i Holdings Co. (3382 JP)
Takeuchi Manufacturing Co. (6432 JP) 3 p.m.
Warabeya Nichiyo Holdings Co. L (2918 JP)
Tokyo reported 149 new covid cases (+5 DoD) with 1,126 nationwide.
Press reporting how the Nikkei has sold down since the LDP elected Kishida over the public’s choice of Kono; asks whether  if weakness continues will Kishida pull his redistribution rhetoric?
Japan will this month sell up to 1.03 billion Japan Post Holdings shares, which at Wednesday’s closing price would be worth 952 billion yen ($8.52 billion), a filing showed, to help with rebuilding areas hit by the 2011 earthquake and tsunami.
Japan’s Shinsei Bank Ltd is forming a panel of independent directors to weigh its response to a takeover bid from SBI Holdings, so as to ensure the “fairness and objectivity of the evaluation,” it said on Wednesday.  On Tuesday, the Kyodo news agency said Shinsei would officially object to the takeover bid.
SBI Holdings and Sumitomo Mitsui Financial Group will launch a digitalized stock exchange in Osaka in the spring of 2022 to compete against the Tokyo Stock Exchange, Nikkei has learned.
The move comes amid growing calls for alternatives to the TSE, which in the fall suffered a computer glitch that halted trading for a day.
Toyota’s premium Lexus brand outsold its German rivals in the U.S. luxury market in Q3 indicating its managing the global chip shortage better than its competitors. +VE
Nissan to Halt Mexico Plant Ops. in Oct. amid Chip Shortage: -VE
Tomoko Yoshino on Wednesday became the first female chief of Rengo, Japan’s largest labor organization, after her promotion from vice president was approved at a regular convention.  The 55-year-old Yoshino, from a labor union mainly representing small and medium-sized manufacturers, will serve a two-year term, succeeding Rikio Kozu, who led the body for six years.
Aeon results mixed; 
Aeon (8267): FY Operating Income Forecast Misses Estimates
Aeon Delight (9787): 1H operating profit +12% y/y to 8.4b yen
Aeon Fantasy (4343): 1H operating loss 2.6b yen; now expects full- year operating loss of 2.5b yen vs 1.4b yen profit previous forecast
Aeon Financial (8570): 2Q net income 6.5b yen; lifts full-year net income forecast to 23b-26b yen from 19-21b yen; boosts planned FY dividend to 45 yen/share from 40 yen.

Expect markets to open higher following the US rebound with bargain hunting in large Tech as SEC and Hynix hit annual lows yesterday.  
Data out 
Current Account Aug $7.51b vs $8.21b (F/cast was 8b)
Slight -VE
KDCA reported as of Tuesday at midnight, the number of new cases had increased by 2,028 in the previous 24 hours, for a cumulative total of 323,379 cases to date. Of the new cases, 2,002 were locally acquired.  Of South Korea’s population, 77.5% is partially vaccinated and 54.5% is fully vaccinated.
Finance Minister Hong Nam-ki said Wednesday the government will impose a tax on gains from virtual assets, such as cryptocurrencies, next year as planned.
SAMSUNG (005930): 
1) To mass-produce 3-nm semiconductors in 1H next year, for the first time in the industry; TSMC plans to apply such process from July next year - Maeil;
2) iPhone 13 shortage lifts pressure on Android rivals - Digitimes;
3) 3Q PRELIM tomorrow, FN Guide Consensus Sales W73.9tn, OP W15.8tn
1) To apply ADAS front camera jointly developed with Daimler AG, to Mercedes-Benz 'C-Class' model; Expects to secure additional orders from Benz, and other global automakers - The Elec;
2) 3Q PRELIM tomorrow, FN Guide Consensus Sales of W18.1tn and OP of W1.1tn
South Korea’s housing prices in the first nine months of this year spiked nearly 12%, surpassing the annual gains observed in 2001 and 2006, when the instability of the local real estate market triggered by the previous financial crisis concerned onlookers and buyers, data showed Wednesday. Slight -VE for sentiment but +VE Developers
Hyundai Motor’s little mini SUV, the Casper, is here, creating a buzz in the A-segment market, where the competition has long been dull. This new Casper is Hyundai’s first A-segment release in 19 years, and already it’s received record preorders. Even the president lined up to buy one. The Casper is slightly more expensive than its rivals the Chevrolet Spark and the Kia Ray, but there’s a reason for that. It comes with advanced driver assistance functions that are often left out of the compact car segment.  +VE
The sales volume of Galaxy Z Fold3 and Flip3 has surpassed 1 million in South Korea, according to Samsung Electronics on Wednesday. +VE
LG Innotek said Wednesday the company is taking part in an international trade show for substrates and chip packaging technologies 
to showcase its newest products and technologies. +VE

Expect market to open higher following the US with interest in Tech No data due but after market Wednesday
Inflation Rate Sept +2.63% YoY vs +2.35% Aug revised from 2.36% (F/cast was +2.6%)
Inflation Rate Sept 0.51% MoM vs +0.31% Aug (F/cast was +0.2%)
CPI was boosted by increasing fuel, airfare and food costs.
Wholesale Prices Sept +11.96% YoY vs +11.96% Aug revised from 11.88% (F/cast was +12.3%)
The Chinese military’s record number of incursions into Taiwan’s air defense identification zone (ADIZ) has undermined peace in the region, President Tsai Ing-wen said yesterday, warning Beijing against further actions that could accidentally spark conflict across the Taiwan Strait.  “Chinese aggression has severely undermined regional peace and stability,” Tsai said at the weekly meeting of the Democratic Progressive Party’s Central Standing Committee. “Beijing must refrain from going too far and accidentally sparking conflict across the Strait.”  
Taiwan’s Foreign Ministry said on Wednesday Washington had reassured them that its approach to the island had not changed, a day after President Joe Biden said that he and Chinese President Xi Jinping agreed to abide by the “Taiwan agreement.”
A group of French senators arrived in Taiwan on Wednesday for a five-day visit to show support for the self-ruled island amid mounting tensions between Taipei and Beijing. +VE
TSEC Corp yesterday said it is investing NT$1 billion (US$35.75 million) to expand large-sized solar module capacity and a logistic facility at its plant in Pingtung City in expectation of rising demand for clean energy next year.  The investment would bring TSEC’s annual solar module capacity to 1.5 gigawatts, a 50 percent increase from the current level, the company said in a statement.
The new production line would be completed in September next year and enter volume production in the fourth quarter of the same year, the firm said.
Taiwan’s machine tool exports are expected to get a “transformational boost” should Taiwan join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Taiwan Machine Tool and Accessory Builders’ Association said yesterday.  Potentially +VE
Wisdom Marine Lines Co’s pretax profit last month soared 36-fold from a year earlier to NT$1.34 billion (US$47.91 billion), as revenue hit a record NT$1.7 billion on the back of higher shipping rates, the company said yesterday.  Q3 revenue surged 21-fold from a year earlier to NT$2.68 billion, the nation’s largest dry bulk shipper said in a statement. Wisdom Marine said it remains upbeat for this quarter, despite power rationing in China. +VE

Market closed re-opens Friday
Data due Foreign Exchange Reserves
GlobalFoundries said in its prospectus that the Chengdu factory halted operations due to ‘a variety of factors, including unanticipated market conditions’ ; comes as it set aside a provision of US$34 million in June to settle the potential compensation.  For Chengdu’s government, the failed JV with GlobalFoundries has deprived the city of a chance to put itself on the semiconductor production map, at a time when China is pushing domestic chip-making capabilities.   Highlights the challenge China faces in trying to enter the chip making sector. -VE
GIC Weighs Portfolio Changes on China’s Regulatory Crackdown
China Tech Stock Gauge Falls to Record Low as Yields Rise -VE

ADR’s +26pts @ 23,992 weakness in Chinese Financials but HSBC +VE, ECommerce mixed, Energy weak. Increased short selling yesterday means that an initial short squeeze likely.
Data due Foreign Exchange Reserves

TAM JAI INTL (02217.HK),  debut today (on the 7th opened flat at $3.33 in the gray market, before dropping to as low as $2.94 at one point, PhillipMart data showed. The stock last posted $3.05, down 8.4% against its listing price of $3.33, on a volume of 4.7 million shares.

SHORT SELLING HSI Wednesday 23.4% vs 19% Tuesday
Top shorts
  Bud Apac (1876) 61%, Country Garden (2007) 53%, Wharf REIC (1997) 52%, China Overseas (688) 47%, Ali Health (241) 45%, MTRC (66) 45%, Haidilao (6862) 44%, HKEX (388) 42%, AIA (1299) 42%, HK & China Gas (3) 40%, Hengan (1044) 40%, BDY (1211) 38%, Sands China (1928) 40%, Wuxi Bio (2269) 34%, Shenzhou (2313) 34%, Power Assets (6) 33%, AAC Tech (2018) 33%, Henderson Land (12) 32%, CKI (1038) 32%, ICBC (1398) 31%, Xiaomi (1810) 30%, CM Bank (3968) 30%, Xinyi Solar (968) 30%, SHKP (16) 29%, Hang Seng Bank (11) 28%, HSBC (5) 27%, Petrochina (857) 27%, CKH (1) 26%, Geely (175) 26%, CLP (2) 26%, CCB (939) 26% , CK Asset (1113) 25%, Bank of China (3988) 25%, China Res Land (1109) 25%.

Chinese Estates to be taken private by Solar Bright  
The company currently holds 582.3m Evergande shares.  

European companies are discussing relocating staff from Hong Kong, the European chamber of commerce said, as the city commits to a “Covid Zero” strategy that almost every country apart from China is abandoning.   
Hong Kong’s strict quarantine measures have led many businesses to consider restructuring at least part of their operations to places such as Singapore, Frederik Gollob, chairman of the European Chamber of Commerce  said Wednesday on Bloomberg Television. -VEHKEX (00388.HK), responding to the Policy Address, said it is looking forward to the promotion of trading of RMB-denominated securities in Hong Kong with the SFC, HKMA and the industry, and explore the feasibility of the inclusion of RMB-denominated securities in southbound trading under Stock Connect. The HKEX will make announcement on the latest update to the market where appropriate.

CHINA GAS HOLD (00384.HK) announced that it repurchased 1.2606 million shares of the company on the Stock Exchange on 6th Oct at a repurchase price between $21-21.2 per share, involving approximately $26.5926 million.CLP HOLDINGS (00002.HK)  said it  welcomes and supports the clear roadmap announced in the Policy Address to help Hong Kong achieve carbon neutrality before 2050. CLP Power will offer its full support to the Government and work closely with the community on the best way forward to introduce new zero-carbon energy sources and reduce the carbon intensity of power supply.

BAUHAUS INT'L (00483.HK)  announced that for the six months ended 30 September 2021, the same-store sales growth declined 11% YoY, among which those of Hong Kong and Macau fell 10% and 13% YoY.  It announced that it has completed the disposal of the property located at 2nd Floor of Wofoo Building, Tsuen Wan by the end of the previous month.  The company's board of directors proposed to utilise the proceeds obtained from the disposal for the payment of a 2nd special dividend to its shareholders. The group has subsequently resolved the declaration and payment of the 2nd special dividend of HK18.5 cents per ordinary share of the company to be payable to the shareholders whose names appear on the register of members of the company on Monday, 25 October 2021.

RONSHINECHINA (03301.HK) announced that during the month ended September 2021, the total contracted sales of the Group amounted to approximately RMB12.523 billion, down 19.7% year-on-year.

The Centa-Salesman Index (CSI) (for residential selling prices) last posted at 57.24, down 0.85 pts weekly.  Said the research department of Centaline Property, it noted positive market sentiment prior to the Policy Address release. The index stood firmly aloft the 45-55 range, foretelling no property price decline. CSI will factor in a raft of favorable news from today's Policy Address in the coming weeks.

The Government has identified about 350 hectares of land to produce some 330,000 public housing units for the coming 10-year period, said Chief Executive Carrie Lam at a press conference.
Lam estimated that up to one million public and private homes will be available in the next 20-25 years, considering reclamation works for the Kau Yi Chau Artificial Islands, New Territories North development areas and flats to be built in the Northern Metropolis. Hong Kong's housing plights could be tackled thoroughly upon successful rollout of various land expansion projects.
Regarding Northern Metropolis' buildout cost, Lam believed Hong Kong can make money off the land by home building and land expansion, while solving cash flow problems by bond issuance. The Government would also like to offer more green bonds. There is hence no need to worry about such financial burden.Daily Journal Corporation (DJCO.US) +0.960 (+0.299%) owned by Warren Buffett's partner Charlie Munger has expanded its stake in the U.S. shares of Alibaba Group Holding Limited (BABA.US) by 82.7% within a single quarter, as of the end of September 2021, at an average price of USD182.3 per share, according to the document filed by the company to the U.S. Securities and Exchange Commission (SEC). As of the end of September, DJCO holds approximately 302,000 U.S. shares of Alibaba, accounting for 19.86% of its entire investment portfolio.

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