Sept 22 Asian Macro Initial Thoughts: Japan, Taiwan & China open. S Korea and HK closed

22 Sep

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Asia; markets closed S.Korea and HK. Re-opening Taiwan & China.
Oil rising after market as US API data shows a larger than expected drawdown. Caution ahead of BoJ and FOMC decisions but for opposite reasons. China Prime Loan data no change expected but investors are looking for Beijing’s view on Evergrande; and whether PBOC injects liquidity into the market.

Australia Futures indicate market to open -14pts but downside limited by the rally in oil prices and the API data after market US showed a higher than expected drawdown. Gold also rose but Iron Ore remains weak.
Ex Div Challenger Ltd (ASX: CGF), Insurance Australia Group Ltd (ASX: IAG), Sandfire Resources Ltd (ASX: SFR), Sonic Healthcare Limited (ASX: SHL), and Suncorp Group Ltd (ASX: SUN).
Data due Leading Index
Japan Nikkei futures opened -66pts but have dropped further currently -120pts; caution ahead of the BoJ rate decision and press conference.
S Korea Markets closed.
Taiwan Market to open lower but downside likely to be muted following the recovery in the US overnight and with limited exposure to Evergrande.
China Market to open lower FT A50 futures -29pts but expect more downside as local investors react to the  news Evergrande failed to make payments
HK ADR’s -119pts @ 24,102 with broad  weakness, only HK EX, Tencent and Meituan +VE.  But market closed re-opens Thursday.
US Futures  
Opened lower Dow futures -30 points, or 0.09%. S&P 500 -0.13 and Nasdaq 100 futures -0.18%.

DOW -0.15%, NDX +0.22%, S&P -0.08%, Russel 2K +0.18%  on light  volumes.
Markets opened higher but had a roller coaster day but ended around the day lows with caution ahead of the FOMC announcement on Wednesday.
Uber +11% after raising its outlook for Q3. ConocoPhillips +4% as energy stocks rebounded
Disney -4% as CEO Bob Chapek warned investors about potential headwinds for Disney+ subscriber growth in Q3
After Market
Stitch Fix +15% onstrong earnings, Adobe -3% despite beating, Hyatt Hotel -3% announced offering 7m class A shares to finance purchase of Apple Leisure Group.
Banks JPMorgan Chase flat, Citigroup -0.6% Wells Fargo +0.1%, Amex +1.7%
Work from home names: Facebook +0.5%, Apple +0.3%, Amazon -0.4%, Netflix -0.4%,  Disney -4.2%, Zoom Video -0.9%, Alphabet +0.2% and Microsoft +0.2%,
Tech NXP Semi +1.6%, Nvidia +0.6%, Micron -0.3%, AMD +1.3%, Skyworks +0.2%
Re-opening stocks  Boeing -0.5%, Caterpillar -0.5%, Simon Property +0.7%, Kohl’s -0.7%, Nordstrom -0.3%, Gap -2.3%, United Airlines -1.8%, Carnival -1.2%, Wynn Resorts -4.1%, Chevron +0.1%, Exxon Mobil -0.1%,  
Lock down names Campbell Soup -0.9%, General Mills -1.3%, JM Smucker -1.5%
Current Account Aug $-190.3b vs -195.7b Jul (F/cast was -192b)
Housing Starts Aug +3.9% MoM vs -7% Jul (F/cast was +2%)
Building Permits Aug +6% MoM vs +2.3% Jul (F/cast was -1.8%)
Redbook 17.1% vs 15.3% prior
After Market
API Crude Oil Stock Change -6.108m vs -5.437m (Concensus was -2.4m)
USD was slightly stronger. Bitcoin -4.9% @ 41,504.11, VIX -5.3% @ 24.36, US T10 @ 1.328% a small rebound pre FOMC announcement
OIL Brent +1.1%, WTI +0.31% as supply drops after the recent storms
Gold +0.63%, Silver +1.3%, Copper -0.1% Platinum +5.7%, Palladium +1.4%.
MBA Mortgage Applications and 30 yr Mortgage Rate, EIA Oil Report, FOMC Interest Rate Decision.
UN General Assembly

DAX +1.43%, CAC +1.5%, FTSE +1.12%
Markets opened higher, rebounding from Monday’s weakness. Travel & Leisure lead on US easing immigration restructions for vaccinated visitors. Basic resources and oil & gas were +VE. Gas in focus as shortages become evident, with the UK Govt poised to decide about intervention to assist energy companies
Universal Music Group +36% surging in its stock market debut.
Entain +18% as news reported DraftKings had made a $20 bn takeover offer for firm.
Airlines continue to rally on news the US will allow vaccinated foreign travelers
Kingfisher -4.9% despite reporting a 61.6% jump in first-half pretax profit largely thanks to a home improvement boom during the pandemic.
Public Sector Net Borrowing Sept £-20.5B vs £-6.9B Aug revised (F/cast was £-14.2B)
CBI Industrial Trends Orders Sept 22 vs 18 Aug (F/cast was 15)
Eurozone ECB Non-Monetary Policy Meeting, Consumer Confidence Flash
Germany No data due
France No data due  
UK  No data due

Nikkei futures opened -66pts but have dropped further currently -120pts; caution ahead of the BoJ rate decision and press conference. Expect continued weakness in companies with exposure to China and Evergrande.
Yen currently 109.19 slightly stronger
Data due BoJ Rate Decision expected to keep monetary policy steady as weak growth and deflation risks the primary concerns.  Sets it oput as different Central Banks who are considering the withdrawal of crisi support for their economies.
Tokyo reported 253 new covid cases +VE with hopes state pf emergency will be lifted at the end of the month.    Elderly to get booster shots early 2022.
Exposure to China/Evergrande include Toto, Daikin, Nippon Paint, Komatsu, Hitachi Construction Machinery, Softbank.  GPIF thought to be exposed to Evergrande Bonds -VE.   Although Softbanks impact may be offset by the rise in Uber & Lyft overnight in US.
Autos remain weak on semiconductor shortages; Honda announced output at 40% Aug/Sept and 70% for Oct.  Daihatsu Motor said it will suspend operations of all of its five vehicle assembly plants in Japan for up to nine days in October -VE.
Mitsubishi UFJ Financial Group Inc. plans to sell part of its American banking unit MUFG Union Bank to U.S. Bancorp in a deal expected to be worth over ¥1 trillion ($9.12 billion), sources familiar with the matter said Tuesday +VE
The average price of land in Japan as of July 1 fell 0.4% YoY for the second consecutive year of declines amid the prolonged coronavirus pandemic, according to government data. -VE
Nishimatsu (1820) announces share buyback of 15m shares for Y60B until Nov 30. +VE
Sony announces its fall line up of games for Playstation on new studio; as God of War and Horizon Forbidden West are delayed to next year. Initial feedback is +VE

Markets closed
No data due
KDCA reported 1,729 new cases rising DoD despite few tests and raising concerns of a surge post the Chuseok holiday. -VE
South Korea President Moon Jae-in on Tuesday addressed the U.N. General Assembly and repeated a call for a declaration to formally end the 1950-1953 Korean War.

Expect market to re-open lower although downside muted following the recovery in the US overnight and with limited exposure to Evergrande.  China continues to carry out  military exercises southwest of Taiwan and halts the import of some Taiwanese apples citing pests.
Data due after the market Unemployment Rate F/cast 3.9% (Trading Economics) 4.7% (Bberg); prior was 4.36%
CECC reported 5 imported covid cases and no local cases +VE
TSMC +VE after power outage at Germany’s semicon hub in Dresden.  The outage led to many IDMs to suspend production. Meanwhile, media comments that despite the IDMs having resumed production, this has already led to more twists and turns in 3Q21 auto-use semiconductor supply chain and may even impact firms’ 4Q21 supply chain schedulesmeaning TSMC likely to win rush orders.
Hon Hai Precision (2317)  confirmed it is issuing NT$15.45bn worth of unsecured corporate bonds that its board approved previously. The funds will be used to pay back certain loans.  It is hoped by analysts in 2021 to easily post net profit higher than the 2020 level that shed 11.7% yoy to NT$101.8bn. The upbeat mood is fueled by a red-hot NB market, continued popularity of iPhone 12, and the start of sales of iPhone 13. It is expected that shipments of iPhone 13 will jump 10% as compared with iPhone 12. +VE
IPhone/Ipad  Strong pre-orders of iPhone 13 on China’s and TMall will benefit iPhone 13 supply chain firms, such as Hon Hai (2317), Pegatron (4938), TSMC (2330), Largan (3008), Flexium Interconnect (6269), Unimicron Technology (3037), Advanced Wireless Semiconductor Co. (8086), and Kinsus Interconnect Technology (3189), boosting their 4Q21 sales.   iPad mini 6 is reportedly said to be popular with consumers as Apple’s web site in China announced orders booked will be shipped in 4-6 weeks, or compared with the iPhone 13 Pro and iPhone 13 Pro Max which will take 4-5 weeks. Pundits expect this bodes well for Hon Hai (2317), Compal Electronics (2324), TSMC (2330), GIS (6456), TPK (3673), Zhen Ding Technology (4958), and ASE Technology Holding (3711). +VE
Chunghwa Telecom Co (CHT) yesterday said that it is accelerating its 5G network deployment to widen its service coverage and aims to install 12,000 5G base stations by the end of this year, compared with more than 10,000 currently. The nation’s biggest telecom also expects its 5G subscriber base to grow to about 2 million users by the end of the year, one-and-a-half years after it launched commercial 5G services. As equipment costs have declined, the company said that it would retain record capital expenditures of NT$43.1 billion (US$1.55 billion) for this year, with NT$15.7 billion earmarked for mobile telecom infrastructure construction. +VE
Several Taiwanese manufacturers in Vietnam have been struggling with production problems over the past few weeks, as the country’s south remains under a COVID-19 lockdown.  Pou Chen Corp an ODM for international footwear brands, said that production at its factory in Ho Chi Minh City has ground to a halt, so it expects a significant drop in revenue at that factory from July to last month.   Feng Tay Enterprises, said production at its Vietnamese factories has been suspended for about two months.  Fu Sheng Industrial, a Taiwanese company that makes golf club heads, said its production in Vietnam had been suspended since the end of July, but it was optimistic that the situation would gradually return to normal in the fourth quarter, as the vaccination rate in Vietnam has been rising and some production has been re allocated to China.
The Cingshuei Geothermal Power Plant, the first privately built geothermal plant in Taiwan, is set to obtain a commercial license by the end of this month. The 4.2 megawatt (MW) plant in Yilan County would generate enough electricity to power 10,000 households and has potential for expansion to further utilize the area’s geothermal resources +VE.
Total mortgages offered by the nation’s banks continued to grow in July, albeit at a slower pace following amendments to the Income Tax Act , which took effect on July 1, data compiled by the Financial Supervisory Commission showed last week.  The revised “integrated house and land transaction income tax” is 45 percent on gains from the sale of property within two years of purchase, and 35 percent on sales made within two to five years of purchase.  The new tax rates apply to individuals and institutions. -VE
MediaTek Inc  retained its position as the fourth-largest IC designer globally in terms of sales for the second quarter of the year, but the Taiwanese firm showed higher growth than the average among the world’s top 10 companies, Taipei-based market information advisory firm TrendForce Corp said. +VE

Expect market to re-open lower with concerns over policy regarding the property sector.  Concerns over the covid outbreak in Fujian.
Data due
Loan Prime Rate 1 & 5 year
Chinese leader Xi Jinping said on Tuesday that China would not build new coal-fired power projects abroad, using his address at the United Nations General Assembly to add to pledges to deal with climate change.
Xi provided no details, but depending on how the policy is implemented, the move could significantly limit the financing of coal plants in the developing world.
Persistent default fears eclipsed efforts by China Evergrande Group's chairman to lift confidence in the embattled firm on Tuesday, as Beijing showed no signs it would intervene to stem any domino effects across the global economy.  In my view this is not a Lehman moment but more like an AIG one; where the domino effect means a more co-ordinated response and is why Beijing has appointed its own team to review the company.

Market closed but ADR’s pts at
No data due
SHORT SELLING HSI Tuesday 17.1% vs 22.2% Monday
Top shorts   
Henderson Land (12) 49%, Wharf REIC (1997) 49%, Country Garden (2007) 48%, Haidilao (6862) 44%, BYD (1211) 40%, Bud Apac (1876) 38%, New World Dev (17) 35%, MTR (66) 34%, Hang Lung Ppty (101) 31%, CK Asset (1113) 31%, Hang Seng Bank (11) 30%ICBC (1398) 30%, Petrochina (857) 29%, Bank of China (3988) 27%, AIA (1299) 26%, Sunny Optical (2382) 26%, Wuxi Bio (2269) 26%, Xinyi Glass (868) 26%, SHKP (16) 25%,

CHINA TELECOM (00728.HK) announced that China Telecom Corp., the controlling shareholder of the company, proposed to increase its shareholding in the company's A-shares by an amount of not less than RMB4 billion, 
as and when appropriate, during the twelve-month period from 22 September 2021.

FUJIAN HOLDINGS (00181.HK) announced that Chen Yangbiao has resigned as the Chairman and an executive Director with effect from 21 September 2021 
due to other work commitments in Mainland China.FOSUN PHARMA (02196.HK) announced that the Company completed the issuance of the third tranche of super short-term commercial paper for 2021 in the aggregate principal amount of RMB1.2 billion with a term of 210 days. The value date is 18 September 2021. The coupon rate is 2.6%.

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