Sept 27 Asian Macro Initial Thoughts; Expect a weak open with China power shortage a concern.

27 Sep

This and previous notes can be found at Substack ( Asian Market Sense )
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Asia shortened trading week for China and Hong Kong. Evergrande and the potential knock on effects to the mainstream and shadow banking systems. The deal to release Huawei’s CFO annoucned Friday saw her leave Canada and two Candians held in China on their way home but unlikely to ease tensions between the US, Canada and China. On Friday China published ‘List of facts about US interference in Hong Kong affairs and support of anti-China forces in Hong Kong’

Baron’s highlights stocks that are aligned with China policy; CATL, BYD (1211 HK), Nari Tech (600406 CH), Sino Wealth Electronic (300327 CH), Wuxi Bio (2269 HK), AIA (1299 HK), Huazhu Group (HTHT), East Money Info (300327 CH).

Australia Futures indicate market to open slightly higher +2pts.  Energy, Gold and Iron Ore names +VE as oil, gold and Iron Ore prices move higher.   Cross read from ladt week’s Nike numbers -VE for Super Retail group and Accent Group.
Japan Nikkei local futures +45pts,  Chicago Nikkei Futures  +40pts but upside limited ahead of LDP leadership election.  Also this week a Topix and Nikkei rebalance.
S Korea Expect markets to open flat with limited upside as investors watch the implications of Evergrande, Power Shortages in China and the surge in covid cases.
Taiwan Market to open flat as investors turn cautious over growth in China.
China Market to open lower the Dragon Index closed lower, a shortened trading week, the crypto ban and Evergrande’s futures continues to overhang the market as its car unit, New EV, scraps its Shanghai Star board listing. Additionally news of industry power cuts to meet emission targets also -VE.  
HK ADR’s -152pts at 24,040 but with Friday closing lower expect more margin call selling and for the index to open below 24k.
Europe  German election provides no clear winner so the interparty negotiations likely to take weeks to provide a new government; SPD expected to win the largest share.
US Futures 
Opened Dow +20pts, S&P and NDX little changed.

Nikkei local futures +45pts but easing,  Chicago Nikkei Futures  +40pts but upside limited ahead of LDP leadership election.  Also this week a Topix and Nikkei rebalance.
Yen closed 110.72
Data due 1pm 
Leading Economic Index Final Jul (Jun was 104.6 F/cast is 104.1)
Coincident Index Final Jul (Jun was 94.6, F/cast is 94.5).
Health ministry data shows there were 2,661 new cases confirmed nationwide on Saturday, a dramatic drop from the middle of last month when the daily tally routinely topped 20,000 and peaked over 25,000.
Leaders of the United States, Japan, India and Australia presented a united front on Friday at their first summit and stressed the need for a free and open Indo-Pacific region amid shared concerns about China.
The two-hour meeting at the White House of the Quad, as the grouping of the four major democracies is called, will be watched closely in Beijing, which criticized the group as "doomed to fail."
While China was not mentioned in the public remarks by the four leaders, Beijing was clearly top of mind. They agreed to cooperate on such fields as COVID-19 vaccines, and clean energy and space.
Candidates to become Japan’s next prime minister all said on Friday they supported Taiwan’s application to join a trans-Pacific trade pact, echoing Japanese officials’ remarks saying Taiwan shared values like democracy.  Voting for the position takes place on Wednesday.
Panasonic Corp. will eliminate more than 1,000 jobs in Japan at the end of the month through an early retirement program as part of its planned structural reorganization, a company source familiar with the matter said.  Slight +VE
SBI Holdings said on Friday it would extend the deadline for its $1.1 billion unsolicited tender offer for Shinsei Bank to Nov. 24 from Oct. 25 if Shinsei agreed to meet certain conditions.
Renewable energy companies are betting that the leading contender in the race to become Japan's next prime minister, Taro Kono, will unleash changes allowing more market access and a fairer playing field after years of neglect.
Japan is making final preparations to shorten the period of quarantine for people fully inoculated against COVID-19 from 14 to 10 days and allow them to immediately self-isolate at home, even when returning from higher-risk locations, the health ministry said Friday. Likely to become effective in October.

Expect markets to open flat with limited upside as investors watch the implications of Evergrande, Power Shortages in China and the surge in covid cases.
No data due.  
KDCA reported 3,273 new covid cases Saturday  
(+839 DoD) a new high. Thought to be a result of the Chuseok holiday gatherings.
Kakao Pay Corp said on Friday it had decided to push back its planned initial public offering, 
worth as much as 1.5 trillion won ($1.28 billion), to November from October.
The sister of North Korean leader Kim Jong-un said Friday that President Moon Jae-in's proposal to declare a formal end to the Korean War is an "admirable idea" and Pyongyang is willing to discuss improving inter-Korean relations if Seoul ceases to be hostile toward it.
Samsung Electronics and Harvard on Sunday introduced a new approach to mimicking the mechanism of a human brain on a memory chip.  In a paper published in Nature Electronics, Samsung engineers and Harvard researchers explained how to create memory devices that can better mimic the unique computing traits of a human brain -- low power, facile learning, adaptation to environment and autonomy and cognition.  Slight +VE
A Seoul district court has ruled Samsung Securities Co. must compensate investors for half of their damages incurred due to a 2018 dividend error by an accidental stock issuance, judicial sources said Sunday. Slight  -VE
South Korea's full service carriers, including Korean Air Lines Co., are predicted to post strong earnings in the third quarter of the year on the back of a rise in air cargo rates, analysts said Sunday. +VE
Samsung was among a list of companies including TSMC, Intel, Apple, Microsoft and some automakers, which tuned into the US meeting on chip supply chains held via teleconference, according to the reports. The companies were asked to submit documents including information about their supply chains in the US in the next 45 days. The information requested by the US government includes chip stockpiles, orders and sales records, according to a report by Bloomberg.
LG Energy Solution announced Friday that the company and UC San Diego have co-developed a new solid-state battery that is safer and more durable than existing ones. The research results have been published in Science, one of the top peer-reviewed academic journals, the company added.
Lotte Department Store is offering its first-ever voluntary retirement since first opening 42 years ago.
Twenty-nine of Korea’s 66 cryptocurrency exchanges met a legal deadline to put themselves under regulatory supervision, but they still face challenges, market insiders said Sunday, such as risks from legal breaches and an inability to convert coins into Korean won.  Slight +VE for sentiment.

Market to open flat as investors turn cautious over growth in China. Longer term Taiwan is getting more international support; its application to the CPATPP along with a number of countries calling for the UN to recognise the country could prompt wider investment interest.
Data due after market
Industrial Production and Retail Sales
After market Friday
Export Orders Aug +17.6% YoY vs 21.4% Jul (F/cast was +18%)
The ministry expects export orders to rise again this month, with growth coming from information and communications technology (ICT) and electronic products.
The Executive Yuan on Friday revealed the schedule for Taiwan’s indigenous missile and warship production.  The schedule is part of a draft bill on the nation’s sea and air combat power enhancement program that the Cabinet submitted to the legislature.The NT$240 billion (US$8.65 billion) program, to be implemented from next year to 2026, would also include the acquisition of long-range cruise missiles, upgraded air defense systems and modern warships.  +VE Defence stocks.
Public confidence in Taiwan’s economy improved this month amid a stabilizing COVID-19 situation and relaxed disease prevention measures, a Cathay Financial Holding Co survey showed on Wednesday. The survey of 22,037 people conducted from Sept. 1 to 7 showed that nearly half of respondents expected the local economy to improve over the next six months, compared with 48 percent in a poll conducted early last month. +VE
Long-term polling data show that a majority of Taiwanese feel that the Taiwan-US relationship is more important than the Taiwan-China relationship, National Chengchi University professor Tsai Chia-hung told a panel on national security and the state of Taiwan-China relations held yesterday by the Democratic Progressive Party (DPP).
Telecoms expect sales of Apple Inc’s iPhone 13 series to boost 5G penetration and average revenue per user this year, company executives said Friday.  Almost all executives from the nation’s major telecoms have a bullish view about demand for the new iPhone series, the second-generation 5G phones from Apple, given performance enhancements and discounted retail prices over previous generation models.
China Steel Corp (中鋼), the nation’s largest steel maker, yesterday said that its board of directors approved a NT$5.51 billion (US$198.69 million) investment in a wind energy venture to embrace global carbon-neural trends.  The company plans to inject fresh capital into its offshore wind subsidiary, a joint venture with Denmark’s Copenhagen Infrastructure Partners.
CPC Corp, Taiwan  yesterday said that its gasoline and diesel prices would remain unchanged from last week, a move echoed by the privately run Formosa Petrochemical Corp.CHINA
Expect market to open lower with the overhang from Evergrande and now HNA as Chairman and CFO detained by the police. Additionally news of industry power cuts to meet emission targets also -VE.  
US listed China stocks closed lower Friday across the board.
Data due Industrial Profits (YTD) for Aug (Jul was 57.3% F/cast is 45%)
China's National Health Commission reported 38 confirmed COVID-19 cases, with 10 of them being local infections (8 recorded in Harbin, Heilongjiang; 2 in Fujian).
People's Bank of China (PBOC) announced that the trading and speculation activity of virtual currency is posing disturbance to the financial order and is inducing other illegal and criminal activities, which severely threatens the property safety of the people. The PBOC expressed that Chinese financial institutions and non-bank payment institutions are strictly forbidden from providing services to virtual currency-related businesses, in order to prevent relevant risks of virtual currency speculation and to safeguard national security and social stability. It also ruled that it was illegal for overseas financial institutions to provide crypto services to Chinese citizens. It would appear that Beijing is seeking to prevent capital flight from China as ‘common prosperity’ comes into play.
Chinese President Xi Jinping warned that relations between Beijing and Taipei were "grim" on Sunday, urging the island's main opposition party to help seek "unification of the country."  China views self-ruled democratic Taiwan as part of its territory and vows to retake it one day, by force if necessary.  Xi has become the most bellicose leader since Mao Zedong, describing the seizure of the island as "inevitable."  In a congratulatory letter to Eric Chu -- the newly elected leader of the Beijing-friendly Kuomintang (KMT) party -- Xi said the Chinese Communist Party and the KMT should collaborate under a "shared political basis."
Tesla Inc chief executive officer Elon Musk yesterday spoke at the opening of China’s World Internet Conference, reassuring Beijing about his company’s commitment to invest and expand in the country against a backdrop of unprecedented economic turbulence. The summit was opened by Chinese President Xi Jinping’s promise that China would work with all countries to create a vibrant digital economy and improve supervision effectiveness, in remarks delivered by Chinese Vice Premier Liu He  +VE
HNA Chairman and CEO detained by the police. The company is under state control, said they were taken into custody on Friday over suspected crimes, without providing details of the alleged offences. -VE
FT Reports Chinese liquor baron Yuan Renguo, former chair of Kweichow Moutai jailed for life in Xi’s anti-graft campaign. Having been arrested in 2019 a year after leaving the company. Gives an indication of risk that company managements have in China.
China planning to create two rare earth mining giants to get better pricing power by consolidating all its existing rare earth miners. One operating in the south of China for medium to heavy rare earth’s. The other in the north for all light rare earths. Impact on Chalco, Minmetals and others.

ADR’s -152pts at 24,040 but with Friday closing lower expect more margin call selling and for the index to open below 24k. Caution with a shortened trading week and Golden Week in China from Friday.
No data due

SHORT SELLING HSI Friday 20% vs 17.9% Thursday
Top shorts 
Wharf REIC (1997) 51%, Haidilao (6862) 46%, Country Garden (2007) 44%, Henderson Land (12) 41%, China Overseas (688) 36%, Power Assets (6) 36%, HKEX (388) 33%, MTR (66) 33%, Meituan (3690) 31%, CH Res Land (1109) 31%, Wuxi Bio (2269) 31%, CM Bank (3968) 30%, Mengniu Dairy (2319) 30%, Petrochina (857) 30%, Bud Apac (1876) 30%,  Galaxy Ent (27) 30%, Ali Health (241) 29%, Bank of China (3988) 29%, AAC Tech (2018) 28%, BYD (1211) 28%, CKI (1038) 25%, CLP (2) 25%, HSBC (5) 25%, BoC HK (2388) 25%.

Ten district councilors from Kowloon saw their oaths taken Friday not yet determined as valid
by the government, while Leos Lee Man-ho lost his seat after he was absent at the ceremony.

APAC RESOURCES (01104.HK)  announced the annual results for the fiscal year ended by June 2021. The total revenue grew 29.3% YoY to HK$565 million. A net profit of HK$1.357 billion was recorded, compared to a loss of HK$429 million for the previous fiscal year.
EPS was HK111.35 cents. A final dividend and a special dividend of HK10 cents each were declared.

INT'L ENT (01009.HK) announced the results for the fiscal year ended by June 2021. The revenue for the period amounted to HK$64.9 million, down 71.4% YoY. The loss narrowed to HK$242 million, compared to a loss of $280 million for the previous fiscal year. LPS was HK17.68 cents. No final dividend was declared.

CHAODA MODERN (00682.HK)  announced the annual results for the fiscal year ended by June 2021. The revenue stretched 1.8% YoY to RMB73.65 million. The loss, on the other hand, widened to RMB26.4 million from the loss of RMB13.91 million in the previous fiscal year. LPS was RMB0.8 fen. No final dividend was declared.

TOP EDUCATION (01752.HK)  announced the results for the fiscal year ended by June 2021. The revenue for the period amounted to AUD24.85 million, down 18.4% YoY. Net profit plunged 95.8% to AUD185,000.
was AU0.008 cents. No final dividend was declared.

Reports that Beijing has taken oversight of Evergrande’s accounts to ensure existing prepaid units are built and delivered.  
That is likely to constrain the groups ability to pay bond holders. 

YONGDA AUTO (03669.HK)  announced that, on September 24, 2021, the company repurchased 500,000 shares at the highest and lowest prices of HK$11.74 and HK$11.20 per share, respectively.  
The aggregate purchase price paid in respect of the share repurchase was approximately HK$5.748 million.

XIAOMI-W (01810.HK)'s statement disclosed that, on 24 September, it has repurchased 4.44 million shares of the company on the Stock Exchange, at a price ranging between $22-22.5 per share, involving a total of approximately $98.73 million.

TENCENT (00700.HK)'s statement disclosed that, on 24 September, it has repurchased 220,000 shares of the company on the Stock Exchange, at a price ranging between $456.6-472.4 per share, involving approximately $102 million.

CKH HOLDINGS (00001.HK)'s statement disclosed that, on 24 September, it has repurchased 310,000 shares of the company on the Stock Exchange, at a price between $51.2-51.55 per share, involving a total amount of approximately $15.94 million.

CALC (01848.HK) announced that China Asset Leasing, a subsidiary of the Company, entered into the Agreements to purchase four lease-attached aircraft from ARI's China Aero Assets Leasing. 
The consideration payable by the Company represents a discount of approximately 10% against the valuation of the Aircraft.HKRH (02882.HK) Profit Warning it announced that the group is expected to record a substantial decrease in loss by more than 70% for the year ended 30 June 2021 as compared to the financial year ended 30 June 2020.

In the Executive Committee meeting of The Real Estate Developers Association of Hong Kong (REDA) held today (24th), members discussed a story reported by a foreign news agency of the alleged concerns of unnamed Mainland officials about Hong Kong’s housing problem, according to REDA's statement. 
Members of the Executive Committee clarified that they had not heard of the subject of the story and neither had REDA. As a member of the society, REDA has all along been paying care and attention to the livelihood and economic issues of Hong Kong including the land and housing supply problem. It has been working closely with the SAR HKRH (02882.HK) -0.010 (-2.941%) announced that the group is expected to record a substantial decrease in loss by more than 70% for the year ended 30 June 2021 as compared to the financial year ended 30 June 2020.Government and the various stakeholders to address these issues. Under the new political environment of good governance, REDA and its members will continue to support the SAR Government in increasing land and housing supply for the social and economic well being of Hong Kong.

Hong Kong ranked third globally in the Global Financial Centres Index (GFCI) 30 Report published by Z/Yen from the United Kingdom and the China Development Institute from Shenzhen, 
rising by one place from the March issue of the index this year.
The result is an unequivocal affirmation of Hong Kong's status and strengths as a leading global financial centre as it has remained among the top in various areas of competitiveness, remarked a government spokesman.

TENCENT (00700.HK) announced a notice on further stringent management to prevent minors' online game indulgence as well as actual arrangements for holidays and time off in lieu. 
Accordingly, Tencent Games will impose a curb and a ban on underage users of online games operated in Mainland China before and after the National Day holiday. Minors may login between 8-9pm during 24-25 September, 1-8 October and on 10 October. They will be banned from playing games during 26-30 September and on 9 October.

HKE HOLDINGS (01726.HK) Positive Profit Alert. 
The Group is expected to record an increase in its consolidated net profit to about SGD250,000 for the year ended 30 June 2021 on an annual basis.

Centa-City Leading Index (CCL) last stood at 190.55, the second highest of all time, up 0.75% WoW, which represents the largest rise over the past eight weeks.
CCL Mass last posted 193.33, +0.49% WoW.
CCL (small-and-medium units) +0.59% WoW to post at 190.82.
CCL (large units) +1.60% WoW to post at 189.12.

DOW +0.1%, NDX -0.03%, S&P +0.15%, Russel 2K -0.49%
Markets opened lower but worked better with the Dow and S&P trading around flat through the morning. NDX worked better to flat through the morning. Tech weak after China announced that providing any crypto trading services (in mainland or overseas) or equipment to Chinese citizens illegal; Coinbase -VE  
Energy stocks +VE
Nike -6.2% after cutting its FY sales guidance because of a prolonged production shutdown in Vietnam, labor shortages and lengthy transit times. It expects full-year sales to rise at a mid-single-digit pace, compared to low double-digit growth it forecast before -VE
Costco +VE on strong Q4 results.
Banks JPMorgan Chase +1.2%, Citigroup +0.2% Wells Fargo +0.3%, Amex +1.4%
Work from home names: Facebook +2%, Apple +0.1%, Amazon +0.3%, Netflix -0.15%,  Disney -0.1%, Zoom Video -1.4%, Google 0.71% and Microsoft -0.1%,
Tech NXP Semi +0.2%, Nvidia -1.8%, Micron flat, AMD -0.3%, Skyworks -0.4%
Re-opening stocks  Boeing +0.1%, Caterpillar +0.1%, Simon Property -0.9%, Kohl’s -0.5%, Nordstrom -0.2%, Gap -1.2%, United Airlines +2.8%, Carnival +3% on news its voyages for Q3 were cash flow +VE, Wynn Resorts -1.1%, Chevron +0.5%, Exxon Mobil +0.9%,  
Lock down names Campbell Soup +0.4% General Mills +0.4%, JM Smucker -0.6%
New Home Sales Aug +1.5% MoM vs +6.4% Jul revised (F/cast was +0.5%)
Baker Hughes Oil Rig Count 421 vs 411 prior
Baker Hughes Total Rig Count 521 vs 512 prior
Fed Speakers: Powell, Clarida, Bowman.
USD was weaker vs Yen & Euro. Bitcoin -4% @ 42,967.38, VIX -4.72% @ 17.75, US T10 @ 1.453%
OIL Brent +1.06%, WTI +0.89% to an almost 3yr high.
Gold +0.05%, Silver -1.16%, Copper +1.19% Platinum -1.55%, Palladium -0.95%.
AHEAD Durable Goods data, Dallas Fed Manufacturing Index,

DAX -0.72%, CAC -0.95%, FTSE -0.38%
Markets opened lower and traded sideways in the red as German Business sentiment remained weak and caution ahead of the German election on Sunday. Plus some ongoing concerns over Evergrande.
Parisian airport operator ADP +3% on hopes of relation on travel ahead Tui & IAG +2%
AstraZeneca +2% on news it had invested in the start-up behind Imperial College London’s experimental Covid-19 vaccine. The deal will see both companies working together to develop and sell drugs based on the latter’s self-amplifying RNA technology platform.
Rolls Royce and German lender Commerzbank both added around 2%.
BUT private equity firm EQT weak
Deliveroo -5% after losing a deal with Shell’s gas station convenience stores to rival Uber Eats.
BP +1% despite saying it would close some of its British gas stations due to truck driver shortages disrupting supply.
Ifo data
Business Climate Sept 98.8 vs 99.6 Aug revised (F/cast was 98.5)
Current Conditions Sept 100.4 vs 101.4 Aug (F/cast was 102)
Expectations Sept 97.3 vs 97.8 Aug revised (F/cast was 96.5)
Consumer Confidence Sept -13 vs -8 Aug (F/cast was -8)
Distributive Trades Sept 11 vs 60 Aug (F/cast was 45)
Eurozone Loans to Households & Companies, M3 Money Supply
Germany No data due
France Unemployment Benefit Claims, Jobseekers.
UK  No data due

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