Asian Macro Initial Thoughts; caution with Jackson Hole, BoK and earnings in focus.


26 Aug

This and previous notes can be found at Substack ( Asian Market Sense )
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Asia Summary 

Australia Futures indicate market to open -11pts  earnings continue to dominate.   Oil ands Miner names +VE but Gold -VE.
Data Weekly Payrolls, Private Capital Expenditure.
Japan Nikkei Local futures opened +28pts,  Chicago Futures -10pts; expect a cautious open with Covid concerns and ahead of Jackson Hole.  Chipmakers in focus on Western Digial/Kioxia news  
S Korea Expect markets to see a cautious open ahead of the BoK rate decision.  Games in focus with new releases competing for top rankings.
Taiwan Market to open higher with continued interest in Tech.
China Market to open flat with continued concerns about corporate debt and the new Government ‘common prosperity’ policies
HK ADR’s +71pts at 25,764 with continued weakness in Financials.   Expect some initial short covering but then the market may drift lower as investors focus on earnings with a large number of companies due today. Evergrande issuing a profit warning will crystalise the concerns already seen towards the company -VE.   An increasing number of companies carrying out share buybacks.
US Futures 
Opened Dow +25pts, S&P +0.03%, NDX flat

Biden’s CIA report on the origin of Covid is inconclusive as China says it will take action against those that seek to blame it for the outbreak.

DOW +0.11%, NDX +0.15%, S&P +0.22%, Russel 2K +0.37%
Markets opened around flat, Dow and S&P worked slightly higher initially but eased in the PM whilst the NDX traded sideways around flat.  Results in focus but a feeling of caution ahead of Jackson Hole. Sentiment helped by comments that the Delta variant is peaking.  Financials, Travel & Leisure continued to rally.  Chips +VE as Western Digital +8% was reported in talks with Japan’s Kioxia.  Nvidia +1.9% on news the Dept of Energy  will run its new supercomputer on the company’s computing platform.  Micron Technology +2.8%.
Nordstrom -17.6% despite Q2 results beating it saw a broker downgrade saying it was as good as it gets
Dick’s Sporting Goods +13.3% hit a new high after reporting strong quarterly earnings that beat estimates and a special dividend.
Campbell Soup weak on broker down grade
Toll Brothers +VE after quarterly results.
category is slowing significantly.
Urban Outfitters weak despite a better-than-expected quarterly earnings report; after saying it is dealing with supply chain issues.

Banks JPMorgan Chase +2.1%, Citigroup +1.1% Wells Fargo +1.9%, Amex +3.1%
Work from home names: Facebook +0.8%, Apple -0.8%, Amazon -0.2%, Netflix -1.1%,  Disney -0.1%, Zoom Video -0.7%, Alphabet +0.6% and Microsoft -0.2%,
Tech NXP Semi +1.5%, Nvidia +1.9%, Micron +2.9%, AMD +0.6%, Skyworks -0.5%
Re-opening stocks  Boeing -0.2%, Caterpillar +1%, Simon Property flat, Kohl’s -0.1%, Nordstrom -17.6%, Gap -5.3%, United Airlines +1%,  Carnival +1.1%, Wynn Resorts +1.4%, Chevron +0.7%, Exxon Mobil +0.2%,  
Lock down names Campbell Soup -2.2% General Mills -0.5%, JM Smucker +0.1%
DATA
MBA Mortgage Applications +1.6% vs -3.9% prior
MBA 30yr Mortgage Rate 3.03% vs 3.06% prior
Durable Goods Orders Jul -0.1% MoM vs +0.8% Jun (F/cast was -0.2%)
Durable Goods Orders Ex Transp Jul +0.7% MoM vs +0.6% Jun revised (F/cast was +0.4%)
Durable Goods Orders Ex Defense Jul -1.2% MoM vs +0.9% Jun revised (F/cast was +0.3%)
EIA Crude Oil Stocks Change -2.979m vs -3.234m (Consensus was -2.683m)
EIA Gasoline Stocks Change -2.242m vs +0.696m prior (Consensus was -1.557m)
USD was slightly weaker vs Yen & Euro. Bitcoin +1.6% @ 48,903.20, VIX -2.5% @ 16.8, US T10 @ 1.349% edging higher ahead of Jackson Hole.
OIL Brent +1.2%, WTI +0.7% on good US demand
Gold -0.9%, Silver -0.1%, Copper +0.1% Platinum -1.7%, Palladium -0.7%.
AHEAD GDP Price Index, Corporate Profits, Initial Claims, 4 Week Ave, Continuing Claims, PCE Prices, Core PCE Prices, EIA Gas Report, Kansas Fed Manufacturing Index.

DAX -0.28%, CAC +0.18%, FTSE +0.34%
Markets opened flat after Asia gave up intital gains. FTSE and CAC traded flat around flat whilst the DAX drifted slightly lower after weak Ifo data and increased uncertainty about the forthcoming election.
Travel and Leisure gained whilst Utilities were weak.
UK, retailers reported the sharpest increase in spending for almost seven years in August but inventories fell to the lowest levels on record, exerting pressure on prices, data from the Confederation of British Industry (CBI) showed on Tuesday.
Elekta -8% after missing first-quarter operating profit expectations.
Stadler Rail +5% after increasing first-half net profit and confirming its full year outlook
Data
German Ifo Data
Business Climate Aug 99.4 vs 100.7 Jul revised (F/cast was 100.5)
Current Conditions Aug 101.4 vs 100.4 Jul (F/cast was 100.4)
Expectations Aug 97.5 vs 101 Jul revised (F/cast was 100.7)
France
Unemployment Benefit Claims Jul -57.8k vs -72.5k Jun (F/cast was -62k)
Jobseekers Total Jul 3359.8k vs 3417.6k Jun (F/cast was 3355.6k)
AHEAD
EUROZONE Loans to Households, Companies and M3.  ECB Monetary Policy Meeting Accounts.
GERMANY
Consumer Confidence
FRANCE Business Confidence & Climate Indicators
UK  Car production

JAPAN
Nikkei Local futures opened +28pts,  Chicago Futures -10pts; expect a cautious open with Covid concerns and ahead of Jackson Hole.  Chipmakers in focus on Western Digial/Kioxia news  
Yen currently 109.98
Data due Foreign Stocks and Bond Investment
Tokyo on Wednesday reported 4,228 new covid cases with the national tally of 24,321.  
The government Wednesday declared a state of emergency in eight more prefectures and newly apply pre-emergency priority measures in four prefectures wef Friday through Sept. 12. The eight prefectures are Hokkaido, Miyagi, Gifu, Aichi, Mie, Shiga, Okayama and Hiroshima, all of which are currently under priority measures.  Priority measures will be newly implemented in the four prefectures of Kochi, Saga, Nagasaki and Miyazaki.   This puts 21 prefectures under a state of emergency, and 12 under priority measures, or about 70% of all 47 prefectures in the nation.
PM Suga held talks on Wednesday with a powerful ruling party executive on a party leadership vote that will decide who leads the Liberal Democratic Party (LDP) into the next election due by November.  The ruling LDP vote is expected to take place on Sept. 29.
Kioxia in talks with Western Digital regarding a merger that would make Western Digital’s market share increasing to a par with Samsungs.  +VE

SOUTH KOREA
Expect markets to see a cautious open ahead of the BoK rate decision   Games in focus with new releases compeating for top rankings.
Data due BoK Interest Rate Decision
A consortium led by healthcare-dedicated investment firm CBC Group agreed to acquire a 47% stake in South Korea’s top botox maker Hugel Inc from Bain Capital for 1.7 trillion won ($1.5 billion), GS Holdings and Hugel said on Wednesday.  It includes Abu Dhabi sovereign wealth fund Mubadala Investment Co, South Korea’s GS Holdings Corp and private equity firm IMM Investment Corp, it said in a joint statement.  The deal includes agreed-for payments for shares and convertible bonds, GS Holdings and Hugel said in regulatory filings.
Posco Chemical to spend W281b on two battery materials plants in China its first overseas production base for the electric vehicle battery business, the firm said Wednesday. +VE
Netmarble and NCSoft are competing for mobile game players with the back-to-back releases of new titles.  Netmarble on Wednesday launched action role-playing mobile game Marvel Future Revolution in some 240 countries, including Korea, and early signs were positive as the game shot to No. 1 on the RPG charts on Apple’s App Store in 78 countries, based on prerelease downloads that were made available Tuesday.  NCSoft, which relies heavily on its long-running Lineage franchise, is set to launch Blade & Soul 2 on Thursday, marking a new addition to its pay-to-win game portfolio. The game is a sequel to Blade & Soul, a Korean fantasy martial-arts RPG that was released in 2012. The game ranked No. 1 on Google’s Play Store on Wednesday, thanks to  massive prerelease downloads, illustrating heightened attention from  local gamers. +VE
South Korea is poised to impose curbs on the lucrative app stores run by Apple Inc. and Alphabet Inc.’s Google,  setting up a potential showdown with the Biden administration.  The Democratic Party used its parliamentary supermajority to  putforward a bill that would ban companies from forcing  developers to use their online payment systems. The ruling party’s heft  in the National Assembly suggests the Telecommunications Business Act is  highly likely to pass Monday when the next full session takes place. Slight +VE Games Developers.
Unionized sailors at South Korea’s largest shipper HMM have suspended plans for a strike and will hold a new round of wage negotiations with management next week, union representatives said Wednesday. +VE
SK Telecom launched a new subscription-based e-commerce platform T Universe on Wednesday, aiming to attract 36 million subscribers out of the country’s total population of 51 million by 2025. +VE


TAIWAN
Expect market to open higher with continued interest in the Tech sector
No data due but on Wednesday the CECC reported no new covid cases +VE
Central bank Governor Yang Chin-long said that he saw no urgency to raise interest rates, as inflationary pressures are mild and benign in Taiwan +VE
Largin told shareholders the company would continue to focus on handset camera lenses for the rest of the year, but would step up efforts to improve its technology and raise its production scale to maintain its competitiveness.  The CEO said that the order outlook for this quarter is positive, but shortages of many components have affected the smartphone specification upgrade cycle, which would also hit the company’s gross margin.  He also said the government must “create more clean energy for businesses to buy,”  “After two to three years of internal discussion, we have decided that buying green energy is our best option, but most of the green energy available in Taiwan has already been bought up,” he said.  Largan would have to meet demands by customers such as Apple Inc, which is aggressively decarbonizing.  Slight +VE
Cathy Life Insurance Co saw its pre-hedge recurring yield fall to 2.84 percent last quarter from 3.12 percent a year earlier due to lower market rates, but its after-hedge investment return rose to 5.59 percent from 3.78 percent over the same period due to booming stock investments, it told an investors’ conference yesterday.  Slight +VE              


CHINA
Expect market to open  flat with continued concerns about corporate debt and the new Government ‘common prosperity’ policies
No data due
China on Wednesday criticized the U.S. “politicization” of efforts to trace the origin of the coronavirus, demanding without any evidence that American labs be investigated, ahead of the release of a U.S. intelligence report on the virus. “Scapegoating China cannot whitewash the U.S.,” Fu Cong,  director-general of the Ministry of Foreign Affairs’ arms control  department, told a briefing. Slight -VE
US. Vice President Kamala Harris on Wednesday again charged China with bullying its Southeast Asian neighbours, the second time in two days she has attacked Beijing during a regional visit, as Washington tries to rally regional partners to take on China's growing economic and military influence.  The Chinese foreign ministry shot back on Wednesday and accused the U.S. of meddling in regional affairs and disrupting peace. Earlier in the day, Chinese state media accused Harris of seeking to drive a wedge between China and Southeast Asian nations with comments in Singapore that Beijing used coercion and intimidation to back its unlawful South China Sea claims. -VE
US officials have approved hundreds of millions of US dollars of license applications for blacklisted Chinese firm Huawei to buy chips for its growing auto component business, two people familiar with the matter said. +VE
The Meishan terminal at Ningbo port yesterday reopened following a two-week shutdown that further snarled already stressed shipping routes in Asia. But an outbreak at a terminal in Shanghai’s Pudong airport is affecting air freight shipments Overall slight +VE
China's provinces are still planning to launch more than 100 gigawatts (GW) of new coal-fired power capacity despite a decline in new approvals in the first half of 2021, environmental group Greenpeace said on Wednesday.  Local planning agencies approved 24 new coal-fired power plants with a total capacity of 5.2 GW in the first six months of 2021, Greenpeace said. -VE

HONG KONG 
ADR’s +71pts at 25,764 with continued weakness in Financials. Expect some initial short covering but then the market may drift lower as investors focus on earnings with a large number of companies due today. Evergrande issuing a profit warning will crystalise the concerns already seen towards the company -VE. An increasing number of companies carrying out share buybacks.
Data due After market Balance of Trade, Exports and Imports

EARNINGS HK due Thursday includes:  Great Eagle (41), Sino Land (83), Xingfa Aluminium (98), Sichuan Expressway (107), Chow Sang Sang (116), Poly Property (119), China Everbright (165), Minmentals (230), Greenland (337), WingTai Property (369), Fountain Set (420), Boyaa Interactive (434), Dongfeng Mtr (489), TravelSky (696), Singamas Container (716), Net Dragon (777), CIFI (884), Lee’s Pharma (950), CSPCPharm (1093), Sing Tao News (1105), Dream Int (1126), CGN Mining (1164), COSCO Shipping Ports (1199), Midland (1200), Sino Hotels (1221), New China Life (1336), Modern Chinese Medicine (1643), Shandong Gold (1787), Shandong Chenming Paper (1812), CGN Power (1816), SIM Tech (2000), Best Pacific (2111), Yantai North Andre Juice (2218), CosmoLady (2298), PingAn Ins (2318), Comba Telecom (2342), Win Hanverky (3322), Anton Oilfield Sev (3337), Hengdeli (3389), China BlueChem (3983), ZhongAn Online P&C (6060), Haitong Sec (6837), and others
SHORT SELLING Wednesday 14.9% vs 15% Tuesday
Top shorts 
Bank Comm (3328) 55%, Ali Health (241) 54%, Country Garden (2007) 50%, Sunny Optical (2382) 45%, Henderson Land (12) 44%, New World Development (17) 39%, Haidilao (6862) 37%, AIA (1299) 36%, Mengniu Dairy (2319) 34%, CCB (939) 33%, Bank of China (3988) 33%, CLP (2) 33%,  Hang Lung Ppty (101) 32%, BYD (1211) 31%, Power Assets (6) 31%, HSBC (5) 30%, Hengan (1044) 29%, Longfor (960) 28%, CK Asset (1113) 27%, Wharf REIC (1997) 27%, HKEX (388) 27%, Xiaomi (1810) 26%, CKI (1038) 25%, SHKP (16) 25%, CSPC Pharma (1093) 25%.

RESULTS after market
MENGNIU DAIRY (02319.HK)  Short selling $108.17M; Ratio 34.009%   announced the interim results. 
The net profit increased by 143% YoY to RMB2.947 billion, with an EPS  of RMB0.748. No interim dividend was declared  The revenue added 22.3% YoY to RMB45.905 billion.

XIAOMI-W (01810.HK)  Short selling $485.32M; Ratio 25.674%   announced the interim results for the six months ended 30 June 2021. The revenue amounted RMB164.671 billion, up 59.5% YoY. Net profit leaped 141.1% YoY to RMB16.061 billion, higher than estimate. Non-IFRS adjusted net profit jumped 118.4% to RMB12.391 billion, likewise beating the estimate.  EPS  was RMB0.642. No dividend was declared.

MAANSHAN IRON (00323.HK)  Short selling $561.76K; Ratio 1.790%   announced interim result ended June 2021. The net profit amounted to RMB4.644 billion, up 471.7% YoY.  EPS was RMB0.6. No dividend was declared.

BOCOM INTL(03329.HK) announced interim result ended June 2021. 
The revenue rose 22.9% year on year to HK$1.145 billion. The net profit amounted to HK$559 million, up 99% year on year. EPS was HK$0.2. No dividend was declared.

KUAISHOU-W Interim Loss Trims to RMB64.79B; Non-IFRS Adj. Net Loss RMB9.69BAFTER MARKET NEWS

EVERGRANDE (03333.HK)  Short selling $44.88M; Ratio 17.687%   issued a profit warning.
The net profit is expected to be between approximately RMB9 billion and RMB10.5 billion for the six months ended 30 June 2021, a decrease of 29% to 39% from that of the same period last year.  The profit composition consists of the loss from the property  business of approximately RMB4 billion, the loss of EVERG VEHICLE  (00708.HK)  Short selling $3.01M; Ratio 0.740%    of approximately RMB4.8 billion, and the gain from the sale of part of the shares of HENGTEN NET (00136.HK)  Short selling $15.86M;  Ratio  13.423%  held by the Group and its holding of the remaining shares on a  marked-to-market basis of approximately RMB18.5 billion. The decline in  profit in the first half of 2021 was mainly due to the decrease in the selling price of properties and the increase in expenses in the first  half of the year.

XIAOMI-W (01810.HK)  Short selling $485.32M; Ratio 25.674%   announced the acquisition of 71.16% of the entire issued share capital of DEEPMOTION after Closing. The target company also undertook to cancel all options granted but unexercised under the ESOP before Closing. The total Consideration under the Ordinary Share Purchase Agreement is approximately US$62.47 million. The Target Company is an autonomous driving technology company focusing on providing full software stack solutions including perception, localization, planning and control for advanced driver-assistance system (ADAS) and automated driving applications.

CKH HOLDINGS (00001.HK)  Short selling $39.68M; Ratio 21.900%   repurchased 291,000 shares of the company on the Stock Exchange today (25th), at a price ranging between $56.95-57.55, involving a total amount of approximately $16.699 million.

NEW WORLD DEV (00017.HK)  Short selling $27.03M; Ratio 39.351%   announced that it repurchased 699,000 shares of the company on August 25 at a price of $36.9-37.05 per share, involving $25.8725 million.

HENGAN INT'L (01044.HK)  Short selling $40.55M; Ratio 29.418%   announced the repurchase of 500,000 shares of the company on the Stock Exchange today (25th), involving $22.0016 million.

AIA (01299.HK)  Short selling $403.53M; Ratio 35.545%   announces that it has formed a strategic partnership with GLP to invest in the global logistics real estate industry and related opportunities.  The strategic partnership aligns with AIA’s Environmental, Social and Governance (ESG) strategy by specifically engaging with companies that recognise and incorporate ESG-related considerations into their investment decisions.

LONGFOR GROUP (00960.HK) 's CEO Shao Mingxiao expressed during the result announcement conference that he believes the recent strengthened regulation on the real-estate sector is aimed at achieving the ultimate goal of healthy and orderly growth for the sector by 2024.  Shao stated that the company had been operating in full compliance to the government's policies and within the parameters of "three green lines" since five years ago. Shao further stressed his confidence that the company will be able to realize the full-year sales target of RMB310 billion, given that the group's contracted sales have hiked 20% YoY to RMB161.65 billion in the first seven months this year.

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