Aug 19 Asian Macro Initial Thoughts; Expect a cautious start to trading


19 Aug

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

Asia Summary

Australia Futures indicate market to open -51pts but earnings in focus with another busy day for results. Treasury wine’s were good considering the China tariffs, Newcrest was inline. Oil weak, Gold firm.
Data Employment data
Japan Nikkei futures flat Chicago Futures -20pts exepct cautious trading as covid cases surge  
S Korea Futures indicate markets to open slightly higher building on yesterday’s gains.  Lotte Rental debut IPO priced at 59,000 won; top of the range.
Taiwan Expect market to open flat following the US, local results remain and the extension on day trading +VE
China Expect market to open lower with continues concerns over policy moves after Tencent warns about more regulatory moves and also talk of a property tax being raised again. Baidu sells bonds as regulatory crackdown continues moving into AI from search engine.
HK ADR’s -124pts at 25,743, broad selling (only Unicom, BoC and Tencent closed higher).  Retail names +VE from good unemployment data and consumption vouchers.  Earnings still in focus.  
US Futures 
Opened slightly lower Dow -20pts S&P and NDX flat.

News reports that Taliban are preventing people travelling to the airport raises concerns about their commitment to the assurances they have given -VE for sentiment.


DOW -1.08%, NDX -0.89%, S&P -1.07%, Russel 2K -0.84%
Markets opened lower S&P and NDX traded around flat but sold down in the afternoon to close on the lows. DOW opened lower worked back to flat but then sold down. All closed on the lows with concerns over the Fed being split but leaning towards tapering this year; as goal on inflation satisfied and close to satisfied on jobs.  Covid also a concern along with a drop in Housing Starts.
Lowes +9.6% as earnings beat +VE Techtronics (699 HK).  TJX +5.6% on good results. Target -2.8% despite Q2 earnings beat and raise guidance on better back-to-school sales.
Banks 
JPMorgan Chase -0.9%, Citigroup -1.5% Wells Fargo -1.5%, Amex -1.5%
Work from home names: Facebook -0.84%, Apple -2.6%, Amazon -1.3%, Netflix +0.6%,  Disney -0.6%, Zoom Video -1.3%, Alphabet -0.9% and Microsoft -0.6%,
Tech NXP Semi -1.3%, Nvidia -2.2% on results said Arm deal progressing but slow and sees demand continuing into 2022, Micron -0.2%, AMD -3.8%, Skyworks -1.9%
Re-opening stocks  Boeing -1.5%, Caterpillar -1.7%, Simon Property -0.1%, Kohl’s -1.1%, Nordstrom -2.3%, Gap -0.3%, United Airlines -0.6%, Carnival +2%, Wynn Resorts +0.4%, Chevron -2.7%, Exxon Mobil -2.1%,  
Lock down names Campbell Soup -2.6% General Mills -2.6%, JM Smucker -2.9%
DATA
MBA Mortgage Applications -3.9% vs +2.8% prior
MBA 30 yr Mortgage Rates 3.06% vs 2.99% prior
Housing Starts Jul -7% MoM vs +3.5% Jun revised (F/cast was -2.6%)
Building Permits Jul +2.6% MoM vs -5.3% Jun revised (F/cast was +1%)
EIA Gasoline Stocks Change 0.696m vs -1.4m prior (Consensus was -1.671m)
EIA Crude Stocks Change -3.234m vs -0.447m prior (Consensus was -1.055m)
FOMC minutes showed officals divided but leaning towards tapering.
USD dipped vs Yen & Euro. Bitcoin -1.9% @ 44,678, VIX +20.4% @ 21.57, US T10 @ 1.26% as Fed moves towards a taper this year
OIL Brent -2.2%, WTI -1.7% covid surge, stronger USD and increased crude drawdown.
Gold -0.01%, Silver +0.1%, Copper -2.1% Platinum +0.2%, Palladium +0.1%.
AHEAD Initial Claims, Philadelphia Fed Manufacturing Index, Leading Index, EIA Natural Gas Stocks, TIPS Auction.

DAX +0.28%, CAC -0.73%, FTSE -0.16%
Opened slightly higher following the handover from Asia but sold down initially then FTSE traded sideways in the red but worked better into the close. The DAX worked better through the day. The CAC drifted lower. UK inflation dipped but Eurozone inflation rose. There was caution ahead of the FOMC minutes. Travel & Liesure +VE, Mining names -VE.
Carlsberg +2.3% after raising FY guidance.
Alcon +13.5% after reporting better-than-expected quarterly results and hiking guidance.
DATA
Eurozone
Construction Output Jun +2.8% YoY vs 12.2% May revised
Core Inflation Rate Final Jul +0.7% YoY vs +0.9% Jun (F/cast was +0.7%)
Inflation Rate Jul +2.2% YoY vs +1.9% Jun (F/cast was +2.2%)
Inflation Rate Jul -0.1% MoM vs +0.3% Jun (F/cast was -0.1%)
UK
Inflation Rate Jul 2% YoY vs 2.5% Jun (F/cast was 2.4%)
Inflation Rate Jul 0.0 MoM vs 0.5% Jun (F/cast was 0.3%)
Core Inflation Rate Jul 1.8% YoY vs 2.3% Jun (F/cast was 2.1%)
Core Inflation Rate Jul 0.0 MoM vs 0.5% Jun (F/cast was 0.2%)
Retail Price Index Jul 0.5% MoM vs 0.7% Jun (F/cast was 0.3%)
Retail Price Index Jul 3.8% YoY vs 3.9% Jun (F/cast was 3.6%)
PPI Core Output Jul 3.9% YoY vs 3.1% Jun revised (F/cast was 3.1%)
PPI Core Output Jul 0.7% MoM vs 0.6% Jun revised (F/cast was 0.3%)
PPI Output Jul 4.9% YoY vs 4.5% Jun revised (F/cast was 4.4%)
PPI Output Jul 0.6% MoM vs 0.6% Jun revised (F/cast was 0.4%)
PPI Core Input Jul 9.9% YoY vs 9.7% Jun revised (consensus was 9.1%)
PPI Core Input Jul 0.8% MoM vs 0.5% Jun revised (consensus was 0.5%)
AHEAD
EUROZONE Current Account
GERMANY No data due
FRANCE No data due  
UK  No data due

JAPAN
Nikkei futures flat Chicago Futures -20pts exepct cautious trading as covid cases surge.    
Yen currently 109.79
Data due
Tankan Index Aug 33 vs 25 Jul (F/cast was 26)
Foreign Stock and Bond Investment
Tokyo reported 5,381 cases (+1,004 DoD)  and nationwide 23,917 a new high.   Govt asks businesses to cut commuter travel to try and contain the virus surge -VE Rail names.
Former PM Abe turns ‘kingmaker’ to influence the leadership of the LDP  as Suga’s popularity wains.  -VE  for sentiment.
Nissan unveiled the new Z sports car range. +VE
Softbanks sale of ARM to Nvidia going slower than expected Slight -VE

SOUTH KOREA
Futures indicate markets to open slightly higher building on yesterday’s gains.  Lotte Rental debut IPO priced at 59,000 won; top of the range.
No data due
Mobile carriers are adjusting their business strategy to expand their non-telecom businesses in a bid to take a share in the growing demand for digital content delivered via both mobile and fixed-line networks. +VE
Hyundai Motor’s two automotive affiliates, Hyundai Motor and Kia, started a car-hailing service for the elderly and the disabled in the United States, as part of its universal mobility project, the automaker said Wednesday. Slight +VE
Korea Pharma said Wednesday that the company’s hyperlipidemia drug could potentially be effective against the COVID-19 virus, citing a study result published in international journal Frontiers in Pharmacology. +VE
Satrec Initiative, a South Korean manufacturer of small- and medium-size observation satellites, will push for the development of an Earth mapping satellite with the world’s highest resolution imaging system, the firm said Wednesday. +VE
Korean Air and Asiana Airlines continued to deliver profit thanks to their cargo business, drawing a stark contrast with low cost carriers amid a severe drop in international air travel due to the prolonged coronavirus pandemic. +VE

TAIWAN Expect market to open flat following the US, local results remain and the extension on day trading +VE
No data due
The Ministry of Finance, the Financial Supervisory Commission and the National Development Council on Tuesday night reached a consensus on extending the transaction tax cut for day trading for two or three years after it expires at the end of this year, local media reported yesterday. +VE
Aspeed Technology Inc the world’s biggest supplier of baseboard management controller (BMC) for servers, yesterday said it is confident of achieving revenue growth of 15 to 20 percent annually this year as a global chip shortage becomes less of a challenge in the second half of the year. The severe chip crunch had curbed the company’s growth momentum in the first half of this year, with revenue growing 2.03 percent year-on-year to NT$1.67 billion (US$59.98 million). “With the chip shortage easing in the second half, we believe that our growth target of 15 to 20 percent should be achievable,” Aspeed chairman Chris Lintold an online investors’ conference arranged by the Taipei Exchange. +VE
Electric bus maker Kaison Green Energy Technology Co has inked a memorandum of understanding (MOU) with Macquarie Formosa Solar Co  to collaborate on expanding its product portfolio to cover electric vehicles (EV) and electric charging infrastructure areas. +VE

CHINA
Expect market to open lower with continues concerns over policy moves after Tencent warns about more regulatory moves and also talk of a property tax being raised again. Baidu sells bonds as regulatory crackdown continues moving into AI from search engine.
No data due
China Huarong  to be recapitalised by Govt backed entities; reinforces the view that Govt does not want to step in directly but does not companies to fail. New investors are CITIC, China Insurance Investment and China Life AM.  +VE
President Xi’s ‘Common Prosperity’ talk raises expectations of a Property Tax -VE Developers
China's Ministry of Commerce (MOC) openly sought opinions on the regulation and management of live streaming electronic commercial platforms, with several opinions suggesting that the behavior of tipping the live streaming hosts ought to be regulated and managed in accordance with the factors such as hosts' content, payment model, users' age, etc.. Accounts breaching relevant regulations should be punished by temporary or permanent suspension from streaming  -VE.


HONG KONG  ADR’s -124pts at 25,743, broad selling (only Unicom, BoC and Tencent closed higher).  Retail names +VE from good unemployment data and consumption vouchers.  
Data due after market Inflation Rate (Jun was +0.7% F/cast is +0.6%)
After market Wednesday
Unemployment Jul 5% vs 5.5% Jun (F/cast was 5.5%)
Lowest since Q1 2020. Broad recovery in jobs +VE for the recovery and retail names.

EARNINGS HK due Thursday includes: BEA(23) Baozun(9991) Bili(9626) BOC AV(2588) Unicom(762) CITIC SEC(6030) CNOOC(883) Citic Tel(1883) Ch Power(2380) ESR(1821) Hua Med(2552) Jinke (9666) Kerry(683) Maoyan (1896) SciClone(6600) Sino Ocean(3377) Smoore(6969) Soho(410) Stella(1836) ZJ Express(576) ZTO(2057)
CHINA Hans Laser(002008) Ping An Bank(00001) Hengrui(600276)

SHORT SELLING Wednesday 15.9% vs 14.3% Tuesday
Top shorts  
Bud Apac (1876) 62%, Sunny Optical (2382) 43%, Shenzhou Int (2313) 41%, Country Garden (2007) 41%, MTR (66) 35%, CK Asset (1113) 34%, Bank of China (3988) 34%, Ping An (2318) 33%, Hang Lung Ppty (101) 33%, Ali Health (241) 33%, CCB (939) 30%, Henderson Land (12) 29%, HKEX (388) 29%, Hengan (1044) 27% (reported today), Haidilao (6862) 26%, Baba (9988) 25%, AAC Tech (2018) 25%, Xinyi Solar (968) 25%.

WATCH

CHINA MOBILE (00941.HK) pre-disclosed the A-share prospectus. The company intended to publicly issue not more than 964.813 million A shares,
being not more than 4.5% of the company's total issued shares after this issuance.   The telecom also disclosed that 5G boutique network construction and four other projects are expected to have a total investment of RMB156.9 billion +VE.

GEELY Chip scarcity has taken heavy toll on the auto industry and challenged the operation, said Gan Jiayue, CEO of Geely Automobile Group, at the conference. Fortunately, the company has adopted pre-emptive measures to start establishing the supply chain bulk procurement department around last June-July, when they found difficulties in scouting chip and public resources.  The company is hopeful that it could fare better than fellows on chip management, yet conceded the situation is unpredictable given multiple uncertainties at the moment  Slight +VE.

SOLOMON SYSTECH (02878.HK) announced interim result ended June 2021.
The revenue rose 27.7% year on year to US$74.828 million. The net profit amounted to US$10.71 million, up 143.1%. EPS was US0.43 cents. No dividend was declared  +VE.

NEW WORLD DEV (00017.HK) Short selling $17.58M; Ratio 16.451% announced that it has repurchased 500,000 shares
on the Stock Exchange today (18th), involving $18.65 million +VE.

SINO BIOPHARM (01177.HK) announced that the group’s profit attributable to the owners of the parent for the six months ended 30 June 2021 is expected to increase by over 500%
as compared to the same period last year (profit attributable to the owners of the parent for the same period last year was RMB1.241 billion) +VE.

CK ASSET (01113.HK) Short selling $60.18M; Ratio 34.447% revealed that Li Ka Shing Foundation Limited acquired a total of 1.516 million shares in CK Asset at the average price of HK$51.4717, HK$51.5467, HK$52.042 and HK$51.8886 per share on 12 August, 13 August, 16 August and 17 August 2021 respectively. 
As a result, the deemed interests of Li Ka-shing, Victor T K Li and Li Ka Shing Foundation Limited in CK Asset under the Securities and Futures Ordinance are as follows: Li Ka-shing's stake increased from 45.74% to 45.78%; Victor T K Li's increased from 45.8% to 45.85%; Li Ka Shing Foundation Limited's increased from 11.02% to 11.06%.  +VE

Li Huaqiang, head of the transportation service department of the Ministry of Transport (MOT), found it necessary to standardize the operation and behavior of platform companies. 
Equally, ride-hailing platforms are asked to regulate their own pricing behavior and lower their excessive commission rates. Li also suggested these platforms cap their commission rates through stronger communication and negotiation with drivers. -VE DiDi

 TENCENT (00700.HK) Short selling $742.72M; Ratio 6.409% announced the interim results for the six months ended 30 June 2021.
The non-IFRS net profit for period amounted to RMB67.157 billion, up 17% YoY, in line with estimates. Interim net profit grew 45.7% YoY to RMB90.354 billion, ahead of estimates. Basic EPS was RMB9.492. No dividend was declared.
Results for the second quarter ended 30 June 2021. The non-IFRS net profit for the period rose 13% to RMB34.039 billion. 2Q Net profit amounted to RMB42.587 billion, up 29% YoY. was RMB3.574.
It said in the result announcement that it sought to pioneer a healthy game playing environment in the game industry. In August, it further tightened the game time and spending limits for Minors in China, beyond regulatory requirement. For Honour of Kings and Peacekeeper Elite, TENCENT reduced Minors’ daily game time limit to 1 hour on non-statutory holidays and to 2 hours on statutory holidays, versus regulatory requirement of 1.5 hours and 3 hours respectively. During the second quarter of 2021, players aged under 16 accounted for 2.6% of its China game grossing receipts, revealed TENCENT. Among which, players aged under 12 accounted for 0.3%. Key warning of more regulation -VE but the company is well positioned to react to the new environment +VE longer term

Hema Market under BABA-SW (09988.HK) Short selling $1.00B; Ratio 25.112% 's MMC business group has signed a direct purchase agreement for yellow croakers with Ningde city, with aim to upgrade the croaker logistic chain, ensuring that sealed croaker packages can be delivered to smaller community shops across the country within 24 hours in a transportation environment of minus 18 degrees. +VE

EVERGRANDE (03333.HK) Short selling $72.02M; Ratio 24.661% has recently been in choppy waters, with its Emerald Bay Phase 2 in So Kwun Wat failing to secure the Certificate of Compliance, reported Hong Kong Economic Journal. The project delivery is thus delayed until mid-September. -VE


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