Aug 23 Asian Macro Initial Thoughts Expect a cautious open.


23 Aug

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

Ahead this week the focus is likely to be on the covid resurgence and soundbites from the US Fed’s Jackson Hole Symposium.
US Home Sales data, Durable Good and Personal Consumption and Spending and Inflation data. Earnings from Best Buy, Nordstrom,sales Force, HP and Dell.
Globally we get Flash PMI data out this week.
In Europe GDP, Ifo data, Loans data, German Import prices and Consumer Confidence, French employment data,
Asia sees Kamala Harris visiting Singapore and Vietnam, BoK interest rate decision, Japan Tokyo CPI, HK trade data.Talk of investor caution and even exhaustion, with the ‘buy the dip’ mentality wearing thin. Friday in HK saw increased selling volume on a down day.

Afghanistan remain in focus to with concerns over human rights and potential public opposition to the Taliban.

Australia Futures indicate market opening +35 pts with a rebound in iron ore prices expected. Investors still reacting to the covid resurgence and earnings. Oil remains weak but Gold slightly +VE.  Earnings still in focus but expect caution ahead of the PMI flash data
Japan Chicago Futures indicate market to open -15pts.  Markets cautious covid resurgence coupled with PM Suga unlikely to remain in power weighing on investors minds.
S Korea Expect markets to open lower with caution ahead of the BoK meeting this week with investors worried about the outlook for rate hikes.
Taiwan Market to open flat, local data continues to be positive. Shipping +VE but Tech may see continued pressure despite the good Export Orders after market Friday. Foreign selling the key but T/O has been low recently.
China Market to open lower as investors try to work out the crack down on tech and move towards ‘common prosperity’. An outbreak of covid in Shanghai of concern.
HK ADR’s +207pts back above 25k; after HSI fell into bear territory Friday as T/O increased 24%. But still likely to see some initial margin call selling
Europe covid concerns remain but investors will be watching the Flash PMI data
US  covid resurgence, Jackson Hole, Housing and other data likely to prompt a cautious open

JAPAN
Expect a cautious open as covid resurgence coupled with PM Suga sees another set back as opposition candidate Takeharu Yamanaka won the Yokohama mayoral elecetion.
Data due Flash PMI data expected weaker
Tokyo reported 4,392 cases on Sunday below 5,000 but a record number for a Sunday.
Prefecture Governor’s call for more lockdowns to cope with the surge in covid cases.
Autos weak on parts shortages with Mazda and Daihatsu being the latest to announce production shut downs due to the covid resurgence in Vietnam, Malaysia and elsewhere.
Nintendo talk of index inclusion again helped the stock rally on Friday
Mizuho Bank suffered its fifth system failure on Friday. -VE
Liquid the crypto exchange suffered a $97m heist -VE
FujiFilm to invest 70bn yen in its semiconductor materials business over the next three years. +VE
President Joe Biden plans to nominate Rahm Emanuel, who previously served as chief of staff to former President Barack Obama and mayor of Chicago, as U.S. ambassador to Japan, the White House said on Friday.


SOUTH KOREA
Expect markets to open lower with caution ahead of the BoK meeting this week with investors worried about the outlook for rate hikes. Local press talking about retail margin calls.  Likely to see Kospi to test 200 day moving average.
No data due
But customs to announce August’s first  20 days of Imports/Exports at 9am
KDCA reported 1,628 new covid cases Sunday dropping because of lower testing
South Korea has extended its social distancing curbs for two weeks amid a surge in COVID-19 cases, while allowing vaccinated people some latitude, its prime minister said on Friday. -VE
Samsung’s new smartphone models; Galaxy Z Fold3 and Galaxy Z Flip3 have not been launched yet but preorder figures suggest they are likely to be a super hit. The two models are estimated to have logged a combined 450,000 preorders as of Sunday, according to local media reports that cited unnamed industry sources. Advance orders, which began Aug. 17, are to end Monday +VE.
Unionized longshore workers at South Korea’s largest shipper, HMM, began voting Sunday on whether to go on strike after three rounds of wage negotiations failed.   Should they vote in favor of the collection action, it will mark the first strike at the shipper since its establishment in 1796. -VE
The global market for floating solar panels is set to more than quadruple by 2025, a recent report has revealed.  The report published by Korea Energy Economics Institute on Sunday estimates that the total power generation capacity of floating solar farms around the globe had surpassed 3 gigawatts as of October 2020. +VE
General Motors said it will expand the recall of Chevy Bolt electric vehicles equipped with South Korean supplier LG's batteries over fire risks, which is expected to additionally cost about US$1 billion.  The latest recall covers 73,000 Bolt EVs and EUVs from model years 2019 through 2022 sold in the United States and Canada to replace the defective battery modules. -VE
The U.S. special envoy for North Korea will visit South Korea this weekend amid a standoff over U.S.-South Korean military exercises that North Korea has warned could trigger a security crisis. Slight +VE
Namyang Dairy Products Chairman Hong Won-sik, who pledged to resign from the top post of the dairy firm due to a scandal in May, turns out to have reversed the decision to maintain his post, the company’s half-year report showed Thursday. -VE
LG Electronics said Friday it has forged a business partnership with Hyundai Elevator, seeking joint opportunities to integrate robotics technologies into buildings such as residential apartments, office buildings or hospitals. +VE
Hyundai Heavy Industries Holdings Co. (HHIH), the world's largest shipbuilding group, said Friday that it has completed the process to acquire South Korea's top construction equipment maker Doosan Infracore Co. +VE
Korean Air plans to replace its A380-800 and B747-8I aircraft with smaller planes to increase efficiency, the carrier’s chief executive officer said Thursday. He has confirmed the plan to ditch the Airbus A380-800 in the next five years and Boeing’s 747-8I over the next 10 years in an interview with FlightGlobal. +VE and Boeing looks to be their preferred choice going forward.
South Korea’s large business groups increased their investments by nearly 5 percent in the first half of 2021, according to data by a local market researcher on Friday. +VE for sentiment.


TAIWAN
Market to open flat, local data continues to be positive. Shipping +VE but Tech may see continued pressure despite the good Export Orders after market Friday. Foreign selling the key but T/O has been low recently.
No data due
But after market Friday Jul Export orders +21.4% YoY to US$55.3 bn, marking the best July figure ever, statistics from the Ministry of Economic Affairs (MOEA) yesterday showed. Last month’s figure beat the expectations of the ministry, which predicted another robust annual growth this month. Export orders are forecast to reach US$55 billion to US$56.5 billion this month, up 20.9 percent to 24.2 percent on an annual basis, the ministry said. +VE
CECC reported 10 new covid cases Sunday (4 imported).  Domestically produced vaccine will be available from today +VE
‘Strategic clarity’ implied in Biden’s Taiwan remark; while some said the comment was benign, others believe it was an intentional signal to associate Taiwan with US military allies in the Pacific +VE although likely to raise an aggressive response from China.
Taiwan's foreign minister accused China on Saturday of wanting to "emulate" the Taliban, saying the island that Beijing claims as sovereign Chinese territory did not wish to be subject to communism or crimes against humanity.
The rapid fall of the U.S.-backed Afghan government has sparked heated debate in Taiwan about whether they could suffer the same fate to a Chinese invasion, while state media in China has said Kabul's fate showed Taiwan it cannot trust Washington.
Minister of Economic Affairs Wang Mei-hua (王美花) has contacted local semiconductor manufacturers to continue addressing a shortage of automotive chips, the Ministry of Economic Affairs said on Saturday.  “The semiconductor industry has worked hard to solve the chip shortage in the first half of this year and will continue to address the issue,” Wang said in a news release. +VE
Fubon Financial Holding Co  would delay completing its acquisition of Jih Sun Financial Holding Co  from the fourth quarter of this year to the first quarter of next year, the financial conglomerate told an investors’ conference on Friday. Slight -VE
CPC Corp, Taiwan and Formosa Petrochemical Corp Sunday announced that they would cut gasoline prices by NT$0.4 per liter and diesel prices by NT$0.3 per liter, effective today. The companies had last week reduced gasoline prices by NT$0.3 per liter and diesel prices by NT$0.2 per liter. +VE
Imperial Hotel Taipei is to shut down at the end of October, succumbing to a business decline induced by social distancing restrictions and border controls to curb a COVID-19 outbreak. The five-star hotel with 326 guest rooms in the city’s Zhongshan District yesterday confirmed that it is to terminate its leasing contract with Taiwan Life Insurance Co -VE for Taiwan Life Ins.
Evergreen Marine Corp Friday gave an upbeat outlook for next quarter and for the first half of next year on expectations that congestion at major sea ports would continue amid the COVID-19 pandemic, leading to an increase in freight rates. “At the previous investors’ conference, we forecast that the port congestion would last until the third quarter, but now, it seems like the issue will not be resolved until the fourth quarter, or until the end of June next year,” Evergreen president Eric Hsieh told an investors’ conference in Taipei. +VE

CHINA
Market to open lower as investors try to work out the crack down on tech and move towards ‘common prosperity’.  
No data due
President Joe Biden plans to nominate veteran U.S. diplomat Nicholas Burns to serve as U.S. ambassador to China, the White House said on Friday, signaling the administration may be looking for the envoy to play a more central role in the increasingly fractious relations between the two global rivals.
China reported on Sunday that there were 32 new coronavirus cases in the mainland on August 21, up from 20 a day earlier, according to the National Health Commission.   Of the new infections, four were locally transmitted, unchanged from the previous day. Three were in Shanghai and one was in Jiangsu province.  Press reports hundreds quarantined in Shanghai as an outbreak surfaces in the city; with fully vaccinated people being infected -VE
CSRC reported to be looking for ways to creat conditions for US audit cooperation +VE  
China’s National People’s Congress on Friday passed a law designed to protect online user data privacy and will implement the policy from Nov. 1, according to state media outlet Xinhua -VE for Tech names.
Chinese regulators are considering pressing data-rich companies to hand over management and supervision of their data to third-party firms if they want U.S. stock listings, sources said, as part of Beijing’s unprecedented scrutiny of private sector firms. Slight -VE
China’s tech stocks slumped to new lows on Friday and Hong Kong’s benchmark index hit an almost 10-month trough, as an unrelenting series of Chinese regulatory crackdowns crushed investors’ confidence. The big question is really how the investing public are feeling about Presdient Xi’s ‘common prosperity’ as they see their investments decimated?
Chinese steelmakers Ansteel Group and Ben Gang formally began the process of merging their operations on Friday, the official Xinhua news agency reported, in a move that will create the world's third-largest producer of the metal. State-owned Ansteel is taking a 51% stake in smaller rival Ben Gang from the regional state assets regulator, with no money changing hands in a government-backed restructuring that is part of a drive to consolidate production in China's bloated steel sector. +VE and expect more consolidation ahead.
China will plant 36,000 square kilometres of new forest a year - more than the total area of Belgium - from this year to 2025 as it bids to combat climate change and better protect natural habitats, a senior forestry official said on Friday.

HONG KONG
ADR’s +207pts at 25,056 back above 25k; after HSI fell into bear territory Friday as T/O increased 24%. But still likely to see some initial margin call selling; Baba and CK still closed in the red. Sentiment slight +VE from Beijing delaying the imposition of the anti-sanction legislation.
No data due

EARNINGS HK due Monday includes: Henderson Land (12) Cross Harbour (32), Henderson Invest (97), Tingyi (322), Luks Group (366), Gemdale Property (535), Ajisen (538), China Overseas Land (688), Goodbaby (1086), China Modern Dairy (1117), CC Land (1224), China Lilang (1234), Grand Baoxin (1293), Xtep (1368), Genscript (1548), Fusen Pharma (1652), Guotai Junan Int (1788), Zhaojin Mining (1818), China Wood (1822), Shanghai Fosun Pharm (2196), Wuxi Bio (2269), Parkson Retail (3368), CICC (3908), KWG (3913), Poly Property Services (6049)

SHORT SELLING Friday 14.3% vs 15.3% Thursday
Top shorts 
Ali Health (241) 55%, Bud Apac (1876) 53%Hang Lung Ppty (101) 48%, Hengan (1044) 43%, AIA (1299) 37%, CK Asset (1113) 37%, Country Garden (2007) 35%, Geely (175) 31%, Bank of China (3988) 30%, Bank Comm (3328) 30%, PetroChina (857) 26%, Sunny Optical (2382) 26%, HSBC (5) 26%.


WATCH
Sun Hung Kai Properties' proposal to build two commercial buildings on top of the West Kowloon Station was approved with conditions by the Town Planning Board on Friday.  
SHKP amended the original proposal and lowered the heights of the two towers by 9 meters and 11 meters to 122 meters and 148 meters respectively. The two towers not only offer grade A offices and facilities for retails, but also public green spaces and roads. On the top floor of the highest building, there will be an outdoor viewing point that opens to the public, offering a spectacular scenery of the Victoria Harbour. There will also be a 1.5km long West Kowloon Parkway, allowing citizen to walk to the West Kowloon Waterfront Promenade more easily.

A total of 18 secondary transactions in the top ten blue-chip estates were recorded over the weekend, surging 1.6 times from a week ago with at least one deal registered in each estate, according to Centaline Property Agency.

China Evergrande Group is in discussions to sell its Hong Kong headquarters in Wan Chai as part of efforts to stave off a cash crunch, according to a person familiar with the matter.  China’s most indebted developer is in talks with state-owned Yuexiu Property Co. to sell the office tower in Wan Chai, the person said, asking not to be identified because the matter is private. While the two companies are still negotiating and nothing is decided, Evergrande has floated a potential price tag of more than $2 billion, the person said. That compares with its HK$12.5 billion ($1.6 billion) purchase cost in 2015.

NANYANG HOLD (00212.HK)  announced that the Group’s profit for the six months ended 30 June 2021 is anticipated to increase by more than 2.5 times 
as compared to that for the corresponding period in 2020.

The Securities and Futures Commission (SFC) announced to approve the launch of an A shares index futures contract by HKEX (00388.HK). Since the launch of the Mainland and Hong Kong Stock Connect (Stock Connect) in 2014, international investors have increasingly participated in the A shares market via the northbound trading link. SFC’s Chief Executive Officer, Ashley Alder, said this A shares index futures contract provides a significant new risk management tool for the growing number of global investors who participate in China’s A shares market, including those trading through Hong Kong’s Stock Connect mechanism. The ability to trade A shares futures in Hong Kong, and to hedge pricing risks effectively, is expected to facilitate the further growth of long term capital flows into the Mainland financial markets.

From January to July 2021, the foreign exchange settlement and sales by banks aggregated RMB9.2181 trillion and RMB8.279 trillion, respectively, with a surplus of RMB939.2 billion, according to statistics of the State Administration of Foreign Exchange (SAFE).

HK & CHINA GAS (00003.HK) Short selling $42.93M; Ratio 9.318% announced the interim result ended 30th June 2021. Net profit amounted to HK$4.2 billion, up by 57.5 per cent yearly. EPS hit HK22.5 cents. The Group declared an interim dividend of HK12 cents per share, flattish annually. Profit (exclusive of the Group’s share of revaluation value from an investment property, the International Finance Centre complex) amounted to HK$4.2 billion, up by 41.4 per cent yearly.

Centa-City Leading Index (CCL) last posted 190.39, down 0.49% after notching a new record high last week.
CCL Mass last stood at 192.51, likewise down 0.55% after setting record highs for two consecutive weeks. CCL (small-and-medium units) slumped 0.47% to post at 190.3. CCL (large units), ending its five-week rising streak, dropped 0.6% to post at 190.83.

GLOBAL MARKETS
DOW +0.65%, NDX +1.19%, S&P +0.81%, Russel 2K +1.65%
Markets opened higher despite the weakness in Asia and worked slowly higher through the day but down on the week. Tech saw renewed interest with strength in Nvidia. Tesla +1% as it unveiled a new custom chip and plans for a humanoid robot but still closed lower on the week.
Covid concerns continue to overhang the market
Banks JPMorgan Chase +0.3%, Citigroup +2.6% Wells Fargo +0.4%, Amex +0.5%
Work from home names: Facebook +1.2%, Apple +1%, Amazon +0.4%, Netflix +0.6%,  Disney +1.1%, Zoom Video +1.4%, Alphabet +1.3% and Microsoft +2.6%,
Tech NXP Semi +1%, Nvidia +5.1%, Micron -0.1%, AMD +0.9%, Skyworks +0.9%
Re-opening stocks  Boeing +0.2%, Caterpillar +0.2%, Simon Property +0.2%, Kohl’s +2.9%, Nordstrom +3.5%, Gap +3.1%, United Airlines +0.2%, Carnival +1.4%, Wynn Resorts -0.4%, Chevron +0.01%, Exxon Mobil +0.02%,  
Lock down names Campbell Soup +0.2% General Mills +0.3%, JM Smucker -0.8%
DATA
Baker Hughes Total Rig Count 503 vs 500 prior
Baker Hughes Oil Rig Count 405 vs 397 prior
USD was firmer vs Yen & Euro. Bitcoin +4.8% @ 48,908.27, VIX -14.35% @ 18.56, US T10 @ 1.255%
OIL Brent -1.9%, WTI -2.2%
Gold -0.03%, Silver -1.12%, Copper +2.57% Platinum +2.06%, Palladium -1.13%.
AHEAD Chicago Fed National Activity Index, Flash PMI data, Existing Home Sales.
Earnings JD.com, Palo Alto Networks, Madison Square Garden

DAX +0.27%, CAC +0.31%, FTSE +0.41%
Opened lower and traded sideways in the red until midday when markets started trending higher. UK retail sales were weak with economists arguing that rainy weather and the global chip shortage had an impact on how British consumers behaved last month. German PPI stronger that forecat. Covid concerns remain. Most sectors in the red.
Marks & Spencer +11%, after the retailer lifted its profit outlook.
Morrisons +4.2%, after announcing it had approved a takeover offer of £7 billion ($9.5 billion) from U.S.-based private equity group Clayton, Dubilier & Rice.
DATA
German
PPI Jul +1.9% MoM vs +1.3% Jun (F/cast was +0.7%)
PPI Jul +10.4% YoY vs +8.5% Jun (F/cast was +9.1%)
UK
Consumer Confidence Aug -8 vs -7 Jul (F/cast was -6)
Retial Sales Jul -2.5% MoM vs +0.2% Jun revised (F/cast was +0.6%)
Retial Sales Jul +2.4% YoY vs +9.2% Jun (F/cast was +6.5%)
Retial Sales Ex Fuel Jul -2.4% MoM vs 0.0% Jun revised (F/cast was +0.5%)
Retial Sales Ex Fuel Jul +1.8% YoY vs +6.8% Jun (F/cast was +5.9%)
Public Sector Net Borrowing Jul £-10.4B vs £-21.5B Jun revised (F/cast was £-12.4B)
AHEAD
EUROZONE Flash PMI data, Consumer Confidence
GERMANY Flash PMI data
FRANCE Flash PMI data
UK Flash PMI data and Industrial Trends Orders

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