June 10 Asian Marco Initial Thoughts expect muted trading ahead of US inflation data


10 Jun

This and previous notes can be found at found at Substack Asian Market Sense
Check out ERI-C.com  for your research needs
Free mifid compliant webinar by Daivd Scott this Today 4pm HK time; The title is The shift from an 'Early Stage Inflation Bull Market' to a 'Deflationary Boom', Fundamental Signals for Asian Equities & Global Industry Leaders.

Asia summary 

Australia Futures indicate market to open lower -8pts.  Oil and Gold weaker (-VE Woodside, Oil Search, Evolution and Resolute) but Iron Ore rose +VE BHP.  Carsales.com infocus after GS upgrade.   Watch for Consumer Inflation Expectations & New Home Sales due today after the open.
Japan Nikkei futures opened +10pts, Chicago futures +25pts, expect a slightly higher open but pre-market PPI will be important but overall expect muted trading ahead of the US inflation data.
S Korea Expect markets to open lower with caution ahead of the US inflation data and rising covid cases.
Taiwan Market to open flat with caution ahead of US inflation data.  Local results remains largely +VE;  old economy continues to see interest.
China Market to open lower with inflation concerns despite comments from the government, investors watching for PBOC action and there are also increased concerns on international relations as Biden seek allies to take a harder stance on China.   Wild card is Team China and the potential for the release of Loan data.
HK ADR’s -74pts at 28,668 broad weakness  expect cautious trading ahead of US inflation data.  T/O dropped again Wednesday as investors opt for the sidelines.
Europe  ECB meeting in focus with investors looking for comments on inflation and tapering.
US Futures
Opened higher  Dow futures +42 points, S&P 500 +0.1%. Nasdaq 100 flat.

G7 plans an extra 1bn vaccine doses and to push for further investigation into the source of the virus.

DOW -0.44%, NDX -0.09%, S&P -0.18%, Russel 2K -0.71%
Dow and S&P traded around flat for most of the day. NDX opened higher and traded in the green for most of the day.  All three dipped into the close.
Meme names Clean Energy Fuels +31%. Clover Heath -23% after Tuesday’s +85%.
Gamestop +0.9% in normal hours but fell to -12.3% and now -6% after market after Q1 announced former Amazon e-commerce exec Matt Furlong will be the company’s new CEO. Adjusted Q1 loss per share was 45 cents on revenues of $1.28 billion also announced a further stock sale (5m shares) and SFC investigation.
Banks JPMorgan Chase -1.3%, Citigroup -1.2% Wells Fargo -1.5%, Amex -1.5%
Work from home names: Facebook -1%, Apple +0.3%, Amazon +0.5%, Netflix -1.3%,  Disney -0.2%, Zoom Video -2.2%, Alphabet +0.4% and Microsoft +0.4%,
Tech NXP Semi -0.4%, Nvidia -0.5%, Micron -2.3%, AMD -1.2%, Skyworks +0.2%
Re-opening stocks  Boeing -1.9%, Caterpillar -2.3%, Simon Property flat, Kohl’s -0.6%, Nordstrom +0.5%, Gap -2%, United Airlines -0.9%, Carnival -2%, Wynn Resorts -1.1%, Chevron -0.9%, Exxon Mobil +0.8%, Lock down names Campbell Soup -6.5% after Q3 earnings. General Mills -1.7%,  JM Smucker -0.7%
DATA
MBA Mortgage Applications -3.1% vs -4% prior
MBA 30 yr Mortgage Rate 3.15% vs 3.17% prior
Wholesale Inventories Apr +0.8% MoM vs +1.2% Mar revised (F/cast was +0.8%)
EIA gasoline stock change +7.046m vs +1.5m prior (Consensus was +0.698m)
EIA crude stock change -5.241m vs -5.08m (Consensus was -2.036m) USD was unchanged vs Yen & Euro. Bitcoin +11% @ 36,500, VIX +4.8% @ 17.89,
US T10 @ 1.492% drops despite inflation concerns ahead of US inflation data.
OIL Brent -0.22%, WTI -0.43%
GOLD -0.2%, Silver +0.57%, Copper -0.88% Platinum -0.93%, Palladium -1%.
AHEAD
Core Inflation Rate, Inflation Rate, Initial Claims, 4 week Average Claims, Continuing Claims, EIA Natural Gas Report, WASDE report, Monthly Budget Statement

DAX -0.38%, CAC +0.19%, FTSE -0.2%
Opened flat/lower FTSE and DAX trending lower (weak data) but worked better in the PM session, CAC traded around flat. Healthcare lead, Travel and Leisure +VE but Basic Resouces weak after the China data. The World Bank upgrade not having much impact.  Investors cautious ahead of the  Thursday’s ECB meeting and US inflation data after China’s PPI shot higher.
Earnings from Inditex -2.2% initially +VE but sold down despite good earnings and a positive outlook
Sinch +5.6% announced the $1.3 billion acquisition of mobile messaging platform MessageMedia.
Unibail-Rodamco-Westfield +5.7% on the reopening of malls around the world after lengthy Covid-19 restrictions.
Voestalpine -3.5% after its fiscal full-year earnings report.
DATA
GERMANY
Balance of Trade Apr €15.5B vs 20.2B Mar revised (Consensus was 12.5B)
Exports sa Apr +0.3% vs +1.3% Mar revised (Consensus was +0.5%)
Imports sa Apr -1.7% vs +7.1% Mar revised (Consensus was -1.1%)
Current Account Apr €21.3B vs 30.B Mar revised (F/cast was 18.9B).
AHEAD
EUROZONE 
ECB Rate Decision
GERMANY No data due  
FRANCE 
Non Farm Payrolls, Industrial Production
UK No data due

JAPAN 
Nikkei futures opened +10pts, Chicago futures +25pts, expect a slightly higher open but pre-market PPI will be important but overall expect muted trading ahead of the US inflation data.    
Yen currently 109.62
Data due
PPI May  Apr was +0.7% MoM F/cast is +0.6%
PPI May Apr was +3.6% YoY F/cast is 4.6%
Foreign Stock and Bond Investment
Tokyo reported 440 new covid cases Wednesday (+71 DoD)  Nationwide the number was 2,242.
Japan plans to finish vaccinating all citizens who have applied for shots by October-November  PM Suga said
PM Suga said on Wednesday the government will aim to achieve its fiscal targets including its goal to bring the primary balance to a surplus.  He also said the government will strive to raise the nationwide average minimum wage to 1,000 yen ($9) an hour soon.
Japan and Australia voiced "serious concerns" on Wednesday over reports of human rights abuses against Uyghur and other Muslim minorities in China's far western region of Xinjiang, but Beijing dismissed the remarks as a malicious smear.
US food delivery firm DoorDash Inc, which is backed by SoftBank Group Corp, announced the launch of services in Japan on Wednesday, joining an increasingly crowded market that has grown during the COVID-19 pandemic.  Services will be initially limited to the city of Sendai in Miyagi prefecture, the money losing delivery firm told reporters, in a step that follows its expansion to Canada and Australia.
Nikon Corp will end its camera body production in Japan by the end of this year, according to its officials, as the digital camera market is dwindling due to the improved photo functions of smartphones.  As part of its structural reforms, the camera giant will transfer such production from a plant in Natori, Miyagi Prefecture, its sole domestic camera manufacturing site, to a major factory in Thailand.

SOUTH KOREA 
Expect markets to open lower with caution ahead of the US inflation data and rising covid cases.
No data due
KDCA reported 602 new covid cases Wednesday
(+148 DoD). Health authorities are speeding up vaccinations in order to inoculate 14m people by the end of this month and 36m by September.  The country aims to achieve herd immunity in November but hopes it can  be reached earlier than expected with the increased vaccine rollout.
Government is preparing to provide the COVID-19 vaccine from US pharmaceutical company Moderna to employees of some major domestic companies as part of efforts to help normalize their business operations early, according to industry sources Wednesday.
South Korea’s ruling Democratic Party said on Wednesday it was trying to regain public trust by asking 12 lawmakers to leave the party
over a property scandal that has alienated voters.
Outlook for chip market gets brighter upon strong demand for memory. According to a forecast released by the World Semiconductor Trade Statistics on Wednesday, the worldwide semiconductor market is expected to increase by 19.7 percent to $527 billion in 2021 from a year earlier, and continue to grow by 8.8 percent in 2022.  The latest forecast for 2021 has nearly doubled from the institution’s initial forecast of 10.9 percent growth made in March. +VE
EuBiologics announced Wednesday that it will commence phase two clinical trial of its COVID-19 vaccine candidate EuCOVAC-19 +VE.
SPC Group is launching the Paris Baguette bakery franchise in Cambodia, opening the first branch in the country‘s capital city, the company said Wednesday. +VE
SK Innovation said Wednesday that it was considering producing new kinds of electric vehicle batteries, including cylindrical and prismatic battery cells, to expand its customer base.
South Korea said on Wednesday it will accelerate travel bubble talks with the likes of Singapore, Taiwan and Thailand to allow quarantine-free package tours for those who are fully vaccinated from as early as July.

TAIWAN 
Expect market to open flat with caution ahead of US inflation data.  Local results remains largely +VE;  old economy continues to see interest.
No data due
CECC reported 275 cases of COVID-19, all but one of which were domestic infections, 
as well as 25 deaths from the disease
Hon Hai Precision Industry Co  yesterday began weekly testing of staff coming to its headquarters 
in New Taipei City’s Tucheng District, the first company in the city to screen employees for COVID-19.  Hon Hai has plans to expand the weekly testing program to all of its manufacturing sites in Tucheng and across Taiwan, but the rate at which the program is expanded would depend on the availability of testing supplies, it said.  +VE but will increase the company’s costs.
Greatek Electronics Inc’s  shares tumbled more than 3 percent yesterday, as it said it expected output to drop by about 10 percent this month because it has shut some production lines to test all employees for COVID-19 after reporting eight confirmed cases. -VE
Evergreen Marine Corp, on Tuesday reported a net profit of NT$17.16 billion (US$618 million) for last month, 14 times more than a year earlier due to rising freight rates. The firm’s earnings per share were NT$2.91 last month, equivalent to about 41 percent of the NT$7.04 earnings per share it made in the first quarter.
Revenue increased 145 percent year-on-year to NT$34.4 billion +VE.
TSMC yesterday raised its cash dividend for last quarter to NT$2.75 per share from NT$2.5 a year earlier, given the company’s increased earnings.  That represents a payout ratio of about 51 percent based on its earnings per share of NT$5.39 in the first three months of this year.  TSMC said that its board of directors approved the cash dividend distribution yesterday. +VE
Innolux Corp yesterday posted NT$31.38 billion in revenue for last month, the highest in about four-and-a-half years. Revenue increased 3.4 percent from April and 42.3 percent from a year earlier. Shipments of large panels for computers and TVs rose 4 percent sequentially, while shipments of small panels dropped 2 percent. During the first five months of the year, revenue surged 56.36 percent year-on-year to NT$145.56 billion +VE.
Hiroca Holdings Ltd  yesterday reported consolidated sales of NT$8441.84 million for last month, up 10.73 percent year-on-year. Hiroca, which produces interior trim parts, as well as plastic, fabric and leather decorations, said that an increase in shipments to major automakers in China boosted its sales last month. However, revenue fell 20.78 percent from April due to a shortage of chips, the firm said. Cumulative sales in the first five months of this year rose 51.61 percent to NT$2.77 billion from a year earlier.  -VE
Winbond Electronics Corp yesterday said that it has ordered NT$5.33 billion of manufacturing equipment from Applied Materials South East Asia Pte Ltd, after its board of directors approved a NT$378 million capital expenditure last month. Revenue last month soared 92.05 percent to NT$8.21 billion year-on-year from NT$4.27 billion last year, but edged lower 1 percent month-on-month from NT$8.3 billion in April. Cumulative revenue in the first five months totaled NT$29.63 billion from NT$15.9 billion last year. Slight +VE
HTC Corp yesterday said that it would launch new virtual reality (VR) headsets in its Vive lineup Friday; The Vive Pro 2, a successor to the original Vive Pro, is to sell for NT$24,900. It features a 120-degree field of view, a refresh rate of 120 hertz, and “premium 5K fidelity,” with 2.5k resolution per eye, HTC said. The Vive Focus 3, the latest in the firm’s series of all-in-one business-oriented VR headsets, can be preordered from today, before its June 25 launch, for NT$32,900, it said.

CHINA 
Expect market to open lower with inflation concerns despite comments from the government, investors watching for PBOC action and there are also increased concerns on international relations as Biden seek allies to take a harder stance on China.  Wild card is Team China and the potential for the release of Loan data.
No data due but could get New Yuan Loans, Outstanding Loan Growth, Total Social Financing, M2 Money Supply.
Positive coronavirus disease infections  reported in Guangzhou have been traced to one transmission chain, but patient zero has yet to be found 20 days after the first patient was reported, a health official said on Tuesday, state media reported.  
Since May 21, Guangzhou has recorded a total of 98 confirmed infections, most of whom are patients with mild symptoms, as well as 10 non symptomatic people.
China hurried work on anti-sanctions law 
‘after Joe Biden disappointed Beijing by continuing to take a tough stance’   The  law, which will provide a legal framework for retaliation and allow  Chinese firms to seek compensation over foreign sanctions, is expected  to be passed by the National People’s Congress Standing Committee on  Thursday.
FT Report on Hu Xiaogang, vice-president of China Great Wall Asset Management, being probed by the Central Commission for Discipline Inspection, the anti-corruption watchdog, for suspected “severe” violations, according to a statement published by the China Banking and Insurance Regulatory Commission -VE for sentiment and Bond Market; news was out Wednesday.
The chief executive of Sinovac Biotech Ltd, the main supplier of COVID-19 vaccines to Brazil, complained last month to Brazilian diplomats in Beijing that anti-China comments in Brasilia were not helping with delayed shipments,
two people with knowledge of the matter told Reuters.  Indicates that China is politically motivated in its vaccine diplomacy. -VE
The European Union denounced on Wednesday Hong Kong's major overhaul of its political system as a breach by China of its international commitments and threatened to send a delegation to visit the autonomous city.  The possible move is likely to irk Beijing which might see it as an interference with its domestic affairs and may further sour relations after the EU put on hold an investment deal with China over concerns about Hong Kong, China's claims to sovereignty in most of the South China Sea, and the mass detentions of Muslim Uyghurs in northwestern China.-VE
U.S. Defense Secretary Lloyd Austin issued an internal directive calling for several initiatives to counter China, U.S officials said on Wednesday, but few specifics were provided on how they would be different from efforts already underway. -VE
The head of the Philippine armed forces visited a coral-fringed island his country occupies in the South China Sea this week, a move that could stoke already heightened tensions between Manila and Beijing in disputed waters claimed by both countries. -VE
Samoa's disputed leader is promising to build a port with Chinese help for $100 million, about a third of the cost proposed earlier, said sources with knowledge of the initial plan, as he bids to stay in power despite losing a parliamentary majority in a tight election. Opposition leader Fiame Naomi Mataafa, who was sworn-in as prime  minister at an ad-hoc ceremony in May, told Reuters she would shelve the  port development, calling it excessive for a small country already  heavily indebted to China. -VE
Joe Biden drops Donald Trump orders seeking to ban TikTok, WeChat.  The new executive order directs the US Commerce Department to assess the apps associated with foreign adversaries.  The agency is directed to evaluate transactions of software applications that may pose a risk for tech services to operate properly in the US  Slight +VE
China-Australia relations: trading relationship still strong with growing divide between ‘rhetoric and reality’.  China’s total imports from Australia in May rose more than 55 per cent from the previous month to US$13.6 billion, while exports rose just over 1 per cent.  The Australian Chamber of Commerce and Industry says political posturing between the two countries does not reflect the actual appetite for trade Slight +VE
The Chinese foreign ministry defended the value of cultural exchanges with Japan on Wednesday after Chinese intellectuals came under heavy attack from nationalists online for attending events sponsored by the Japanese government over many years. Some prominent Chinese scholars and writers came under fire last week after nationalistic netizens noticed their names among a list of 144 Chinese intellectuals who had been sponsored by the Japan Foundation to visit Japan from 2008 to 2016. -VE

HONG KONG  
ADR’s -74pts at 28,668 broad weakness  expect cautious trading ahead of US inflation data.  T/O dropped again Wednesday as investors opt for the sidelines.  
No data due


Short Selling Wednesday 13.1% vs 12.8% Tuesday
Top Shorts  
Sunny Optical (2382) 42%, Hengan (1044) 31%, Bank of China (3988) 30%, Country Garden (2007) 30%, Bank Comm (3328) 29%,  Xinyi Solar (968) 28%, Henderson Land (12) 28%, Hang Lung PPT (101) 28%, Galaxy Ent (27) 26%, BoC HK (2388) 24%.

COVID
Vaccinated people who arrive from medium to low risk regions could see their hotel quarantine halved to seven days
-- if they test positive for antibodies, two scientific committees under the Centre for Health Protection have recommended.  Comes as Carrie Lam’s administration accused of having no exit plan from HK lockdown. 

WATCH
China Overseas Land and Investment (0688) has received presale consent for One Victoria in Kai Tak
and expects it to be the first residential project to go on sale on the former Kai Tak airport runway.  The developer expects to release the sales brochure for the 1,059-flat project next week. +VE
XIAOMI-W (01810.HK) announced the official operation of Xiaomi franchised shop at Temple Mall in Wong Tai Sin on 10 June, 
representing the third of such shop in Hong Kong. The company said it had set up over 1,000 Mi Homes in the world, marking a significant milestone of the group in global expansion. +VE
KONG SUN HOLD (00295.HK) announced that the solar power plants owned by the group have generated electricity
in an aggregate volume of approx 617,000 megawatt-hour (‘‘MWh’’) from January to May 2021, up 2.18% year-over-year. The total installed capacity of the group was 838.8 megawatts as at 31 May 2021 +VE.
CSPC PHARMA (01093.HK) announced that the “Pregabalin Capsules (75mg, 150mg)” developed by CSPC Ouyi Pharmaceutical
, a subsidiary of the Company, has obtained drug registration approval granted by the National Medical Products Administration of the PRC, and is deemed to have passed the consistency of quality and efficacy evaluation of generic drugs +VE.
SUNNY OPTICAL (02382.HK) announced that the shipment volume  of handset lens sets reached nearly 99.41 million units in May 2021,
+2% YoY but -19.7% MoM, which was mainly due to the impact of overseas pandemic and the slowing down of domestic smartphone market demand. -VE
HK&S HOTELS (00045.HK), parent of The Peninsula Hong Kong, anticipated at least 70% of employees to have made their vaccination appointments by end-July,
local media citing Chief Operating Officer Peter Borer's letter to the staff. Given unceasing negative business impact from the epidemic, Borer made clear that HK&S HOTELS may consider other cost-saving measures (likely including layoff) should there be no operation improvement in the coming months. -VE
SHUN TAK HOLD (00242.HK)'s overseas solely invested project in Singapore -- PARK NOVA has sold 13 of its 54 units and has broken the local price record and reached as high as HKD33,800 per square foot, 
the group's executive chairman Pansy Ho said. Local project manager revealed that all 13 units sold, which are primarily high-level and substantially-sized units, were bought by local buyers; the most expensive type of the project is the penthouse unit, with an area of approximately 5,900 feet, selling at SGD34.38 million.
The local housing market has picked up the momentum with buyers being mostly users, not speculators, said SHUN TAK HOLD Group Executive Chairman and Managing Director Pansy Ho at the press conference. She added that demand is further unleashed now since promotion activities were restricted in the past due to pandemic. Ho, on another note, talked about China's market where the momentum is still strong with commercial projects at different development stages. Some of them were wrapped up in the last year progressively, such as over 400 flats in Hengqin Project, which was sold out in a month.
SHUN TAK HOLD (00242.HK) has been optimizing its tourism product mix, including deeper cooperation with CHINA TRAVEL HK (00308.HK)
by introducing the latter's cross-border fleet onto its platform, said SHUN TAK HOLD Group Executive Chairman and Managing Director Pansy Ho. However, their in-depth partnership has fallen apart amid the epidemic. Vowing to support the government, Ho said SHUN TAK HOLD will provide offers to get citizens vaccinated. The group is in talks to consider offering coupons, gifts, discounts and so on.
HKEX launched a consultation exercise on the Exchange's proposal to raise the profit requirements to be listed on the Main Board, 
which will take effect on January 1 next year, which revealed that though some respondents did not support the proposals due to various reasons, they were not against the principle of improving the quality and maintaining the diversity of the capital market in Hong Kong, Secretary for Financial Services and the Treasury, Christopher Hui said. After careful consideration of the respondents' feedback and the principle of upholding market quality and protecting the interest of the investing public, the HKEX decided to adjust the level of increase in profit requirements i.e. from an increase by 150% or 200% to an increase by 60%, and postpone the implementation date to January 1, 2022.
JD-SW (09618.HK) announced that it clinched four cooperation memorandums with BAIC MOTOR (01958.HK) in Beijing, whereby both parties will form alliance in digital infrastructure, smart manufacturing, industrial product procurement, unmanned smart logistics vehicles, digital marketing and user operations, automotive after-service platforms, smart supply chains, digital operation platforms, and so on. They aim at setting up a benchmark in digital intelligent service supply chain for the automobile industry. +VE
Centa-Salesman Index (CSI) last stood at 73.97, up 0.86 pts from the previous week.
CSI had been struggling around 70 for the 11th straight week, failing to surpass 80 in one breath, said Wong Leung Sing, senior associate director at research department of Centaline Property. With vibrant second-hand deals and front-line agents' optimism and rationality in the long run, Wong believed CSI will stand at 70 for some time. This may foretell a lengthy home price uptrend. +VE
Hong Kong Airlines announced that it will maintain the number of fleets in service at approximately eight A330 aircraft, in view of ailing travel demand in foreseeable future. Meanwhile, the A320 fleet will ground from July 2021 for a year. For pilots, the company will roll out Long Pay Leave (LPL) for all A320 pilots. Those who join a six-month LPL are entitled to one-month fixed salary, and those who join the nine-month package will be given two-month fixed salary.  The restructuring and consistent integration are in no time delay for the airline amid plunging travel demand paired with unspecific recovery timeframe, Hong Kong Airlines stressed. -VE

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