March 12 Asian Macro Initial Thoughts Asia to open higher but China under increased pressure on HK

12 Mar

Australia rallied in early trades ahead of New Home Sales data due later.
Nikkei Futures opened +50pts and rising currently +70pts , expect Tech sector to see interest
S Korea expect market to open higher with Tech in focus as inflation concerns ease, Coupang +VE after IPO in US although stock closed off its initial highs.
Taiwan expect a higher open with Tech names in focus following the rally overnight in the US. China’s action on Hong Kong electoral changes may see Taiwan get more international support +VE
HK ADR’s -95pts with broad weakness only Petro names, Baba and Xiaomi in the green.
US Futures opened Dow +30pts, S&P and NDX currently flat

DOW +0.58%, NDX +2.52%, S&P +1.04%, Russel 2K +2.3% 
Markets opened higher on good jobs data and rallied as Biden signs new stimulus bill but then eased into the close. Chips rallied on news China’s semiconductor trade association formed a new group to work with their U.S. counterparts to ease recent trade tensions between the two countries.
Apple was said to have trimmed iPhone orders by 20% given lower demand for its iPhone 12 mini devices. However, a source from Apple's supply chain leader dismissed the above rumor today, according to Chinese media. Apple indeed saw better-than-expected sales of iPhone 12 and iPhone 12 pro, the person added.
Worth noting that helping to bolster markets yesterday was an uneventful $24bn auction of 30-year Treasuries.
Banks JPMorgan Chase -0.5%, Citigroup -0.6%, Wells Fargo -1.8%, Amex +0.7%
Work from home names: Facebook +3.4%, Apple +1.7%, Amazon +1.8%, Netflix +3.7%,  Zoom Video +5.7%, Alphabet +3.2% and Microsoft +2%,
Tech NXP Semi +4.5%, Nvidia +4.2%, Micron +4.6%, AMD +4.8%, Skyworks +3.6%
Re-opening stocks  Boeing +2.7%, Caterpillar -0.6%, Simon Property +1.3%, Kohl’s unch, Nordstrom -0.8%, Gap +1%, United Airlines +0.3%, Carnival +2.9%, Wynn Resorts +2.3%, Chevron -0.2%, Exxon Mobil -0.7%,  
Lock down names Campbell Soup -0.9% General Mills -0.7%, JM Smucker -0.7%
After Market 
Ulta Beauty -6.5% (was +1.3 in normal hours) on the news that CEO Mary Dillon will be stepping down in June, with company president Dave Kimbell taking her place. Ulta beat Wall Street estimates on earnings and revenue, but net sales decreased 4.6% from the fourth quarter of 2019 partly due to pandemic lockdowns and a decrease in cosmetics sales.
DocuSign -5.1% (was +5.9% in normal hours) despite the company reporting fourth-quarter results that topped analyst expectations.
Poshmark -9% *waas +15.8% in normal hours) revealed a weaker-than-expected sales guidance for the current quarter in the company's first quarterly results since going public.
Funko +11.7% (was +6.1% in normal hours) posted better-than-expected results for its fourth quarter. Funko experienced a boost in sales thanks to key products lines like "The Mandalorian", "Harry Potter" and "Marvel Comics" the company said
Initial Claims 712k vs 754k prior revised (F/cast was 715k)
4 Week Average Claims 759k vs 793k prior revised (F/cast was 757.5k)
Continuing Claims 4.144m vs 4.337m prior revised (F/cast was 4.015m)
JOLTs Job Openings Jan 6.917m vs 6.752m Dec revised (F/cast was 6.5m)
EIA Natural Gas Change Report vs -98Bcf prior (Consensus was -73 Bcf)
USD was flat vs Yen & Euro. Bitcoin +2.7% @ 57,850.00, VIX -2.9% @ 21.91,
US T10 +1.535% on good jobs data and successful T30 auction.
OIL Brent +2.4%, WTI +2.3%
Gold -0.05%, Silver +0.25%, Copper +2.8%, Platinum -0.1, Palladium +1.9%
AHEAD PPI, Core PPI, Michigan Data Prelim (Current Conditions, Consumer Sentiment, Inflation Expectations, Consumer Expectations, 5 year Inflation Expectations), Baker Hughes Rig Data, US Budget Plan.
Earnings Buckle
DAX +0.2%, CAC +0.72%, FTSE +0.17% 
Markets opened higher but trended lower ahead of the ECB press conference but then worked better into the close as the ECB opted to leave its Pandemic Emergency Purchase Program unchanged, at a total of 1.85 trillion euros ($2.21 trillion) due to last until March 2022. To ramp up bond buying and Lagarde expects the economic situation to improve over 2021.Tech led the gains but Banks were weak.
France’s EDF +10.9% strong
JCDecaux weak after forecasting a drop in adjusted organic revenue for the first quarter of about 40 per cent, “due to ongoing and stronger mobility restrictions introduced in some large countries, such as UK and Germany”.
Earnings from Generali +0.9% off earlier high, Hugo Boss -3.6%, Morrisons -1% and John Lewis Partnership -5%
Eurazeo after issuing a strong earnings report and positive outlook for 2021,
Rolls-Royce’s +0.7% off initial high, announced FY20 loss deepened 1.4 times to GBP3.169 billion. Underlying loss before tax was GBP3.958 billion, deeper than market estimates.
WPP +0.2% relaunched its buyback program after new client wins and cost cutting helped the advertising giant to stronger-than-expected full-year earnings in 2020. However, some analysts remain cautious on the company’s outlook.
ECB Interest Rate Decision unchanged at zero%
Marginal Lending Rate unchanged at 0.25%
EUROZONE  Industrial Production
GERMANY Inflation Rate
FRANCE No data due
UK Balance of Trade, GDP Data, Construction Output, Industrial Production, Manufacturing Production, Goods Trade Balance, NIESR Monthly GDP Tracker

Expect Nikkei to open +50pts and rising currently +70pts  Yen currently 108.52. Tech in focus following the US but sentiment improved with tamer inflation and Biden’s first Quad meeting.
Data due pre market BSI Large Manufacturing Q1 (Q4 was 21.6 and F/cast is 10)
Tokyo reported 335 new covid cases (vs 340 Wednesday) Nationwide was 1,280
Tokyo 2020 Olympic Games, Organising Committee President Seiko Hashimoto said on Thursday, no decision yet on spectators; denying media reports that a decision had been reached.
Japan will reaffirm its strong relationship with the United States and discuss the "difficult" regional security situation in the "two-plus-two" meeting of foreign and defence chiefs next week, the government's top spokesman said on Thursday.
Toyota may have pioneered the just-in-time manufacturing strategy but when it comes to chips, its decision to stockpile what have become key components in cars goes back a decade to the Fukushima disaster. +VE
Softbank +VE after Coupang IPO racked up a roughly $33 billion gain on paper through the public market debut of South Korea’s largest e-commerce company, Coupang Inc, the latest sign of a dramatic turnaround for its $100 billion Vision Fund. +VE but there are lots of other investments within the fund.
FT Reports that Japanese investors buy gilts at record pace this year. On the basis of reduced Brexit risks and fading likelihood of negative rates lift appeal of UK debt

Expect markets to open higher but upside limited ahead of the weekend.
No data due
KDCA reported 465 new covid cases Thursday above 400 for the third day.
Shares of Coupang, closed @ 49.25, 41% above their offer price on Thursday but off the initial high, after the company raised $4.6 billion in the biggest U.S. initial public offering this year.
Samsung Electronics said Thursday it will launch another budget smartphone model in South Korea this week as the global tech giant eyes beefing up its handset sales against rivals.  The Galaxy A32 will be released in South Korea on Friday with a price tag of 374,000 won ($330). The budget smartphone is already available in select markets in Europe and India.
SK Innovation said Thursday that its board of directors had ordered the establishment of a “complete global compliance system” in response to the ongoing battery dispute with LG Energy Solution in the US.  At an audit committee meeting, held Wednesday and attended by all the company’s outside directors, board members lashed out at the management, saying the company’s “lack of experience in global disputes” had resulted in its defeat in the US’ top trade court.
Legal risks mount as the trial of Samsung Group’s de facto chief, Lee Jae-yong, resumed Thursday, increasing legal risks for the country’s biggest conglomerate as the court examines his role in the 2015 merger of two business units within the group.
SK Bioscience will develop an all-in-one vaccine targeting COVID-19 variants, together with the Coalition for Epidemic Preparedness Innovations, the South Korean firm said Thursday.  SK Bioscience would receive funding from CEPI, worth up to $14.2 million, for the research and development. The South Korean vaccine developer could receive additional funds of as much as $12.5 million for building manufacturing facilities.

Expect market to open higher follow the rally in US the names.
No Data due 
A huge increase in foreign-exchange interventions could lead to the US labeling Taiwan a currency manipulator, central bank Governor Yang Chin-long  said yesterday, but he added that the designation is unlikely to have any immediate negative impact on the nation’s export-dependent economy.
The average monthly regular wage in January was NT$43,125 (US$1,527), a 2.07 percent increase from the same month last year and up 0.61 percent from December last year, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. Including bonuses and other compensation, the overall average monthly wage fell 23.92 percent year-on-year, but increased 40.41 percent month-on-month to NT$75,145, as many employers offered bonuses before the Lunar New Year holiday, which was in February this year, but in January last year, the agency said in a report.
A U.S. warship sailed through the Taiwan Strait, the American navy said Thursday, a day after a top U.S. commander warned of the threat to Taiwan of a Chinese invasion within the next six years.
Phison Electronics, a supplier of NAND flash memory controllers and modules, yesterday forecast that revenue could grow at an annual pace of 20 percent this year, as a supply crunch and strong demand drive up prices. The estimate is conservative, the company said, as it is based on it not increasing shipments. Last year, revenue rose 23 percent to NT$47.56 billion (US$1.68 billion) from NT$38.64 billion.

Expect market to open flat with investors cautious ahead of the weekend and concerned about international relations after the NPC rubber stamped the changes to Hong Kong’s electoral system.  Also news that government budgets were to be cut indicates a focus on debt control rather than stimulus ahead.  Key will be whether we see ’Team China’ active in the market.
No data due but after market Thursday
Vehicle Sales Feb +365% YoY vs +30% Jan (F/cast was 14%)
CAAM warned chip shortages could hit some Chinese firms.
Could get FDI (YTD) today and on Monday we get House Price Index on the open and NBS Press Conference, FIA, Industrial Production, Retail Sales, Unemployment
US says Beijing’s overhaul of Hong Kong electoral system a ‘direct attack’ on city’s autonomy.   Hong Kong will be on the agenda for a meeting next week between Secretary of State Antony Blinken and Yang Jiechi, says US State Department spokesman.  European Union again warns of ‘additional steps’ over the measure; says it is a breach of the ‘one country, two systems’ principle.  
Premier Li says he hopes the two sides can work to build trust after it was confirmed that senior officials will meet next week in Anchorage. But US Secretary of State Antony Blinken has downplayed the prospect of restarting the dialogue between the two without concrete action from Beijing
Li Keqiang says Taiwan’s politicians welcome for talks if they accept there is ‘one China’.   Premier reiterates that ‘1992 consensus’ should be basis for dialogue and says Beijing ‘will continue to promote peaceful development of relations’ In response Taipei says China should ‘take note of the mindset of the Taiwanese people and refrain from using political terms to hold back amicable interaction’
China offered to pay for vaccines for athletes at both the Tokyo and Beijing Olympics as criticism of the 2022 Winter Games host country continues.
Serbia said on Thursday it plans to start domestic production of Russia’s Sputnik V vaccine in May and China’s Sinopharm shot by mid-October.
The rise in anti-China sentiment has raised questions in Myanmar business circles and in China, not only over the surge of Chinese investment in recent years but for billions of dollars earmarked for a strategic neighbour on Beijing’s “Belt and Road” infrastructure plan.
China’s electric vehicle battery supply chain dominance enhanced with nickel production innovation.  Tsingshan Holding Group said last week that it will be able to provide a new flow of nickel matte from its Indonesian operations +VE
Pakistan blocks China’s TikTok after complaint over ‘indecent content’  A previous ban in October was lifted within 10 days after the company vowed to block all accounts involved in spreading ‘obscenity and immorality’.  TikTok is one of the most-downloaded apps in Pakistan after WhatsApp & Facebook. -VE
FT reports China has told Bangladesh it will not fund coal mines and polluting power plants, as Beijing took the first steps towards fulfilling its promises of sustainable Belt and Road investment. +VE

ADR’s -95pts to open at 29,290 broad weakness on concerns over US/China relations. Most ADR’s closed in the red with only Petro names, Baba and Xiaomi in the green.  The activity of Team China likely to be influential today but expect some caution going into the close ahead of the weekend.
Data due  after market Industrial Production
SHORT SELLING Thursday 12.8% vs 13.5% Wednesday
Top Shorts  Bud Apac (1876) 51%, HSBC (5) 36% (Moodys put on Watch list for downgrade Wednesday), Ping An (2318) 36%, Bank of China (3988) 34%,  AIA (1299) 33%, Sands China (1928) 31%, ICBC (1398) 30%,  Hang Seng Bank (11)  29%, Sino Biopharm (1177) 29%, Anta (2020) 28%, MTRC (66) 28% (reported a loss after market), Hengan (1044) 28%, CKH (1) 27%, CCB (939) 27%, Henderson Land (12) 25%.
Earnings due Friday incl AIA Group (1299), China Res Cement (1313), Texhong Textile (2679).
Baidu will launch its Hong Kong secondary listing today and sell around 4 percent of its shares, which at current price will raise at least US$3 billion (HK$23.4 billion), Reuters reported citing sources.
Jardine Matheson is facing opposition from minority shareholders after announcing Monday a US$5.5-billion privatization scheme, Bloomberg reported. Some shareholders are mulling a lawsuit and seeking reasonable valuation in Bermuda for the deal which they say is made at a US$1 billion discount, said an advisor to the investors.
CHINA UNICOM (00762.HK) announced the results for the year ended 31 December 2020. Net profit amounted to RMB12.493 billion, representing a year-on-year increase of 10.3%. EPS was RMB0.41.  Also that FY21 Budget CAPEX was fixed at RMB70 billion, flattish yearly, among which RMB35 billion will be spent on 5G projects, up RMB1 billion yearly. It’s 2020 Mobile ARPU grew 4.1% yearly to RMB42.1. Wang Xiaochu, Chairman and Chief Executive Officer, said the 5G ARPU hit about RMB70 last year, expecting such level to drop with increasing new 5G users in future. Yet, he believed the entire Mobile ARPU will hike steadily, aided by about 10% increment in 5G ARPU shifted from 4G users' plan. It forecast 2020-22 to remain as an investment peak period for 5G with an annual investment budget of around RMB70 billion. He also assumed the number of 5G base stations to add to 1 million, spanning coverage from major cities, industrial areas to main transport hubs. +VE
China’s US$110 billion K-12 off-campus education market, which has struggled during the coronavirus pandemic, is now bracing for a regulatory storm amid comments expressed by the country’s leaders, lawmakers and advisers in the “two sessions”, the country’s biggest annual political gathering.
President Xi Jinping described the domestic market for K-12 – referring to kindergarten to 12th grade – after-school training services as a “social problem” in a meeting last week of the Chinese People’s Political Consultative Conference
(CPPCC). “It can’t be solved by the education authority alone, and all social aspects and related departments should make joint efforts to study and solve it,” Xi said in comments published by official media. -VE
Dongfeng launches a new brand, betting on the all-electric Voyah to catch up with Tesla, NIO, Xpeng and hundreds of electric car makers as China’s EV war intensifies  The first all-electric Voyah model will be launched in July, with a range of up to 500 kilometres (310 miles) on a single charge.  The basic model, expected to be priced at less than 400,000 yuan, carries a 1.5-litre four-cylinder turbocharged engine and an electric motor +VE
SWIRE PACIFIC A (00019.HK)'s Chairman Merlin Swire said  It had derived around $45 billion of funds from non-core asset disposal in the past few years, contributing to the strength of its balance sheet, said Chairman Merlin Swire. He added the group now has ample funds to develop its core business.Also the group's CATHAY PAC AIR (00293.HK) tracked healthy cash flow since the capital restructuring last year, and hence the group has found no need to increase capital from shareholders. He restated the group's confidence on the long-term development of CATHAY PAC AIR, adding it will continue to support the airline if necessary.   On another note, SWIRE PROPERTIES (01972.HK) Chief Executive Guy Bradley foretold more emphasis to be put on Mainland business buildout in the future.
MTR CORPORATION (00066.HK) announced annual results ended December 2020. Revenue declined 21.9% yearly to HK$42.541 billion. Loss was HK$4.809 billion, in-line with HK$0.375-4.932 billion in broker forecast as compiled by our reporters. LPS equaled HK$0.78. Final DPS was HK$0.98, flattish yearly. Full-year DPS was HK$1.23, flattish yearly.
PCCW (00008.HK) said that Viu, its leading pan-regional OTT video streaming service, ranks first in aggregate monthly active users amongst premium major video streaming platforms in Southeast Asia (Indonesia, the Philippines, Singapore and Thailand) in Q4 2020 according to a report from AMPD Research. Viu had 45 million monthly active users (MAU) as of December 2020.

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