March 19 Asian Macro Initial Thoughts. Asia to open lower, China/US talks icy


19 Mar

Asia 
Australia trading lower in early trades ahead of Retail Sales Data
Futures Nikkei opened +12pts but reversed after the inflation data expected a lower open and caution ahead of BoJ
S Korea expect markets to open lower on inflation concerns
Taiwan expect market to open lower following US sell off
China to open lower with caution as talks in Alaska get underway
HK ADR’s -241pts at 29,164 with only HSBC, CLP and Unicom’s ADR’s closing in the green. I would expect to see 29k tested ahead of the weekend.
US Futures opened flat Dow +5pts, S&P and NDX around flat

DOW -0.46%, NDX -3.02%, S&P -1.48%, Russel 2K -2.94% 
Dow opened flat initially rose to a high at lunchtime but sold down in the PM to close at the lows. NDX and S&P opened lower and initially traded sideways but sold down in the PM and closed around their lows. Russell 2000 opened slightly lower traded around flat until lunch then sold down. Tech weak abscond yields spiked; Tesla -7%, Apple, Amazon and Netflix over 3% down. Banks strong but off the midday highs.Jobs data was slightly worse than expected but Phili Fed Manufacturing strong.
Banks JPMorgan Chase +1.6%, Citigroup +0.3%, Wells Fargo +2.4%, Amex -1.4%
Work from home names: 
Facebook -1.9%, Apple -3.4%, Amazon -3.4%, Netflix -3.8%,  Disney -1.5%,  Zoom Video -6%, Alphabet -2.9% and Microsoft -2.7%,
Tech  
NXP Semi -4.7%, Nvidia -4.6%, Micron -5.2%, AMD -5.5%, Skyworks -4.4%
Re-opening stocks  
Boeing -2.9%, Caterpillar -1.3%, Simon Property -1.2%, Kohl’s -1.4%, Nordstrom -2.8%, Gap -2.5%, United Airlines -2.6%, Carnival -2.3%, Wynn Resorts -3.1%, Chevron -3.6%, Exxon Mobil -4.3%,  
Lock down names 
Campbell Soup +1.1% General Mills +0.9%, JM Smucker -0.1%
DATA
4 week average claims 746.25k vs762.25k prior (F/cast was 719.25k)
Initial claims 770k vs 725k prior (F/cast was 675k)
Continuing claims 4.124m vs 4.142m prior (F/cast was 4m)
Philadelphia Fed Manufacturing Index Mar 51.8 vs 23.1 Feb (F/cast was 24)
CB leading Index Feb +0.2% MoM vs +0.5% Jan (F/cast was +0.3%)
EIA Gas report 12 March -11Bcf vs -52 Bcf prior (F/cast was -17Bcf)
10 year TIPS auction -0.58% vs -0.987% prior
USD was stronger vs Yen & Euro. Bitcoin flat @ 57,876.54, VIX +12.2% @ 21.58,
US T10 1.719% but hit 1.75% intraday, T30 2.472% but hit 2.5% intraday
OIL Brent -6.9%, WTI -7.12% on stronger USD and rising inventories
Gold spot -0.7% but futures +0.3%, Silver -0.95%, Copper -1%, Platinum -0.6%, Palladium +0.6%
AHEAD 
Baker Hughes Oil Rig report

DAX +1.23%, CAC +0.13%, FTSE +0.25% 
Markets opened slight higher following the FOMC decision but with caution ahead of the BoE rate decision; which came out and left policy unchanged. DAX strong whilst FTSE and CAC trading around flat. Basic Resources lead along with Bank (Dax, has large weightings of chemicals, industrial and financial services), Auto’s strong but F&B weak.
The European Medicines Agency’s (EMA) safety review on Thursday into the coronavirus vaccine developed by AstraZeneca and the University of Oxford found it was safe after the fear over blood clots.
Earnings Generali +0.7%, Hugo Boss +1.7%, Rolls-Royce -2%, WPP +2.5%, Morrisons flat and John Lewis Partnership +25%
Sartorius +8.2% after raising its 2021 guidance, with spin-off Sartorius Stedim Biotech +6.2
Zur Rose Group -12.6% after its full-year earnings report.
DATA
EUROZONE 
Balance of Trade Jan Euro 6.3b vs 29.4b Dec revised (F/cast was 19.1bn)
Labour cost index Q4 3% YoY vs1.6% Q3 (F/cast was +2%)
Wage Growth Q4 +3.5% YoY vs +2.2% Q3 (F/cast was +2.45
UK
BoE Interest Rate unchanged @ 0.1%. With all members supporting no change. QE stays the same.
AHEAD
EUROZONE No data due
GERMANY PPI
FRANCE No data due
UK Public Sector Borrowing

JAPAN 
Nikkei futures opened +12pts but reversed after the inflation data, currently -8pts. Expect a lower open with cautions ahead of BoJ decision. Yen currently 108.95
Data out
Inflation Rate Feb -0.4% YoY vs -0.6% Jan (F/cast was -0.4%)
Inflation Rate Feb MoM +0.1% vs +0.6% Jan (F/cast was +0.1%)
Core Inflation Rate Feb -0.4% YoY vs -0.6% Jan (F/cast was -0.5%)
Inflation Rate Ex Food and Energy Feb +0.2% YoY vs +0.1% Jan (F/cast was +0.1%)
Later BoJ interest rate decision no change expected but watch for comments on policy review.
Tokyo reported 323 new covid cases Thursday (vs 409 Wednesday). National total was 1,499.  Tokyo orders 27 restaurants to shorten opening hours having earlier failed to do so.
Japan will lift the coronavirus state of emergency in the Tokyo area on Sunday, PM Suga said, while the capital’s governor warned citizens not to let down their guard.
Toshiba Corp shareholders voted on Thursday in favour of an independent probe into allegations that investors were pressured ahead of last year’s annual general meeting - a watershed victory set to spur more shareholder activism in Japan. Puts pressure on CEO Nobuaki Kurumatani who could lose his jobs if anything untoward is found. It will also put Japan Inc on notice that shareholders are becoming more critical of managements.
Universal Studios Japan (USJ) opened on Thursday its $550 million, pandemic-delayed Mario-themed attraction in a major leap by games maker Nintendo Co Ltd beyond the virtual world
.Tokyo Olympics creative head Hiroshi Sasaki said he has resigned after making a derogatory comment about a popular female Japanese entertainer, in the latest controversy over insensitive remarks towards women to hit Games organisers.
Imperial Hotel to rebuild main building and tower.

SOUTH KOREA 
Expect markets to open lower with inflation worries continuing to hurt tech.No data dueKDCA reported 445 new covid cases Thursday (vs 469 Wednesday)
Rules singling out foreign workers for mandatory coronavirus testing in parts of South Korea will soon be partially revised, diplomatic missions and commerce organisations said on Thursday after they had complained to authorities.
LG Group’s spinoff decision to take center stage at shareholders meeting
Market expectations grow over LG’s ‘select and focus’ strategy, creation of new holding firm likely too be announced at next Friday’s AGM. Slight +VE
Hyundai Motor, the game changer for this year’s business is the launch of Ioniq 5, its first all-electric vehicle built on their exclusive EV platform. While vying against global competitors such as Tesla, the new model is expected to serve as a key barometer on whether Hyundai Motor Group manages to accommodate to the post-coronavirus market changes and transform into a sustainable, comprehensive mobility operator. +VE S-Oil has teamed up with a local gas firm to capture carbon dioxide emitted from its facility and use it for carbonated soft drinks and dry ice. +VE
Ministry of Food and Drug Safety announced Wednesday that it has decided not to approve Chong Kun Dang Pharmaceutical’s candidate, Nafabeltan, based on a review by its advisory board of its efficacy and safety. -VE But next in line is GC Pharma’s blood plasma-derived therapy, GC5131A, which is intended to treat more serious COVID-19 cases.  Also Green Cross has finished phase two trial of its experimental COVID-19 blood plasma treatment drug GC5131A in December last year.
Daewoong Pharmaceutical said Thursday that the company has out-licensed its gastroesophageal reflux disease agent Fexuprazan to Shanghai Haini Pharmaceutical for 380 billion won.  The deal included an upfront payment of 6.8 billion won and 13.6 billion won in milestone payments, the company added. +VE
Hanwha Group plans to sell half of its stake in US electric truck maker Nikola Corp., the two companies said Thursday. +VE
Doosan Fuel Cell Co. said Thursday that it will team up with Korea Shipbuilding & Offshore Engineering Co. (KSOE) to develop solid oxide fuel cells (SOFCs), energy conversion devices that generate electricity, to be used for ships. +VE
Korea Corporate Governance Improvement appears to be in a predicament as its hostile takeover bid for Hanjin KAL is being overshadowed by the Korea Development Bank’s tighter control over the parent company of flag carrier Korean Air Lines. -VE

TAIWAN 
Expect market to open lower with Tech under pressure following the sell off in the USNo data due After market Thursday Central Bank left interest rates unchanged
Central Epidemic Command Center (CECC) yesterday reported eight new imported cases of COVID-19; one from Oman, three from the Philippines, and two each from Egypt and Vietnam.
The Ministry of Economic Affairs (MOEA) has been communicating with manufacturers with facilities in the nation’s science parks and industrial zones to prepare them for a 15 percent reduction in daily water use ahead of a possible “dry monsoon” during May and June, Minister of Economic Affairs Wang Mei-hua  said yesterday. -VE
Air Liquide Far Eastern Ltd’s  25-megawatt ultra-pure, low-carbon hydrogen electrolyzer plant yesterday began operations at the Tainan Technology Industrial Park, with the aim of supplying hydrogen gas to the park’s semiconductor manufacturers. +VE
China Airlines Ltd yesterday reported a net profit of NT$140 million (US$4.95 million), a turnaround from a net loss of NT$1.19 billion in 2019, thanks to the contribution of its air cargo business, which helped to offset a dwindling passenger business amid the COVID-19 pandemic and losses at its other air travel units. +VE
E Ink Holdings Inc, the world’s sole supplier of e-paper displays, yesterday said that it plans to double its capital expenditure to NT$1.6 billion (US$56.53 million) to expand capacity and catch up with customer demand. E Ink is building four new production lines in Hsinchu to accelerate its expansion amid significant demand, as retailers have fewer employees due to the COVID-19 pandemic and are seeking the convenience of electronic shelf labels to adjust prices.  This year, the company expects to add new clients from retail areas in Europe and the US. +VE
FT Reports Delta Electronics, a producer of power components for Apple and Tesla, has cut its headcount in China by almost half, in the biggest such move to be made public by a Taiwanese electronics company in the country.
Kwang Yang Motor Co which sells its gasoline-powered scooters under the brand KYMCO, yesterday said that it aims to increase the number of its battery swap stations to 1,500 by the end of this year and 4,000 by the end of next year.  It is taking on rival Gogoro which has a dominant market share of 77 percent in the nation’s electric scooter market, and 2,000 battery stations. Kwang Yang said that it is first forming partnerships with Chunghwa Telecom Co, President Chain Store Corp, Fubon Insurance and Carrefour Taiwan that would allow it to install mini battery swapping stations at their outlets. +VE

CHINA 
Expect market to open lower with concerns over US/China relations and spiking US treasury yields.
No data due
The United States and China leveled sharp rebukes of each others' policies in the first high-level, in-person talks of the Biden administration on Thursday, with deeply strained relations of the two global rivals on rare public display during the meeting's opening session in Alaska. The US said that Chinese actions threaten a global order based on rules and vowing that Washington would also stand up for its friends. “We do not seek conflict, but we welcome stiff competition, and we will always stand up for our principles, for our people, and for our friends,” the U.S. national security adviser, Jake Sullivan, said at the start of talks with Chinese counterparts in Alaska.Yang said human rights in the United States were at a low point with Black Americans being “slaughtered” and added that the United States should handle its own affairs and China its own.  Yang said it was necessary to abandon a “Cold War mentality,” and confrontation and added: “The way we see the relationship with the United States is as President Xi Jinping has said, that is we hope to see no confrontation, no conflict, mutual respect and win-win cooperation with the United States.” -VE
US lawmakers reintroduce bill to revoke China’s trade relations status.  The legislation would require the US president to approve regular trade relations annually.  ‘It’s time to protect American jobs and hold the Chinese Communist Party accountable for their forced labour camps,’ lawmaker says. -VE
Finland says APT31 group likely behind 2020 parliament hacking attack.  The Finnish intelligence service said the espionage operation was carried out ‘with the aim of intruding into parliament’s IT systems’.  The Cybergroup APT31 has been generally linked to the Chinese government -VE
Xinjiang’s leaders must ‘optimise’ governance of region, Communist Party’s No 4 says.  Party ‘must scientifically grasp the situation of the Xinjiang work, focus on the ultimate goal of long-term stability’, Wang Yang says after four-day trip to region. As the European Union on Wednesday agreed to blacklist four Chinese officials for human rights abuses in Xinjiang for the first time -VE

HONG KONG  
ADR’s -241pts at 29,164 with only HSBC, CLP and Unicom’s ADR’s closing in the green. I would expect to see 29k tested ahead of the weekend.
No data due
SHORT SELLING Thursday 15.2% vs 14.7% Wednesday
Top Shorts  MTRC (66) 44%, Ping An (2318) 41%, Bud Apac (1876) 31%,Anta Sports (2020) 30%, Henderson Land (12) 29%, Hengan (1044) 29%, China Overseas (688) 29%, Galaxy Ent (27) 28%,  Hang Seng Bank (11) 28%, Citic (267) 27%, Sinopec (386) 27%, Sands China (1928) 27%, Mengniu Dairy (2319) 26%, CCB (939) 26%.
Earnings due Friday include HK China Gas (3), UniPresident (220), Fountain Set (420) Hengan (1044), Chongqing Iron (1053), SinoPharm (1099), Zijin Mining (2899), China Merchant Bank (3968) and others.

WATCH
BILIBILI-SW (09626.HK) (BILI.US)’s IPO registered almost $16.6 billion margin as at around 6:00 pm according to brokers. Based on the public fundraising amount of $741 million, the IPO was over-subscribed by about 21.4 times.
DAHSING BANKING (02356.HK) announced the introduction of a BILIBILI-SW (09626.HK) IPO share subscription package. Clients will be exempted from loan application fees and entitled to loan rates as low as 1.88% when applying for BILIBILI-SW margin subscription at its branches.
CHINA RES LAND (01109.HK)  announced that on 18 March, the Company entered into a facility agreement for a USD129 million loan facility with a bank. The Loan Facility has a term of one year.
There were 6,021 XTEP INT'L (01368.HK) branded stores as of end-2020, implying a net decline of 358 shops. However, the Group's gross saleable area was roughly the same as the previous year. The Company will open 200-300 stores for the core Xtep brand this year, primarily involving structural change in the shops, revealed Chairman and CEO Ding Shui Po.
CRYSTAL INTL (02232.HK) announced annual results ended December 2020. Net profit amounted to US$108 million, down 28.8% yearly.  EPS. equaled US3.79 cents. Final DPS
was HK5.8 cents, together with special DPS of HK5 cents. Full-year DPS was HK13.8 cents.
TOWNGAS CHINA (01083.HK)   announced annual result ended December 2020. The net profit amounted to HK$1.447 billion, up 10.6% yearly. EPS was HK49.56 cents. A final dividend of HK15 cents was declared, same as that for 2019.
CKH HOLDINGS (00001.HK)  results for the year ended 31 December 2020. The total revenue fell 8.2% yearly to $403.846 billion on Post-IFRS 16 Basis. The net profit dropped 26.8% yearly to $29.143 billion, in line. JP Morgan and BofA Securities had previously forecast the company's 2020 net profit at $28.802 billion and $29.491 billion on Post-IFRS 16 Basis. Total EBITDA sank 10% to $122.348 billion. EPS was $7.56. A final dividend of $1.7 was declared, versus $2.3 over a year ago.
CK ASSET (01113.HK)  announced annual results ended December 2020. Net profit amounted to HK$16.332 billion, down 43.9% yearly and slightly below $16.587-19.595 billion consensus.  EPS equaled HK$4.42. Final DPS was HK$1.46. Interim DPS was HK$1.58. Full-year DPS was HK$1.8, down HK$0.3 or 14.3%.
Underlying profit was HK$19.339 billion, down 32.5% yearly and in-line with HK$16.436-19.595 billion in broker forecast. Underlying EPS equaled HK$5.24.It also announced the purchase of a range of public utilities assets from Li Ka Shing Foundation (LKSF) at HK$17 billion. The Purchase Price will be satisfied by the issue of over 333 million Consideration Shares by the Company to LKSF at a price of HK$51 per Share, which represented a premium of 8.4% to the closing price of HK$47.05 per Share today. Upon completion, the Company will hold 20% of UK Power Networks Holdings; 36% of Northumbrian Water; 22% of Wales & West Utilities; and 24% of Dutch Enviro Energy.CK ASSET's Deputy Managing Director and Executive Director Edmond Ip complemented to the announcement that the company will buy back its shares to cushion the share dilution of the company as a result of the new share issue for the acquisition. The company will make repurchase at the same price HK$51 per share.If the number of shares bought back during the repurchase period is less than 333 million shares, the company will make further repurchase on the market after obtaining the shareholders' approval at the AGM, hoping to repurchase 330 million shares at least.
Chairman Li Tzar Kuoi, Victor projected the share price to fare well if the shareholders agree with the deal, adding the transaction is creating returns to the shareholders and providing an opportunity for cash-in at above-market price.Regarding Properties he predicted the group to introduce three new projects this year, respectively located at Hung Shui Kiu, Borrett Road and Wong Chuk Hang Phase III. Accounting the unsold inventory of other projects, he estimated there will approximately 2,400 units this year, involving over $20 billion.   The group's property sales last year zoomed past 2019's as 1,800 flats were sold, amounting to $18 billion, Li also said.He conceded that the pandemic has put the company amid turbulence, but such crisis has also helped the group to uncover different business resilience.  While the business has turned around and recovered since the second half of last year, especially the retail and port, the data for the first two months of this year was quite respectable. He emphasized the group has abundant cash flow and is looking at new acquisition opportunities.

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