March 23 Asian Macro Initial Thoughts expect a rebound in Asian Tech but China under pressure


23 Mar

Asia
Australia dipped initially but now trading higher
Nikkei Futures opened -15pts have fluctuated so expect a flat open but moving higher after Monday’s sell off.
S Korea Expect a flat open but to work cautiously higher as us yields eased and tech rallied
Taiwan open higher following the Tech rally in the US and good local data.
China should open lower as International relations deteriorate but key will be whether ‘Team China’ is active in supporting the market
Hong Kong ADR’s +176pts at 29,061 but expect some initial margin call selling and cautious trading as earnings are released and concerns about more sanctions on China. Baidu IPO debut today too.

US Futures Opened Dow +38pts but have eased to +19pts, S&P +0.1% and NDX was flat but now slightly +VE

DOW +0.32%, NDX +1.23%, S&P +0.7%, Russel 2K -0.9% 
Dow and S&P opened flat but worked higher for most of the day before dipping into the close. NDX opened higher as the T10 yield eased and rallied strongly in the morning but again sold off into the close. The Russell sold down at the open and traded sideways for the morning, rallied in the PM but failed to make the green and sold down into the close.
Powells prepared remarks to the House Committee on Financial Services noted the recovery is gaining steam, helped by the fiscal and monetary policies before adding there’s still a long way to go.
Banks JPMorgan Chase -2.7%, Citigroup -1.4%, Wells Fargo -1.7%, AMEX -0.6%
Work from home names: Facebook +1.2%, Apple +2.8%, Amazon +1.2%, Netflix +2.1%, Disney +0.6%,  Zoom Video +0.7%, Alphabet +0.2% and Microsoft +2.5%,
Tech NXP Semi -0.8%, Nvidia +2.7%, Micron +0.9%, AMD +1.6%, Skyworks +2.3%
Re-opening stocks  Boeing -1.8%, Caterpillar +0.3%, Simon Property -1.3%, Kohl’s -4.8%, Nordstrom -5.8%, Gap -2.6%, United Airlines -4%, Carnival -5.1%, Wynn Resorts -1.9%, Chevron -0.7%, Exxon Mobil -1.2%,  
Lock down names Campbell Soup +2.5% General Mills +2.3%, JM Smucker +0.6%
DATA
Chicago Fed National Activity Index Feb -1.09% vs +0.75% Jan revised (F/cast was +0.78)
Existing Home Sales Feb -6.6% vs +0.2% Jan revised (f/cast was -1.5%)
USD was weaker vs Yen & Euro. Bitcoin -5.6% @ 54,328.02 as Powell calls cryptocurrencies ‘not really useful stores of value’ and says Fed will move slowly, VIX -9.9% @ 18.88, US T10 @ 1.684% following concerns over the Turkish Lira
OIL Brent +0.1%, WTI +0.2% despite concerns about renewed lockdowns in Europe.
Gold -0.3%, Silver -2%, Copper +0.08% Platinum -1.1%, Palladium -1.1% but they were trading higher in the aftermarket.
AHEAD 
Current Account, Redbook, New Home Sales, Richmond Fed Manufacturing Index, API crude Oil Stocks
Powell Testimony, Brainard Speech

DAX +0.25%, CAC -0.49%, FTSE +0.26% 
Markets opened lower with concerns over Turkey after President Erdogan replaced the central bank chief days after a sharp interest rate hike. But worked higher FTSE and DAX broker into the green and traded sideways. CAC failed to break above Friday’s close and drifted lower in the PM
Travel & Leisure names like IAG -8%, Dufry -4.9% Tui -4.4% and Retail names were weak as Europe lags in the vaccine roll-out as a third covid wave strikes.Autos strong but Retail
Volkswagen +7% and Porsche +8.9% after Deutsche Bank significantly raised its price target for the German automakers’ stocks.
Earnings from Kingfisher +3.6%, Julius Baer +1.2% and Lonza +2%
Spanish bank BBVA -6.8% after re-affirming its commitment to Turkey on the back of the news of Erdogan’s central bank move.
DATA
EUROZONE 
Current Account Jan Euro 5.8b vs 51.9b Dec (F/cast was 32b)
AHEAD
EUROZONE No data due
GERMANY No data due
FRANCE No data due
UK Claimant Change, Unemployment Rate, Average Earnings, CBI Industrial Trends Orders, 30yr Gilt Auction.

JAPAN 
Nikkei futures opened -15pts and have fluctuated so expect a flat  open but work better on bargain hunting after Monday’s sell off.  Yen currently 108.80
No data due 
Tokyo announced 187 new covid cases Monday
Japan Asia Group (JAG) said on Monday it would issue new shares to existing shareholders to dilute a stake held by a fund backed by veteran activist investor Yoshiaki Murakami. JAG’s move comes as City Index Eleventh flagged a second bid to buy the energy and environmental services firm and said it could boost its stake close to 33% before launching the bid -VE
Japan’s KM Biologics Co said on Monday it had started a human trial for its COVID-19 vaccine, becoming the country’s third candidate to advance to clinical trials. +VE
Toyota, Nissan, Honda and other Japanese carmakers scrambled on Monday to assess the impact on their production of a fire at a Renesas Electronics chip plant that could aggravate a global semiconductor shortage. Renesas has said it will take at least a month to resume production at a 300mm wafer line at its Naka plant -VE
Japan’s major tour bus firm Hato Bus Co. resumed its operations on Monday following the lifting of a coronavirus state of emergency for the Tokyo area, allowing passengers to enjoy fresh air and cherry blossoms in full bloom from an open top bus. +VE
Global Dining Inc a Tokyo-based restaurant chain operator filed a damages suit on Monday against the Tokyo metropolitan government for ordering that business hours be reduced as a public safety measure during the coronavirus pandemic.

SOUTH KOREA 
Expect markets to open flat following the mixed US performance but likely to work better through the day.
No data due
KDCA reported 36 new covid variants, including 26 local infections, further escalating concerns over the spread of the more transmissible strains.  Total new cases were 415 staying above 400 for a sixth day. -VE for sentiment
Lotte is considering acquiring a significant stake in Enzychem Lifesciences to become its second-largest shareholder, a local newspaper reported Monday.  The group’s de facto holding firm Lotte Holdings and Lotte Chemical would jointly buy the shares, the group said, which would be the conglomerate’s first attempt at a biotech business.  Slight -VE
Oriental Brewery, South Korea's largest brewer, plans to raise prices of some beers next month because of a rise in beer tax, a company official said Monday. Slight -VE
NAND flash chips could have more than 600 layers as memory technologies evolve, SK hynix CEO Lee Seok-hee said at a global forum on Monday.  During a keynote speech at the International Reliability Physics Symposium hosted by Institute of Electrical and Electronics Engineers, Lee said, “In both DRAM and NAND areas, the company is working to improve not only materials of memory semiconductors but also design structures and reliability to raise the technological value.”  +VE
HMM Co., said Monday it has deployed two additional ships to cope with soaring freight costs amid the new coronavirus pandemic. HMM will operate two additional 16,000 twenty-foot-equivalent unit (TEU) ships, according to the Ministry of Oceans and Fisheries. TEU is a measure used for the capacity of container transportation. The launch came around a month earlier than the original schedule of April. +VE
Samsung Electronics Co. on Monday launched its 2021 lineup of high-resolution monitors as the South Korean tech giant eyes to increase sales amid the rising trend of remote working and distance learning.
Hanwha General Chemical said Monday that it had become the first South Korean company to own mixed hydrogen combustion technologies.  Mixed hydrogen combustion burns natural gas together with hydrogen to generate electricity. This method of generating electricity can cut carbon emissions by more than 30 percent, according to Hanwha Group’s chemicals unit, and can significantly reduce nitrogen oxide emissions, which cause fine dust issues. +VE

TAIWAN 
Expect market to open higher following the Tech rally in the US and good local data.
Data due after market  Industrial Production and Retail Sales
After Market Monday
Unemployment Feb 3.73% vs 3.75% Jan (F/cast was 3.8%) ending six months of declines.
Export Orders Feb 48.5%YoY vs 49.3% Jan (F/cast is 46%)as the pandemic boosted demand for notebook computers and related equipment amid rising remote working and learning trends, the Ministry of Economic Affairs said yesterday. The figure is the best February performance in the nation’s history and came as export orders grew for 12 months in a row on an annual basis, primarily aided by an annual growth of 88.4 percent in orders for information and communications technology (ICT) products to US$11.39 billion. Orders from the US, the biggest export destination for local manufacturers, surged 50.2 percent year-on-year to US$12.21 billion, accounting for 28.7 percent of the total exports.+VE
A newly formed Chinese company using the likeness of a firm formed in Taiwan and technology developed with an investment from a government-affiliated organization could be just the tip of a national security iceberg and must be investigated, a legislator said yesterday. After Hestia Power, started with support and investment by the Industrial Technology Research Institute, was dissolved last month, staff from the company turned up in Shanghai at a new venture called Shanghai Hestia Power Inc, Taiwan People’s Party (TPP) Legislator Ann Kao  told a news conference at the Legislative Yuan in Taipei. The Shanghai firm has the same leaders and team members, and even uses the same logo, she said. “This is a national security issue, for China to steal our core technology and skilled talent in the semiconductor industry,” she said, adding that the government must close legal loopholes to prevent such an incident from recurring. “How can institute-subsidized research and development end up in China to aid them in surpassing Taiwan in a key sector of the semiconductor industry?” she said.Institute officials said the institute is cooperating with an investigation into breach of trust and other possible contraventions.  -VE
Formosa International Hotels Corp yesterday proposed a cash dividend of NT$4.39 per share based on last year’s profits, even though the COVID-19 pandemic and international travel bans played havoc at some properties. +VE
Tigerair Taiwan Ltd, has partnered with the Rakuten Monkeys baseball team to offer a tour to Japan’s Miyako Island, as well as cobranded products, to create new revenue streams, the airline said yesterday.  +VEHon Hai, Wistron plants added to ‘lighthouse’ list.  The WEF lists a factory as a ‘global lighthouse’ if it has adopted the latest technologies, such as artificial intelligence and the Internet of Things +VE
Acer Inc shares yesterday -1.15% after the company was hit by a massive ransomware attack, in which hackers demanded US$50 million before releasing stolen data. It was reported last week that Acer had been hit by the REvil hacker group, which had asked for the ransom -VE

CHINA 
Expect market to open flat key will be whether Team China remains active in supporting the markets.  Trade relations deteriorate this time with France adding to the number of countries at odds with China.
No data due
France’s foreign ministry has summoned China’s ambassador over repeated insults and threats aimed at French lawmakers and a researcher and a decision by Beijing to sanction officials across the European Union.  Comes as the United States, the European Union, Britain and Canada imposed sanctions on Chinese officials on Monday for human rights abuses in Xinjiang, in the first such coordinated Western action against Beijing under new U.S President Joe Biden.
China on Monday blacklisted 10 EU individuals and four entities in response to Brussels’ sanctions against Chinese officials over alleged human rights abuses in the Xinjiang region.  The Chinese foreign ministry said members of the European Parliament Reinhard Butikofer, Michael Gahler, Raphael Glucksmann, Ilhan Kyuchyuk and Miriam Lexmann were among those who “severely harm China’s sovereignty and interests and maliciously spread lies and disinformation.”  The other individuals sanctioned by China were Dutch politician Sjoerd Wiemer Sjoerdsma, Belgian parliamentarian Samuel Cogolati, Lithuanian member of parliament Dovile Sakaliene and two scholars - Adrian Zenz of Germany and Bjorn Jerden of Sweden.
The White House said it was evaluating its next steps toward China after testy talks in Alaska last week between key U.S. and Chinese officials and sanctions over alleged abuses in Xinjiang announced earlier on Monday. It said it cannot rule out any further actions on China and that it continued to have concerns about human rights related to China’s Xinjiang region. -VENational People’s Congress Standing Committee to weigh the overhaul of Hong Kong political system next week. The  agenda for the meeting of National People’s Congress Standing Committee led with proposals to amend annexes 1 and 2 of the Basic Law, state media says. National legislature passed resolution earlier this month paving the way for shake-up to ensure only ‘patriots’ hold key positions of political power.
Reckitt Benckiser Group is considering selling its infant formula business in Greater China, in a deal that could value the business at more than $2 billion, two people with knowledge of the matter said.  At this stage it is a 'business review’.
ByteDance is acquiring Moonton Technology for an undisclosed amount amid an ongoing lawsuit with Tencent, which alleges intellectual property infringement Moonton’s Mobile Legends: Bang Bang is one of the biggest mobile games in Southeast Asia, where Tencent has struggled to make headway with Honour of Kings. Slight -VE Tencent.
Russia and China can reduce sanctions risks by moving away from US dollar, the Russian foreign minister says the nations should work together and strengthen self-reliance in science and technology.   He made the remarks ahead of talks with his counterpart Wang Yi in the southern Chinese city of Guilin

HONG KONG  
ADR’s +176pts at 29,061 weakness in HSBC, BABA, CKH and BOC and BOCHK but expect some initial margin call selling and then cautious trading ahead earnings.  Yesterday’s turnover was low and so watch to see if activity increases.
No data due but after market Monday
Current Account Q4 HK$30.9b vs 96.5b Q3 (F/cast was HK$25b)
Inflation Rate Feb +0.3% YoY vs +1.9% Jan (F/cast was +0.2%)
On inflation a Government spokesman said that taking the first two months of 2021 together to neutralise the distortions caused by the timing of the Lunar New Year, underlying consumer prices registered a small year-on-year decline of 0.3%, mainly reflecting the narrowed increase in food prices and the enlarged fall in private housing rentals. Meanwhile, price pressures on other major CPI components remained very mild.

IPO
BIDU-SW (09888.HK), debut today, opened at $250 in gray market, down 0.8% against the listing price of $252.  It  closed at $254.8 up 1.1% or $2.8 against the listing price of $252, 
PhillipMart data showed. Excluding handling fee, the book gain is $140 per board lot size of 50 shares.

Short Selling  Monday 11.7% vs 17.7% FridayTop Shorts  Bud Apac (1876) 64%, Hengan (1044) 42%, ICBC (1398) 31%, HSBC (5) 28%, Ping An (2318) 27%, China Life (2628) 27%, Bank Of China (3988) 26%, MTRC (66) 26%, CCB (939) 26%, Henderson Land (12) 25%
EARNINGs due Tuesday include Henderson Land (12), Henderson Investment (97), K Wah (173) , Kunlun (135),  Geely (175), ShuiOn Land (272), China Foods (506), Yue Yuen (551), Zhejiang Expressway Co (576), Asia Cement (743), China Literature (772), Convenience Retail Asia (831), Huaneng Power (902),  GoodBaby (1086),  China Modern Dairy (1117), Milan Station (1150), Sino Biopharmaceutical (1177), PICC (1339), 361 Degrees (1361), Guotai Junan International (1788), Fosun Tourism Group (1992), Lifestyle China Group (2136), Wuxi Biologics (2269), PICC Property and Casualty (2328) , Chalco (2600), Solomon Systech (2878), Sino-Ocean Group (3377), Agile (3383), Hengdeli (3389), Pou Sheng (3813), Kingsoft (3888), ZhongAn Online P & C Insurance Co (6060).
NATIONAL SECURITY 
Eight of the 12 activists convicted of crossing into mainland waters illegally were sent back to Hong Kong and promptly detained overnight in six police stations. Lawyer Chow Hang-tung, a spokesman of a concern group for the 12, said Li was interrogated without the presence of a legal representative yesterday. "Li's lawyer attempted to find Li in a police station in the afternoon but was unable to see him. The reason given by police is that he is being interrogated and does not want to meet with the lawyer," Chow said. She added the concern group and families were extremely disappointed with the handover arrangement as they were not informed about it. As of 6pm yesterday only one of the activists was able to phone his relatives. "Why are police trying to hide the whole arrangement?" Chow said. "When they return to Hong Kong, they should have the right to meet with lawyers when being interrogated by the police and seeing their families."
WATCH
Tencent (700 HK) Warner Music has agreed a fresh licensing agreement with Tencent to stream its music in China, as the record label behind Dua Lipa, Lizzo and Ed Sheeran looks to push further into the fast-growing music market.  +VE and should off-set the ByteDance news
BILIBILI-SW (09626.HK) (BILI.US)’s IPO registered approximately $42.9 billion margin as at around 6:00 pm Monday according to brokers. Based on the public fundraising amount of $741 million, the IPO was over-subscribed by about 56.9 times.
Rumoured that a fresh round of dismissal in Hong Kong, HSBC is slashing 50-60% of the workforce, or at least about 100 workers, from the EIR (External Investigative Reporting) department, Apple Daily reported. A half of the positions in the compliance unit will be moved to Guangzhou for cost saving.
CG SERVICES (06098.HK) announced annual result ended December 2020. The net profit amounted to RMB2.686 billion, up 60.8% yearly.  EPS was 97.62 fen. A final dividend of 21.87 fen was declared against a dividend of 15.14 fen in the same period of the previous year. Li Changjiang, at the results conference, laid out the company's missions in its five year (2021-2025) plan. The company will foster all sorts of its businesses concurrently, aiming to manifest $100 billion revenue breakthroughs in property services, value-added services and such other areas.   The management also hoped the revenue and profit to grow by not less than 50% this year.
CHINA UNICOM (00762.HK) announced that Mobile Subscribers amounted to 306 million in February 2021, representing a monthly net loss of 20,000. During the month, 5G Subscribers reached 84.543 million, representing a net increase of 6.589 million.
CHINA TELECOM (00728.HK) announced Key Performance Indicators for February 2021. Mobile Subscribers amounted to 352.8 million, representing a net increase of 250,000.  During the month, 5G Package Subscribers reached 103 million, representing a net increase of 6.2 million, down from January's 10.67 million.
ZTE (00763.HK) is set to suffer controllable business impacts from the U.S. FCC ban, which mainly involves the communication network equipment replacement in the local market, opined Chairman Li Zixue, after the U.S. communication watchdog had announced earlier the inclusion of Huawei and ZTE into her sanction list that jeopardizes her national security. Amid the era of 5G buildout stage last and this year, China's domestic development will go on laying grounds for the large-scale 5G buildout, said Li.
ENN ENERGY (02688.HK) announced annual results ended December 2020. Net profit amounted to RMB6.278 billion, up 10.7% yearly. EPS equaled  RMB5.59. Final. DPS was HK$2.1, together with special DPS of HK$0.32.
TINGYI (00322.HK) announced annual result ended December 2020. The net profit amounted to RMB4.062 billion, up 22% yearly. EPS was 72.23 fen.  A total DPS of US11.08 cents was declared, including a final DPS of US5.54 cents and a special DPS of US5.54 cents. +VE
BILIBILI-SW (09626.HK) has closed its international placing at 17:00 today, a day ahead of schedule, said market rumors.
Under the most bullish scenario, Hong Kong Tourism Board (HKTB) projected roughly 9.6 million travelers to visit Hong Kong in 2021, a year hampered by the pandemic. The forecast was 1.6 times above the 2020 figure, yet representing only 15% of the 2018 peak level.  Given global Covid outbreaks, HKTB shrugged off a full cross-border travel resumption between Hong Kong and other regions in the next 3-6 months.  -VE for Tourism names

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