Things to know before trading Asia on Monday


06 Mar

This and previous notes can be found at asianmarketsense.com

Overview
The coming week is likely to be dominated by investors coming to terms with the fact that higher yields are here for the foreseeable future and that they need to repositioning their portfolios to reflect that. Key is that the higher yields are here with stronger expectations for US growth, especially as Biden’s stimulus bill got agreement in the early hours of Saturday to proceed.
With most earnings now reported expect more attention on the macro data. China's NPC and CPPCC ongoing news bites will be closely monitored and on Sunday we get China Trade Data too. We could get new loans and Total Social Financing data later in the week too.
International reaction to moves by China to change Hong Kong’s electoral system along with other human rights issues are likely to remain at the forefront of news. Key for China being that they don’t alarm investors; that investors continue to believe that they can rely on Hong Kong’s legal system to protect their investments. Another worry for China is going to be the fact that Biden had continued Trump’s tough stance but is working with Allies to bring wider and more concentrated pressure on China.
Also this week GDP growth data from Japan and Household spending along with Trade data from Taiwan and Germany.Inflation data from Taiwan, China, US, Germany will also be closely watched.

DOW +1.85%, NDX +1.55%, S&P +1.95%, Russel 2K +2.11% Markets opened in the green but initially sold down as the strong jobs report saw the T10 yield spike to 1.6% putting pressure on Tech names before rebounding from late morning to close at the day highs.  Powell's comments about price inflation worried investors although he did say he had noted the the rise in yields.  The stimulus bill was also seeing delays in the Senate over unemployment aid but a deal was reached in the early hours of Saturday allowing the bill to go forward.  With the majority of earnings complete markets are likely to focus more on the economic data and the inoculation roll out.
Banks JPMorgan Chase +0.2%, Citigroup +0.6%, Wells Fargo +0.7%, Amex +3.3%
Work from home names: Facebook +2.6%, Apple +1.1%, Amazon +0.8%, Netflix +1%, Disney +1%, Zoom Video -1.7%, Alphabet +3.1% and Microsoft +2.2%,
Tech NXP Semi +8.1%, Nvidia +0.7%, Micron +5.5%, AMD +1%, Skyworks +3.7%
Re-opening stocks  Boeing -0.7%, Caterpillar +3.5%, Simon Property +1%, Kohl’s +1.4%, Nordstrom -1.3%, Gap +7.6%, United Airlines -2.9%, Carnival -4.8%, Wynn Resorts +0.3%, Chevron +4.3%, Exxon Mobil +3.8%,  
Lock down names Campbell Soup +1.7% General Mills +2.7%, JM Smucker +1.8%
DATA
Balance of Trade Jan $-68.2b vs -67b Dec revised (F/cast was -67.5b)
Exports Feb $191.9b vs 190b Jan (F/cast was 192.5b)
Imports Feb $260.2b vs 256.6b Jan (F/cast was 260b)
Non Farm Payrolls Feb 379k vs 166k Jan revised (F/cast was 170k)
Unemployment rate Feb 6.2% vs 6.3% Jan (F/cast was 6.3%)
Average Weekly Hours Feb 34.6 VS 34.9 Jan revised (F/cast was 34.9)
Average Hourly Earnings Feb +0.2% MoM vs +0.1% Jan revised (F/cast was +0.2%)
Participation Rate Feb 61.4% vs 61.4% Jan (F/cast was 61.5%)
Baker Hughes Total Rig Count 403 vs 402 prior
Baker Hughes Oil Rig Count 310 vs 309 prior
US Consumer Credit Change Jan $-1.31b vs +8.8b Dec (F/cast was +12.5b)
USD was stronger vs Yen & Euro. Bitcoin +1.24% @ 48,650, VIX -13.7% @ 24.66, US T10 1.577% but off intraday high of 1.62%.
OIL Brent +3.9%, WTI +3.4% as OPEC+ maintained production levels and the strong US jobs report.
Gold -0.15%, Silver -0.65%, Copper +3.05% Platinum -0.18%, Palladium -0.8% Gold near a 9 mth low as dollar gains.
AHEAD Wholesale Inventories, Consumer Inflation Expectations.

DAX -0.97%, CAC -0.82%, FTSE -0.31%  having opened lower; following Asia where markets closed lower after China only targeted 6% growth, markets worked back into the green only to then sell off into the close as US markets tanked.  Comments from Fed Chair Powell that economic opening could lead to some price inflation and a strong job report saw US T10 yield spike above +1.6%; worrying investors. Travel and Leisure led the declines as a shipment of AstraZeneca vaccine to Australia was blocked by Italy.
Germany’s will need a supplementary budget to meet the extra costs of dealing with covid.
Carnival -11.5% led the sector lower.
BT +4.9% as the CEO intends to leave unless the company finds a successor to its chairman
DATA
GERMANY 
Factory Orders Jan +1.4% MoM vs -2.2% Dec revised (F/cast wa +1.5%)
FRANCE 
Balance of Trade Jan Euro -3.95b vs -3.57b Dec revised (F/cast was -4.2b)
UK 
Halifax House Price Index Feb -0.1% MoM vs -0.4% Jan revised (F/cast was +0.2%)
Halifax House Price Index Feb +5.2% YoY vs +5.4% Jan (F/cast was +5%)
AHEAD
EUROZONE No data due
GERMANY Industrial Production
FRANCE No data due UK No data due

JAPAN Expect Nikkei to open higher following the rebound in US markets on Friday and new that the Biden stimulus bill was approved.  Yen closed 108.34
Data due Pre Market Current Account and Bank Lending.  Later @ 12pm Prelim Coincident Index and Leading Economic Index then at 1pm Eco Watchers Survey Current and Outlook.
Tokyo on Friday reported 301 new covid cases, up 22 from Thursday. PM Suga also said state of emergency would be extended for two weeks to try and combat covid. Slight -VE for sentiment.
Government is looking at an option to allow people to have their salaries transferred to smartphone virtual wallets. A significant move toward digital currency but a slight -VE for the existing banks.
Bank of Japan Governor Kuroda highlighted climate change on Friday as one of the key themes in guiding monetary policy, but kept his distance from the idea of the central bank buying green bonds. The BOJ will host a global workshop on March 25 and 26 to scrutinise how climate change risks could affect the banking system.
Takeda Pharmaceutical said it had asked regulators to approve use of Moderna's COVID-19 vaccine on Friday, which would add a third option to Japan's vaccination programme. +VE if granted
Honda released the world’s first commercially available vehicle equipped with Level 3 automated driving technology on Friday. When Honda’s Legend luxury sedan is in self-driving mode, the system can take control enabling the person in the driver’s seat to engage in such activities as watching TV or using a smartphone while in transit.
Toshiba;  Effissimo Capital Management has gained further backing in its push for a probe into Toshiba Corp, but big stakes built up by investors like BlackRock have raised questions over how much influence it and other activist shareholders will ultimately wield. Slight -VE
JCR Pharmaceuticals Co. will build a new plant in Kobe to produce the basic fluid for the AstraZeneca vaccine, the Hyogo Prefecture-based firm announced Thursday. The company is currently preparing for mass production of the fluid for the British pharmaceutical company’s COVID-19 vaccine at an existing plant in Kobe, but it has decided that a new plant is needed to ensure a stable supply. +VE
Japanese apparel group Onward Holdings is selling its Jil Sander brand to OTB, the Italian luxury conglomerate that also owns labels such as Maison Margiela and Marni.  Onward, which depends heavily on sales at Japanese department stores and has struggled with pandemic-related store closures and weak consumer spending, said it aimed to shore up its finances by exiting the unprofitable Jil Sander business. +VE

SOUTH KOREA 
Expect markets to open higher and whilst inflation concerns remain, the passing of the US stimulus bill will be +VE for growth and exporters; especially as the USD is remaining strong.
No data due
KDCA reported 418 new covid cases on Saturday (vs 398 Friday) as sporadic cluster infections showed no signs of a letup and the rising number of travelers amid warm weather is worried to spark yet another uptick in the curve.
Govt to revise social distancing rules as the country is now in a better position to deal with covid cases +VE for sentiment and re-opening of the economy.  Detail to be released in the next two weeks.
Vice finance minister on Friday warned of possible drivers of inflation, including rising oil prices and farm products, vowing efforts to closely monitor a potential surge in consumer prices.  “The consumer price index has continued an upward trend from 0.6 percent in January to 1.1 percent last month, largely due to gains in global oil prices and farm products,” said Vice Finance Minister Kim Yong-beom during an economic meeting.  Expect investors to focus on inflation hedging stocks.
SK Group's headquarters was raided by Prosecutors on Friday to see if the group is involved in the alleged creation of an illicit fund by the chairman of the SK Networks Co., a global trading unit of the group. They were searching to secure evidence for an investigation into the slush fund allegation. On the same day, prosecutors indicted chairman Choi Shin-won, who was arrested last month on charges of embezzlement and breach of trust. He is a son of late SK Group founder Chey Jong-gun and a cousin of SK Group Chairman Chey Tae-won. -VE
South Korea's agricultural ministry said Friday the country has not reported a farm-linked highly pathogenic bird flu case for around a week, in a possible sign of a letup.+VE

TAIWAN 
Expect market to open higher with Tech and Exporter +VE after the US stimulus bill saw agreement in the Senate.
No data due 
The manufacturing industry saw its growth accelerate in January from a stable state in the previous month, with an index gauging the sector’s health at “yellow-red” for the first time since September 2010, the Taiwan Institute of Economic Research (TIER) said Friday. The think tank attributed the upward trend to a gradual recovery around the world; as an increasing number of countries have launched programs to vaccinate their residents against COVID-19 and to the booming stay-at-home economy, which has increased demand for electronics. The manufacturing sector has also benefited as businesses increased inventories prior to the Lunar New Year holiday. +VE
Taiwan Semiconductor Manufacturing Co (TSMC) yesterday unveiled a plan to hire 9,000 people this year in the latest round of recruitment as the chipmaker races to boost capacity to alleviate a chip crunch and safeguard its technology advantage.TSMC’s talent recruitment this year might be the most ambitious in its history, while last year’s drive of 8,000 added recruits doubled the 4,000 new hires that it averaged over the preceding few years.  +VE
Eastern Media International yesterday signed a management contract with Formosa International Hotels to open a hotel under the Silks X brand that could start operations in 2025. The e-commerce and home shopping operator is to build the hotel in a mixed-use complex near the Taiwan Taoyuan International Airport MRT line’s Linkou Station with a budget of NT$1 billion (US$35.37 million), EMG chairman Gary Wang  told a news conference. +VE
Largan Precision has settled a lengthy litigation battle with smaller rival Ability Opto-Electronics Technology according to statements that the companies filed with the Taiwanese Stock Exchange yesterday. +VE
Developers and contractors in northern Taiwan plan to introduce NT$260.78 billion (US$9.22 billion) in new projects for the spring sales season, representing an increase of 43 percent from a year earlier, as they remain upbeat about a continued boom amid an economic upturn, the Chinese-language My Housing Monthly said. +VE
Broadcom Inc CEO Hock Tan said that customers are beefing up semiconductor orders at an unprecedented pace and tried to quell concern that this might create a glut later on. “We see customers accelerating the bookings for early deliveries and attempting to build buffers and creating the demand-supply imbalance you all hear out there,” Tan told analysts during an earnings conference call yesterday. About 90 percent of Broadcom’s supply this year has been ordered by customers. Normally, chipmakers have about one-quarter of their supply locked up in orders. +VE

CHINA 
Expect market to open higher following the US rebound but Sunday’s trade data and news from the NPC could influence that.  Concerns about international relations as US seeks to rally allies  to condemn China moves in Xinjiang and in reaction to proposed changes to the HK electoral system also a dampener.
Data due Sunday
Balance of Trade Jan-Feb (Prior was $78.17b, F/cast is $60b)
Exports Jan-Feb (prior was +18.1% F/cast is +35%)
Imports Jan-Feb (prior was +6.5% F/cast is 12%)
Foreign Exchange Reserves Feb (Jan was $3.211tn F/cast is 3.2tn)
China pledged to boost spending and drive research into cutting-edge chips and artificial intelligence (AI) in its latest five-year targets, laying out a technological blueprint to vie for global influence with the US. Chinese Premier Li Keqiang singled out key areas in which to achieve “major breakthroughs in core technologies,” including high-end semiconductors, operating systems, computer processors and cloud computing — areas in which US firms now hold sway. Beijing would also aim to get 56 percent of the country on faster 5G networks.
China yesterday set a modest annual economic growth target, at above 6%, and pledged to create more urban jobs than last year.  That target of 6%  is significantly below the consensus of analysts, who expect growth could beat 8% this year.  Some think the low target isa signal that China wants higher quality growth. It would also give planners more flexibility in areas where the economy its struggling.  I think it also recognises the debt problems that China has and the potential impact controlling that and reducing it will have on the economy.  The jobs target is a big concern for Beijing, they do not want a disenchanted youth complaining about the system but the SOE’s are not good at creating jobs and the stifling of SME’s in recent years could mean that is difficult to achieve.
Beijing zeroes in on eight core areas for country to become manufacturing superpower. China unveiled on Friday a comprehensive plan to upgrade its manufacturing capabilities by 2025 via eight priority areas, sharpening its global competitiveness amid a broad trade and tech dispute with the United States. The plan, which was introduced at the annual meeting of top legislative body the National People’s Congress, is focused on rare earth and special materials, robotics, aircraft engines, new energy vehicles and smart cars, high-end medical equipment and innovative medicine such as vaccines, agricultural machinery, major equipment used in shipbuilding, aviation and high-speed rail , and industrial applications of China’s Beidou global navigation satellite system. “We must keep the share of manufacturing stable in the overall economy and enhance China’s competitive advantages in this sector,” the government said in the 142-page 14th five-year plan, which is set to be endorsed by the NPC’s nearly 3,000 delegates.
The United States on Friday called China’s moves to change the Hong Kong electoral system a direct attack on its autonomy and democratic processes and said Washington was working at “galvanizing collective action” against Chinese rights abuses. -VE
The European Union has called on Beijing to “carefully consider the political and economic implications of any decision to reform the electoral system of Hong Kong”, warning it is “ready to take additional steps in response to any further serious deterioration of political freedoms and human rights” in the city. -VE
US Senate has backed a bill to clamp down on China-funded Confucius Institutes.   The Chinese cultural centres on university campuses have been accused by lawmakers of being propaganda tools.  The proposed measure would cut back on federal funding for colleges with a Confucius Institute on campus unless the school has full authority over the centre

HONG KONG  
ADR’s +303pts at 29,401with Chinese Financials and Petro names +VVE but still seeing weakness in E Commerce names.   
No data due but on Friday 
The Hong Kong Monetary Authority (HKMA) announced that the official foreign currency reserve assets of Hong Kong amounted to US$495.9 billion as at the end of February 2021, up US$2.7 billion from US$493.2 billion in end-January 2021.
Including unsettled foreign exchange contracts, the foreign currency reserve assets of Hong Kong at the end of February 2021 amounted to US$495.7 billion.
Short Selling  Friday 14.1% vs 15.1% Thursday 
Top Shorts Sinopec (386) 38%, Ping An (2318) 37%, CKI (1038) 32%, HSBC (5) 30%, Country Garden (2007) 30%, CKH (1) 30%, CSPC Pharm (1093) 28%, Henderson Land (12) 28%, Galaxy Ent (27) 27%, Bud Apac (1876) 27%, Hang Seng Bank (11) 25%, BABA-SW (9988) 25%.
Earnings due Monday include Chinese Estates (127), China Tower (788), SITC (1308), Naga Corp (3918).
PROFIT WARNING
CENTRALWEALTHGP (00139.HK) profit warning, expecting a significant decrease in profit before income tax by approximately 83% to 87% for the year ended 31  December 2020 as compared to the profit before income tax recorded in  the consolidated financial statements of approximately HK$249 million for the year ended 31 December 2019.
WATCH
HKSAR Government expressed extreme concerns, saying it will stay in close touch with vaccine suppliers, after the EU announced an export control system, which will prohibit vaccine exports when necessary.
HUTCHMED (HCM.US) announced that its total revenue rose 11.27% yearly to US$227 million last year. Net loss attributable to HUTCHMED expanded to US$125.7 million from US$106 million net loss over a year ago.
AUTOHOME-S (02518.HK)'s IPO registered nearly $2.56 billion margin as at around 6 pm Friday according to brokers. Based on the public fundraising amount of approximately $762 million, the IPO was over-subscribed by approximately 2.35 times.
CONCH CEMENT (00914.HK) announced the preliminary results for the year ended December 2020. According to PRC accounting standards, net profit burgeoned 4.58% yearly to RMB3.513 billion with EPS of RMB6.63.
HUADIAN POWER (01071.HK) announced FY20 preliminary results. Net profit amounted to RMB4.204 billion, up 23.4% yearly. Basic EPS equaled RMB0.33.
Decathlon announced the cooperation agreement for Greater China with BABA-SW (09988.HK)'s Alibaba Cloud.  Accordingly, both sides will combine their industrial ecosystems to expedite Decathlon's digital transformation and new retail innovation in China through cloud and data solutions.
HKEX (00388.HK) announced that it will implement the second phase enhancement of the Volatility Control Mechanism (VCM) in its securities market on 29 March 2021.  The first phase enhancements were successfully launched in May 2020, and currently only  one trigger per applicable security is allowed in each trading session. The second phase enhancement will allow multiple triggers of the VCM per applicable security in the same trading session.
MTR CORPORATION (66.HK) will invite developers and/or consortia to submit Expression of Interest (EOI) for THE SOUTHSIDE Package Six Property Development on 8 March 2021 (Monday). The deadline for submission is 2:00pm on 12 March 2021
KUAISHOU-W (01024.HK) plans to introduce a chatroom app like Clubhouse - "Spaceship (literal translation of 飛船)", Chinese media reported.
To tie in with the Government's latest relief measures the Hong Kong Housing Authority (HA)'s Commercial Properties Committee (CPC) approved the proposed extension of the existing 75 per cent rent concession for the HA's eligible non-domestic tenants/licensees, including carpark users for monthly parking of commercial vehicles, for six months from April 1 to September 30, 2021.
Centa-City Leading Index (CCL) last printed at 177.17, up 0.34% weekly. The  research department of Centaline Property, said residential prices zigzagged to rise notably. CCL Mass +0.29% to 180.36 , CCL (small-to-medium units)  +0.31% to 177.86 and CCL (large units) +0.48% to 173.63. They analyzed that buyers flurried to purchase homes before Chinese New Year, shoring up prices which were led by large estates.
Doma, a real estate tech platform backed by Li Ka-shing's Horizons Ventures, announced the final merger agreement with a SPAC, Capitol Investment Corp. V. Capitol Investment will combine with Doma through equity and cash financing, likely valuing the latter at US$3 billion.
XIAOMI-W (01810.HK) is set to launch its first foldable smartphone, likely a model under the MIX series, Chinese media reported.

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