Feb 23 Asian Macro Initial Thoughts Expect a mixed open, US futures open higher


23 Feb

Asian Futures Nikkei Futures opened higher and currently +40pts,  HK ADR’s -226pts and Australia opened flat and trading sideways in volatile early trades.  
US Futures opened Dow +50pts, S&P +0.2% and NDX +0.1%. Expect caution ahead of Powells testimony later today.

DOW +0.09%, NDX -2.46%, S&P -0.77%, Russel 2K -0.69% on light volumes; markets opened lower; Dow worked better with the day high mid afternoon and then sold off into the close. S&P opened lower worked better but Fridays close was resistance and sold down into the close.  NDX opened lower, hit a low late morning and worked better for a while but sold down into the close.  Rotation still underway with weakness in Tech and Consumer Discretionary.  Inflation concerns remain and investors will be watching Powells comments to the Senate Banking committee on Tuesday for clues.  Deutsche upgrades several airline stocks; American Airlines closed +9% but  Boeing -2.1% was weak the premarket, rallied but then sold all the way back down after an engine failed on a United Airlines (UAL) Boeing 777 jet.
M&A 
Cooper Tire +29.4% agreed to be acquired by rival Goodyear Tire -0.2% for $2.8 billion in cash and stock. The deal is worth $54.36 per share for Cooper Tire shareholders, 24% above Cooper’s Friday closing price. Goodyear shares +21%.
Starboard Value Acquisition (SVAC) -5.1% announced a deal to merge with data center company Cyxtera Technologies, in a transaction worth $3.4 billion including assumed debt. The current owners will roll their equity stakes into the combined company, and Starboard Value Acquisition shares were 12% in premarket trading.
Principal Financial +5.7% Activist investor Elliott Management has taken a stake in and plans to push for changes at the life insurer.
People’s United Financial +15% agreed to be bought by M&T Bank +3.5% in an all-stock deal valued at $7.6 billion.
Earnings 
Discovery Communications +8.9% as earnings beat and Discovery said its Discovery+ streaming service was on pace to have 12 million subscribers by the end of the month.
Other
Tesla -8.6% is estimated to have made about $1 billion in paper profits on its bitcoin investments, according to a research note from Wedbush analyst Dan Ives. He said Tesla is on a trajectory to make more from bitcoin than it did from selling electric vehicles in all of 2020.
Zillow -9.3% has rolled out a “virtual tour” feature for listed properties, which ties pictures and videos to floor plans.
Kohl’s +62% on news a group of private-equity firms now controls a 9.5% stake in the retailer, and The Wall Street Journal reports that the group is attempting to take control of the board of directors. The group is the same one that teamed up to push for change at retailer Bed Bath & Beyond (BBBY)
GameStop +13.3% on news that Keith Gill doubled his stake in the video game retailer to 100,000 shares.
Tapestry +3.9%Credit Suisse upgraded the stock to “outperform” from “neutral.” On being primed for a strong rebound as lockdowns diminish, and also said Tapestry’s investments in new growth channels over the past year are paying off.
Banks JPMorgan Chase +1.4%, Citigroup -0.4%, Wells Fargo -1.5%, Amex +3.2%
Work from home names: Facebook -0.5%, Apple -3%, Amazon -2.1%, Netflix -1.2%,  Disney +4.4%, Zoom Video -5.5%, Alphabet -1.7% and Microsoft -2.7%,
Tech NXP semi -3.1%, Nvidia -3.8%, Micron -5.2%, AMD -4.7%, Skyworks -4.3%
Re-opening stocks  Boeing -2.1%, Caterpillar +3.9% (infrastructure building hopes in US), Simon Property +3.1%, Kohl’s +6.2%, Nordstrom +1% at day low, Gap +2.2%, United Airlines +3.5%, Carnival +5.6%, Wynn Resorts +2.5%, Chevron +2.7%, Exxon Mobil +3.7%,  
Lock down names Campbell Soup -0.4% General Mills -0.6%, JM Smucker +0.5%
DATA
Chicago Fed National Activity Index Jan +0.66 vs +0.52 Dec (F/cast was +0.39)
CB Leading Index Jan +0.5% MoM vs +0.3% Dec (F/cast was +0.3%)
Dallas Fed Manufacturing Index Feb 17.2 vs 7.0 Jan (F/cast was -30)
USD was weaker vs Yen & Euro. Bitcoin -5.7% @ 54,599.95 as Yellen warns that it is ‘extremely inefficient’. VIX +6.4% @23.45 , US T10 @ 1.369% continues to rise.
OIL Brent +4.7%, WTI +4.1% as US production still impacted by the artic storm in Texas.
Gold +1.8%, Silver +3.5%, Copper +1.8% Patinum -0.8% Palladium +1.2%. Gold stronger on inflation concerns.
AHEAD Redbook, Case-Shiller Home Price, House Price Index, Consumer Confidence, Richmond Fed Manufacturing Index,  API Crude Oil IndexFed Chairman Powell semi-annual economic testimony Senate Banking Committee
Earnings: Home Depot, Macy’s, Intuit, Thomson Reuters, Square, Toll Brothers, Jazz Pharmaceuticals, McAfee, Medtronic, Pioneer Natural Resources, Bank of Montreal

DAX -0.31%, CAC -0.11%, FTSE -0.18%  Markets opened lower following a mixed Asia and initially sold down but then worked better through the day, after good German Ifo data. But investors still harbouring inflation concerns as US T10 hits 1.367%; tech weak but Travel and Leisure seeing some interest on vaccine roll out hopes. As UK announced plans to lift lockdown measures in the coming months.  Tui +5% on the news.
ECB’s Lagarde outlined that inflation was very low but appreciation of the Euro posed a risk. Risks to growth in the Eurozone are tilted to the downside but less pronounced.
Varta -10.7% continued selling after last weeks poor earnings
Stadler Rail +3.9% after UBS upgraded the stock to “buy” and raised its price target.
G4S -9.8% after Canada’s GardaWorld said it would not raise its takeover bid for the British security firm.
DATA
GERMANY
Ifo Data
Business Climate Feb 92.4 vs 90.3 Jan revised (F/cast was 91)
Current Conditions Feb 90.6 vs 89.2 Jan (F/cast was 88.9)
Expectations Feb 92.4 vs 91.5 Jan revised (F/cast was 92)
AHEAD
EUROZONE Core Inflation Rate, Inflation
GERMANY No data due
FRANCE No data due
UK Unemployment Rate, Claimant Count Change, Average Earnings, Employment Change, Labour Productivity, CBI Distributive Trades

JAPAN 
Nikkei futures opened +25pts and have rallied now +40pts  Yen currently 105.04 slight strengthening. Expect market to see some consolidation in Tech following the US along with stocks that have hit highs recently with rotation into re-opening sectors like Airlines and Consumer names +VE following the arrival of vaccine and the drop in covid cases.
No data due 
Tokyo reported 178 new covid cases, lowest since Nov 9. National the number was 740 below 1,000 for the first time in 7 days.
Japan will only receive limited doses of COVID-19 vaccines for the first months of the rollout and shots for the elderly will be distributed gradually, the country's inoculation chief said.
Osaka, Kyoto and Hyogo are set to ask the central government to lift a state of emergency over the coronavirus pandemic in the western areas at the end of the month, ahead of its end date on March 7, officials said Monday.
Toshiba Corp is in talks with General Electric to jointly produce equipment used in offshore wind power generation, sources with knowledge of the matter said Monday. Offshore wind power is seen by Toshiba as a promising business area as the Japanese infrastructure conglomerate seeks to focus more on renewable energy. The two firms are expected to reach a tie-up next month, the sources said.
The government plans to lift regulations that have required domestic venture capital funds to invest at least 50% of the money they raised in Japanese start-ups, aimed at making them more attractive to foreign investors. The Yomiuri Shimbun reported. According to sources, the new system could be introduced as early as this summer.
Twelve major Japanese companies have established a policy of ceasing business deals with Chinese companies found to benefit from the forced labor of the Muslim Uyghur minority in China's far-western Xinjiang region, including Panasonic, Toshiba, Fast Retailing Co, Sony Corp and Hitachi Ltd.
Softbank +VE with the upcoming floatation of top South Korean e-tailer Coupang, furthering a turnaround that has seen the fund yo-yo from huge losses to record profit.

SOUTH KOREA 
Expect markets to open flat good Consumer Confidence likely to be off-set by the US sell off and continued inflation concerns. 
Data out
Consumer Confidence Feb 97.4 vs 95.4 Jan (F/cast was 93)
KDCA reported 332 new covid cases Monday (vs 416 Sunday) the lowest in seven days but warned that it had carried out fewer tests over the weekend Doctors in South Korea have threatened a protest strike against legislation to strip them of licences following criminal convictions with jail terms, sparking fears about possible disruption of a coronavirus vaccination effort set to begin this week.
Travel agencies said Monday they saw their annual sales plummet more than 80 percent last year due to the COVID-19 pandemic and are in urgent need of relief measures from the government. "(Travel agencies) can no longer shoulder their fixed costs due to mounting debts and their employees have been driven out of their workplaces after massive layoffs," a task force formed to tackle the crisis facing the businesses said in a press conference held in front of Cheong Wa Dae in central Seoul.
A bill from South Korea’s antitrust regulator aimed to govern dominant e-commerce platforms is still pending in the National Assembly due to a tug of war between two government bodies; the Fair Trade Commission and the Korea Communications Commission. In the meantime, platform operators and local customers have been raising their concerns, viewing the regulatory move as excessive market intervention.
Korean Air Lines Co. and Asiana Airlines Inc;  said Monday they will ground all Boeing 777 passenger jets following a recent engine failure incident in the United States.  Less of a problem than usual due to the lack of demand for passenger flights.
Asiana Airlines said on Monday it has converted two of its Airbus A350-900 passenger aircrafts to cargo planes as it seeks to expand its freight business.
The move will give the airline an additional 23 tons of space to carry cargo per plane, bringing its air cargo fleet to a total of four. Two other passenger planes were converted last year. +VE
AmorePacific is making efforts to reduce excessive plastic consumption, addressing the impact that the beauty industry has on the natural environment, officials said Monday. The company’s eco-friendly initiative is built on the “4R strategy” -- recycle packaging material, reduce petroleum-based plastic, reuse plastic containers, and reserve empty containers. +VE

TAIWAN 
Expect market to open flat with Tech likely to see consolidation following the US and no new data to drive the market higher.
No data due 
A draft bill on protecting Taiwan from invasion is likely to be passed by the US Congress, but it remains to be seen how US President Joe Biden’s administration would implement the act if it is passed.  Slight +VE
The production value of Taiwan’s semiconductor industry grew 20.9 percent year-on-year to NT$3.22 trillion (US$113.6 billion) last year, and it is expected to build on that performance this year, the Industrial Technology Research Institute’s  Industry, Science and Technology International Strategy Center said yesterday. The global semiconductor market grew 6.8 percent to US$440.4 billion last year, boosted by robust demand from the digital transformation and growing stay-at-home economy seen during the COVID-19 pandemic, the center said. That strength is likely to carry over to this year, leading to an 8.6 percent increase in domestic output to a new record NT$3.49 trillion, the center forecast. +VE
Largan Precision has proposed a record cash dividend per share of NT$91.5 based on last year’s earnings. The company’s board of directors proposed the record dividend based on its net earnings of NT$182.9 per share because the company is sitting on a large amount of cash — more than NT$100 billion (US$3.5 billion) as of the end of last year, it said in a statement yesterday. The cash dividend represents a payout ratio of about 50.03 percent, the first time in 11 years that it has surpassed 50 percent +VE
Coretronic Corp a manufacturer of LCD backlight modules, yesterday said it plans to boost capital expenditure this year by 10 percent to cope with growing customer demand for TVs.  It plans to spend NT$1.27 billion (US$44.82 million) to buy new manufacturing equipment, as well as expand its cleanrooms in China and Vietnam, as it expects TV backlight module shipments to grow more than 50 percent this year. The company, which counts Samsung Electronics Co and Sony Corp as its major clients, said its Vietnamese plant began operation last month and would be running at full capacity later this year. +VE
Rakuten International Commercial Bank, the nation’s first Web-only bank, aims to attract new clients by offering more attractive lending and deposit rates, but is cautious about funding young borrowers without credit records, the bank said yesterday. At an event celebrating its first full month of operation in Taipei, the bank said it is offering a 50 percent discount on lending rates for consumers applying for personal loans from today until March 22. +VE
China Airlines (CAL) nor EVA Airways have Boeing 777-200 planes in their fleets, the two airlines said yesterday. +VE

CHINA 
Expect market to open lower with continuing concerns over the PBoC liquidity policy and concerns about US/China relations after Senior Chinese diplomat Wang Yi called on the US to change its ways but the US response was that Beijing was trying to avert blame for its for its "predatory economic practices, its lack of transparency, its failure to honour its international agreements, and its repression of universal human rights.”   Still expect resources names to see good interest.
Data due on the open
House Price Index for Jan (Dec was +3.8% F/cast is +3.5%)
President Xi Jinping launches national campaign to ‘learn lessons’ from history as party’s centenary approaches; the education drive meant to renew the party’s legitimacy, analyst says. Urging the officials to learn from the past is a reference to party loyalty.  “[We] must guide the entire party to learn positive and negative lessons from its history, and resolutely follow the central leadership’s line,” Xi said, adding that “party unity” was the “life of the party”.
China’s food security at core of Beijing’s new five-year rural-revitalisation plan.  Ministry of Agriculture and Rural Affairs says China must ‘speed up innovations’ in the seed industry to help feed the nation’s 1.4 billion people
Concerns about covid reporting in China as Cambodia goes into lockdown with a surge of covid cases having had none for months. Chineseworkers are thought to be responsible.  Many Chinese workers went back to China for Chinese New Year and have recently returned and covid cases have resumed.  A strange coincidence?
The People's Bank of China unveiled the financial market operation in January. During the month, China's bond market issued a total of RMB4.3 trillion of various bonds.
According to PBoC's financial market operation for January, the average daily
turnover of Shanghai bourses surged by 32.5% MoM to RMB484.3 billion. The average daily turnover of Shenzhen bourses advanced 34.3% MoM to RMB609.26 billion. +VE Brokers
Chinese State Council wrote in a guidance that Beijing will move up the usage ratio of renewable energy and nudge the development of wind power and photovoltaic power, while exploring hydropower, geothermal energy, ocean energy, hydrogen energy, biomass energy, and solar thermal power generation in accordance with local conditions.
MWC Shanghai kicks off major telecoms industry showcase amid US-China tech war, pandemic.  Many of the leading Chinese and global telecoms companies are expected to take part in this year’s MWC Shanghai.  The telecoms industry trade show will be available on the internet to visitors and exhibitors around the world via a virtual portal, My MWCS Online
Huawei launched the Mate X2 foldable smartphone as it faces questions over the future of its handset business. It will be one of the first Huawei phones able to run its own HarmonyOS mobile operating system.  The 256GB version will be priced at 17,999 yuan ($2,785) while the 512GB model will start at 18,999 yuan.
Ant Group Co-backed MYbank  is to join China’s digital yuan (e-CNY) trial, as the People’s Bank of China (PBOC) charges ahead with rolling out an electronic currency system that could uproot the nation’s payments landscape. MYbank’s service is soon to be introduced to the central bank’s digital yuan app, people familiar said, requesting not to be identified because the matter is private. Tencent Holdings Ltd-backed WeBank  will also participate, one of the people said.
Canada’s parliament passed a non-binding motion on Monday saying China’s treatment of the Uighur Muslim minority in the Xinjiang region constitutes genocide, putting pressure on Liberal Prime Minister Justin Trudeau’s government to follow suit. Comes as Britain denounced the torture, forced labour and sterilisations that he said were taking place against Muslim Uighurs on an "industrial scale" in China's Xinjiang region.  The with the EU and Turkey also voiced concerns. In response China on Monday rejected  the “slanderous attacks”.  Foreign Minister Wang Yi told the U.N. Human Rights Council that it was taking counter-terrorism measures in accordance with the law and that Xinjiang enjoyed “social stability and sound development” after four years without any “terrorist case”.  Wang invited UN scrutiny but gave no timetable.  It made similar declarations with covid and it took 12 months for a WHO team to get limited access.
India is set to clear 45 investment proposals from China, which are likely to include those from Great Wall Motor and SAIC Motor Corp, government and industry sources told Reuters, as military tensions between the two countries ease at the disputed border. About 150 investment proposals from China worth more than $2 billion were stuck in the pipeline. Companies from Japan and the U.S. routing investment through Hong Kong were also caught in the cross-fire as an inter-ministerial panel led by the interior ministry increased scrutiny of such proposals.
Beijing Nayuki Food & Beverage Management Co., Ltd., an affiliated company of Nayuki, was put on the abnormal operation list by the State Administration for Market Regulation in Chaoyang, Beijing over concealing corporate information, Chinese media citing Tianyancha. In response, Nayuki said the incident was merely a misunderstanding. The affiliate will soon be removed from the abnormal operation list.

HONG KONG  
ADR’s -226pts at 30,093   HSBC in focus with earnings expected at lunchtime.  Xia Baolong, head of Hong Kong and Macau Affairs Office, speech likely to be -VE for local sentiment and could see a further deterioration in US and UK relations with China.  After yesterday’s sell off expect some margin selling on the open.
Earnings due Tuesday HSBC (5), Hang Seng Bank (11), Guoco (53) SmarTone (315), Top Form (333) SJM (880), and others.
No data due but after market Monday
Inflation Rate Jan +1.9% vs -0.7% Dec (F/cast was -0.2%)
The increase in January was mainly due to the low base of comparison resulted from the Government's payment of public housing rentals and waiver of two-thirds of rent for tenants of Group B estates by Hong Kong Housing Society in January last year.
Netting out the effects of all Government's one-off relief measures, the year-on-year rate of change in the Composite CPI (i.e. the underlying inflation rate) in January 2021 was -0.5%, lower than that in December 2020 (0%). The decrease was mainly due to the decreases in the costs for meals bought away from home and the enlarged decreases in the prices of pork.
SHORT SELLING Monday 12.4% vs 13% Friday 
Top Shorts:  Hengan (1044) 38%, Ping An (2318) 37%,  Bud Apac (1876) 33%, CCB (939) 31%, China Res Land (1109) 30%,  SHKP (16) 29%, BankComm (3328) 29%, Sands China (1928) 28%,  AIA (1299) 27%, CSPC Pharma (1093) 27%, CLP (2) 25% (reported earnings today),  Bank of China (3988) 25%.
NATIONAL SECURITY 
There should be changes to Hong Kong's electoral system to ensure important positions are filled by patriots, a top Beijing official responsible for the city's affairs said.  Xia Baolong, head of Hong Kong and Macau Affairs Office, said “true patriots” should head the SAR's administrative, legislative and judicial institutions.
Important positions cannot fall to people who oppose China and stir up trouble in Hong Kong. Those who made use of “scorched earth” tactics and demand foreign sanctions against mainland and Hong Kong are not patriots, he said in a summit held online by the Chinese Association of Hong Kong and Macau Studies. Xia said there are five principles to uphold for such reforms to the city’s electoral system. A big concern will be his call that patriots hold the top judicial positions but also is seems apparent that HK will no longer follow the five-step plan laid down in the Basic Law for constitutional reform after Xia's speech makes it clear that Beijing is determined to reform Hong Kong's electoral system. -VE for sentiment
BUYBACKS/INSIDER DEALING 
WANT WANT CHINA (00151.HK) announced that it had on 22 February repurchased on-market 6.10 million sharesinvolving $36.0813 million.

PROFIT ALERT
ISDN HOLDINGS (01656.HK) Updated its Positive Profit Alert that the Group expects to record an increase in profit of more than 80% for the FY2020 after offsetting the allowance for impairment.
WATCH
ND PAPER (02689.HK) announced interim result ended December 2020. The revenue rose 7.1% year on year to RMB30.887 billion. The net profit amounted to RMB4.002 billion, up 75.6%. EPS was RMB0.85. Interim dividend per share
of RMB10 cents (approximately HK12 cents) was declared, flattish yearly.
CHINA UNICOM (00762.HK)  announced that the aggregate number of 4G subscribers (including 5G subscribers) nearly hit 273 million in January 2021, with a net addition of 2.739 million subscribers. The net addition was 1.123 million subscribers in December 2020.
China Passenger Car Association (CPCA) said the market estimated China's narrow-sense PV retail sales volume at 1.19 million units in Februaryup 377% YoY but down 44.9% MoM.
The office rental decline at Grade A buildings eased to only 0.6% MoM in January 2021, down from a 1.1% MoM fall in December 2020 according to JLL's latest report.  The office rent was steady in CBDs like Central and Tsim Sha Tsui, yet logging the steepest fall of 1.4% MoM in Wan Chai or Causeway Bay
Worldwide sales volume of smartphones shrank 5% yearly in 4Q20, and 12.5% in FY20, Gartner wrote in a report. During the fourth quarter, Apple reclaimed the top spot with sales volume up 14.9% YoY to 79.943 million units, outrunning Samsung at the second. XIAOMI-W (01810.HK) ranked the third, with sales volume up 33.9% to 43.43 million units.
Alibaba's Fresh Hema is broadening the product coverage of RunRunFresh nationwide, Chinese media reportedAccording to the report, Hema will designate Shanghai as the first pilot city, with a goal to let Shanghai Hema sell various products spanning from vegetables, fruits, meat and poultry, to dairy products, baked goods, seafood and aquatic products, before 1 May.
CHINA LIFE (02628.HK) announced that the accumulated premium income of the Company for January 2021 was about RMB218.9 billion, up 13.1% yearly.
Hong Kong market turnover at the close Monday amounted to HK$302.588 billion, with warrants amounting to HK$18.27 billion, which accounted for 6.04% of the market turnover.  Blue chips HK$119.47bn (39.48%) and SOE-shares totaled HK$116.26 billion (38.42%).

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