June 1 Asian Macro Initial Thoughts OECD raises outlook +VE but lots of Asian data due

01 Jun

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Australia Futures indicate market to open lower the pre market manufacturing data was weak but the PMI came in better.  More data due later so expect a cautious start.  Oil & Gold higher overnight +VE  Beach, Woodside, Evolution and Northern star.  Iron ore rebounding +VE BHP, Fortescue and Rio.

Pre Market Data
Manufacturing Index May 61.8 vs 61.7 Apr (F/cast was 62) Manufacturing PMI May 60.4 vs 59.7 Apr (F/cast was 59.9)
Data due after the after Inflation Gauge, Building Permits, Company Gross Profits, Current Account and RBA Interest Rate Decision.

Japan Nikkei futures opened  +33pts and have worked higher currently +45pts but off highs.  Sentiment helped by falling covid cases but key will this mornings data.

S Korea Expect markets to open lower with caution ahead of Trade data on the open and then Manufacturing PMI later.  Sentiment helped by the OECD growth upgrade and falling covid cases but the data is key.

Taiwan Market to open higher with +VE news of the covid outbreak easing and TSMC opening R&D in Japan but the PMI number will be closely watched too.

China Market to open flat ahead of the Caixin PMI data senitment weak as the PBoC tightens on  Forex and international relations remain fraught. Rising covid cases a concern. Wild card remains ‘Team China’

HK No ADR’s  expect market to open lower with caution ahead of the Chinese data due today

US Futures
Opened Dow -48pts, S&P -0.15% and NDX -0.1%

US markets Friday reacted well to the PCE report acepting the Fed’s line that the inflation being seen is temporary and good because it reflects growth. Housing and loans in focus as the Eviction moratorium expires June 30.

OECD Report ‘NO ORDINARY RECOVERY’ Global economic growth is now expected to be 5.8% this year, a sharp upwards revision from the December 2020 Economic Outlook projection of 4.2% for 2021. The vaccines rollout in many of the advanced economies has been driving the improvement, as has the massive fiscal stimulus by the United States. World GDP growth is expected to be 4.4% next year but global income will still be some USD 3 trillion less by end 2022 than was expected before the crisis hit. USD 3 trillion is about the size of the entire French economy.

Link to full report https://www.oecd.org/economic-outlook/

US  Markets closed re-open Tuesday
Manufacturing PMI, Construction Spending, IBD/TIPP Economic Optimism, ISM Manufacturing Data (PMI, Employment, New Orders, Prices) Dallas Fed Manufacturing Index, Logistics Managers Index Current, Total Vehicle Sales (after market).
Fed Speakers Quarles and Brainard
Earnings Canopy Growth, Hewlett Packard Enterprise, Ambarella, Zoom Video

DAX -0.64%, CAC -0.57%, FTSE Closed
DAX opened lower and traded sideways in the red. CAC opened higher but now traded around flat.  Both faded in the afternoon and eased lower into the close. Concerns over inflation as German and Spain saw the highest readings in 4 years.

OECD Economic Outlook report entitled “No Ordinary Recovery,” said the global economic outlook is brightening, but in a very uneven way. For the global outlook overall it sees a 5.8% growth in 2021 GDP vs -3.5% in 2020. It forecasts a 6.3% growth for the G20 group of developed economies, and 4.3% for the Euro area. But warned of significant head winds, particularly the availabilty of vaccines.

Deutsche Bank -1.3% off early lows as the US Fed said it was concerned about the German lender’s anti-money laundering practices.

Brent Oil futures traded higher

UK Market closed


Loans to Households Apr +3.8% YoY vs +3.3% Mar (F/cast was +3.3%)
Loans to Companies Apr +3.2% vs +5.3% Mar (F/cast was +5.1%)
M3 Money Supply Apr +9.2% vs 10.1% Mar (F/cast was +9.8%)

Inflation Rate Prelim May +2.5% vs +2% April (F/cast was 2.3%)
Inflation Rate Prelim May +0.5% vs +0.7% April (F/cast was +0.2%)

Manufacturing PMI, Core Inflation Rate, Inflation Rate, Unemployment  
GERMANY Manufacturing PMI, Unemployment data
FRANCE Manufacturing PMI, New Car Registrations
UK Manufacturing PMI, Nationwide Housing Prices

Nikkei futures opened +33pts and have worked higher currently +45pts but off highs.  Sentiment helped by falling covid cases but key will this mornings data.
Yen currently 109.70 slightly weaker
Data due pre market 
Capital Spending Q1 Q4 was -4.8% YoY F/cast is -6%)
at 8:30am HK time Manufacturing PMI May (April was 53.6 F/cast is 52.5).

The daily number of newly confirmed coronavirus cases across Japan came to 1,793 on Monday, standing below 2,000 for the first time since April 5.  Tokyo reported 260 cases and Osaka 98  +VE

The organisers of the Tokyo Olympics have secured about 80% of the medical staff needed to stage the Games, a top Olympic official told Reuters on Monday, amid worries over infections and the slow rollout of vaccinations in the Japanese capital.

OECD report downgraded Japans growth to 2.6% from the previous estimate of 2.7%, as the reintroduction of lockdowns was expected to impact the economy. -VE

Airdo and Solaseed Air, based in Sapporo and Miyazaki, respectively, said Monday they will launch a joint holding company as early as October 2022. Aiming to jointly procure goods and cut costs +VE

Expect markets to open lower with caution ahead of Trade data on the open and then Manufacturing PMI later.  Sentiment helped by the OECD growth upgrade and falling covid cases but the data is key.
Data due on the open
Balance of Trade May  (Apr was $0.39b F/cast is $3.2b)
Exports May (Apr was 41.1% Consensus is 48.5%)
Imports May (Apr was 33.9% Consensus is 40.5%)
Due 8:30am HK time Manufacturing PMI May (Apr was 54.6 F/cast is 54)

KDCA reported 430 new covid cases Monday  (-50 DoD) +VE

OECD raised its forecast for S Korea to 3.8% growth  from 3.3% prior.  “Strong overseas demand for IT products, which account for about a fifth  of total exports and automobiles is lifting exports. A gradual easing  of distancing measures and government relief packages have helped   vulnerable households and firms,“ the OECD said in a report on the   global economic outlook.  +VE

North Korea’s state media on Monday criticised the recent termination of a pact between the United States and South Korea that capped the development of South Korea’s ballistic missiles, calling it a sign of Washington’s “shameful double-dealing.”  South Korea's science minister said Monday the country will expand investment and focus on the development of its space program in reaction to the ban being lifted.

Posco and Hyundai Steel reached a deal with Hyundai Motor Co. and Kia Corp. to raise the price of a ton of automotive steel to 50,000 won ($45)  . The move is meant to reflect the increased costs of iron ore, one of the main raw materials used in steel production. +VE

Korean Air Lines Co., South Korea's biggest carrier, said Monday it has obtained its second overseas approval from Thailand for its planned acquisition of smaller local rival Asiana Airlines Inc. +VE

Eastar Jet the financially troubled budget carrier has received letters of intent (LOIs) from some investors for its stake up for sale and will select a final bidder next month. Slight +VE

Hanwha Group has won a 24.3 billion-won ($21.8 million) deal from the Agency for Defense Development to develop a key device that helps laser beam weapons target drones flying several kilometers away, the company said Monday. +VE

Samsung Heavy said Monday that it has signed a 417 billion won ($374 million) deal to build two liquefied natural gas (LNG) carriers. Its also reported that Wan Han Lines placed an order for four container vessels +VE    But press is reporting that it is still facing problems despite the present shipbuilding boom; troubled finances and weak recovery scenarios. Some critical hits to the company’s accounting books stem from  its heavy reliance on the once-promising offshore plant business and the  excess drillship inventory caused by order cancellations in the wake of  the COVID-19 pandemic. Slight -VE

Hyundai Motor Group's eco-friendly vehicle exports jumped 46.6 percent in the first four months of this year compared with a year earlier, led by robust demand for its electric vehicle (EVs) and hybrid models, industry data showed Monday. +VE

Media reports LG Electronics is on path to take the crown of the world’s No. 1 home  appliance maker by sales, as it continues a stellar performance this  year citing local analysts prediction.

Expect market to open higher with +VE news of the covid outbreak easing and TSMC opening R&D in Japan but the PMI number will be closely watched too.
Data due pre market 
Manufacturing PMI May (Apr was 62.4 F/cast is 62)

CECC Monday said the coivd outbreak easing as the Rt number dropped from 15 to 1.2. It reported 351 new cases (347 domestic and 4 imported).

TSMC will spend JPY37 billion to set up a research and development center in Japan, and is expected to officially start research and development next year. The Ministry of Economy, Trade and Industry of Japan officially decided today to aid half of funding to its plan to establish a research and development center.

Intel Corp is working with firms in Taiwan’s supply chains, including original design manufacturers (ODMs), to solve the global semiconductor supply issue, which could last for years, the chipmaker’s chief executive officer Pat Gelsinger said yesterday.

An increase in electricity rates, which is imposed annually in the summer to discourage high consumption, takes effect today, with a potential maximum increase of 27 percent, state-run Taiwan Power Co (Taipower) said yesterday.  Slight -VE

Wan Hai Lines Ltd  yesterday said that it has placed an order for four container vessels with South Korea’s Samsung Heavy Industries Co for between NT$13.08 billion and NT$13.8 billion as the company plans to adjust its fleet to cope with its business needs. The four 13,100 twenty-foot-equivalent unit container ships are to be delivered from the second quarter of 2023, Wan Hai said. The price includes potential equipment upgrades on the vessels, it said.

Expect market to open flat ahead of the Caixin PMI data senitment weak as the PBoC tightens on  Forex and international relations remain fraught.  Rising covid cases a concern
Data due 9:45am 
CaixinManufacturing PMI May (Apr was 51.9, F/cast is 51.7)

China has accumulated 50 new local confirmed COVID-19 cases since the start of May and has consecutively reported new confirmed cases or patients without any symptoms for 18 days, involving several provinces as the virus begins to demonstrate a more rapid and threatening transmission rate, expressed China's National Health Commission during a press conference. -VE

The People's Bank of China announced to heighten the forex reserve requirement ratio (RRR) for financial bodies from 5% to 7% starting 15 June, representing a 2-ppt increase in order to bolster financial institutions' forex liquidity management.  Slight -VE another sign of tightening.
Spot USD/CNY closed at 6.3607, up 47 bps, setting a new high in more than three years.
As at 16:50, USD/CNY added 8 bps in the night session. USD/CNH stood at 6.3659, down 74 bps.

OECD raises China’s GDP growth

China announced on Monday married Chinese couples may have up to three children, in a major policy shift. The policy change will come with "supportive measures";  it will lower educational costs for families, step up tax and housing support, guarantee the legal interests of working women and clamp down on "sky-high" dowries.  I still doubt the policy change will have much impact as families are aware of the costs already.

China plans to strengthen controls in industries such as steel and aluminium which involve high energy use and produce high emissions, in an effort to promote low-carbon developments, the environment ministry said on Monday.  Vice-premiers, ministers and economic stars appear at first plenary meeting of group tackling peak emissions and carbon neutrality  A good move but there will be significant costs invovled.

Australia and New Zealand on Monday expressed grave concerns over developments in Hong Kong and the human rights situation in the Xinjiang region of China, as the two nations sought to get in lockstep over their biggest trading partner.  -VE

The container yard of Yantian Port has been partly shut since last week after an outbreak of Covid-19 among port staff and in the broader community  Yantian is one of the busiest ports in the world, with a cargo throughput of 13.34 million twenty-foot equivalent unit in 2020  -VE

Cambodia’s Ream Naval Base upgrade sparks worries of China link before US diplomat’s visit.  A new port and a ship repair facility are likely to have been built just north of where US-funded facilities were demolished last year, a think tank says.  US Deputy Secretary of State Wendy Sherman is visiting the Southeast Asian nation, which counts Beijing as a close ally, as part of an Asean tour  Slight -VE

More than 20 investors have expressed interest in a funding round for Dalian Wanda Group's commercial property management unit, which could raise about 20 billion yuan (HK$24.36 billion).  Sovereign wealth funds, Chinese technology companies and private equity funds are among those that have shown preliminary interest in the fundraising, people familiar with the matter said yesterday.

No ADR’s  expect market to open lower with caution ahead of the Chinese data due today  
Data due after market 
Retail Sales

Short Selling Monday 16.9% vs 15.3% Friday
Top Shorts Bank Comm (3328) 45%, Power Assets (6) 39%, Haidilao (6862) 36%, Bud Apac (1876) 36%, Henderson Land (12) 35%, Country Garden (2007) 33%, Mengniu Dairy (2319) 31%, HSBC (5) 30%, Sands China (1928) 30%, Ali Health (241) 27%, SHKP (16) 26%, CKI (1038) 25%, Sunny Optical (2382) 25%, CCB (939) 25%, Hengan (1044) 25%, Ping An (2318) 25%, AIA (1299) 25%, BoC (3988) 25%.

MMG (01208.HK) intends to place 400 million shares at $4.12-4.26 per share, which is a discount of 6%-9.1% from the closing price of $4.53 as quoted on Monday (31st),
raising up to $1.704 billion, as Bloomberg cited a sales document.
Didi Autonomous Driving is set to finish a series of financing worth over USD300 million, 
with GAC GROUP (02238.HK) investing USD200 million, reported LatePost. Sources stated that, after this series of financing, Didi Autonomous Driving's value will surpass that of Pony.ai.
BlackRock increased 21.21 million shares of PING AN (02318.HK) at $84.63 per share last Thursday (27 May),
involving $1.795 billion, as disclosed by the Stock Exchange. The shareholding ratio hiked from 4.9% to 5.19%. It also purchased 2.8096 million shares of FUYAO GLASS (03606.HK) at an average price of $49.2302 each, involving $138 million as disclosed by HKEX.
BRILLIANCE CHI (01114.HK) announced that on 27th May, the Company received from the Stock Exchange the Resumption Guidance, which asked the Company to conduct an appropriate independent investigation into the Audit Issues, announce the investigation findings, assess and announce the impact on the Company’s business operation and financial position and take appropriate remedial actions.
Trading in the shares of the Company has been suspended with effect from 31st March.
The Hong Kong Monetary Authority (HKMA) announced that the total assets of the Exchange Fund amounted to HK$4.5384 trillion as at April 30, HK$2.7 billion higher than that at the end of March. 
Hong Kong dollar assets increased by HK$3.0 billion while foreign currency assets decreased by HK$300 million.
The rise in Hong Kong dollar assets was mainly due to the mark-to-market revaluation on Hong Kong equities. The decline in foreign currency assets was mainly due to a decrease in the month-end balances of unsettled purchase of securities and reduction in Fiscal Reserves placements, which were partly offset by the mark-to-market revaluation on foreign currency investments.

FuSure Reinsurance, whose substantial shareholder is TENCENT (00700.HK), has recently acquired the ordinary reinsurance license in Hong Kong, confirmed by sources quoted by Caixin. FuSure, as a professional reinsurance company specializing in specific business, has been added to the register of authorized insurers by the Hong Kong Insurance Authority.

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