June 17 Asian Macro Initial Thoughts; weaker open; Fed mentions rate rises as growth stronger

17 Jun

This and previous notes can be found at Substack ( Asian Market Sense )
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Asia Summary
NZ Q1 GDP better than expected
Indonesia rate decision due today.
HK 5 company directors arrested under national security law article 29 (colluding with foreign powers)

Australia Futures indicate the market to open +15pts; Oil slightly weaker although it topped US$74 overnight; Gold and resources weak but Banks and Tech +VE but having closed at a new high Wednesday expect cautious.  Employmemt data and RBA statement could be the swing factor.  
Part Time Employment, Unemployment Rate, Employment Change, Full Time Employment Change, RBA Bulletin, Participation Rate
Japan Nikkei futures opened  -105pts  (Chicago futures -90pts) and slipping;  market to open lower on higher inflation concerns although the FOMC implied it was due to the strength of the recovery.
S Korea Expect markets to open lower following the FOMC comments and after the Kospi closed at a new high
Taiwan Market to open lower following the weakenss in tech seen int the US markets  overnight.  Expect interest in Shipping and Steel to continue .
China Market to open lower with concerns about weak Retail Sales at the ordinary level.  House Price data out this morning will be watched careful as the PBOC seeks to prevent bubbles.
Data due on the open
HK ADR’s -95pts at 28,341 across the board weakness only oil names +VE.  Expect some further initial weakness on margin call selling.  
US Futures 
Opened lower Dow -63pts (-0.2%), S&P -0.25% and NDX -0.35%
Initial claims tonight along with Phili Fed, TIPS auction and more.

DOW -0.77%, NDX -0.24%, S&P -0.54%, Russel 2K -0.17%
Markets opened around flat and traded sideways ahead of the FOMC but started to sell off around midday to the day lows and then rebounded after the Fed decision; before drifting lower into the close.
The FOMC indicated that there could be rate hikes as soon as 2023 vs the prior indication of no hikes until 2024. Slightly at odds with it’s stance that current inflationary signs are temporary. it also raised its headline inflation expectation to 3.4% for 2021. It gave no indication of when tapering might begin but said it would give advanced warning. It also said the dot plot should be taken with ‘a pinch of salt’. Key being that whilst there were issues with the recovery; overall it is much stronger than was previsously expected.
Biden and Putin summit agree to re-instate Ambassador’s and work on Iran, replacing nuclear agreeements, Artic drilling.  Putin said the cyber attacks were not coming from Russia but the US -VE.  Biden gave Putin a list of facilities that should be ‘off limits’ commented to the Russia that the US had cyber capabilities.  
JPMorgan Chase -0.6%, Citigroup -3.2% after CFO warns on trading revenue and expenses at the banking forum. Wells Fargo +0.2%, Amex -0.9%
Work from home names: Facebook -1.7%, Apple +0.4%, Amazon +1%, Netflix +0.1%,  Disney -0.7%, Zoom Video +0.8%, Alphabet +0.5% and Microsoft -0.4%,
Tech NXP Semi -1.3%, Nvidia +0.1%, Micron -2.1%, AMD -0.5%, Skyworks -0.4%
Re-opening stocks  Boeing -1.7%, Caterpillar -1%, Deere -0.3%, Simon Property -0.4%, Kohl’s -0.4%, Nordstrom +2.4%, Gap +1.6%, United Airlines +0.6%, Carnival +2.3%, Wynn Resorts flat, Chevron -0.6%, Exxon Mobil -0.4%,  
Lock down names Campbell Soup +0.3% General Mills -1.6%, JM Smucker -0.7%

MBA Mortgage Applications +4.2% vs -3.1% prior
MBA 30 yr Mortgage Rate 3.11% vs 3.15% prior
Housing Starts May +3.6% vs -12.1% Apr revised (F/cast was +2.5%)
Building Permits May -3% vs -1.3% Apr (F/cast was +0.9%)
Import Prices May +11.3% vs +10.8% Apr revised (F/cast was +10.7%)
Export Prices May +17.4% vs +14.4% Apr (F/cast was +15.2%)
EIA Gasoline stocks change +1.954m vs 7.046m prior (Consensus -0.614m)
EIA Crude Oil stocks change -7.355m vs -5.241m prior (Consensus -3.29m)
FOMC Rate Decision unchanged @ +0.25%

USD was stronger vs Yen & Euro. Bitcoin -4% @ 38,516.56, VIX +6.6% @ 18.15, US T10 @ 1.581%
OIL Brent -0.11%, WTI -0.62% Oil rose after the EIA report to close to US$75 before easing back after market.
GOLD -2.45%, Silver -2.48%, Copper -1.44% Platinum -2.39%, Palladium +1.38%.
Philadelphia Fed Manufacturing Index,Initial Claims, 4 week Average Claims, Continuing Claims, Leading Index, EIA Natural Gas Report, 5yr TIPS Auction.
Earnings: Adobe, Kroger, Jabil, Commercial Metals, Smith and Wesson

DAX -0.12%, CAC +0.2%, FTSE +0.17%
Markets opened slightly higher but eased to trade around flat. UK inflation data pre market was higher than expected. Resources weak on news of China releasing national reserves. Leaders were Travel and Leisure Laggards Banks.
Colruyt Group -11% after it missed fiscal full-year earnings and issued a profit warning.
Solarpack soared on news it was the takeover target of Sweden’s EQT.
The private equity firm made a cash offer of €26.50 a share, a bid representing a 45 per cent premium to Tuesday’s closing price for the developer of solar photovoltaic plants.
Swissquote, the online financial trading group, jumped on announcing that it expected record half-year results.
Gateley sank after the legal and professional services group revealed that it had been a victim of a “cyber security incident”.
Labour Cost Index Q1 +1.5% YoY vs +2.8% Q4 revised (F/cast was +3.8%)
Wage Growth Q1 +2.2% YoY vs +3.5% Q4 (F/cast was +4.6%)
Inflation Rate May +2.1% YoY vs +1.5% Apr (F/cast was +1.8%)
Inflation Rate May +0.6% MoM vs +0.6% Apr (F/cast was +0.3%)
Core Inflation Rate May +2% YoY vs +1.3% Apr (F/cast was +1.4%)
Core Inflation Rate May +0.8% MoM vs +0.3% Apr (F/cast was +0.2%)
PPI Core Output May +2.7% YoY vs +2.5% Apr (F/cast was +2.6%)
PPI Core Output May +0.4% MoM vs +0.5% Apr (F/cast was +0.3%)
PPI Output May +4.6% YoY vs +4% Apr revised (F/cast was +4.4%)
PPI Output May +0.5% MoM vs +0.4% Apr (F/cast was +0.3%)
PPI Input May +10.7% YoY vs +10% Apr revised (consensus was +10.6%)
PPI Input May +1.1% MoM vs +1.2% Apr (consensus +1.1% )
Retail Price Index May +3.3% YoY vs +2.9% Apr (F/cast was +3.5%)
Retail Price Index May +0.3% MoM vs +1.4% Apr (F/cast was +0.4%)
EUROZONE Construction Output, Core Inflation Rate, Inflation Rate.
GERMANY No data due  
No data due
UK No data due

JAPAN Nikkei futures opened -105pts  (Chicago futures -90pts) and slipping;  market to open lower on higher inflation concerns although the FOMC implied it was due to the strength of the recovery.
Yen currently 110.67
Data due
Tankan Index Jun vs 21 May (F/cast was 18)
Foreign Stock investment Prior was ¥94.5B
Foreign Bond Investment Prior was ¥665.9B
Tokyo reported 501 new covid cases Wednesday (+164 DoD) with the 7day average at 384.6. Nationally the total was 1,703
Japan will lift the state of emergency on June 20 for nine prefectures including Tokyo and Osaka, public broadcaster NHK reported on Wednesday, adding the government will instead introduce "quasi-emergency" in seven of those prefectures.  PM Suga earlier told reporters the decision would be made on Thursday. +VE
Government will include a pledge to achieve a "safe and secure" Tokyo Olympic Games in its economic blueprint due out on Friday, according to a final draft seen by Reuters on Wednesday. Spectators at large events to be capped at 10,000. Slight -VE
Tokyo Stock Exchange has asked Toshiba Corp (6502.T) to properly disclose issues around its alleged pressure on shareholders, a spokesperson for Japan Exchange Group (JPX) (8697.T), which owns the bourse, said on Wednesday. -VE
The number of Chinese fishing boats operating illegally around the Yamato Bank area, a good fishing ground off the Noto Peninsula in the Sea of Japan, has increased sharply (6x vs 2020) this spring, the Japan Coast Guard and the Fisheries Agency have found.  Local fishermen have voiced their concerns about poor catches due to overfishing. -VE
Sony Music Entertainment has acquired Somethin’ Else, the biggest independent producer of audio programmes in the UK, as the record label accelerates its push into the fast-growing podcast market. +VE

SOUTH KOREA Expect markets to open lower following the FOMC comments and after the Kospi closed at a new high
No data due
KDCA reported 545 new covid cases (+171 DoD) Slight -VE
Starting 1 July S Korea to waive its self-quarantine requirement for fully vaccinated passengers arriving in S Korea under if they have been fully vaccinated two weeks before arrival with a WHO approved vaccine, regardless of their citizenship +VE Tourism & Leisure names.
The newly appointed U.S. envoy for North Korea, Sung Kim, will make his first visit to South Korea this week for a possible three-way meeting with counterparts from Seoul and Tokyo, a South Korean foreign ministry official told Reuters on Wednesday.
Small businesses with five to 49 employees will be required to enforce a 52-hour workweek next month as planned by the government, the labor ministry said Wednesday, rejecting industry demands for a grace period. -VE
LG Display is rolling out new innovative OLED products, including transparent panels. It said Wednesday it will be taking part in the Korea Railways & Logistics Fair 2021 that kicked off a three-day run on Wednesday in Busan to showcase its transparent OLED technology.  +VE
LG Energy Solution will host an international battery forum on June 22 to discuss next-generation batteries with renowned scholars including Nobel laureate Michael Stanley Whittingham.  +VE
The labor union of major display maker Samsung Display Co. said Wednesday its union leadership plans to go on strike next week, as the union and the management failed to narrow differences in wage talks, marking the first-ever walkout for the company and any Samsung Group affiliate. -VE
A consortium of South Korean retail giant Shinsegae Group and internet behemoth Naver is expected to win a bid to take over eBay Korea, local media reported Wednesday.  If materialized, the deal would set off a major shake-up in the country’s e-commerce retail segment.  +VE
SK accused by environmental activists of greenwashing following gas U-turn.  After it finalised a large Australian liquefied natural gas deal months  after promising to end new overseas oil and gas investments. -VE

Expect market to open lower following the weakenss in tech seen int the US markets  overnight.  Expect interest in Shipping and Steel to continue .
Data due
Interest Rate Decision.
CECC reported 170 new COVID-19 cases and 18 deaths, marking the fourth straight day  with fewer than 200 cases, according to the Central Epidemic Command  Center (CECC). +VE
China's growing military coercion near Taiwan has increased the risk of miscalculation, the U.S. Department of Defense said, after Beijing sent a record-high number of military aircraft into Taiwan's air defense identification zone (ADIZ) on Tuesday. "In response to the growing PRC threat, we will continue deepening our  unofficial security relationship to ensure Taiwan has sufficient  capabilities to defend itself," the Pentagon spokesperson added.
TSMC said Wednesday that it will sell NT$19.7 billion (US$711 million) worth of unsecured straight bonds to raise funds for its production expansion.  It will be the company's third bond sale this year, following its earlier NT$21.1 billion and NT$19.2 billion sales.
The proceeds from the latest bond sale will be used to build new production facilities, said TSMC, the world's largest contract chipmaker. +VE
Macau yesterday said that it is to close its representative office in Taiwan, following neighboring Hong Kong, which made the same move last month in protest at Taipei’s support for democracy advocates. -VE
Starting next year, listed firms would be required to disclose their power and water consumption, as well as waste management, so investors can evaluate their environmental, social and corporate governance (ESG) performance, the Financial Supervisory Commission (FSC) said on Tuesday.
Yuan deposits held by local banks last month slipped by 0.45 percent, or 1.08 billion yuan (US$168.8 million), to a six-month low of 238.04 billion yuan, as retail and corporate investors shed holdings, the central bank said yesterday.
Smartphone sales in Taiwan grew 2.7 percent year-on-year to 1.38 million units in the first quarter of this year, marking the first annual increase over the past five years, International Data Corp (IDC) said yesterday, attributing it to demand for high-end 5G-enabled smartphones.  Average selling prices also increased 14.8 percent year-on-year in the first quarter due to a chip shortage and robust demand, it said. +VE Telco operators too.
Innolux Corp and AU Optronics Corp -VE hurt by driver IC shortages  along with timing controllers also key for flat panel shipments.  In Q4  display makers face potential downward price  corrections, as sales of TVs and monitors are likely to fall short of  regular seasonal expansion after economic reopenings in the US and  Europe, he said.  

Expect market to open lower with concerns about weak Retail Sales at the ordinary level.  House Price data out this morning will be watched careful as the PBOC seeks to prevent bubbles.
Data due 
on the open
House Price Index May (Apr was +4.8% F/cast is +5.1%).
May get FDI (YTD)
China will release national reserves of some base metals as the country reported lower-than-expected industrial production and retail sales growth in May.  China announced the plans to release industrial metals from its national reserves to curb commodity prices in what some analysts said could be the first such move in a decade by the world's top consumer of metals.  The National Food and Strategic Reserves Administration said on its website it would release copper, aluminium and zinc in batches to nonferrous processing and manufacturing firms soon via public auction. The first time for over 10 years.
Suning shares frozen in Shenzhen as debt concerns mount; -VE for sentiment over the potential for defaults
China’s Taiwan Affairs Office spokesman Ma Xiaoguang said regarding the Twenty-eight Chinese aircraft, including fighters and nuclear-capable  bombers, entering Taiwan’s air defense identification zone (ADIZ) on  Tuesday, it was the Taiwanese government that was to blame for tensions.  Beijing believes that Taipei is working with foreign nations to seek formal independence.
Beijing’s refusal to recognise the fact that Taiwan is independent is going to be a growing problem.
China set to send first crew to new space station Thursday. The astronauts will be traveling in the Shenzhou-12 spaceship launched by a Long March-2F Y12 rocket set to blast off at 9:22 a.m. (0122 GMT) from the Jiuquan launch center in northwestern China.  +VE sentiment.
The PBOC announced that the foreign exchange amount of the central bank accounted for RMB21.19 trillion at end-May, up RMB21.273 billion monthly.
U.S. President Joe Biden said China was trying to project itself as a responsible nation in regard to the COVID-19 pandemic, but it remained unclear whether Beijing was really trying to understand the origins of the coronavirus.  Interestingly when asked if  he viewed President Xi as an old friend, he replied “Let’s get something straight: We know each other well, we’re not old friends. It’s just pure business.”

ADR’s -95pts at 28,341 across the board weakness only oil names +VE.  Expect some further initial weakness on margin call selling.  
Data due 
after market Unemployment Rate

Short Selling Wednesday 17.4% vs 14.3% Tuesday
Top Shorts 
Hengan (1044) 41%, Country Garden (2007) 40%, Hang Seng Bank (11) 40%, Mengniu Dairy (2319) 34%, MTRC (66) 33%, Bank of China (3988) 32%, Baba (9988) 30%, Sunny Optical ( 2382) 29%, Sino Biopharm (1177) 29%, BankComm (3328) 28%, Geely (175) 28%, Ping An (2318) 28%, Henderson Land (12) 27%, Ali Health (241) 26%, CLP(2) 26%, Shenzhou Int (2313) 25%, Wharf REIC (1997) 25%, Xinyi Solar (968) 25%.
Hong Kong Monetary Authority has set up a working group to look into ‘legal and regulatory issues’ related to an e-Hong Kong dollar

Local currency’s peg to US dollar is regularly questioned amid concerns that the de facto central bank might be forced to abandon the currency board. SCMP has an article.

Registration for New People’s Party’s three-round lucky draw opens on June 29. 
But to be eligible you need to have had both vaccine shots and register as a either members or registered friends of the New People’s Party.
The Standard has a list of the vaccination invcentives.  https://www.thestandard.com.hk/breaking-news/section/4/174489/Check-out-the-vaccination-incentives-up-for-grabs

Five company directors arrested under article 29 (colluding with foreign powes); said to be staff at Apple Daily and Digital Times -VE for sentiment.
Canada was warned by HK immigration officials 
not to assume all Hong Kong protesters are "innocent”  in a report last June which said  “it cannot be assumed that charges are politicized or trumped up by  authorities; there have been shocking images of violent attacks during  confrontations.”

Blackstone Group Inc will buy all issued shares in SOHO China Ltd for HK$23.7 billion ($3.05 billion) and maintain its stock market listing,
the Chinese office developer said in a filing on Wednesday. Slight +VE for the sector.
Polestar, the premium electric vehicle maker owned by China’s Geely and Volvo Cars, will build its Polestar 3 electric SUV at Volvo’s U.S. plant in South Carolina starting in the second half of 2022, the brand’s chief executive said. +VE
The total market cap of Hong Kong bourse whopped $53 trillion at the end of May, compared to only a-tenth scale in 2000 when HKEX (00388.HK) was listed,
the CEO Nicolas Aguzin revealed. At present, almost one-third of market cap is stemmed from new economy stocks. Looking ahead, HKEX will go ahead in three directions, including keep attracting listing of new economy stocks and biotech companies, Aguzin furthered. In terms of fundraising amount, Hong Kong has become the world's second largest listing location for biotech companies.BYD COMPANY (01211.HK) (002594.SZ) announced that the shareholders' meeting approved the spin-off of its subsidiary BYD Semiconductor Co., Ltd. to go public on the GEM +VEThe Pure Group opened a new flagship in Tsim Sha Tsui measuring over 30,000 sq.ft., being the biggest Pure Fitness branch in Asia.
The group's Co-founder and CEO Colin Grant told reporters that folks have been devoting more attention to health amid the pandemic, citing a very resilient business given pent-up demand following gym reopening.

SA SA INT'L (00178.HK) believes the electronic consumption voucher scheme will reinvigorate the retail industry to a certain extent and the company will actively collaborate with different parties to launch voucher discounts, 
said Simon Kwok, chairman and CEO of the company. Kwok added that the retail business in China remains the focal point of the group's business development. Should there be any potentially promising locations, the group does not exclude the possibility of opening more than 30 stores in China within this financial year, said Kwok +VE.

Centa-Salesman Index (CSI) last posted at 74.59, up 0.62 pts from last week's 73.97.

CSI is poised to break through its previous struggle at the level of 70, as the index rose for four consecutive weeks, accumulating a total gain of 3.38 pts, said the research department of Centaline Property.
They added that whether the upward trend of the property price will change remains to be seen. If the CSI successfully surpasses 75, it could be a signal that the rise of the property price would escalate. +VE

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