June 2 Asian Marco Initial Thoughts Expect markets to consolidate. Oil hits 2 yr highs after Opec meeting

02 Jun

This and previous notes can be found at asianmarketsense.com
Check out ERI-C.com  a research and trading analysis
Australia Futures indicate market to open +11pts lead by iron ore miners and Oil names.   Slight weakness in Gold names. Nine Entertainment in focus on its new agreement with Facebook and Google +VE.  Expect cautious trading ahead of today’s data;

GDP Data (GrowthRate, Capital Expenditure, Final Consumption, Deflator), RBA Chart Pack

Japan Nikkei futures opened -2.5pts and have dropped to -27pts; expect markets to open lower and see some consolidation.

S Korea Expect markets to open lower following the US.  Local inflation data in-line but expect further consolidation today.

Taiwan Market to open lower following the caution seen in US markets overnight.

China Market to open lower with rising concerns over covid and PBoC policy.

HK ADR’s +50pts at 29,518 Oil names +VE E-Commerce mixed and Chinese Financials some weakness,
US Futures
Opened Dow -13pts S&P  and NDX slightly lower

Russian criminal gang likely hacked meat supplier JBS, White House says  Thousands of workers were stood down after North American and Australian servers hit.  The attack could push up meat prices.

DOW +0.13%, NDX -0.09%, S&P -0.05%, Russel 2K +1.14%
Pre market the futures turned positive having been weak during Asian trading. Airlines +VE on increased Memorial Day travel. Markets opened higher but then sold down.  Dow stayed slightly +VE, S&P to flat and traded around there, NDX into the red before rebounding and traded around flat.
Covid concerns eased as over 50% of the US population has received on vaccine dose.
OPEC agreed to gradually ease production cuts
AMC Entertainment +22% despite selling $230.5 million in new shares to an investor.
Banks JPMorgan Chase +1.1%, Citigroup +1.4% Wells Fargo +1.2%, Amex +2.3%
Work from home names: Facebook +0.1%, Apple -0.3%, Amazon +0.1%, Netflix -0.7%,  Disney -0.1%, Zoom Video -1.2% reported afte market, Alphabet +1% and Microsoft -0.9%,
Tech NXP Semi -1.7%, Nvidia +0.1%, Micron flat, AMD +0.9%, Skyworks +0.2%
Re-opening stocks  Boeing +3.1%, Caterpillar +0.7%, Simon Property +4.4%, Kohl’s +0.5%, Nordstrom +2.1%, Gap -0.9%, United Airlines +2.3%, Carnival +2%, Wynn Resorts +2.8%, Chevron +2.7%, Exxon Mobil +3.6%,  
Lock down names Campbell Soup +0.4% General Mills -0.3%,  JM Smucker +0.2%

After Hours reporting
Zoom Video Communications +3.1%
Hewlett Packard Enterprise -0.9% (was +0.9% in normal trading DATA
Logistics Managers Index Current  May 71.3 vs 74.5 Apr
Manufacturing PMI May 62.1 vs 60.5 Apr (F/cast was 61.5)  
Construction Spending Apr +0.2% MoM vs +1% Mar revised (F/cast was +0.6%)
ISM Manufacturing Data
PMI May 61.2 vs 60.7 Apr (F/cast was 60.8)
Employment May 50.9 vs 55.1 Apr (F/cast was 55.3)
New Orders May 67 vs 64.3 Apr (F/cast was 64)
Prices May 88 vs 89.6 Apr (F/cast was 90)
Dallas Fed Manufacturing Index May 34.9 vs 37.3 Apr (F/cast was 32)
USD was slightly stronger vs Yen & Euro. Bitcoin -0.9% @ 36,393.80, VIX +6.8% @ 17.9,
US T10 @ 1.616% Inflation in focus ISM data was in line but labour issues could limit growth
OIL Brent +2.7%, WTI +3% hitting a 2yr high as OPEC agreed gradual production cuts and did not think the availability of Iranian oil a cause for concern.
Gold -0.3%, Silver -0.3%, Copper -0.5% Platinum +0.8%, Palladium +1.1%.
AHEAD MBA Mortgage Applications and 30 yr Mortgage Rate, Redbook, Beige Book, API Crude Oil Stock Change.
Fed Speakers Harker, Bostic, Evans and Kaplan
Earnings: Advance Auto Parts, Lands’ End, NetApp, Splunk, Cloudera, PVH, C3.ai

DAX +0.95%, CAC +0.66%, FTSE +0.82%
Markets opened higher and is trending higher with good European PMI data and oil prices rising but then eased lower after around 1pm. Markets hit new intra day highs.  Basic Resources were the leaders but all sectors closed in the green.

The European Commission on Monday proposed that vaccinated tourists should be exempted from mandatory testing or quarantine measures when travelling between EU nations, urging a progressive easing of travel restrictions to accommodate rising Covid-19 inoculations.

Atlantia investors on Monday backed the $11 billion sale of the Italian infrastructure group’s stake in its motorway division to state bank CDP and allies Blackstone and Macquarie.
Trainline +5.6% but SES -2.6%
Austria’s Raiffeisen Bank International +3.8% in early trade while Swiss online pharmacy Zur Rose Group -3.6%.
Manufacturing PMI Final May 63.1 vs 62.9 Apr (F/cast was 62.8)
Core Inflation Rate Flash May 0.9% YoY vs +0.7% Apr (F/cast was +0.8%)
Inflation Rate Flash May +2% YoY vs +1.6% Apr (F/cast was+1.9%)
Inflation Rate Flash May +0.3% MoM vs +0.6% Apr
Unemployment Apr 8% vs +8.1% Mar (F/cast was +8.1%)

Manufacturing PMI Final May 64.4 vs 66.2 Apr (F/cast was 64)
Unemployment Rate Apr 6% vs 6% Mar (F/cast was 6%)
Unemployment Change Apr -15k vs +8k Mar (F/cast was +15k)

Manufacturing PMI Final May 59.4 vs 58.9 Apr (F/cast was +59.2)
New Car Registrations May 46.4% vs 568.6% Apr

Manufacturing PMI Final May 65.6 vs 60.9 Apr (F/cast was 66.1)
Nationwide Housing Prices May +10.9% YoY vs 7.1% Apr (F/cast was 10.3%)
Nationwide Housing Prices May +1.8% MoM vs +2.3% Apr revised (F/cast was +1.1%)

Retail Sales
Budget Balance
BoE Consumer Credit, Mortgage Lending, Mortgage Approvals, Net Lending to Individuals

Nikkei futures opened -2.5pts and have dropped to -27pts; expect markets to open lower and see some consolidation.
Yen closed 109.47
No data due
Tokyo reported 471 new covid cases Tuesday 
(+211 DoD)  Nationwide the total was 2,643  but the trend remains downward +VE

Concerns rise that the lack of inoculations in Japan could mean that the Olympics becomes the breeding ground for a Tokyo variant of the virus.  Comes as the vaccination drive increases -VE.

A Japanese government annual report will warn against protectionist moves seen around the world, such as export restrictions on novel coronavirus vaccines and tariff hikes to protect domestic industries, Jiji Press has learned. Protectionist moves are “feared to turn into something normal,” says a draft outline of the 2021 White Paper on International Economy and Trade, being compiled by the Ministry of Economy, Trade and Industry. -VE

Toyota Motor Corp and Honda Motor Co have stopped producing vehicles at their plants in Malaysia, officials of the Japanese automakers said Tuesday, after the Southeast Asian country began a two-week total lockdown to stem the spread of the coronavirus -VE.
Department stores, large cinemas and amusement parks in Tokyo and Osaka Prefecture reopened Tuesday 
as coronavirus restrictions on some businesses were partially eased under the extended state of emergency until June 20.
The European Union is set to add Japan to its small list of "safe" countries from which it will allow non-essential travel
, but will hold off opening the door to British tourists for now, EU sources said on Tuesday. 
The government said Tuesday that it will impose a six-day quarantine period on travelers who have recently been to Vietnam and Malaysia 
as part of efforts to prevent the spread of the highly-contagious Indian coronavirus variant.

Expect markets to open lower following the US.  Local inflation data in-line but expect further consolidation today.
Data out 

Inflation Rate May +2.6% YoY vs +2.3% Apr (F/cast was 2.7%)
Inflation Rate May +0.1% MoM vs +0.2% Apr (F/cast was +0.1%)

KDCA reported 459 new covid cases Tuesday
North Korea's ruling party has amended its rules to create a de facto second-in-command under leader Kim Jong Un
as he looks to revamp domestic politics, South Korea's Yonhap news agency said on Tuesday.

Carmakers' sales rose 41% last month from a year earlier on strong overseas demand amid a quicker-than-expected recovery from the COVID-19 pandemic and a lower base effect, industry data showed Tuesday.  The five carmakers; Hyundai Motor Co., Kia Corp., GM Korea Co., Renault Samsung Motors Corp. and SsangYong Motor Co., sold a combined 608,430 vehicles in May, up from 432,621 units a year ago, according to data from the companies.  Their domestic sales fell 13% to 124,145 units last month from 142,410 a year ago. But overseas sales jumped to 484,285 from 290,211.  +VE

SsangYong Motor Co. said Tuesday its sales rose 6% YoY last month on increased exports of its SUVs.  It sold 8,750 vehicles in May, up from 8,254 units a year earlier, the company said in a statement. +VE

Renault Samsung Motors Corp. said Tuesday its sales fell 13.3% YoY last month due to weak domestic demand  -VE.

ONE store, South Korea’s homegrown app market backed by all three mobile carriers, announced Tuesday that it has secured 17 billion won ($15 million) of funding from Microsoft and Deutsche Telekom’s venture capital unit in exchange for about a combined 3% stake via convertible preferred stock.

Samsung SDI weak Tuesday on broker downgrade MS said it is the slowest mover in the battery sector; saying that the global electric vehicle market is expected to enjoy annual growth of 20 percent over the next 10 years, and battery  manufacturers are failing to generate enough profits as their primary  focus is currently on expansion and market share.  Some question that view, as the company recently announced putting profitability first and expansion later.

The Ministry of Science and ICT said five data center companies  (Naver Cloud, Douzone Bizon, Kakao Enterprise, NHN and KT) and the Artificial Intelligence Industry Cluster Agency signed a memorandum of understanding with local server chip companies SK Telecom, Rebellions, FuriosaAI, and the Electronics and Telecommunications Research Institute to expand the use of locally developed artificial intelligence (AI) semiconductors in data centers. +VE

Korea Shipbuilding & Offshore Engineering Co. (KSOE) said Tuesday that it has a combined 1.36 trillion won ($1.2 billion) of orders from five customers to build 12 ships. +VE
Recent housing prices in Apgujeong-dong, Seoul, suggest t
hat a raft of real estate policies from the administration since 2017 to tamp down runaway property prices had little efficacy eventually.

Expect market to open lower following the caution seen in US markets overnight.
No data due
The official manufacturing purchasing managers’ index (PMI) last month lost momentum,
while the non-manufacturing index tumbled into the contraction zone as the service sector was hit hard by COVID-19 restrictions that kept people at home, the Chunghua Institution for Economic Research (CIER) said yesterday. Slight -VE

CECC confirmed 267 more Covid diagnoses Tuesday, including 262 local cases and five imported cases. There was also 65 backlog cases, giving a total 327 local infections for the day.

The Bureau of Energy (BOE) has agreed to allow Yunneng Wind Power Co the project developer of a 640 megawatt (MW) wind farm off the coast of Yunlin County, to adjust its shareholding structure as the company faces financial difficulties.  Yunneng is 48 percent owned by German wind farm developer Wpd AG, 27 percent owned by a consortium led by Japan’s Sojitz Corp and 25 percent owned by Thailand’s Electricity Generating Public Co Ltd.  It has been hit by a number of covid related cost overuns and hence needs new capital to survive.  Slight -VE

New vehicle sales last month -9.2% MoM  to 34,403 units from 37,901 units in April as the market took a hit from a nationwide level 3 COVID-19 alert, data compiled by online market researcher U-Car.com showed.  That represented a +2.6% YoY  Slight -VE

Qualcomm Inc yesterday said that it is working with local partners, including Acer Inc, to supply new Snapdragon processors for 5G-enabled laptops in its bid to challenge industry leader Intel Corp and expand its presence in the computer market +VE.

Expect market to open lower with rising concerns over covid and PBoC policy.
No data due
Guangdong reported 11 new confirmed cases as of the end of Monday, 
with one of them being a previous asymptomatic case. Health officials in Guangzhou have reported 10 new confirmed cases – with one a previous asymptomatic case – as well as 10 further new asymptomatic cases.
State news agency Xinhua reported on Tuesday that 38 zones in the provincial capital Guangzhou, where the mini-outbreak is concentrated, have been locked down,
including the entire Zhongnan community in the city’s Liwan district. Residences and work areas of all infected cases, as well as 37 other exposed venues have been sealed. -VE
China reports first human case of H10N3 bird flu; a  41-year-old man in China’s eastern province of Jiangsu
has been confirmed as the first human case of infection with a rare strain of bird flu known as H10N3, Beijing’s National Health Commission (NHC) said on Tuesday.  There is no indication it can spread easily in humans but -VE for sentiment.
Fifteen tutoring firms have been hit with millions of dollars of fines over alleged fraud, Chinese state media said yesterday, as the government’s chastening of the tech sector seeps into private education businesses. 
The groups, including major brands such as Zuoyebang, which counts Alibaba Group Holding Ltd as an investor, and Yuanfudao which is backed by Tencent Holdings Ltd were hit with fines amounting to 36.5 million yuan (US$5.7 mn).
After issuing fines and warnings to tech companies spanning e-commerce, gaming, video streaming and food deliveries, Beijing has turned its attention toward tutoring start-ups, many of them online. -VE

Social media continues to express doubts over the three child policy; whether it would make much difference, and calls for details on what promised “supportive measures” will include. -VE for public confidence in the Party.

The U.S.-China Economic and Security Review Commission report titled, “Unfinished Business: Export Control and Foreign Investment Reforms.”, due to be published on Tuesday, said the Commerce Department had been slow to create a list of sensitive technology that should be scrutinized before export to China.  The lag in developing the list of emerging and foundational technologies, as required by a 2018 law, may exacerbate national security risks, the report said. -VE for China going forward.

The most senior U.S. official to visit Cambodia in years expressed concern on Tuesday about China's military presence there and sought clarification on the demolition of U.S.-funded buildings, the State Department said.  Deputy Secretary of State Wendy Sherman urged Cambodia’s leadership to "maintain an independent and balanced foreign policy, in the best interests of the Cambodian people".

The foreign ministry of Malaysia on Tuesday said it would summon China's envoy to explain an "intrusion" by 16 air force planes into its airspace, after the Southeast Asian country's military detected "suspicious" activity over the South China Sea.

Malaysia's air force said it scrambled jets on Monday to conduct visual confirmation after the planes flew within 60 nautical miles off Sarawak state of Malaysian Borneo.

Xi Jinping wants isolated China to ‘make friends and win over the majority’  Chinese president calls for better communication to improve the country’s image and counter criticism.  He tells Politburo that ‘high-level experts’ should use global conferences, forums and foreign media to speak out.   His latest call was a rare admission of Beijing’s isolation that has been exacerbated by aggressive “Wolf Warrior” diplomacy and ineffective propaganda and influence campaigns abroad. It also suggests how Beijing will seek to shift the unfavourable narratives in its ideological and geopolitical wrangling with Western democracies.

WHO approves Sinovac Biotech’s coronavirus vaccine for emergency use, the second Chinese treatment to win designation.  The move has the potential to help WHO’s dose-strapped Covax vaccine distribution programme +VE

WHO rechecks research on when virus first surfaced in Italy after a study published last year suggested antibodies to either the virus or a variant were detected in Italy in 2019.  That prompted Chinese state media to suggest the virus might not have originated in China, although the Italian researchers stressed the   findings raised questions about when the virus first emerged rather than  where.

New home prices in China rose in May, extending the uptrend for a third month with the heat spreading to more cities as developers made faster sales, a private survey showed yesterday.

New home prices in 100 cities rose 0.34 percent in May from a month earlier, quickening slightly from 0.23 percent in April, data from China Index Academy, one of the country's largest independent real estate research firms, shows.  -VE as may prompt more cooling measures.

ADR’s +50pts at 29,518 Oil names +VE E-Commerce mixed and Chinese Financials some weakness, HSBC’s ADR -1,3%  
No data due
After market 
Retail Sales Apr 10.9% YoY vs +19.8% Mar (F/cast was +22%)

A government spokesman said that retail sales continued to grow visibly on a year-on-year basis in April due to a low base of comparison. Yet, retail sales volume was still far below its pre-pandemic level as inbound tourism remained frozen.  -VE for Retail

Short Selling Tuesday 18.7% vs 16.9% Monday
Top Shorts 
Country Garden (2007) 60%, Bud Apac (1876) 51%, CKAsset (1113) 51%, Bank Comm (3328) 50%, Sino BioPharm (1177) 38%, Ping An (2318) 35%, Hengan (1044) 33%, MTRC (66) 32%, Baba (9988) 30%, BoC (3988) 29%, Sinopec (386) 29%, Henderson Land (12) 28%, Hang Seng Bank (11) 28%, Power Assets (6) 26%.

National Security
The June 4 Museum has been raided three days after it reopened, with Food and Environmental Hygiene Department officers suggesting it was operating without a license.  
It was the first raid since the Hong Kong Alliance in Support of Patriotic Democratic Movements of China opened the museum in 2012.  There are thoughts it could have been for political reasons ahead of the June 4 Tiananmen square rememberence. 

A Chinese public-interest group said on Tuesday it is suing Tencent (0700.HK) over what it alleges is inappropriate content for minors in the top global game developer's flagship video game, Honor of Kings.  
Beijing Teenagers Law Aid And Research Center said it filed the lawsuit in a Beijing court on Tuesday, to mark the implementation of an amended protection of minors law. The suit, whose content Reuters could not independently confirm, also coincides with an unprecedented antitrust crackdown by Beijing on some of China's biggest tech companies that sources told Reuters includes Tencent. Slight -VE

HSBC HOLDINGS (00005.HK) plans to shrink its Sydney office space by 30% before end-2022 as the bank pushes forward a hybrid working model, foreign media reported. The lender will release one of the four floors in Barangaroo, and go from four floors to two in Parramatta.

KWG GROUP (01813.HK) announced that for May, the pre-sales value of the Group and its joint ventures and associates amounted to RMB11.301 billion, representing a year-on-year increase of 23.5%.

MODERN LAND (01107.HK) announced that in May 2021, contracted sales of the Group amounted to approximately RMB4.148 billion, +23.86% YoY

Henderson Land Development (0012) co-chairman Martin Lee Ka-shing said the developer will submit a tender for Site 3 of the New Central Harbourfront in Central. Bids for the commercial site close on June 18.  Lee described the plot as "superior land" but did not reveal to whether it would bid on its own or through a joint venture.

NEXT DIGITAL (00282.HK) announced that on 31 May, the Company received a letter from the National Security Department confirming that Lai Chee Ying (aka Jimmy Lai) must not directly or indirectly exercise the voting rights in relation to any shares in the Company held by him except under the authority of a license granted by the Secretary for Security. As Lai is a shareholder of the Company, not a member of the board of directors of the Company, the prohibition of exercise of the voting rights in relation to any shares in the Company held by him is not expected to have any impact on the operational and financial performance of the Company.

To support the Government’s Covid-19 vaccination promotion, GREAT EAGLE H (00041.HK) announced today a series of consumer promotions will be launched at the hotels and shopping mall under the Group from now till 31 August. Three hotels under the Group in Hong Kong (i.e. The Langham, Hong Kong, Cordis, Hong Kong and Eaton HK) will offer 3,000 room nights at 50% off the room rates and dining outlets for Hong Kong residents who have received two doses of the Covid-19 vaccine and present a vaccination record. In addition, Langham Place under CHAMPION REIT (02778.HK) of the Group also offers 100% spending rewards to LP Club members who have received two doses of the Covid-19 vaccine.

* The email will not be published on the website.