June 25 Asian Macro Initial Thoughts; markets to move higher. Tokyo CPI flat +VE


25 Jun

This and previous notes can be found at Substack ( Asian Market Sense )
Check out ERI-C.com for  interesting research and trading analysis

Asia markets to open higher but expect upside to be limited with caution going into the weekend

Australia Futures indicate market to open +51pts with Oil +VE but Miners and Gold weak.  Tech+VE following the US overnight.
Japan Nikkei futures +45  (Chicago Futures +40pts) Tokyo CPI data flat and improvement from deflation.  Komatsu and constuction names +VE on US infrastructure deal. Toshiba shareholder meeting in focus.  
S Korea Futures indicates the  markets +1.85pts; building  on Thursday’s high after good Business Confidence data but upside limited with caution ahead of the weekend.  
Taiwan Market to open higher with broad interest.
China Expect market to open higher following the US but upside limited with credit/default concerns still overhanging the market along with the potential for more sanctions from the US.  Team China on standby to ensure stablity ahead of party  anniversary.
HK ADR’s +78pts at 28,959  (Futures +75pts) a broad rally so expect some initial upside  as recent shorts cover.  Further upside likely to to be muted ahead of the weekend and concerns over further sanctions on China.  Infrastructure related names likely to see some +VE reaction to the US agreement on infrastructure.  
US Futures 
Opened Dow +100pts, S&P +0.1%, NDX flat

DOW +0.95%, NDX +0.69%, S&P +0.58%, Russel 2K +1.31%
Markets opened higher, S&P traded sideways and closed at a new high.  NDX traded sideways but dipped in the PM session; again hitting a new high.  Dow  worked slightly higher through the day.
Sentiment +VE as a $1tn bipartisan bill on infrastructure was agreed albeit, smaller than originally planned but +VE infrastructure like Cat +2.6%, Vulcan +3.3%, US Steel +3.4%, Nucor +2%.
Market leaders were financials (ahead of stress results due after market), consumer discretionary, health care and tech.
Laggards were travel and leisure on worries over the Delta + covid varient. Initial claims missed revealing a bumpy recovery.
AFTER MARKET
NIKE +5% in after hours trading; as earnings and revenue beat. Digital sales +41% YoY and 147% from two years ago. Despite sales in China slowing
Fed Ex  -4% despite beating on the top and bottom lines of its earnings and gave a strong yearly outlook.

Banks JPMorgan Chase +0.9%, Citigroup +2.4% Wells Fargo +2.8%, Amex +1.3%
Work from home names: Facebook +0.8%, Apple -0.2%, Amazon -1.56%, Netflix +1%,  Disney +1.5%, Zoom Video -0.9%, Alphabet +0.3% and Microsoft +0.5%,
Tech NXP Semi +2.4%, Nvidia +0.8%, Micron +2%, AMD +2.7%, Skyworks +2.6%
Re-opening stocks  Boeing +2.9%, Caterpillar +2.6%, Simon Property -1.2%, Kohl’s +1.1%, Nordstrom +2.6%, Gap +0.5%, United Airlines -1.4%, Carnival -2.5%, Wynn Resorts -1.4%, Chevron +0.9%, Exxon Mobil +0.4%,  
Lock down names Campbell Soup flat, General Mills -0.1%, JM Smucker +0.5%

DATA
Durable Goods Orders May +2.3% MoMvs -0.8% Apr revised (F/cast was +2%)
Durable Goods ExTrans May +0.3% MoM vs +1.7% Apr revised (F/cast was +0.6%)
Durable Goods Ex Defence May +1.7% MoM vs +0.5% Apr revised (F/cast was +0.6%)
GDP Price Index Final Q1 4.5% QoQ vs +1.9% Q4 (F/cast was +4.3%)
GDP Growth Rate Final Q1 +6.4% QoQ vs +4.3% Q4 (F/cast was +6.4%)
Corporate Profits Final Q1 +1.7% vs -3.3% Q4 (f/cast was -0.8%)
Goods Trade Balance Adv May $-88.11b vs -85.73b Apr (F/cast was -84b)
Wholesale Inventories Adv May +1.1% vs +1% Apr revised (F/cast was +0.4%)
Initial Claims 411k vs 418k prior revised (F/cast was 360k)
4 week Average Claims 397.75k vs 396.25k prior revised (f/cast was 383k)
Continuing Claims 3.39m vs 3.534m prior revised (F/cast was 3.52m)
Core PCE Prices Final Q1 +2.5% QoQ vs +1.3% Q4 (F/cast was +2.5%)
PCE Prices Final Q1 +3.7% QoQ vs +1.5% Q4 (F/cast was +3.7%)
EIA Natural Gas Report 55 Bcf vs 16 Bcf prior (Consensus was 66 Bcf)
Kansas Fed Manufacturing Index Jun 30 vs 32 May (F/cast was 29)
7 yr note auction 1.264% vs 1.285% prior
Fed Bank Stress Tests; all 23 banks clear easily, with plenty of loss cushioning capital; clears the way for buybacks, dividends etc +VE.

USD was little changed vs Yen & Euro. Bitcoin +4.7% @ 34,743.23, VIX -2.14% @ 15.97, US T10 @ 1.499% little moved by the jobs data.
OIL Brent +0.49%, WTI +0.34% off the highs
Gold -0.47%, Silver -0.43%, Copper -0.46% Platinum +0.55%, Palladium +0.49%.

AHEAD
Personal Income & Spending, PCE Price Index, Core PCE Price Index, Michigan Final (Inflation Expecations, Consumer Sentiment, 5yr Inflation Expectations, Consumer Expectations, Current Conditions), Baker Hughes Rig Count, NY Fed Treasury Purchases (2.25 - 4.5 yrs).
FED Speakers Mester and Rosengren
Earnings: CarMax, Paychex

DAX +0.86%, CAC +1.22%, FTSE +0.51%
Markets opened mixed; FTSE flat and traded sideways; BoE kept policy unchanged but said it  would monitor inflation. DAX slightly higher and traded sideways; Ifo data was strong. CAC worked higher in the first hour and then sideways.  Leaders Travel & Leisure, Laggards Telcos.
Tecan +11% announced a $1 billion acquisition of Paramit Corp.
Deliveroo +9% after a U.K. court ruled that its couriers are self-employed.
Vifor Pharma -5% said it would revise a key study after the pandemic affected the recruitment of participants, with data now expected in the second half of 2022.
DATA
EUROZONE ECB General Council Meeting
GERMANY
Ifo Data
Business Climate Jun 101.8 vs 99.2 May (F/cast was 100.1)
Current Conditions Jun 99.6 vs 95.7 May (F/cast was 97.3)
Expectations Jun 104 vs 102.9 May (F/cast was 104.1)
FRANCE
Business Confidence Jun 107 vs 107 May (F/cast was 110),
Climate Indicator Jun 113 vs 108 May (F/cast was 111),
UK
BoE Interest Rate Decision unch
CBI Distributive Trades Jun 25 vs 19 May (F/cast was 15)
After market Consumer Confidence Jun (May was -9 f/cast is -70

AHEAD
EUROZONE Loans to Households and Companies, M3 Money Supply
GERMANY 
No data due
FRANCE 
Unemployment Benefit Claims, Jobseekers Total  
UK 
CBI Distributive Trades, BoE Quarterly Bulletin.

JAPAN 
Nikkei futures +45pts, (Chicago Futures +40pts) Komatsu and constuction names +VE on US infrastructure deal. Tokyo CPI data flat and improvement from deflation. Toshiba shareholder meeting in focus.  
Yen currently 110.84

Data out 
Tokyo Core CPI Jun 0.0% vs -0.2% May (F/cast was -0.1%)
Tokyo CPI Jun 0.0% vs -0.4% May (F/cast was -0.2%)
Tokyo reported 570 new covid cases (-49 DoD)  Nationwide the total was 1,672.  But there are signs of another COVID-19 rebound in Tokyo are beginning to emerge only days after the capital’s state of emergency was lifted.
PANASONIC sold all its Tesla shares to fund operations but is maintaining its Tesla relationship +VE
Equity Summary 
Heiwa Real Estate (8803): Shareholders reject Lim Advisors’ proposal, Nikkei reports
Kobe Bussan (3038): May sales +2.8% y/y
Oracle Japan (4716): 4Q parent operating profit 21.2b yen vs analyst estimate 23.8b yen; forecasts EPS of 385-395 yen for current fiscal year vs estimate 426.5 yen (GAAP)
Park24 (4666): Credit rating lowered to BBB from BBB+, negative at R&I
EARNINGS due Demae-Can Co. (2484 JP), Ichibanya Co. (7630 JP), Okuwa Co. (8217 JP), Takashimaya Co. (8233 JP)
Power companies  +VE as most expect a surge in electricity demand during the summer as the Olympics takes place.
Investigators who revealed Toshiba colluded with Japan’s trade ministry to pressure foreign shareholders on Thursday defended their inquiry against government criticism. After Akira Amari, a senior member of Japan’s ruling party on Thursday accused activist  investors in Toshiba Corp of focusing only on short-term profits and called for better monitoring of such investors to protect economic security.
Japan’s Kioxia Holdings Corp, the world’s second largest maker of flash memory chips and formerly known as Toshiba Memory, plans an initial public offering as early as September, weekly financial magazine Diamond reported on Thursday.  Kioxia, which is controlled by private equity firm Bain Capital, last year shelved a plan to offer up to 334.3 billion yen ($3 billion) in shares, which would have been Japan’s largest IPO of 2020.

SOUTH KOREA 
Futures indicates the  markets +1.85pts; building  on Thursday’s high after good Business Confidence data but upside limited with caution ahead of the weekend.  
Data out
Business Confidence Jun 98 vs 96 May (F/cast was 97)
KDCA reported 610 new cases (576 local infections) -35 cases DoD
Shinsegae Group's E-Mart Inc (139480.KS) said on Thursday it plans to acquire an 80% stake in eBay Inc's (EBAY.O) South Korean business for 3.4 trillion won ($3 billion).  With the deal, traditional retail giant Shinsegae gets a much-needed boost in the Korean e-commerce sector, where it has lagged after competitors such as No. 1 Coupang , while eBay Korea gains a powerful backer after years of underperforming, analysts said.
Posco on Thursday vowed to pursue shared growth with its approx 90 partners and suppliers.  Posco Chairman Choi Jeong-woo proclaimed the new doctrine at a ceremony attended by representatives of labor unions at local firms tied to the steelmaker, as well as dignitaries such as Moon Sung-hyun, chairperson of the Economic, Social, and Labor Council under the presidential office, North Gyeongsang Province Gov. Lee Cheol-woo, Pohang Mayor Lee Kang-deok and lawmakers from constituencies in the region.
Gmarket reported sharp increases in sales of vouchers for hairdressing salons, restaurant meals and cinema seats, the e-commerce giant said Thursday, calling it a sign that consumption is recovering.
DataStreams said Thursday that it has presented a system for brokerless trading and circulation of big data using a blockchain solution. In their study, the trio offered a way to use blockchain technology to  build an exchange platform for big data, enabling direct transactions  between sellers and buyers without the involvement of intermediaries.

TAIWAN 
Market to open higher with broad interest.
No data
due but after market Thursday
M2 Money Supply May +9.21% YoY vs +8.83% Apr
Taiwan’s money supply, measured by M1B and M2 movements, logged annual  gains of 17.74 percent and 9.21 percent respectively last month,  suggesting a surge in liquidity as investors took shelter in cash amid  market swings following a domestic outbreak of COVID-19 last month, the  central bank said yesterday.
CECC reported 130 new covid cases (1 imported)
Taiwan’s GDP is forecast to expand 5.6 percent this year, faster than a 3.1 percent increase last year, driven by strong global demand for semiconductors, aggressive private investment by local tech firms and an expected recovery in consumer spending, S&P Global Ratings said yesterday. Improving external demand and COVID-19 curbs would lend support to  credit profiles across economic sectors, even though their paces of  recovery vary, said the agency’s local arm, Taiwan Ratings Corp
Local politicians and an international press freedom advocacy group yesterday voiced their support for democracy and freedom in Hong Kong, as the territory’s Apple Daily printed its last edition.
The world should not sit idly while China destroys the “one country, two systems” framework in Hong Kong, which has greatly harmed democratic values, Democratic Progressive Party (DPP) Legislator Huang Shih-chieh told a news conference in Taipei.
The United States no longer sees Taiwan as a problem in its relations with China, but as an opportunity to promote a free and open Indo-Pacific, a senior U.S. diplomat said on Thursday.
Like most nations, the United States has no formal diplomatic ties with the Chinese-claimed island, but is its most important international backer, to Beijing's anger, and President Joe Biden's administration has moved to restate that support.

CHINA  
Market to open higher following the US but upside limited with credit/default concerns still overhanging the market along with the potential for more sanctions from the US.  ‘Team China’ on standby to ensure stablity ahead of party  anniversary.
No data due
but on Sunday May Industrial Profits (YTD) are due to be released (Apr was 106.1% F/cast is 82%)
President Joe Biden on Thursday called the closure of Hong Kong's Apple Daily tabloid a "sad day for media freedom" and said it signaled "intensifying repression" by China, while vowing to maintain support for the people of the Chinese-ruled territory.
Taiwan needs to be clearly aware that its future lies in "reunification" with China and that it cannot rely on the United States, China's military said on Thursday, responding to questions on a massed incursion by Chinese warplanes last week.  Chinese Defence  Ministry spokesman Ren Guoqiang said what he termed exercises were "a  necessary action for the current security situation across the Taiwan  Strait and safeguarding national sovereignty". Taiwan independence means war, he added, reiterating the sharper language the ministry began using in January. "The United States should fully understand that China's development and growth cannot be stopped by any force," Ren said.  "The Democratic Progressive Party authorities must be soberly aware that the future of Taiwan lies in national reunification," he added, referring to Taiwan's ruling party. Most Taiwanese have shown no interest in being ruled by China.


HONG KONG 
ADR’s +78pts at 28,959  (Futures +75pts) a broad rally so expect some initial upside  as recent shorts cover.  Further upside likely to to be muted ahead of the weekend and concerns over further sanctions on China.  Infrastructure related names likely to see some +VE reaction to the US agreement on infrastructure.  
No data due


Short Selling Thursday 16.4% vs 15.6% Wednesday
Top Shorts 
Bud APAC (1876) 43%, Bank of China (3988) 35%, Hengan (1044) 34%, Mengniu Dairy (2319) 31%, AIA (1299) 29%, Citic (267) 27%, Sunny Optical (2382) 26%.

National Security
Three groups will apply for police's permission to hold July 1 march after Civil Human Rights Front said it won't organize the July 1 march,  after the group's convenor Figo Chan Ho-wun was sent to jail, and police  challenged whether the front is a legal society.  

WATCH
Shoe makers +VE after Nike earnings

LUK FOOK HOLD (00590.HK) announced annual results for the year ended 31 March 2021.
The net profit increased by 17.4% yearly to HK$1.017 billion. EPS was HK$1.73. The company proposed final and special dividends of HK$0.5 each per share, totalling HK$1 per share. Taking into account of the interim dividend paid, the total dividend would amount to HK$1.5 per share. The dividend payout ratio would be 86.6%.CHINA OVERSEAS (00688.HK) unveiled the first price list for One Victoria, its first residential project at the former runway of Kai Tak, involving 212 units measuring 329-643 sq.m. each. Based on the maximum discount of 13.5%, the sales prices of the project range $6.563-16.544 million.

SHENZHEN INVEST (00604.HK) announced that, for the first 5 months of 2021,
the Group recorded total contracted sales of approximately RMB5.778 billion, representing an increase of 25.9% YoY, and the total contracted sales area was approximately 290,623 sq.m., up 77.7% YoY. The average selling price was approximately RMB19,882 per sq.m..

Hong Kong Book Fair will be held at the Hong Kong Convention and Exhibition Centre in Wan Chai between 14 and 20 July. 
738 companies have applied for participation in the fair so far, roughly the same as that in 2020 with a 3.3% YoY size growth.
To encourage vaccination, Hong Kong Trade Development Council will hand out 35,000 fair tickets to citizens who have received at least one dose of Covid vaccine on a first-come-first-served basis.

Since BABA-SW (09988.HK) established the MMC business group in March, Hema Supermarket tracked increased number of orders nationwide to approximately 6 million currently from April's around 2 million.
The company targeted the gross merchandise
volume (GMV) at RMB350 million on a daily basis. Community group buying (CGB) is the focal point of BABA-SW this year in new retail investment. It was known that the company has at least pumped RMB20 billion in this regard, wrestling for the top three positions in the battlefield.

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