June 30 Asian Macro Initial Thoughts

30 Jun

This and previous notes can be found at Substack ( Asian Market Sense )
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Asia Expect a mixed open but most of Asia likely to open lower but watch for end of month and 1H window dressing.  Hong Kong closed Thursday.  OPEC+ meeting in focus but after US close API data showed a bigger draw down. 

Australia Futures indicate the market to open +33pts with support from rising oil price despite OPEC+ meeting. But Gold names weak
RBA Gov Lowe speaking in the morning and Private sector credit data later.
Japan Nikkei futures opened -20pts  (Chicago futures -15pts from -5pts earlier) pre market data will influence initial trading as will the China data and Japanese Consumer Confidence and Housing data later.  Autos +VE of good US sales data.
S Korea Futures -1.8pts; but  likely to open lower after pre marke data missed forecasts but downside likely to be mitigated by the +VE supplemental budget announcement.  
Taiwan Expect market to open flat as sentiment improves as local covid cases drop old economy names like shipping and steel still +VE.
China Expect market flat but key will be the pre market PMI data.  BUT Team China to be active supporting the market; running into the end of month and 1H.
HK ADR’s +43pts at 29,037  with HSBC under pressure on news many Chinese SOE’s have banned working with it.  Exepct some window dressing but caution ahead of tomorrow’s market closure.  Northbound connect will be closed today and Southbound closed Thursday.
EUROPE  some key inflation and GDP data due.
US Futures 
Opened Dow +20pts, S&P +0.08% and NDX +0.11%; ahead of ADP and PMI data tonight.

DOW +0.03%, NDX +0.19%, S&P +0.03%, Russel 2K -0.58%
DOW open higher as Banks announce buybacks and dividend hikes, Boeing announced a record order from United plus positive housing data +VE for housing stocks .  S&P opened slightly higher to another new high.  NDX opened flat and traded around flat.  Consumer Confidence data out later in the session was also +VE  But all markets drifted to flat by the close ahead of the month and 1H end and the jobs data which is taking greater significance.

Banks Morgan Stanley +3.4%, Goldman’s +1.1%,  but JPMorgan Chase -0.1%, Citigroup -2.6% Wells Fargo -2.2%, Amex -0.3%
Work from home names: Facebook -1.1%, Apple +1.2%, Amazon +0.1%, Netflix +0.1%,  Disney -1.5%, Zoom Video +1.5%, Alphabet -0.2% and Microsoft +1%,
Tech NXP Semi +0.7%, Nvidia +0.2%, Micron +0.5%, AMD +2.8%, Skyworks +4.5%
Re-opening stocks  Boeing -4.2% off initial high, Caterpillar -0.5%, Simon Property +0.6%, Kohl’s -1%, Nordstrom +1.8%, Gap -0.2%, United Airlines -0.7%, Carnival -1.4%, Wynn Resorts +0.7%, Chevron -0.2%, Exxon Mobil -0.6%,  
Lock down names Campbell Soup -0.5% General Mills -0.9%, JM Smucker -0.5%

Redbook 18.2% YoY vs 17.6% prior
Case-Shiller Home Price Apr +2.1% MoM vs +2.2% Mar (F/cast was +1.9%)
Case-Shiller Home Price Apr +14.9 YoY vs +13.4% Mar revised (F/cast was +13.8%)
House Price Index Apr +1.8% MoM vs +1.6% Mar revised (F/cast was +0.8%)
House Price Index Apr +15.7% YoY vs +14% Mar revised (F/cast was +14.4%)
Consumer Confidence Jun 127.3 vs 120 May revised (F/cast was 119)
After Market
API Crude Oil Stock Change -8.153M vs -7.199M (consensus was -4.46M)
USD was slightly stronger vs Yen & Euro. Bitcoin +5% @ 36,184.62, VIX +1.7% @ 16.02,
US T10 @ 1.475% little changed ahead of jobs data.
OIL Brent +0.6%, WTI +0.73% after market API shows stocks dropped more that f/cast expect price to rise but upside capped by OPEC + meeting.
Gold -1.07%, Silver -1.48%, Copper -0.22% Platinum -2.9%, Palladium -0.46%.
MBA Mortgage Applications and 30 yr Mortgage Rate, ADP Employment Change, Chicago PMI, Pending Home Sales, EIA Oil Report

DAX +0.88%, CAC +0.14%, FTSE +0.21%
Markets opened flat but initial ticked higher and then FTSE and CAC effectively traded sideways and the DAX trended hgiher as inflation eased but still above the ECB’s 2% target.  But upside muted as investors assess the impact of delta covid virus and US data.  Travel & Leisure remain weak
Rexel 4.3% off early higher after raising its 2021 profit guidance.
Tui -4.9% after a convertible bond announcement, according to Reuters.
German brakes maker Knorr Bremse plunged 12% after it said it was interested in buying a 60% stake in automotive lighting firm Hella +4%.

Consumer Confidence Jun -3.3 vs -5.1 May (F/cast was -3.3)
Economic Sentiment Jun 117.9 vs 114.5 May (F/cast was 115.9)
Industrial Sentiment Jun 12.7 vs 11.5 May (F/cast was 11.9)
Services Sentiment Jun 17.9 vs 11.3 May (F/cast was 14.5)
Consumer Inflation Expectations Jun 27.1 vs 22.2 May (F/cast was 21.5)
Inflation Rate Prelim Jun +2.3% YoY vs +2.5% May (F/cast was 2.3%)
Inflation Rate Prelim Jun +0.4% MoM vs +0.3% May (F/cast was +0.3%)
Consumer Confidence Jun 102 vs 98 May revised (F/cast was 99)
Nationwide Housing Prices Jun +13.4% YoY vs +10.9% May (F/cast was +13.3%)
Nationwide Housing Prices Jun +0.7% MoM vs +1.7% May revised (F/cast was +1%)
Car Production May 934.3% vs 34,573% Apr (F/cast was 1500%)
Mortgage Approvals May 87.5k vs 86.9k Apr (F/cast was 82k)
Mortgage Lending May £6.6B vs £3B Apr revised (F/cast was £3.4B)
BoE Consumer Credit May £0.28B vs £-0.23B Apr (F/cast was £0.2B)
Net Lending to Individuals May £6.9B vs £2.8B Apr revised (F/cast was £3B)
EUROZONE Core Inflation Rate, Inflation Rate,  
Unemployment Rate, Unemployment Change
Inflation Rate, Household Consumption, PPI,  
Current Account, Business Investment, GDP Growth Rate,

Nikkei futures opened -20pts  (Chicago futures -15pts from -5pts earlier) pre market data will influence initial trading as will the China data and Japanese Consumer Confidence and Housing data later.  Autos +VE of good US sales data.  But sentiment weak as press reports social distancing measures to be extended.
Yen currently 110.53
Data due pre market 
Industrial Production Prelim May (Apr +2.9% MoM (F/cast is -2%)
Industrial Production Prelim May (Apr +15.8% YoY (F/cast is +27%)
Later 1pm
Consumer Confidence, Housing Starts and Construction Orders
Adastria Co. (2685 JP), Daiseki Co. (9793 JP), Nitori Holdings Co. (9843 JP), Samty Co. (3244 JP), Strike Co. (6196 JP)
Tokyo on Tuesday reported 476 new covid cases, +159 DoD.  Nationwide the number was 1,381
State Minister of Defense Yasuhide Nakayama  has suggested that Japan, the U.S. and other countries re-examine their decisions to follow the “One China” policy that recognizes Beijing instead of Taipei, while also calling on democracies to stand up to growing mainland pressure on Taiwan.
He questioned whether the decisions made in the 1970s would be able to stand the test of time. Likely to annoy China but +VE
Mitsubishi UFJ Financial Group shareholders on Tuesday defeated a proposal for the bank to align its business with global targets on climate change, dealing a win for the board over investors pushing for more action on the environment.  Mitsubishi UFJ is Japan's biggest lender and backs numerous coal and fossil fuel projects.  It said the "essential content" of the proposal "has already been incorporated into the company's management strategies," with a recent carbon neutrality pledge and other policy changes. Slight -VE
Dentsu Group Inc said Tuesday that it expects to book a profit of about 89 billion yen ($805 million) from carrying out a Sale and Leaseback of its HQ in central Tokyo. The deal will be the largest building transaction ever in Japan, according to sources familiar with the matter.  It’s book value will be 179.0 billion yen as of June 30. The sources said the value of the transaction will likely be around 300 billion yen. +VE
Japan will respond appropriately to information that could affect the defense and security of the nation, including information on unidentified flying objects, Chief Cabinet Secretary Katsunobu Kato has said.  The U.S. government reported last Friday that 144 UFOs were spotted by the U.S. military and others from 2004 to 2021, but that there was sufficient data to categorize only one of them.
DCM Japan (3050): 1Q operating profit 10.4b yen vs estimate 9.3b yen (2 analysts)
Edion (2730): To buy back up to 4.66% of shares for 6b yen
Fujifilm (4901): To Invest $850M in Unit Fujifilm Diosynth Biotech
J Front Retail (3086): 1Q operating loss 3.8b yen; cuts full-year OP forecast 50% to 5.5b yen
Keiyo (8168): 1Q parent operating profit -24% y/y to 1.96b yen
Mazda (7261): To obtain 70b yen of subordinated loans
Nagaileben (7447): 9-month operating profit 4.3b yen; maintains full-year OP target at 5.1b yenbandai
Resorttrust (4681): To buy back up to 2.4b yen of shares
Sanrio (8136): Bandai Namco (7832) raised its stake in Sanrio to 4.6%, probably buying shares from Sega Sammy (6460), Nikkei says
Sugi Holdings (7649): 1Q operating profit 7.3b yen vs analyst estimate 7.4b yen; nudges up full-year OP target 0.9% to 34.3b yen
TechMatrix (3762): Full-year operating profit 3.6b yen vs company guidance 3.3b yen; forecasts OP of 3.7b yen for current fiscal year
Toshiba (6502): To Buy Back 100b Yen of Shares on ToSTNet-3 on Wednesday
Ushio (6925): Lifts full-year operating profit forecast 80% to 9b yen

Futures -1.8pts; but  likely to open lower after pre marke data missed forecasts but downside likely to be mitigated by the +VE supplemental budget announcement.  
Data out
Industrial Production May -0.7% MoM vs -1.6% Apr (F/cast was -0.4%)
Industrial Production May +15.6% YoY vs +12.6% Apr revised from 12.4% (F/cast was +19%)
Manufacturing Production May +16% YoY vs +13% Apr (F/cast was +21%)
Retail Sales May +3.1% YoY vs +8.6% Apr (F/cast was +7.9%)
Retail Sales May -1.8% MoM vs +2.1% Apr revised from +2.3% (F/cast was +1.4%)
Construction Output May -7.6% YoY vs -3.2% Apr revised from -1.8% (F/cast was -0.7%)
KDCA announced 595 new covid cases to midnight Monday (+94 DoD)
South Korea plans to allocate 33 trillion won ($29.2 billion) for its second round of COVID-19 supplementary budget this year, the ruling party and the government said Tuesday, amid growing concerns over the nation’s fast-growing national debt.  +VE for sentiment
South Korean biopharmaceutical companies have joined forces to co-develop and co-produce 100 mn doses of a homegrown messenger RNA vaccine for COVID-19 next year, according to the Ministry of Health and Welfare on Tuesday.  Dubbed the “K-mRNA vaccine consortium,” it will be led by three major firms; Hanmi Pharmaceutical, GC Pharma and ST Pharm. +VE
Hanmi Pharmaceutical said Tuesday that efpeglenatide, its long-acting  diabetes drug candidate, had significantly reduced the incidence of  major adverse cardiovascular events and kidney disease, quoting the  results of phase 3 clinical trials. +VE
Samsung Electro-Mechanics said Tuesday the company has developed a multi-layer ceramic capacitor with the largest storage capacity for 5G smartphones. +VE
Samsung Electronics Vice Chairman Lee Jae-yong will face a formal court trial on charges of illegally taking propofol injections, according to sources Tuesday.  Slight -VE and a slight embarassement  for those who have called for his release from jail.
Hyundai Motor on Tuesday released a promotional video featuring K-pop supergroup BTS and robots, as part of efforts to reposition the company as a tech firm leading future technologies.  It seeks to make the field of robotics familiar to young people, by introducing Spot and Atlas of Boston Dynamics, a US-based robot specialist which Hyundai Motor recenlty acquired. Slight +VE
Netmarble on Tuesday showcased Marvel Future Revolution, an open world role-playing game featuring Iron Man, Doctor Strange, Captain America and other beloved characters from Marvel Comics.  Set for a global launch in 240 countries and territories in the second half of the year. The event also kicked off preregistrations for the game.  +VE
LG Energy Solution on Tuesday signed a non-binding agreement with Australian mineral firm Infinity Lithium to source lithium hydroxide, a key material for high-nickel electric vehicle batteries. +VE

Expect market to open flat as sentiment improves as local covid cases drop old economy names like shipping and steel still +VE.
No data due
CECC reported 54 new covid cases, all domestic, another monthly low.
After market another 4.9 earthquake hit this time Northeastern Taiwan
The Financial Supervisory Commission yesterday unveiled relaxed guidelines for listed firms to conduct virtual annual general meetings (AGMs) from the middle of August.  +VE
Dyaco International Inc is to expand its production facilities domestically, and buy land in the US for warehousing and customer service needs, the company said on Monday.
Citing a “positive mid-to-long-term outlook,” the company’s board of directors yesterday approved a plan to expand its production facilities in Taichung’s Dajia District +VE
China Airlines Ltd could see its flight schedule return to previous timetables soon as its pilots enter a “safe” COVID-19 category, meaning they can work a regular schedule again after being sidelined by a cluster infection +VE.

Expect market flat but key will be the pre market PMI data.  BUT Team China to be active supporting the market; running into the end of month and 1H.
Data due pre market
Manufacturing PMI Jun (May was 51.0 (F/cast is 50.9)
Non Manufacturing PMI Jun (May was 55.2 (F/cast is 55)
Brazilian health regulator Anvisa has canceled a request for emergency use authorization for the COVID-19 vaccine developed by China’s CanSino Biologics Inc after the laboratory cut ties with its Brazilian representative.   It  received a notice from CanSino via email that Belcher was no longer its authorized representative in Brazil.  -VE
Presdent Xi’s speech Tuesday recognised that “foot soldiers” were key and awarded a number of  July 1 Medal on Tuesday; the first time they were handed out.  Seeking to send a message that the party must stay close to the grass roots and away from corruption to remain in power.  Expect more speeches and investors will be looking for signs of future priorities.
FT Report ‘Rising China bond yields raise fears over looming surge in state-linked defaults’  -VE
Guangzhou has cut the prices of natural gas and water for non-residential consumers to help companies amid a recent flare-up of the coronavirus disease.  Prices for gas and water will be reduced to 90 percent of their current rates, with natural gas capped at 3.11 yuan (US$0.4815) per cubic meter, the city government said on its website on Monday.  The price reduction is from June 1 to the end of December.  Suggests the impact is greater than has been reported -VE

ADR’s +43pts at 29,037 with HSBC under pressure on news many Chinese SOE’s have banned working with it. Exepct some window dressing but caution ahead of tomorrow’s market closure. Northbound connect will be closed today and Southbound closed Thursday.
No data due

HUTCHMED (00013.HK), debut, the grey opened at $49 and  last posted $49.7, 24% higher against its listing price of $40.1, on a volume of 430,000 shares, PhillipMart data showed.

NAYUKI (02150.HK), debut, the grey opened at $21.6 and last stood at $20.15, +1.8% against the listing price, at Futu Sec but closed below the listing price at two other brokers

Short Selling Tuesday 15.4% vs 16.0% Monday
Top Shorts 
Bank of China (3988) 35%, Hengan (1044) 35%, Country Garden (2007) 32%, AIA (1299) 30%, Ping An (2318) 30%, Petrochina (857) 29%, CK Asset (1113) 28%, Wuxi Bio (2269) 24%.

Police have dismissed an appeal over its decision to ban groups from organizing a rally on July 1 after the League of Social Democrats, Tin Shui Wai connection and Save Lantau Alliance applied for permission from police to organize the July 1 march. The police denied their application, citing social distancing measures.  

A consortium led by BABA-SW (09988.HK) and the Jiangsu Provincial People's Government is nearing a deal to acquire a stake in Suning's retail arm Suning.com (002024.SZ),
likely relieving liquidity tightness resulted from Suning's links to EVERGRANDE (03333.HK) Bloomberg citing sources. Following the deal, Suning Holdings Group's co-founder and chairman Zhang Jindong will lose control over Suning.com, said the people. A +VE step for the resolution of some Chinese debt crisis and could set a blueprint for other companies.

HUARONG says it still need more time to produce its audited results -VE

PUBLIC FIN HOLD (00626.HK) announced that it declared 
an interim dividend of HK$0.05 per share.

Secretary for Development Michael Wong announced the Land Sale Programme for fiscal second quarter (July to September 2021).
The Government will roll out two residential sites by way of tender, one at the junction of Lau Yip Street and Chung Yip Road in Yuen Long, and the other at 79 Broadcast Drive in Kowloon Tong. The sites shall offer roughly 200 flats in combination. Hong Kong housing market continues to see heated activities with the home prices poised to reach new highs. He said that the government will continue to launch new land to contain the surge of the property price. Wong added that the private property flats supply reached 7,050 units in the first half of this financial year, fulfilling already half of the full-year target; he therefore remains optimistic for achieving the full-year goal of 12,900 units.  Slight +VE but the government historically missed its targets.

AIA (01299.HK) announced that it has agreed to invest RMB12.033 billion through its wholly-owned subsidiary, for a 24.99% equity stake, post investment, in China Post Life Insurance Co., Ltd, a subsidiary of China Post Group Co., Ltd.
The investment will be financed on an all-cash basis from internal resources. The group’s operation of AIA Life Insurance Company Limited (“AIA China”), its wholly-owned life insurer in China, will remain entirely independent of this investment  +VE  if gets regulatory approval.

FAIRWOOD HOLD (00052.HK) posted an operating loss last year under business impact from the pandemic and gathering ban, said CEO Francis Lo at a press conference. However,
Lo was optimistic about the fast food chain's performance this year without concerns over further losses, citing business improvement between April and June 2021. It will cope with raw material cost hike by enhancing operating efficiency, as the group did not want to pass the buck back to consumers.
CEO Francis Lo expressed during a press conference that the company is actively mulling store opening in both China and Hong Kong. He stated that the company intends to open 12-13 stores in Hong Kong, covering both business and residential areas. As for China, Lo contended that the company targets 20 stores in GBA by the end of the year and 30 stores by the end of 2022, with new stores potentially featuring take-away service. Slight +VE

BYD COMPANY (01211.HK) announced that it has secured 12-meter electric bus orders from public transport operators (PTOs) in Spain and Portugal.
The carmaker plans to deliver the e-buses by the end of year +VE.

The issuance amount of the new batch of silver bonds is raised to $24 billion, and may be lifted further to $30 billion at maximum as appropriate, the HKMA announced. 
The tenor is three years with an entry fee of $10,000 per board lot. The floating rate is linked with inflation whereas the fixed rate is the guaranteed rate of return of 3.5%. Interest is payable every six months. The eligible age for subscribing the bonds is lowered to 60 from 65. The subscription period will be 20-30 July, and the bonds will be issued on 10 August. The allotment cap for each investor is $1 million, which is a maximum of 100 lots.

The package two of The Southside atop Wong Chuk Hang station, co-developed by KERRY PPT (00683.HK), SINO LAND (00083.HK) and MTR CORPORATION (00066.HK), was named "La Marina". 
The residential project will be divided into two towers, offering a total of 600 units. The material date would be in August 2023.AlipayHK announced to set up a consumption voucher experience hall in Olympian City with its strategic partner Sino Group, aiming to introduce the shopping experience of AlipayHK and its major spending aspects to the general public.
AlipayHK expressed that it covers over 100,000 merchants at the moment; with the extra rewards, it hopes to stimulate the spending appetite of the public and foster sustainable local consumption +VE.

PETROCHINA (00857.HK) (601857.SH)'s owner CNPC will prioritize and depend on technology when it comes to business development, stressed CNPC Chairman Dai Houliang at a leading group meeting. In addition, the group will keep beefing up efforts in tackling tech problems concerning new energy and new materials; slight +VE.

Survey shows  that Hong Kong people's sense of pride in becoming a national citizen of China increased by seven percent points to 41 percent.  But it also shows the positive appraisal percentage of the Central Government's policies on Hong Kong stood at 35 percent, while negative appraisal stood at 45 percent. Hong Kong Public Opinion Program interviewed 1,014 Hong Kong residents by a random telephone survey in late June and released popularity figures of chief executive and SAR government and SAR anniversary survey result.  The percentage of those not feeling proud dropped by eight percent points to 55 percent. Still the data represented the most positive survey results since 2010.

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