Sept 14 ASIAN MACRO INITIAL THOUGHTS Asian Futures muted as US futures rise
Covid-19 Globally over 28.9m cases, 922k deaths
US Futures open +130pts and are rising with the S&P and NDX pointing higher too.
Expect a cautious start to the week in Asia ahead of a lot of important macro data releases; most people will focus on the FOMC meeting (last before US election) and hopes for more easing but there is a lot more data to impact investors; including rate decisions in Japan Taiwan and UK. Also in focus will be the stimulus package that can’t be agreed and whether that impacts Retail Sales data due Wednesday.
China’s economy continues to recover but trade, border and other disputes overhang the market and are a worry to investors.
Apple changed its App Store Guidelines on Friday which affect game streaming services likely to raise resentment of Apple by App Makers as each game will need to offer in-app purchasing via Apple’s payment processing system; where Apple usually takes a 30% cut. Means players will need to down load more apps and could put Apple in Congress’s antitrust subcommittee sights again. On +VE an 'Apple bundle’ could be announced.
US & Europe closing data at bottom of the note
JAPAN Expect Nikei to open flat Yen closed 106.14 with caution ahead of the LDP leadership vote which Suga is expected to win. Data also likely to impact trading.
Data due Tankan Index, Industrial Production, CapacityUtilisation, Tertiary Industry Index, LDP Leadership Vote
Chief Cabinet Secretary Yoshihide Suga, who is set to become prime minister this week, said on Sunday there was no limit to the amount of bonds the government can issue to support an economy hit by the coronavirus pandemic.
Tokyo reports 146 new covid cases (vs 226 Saturday) and nationwide the number was 436.
Economy Minister Yasutoshi Nishimura said on Friday the government plans to include people living or vacationing in Tokyo in a subsidised domestic tourism campaign from October, having initially excluded the capital as a coronavirus hotspot. But he added the government would review the plan later this month based on the COVID-19 situation. He also announced removing some social distancing requirements. +VE Rail operators
National Security Council (NSC) on Friday said Japan needs to consider better ways to deter missile attacks and pledged to formulate a new national security strategy by the end of the year. It is expected the the new PM will also continue PM Abe’s move to allow the defences forces strike capabilities.
SoftBank said to have completed the sale of ARM to Nvidia; priced at US$40bn. +VE Talk that Son may now look to take Softbank private says FT report.
Nissan Motor to issue $8 billion in dollar-denominated debt and is considering euro-denominated bonds, it said on Friday, as the troubled automaker looks to diversify its funding.
Sharp Corp said on Friday it has won a patent infringement lawsuit against Daimler DAIGn.DE in Germany, a ruling that could enforce a sales ban against the German automaker.
Mitsui OSK Lines Ltd said on Friday it would spend about 1 billion yen ($9.42 million) on measures to help Mauritius, including the clean-up of the island’s mangrove forests and contribution to an environmental recovery fund.
SOUTH KOREA Expect markets to open flat with markets still struggling for direction; so markets expected to remain rangebound ahead of the US’s FOMC decision on Wednesday; more easing expected according to local commentators.
No data due
Government on Sunday eased its tough social distancing policy for the next two weeks in the densely populated Seoul metropolitan area, as new daily covid cases reported 121 as of midnight on Saturday.
Samsung Electro-Mechanics said Sunday it has developed the world’s smallest power inductor; approx 50% smaller than the industry’s previously smallest product, width of 0.8 mm and a length of 0.4 mm, (vs prior width12 mm and length of 10 mm). The thickness of the latest product measures 0.65 mm. A power inductor is a key electronic component inside smartphones, wearable devices and electric vehicles that helps the battery supply a stable flow of electricity to the semiconductor. +VE
LG Group said Sunday it has formed a research consortium with global partners to discover high-performance materials with artificial intelligence (AI) and robot technologies. +VE
South Korea will focus on investing in digital infrastructure, including its Data Dam project, to combat future risks stemming from the coronavirus pandemic, the nation’s finance minister said Friday.
Celltrion said Friday that it had confirmed the safety of COVID-19 antibody drug CT-P59 in healthy people through a domestic phase 1 trial involving 32 people. Once another clinical phase 1 trial targeting light-symptom COVID-19 patients wraps up, Celltrion plans to proceed to global phase 2 and 3 trials in as many as 12 nations targeting 500 patients. +VE
KEPCO Industrial electricity consumption fell to a four-year low in July amid an economic slump caused by the coronavirus outbreak, data showed Friday. -VE
Asiana Airlines Creditors plan to inject $2 billion into debt-ridden company after a planned sale of South Korea's second-largest carrier collapsed, a state bank said on Friday. Over the weekend press reported the carrier is expected to undergo organizational restructuring, including sales of some of its subsidiaries. For me the future of the airline still looks uncertain -VE
Samsung Electronics further expanded its dominance in the domestic smartphone market in Q2 with 67% market share, a report showed Friday, thanks to robust sales of the Galaxy A budget line and Galaxy S20 series; said Counterpoint Research, up 3 percentage points from the previous three months. +VE
Samsung Electronics’ in the run up to its leader Jay Y. Lee new trial next month, has been ramping up a public relations campaign touting Lee's deal-making expertise including in winning a $6.6 billion contract from Verizon VZ.N. Obviously hoping that will influence the court. One would hope it would not as that would undermine the legal system in the public’s eyes.
LG CHEM +VE as Nikola, a startup on electric and fuel cell trucks, will adopt electric batteries co-developed by South Korea’s LG Chem and its US partner General Motors, according to industry sources on Friday.
Kakao Games continued its bullish run on the Kosdaq market, with shares spiking by a daily permissible limit of nearly 30% for a second consecutive day Friday.
TAIWAN Expect market to open flat with good recent earnings and signs of improvement in the economy limiting any downside. But at present there is little to drive the market to the upside.
No data due
Global notebook computer shipments are forecast to grow 4% QoQ to 55mn units this quarter, as telecommuting and distance learning demand remains strong, boosting sales of educational, consumer and gaming laptops, Taipei-based market researcher TrendForce Corp said. +VE for HP, Lenovo, Asustek and Acer
Gasoline and diesel prices this week are to drop by NT$0.5 and NT$0.3 per liter respectively after remaining unchanged for three straight weeks, CPC Corp, Taiwan and Formosa Petrochemical Corp announced separately yesterday.
Taiwan Semiconductor Manufacturing Co (TSMC) to issue US$1 bn in unsecured corporate bonds to fund production expansion, it said on Friday. The 40-year bonds have a face value of US$1 million each, with a coupon rate of 2.7%, TSMC said in a regulatory filing.
Fitch Ratings yesterday revised upward its forecast for Taiwan’s economy, saying it might grow 1% this year, from an expected 0.2% contraction, due to fast recoveries of private consumption and exports. The agency expects Taiwan’s economy to expand 2.8% next year, as the COVID-19 pandemic is expected to ease in many countries worldwide.
Credit card spending in July returned to growth after a four-month negative trend, due to tax payments and a recovering demand for domestic travel, Financial Supervisory Commission data showed. Credit card spending +29.5% YoY to NT$362.6 billion (US$12.289 billion), hitting a high for the month, the data showed. +VE
Local banks saw the credit risk of their overseas branches worsen due to the fallout of the COVID-19 pandemic after reporting US$400 million in potential loan losses as of Thursday, double that of a year earlier, Financial Supervisory Commission (FSC) data showed. FSC rules stipulate that local banks must report possible losses of US$10 million or higher from corporate loan defaults at their overseas branches. -VE
CHINA Expect market to open higher on the good loan growth data but with caution ahead of the House Price Index data and on Tuesday Retail Sales, Unemployment and Industrial Production data. PLUS International tensions still overhang the market.
Data due House Price Index
After market Friday
New Yuan loans Aug CNY 1289b vs 992.7b Jul (Consensus 1220b, F/cast was 1100b)
Outstanding Loan Growth Aug 13% YoY vs 13% Jul (F/cast was 12.9%)
Total Social Financing Aug CNY 3580b vs 1690b Jul (F/cast was 2600b)
M2 Money Supply Aug 10.4% YoY vs 10.7% Jul (F/cast was 10.7%)
FDI (YTD) Aug +2.6% vs +0.5% Jul (F/cast was +1.2%)
New loans show that the economy continues to recover.Household loans (mainly mortgages) rose to CNY 841.5 billion from CNY 757.8 billion in July and corporate loans surged to CNY 579.7 billion from CNY 264.5 billion. Outstanding yuan loans grew 13 percent from a year earlier, the same as in July and in line with forecasts.Total social financing, a broad measure of credit and liquidity in the economy, jumped to CNY 3.58 trillion, the highest since March.But the broad M2 money supply went up at a slower 10.4 percent year-on-year, below 10.7 percent in July and forecasts of 10.7 percent.
The PBOC announced that RMB deposits increased RMB1.94 tn in August, and foreign currency deposits rose USD25.8 bn. Also that RMB settlement of cross-border trade transactions reached RMB538.5 bn in August and that RMB settlement of direct investments reached RMB293.8 bn.
China issued new rules today to regulate financial holding companies, as it moves to prevent systematic risks to the vast financial sector, Reuters reports. The aim is to restrict companies expanding blindly into the sector. To be licensed as financial holding firms, companies must have at least 5 billion yuan (US$731.74 million) in capital, according to the rules. The rules also set requirements in total assets that financial holding firms can manage. Companies that hold banking assets will need to have at least 500 billion yuan in total assets, and those that do not hold banking assets should have at least 100 billion yuan in assets.
China has banned pork imports from Germany following an out break of swine flu there -VE as likely to add to food inflation pressure in China and thought to be a largely political gesture coming ahead of the talks between President Xi and Chancellor Merkel and the presidents of the European Council and European Commission.
ByteDance's says TikTok’s algorithm is not for sale Microsoft bid rejected which means the US operation is likely to be shutdown in the U.S.. -VE for ByteDance
Chinese and Indian Foreign Ministers declared that both sides should disengage their troops from Himalayan border immediately. Chinese State Councilor and Foreign Minister Wang Yi, and Indian Foreign Minister Subrahmanyam Jaishankar, talked with each other during a Shanghai Cooperation Organisation (SCO) foreign ministers' meeting in Moscow with an attempt to melt down disputes.
Chinese Foreign Ministry retaliates against the US curbing the normal duty performance of Chinese Embassy and Consulate in the US. To prompt early correction of the wrongdoing of the US, China has recently imposed equivalent restriction on the activities of the US Embassy and Consulate in China and its personnel, including senior diplomats and all other personnel of the US Consulate General in Hong Kong. -VE
Philippine President Rodrigo Duterte on Friday urged a peaceful way out of conflicts with China over the South China Sea and said international law must be followed, amid increased regional friction over military activities by Beijing and Washington.
China's top anti-corruption body, the Central Commission for Discipline Inspection, has sent an on-site supervision team to the Shenzhen Stock Exchange to safeguard registration-based reforms at the tech-heavy start-up ChiNext board, the CCDI said on today, state media reported. The recent extreme volatility has raised concerns about potential insider trading or criminal activity -VE for sentiment.
China boasts over 80 million 5G users with a firmer foundation for digital industrialization, said Li Ying from Ministry of Industry and Information Technology (MIIT) at the World Digital Economy Conference 2020.
US accuses two Chinese shell firms accused of helping ZTE sell American tech to North Korea Ryer International and Rensy International said to have acted as go-betweens for Chinese tech giant between 2010 and 2016 in breach of sanctions -VE
SCMP article Construction on China’s ‘city of the future’ highlights Beijing’s renewed zeal for ambitious state planning. Looks at the Xiongan New Area, project; where billions is being spent on a site picked by President Xi. But there are still questions whether it will be the ‘perfect city’ the party leaders envisage. But it underlines the amount of infrastructure spending that China is capable of to support its economy.
HONG KONG ADR’s -125pts to open at 24,378 although the downside likely to be limited by the good China loans number out after market Friday. But also key will be the China House Price data due on the open. Govt eased some social distancing measures on Friday but the catering sector is urging for more easing, as HK reported 19 new covid cases on Sunday.
Data due Industrial Production
SHORT SALES Friday 20.9% vs 20.4% Thursday
Top Shorts Ping An (2318) 35%, BABA (9988) 35%, Hengan (1044) 33%, HSBC (5) 31%, Petrochina (857) 30%, Sands China (1928) 30%, Bank of China (3988) 25%, ICBC (1398) 24%,
PICK Techtronics (669 HK) A long time favourite of mine as readers will know. Friday UBS raised its Target Price to HK$120. The stock has alread tested HK$100 and now consolidating but I expect it will retest the HK$100 level shortly and the potential for a break out I think it good.
Prada's (1913.HK) sales in China have recovered strongly since shops reopened there and to date have risen well above last year's levels, Chief Executive Patrizio Bertelli told Reuters on Friday. +VE
SHIPPING stocks -VE China’s transport ministry had called a meeting with container line operators. The meeting “comes in the wake of rumours that China is planning measures to counter voided sailings and rate increases”, ShippingWatch reported.
JOY SPREADER (6988.HK), on the second day of IPO, recorded over $80.1 billion margins granted by ten brokers as at 6:30 pm Friday. Based on the fundraising amount of $174 million from the public offering, the IPO was over-subscribed by approximately 459 times.
Centaline Property Agency recorded 14 secondary transactions at 10 blue-chip housing estates over the past weekend, -33% WoW
Sun Hung Kai Properties (16) released 45 flats in the second price list of Wetland Seasons Park phase 3 in Tin Shui Wai at an average HK$13,613 per sq ft after discounts, about 5 percent higher than the first batch. The cheapest flat in the list costs HK$5.19 million.
Empire Group and Hong Kong Ferry (50 HK) in Tuen Mun sold a 406-sq-ft flat at Seacoast Royale for HK$6.6 million, or HK$16,273 per sq ft.
K Wah International (173.HK) sold a 2,747-sq-ft luxury house at Marinella development for HK$137.8 million, or HK$50,164 per sq ft.
SHK PPT (16.HK) submitted an amendment proposal at the Town Planning Board for its project in Tung Shing Lane, Nam Sang Wai, Yuen Long for reduction in development plot ratio, according to a filing at the authority. As a result, the project would build 22% less flats to 1,518 flats from 1,955 flats with an aim to increase the approval odds.
SUNNY OPTICAL (2382.HK) announced that the shipment volume of handset lens sets in August +22.3% YoY and +19.4% MoM to 162 million units, which was mainly due to the reduced impact from overseas epidemic.
CATHAY PAC AIR (293.HK) CEO Augustus Tang Kin Wing restated in an internal letter that measures optimizing business scale will be submitted to the board of directors soon, so as to align with Hong Kong's aviation sector demand. It will propose its business restructuring to the board as soon as next month, comprising of a manpower resources review, RTHK cited sources.
CHINA RES LAND (1109.HK) announced that the Group achieved gross contracted sales of RMB27.22 billion in August, +24.2% YoY. Also that that in August 2020, the Group acquired 6 land parcels in Changsha, Chongqing, Xiamen, Guangzhou and Haikou with total gross floor area of 1.3189 million square meters. The attributable land premium payable by the Group of the land acquisition amounted to RMB12.19 billion.
The total gross value of construction works performed by main contractors in the second quarter of 2020 decreased by 0.5% in nominal terms over a year earlier to $55.9 billion, according to the provisional results of the Quarterly Survey of Construction Output released today (September 11) by the Census and Statistics Department (C&SD). After discounting the effect of price changes, the provisional results showed that the total gross value of construction works performed by main contractors decreased by 0.6% in real terms over the same period.
PICC P&C (2328.HK) announced that the original insurance premium income reached RMB307.618 billion in the first eight months of 2020, +3.9% yearly.
PICC GROUP (1339.HK) announced that the aggregate premiums income as derived from PICC P&C, PICC Health and PICC Life for the period from 1 January 2020 to 31 August 2020 reached RMB410.38 billion, +3.76% yearly.
NCI (1336.HK) accumulated gross premium income for the period between 1 January 2020 and 31 August 2020 amounted to RMB116.6 billion, +28.2% yearly.
CHINA LIFE (2628.HK) accumulated premium income for the period from 1 January 2020 to 31 August 2020 amounted to RMB492.8 billion, +11.19% yearly.
MEITUAN-W (3690.HK) proposed simplification of the company name from “Meituan Dianping” to “Meituan”. The company considered that the simplification of its name will help build a unified brand image externally.
TENCENT (700.HK)'s Tencent Cloud launched Project Noah, which will recruit over 50 key partners for core development. More than 100 oriented training lessons will be offered each year to foster the domestic data bank ecological development.
Centa-City Leading Index (CCL) last printed at 177.85, +0.24% weekly.
CCL Mass added 0.29% weekly to 180.74;
CCL (small-and-medium units) went up 0.29% weekly to 178.30;
CCL (large units) faded 0.02% weekly to 175.57.
Three major indices rebounded this week, said Centaline Property, predicting home prices to bounce back soon, which may be around Mid-Autumn Festival.
US & EUROPEAN CLOSE on Friday
DOW +0.48%, NDX -0.6%, S&P +0.05%, Russel 2K -0.7% Markets opened higher but tech saw some early selling and remained under pressure. DOW and S&P traded sideways. Around mid day markets started selling down, hitting the days lows between 1pm and 2pm and then worked higher into the close. Tech was under pressure as Bloomberg reported that Softbank was considering changes to its options trading strategy.
The inflation rate rose more than expected which follows the rise in PPI earlier in the week. The rise was credited to a bounce in the the cost of used cars and trucks and new cars. Food and shelter were steady, Medical care eased and apparel costs were still falling.
Facebook -0.6%, Netflix +0.3%, Alphabet -0.67%, Microsoft -0.65% Apple -1.31%, Amazon -1.85%, Tesla +0.37.
Simon Property -3.1%, GAP -2.1%, United Airline -1%, Delta -0.3% Carnival Cruise +0.3%, Boeing +1.6%, Caterpillar +2.7%
Peloton -4.2% and Oracle -0.6% off initial +VE highs after quarterly results beat
Inflation Rate Aug +1.3% YoY vs 1% Jul(F/cast was +1.1%)
Inflation Rate Aug +0.4% MoM vs +0.6% Jul (F/cast was +0.2%)
Core Inflation Rate Aug +1.7% YoY vs +1.6% Jul (F/cast was +1.5%)
Core Inflation Rate Aug +0.4% MoM vs +0.6% Jul (F/cast was +0.2%)
Baker Hughes Total Oil Rig Count 254 vs 256 prior
Monthly Budget Statement Aug $-200b vs -63b Jul (F/cast was -180b)
USD was flat vs Yen & weaker vs Euro. Bitcoin -0.3% @ 10,399.79,
VIX -9.7% @ 26.87, US T10 0.669%
OIL Brent +0.4%, WTI +0.1% with global demand in question.
Gold -0.8%, Silver -1.34%, Copper +1.5%
AHEAD Consumer Inflation Expectation
DAX -0.05%, CAC +0.2%, FTSE +0.48% markets opened flat and trading sideways around those levels and then saw a late rally into the close as US markets tracked higher. Basic Resources +VE (weaker GBP) but Banks were weak
Concerns over UK Brexit plans -VE but UK data was generally better than forecast and it announced signing a free trade deal with Japan. The rise in new UK covid cases was a concern. German Inflation was inline but Wholesale prices slightly worse explaining some of the weakness in the DAX for most of the day
Maersk -6.2% the most in three months on a report that China’s transport ministry had called a meeting with container line operators. The meeting “comes in the wake of rumours that China is planning measures to counter voided sailings and rate increases”, ShippingWatch reported.
Rio Tinto +4.4% announced the departure of its CEO and two senior executives over the company’s demolition of two Aboriginal rock shelters.
LVMH +3% is countersuing acquisition target Tiffany -0.5%, alleging mismanagement through the coronavirus pandemic invalidates a $16 billion takeover agreement.
Altice Europe +24.4% after the French telecoms firm agreed to a 2.5 billion euro ($2.95 billion) takeover offer with its founder and majority shareholder who plans to delist the company.
Knorr-Bremse -7% after majority shareholder Heinz Hermann Thiele sold 10 million shares in the company.
Inflation Rate Final Aug 0.0% YoY vs -0.1% Jul (F/cast was 0.0%)
Inflation Rate Final Aug -0.1% MoM vs -0.5% Jul (F/cast was -0.2%)
Wholesale Prices Aug -2.2% YoY vs -2.6% Jul (F/cast was -2%)
Wholesale Prices Aug -0.4% MoM vs +0.5% Jul
Balance of Trade Jul GBP 1.1b vs 3.9b Jun revised (F/cast was 1.2b)
Construction Output Jul -12.8% YoY vs -24.8% Jun (F/cast was -18%)
Industrial Production Jul -7.8% YoY vs -12.5% Jun (F/cast was -8.7%)
Industrial Production Jul +5.2% MoM vs +9.3% Jun (F/cast was +4%)
Manufacturing Production Jul -9.4% YoYU vs -14.6% Jun (F/cast was -10.8%)
Manufacturing Production Jul +6.3% MoM vs +11% Jun (F/cast was +4.5%)
GDP 3 mth ave Jul -7.6% YoY vs -20.4% Jun (F/cast was -8%)
GDP Jul -11.7% YoY vs -16.8% Jun (F/cast was -11%)
GDP Jul +6.6% MoM vs +8.7% Jun (F/cast was +6.3%)
Goods Trade Balance GBP Jul -8.63b vs -6.55b Jun (F/cast was -7.1b)
NIESR Monthly GDP Tracker Jul +7% vs -7.6% Jun revised (F/cast was +6%)
EUROZONE Industrial Production
GERMANY No data due
FRANCE No data due
UK No data due