Sept 22 ASIAN MACRO INITIAL THOUGHTS Japan closed, Asian futures lower, US Futures Fla
Covid-19 Globally over 31.2m cases, 962k deaths
US Futures opened flat Dow +20pts, S&P and NDX flat
Asian Futures indicate a lower open as USD strengthened but downside mitigated but Monday’s sell off and the fact that US markets recovered from initial lows
Powell, the Fed chairman to tell Congress that struggling small and medium-sized US businesses hit by the coronavirus pandemic may need “direct fiscal support”, rather than loans from the central bank. -VE for sentiment
UN was 75 yrs old Monday; virtual meeting saw President Xi call for mutual respect and cooperation between nations.
DOW -1.84%, NDX -0.13%, S&P -1.16%, Russel 2K -3.35% Opened lower with the Dow -160pts at the start but sold down over 900pts in the morning before trading sideways and then seeing a recovery of some of the losses in the afternoon. S&P fell early and then traded sideways. NDX opened lower but worked its way back to flat. Markets saw bargain hunting in the last hour. Concerns that Judge Ginsburg replacement will cause more dissent between the parties as Trump rushes to appoint a replacement which will further delay the next stimulus package -VE for the recovery and especially retail. Plus concerns that US firms will be subject to China’s ‘unreliable entity list’ although those that are closely intertwined are into the Chinese economy and have significant work forces are, I think less likely to be impacted and those that sell into China are at risk; hence Apples strength. General rotation into stocks with less exposure to China. Concerns about rising covid cases in the UK hurt re-opening names.
Facebook -1.7%, Amazon +0.2%, Apple +3%, Netflix +3.7%, Alphabet -1.4% and Microsoft +1.1%.
Nvidia +2.7%, AMD +4%, Micron -3.1% and Skyworks -1.3%.
Re-opening stocks Boeing -2.9%, Caterpillar -4.6%, Simon Property -7.1%, Gap -2.3%, United Airlines -8.6%, Carnival -6.7%
Lock down names +VE Campbell Soup +1.3%, General Mills +1% and JM Smucker +0.4%
JPM -3.1% on handling of illicit funds; Citi -2%, GS -0.4%, BoA -2.9%.
Nikola, -19% (was -30% at one stage) after the company said founder Trevor Milton is voluntarily stepping down as executive chairman and board member after the fraud allegations. GM -4.8% recently took a stake in the company
Chicago Fed National Activity Index Aug +0.79 vs 2.54 Jul revised (F/cast was +1.8)
USD was stronger vs Yen & flat vs Euro. Bitcoin -3.9% @ 10,495.54, VIX +7.6% @ 27.78, US T10 0.669%
OIL Brent -4.6%, WTI -4.38%; rising covid cases and potential return of Libyan production prompting demand concerns
Gold -2.1%, Silver -8.3%, Copper +0.2% on stronger USD but the metals turned +VE in after hours trading
AHEAD Existing Home Sales, Richmond Fed Manufacturing Index, Fed Chair Powell & Treasury Sec Mnuchin Testimony, API Crude Oil Stock Change. Nike Q1 earnings due.
DAX -4.37%, CAC -3.74%, FTSE -3.38% Markets open lower and trended lower through the day with a small uptick at the end to close just off the day lows. Banks weak over allegations that HSBC -5.3% Standard Chartered -5.8%, Deutsche Bank -8.8% and JP Morgan had all handled illicit funds.
Rising new covid cases in UK and France also a concern, with the UK considering more lockdowns. Banks and Travel stocks lead the markets lower; with Europe’s travel & leisure sector tumbled 5.2% and the banking sector -5.7%
United Internet -23.6% after lowering its outlook, Network International -10.8% extending its recent slide.
Rolls-Royce -11% after announcing plans to raise £2.5 billion ($3.24 billion) to strengthen its finances.
Airbus -6.6% is aiming to put the world's first hydrogen-powered commercial plane into service by 2035, the European aircraft maker's boss said in remarks published Monday.
British Airways parent IAG 12.7% to lead a broad decline for the travel sector amid rising coronavirus cases.
HelloFresh +6% on speculation of more lockdown measures in Europe.
Rightmove and Homebuilders Persimmon and Barratt Developments fell sharply on second lockdown worries along with Restaurant Group and pub groups JD Wetherspoon and Marston’s lower. Discount retailer B&M and supermarkets Tesco and WM Morrison +VE as investors rotate into defensive stocks ahead of a possible shutdown.
Iliad -3% after a €3.5bn bid for Polish mobile operator Play Communications +37%
GERMANY Bundesbank Monthly Report
EUROZONE Consumer Confidence (Flash)
GERMANY No data due
FRANCE No data due
UK No data due
JAPAN Market Closed Autumnal Equinox Day reopens Wednesday
No data due
New covid cases 312 on Monday.
Press reports People flocked to domestic tourist spots on Monday, the third day of the Silver Week holidays which end Tuesday. Slight +VE Retail names
Defense Ministry will seek another record budget of over 5.4 trillion yen for fiscal 2021, government sources said Monday, as Prime Minister Yoshihide Suga vowed to continue with his predecessor's policy of bolstering Japan's capabilities in new domains.
General Atlantic LLC and Japan's SoftBank Group Corp are leading a 580 million reais ($107.25 million) funding round in Brazilian facial biometrics and digital admission company Acesso Digital, it said in a statement on Monday.
Fujifilm Holdings Corp said Monday it has completed delayed clinical tests of Avigan, a potential treatment for COVID-19, paving the way for the application of sales and production of the antivirus drug. +VE
Railways, airlines and other transportation companies are bolstering their cargo sectors to address a plunge in the number of people traveling for pleasure, business and other reasons due to to the novel coronavirus pandemic.
A majority of Japanese people appear willing to work beyond their retirement age due largely to financial concerns, with a recent survey showing 64% of respondents wanting to do so. In an online survey conducted in August by Nippon Life Insurance Co covering 7,543 policyholders, 38.7% said they want to keep working in their current jobs after retirement and 25.3% said they would prefer different jobs.
SOUTH KOREA Expect markets to open lower, Kospi dropped below 2,400 yesterday on light volumes. Expect further downside initially but watch for bargain hunting in tech names.
PPI Aug -0.5% YoY vs -0.8% Jul (F/cast was -0.7%)
PPI Aug +0.5% MoM vs +0.2% Jul (F/cast was +0.3%)
Schools in the South Korean capital Seoul and nearby areas resumed in-person classes for the first time in almost a month on Monday after daily coronavirus cases dropped to the lowest levels since mid-August. +VE for sentiment
BUT A Seoul woman in her 20s tested positive for the novel coronavirus for a second time in April after she was declared recovered approximately a week earlier, Korean health authorities said Monday.
Kia Motors Corp. said Monday it will resume operations at one of two domestic plants that were suspended after some of its workers were infected with the coronavirus.
Hyundai Motor Co. and its labor union agreed Monday to freeze wages for the first time in 11 years as the carmaker struggles to ride out the impact of the coronavirus pandemic. +VE
South Korea's healthcare and cosmetics exports +42% Aug YoY; led by shipments of COVID-19-related medical devices, industry data showed Monday.
Doosan Group said Monday the firm sold its iconic building Doosan Tower to real estate investment company Mastern Investment Management for 800 billion won ($689 million). Doosan said the sale is aimed at improving the group’s financial structure.
LS Cable & System said Monday it has started mass-producing aluminum wires for electric vehicles. The cable provider expanded its investment in aluminum wires as it believes that aluminum will become a key material for vehicles amid growing competition in EV industries. +VE
Hanwha Solutions -7.4% Monday, while its preferred stocks -10%; as it indirectly controls a minority stake in Nikola.
TAIWAN Expect market to open lower as tension with China rises. But good export data should see some support to the Tech sector limiting the downside.
Data due after market Unemployment Rate (F/cast is unchanged at 3.9%)
After market Monday Export Orders Aug +13.6% YoY vs +12.4% Jul (F/cast was +7%)
Thanks to continued strong demand for information and communications technology (ICT) and electronic products, the Ministry of Economic Affairs said yesterday.
Orders for ICT products -8.3% MoM, but +26.4% YoY to US$13.23 billion, the highest August level on record. Mechanical equipment orders were US$1.74 billion, -2.4% MoM but +7% YoY. Chemical products continued to be weak. Concerns expressed that the strong NT$ will hurt SME’s.
Taiwan said on Monday its armed forces have the right to self-defence and counter attack amid “harassment and threats”. As China's Foreign Ministry spokesman Wang Wenbin said “Taiwan is an inseparable part of Chinese territory,” told reporters in Beijing. “The so-called mid-line of the Strait does not exist.”
Fitch Ratings last week affirmed its “AA-” credit rating for Taiwan, as the nation maintains sound external finances, economic growth, a competitive business environment and high governance standards.
Cathay Financial Holding yesterday lowered its forecast for the nation’s GDP growth for a second time this year to 1.7%, from the 1.8% it predicted in June, due to weaker-than-expected economic performance in the first half of the year.
Egis Technology yesterday said that it has filed a patent infringement lawsuit with Beijing’s Intellectual Property Court against Chinese rival Goodix Technology in a renewed legal battle.
CHINA Expect market to open lower with concerns about growing tensions with US, India and Taiwan. Also overhanging the market rising international covid cases which could impact Exporters.
No data due
China voiced unswerving opposition against and strong condemnation of American officials' frequenting Taiwan, said Chinese Foreign Ministry spokesman Wang Wenbin at a regular press conference. Beijing must take proper countermeasures, including the US moves aiming at individuals, Wang added.
A New York City police officer who also serves as a U.S. Army reservist has been charged with acting as an illegal agent of the government of China, federal prosecutors said on Monday. Angwang, a naturalized U.S. citizen who was born in China, has acted as an agent of that country’s government since at least 2014. -VE for sentiment
Trump says Oracle’s TikTok deal is off if ByteDance keeps control -VE for other E commerce platforms as it appears to conflict with his earlier statements.
Coronavirus: second wave over winter ‘inevitable’ in China, SCMP reports infectious disease expert saying. The Shanghai specialist points to situation in Europe, saying a vaccine suitable for widespread use will be the only way to contain the pandemic but he thinks that could be at least a year away. His remarks come as southwestern Yunnan province goes into ‘wartime mode’ to tackle an outbreak of cases -VE
FT reports China pork reserves run low after swine flu hits supply and sends prices soaring. Which could put pressure on Beijing to resume imports from Germany having suspended them in what was seen to be a political move. Obvious implications for inflation. +VE for Pork Suppliers
China yesterday announced plans for three new pilot free trade zones - in the capital of Beijing, the southern province of Hunan, and the eastern province of Anhui, the seventh batch since 2013. An existing FTZ in the wealthy eastern province of Zhejiang will also be expanded, said the notice from China's State Council. Slight +VE
China will lose access to a strategic space tracking station in Western Australia when its contract expires, the facility’s owners said, a decision that cuts into Beijing’s expanding space exploration and navigational capabilities in the Pacific region.
JD Digits unveiled the official strategic cooperation with the Digital Currency Research Institute of the People's Bank of China, according to Chinese media. Both sides will facilitate the R&D of basic mobile technology platforms and blockchain technology platforms based on DCEP (Digital Currency Electronic Payment) projects
Spot USD/CNY closed at 6.7733, down 145 bps. Monday @ 16:45, USD/CNY fell 55 bps in the night session. USD/CNH stood at 6.7750, up 41 bps. While the USD Index held steady during Asian session, RMB appreciation may be hampered by news uncertainties in absence of new countermeasures from both the US and China, Reuters cited traders. Nevertheless, the market remained sanguine about RMB, which may in turn tweak the exchange rate in short term.
HONG KONG ADR’s -94pts to open at 23,856; expect early margin call selling to add to the downside but having closed -505pts on Monday the further downside should be limited. May see weakness in the shoe makers ahead of Nike earnings due tonight in the US.
Data due Current Account
After market Monday Inflation Aug -0.4% YoY vs -2.3% Jul (F/cast was +0.4%)
IPO HUAZHU-S (01179.HK), debut, opened at $303 in gray market, up 2% against the listing price $297, and last stood at $301.2, up 1.4% against the listing price, on volume of 27,000 shares, PhillipMart data showed. Huazhu (HTHT.US) closed up 0.4% last Friday at US$42.02 in the U.S..
Techtronics (669 HK) A long time favourite of mine as readers will know. Traded below $100 Monday expect more downward pressure today slowly accumulate. I still think the outlook is +VE.
SHORT SALES Monday 20% vs 16.8% Friday
Top Shorts Ping an (2318) 54%, CCB (939) 40%, BoC HK(2388) 39%, Hang Seng Bank (11) 36%, ICBC (1398) 33%, China Res Land (1109) 30%, Petrochina (857) 28%, BABA-SW (9988) 27%, Shenzhou (2313) 27%, Tencent (700) 24%
HSBC was -5.3% in London and -5.5% in US trading and ADR closed -1.2%; stock is at a 25 year low. It could still see further downside.
CHINA TELECOM (00728.HK) announced August, mobile subscribers grew 1.62 million MoM to 348 million, slower than a 2.6-million addition last month. 5G subscribers increased by 7.87 million MoM to 57.14 million in August, slower than a 11.43-million growth last month.
CHINA UNICOM (00762.HK) announced that in August, the number of mobile billing subscribers declined by 886,000 monthly to 309 million, worse than the July's growth of 26,000 users. The number of 4G subscribers increased by 1.581 million monthly in August, slower than the 1.659-million addition last month.
CHINA GAS HOLD (00384.HK) announced it and CHINA MOBILE (00941.HK) entered into a strategic cooperation framework agreement, pursuant to which both parties agreed to jointly develop the ‘‘smart kitchen’’ and actively carry out digital economic cooperation on the basis of opening both parties’ business channels, with 5G effectively enabling the integration of key livelihood sectors, the gas industry and the communication business. Under the agreement, the Company and China Mobile agreed to cooperate in multiple main areas, including basic communication business cooperation.
Levo Chan Weng Lin, the chief executive of junket operator Tak Chun, will become Macau Legend Development's (1680) biggest shareholder after buying a 20.6% stake of HK$1.34 billion from David Chow Kam-fai, co-chairman and executive director of Macau Legend Development, and Sheldon Trainor-DeGirolamo. The husband of Taiwan actress Ady Ann Yi-xuan, Chan agreed to buy more than 1.28 billion shares at a 9.4% premium. Ina Chan Un-chan, the third wife of Stanley Ho, owns a 16.33 stake in Macau Legend. +VE
The Hong Kong Monetary Authority announced the tender results of RMB Sovereign Bonds. The application amount for 2-year RMB bonds was RMB13.273 billion, oversubscribed by 2.79 times than the issue amount of RMB3.5 billion. The application amount for 5-year RMB bonds was RMB7.542 billion, oversubscribed by 4.03 times than the issue amount of RMB1.5 billion.
YUM CHINA-S (09987.HK) Bullish on the Chinese catering market in a long run is capable of stretching its presence to 20,000 restaurants across the country, said CFO Andy Yeung. In the first half of 2020, the group has opened 350 restaurants. The current cash flow, together with investment and Hong Kong listing proceeds, approximates US$4.0 billion in total, CEO Joey Wat disclosed. The caterer group will carefully identify acquisition opportunities on market while attaching great importance to rate of return.
HKMA announced that it had undertaken a US$1.9 billion selling order during Hong Kong trading hours to inject HK$14.725 billion into the market. The balance of the banking system of Hong Kong will increase to HK$239.379 billion on Wednesday (23 September).