Sept 28 ASIAN MACRO INTIAL THOUGHTS ASAIN futures mixed, US futures higher
Covid-19 Globally over 33m cases, 996k deaths. WHO warns 2m deaths possible
UK sees protests at the latest tightening of social distancing rules
Australia’ Scott Morrison told the UN that the world needs to know origins of COVID-19; likely to anger China.
G7 finance ministers on Friday backed an extension of a G20 temporary freeze in debt payments and recognized the need for broad debt relief in the future, while taking aim at G20 member China over a lack of transparency in its lending.
Western powers at the UN Human Rights Council called on China on Friday to restore basic legal rights in Hong Kong and open up to scrutiny its remote Xinjiang region where more than one million ethnic Uighurs are held.
Trump nominates Any Coney Barret to Supreme Court
US Futures Opened +100pts S&P and NDX higher too
ASIAN Futures mixed
Short trading week ahead in Asia as we come to month and quarter end.
S Korea closed from Wednesday, China Closed from Thursday for Golden Week, Hong Kong closed Thursday and Friday. Taiwan closed Thursday.
US & European closing data at bottom of the page.
JAPAN Expect Nikkei to open flat following the US. Nikkei futures in Chicago at 23,290 and Osaka 23,180 vs the Nikkei 225′s last close at 23,204.62.Yen closed Friday @ 105.6 slightly weaker.
Data due at lunchtime Final Coincident Index and Leading Economic Index
Prime Minister Yoshihide Suga held his first telephone talk with Chinese President Xi Jinping Friday evening. After the conversation, Suga told reporters they agreed to continue to cooperate closely on bilateral, regional and international issues at a high level, including between the leaders.China’s Foreign Minister Wang Yi may visit Japan as early as October for talks with his Japanese counterpart Toshimitsu Motegi and Prime Minister Yoshihide Suga. Whilst PM Suga is not know for International diplomacy his skills at ‘backroom deal’ may give him a new angle.
ANA Holdings is considering issuing 200 billion yen ($1.9 billion) in shares to bolster its finances as the downturn in air travel drags on, the Nikkei newspaper reported. Slight -VE
Nissan Motor Co. expects to return to profitability in 2021 if the current momentum continues, with demand in China already bouncing back from the coronavirus pandemic, Chief Executive Officer Makoto Uchida said at the Beijing Auto Show.
The central government plans to begin offering grants to municipalities that promote teleworking as a regional revitalization measure from fiscal 2021. The Cabinet Office and the Cabinet Secretariat are expected to earmark ¥15 billion for the subsidy in their budget requests for the fiscal year from April, informed sources said Friday.
Mitsubishi Motors Corp 7211.T will seek voluntary retirement from 500 to 600 employees, mostly in management, in Japan from mid-November to cut costs, two sources familiar with the matter told Reuters on Saturday.
French carmaker PSA has offered to increase the production capacity for Japanese rival Toyota in their joint venture in a bid to win EU antitrust okay for its Fiatdeal, people familiar with the matter said on Friday.
SBI Holdings Inc has ambitions to revive struggling regional banks by taking stakes and pushing them into higher-margin businesses - a strategy that may get a boost from the country's new prime minister. Although regional lenders are dominant outside of Tokyo and other big cities, many are tied to areas where the population is aging rapidly, and business has been hollowed out. The pandemic has deepened the pain after years of low-margin lending. Yoshihide Suga has pledged to strengthen local economies and encourage regional banks to consolidate, a shakeup that many say is long overdue. It will be interesting to see if the Govt alters the Post Office mandate to allow it to be more competitive in terms of regional banking.
SOUTH KOREA Expect markets to open higher but trading to be cautious as we approach month and quarter end with markets to be closed from Wednesday for Chuseok Holiday and not re-opening until Monday Oct 5. Falling new covid cases +VE for sentiment.
No data due
Govt on Saturday reported 49 new domestic coronavirus cases, the smallest number of locally transmitted cases in 44 days in a sign that tighter social distancing rules are paying off.But he Govt said it would impose tighter restrictions during the Chuseok autumn holiday weeks when people traditionally reunite with families, flagging the risks of new clusters of coronavirus infections. The new measures will be in place from Sept 28 to Oct 11 +VE
The presidential office said on Saturday it will ask North Korea to further investigate the fatal shooting of a South Korean fisheries official and may seek a joint investigation. Comes as public and political outrage over the killing grew. Comes as North Korean leader Kim Jong Un apologised on Friday for the shooting death of a South Korean man which he said was to prevent the spread of the novel coronavirus.
KB Financial Group said Sunday it has decided to halt financing construction of coal-fired power plants and to expand investment in infrastructure projects aimed at improving and conserving environment. +VE
The US International Trade Commission (ITC) has voiced support for LG Chem Ltd.'s call for sanctions on its rival SK Innovation Co. in connection with a legal dispute over battery patents, LG Chem said Sunday.
Hyundai Motor, said Sunday that it had unveiled new cars and technologies targeting China at the 16th Beijing International Automotive Exhibition. The automaker said it showcased a technology brand, called “H Smart+,” exclusively for China. The space consists of three areas: a clean field that focuses on electric cars and hydrogen cars, a connected field showing connectivity technology such as Baidu 3.0 and BlueLink, and a freedom field that covers self-driving technologies, future city mobility and robotics.
Investors will be watching the the Big Hit Entertainment IPO which has attracted a lot of retail interest with many of the fans of BTS bidding for shares. Press reports that there is potential for a massive over subscription that could impact short term money markets.
Unionized workers at Hyundai Motor Co. voted to accept a wage freeze for the first time in 11 years as the nation's largest carmaker struggles to cope with the impact of the coronavirus pandemic, the company said Saturday. +VE
Celltrion Group announced Friday it has established Celltrion Healthcare Holdings as a first step of its plan to merge three affiliates by the end of 2021. +VE
India is unlikely to revoke a ban on PlayerUnknown's Battlegrounds (PUBG) following PUBG Corp's decision to withdraw the mobile game's publishing rights in the country from China's Tencent a senior government official said on Friday.
TAIWAN Expect market to open higher with buying in TSMC and UMC on news that the US is to impose sanctions on SMIC in China. Watch for month and quarter end rotation and remember market will be closed on Thursday. Government Funds said to have been actively supporting the Financial sector on Friday; so may see some unwinding if broader market strong
No data due
Taiwan’s diplomatic allies on Friday continued to urge member nations participating in this year’s UN General Assembly to grant Taiwan fuller participation in international organizations, citing the humanitarian assistance it has given countries during the COVID-19 pandemic. Tuvaluan Prime Minister Kausea Natano and Eswatini Prime Minister Ambrose Dlamini spoke on Taiwan’s behalf. Others were Palau, Paraguay, the Marshall Islands, Haiti and Nauru. It is a shame that more countries that rely on Taiwan for Tech are not prepared to make as clear a stand.
Business sentiment among local manufacturers improved last month as the electronics sector continued to see solid global demand for components used in emerging technologies, the Taiwan Institute of Economic Research said Friday. Its the fourth consecutive month of improvement +VE
Gudeng Precision Industrial the sole supplier of extreme ultraviolet light (EUV) pods to TSMC, Friday said that a rebound in demand from its major client would support sequential growth in revenue next quarter. It also expects next year to be “strong” in terms of revenue, as major customers continue to significantly increase production of 5-nanometer and enhanced 7-nanometer technologies, chairman Bill Chiu told reporters +VE.
Formosa Plastics Group Friday announced that it is to form a joint venture in Taiwan with Japanese chemicals company Tokuyama Corp to manufacture and sell high-purity isopropyl alcohol (IPA) to the electronics industry.
CHINA Market open lower on news that SMIC is to be sanctioned -VE for US/China relations and China’s tech industries. Sunday’s Industrial Profits showed a continued improvement but a slightly slowing MoM. I expect investors to de risk ahead of the Golden Week Holiday which starts on Thursday.
Sunday Data Industrial Profits (YTD) Aug -4.4% vs Jul -8.1% (F/cast was -4.7%). Signs of continuing recovery although they slowed slightly. Profits at state-owned industrial firms -17% and those at private-sector -3.3%. Among the 41 industries surveyed, 24 saw profit falls. In August alone, industrial profits +19.1% YoY to CNY 612.8 billion (vs +19.6% YoY in July), the fourth straight month of gains. But it appears that the early, easy gains have been made and future gains will be harder to achieve without significant government stimulus.
US Sanctions SMIC on the basis of risk its products are diverted for use by the PLA. Very -VE although it had warned of the danger in its prospectus this may trigger a big retail sell off especially coming just ahead of markets being closed for Golden Week. Top competitors for SMIC are: GlobalFoundries, United Microelectronics, TSMC, Semi, TowerJazz, LFoundry, Winbond Electronics, XFAB.
Chinese Ministry of Science and Technology announced that 11 novel coronavirus vaccines have commenced clinical trials, among which four are now at the third phase.
China says WHO gave blessing for coronavirus vaccine emergency use programme; which vaccinate certain people against coronavirus in July while clinical trials were still under way. Hundreds of thousands essential workers and other limited groups of people considered at high risk of infection have been given the vaccine, even though its efficacy and safety had not been fully established as Phase 3 clinical trials were incomplete, raising concerns among experts.
Beijing Autoshow: started on Saturday Demand rebounded in recent months; especially for high end cars, EV boom but the sustainability of the rebound reminds in question.
TikTok is trying hard to prove its data security to Australian government, and convincing the latter the connection between ByteDance and Chinese Communist Party should not be a concern, Bloomberg reported. Lee Hunter, general manager of TikTok Australia and New Zealand, stated at the Australian parliamentary hearing that there are 130 CCP members among the senior executives of ByteDance, yet political factor should not affect user data security of Australia. Hunter also wrote in the letter that Australian user data is saved in servers located in the U.S. and Singapore, stressing the company has very stringent scrutiny over cyber security and data usage. Besides, the company has never shared Australian user data with the CCP government, and not been asked by the latter to screen Australian user contents. Worth remembering though that under China’s national security law companies are not allowed to say whether they have shared data with the government.
China’s foreign ministry denied claims from an Australian think-tank that it had destroyed thousands of mosques in its western Xinjiang region, and said there are over 24,000 mosques there, “more mosques per capita than many Muslim countries.” The Australian Strategic Policy Institute (ASPI) had released a report on Thursday which estimated that about 16,000 mosques in Xinjiang have been destroyed or damaged as a result of government policies, mostly since 2017. The estimates were made using satellite imagery and based on a sample of 900 religious sites prior to 2017, including mosques, shrines and sacred sites. -VE for China Australian relations although unlikely to hurt the resource plays because China needs them
HONG KONG ADR’s -2pts to open at 23,233. BUT with sanctions against SMIC expect a weaker opening and for E-commerce names to also be under pressure as US/China relations deteriorate further. China Industrial Profits out Sunday were better than F/cast but the rate of recovery is slowing. It's a short trading week with HK and China closed Thursday and Friday plus month and quarter end so expect de risking and lighter volumes as the week progresses. Chinese Property and Financials weak as concerns over Evergrande continue despite the company’s denial of problems.
No data due
IPO ZAI LAB-SB (09688.HK), debut on Monday. On Friday it opened at $562 in gray market, flattish with the listing price, and last stood at $585, up 4.1% against the listing price, on volume of 15,800 shares, PhillipMart data showed.
SHORT SALES Friday 20.9% vs 20.9% Thursday
Top Shorts MTRC (66) 55%, Country Garden (2007) 47%, Bank of China (3988) 47%, Hang Seng Bank (11) 40%, Ping An (2318) 37%, Henderson Land (12) 33%, Sinopec (386) 32%, BoC HK(2388) 32%, CCB (939) 31%, New World Dev (17) 31%, Swire Pac A (19) 30%, Hang Lung PPT (101) 29%, HK EX (388) 29%, CKH (1) 29%, SHKP (16) 28%, CITIC (267) 27%, AIA (1299) 27%, HK & China Gas (3) 26%, China Res Land (1109) 25%,
Government to report 2 new covid cases on Saturday.
SMIC (981 HK) US has sanctioned on the risk that its tech is diverted to military use. Very -VE but not totally unexpected the share sold down at the beginning of September. Key is how it is implemented.
EVERGRANDE (03333.HK) announced that at present, the Company’s operations remain stable and healthy while financial conditions remain sound.
As of 24 September 2020, aggregated contracted sales amounted to RMB504.9 billion, +11.4% YoY, and the aggregated cash collection RMB452.1 billion, +51.3% YoY As of 30 June 2020, the Company’s cash balance on hand was RMB204.6 billion.FT Lex is negative on the company pointing out that it needs to repay Rmb130bn in January and that even if it sold all its commercial properties it would only cover half the amount. Spinning off its Property Management Arm would not raise enough to make much difference either. The size of the company and the potential impact to the Chinese Banking and Property markets mean that some Govt action may be forthcoming but that could have negative implications to other Chinese Property companies too.
Centaline Property Agency recorded 16 secondary transactions in 10 blue-chip housing estates over the past weekend, unchanged from last week. Developers managed to sell around 300 flats in the primary market "in one day.”Henderson Land Development (0012) released 28 homes in the fourth price list of Two.Artlane in Sai Ying Pun and will offer 18 units for sale this Thursday. The cheapest flat in the price list, measured 196 sq ft, is offered at HK$5.52 million, or HK$28,183 per sq ft. after discounts. The developer sold about 51 out of 72 units on offer at the project on Saturday.
Sun Hung Kai Properties (0016) sold about 84 percent of the units at Wetland Seasons Park Phase 3 Tin Shui Wai.EVERG VEHICLE (00708.HK) announced a proposed initial public offering of RMB Shares and listing on the Sci-Tech Board of the Shanghai Stock Exchange for the issuance of no more than 1.556 billion RMB Shares, priced below $25 each.
PING AN (02318.HK) On Sept 23 acquired 10.80 million shares of HSBC HOLDINGS (00005.HK) on market, involving $305 million, according the shareholding disclosures.
Upon completion, the Chinese insurer's shareholding increased from 7.95% to 8%, making it the largest shareholder in the London-based lender.
Govt reported HK Jun Avg Wage Rate +1.3% YoY in nominal terms; Increment Thinnest in Over Decade. About 51% of the companies reported increase in average wage rates in June 2020 YoY. 47% of the companies recorded decrease in average wage rates over the same period. The remaining 2% reported virtually no change in average wage rates.
Centa-City Leading Index (CCL) last posted at 176.59, -0.10% weekly.
CCL (small-and-medium units) last reported at 177.31, down 0.01% weekly.
CCL Mass last stood at 179.81, up 0.03% weekly.
CCL (large units) last tracked at 172.85, down 0.56% weekly.
Centaline Property, observed the narrower slide in CCL and CCL (small-and-medium units) and expected a successful trough-seeking for home prices soon
DOW +1.34%, NDX +2.26%, S&P +1.6%, Russel 2K +1.6% markets opened lower as futures retreated but stocks then worked higher through the day.
Talk of rotation out of tech and into cyclicals with only 3 more trading days to the end of the quarter expect more rotation ahead. Investors still watching for a stimulus bill to be agreed but the parties seem to still be far apart.
Facebook +2.1%, Amazon +2.5%, Netflix +2.1%, Alphabet +1.1% and Microsoft +2.3%.
Apple +3.8% to temporality cut fees (until year end) for businesses that have been forced by the pandemic to pivot to online-only events. An interesting move as it faces pressure from App designers.
Nvidia +4.3%, AMD +3%, Micron -0.7% and Skyworks +2.1%.
Re-opening stocks Boeing +6.8%, Caterpillar +0.5%, Simon Property +1.2%, Gap -0.2%, United Airlines +4.4%.
Carnival +9.7%, Norwegian Cruise Line+13.7% and Royal Caribbean +7.7% on broker upgrade
Lock down names Campbell Soup +1.6%, General Mills +1.7% and JM Smucker +1.2%
The US Department of Justice Friday asked a federal judge in San Francisco to allow the government to bar Apple Inc and Alphabet Inc’s Google from offering WeChat for download in US app stores pending an appeal.
Durable Goods Orders Aug +0.4% MoM vs +11.7% Jul revised (F/cast was +1.2%)
Durable Goods Orders Ex Transp Aug +0.4% MoM vs +3.2% Jul revised (F/cast was +1.2%)
Durable Goods Orders Ex Defence Aug +0.7% MoM vs +10.4 Jul revised (F/cast was +2.4%)
Baker Hughes Total Rig Count 261 vs 255 prior
USD was stronger vs Yen & Euro. Bitcoin +0.6% @ 10,738.25, VIX -7.5% @ 26.38,
US T10 0.656% falling after weaker than expected Durable Goods orders
OIL Brent -0.7%, WTI -0.2% as demand concerns continue to overhang the sector.
Gold -0.67%, Silver -0.9%, Copper +0.3%
AHEAD Dallas Fed Manufacturing Index
DAX -1.1%, CAC -0.7%, FTSE +0.3% markets opened around flat FTSE slightly higher and traded sideways initially after a better Consumer Confidence number and Public Sector Net Borrowing in line but dipped in the afternoon on the poor car production number before bouncing back to flat. DAX and CAC opened slightly lower and trended lower but then rebounded
Auto, Tech and Travel/Leisure led the declines.
BMW and two of its U.S. subsidiaries have agreed to pay a fine of $18 million over allegations of inflating sales volumes to attract corporate bond investment.
BNP as French prosecutors have opened an investigation into its role in crimes against humanity in Sudan.
Suez +4% after rival Veolia’s CEO announced plans to raise its bid for a stake in the company. Sartorius Stedim Biotech 3.5% after Berenberg initiated the stock at a “buy” rating.
IAG -5.4% and Germany’s Lufthansa -4.8% as covid threat rises.
Loans to households Aug +3% YoY vs 3% Jul (F/cast +2.8%)
Loans to Companies Aug +7.1% YoY vs 7.1% Jul revised (F/cast +7.4%)
M3 Money Supply Aug +9.5% vs +10.2% Jul (F/cast was +10.4%)
European Council Special Meeting
Unemployment Benefit Claims Aug -171k vs -172.2k Jul (F/cast was -36k)
Jobseekers Total Aug 3.6215m vs 3.7925m Jul (F/cast was 3.7565m)
Consumer Confidence Sept -25 vs -27 Aug (F/cast was -27)
Public Sector Net Borrowing Aug GBP -35.9b vs -15.4b revised (F/cast was -34.4b)
Car Production Aug -44.6% vs -20.8% Jul (F/cast was -10%)
EUROZONE No data due
GERMANY No data due
FRANCE No data due
UK No data due