Oct 13 ASIAN Macro Initial Thoughts US Futures flat, Asian higher ahead of China Data; HK T8
Covid-19 Globally over 37.7m cases, 1.8m deaths
US Futures open flat ahead of US earnings and Apple event. Last quarter analysts had lowered their forecasts due to covid; the bar was very low. This quarter some companies have not guided and analysts have raised forecasts as the recovery took place; so the bar is higher and the indexes are trading at highs so the scope for disappointment is larger.
US says 'Quad' nations ready to work with others for free, open Indo-Pacific
Organization for Economic Cooperation and Development on Monday proposed an overhaul of international tax rules to make sure big tech companies pay their dues, and warned that failure to adopt it would make the economic recovery from coronavirus harder. The framework will be presented to Group of 20 finance ministers meeting this week and could be implemented by mid-2021 if an agreement is reached. The group estimated the measures could raise an extra $100 billion in corporate tax revenues annually.
HK Obervatory raised the T8 Which means HK market could see a delayed open or be closed all day. Click the link for details or see earlier email for details
DOW +0.88%, NDX +2.56%, S&P +1.64%, Russel 2K +0.7% Markets opened higher and trended higher through the morning. NDX and S&P saw a slight sell off from the highs into the close. The trend was rotation out of cyclicals and back into Tech as there has been no progress on a stimulus package. Biden’s lead in the polls continues to grow and the markets seen to accept that.
Broker upgrades pushed Twitter +5.1%, Twilio +7.7%, PepsiCo +2.7%, Levi Strauss +3.9%, Ford +5.8% and Alphabet +3.6% higher
Dillard +27% (off highs) on news one of Warren Buffett’s top lieutenants revealed a stake in the company. Ted Weschler’s stake is over 1 million shares, or about 5.89% of the outstanding stock, according to a securities filing.
Apple +6.4% ahead of its iPhone launch event today.
Facebook +4.3%, Amazon +4.8% (Prime Day starts Tuesday) and Microsoft +2.6%.
Netflix +0.1% sold down heavily into the close from US$552 to 540 probably linked to the Disney news.
Nvidia +3.4%, Micron +1.6% and Skyworks +1.8%.
AMD +1.4% as Xilinx takeover talks continue
Re-opening stocks Boeing unch after choppy trading. Caterpillar +2.3%, Simon Property +0.4%, Gap -2.7%, United -2%, Carnival -3.1%
Lock down names Campbell Soup +1.3%, General Mills +0.8% and JM Smucker +1%
Disney +5.3% (had been flat) announced reorganisation and focus on streaming. Centralising its media businesses into a single organisation that will be responsible for content distribution, ad sales and Disney+.
USD was flat, trading around 3 week lows vs Yen & Euro. Bitcoin +2.7% @ 11,680:46, VIX +0.3% @ 25.07, US T10 @ 0.779% flat as traders cannot work out size and timing of a new stimulus packages.
OIL Brent -2.8%, WTI -2.9% as more production comes back on line after Hurricane Delta, Libya’s force majeure was lifted and Norwegian production came back on line.
Gold -0.03%, Silver -0.1%, Copper unch
AHEAD NFIB Business Optimism, Core Inflation Rate, Inflation Rate, IBD/TIPP Economic Optimism, Consumer Inflation Expectations
DAX +0.67%, CAC +0.66%, FTSE -0.25% Markets opened mixed Asian DAX and CAC slightly higher, FTSE slightly lower; German Wholesale Prices improved slightly. Markets trended slightly higher on Chinese optimism but cautious ahead of Chinese Trade data tomorrow and US earnings getting underway Plus the fact that there is still no US stimulus plan; so it ended up FTSE just trading sideways around flat as covid cases rise and the DX and CAC working slight higher.
European Stoxx 600 closed provisionally 0.8% higher, with sectors including Autos, Household goods, Tech and Utilities all adding more than 1%. BUT Travel & Leisure, Retail, Banks and Petrochems ended in the red.
KPN +6.7% as Bloomberg reported Friday that Swedish private equity firm EQT was exploring an $11 billion takeover bid for the Dutch telecoms company.
Virgin Money UK +5.5%.
Rolls-Royce -12% after a volatile few weeks of trading.
IAG -1.7% as British Airways (BA), which is slashing thousands of jobs; said yesterday said that chief executive officer Alex Cruz is stepping down “with immediate effect,” but gave no reason.
GERMANY Wholesale Prices Sept -1.8% YoY vs -2.2% Aug (Sept 0% MoM vs -0.4% Aug)
EUROZONE ZEW Economic Sentiment Index
GERMANY Inflation Rate, ZEW Economic Sentiment & Current Conditions
FRANCE No data due
UK Claimant Count Change, Employment Change, Average Earnings, Unemployment Rate, Labour Productivity
JAPAN Expect Nikkei to open flat with the Tankan index weaker than forecast. Yen 105.33 Traders likely to be cautious as US earnings start and ahead of the Chinese Trade data due this morning. Nikkei futures in Chicago 23,660 (Osaka 23,620) vs 23,558.69 Nikkei’s last close
Data out Tankan Index Oct -26 vs -29 Sept (F/cast was -24). The recovery trend continues but the pace slowed.
PM Suga approval rating fell seven points to 55% in a poll by public broadcaster NHK released on Monday, the second survey since he took office last month. Likely linked to his rejection of 6 scholars to the science advisory body.
Japan vowed Monday to bolster its missile deterrence capability to respond to threats by North Korean weapons that are becoming "more diverse and complex," as displayed during a military parade held by the North over the weekend.
Mitsui & Co Ltd 8031.T plans to sell its remaining stakes in coal-fired power stations by the end of the decade as it shifts to gas from coal to help achieve its 2050 net zero emission target, its chief executive told Reuters. +VE
Takeda Pharmaceutical Co-led group that is developing a blood plasma treatment for COVID-19 has started manufacturing while the late-stage trial to determine whether it works is ongoing, Takeda Chief Executive Christophe Weber said on Monday. +VE
SOUTH KOREA Expect markets to open higher but cautious trading ahead of Chinese Trade data and US earnings. Markets have traded higher fo. The past 8 days; so potential for consolidation.
No data due.
South Korea's finance minister said Monday the government will spare no efforts to maintain momentum of recovery in exports in the fourth quarter of this year. +VE
LG Chem on Monday announced an earnings surprise for Q3; posting the greatest quarterly revenue and operating profit in its history, as it prepares to break off its globally-leading battery unit later in the year. Preliminary earnings report shows it would register 7.5 trillion won ($6.5 billion) in revenue and 902.1 billion won in operating profit in the July-September period. +VE
Hanssem Co. on Monday estimated its Q3 operating profit at 24 billion won ($20.9 million), +236.4% YoY. +VE
Daewoo Shipbuilding & Marine Engineering Co., said Monday that it has signed deals worth 2 trillion won ($1.7 billion) to build six liquefied natural gas (LNG) carriers for two European companies. +VE
Kakao has officially launched live commerce service “Kakao Shopping Live“ on its messenger application, the company announced Monday. +VE
SK Telecom, has launched an artificial intelligence-powered voice call application, the company announced Monday. The company’s new voice call application has integrated the company‘s existing voice-activated assistant Nugu, which was previously used in its AI speaker of the same name. +VE
Celltrion’s COVID-19 antibody pipeline CT-P59 will be clinically tested on asymptomatic COVID-19 patients and people who have come in close contact with confirmed patients, such as medical workers, to prevent infection, Celltrion said Monday. +VE
Daewoong Pharmaceutical gained the Ministry of Food and Drug Safety’s approval to conduct a phase 1 clinical trial of niclosamide as a potential COVID-19 treatment, the company said Monday. +VE
Hyundai Motor Co is set to triple the number of recalled Kona electric cars over battery cell fire risks with plans to recall around 51,000 vehicles in North America, Europe, China and other markets, -VE
TAIWAN Expect market to open flat with investors cautious ahead of China Trade data and US earnings.
No data due
The White House is moving forward with three sales of advanced weaponry to Taiwan, sending in recent days a notification of the deals to Congress for approval, five sources familiar with the situation said on Monday. +VE for sentiment.
Taiwan’s government has denounced China, citing entrapment and manipulation, after Chinese state television aired a documentary showing a Taiwanese citizen confessing to visiting Hong Kong to support anti-government protesters there. It said that China should stop trying to frame Taiwanese citizens, the council added, saying putting Lee on television was contrary to the legal process. A further -VE for cross strait relations.
The National Stabilization Fund yesterday decided to exit the local stock market, saying it has achieved its goal of stabilizing the local bourse, which has rallied firm above 12,000 points since the fund’s previous meeting in July. Slight -VE
DRAM chipmaker Nanya Technology Corp yesterday said it would hold on to 30% of its overall capital expenditures earmarked for this year to use next year, given slackening market demand. It’s will reduce spending on new facilities and equipment to about NT$10.7 billion (US$370.13 million) this year, instead of the NT$15.7 billion budgeted. The move is in line with its bigger competitors’ conservative outlook about the memory industry. Slight -VE
TTY Biopharm Co Ltd yesterday said it has gained Bio-NTech SE’s authorization to sell its mRNA-based COVID-19 vaccine in Taiwan, and the supply of vaccine is expected to total 30 million doses next year. Having received a letter of authorization from the German firm, TTY said it would apply for marketing approval of the vaccine candidates from the Food and Drug Administration (FDA). The candidates are being tested around the world under phase 2 and 3 clinical trials, it said. +VE
CHINA Key will be the pre market trade data but presuming that it is at least inline expect the market to open higher but upside limited as Investors await the new loans data.
Data due pre market
Balance of Trade (F/cast $60bn was 58.93b in Aug)
Exports (F/cast +9% YoY was +9.5% Aug)
Imports (F/cast +0.5% YoY having been -2.1% in Aug))
Data that could be released any time this week
Vehicle Sales Sept. Aug was +11.6% F/cast is +10.5%
FDI (YTD) Sept. Aug was +2.6% F/cast is +2.7%
New Yuan Loans Sept . Aug was CNY1280b F/cast is 1700b
Outstanding Loan Growth Sept. Aug was +13% YoY F/cast is +12.7%
Total Social Financing Sept. Aug was 3580b F/cast is 3200b
M2 Money Supply Sept. Aug was +10.4% F/cast is 10.3%
China’s leading climate think tanks are pushing for cuts to carbon emissions and coal use over the next five years, according to speeches and a major report China’s top experts on climate change and emissions issued on Monday. -VE for Coal Miners and Oil but +VE Alternative Energy Names and Gas.
China has reportedly banned imports of Australian thermal and coking coal, leaving some Australian vessels stuck at Chinese ports. Many say the move is likely politically motivated, but aligns with China’s efforts to reduce pollution and consolidate the coal sector but the speed of implementation is suspect. -VE for Australian relations.
China and Cambodia yesterday signed a free-trade agreement that was put together in under a year and is aimed at slashing tariffs and boosting market access. The signing was attended by Chinese State Councilor and Minister of Foreign Affairs Wang Yi and Cambodian PM Hun Sen at a ceremony streamed online. The agreement covers sectors that include trade, tourism and agriculture, under which both countries are to cut duties for their products.
General Motors Co (GM) GM.N on Monday said continued market recovery from the COVID-19 crisis helped its China vehicle sales +12% YoY in July-September, marking the Detroit automaker's first Chinese quarterly sales growth in two years.
President Xi began his tour of the southern province of Guangdong on Monday by urging people to “seize the opportunity”. Posts shared by Chinese netizens online showed Xi in the coastal city of Chaozhou, flanked by his entourage and local officials, telling the locals that they should have confidence in the future. “When we celebrate the 100th anniversary of the founding of the People’s Republic [in 2049], we will have built China into a much stronger and more beautiful country,” Xi said in one clip. Interesting to see a big domestic push in the face of increased deteriorating international relations.
China boosts its soft power in Africa while launching African space ambitions. Satellite technology deemed crucial to China-Africa relations but not a priority for the US in its relationship with the continent. This like 5G could be another area that China looks top become the global player.
Mainland health authorities will test all nine million people in the eastern city of Qingdao this week after nine cases linked to a hospital were found. The announcement broke a two-month streak with no virus transmissions in China. The government has lifted most curbs on travel and business but still monitors travelers and visitors to public buildings. Also Shanghai reported five imported coronavirus patients, but no domestically infected people Sunday, the municipal health commission said Monday. A total of 133 people in close contact with the patients on the flights have been put under quarantine.
HONG KONG ADR’s flat +33pts to open at 24,682 with Chinese Financials and Petro names under pressure after yesterdays strong rally. Evergrande likely to see continued pressure on more reports of lenders cutting credit lines.
No data due
SHORT SALES Monday 17.7% vs 16.9% Friday
Top Shorts Hang Seng Bank (11) 60%, Wharf REIC (1997) 58%, Ping An (2318) 51%, China Res Land (1109) 46%, HSBC (5) 37%, Henderson Land (12) 35%, AIA (1299) 24%.
YUEXIU PROPERTY (00123.HK) announced that the value of the aggregate contracted sales for the first nine months of 2020 amounted to RMB58.636 billion, +22%YoY
LONGFOR GROUP (00960.HK) announced that in September 2020, the Group recorded contracted sales of RMB30.04 billion, +11.26% YoY. As at the end of September 2020, the Group achieved aggregated contracted sales of RMB186.34 billion, +6.7% yearly.
EVERGRANDE (03333 HK) More on debt trimming rumours: People with the knowledge of the matter said MINSHENG BANK (01988.HK), the biggest creditor of EVERGRANDE, has requested branches to hit break on the additional unsecured debt of the company, including those on bond market, to scale back overall debts. At least three major creditors, including ABC (01288.HK) , CZBANK (02016.HK) and ICBC (01398.HK), have adopted the similar policy, the report said. Meanwhile, big banks will only consider to approve specific projects with adequate security. These banks have not made any response insofar. -VE
New World Development's (0017) first batch of flats at The Pavilia Farm atop Tai Wai Station was oversubscribed 54.5 times with the developer receiving around 10,000 checks for the 180 units offered in the first price list. +VE
Minmetals Land (0230) expects to launch Montego Bay for sale as early as this month.
GAC GROUP (02238.HK) announced that the production and sales volume for the first nine months of 2020 amounted to 1.3902 million -3.74% YoY and 1.4072 million vehicles, -6.69% yearly. -VE
Q TECH (01478.HK) announced that due to the YoY decrease in the sales volume of smartphones affected by the COVID-19 epidemic, the total sales volume of camera modules -2.1% YoY to 37.317 million units in September. -VE
HKMA announced that, as USD/HKD triggered the Strong-side Convertibility Undertaking during Hong Kong trading hours, the HKMA undertook a US$870 million selling order to inject HK$6.743 billion into the market. The balance of the banking system of Hong Kong will increase to HK$286.882 billion on 14 October.
Hong Kong Construction Industry Employees General Union (HKCIEGU) Proposes Salary Freeze for 15 Fields as Jobless Rate Hits 27.8%, Way Above Official Data. It wrote in a report that workers from steel reinforcement fixing, scaffolding and 13 other construction fields will be subject to 1-year salary freeze, effective 1 November. The overall unemployment rate of the construction sector was 27.8%, higher than 11.1% as the Government announced, according to a survey HKCIEGU had in June-August done with over 17,000 members.
Jockey Club will resume Mark Six lottery ticket sales at all off-course betting centers on Friday. Due to the pandemic, the club suspended Mark Six lottery draws in February. They resumed on September 24, but ticket sales were limited to online or telephone purchase.