Oct 5 Asian Macro Initial Thoughts US Futures +150pts, Asian higher, China closed
Covid-19 Globally over 35m cases, 1.035m deaths
US Futures open +150pts; S&P +0.4% and NDX +0.5%
Trump said to be improving but not 'out to the woods' and has received a second dose of an experimental treatment from Regeneron; on compassionate grounds, and steroids normally used for severe cases and could be discharged Monday.
Automated / Touchless Vending Machine makers seeing increased demand as companies refit canteens.
Covid remains the big overhang on the market.
China remains closed until Friday.
S Korea, Taiwan and Hong Kong reopen; playing catch-up having missed to up days in the US and following the sell off from Friday. Technically they should open higher on that basis but watch for early selling. HK ADR’s indicate a higher open but retail sentiment may follow a different path.
DATA ahead this week.
US stimulus package in focus and Fed’s Powell is likely to call for more fiscal stimulus when he speaks. There are large number of Fed speakers this week.
PMI data will be in focus with data from Asia, Europe and US.
Europe also due to releases retail sales data, along with German, French and UK Trade Data. UK will release Industrial and Manufacturing Production Data and GDP data.
Also due will be US ISM Non manufacturing data, Trade data and Wholesale inventories.
China closed for most of the week but we get the Caixin PMI data on Friday when the market re-opens.
Other data for Asia includes Japanese Current Account, Eco Watchers, Household spending data and Machine Tool Orders. For S Korea; Inflation and Current Account and Taiwan; Trade, Inflation and Wholesale Prices data.
JAPAN Expect Nikkei to higher with bargain hunting after Friday’s sell off. Nikkei futures in Chicago @23,400, Osaka @ 23,190 vs 23,029.90 Friday’s close.Yen closed 105.33 Regional Banks in focus with the expectation of M&A and reorganisation. I would also expect robotic names to do well.
Data due Sept Services PMI (Aug was 45,F/cast is 45.6), Composite PMI (Aug was 45.2, F/cast is 45.5)
US Sec of State Pompeo arrived in Japan Sunday for a shortened trip due to Trump testing positive for Covid. He will not now visit S Korea or Mongolia.
PM Suga faced backlash Friday after he decided not to appoint academics who have been critical of the nation's security and anti-conspiracy legislation to a science council that makes policy recommendations to the government.
Australia’s foreign minister said she will travel to Japan to meet counterparts from the “Quad” group of the United States, India and Japan on Oct 6 to discuss regional security, economic recovery, disinformation and supply chains.
Sony Corp and memory chipmaker Kioxia Holdings Corp have applied for U.S. approval to continue supplying Huawei Technologies Co Ltd, Nikkei reported on Sunday. If confirmed, the move follows other tech companies such as Intel Corp that recently received licences from U.S. authorities. Huawei is one of the top customers for Sony’s image sensors for smartphones. Kioxia Holdings Corp is the world’s No. 2 maker of flash memory chips and a Huawei supplier.
Clinical trials of AstraZeneca and Oxford University's experimental COVID-19 vaccine have resumed in Japan, almost a month after being put on hold due to an illness of a British volunteer, while discussions with U.S. authorities continue. +VE
Hitachi Ltd said Friday its U.S. unit won an order worth $798 million to renew a train control system of the San Francisco Bay Area Rapid Transit District known as BART. Hitachi Rail STS USA Inc. will replace the existing 48-year-old operating system with a digitally controlled unit.
DCM Holdings said on Friday it has made an offer for smaller rival Shimachu Co for 164 billion yen ($1.6 billion), which would give it a greater presence in the Tokyo region. +VE
Honda to exit from Formula 1 to focus on electric cars +VE
Japanese household spending is expected to have fallen for a 11th straight month in August, a Reuters poll found on Friday, suggesting the coronavirus crisis is still weighing heavily on consumer confidence. Slight -VE
The Economy, Trade and Industry Ministry intends to abolish the use of hanko seals currently required for documents in about 2,000 types of administrative procedures, such as patent applications. A small +VE step forward in the digitalisation of Japanese bureaucracy.
SOUTH KOREA Markets to re-open higher, weakness in US on Friday offsetting the upside from Thursday. But weekend press was largely +VE on the prospects for Q3 earnings likely to give retail investors confidence.
Data due Manufacturing PMI Sept (Aug was 48.5, F/cast is 48.1)
Sixty four cases reported Sunday down from 75 new COVID-19 cases Saturday, staying below 100 for the fourth straight day over South Korea’s biggest national holidays Chuseok. The majority remain local infections.
SK Telecom is eyeing initial public offerings (IPO) for its digital service subsidiaries starting next year, analysts said Sunday, as the company seeks to realign its business structure.
Kospi are likely to see their operating profits post a V-shaped recovery in Q3 this year and +19% YoY, a financial market tracker said Sunday. +VE
SK Hynix may see pressure as analysts expect it to report mediocre results as memory prices decline; YoY will be good but QoQ expected to decline.
South Korea's chipmakers are expected to benefit from the United States' export restrictions against China's leading foundry firm, SMIC analysts said Saturday, as the ban could give them more opportunities to secure orders.
South Korea has extended incentive programs for primary dealers in state bond auctions until the end of this year, as part of its efforts to stabilize the bond market, according to the finance ministry Saturday.
Samsung Electronics Co.'s latest flagship smartphone, the Galaxy Note 20 Ultra, topped the list of handsets with the best-performing cameras available in the market, a report showed Sunday.
LG Electronics Inc. said Sunday its new dual-screen smartphone will go on sale in South Korea this week as the tech firm aims to boost its handset sales amid the pandemic.
Hyundai Motor Co. retail sales in the United States Q3 +7% YoY on rising demand for its sport utility vehicles (SUVs), the carmaker's US unit said Friday (Korean time). +VE
Big Hit IPO 2 day public subscription kicks off Monday. According to data from the Korea Financial Investment Association, deposits in Korean cash management accounts reached about 62.66 trillion won as of Friday, up nearly 1 trillion won on the previous week.
TAIWAN Market to open lower following the weakness in the US on Friday but downside limited as demand for tech remains firm. So expect the market to work higher. PMI data out may limit the upside if it misses forecasts.
Data due Manufacturing PMI Sept (Aug was 52.2, F/cast was 50)
IC exports made up 36% of August’s total exports, while those of old-economy products, such as plastics, minerals and machinery, fell sharply. The increase in overall export value was driven by strong growth in exports of electronic components and information and communication products, propelled by solid demand for emerging 5G technologies and work-from-home devices. This was offset by a decline in exports of some major products, the ministry said.
Half of the 100 members of the US Senate on Thursday issued a call to assume formal negotiations on a comprehensive bilateral trade agreement between Taiwan and the US.
A Canadian warship has sailed through the sensitive Taiwan Strait, the island’s defence ministry said on Saturday, a voyage that comes at a time of heightened military tension between China and Taiwan and which could anger Beijing.
Hon Hai Precision gave out more than NT$6 billion (US$206 million) in annual bonuses to employees at the end of last month, company sources said on Saturday.
Reflects the healthy state of the company +VE
Chunghwa Precision Test Technology (Wafer testing service provider) on Saturday reported that Sept revenue +1.31% MoM and 4.58% YoY to NT$410.44 million (US$14.1 million). “The penetration rate of 5G smartphones has gradually increased in the second half of the year, driving the company’s probe card business to continue growing in September. Among probe cards, the application processor probe cards used in 5G smartphones served as a major growth catalyst,” it said in a statement.
CPC Corp, Taiwan and Formosa Petrochemical Corp on Sunday announced they would lower the prices of gasoline and diesel, effective today, after CPC kept gasoline prices unchanged last week. CPC said it would lower prices by NT$0.2 per liter and premium diesel would be NT$19.3.
National Aerospace Fasteners Corp reported that revenue for Sept -66.67% YoY to NT$85 million due to the effects of COVID-19. -VE outlook
Credit card spending on food delivery services rose to NT$1.06 billion (US$36.36 million) in June, double that of a year earlier and higher than before the COVID-19 pandemic, indicating that people have continued using such services, despite the pandemic easing, the National Credit Card Center said in a report last week.
Insurers’ FYPs plunge 40% to NT$47.7bn. First-year premiums (FYPs) generated by the nation’s life insurers continued falling in August, due to new rules restricting firms from offering unrealistically high bonuses to policyholders, a Life Insurance Association’s report last month showed.
CHINA Market remains closed
No data due
U.S. Agriculture Secretary Sonny Perdue said he was unsure whether China could live up to its annual farm good purchasing commitments under the trade deal. -VE
China accused the United States on Friday of “fabricating lies” and trying to take the world back to the “jungle age” after Washington blamed Beijing and U.N. agencies for “the murder of millions of baby girls.”
EU seeks fairness from China, seeks to reduce dependencies. Angela Merkel said any agreement on investment with Beijing must involve reciprocity, with firms in the EU enjoying the same freedoms to invest in China as China's do in Europe.
China’s Ant Group Co Ltd is asking lead bankers to personally sign confidentiality pacts and pressing some investors to explain why they should be allowed to attend marketing meetings, sources familiar with the matter said. Other unique measures taken by Ant include dividing up the underwriting work for what could be a $35 billion offering among several banks such that no one firm has the full picture of the process, four sources with direct knowledge of the matter said.
China reported 97 million tourists and 76.7 billion yuan in tourism income on the National Day holiday, according to the Ministry of Culture and Tourism, state media reports. Down YoY.
Fonterra said on Monday it has agreed to sell its farms in China for a total of NZ$555 million ($367.97 million) as the dairy producer continues to focus on the domestic market and reduce debt. China Youran Dairy Group will purchase two farming-hubs located in Ying and Yutian for NZ$513 million, while Beijing Sanyuan Venture Capital is set to acquire an 85% stake in the Hangu farm.
ByteDance is working with U.S. CFIUS on security concerns over the sale of TikTok's U.S. operations, Bloomberg citing insiders. The disposal is expected to drag on past the November U.S. presidential election.
The US has released guidance on its immigration laws that will make it almost impossible for members of a Communist party or similar to be granted permanent residence or citizenship of America. The announcement was made in a policy alert issued on Friday by the US Citizen and Immigration Services (USCIS). Little impact really as China does not recognise dual nationality.
Party investigating former aide to Vice President Wang Qishan; for alleged serious violations of laws and party rules
HONG KONG ADR’s +209pts to open at 23,668 as the market plays catch-up. Petrochem's were weak. May see some weakness in the E Commerce names following the sell off in the US on Friday but with US futures opening higher I would expect market to test higher.
HK reported 5 new cases Sunday, 4 cases on Saturday and 7 cases on Friday.
No data due
SHORT SALES Wednesday 17.7% vs 21.4% Tuesday
Top Shorts Ping An (2318) 39%, China Res Land (1109) 36%, Bank of China (3988) 34%, HSBC (5) 33%, Henderson Land (12) 32%, Hang Seng Bank (11) 29%, ICBC (1398) 28%, CKI (1038) 28%, BoC HK(2388) 28%, CCB (939) 26%, Country Garden (2007) 25%.
Li Ka-shing and Victor Li, through Li Ka Shing Foundation Limited, acquired a total of 771,500 shares in CK ASSET (01113.HK) at the average price of HK$38.2475, HK$38.2090, HK$38.1613 and HK$37.5833 per share on 24 September, 25 September, 28 September and 29 September 2020 respectively. As a result, the deemed interests of Li Ka-shing and Victor Li in CK ASSET increased from 35.59% to 35.62%, and from 35.66% to 35.68%.
Cathay Pacific (293 HK) has suspended an arrangement allowing crew to swap flying duties, intensifying rumors that the airline will start sacking staff. -VE
SMIC (981 HK) has undertaken “preliminary exchanges” with the U.S. Bureau of Industry and Security regarding export restrictions, the company said on Sunday in a filing, Reuters reports. “The company is conducting assessments on the relevant impact of such export restrictions on the company’s production and operation activities,” the filing to the Hong Kong Stock Exchange said. Key will be whether the US grants some of its suppliers licenses to continue supplying the company.
Centaline Property Agency recorded 36 secondary transactions at ten blue-chip housing estates over the four-day weekend. Only Mei Foo Sun Chuen in Lai Chi Kok reported no deal, according to Centaline. Meanwhile, the number of transactions at the ten major estates was 15 over the past two days, down by one from a week before.
CRRC (01766.HK) announced that it had considered and approved the resolutions in relation to the proposed issue of A Shares and listing on the Science and Technology Board of CRRC TIMES ELEC (03898.HK), an indirect non-wholly-owned subsidiary, on 30 September 2020. The number of shares to be issued will not exceed 241 million A Shares.
GEELY AUTO (00175.HK)'s Volvo Cars, is recalling all 2,200 Polestar 2 cars owing to software glitch, reported Swedish media.
HANG SENG BANK (00011.HK) declared a third interim dividend of HK$0.8 per share for the year, against HK$1.4 per share over a year ago. The dividend will be payable on 5 November 2020, to shareholders whose names appear on the register of shareholders on 19 October 2020.
NEW WORLD DEV (00017.HK) announced the annual results ended 30 June 2020. Underlying profit amounted to HK$6.589 billion, down 25.25% yearly. Net profit -93.96% annually to HK$1.096 billion, with EPS of HK$0.43. A final dividend of HK$1.48 was declared. Full year dividend reached HK$2.04. Under a low-rate environment, property prices of small-and-medium units are set to stay stable, they are cautiously upbeat on the future market, Cheng modeled a roughly 5% growth in the home prices of medium-to-high end flats. The company targets at selling $13-15 billion worth of non-core assets in FY21, after selling $10.6 billion of those in the current year, said CEO Adrian Cheng at an online briefing. Additionally within months, sales via the new online channels have accounted for 15% of the group's Hong Kong retail sales, which may keep growing, he said.
NEW WORLD DEV (00017.HK) and MTR CORPORATION (00066.HK) have named their joint project atop Tai Wai Station as "The Pavilia Farm". Sales brochures will be uploaded as soon as today, and the price list next week.
SINOPEC CORP (00386.HK) (600028.SH) announced that Marketing Company and PipeChina entered into the Disposal Agreement, pursuant to which the former agreed to dispose of the refined oil products stored in the pipelines and storage facilities to PipeChina in accordance with the agreement. It is expected that the total price shall be approximately RMB7.7 billion.
HKRMA Annie Yau Tse, chairwoman of the Hong Kong Retail Management Association said that certain sectors have seen uptick stepping into October, riding on the Mid-Autumn Festival holiday. However, the long holiday will boost footfall but not turnover, foretelling weak business conditions despite footfall recovery, she added.
Hong Kong leader Carrie Lam cheered the city’s “return to stability” during China national day celebrations on Thursday, as hundreds of police in riot gear patrolled the route of a banned anti-government march by pro-democracy activists. She said “Over the past three months, the plain truth is, and it is obvious to see, that stability has been restored to society while national security has been safeguarded, and our people can continue to enjoy their basic rights and freedoms,”. Many local residents I think would agree there is stability but a lot of people are unhappy. Today is normally a happy day but the police are out in force on the streets which is oppressive to see.
On Thursday Police arrested 69 people in Causeway Bay for unlawful assembly
US & European Close on Friday
DOW -0.48%, NDX -2.22%, S&P -0.96%, Russel 2K +0.53% Markets opened lower. Dow and S&P worked sideways initially but ticked higher at midday to flat but sold down into the close. NDX initially worked higher before selling done into lunch. It then bounced but then traded sideways for the rest of the day and sell off into the close. Still no deal on stimulus, although airlines +VE as Pelosi indicated that relief for the could be coming soon. She said “We will either enact Chairman DeFazio’s bipartisan stand-alone legislation or achieve this as part of a comprehensive negotiated relief bill, extending for another six months the Payroll Support Program,”. Comes as a number of US companies hit hard by the coronavirus crisis and with new government stimulus funding in limbo announced layoffs; Disney, American Airlines and United Airlines announced 60,000 layoffs in just 24 hours. Others have warned of layoffs to come.Payrolls missed expectations but consumer confidence rebounded.Tech weak on the potential for more taxes under a Democratic sweep scenario.
For many Trump contracting covid raises the hopes of a stimulus agreement. Prompting some rotation into cyclicals.
Facebook -2.5%, Apple -3.2%, Amazon -3%, Netflix -4.6%, Alphabet -2.2% and Microsoft -3%.
Nvidia -4.1%, AMD -3.6%, Micron -2.9% and Skyworks -3.5%.
Re-opening stocks Boeing +0.1%, Caterpillar +2.2%, Simon Property +2.5%, Gap +2.7%, Carnival +0.9%. Airlines United +2.4%, Delta +2.1%, Southwest +2.2%.
Lock down names Campbell Soup +0.6%, General Mills -0.1% and JM Smucker +0.4%
Non Farm Payrolls Sept 661k vs 1.489m Aug (F/cast was 915k)
Unemployment Rate Sept +7.9% vs +8.4% Aug (F/cast was +8.3%)
Ave Weekly Hours Sept 34.7 vs 34.6 Aug (F/cast was 34.6)
Ave Hourly Earnings Sept +0.1% MoM vs +0.3% revised (F/cast was +0.2%)
Participation Rate Sept 61.4 vs 61.7% Aug (F/cast was 61.5%)
ISM New York Index Sept 56.1 vs 42.9 Aug (F/cast was 42)
Factory Orders Aug +0.7% MoM vs +6.5% Jul revised (F/cast was +1.2%)
Factory Orders Wx Transport Aug +0.7% MoM vs +2.4% Jul revised (F/cast was +1.5%)
Michigan Data Final Consumer Expectations Sept 75.6 vs 68.5 % Aug (F/cast was 73.3)
5 year Inflation Expectations Sept +2.7% vs 2.7% Aug (F/cast was 2.6%)
Consumer Sentiment Sept 80.4 vs 74.1 Aug (F/cast was 78.9)
Current Conditions Sept 87.8 vs 82.9 Aug (F/cast was 87.5)
Inflation Expectations Sept +2.6% vs +3.1% Aug (F/cast was +2.7%)
Baker Hughes Total Oil Rig Count 266 vs 261 prior
USD was weaker vs Yen & Euro. Bitcoin -0.3% @ 10.534.29, VIX +3.5% @ 27.63, US T10 @ 0.704%
OIL Brent +2.7%, WTI +4.3%
Gold -0.6%, Silver -1.62%, Copper +4%
AHEAD Services and Composite PMI, ISM Non Manufacturing Data (Business Activity, Prices, New Orders, Employment, PMI).
DAX -0.33%, CAC +0.02%, FTSE +0.39% Markets opened lower on the news that Trump had tested positive of covid. They traded sideways for most of the day but rallied into the close. European Union leaders asked their Brussels-based executive on Friday to name strategic areas where the bloc relies too much on countries such as China and the United States, and to propose ways to make amends.
Centamin -22% the gold mining firm after it forecast a fall in annual production amid delays to some operations at its key Sukari mine in Egypt.
Ocado -2.3% after a lawsuit was brought against the e-commerce firm over alleged patent infringement.
ACS +25% as French rival Vinci has submitted a bid to buy its construction business Cobra for 2.8 billion euros ($3.3 billion). It also comes as a joint venture owned by ACS won a bid to build the new terminal of San Diego’s international airport.
ASDA bought from Walmart -1.8% by the billionaire brothers behind one of Britain's biggest petrol station operators have bought Asda from £6.8 billion
EUROZONE European Council Special Meeting
Core Inflation Rate Flash Sept +0.2% YoY vs +0.4% Aug (F/cast was +0.4%)
Inflation Rate Flash Sept -0.3% YoY vs -0.2% Aug (F/cast was -0.3%)
Inflation Rate Flash Sept +0.1% MoM vs -0.4% Aug (F/cast was +0.1%)
Budget Balance Euro Aug -165.69b vs -151.04b Jul (-140b)
EUROZONE Services and Composite PMI, Retail Sales
GERMANY Services and Composite PMI
FRANCE Services and Composite PMI, Retail Sales
UK New Car Sales, Services and Composite PMI