June 17 ASIAN MACRO INITIAL THOUGHTS: US Futures currently flat
Covid-19 Globally over 8.05m cases, 438k deaths
From CNBC “The attitude of many Americans seems to be that they are done with the coronavirus, but the coronavirus is not done with us,” Marc Odo, portfolio manager at Swan Global Investments,
US Futures opened lower -120pts but now flat.
DOW +2.04%, NDX +1.75%, S&P +1.9%, Russel 2K +2.3% Markets opened higher on the Trump infrastructure news, strong retail sales data plus news that the drug dexamethasone (currently widely available) reduces the death rate of for those seriously ill from covid-19. But initially sold down before revising and trading higher. Until Powell said that the Fed would buy corporate bonds based on market conditions; which caused a tantrum as traders want the Fed to keep buying even if financial conditions improve. Which I think illustrates how traders are becoming detached from the reality of market. He also warned of significant uncertainty over the US recovery.
Re opening names rallied United +3.1%, Delta +2.8%, Southwest +0.6%, American +2%, Carnival +5%, Royal Caribbean +2.7%, Kohls +8.9%, Simon Property +1.5% but MGM Resorts -0.5% having opened at the day highs. Caterpillar +5.2% on the infrastructure news.
Property names rallied as the NAHB Index was stronger than expected
Stephen Roach is warning that a changing global landscape combined with a massive US budget deficit will spark a dollar crash. He’s forecasting -35% over the next 'year or two, maybe more’ vs other currencies.
US justice department sues to halt John Bolton’s book titled The Room Where it Happened. which is due to be published next week.
Trump signed the executive order to reform US police practice, saying chokeholds will be banned unless “an officer’s life is at risk”. There was no mention of racism.
Retail Sales May +17.7% MoM vs -14.7% Apr (F/cast was +7.5%)
Retail Sales Ex Auto May +12.4% MoM vs -15.2% Apr (F/cast was +5.9%)
Redbook 13 Jun -8.3 YoY vs -9.7 prior (13 Jun -2.4 MoM vs -3.2 prior)
Industrial Production May -15.3% YoY vs -15 Apr (F/cast was -18%) [May +1.4% MoM vs -11.2 Apr (F/cast was +2.8%)]
Manufacturing Production May -16.5% YoY vs -18 Apr (F/cast was -21%) [May +3.8% MoM vs -13.7 Apr (F/cast was +3.6%)]
Capacity Utilisation May 64.8% vs 64.9% Apr (F/cast was 67%)
NAHB Housing Market Index Jun 58 vs 37 May (F/cast was 45)
Business Inventories Apr -1.3% vs -0.3% Mar (revised from -0.2%)(F/cast was -0.6%)
API Crude Oil Stock Change vs 8.4m prior
USD was stronger vs Yen & Euro. Bitcoin +0.6 @ 9,505.71, VIX -2% @ 33.7,
US T10 0.741% weaker after Powell’s cautious tone on bond buying programme.
OIL Closed Brent +3%, WTI +3.4% as IEA raised its forecasts for oil demand but was weaker in after market.
Gold +0.9%, Silver unch, Copper -2.4%. Gold strong on virus in Beijing concerns
AHEAD MBA Mortgage Applications and 30 yr Mortgage Rate, EIA Oil Stocks Change Report,
DAX +3.39%, CAC +2.84%, FTSE +2.94% Markets opened higher reacting to the Feds announcement to buy individual corporate bonds and news that Trump was proposing a US$1tn infrastructure plan and they trended higher through the day. PM trading saw more upside on news that a drug called dexamethasone (currently widely available) can significantly reduced the death rate for those seriously ill with covid-19.
Macro data was mixed UK unemployment was unchanged but payroll numbers dropped MoM but by more than forecast. German economic sentiment rose by more than expected although current conditions missed. Eurozone sentiment also beat.
Carnival +7.6% after a preview of its earnings report showed projected revenue -76.6%
Capita +7.6% on winning a customer service contract from Irish Water
Zalando -4.2% on news that Kinnevik has sold some of it stake in the company
Bakkafrost and SalMar (salmon fish farmers) weak after China introduced import restrictions on fish, having linked a new Covid-19 outbreak to a Beijing seafood market.
Land Securities and British Land +VE on broker upgrade.
EUROZONE ZEW Economic Sentiment Index Jun 58.6 vs 46 May (F/cast was 48)
Labour Cost Index Q1 +3.4% QoQ vs +2.3% prior (F/cast was +2.2%)
Wage Growth Q1 +3.4% QoQ vs +2.4% prior (F/cast was +2.1%)
GERMANY Inflation Rate Final May +0.6% YoY vs -1.4% Apr (F/cast was +0.6%) [May 0% MoM vs +0.4% Apr (F/cast was 0%)
Wholesale Prices May -4.3% YoY vs -3.5% Apr (F/cast -4.4%) [May -0.6% MoM vs -1.4% Apr (F/cast was -0.6%)
ZEW Economic Sentiment Index Jun 63.4 vs 51 May (F/cast was 55)
ZEW Current Conditions Jun -83.1 vs -93.5 May (F/cast was -86)
FRANCE IEA Oil Report forecasts oil demand at 91.7m barrels +500k barrels MoM on higher consumption during lockdowns but warned demand would not return to pre-pandemic until 2022 due to the fall in flying.
UK Claimant Count Change May 528.9k vs 1.0327m Apr (F/cast was 330k)
Employment Change Mar 6k vs 211k Feb (F/cast was 330k)
Average Earnings (Inc Bonus) Apr +1% vs +2.3% Mar (F/cast was +1.5%)
Average Earnings (Ex Bonus) Apr +1.7% vs +2.7% Mar (F/cast was +1.9%)
Unemployment Rate Apr +3.9% vs 3.9% Mar (F/cast was +4.4%)
EUROZONE New Car Registrations, Construction Output, Core Inflation Rate, Inflation Rate
GERMANY No data due
FRANCE No data due
UK Inflation Rate, Core Inflation Rate, PPI Core Output, PPI Output, PPI Input, Retail Price Index
JAPAN Expect Nikkei to open higher following the US rally but upside capped by more covid-19 infections and ahead of the Trade data. Yen weaker overnight; currently 107.35 Sentiment wary on North/South Korea tensions and news of China/India clashes
Data due Tankan Index, Balance of Trade, Exports, Imports.
BoJ left policy unchanged but remains committed to do more if needed but expected a protracted battle.
Tokyo Metropolitan Government said it confirmed 27 new coronavirus infections Tuesday, with the capital recording more than 20 cases for the sixth straight day.
PM Abe said Tuesday that the government will aim to cut interbank money transfer fees in a bid to promote cashless payment in the country.
Gov't to promote staggered holidays to curb congestion, virus spread
Softbank announced to sell up to 66.6% of T Mobile stake.
Travel Up to 250 people will be allowed to travel on a private chartered flight to Vietnam from Japan as early as late June, mainly for business purposes, as the first step toward relaxing travel restrictions implemented due to covid-19 +VE
Toyota said Tuesday it will make its software to simulate and analyze vehicle collisions freely available from next January.
Nissan email trail casts new light on takedown of Carlos Ghosn. Email correspondence dating back to February 2018 paints a picture of a methodical campaign to remove a powerful executive. Slight -VE
SOUTH KOREA Expect markets to open higher following the US rally. Tensions with N Korea a slight -VE but minor.
No data due
5G Government is carrying out a nationwide quality inspection of its 5G networks amid growing dissatisfaction among people using the service, which came out last year. It has started assessing 5G networks and service in the nation’s major cities; Seoul, Busan, Incheon, Daegu, Daejeon, Gwangju and Ulsan. The government has sampled around 100 locations in those cities, checking call quality and 5G network reception.
SK Innovation ranked 5th in the global electric vehicle battery market in April, according to industry data Tuesday. According to market tracker SNE Research, SK Innovation took 3.5% of global EV battery market by supplying 189.1 megawatt-hours of batteries. Samsung SDI was next, with 3.4% by deploying 187.2 megawatt-hours of batteries in April. Meanwhile, South Korea’s No. 1 EV battery maker LG Chem took the second spot, with 18.2% market share by deploying 988.1 megawatt-hours of batteries. It was buoyed by the strong sales of Tesla Model 3, and was one of the two battery makers in the top 10 list that supplied more batteries in April on-year, witnessing a 6.9 percent growth.
KT Corp on Tuesday said it will acquire a 10% stake in a robotics unit of shipbuilding giant Hyundai Heavy Industries Group to enhance its competitiveness in smart factory and robot solutions; paying 50 billion won ($41.4 million).
Doosan Group plans to sell its key construction equipment maker unit Doosan Infracore Co. as part of its self-rescue measures to receive financial support from creditor banks, industry sources said Tuesday.
BoK data shows South Korean businesses' sales and profitability worsened in Q1 on a QoQ basis BoK data showed Tuesday, amid slowing demand at home and abroad caused by the spread of the new coronavirus. -VE
TAIWAN Expect market to open higher but with some caution over news of the India/China clash.
No data due
Ministry of Finance yesterday said it would ask state-run banks to offer loans totalling NT$1 trillion (US$33.67 billion) to help local firms upgrade and transform in the post-pandemic era. The ministry would act as an integrator in facilitating the loans that might be available for a year after the COVID-19 outbreak has stabilized,
Global semiconductor industry is to experience a second straight year of contraction in production value this year as the COVID-19 pandemic dampens demand for chips used in mobile phones and automotive devices, TrendForce Corp said yesterday. Demand from remote working and online learning, which boosted PC and server sales in 1H 20, is also likely to ebb in 2H, leading to an opaque outlook for business prospects. Inventory issues might also return in Q3, while seasonal demand in Q4 is uncertain, as it largely depends on whether commercial activities will return to normal soon, the report said.
HTC Corp yesterday unveiled the first made-in-Taiwan 5G smartphone and is to begin taking preorders from July 1.The company last year released two mid-range smartphones; the HTC U19e and HTC Desire 19+ as well as a second-generation blockchain mobile phone; the HTC Exodus 1S which failed to help prop up its flagging sales. The new HTC U20 5G, powered by Qualcomm Inc’s Snapdragon 765G processor and equipped with five camera lenses, is priced at NT$18,990.
Tong Yang Industry yesterday posted May pretax income of NT$1.51 million down from NT$259 million a year earlier, but up MoM from a loss of NT$113 million in April. The company, which supplies bumpers, grilles and fenders to global auto brands, attributed the monthly improvement to resumed market activity after more nations eased their COVID-19 lockdown measures. Pretax income in the first five months totaled NT$274 million, compared with NT$1.087 billion in the same period last year, or pretax earnings per share of NT$0.56. The company said that it is confident about the outlook, citing its operations in China returning to normal levels. +VE
CHINA Expect market to open lower despite the US rally as investors worry about the covid-19 outbreak in Beijing and the clash on the Indian boarder.
No data due
INDIA/CHINA Border Clash: Loss of Life on Both Sides Initial reprots had three Indian soldiers killed in a violent clash with the Chinese military along the countries' shared border in the Himalayas on Monday (15 June), foreign media citing a statement from the Indian army. Chinese media Global Times yet said the face-off had killed five Chinese People's Liberation Army soldiers and wounded eleven. There was loss of lives on both sides according to the Indian army statement, including one Indian officer and two Indian soldiers.
Later reports put the death toll higher with 20 Indian soldiers killed. Shots were not fired so it was a brawl. Each side blaming the other. But with Indian death Modi will be under pressure to act with strikes as he did when Indian soldiers were killed on the Pakistan border or explain why not.
Britain warned, at the UN rights forum, on Tuesday that China’s plan to impose national security legislation on Hong Kong would undermine the autonomy and freedoms of the former British colony. “The imposition of the proposed law lies in direct conflict with China’s international obligations under the Joint Declaration, a treaty agreed by the UK and China and registered with the United Nations,” Julian Braithwaite, Britain’s ambassador to the U.N. in Geneva, told its Human Rights Council.
Hawaii talks a chance for US Sec State Pompeo and Yang Jiechi to ‘draw red lines in the sand’. Details of the talks remain unclear, especially as it has been arranged so quickly
Chinese TV makers are set to outperform their South Korean rivals in the global TV market in Q2 amid the COVID-19 impact, according to Omdia the market researcher Tuesday. China had 39.2% of the market vs 33.1% for S Korea. Global shipments were -7% QoQ (-19% YoY) +VE; show s the importance of China’s domestic market.
China’s foreign ministry has asked Canada to investigate pests found in shipments of logs, spokesman Zhao Lijian told reporters at a daily briefing on Tuesday.
Press reports tightening of censorship Local governments told to exert greater control over content that is already screened for politically sensitive or pornographic word. Writers of fiction will be ordered to ‘abide by public order and morals’, and required to register their real identities
HONG KONG ADR’s indicate -60pts to open at 24,284 with weakness in Chinese Financials, Petro names closed in the green and Tech also +VE. Sentiment likely to be cautious after Tuesday’s strong rally but light volume.
No data due but after market Tuesday
Unemployment May 5.9% vs 5.2% Apr (F/cast was 5%) A fifteen year high and with expectations that it could go higher.
Short Selling HSI Tuesday 21.6% vs 21.4% Monday
Top Shorts Wharf REIC (1997) 51%, MTRC (66) 38%, CCB (939) 38%, ICBC (1398) 35%, China Res land (1109) 34%, Mengniu Dairy (2319) 33%, Want Want (151) 31%, Sands China (1928) 31%, Hang Seng Bank (11) 31%, Bank of China (3988) 29%, Country Garden (2007) 29%, NWD (17) 28%, Ping An (2318) 28%, Hengan (1044) 27%, Galaxy (27) 26%, CNOOC (883) 25%.
PLACEMENT GCL-POLY ENERGY (3800.HK) is placing 1.3 billion new shares, representing 6.15% of the enlarged share capital of the company, according to market sources. The placing prices reportedly range $0.203-0.208 per share, a 15.1-17.1% discount against the closing price of $0.245 today. The company plans to raise $264-270.4 million.
Sec for Justice says private prosecutions that run against the public interest or brought by improper motives must stop. She said the Justice department would intervene, whilst she said she was not referring to a specific case it came as the Eastern Magistrates court allows a private prosecution agains t the traffic policemen who shot a protester in Sai Wan Ho was given permission to proceed. Her comments are likely to raise concerns because he is the first policeman to end up in court in relation to the anti-fugitive bill. Also coming ahead of the Chinese imposition of a National Security Law it will raise concerns.
HKTDC is revising down Hong Kong's 2020 export growth forecast to -10% from -2%, pricing in ongoing trade protectionism whereas the coronavirus crisis has sent economy into a steep slide, said Director of Research Nicholas Kwan at a press conference. According to the latest survey done with 500 exporters, 82% disclosed that they recorded over 10% year-on-year sales decline. 97.5% of them expressed that their business was overshadowed by the plague.
Govt Economist: said HK 2Q GDP Unlikely to Improve A Lot; HK National Security Law Favours the Economy. The consumption sentiment in Hong Kong is getting warmer as the Government has partially relaxed social distancing measures and given waiver to certain business activities upon the gradually muted coronavirus situation,
HSBC announced that individual customers who apply for Cash Payout Scheme of the government through the bank can enjoy HKD preferential deposit rates and the chance to win rich prizes. Clients who register on or before 31 August via the bank and obtain the distributed cash from their accounts on or before 17 September will be entitled to 10% p.a. of HKD deposit rates for a month with the maximum principal amount of $10,000. Customers should complete at least one designated digital procedure or transaction within the offering period.
CLP HOLDINGS (2.HK)'s Castle Peak Power Company Limited (CAPCO) announced that it has successfully priced the issuance, through its wholly-owned subsidiary Castle Peak Power Finance Company Limited, of a US$350 million Energy Transition Bond (the Bond) under the Climate Action Finance Framework (CAFF) of its parent company CLP Holdings Limited (CLP). The transaction was well-supported by institutional investors, with a coupon of 2.2%, recognising the growing importance of energy transition bonds to enable meaningful action on climate change in Asia.
RAZER (1337.HK) its founder Min-Liang Tan will promote goods on BABA-SW (09988.HK)'s Tmall platform via live broadcast on 18 June. On the listing day (11 June), NTES-S (9999.HK) CEO William Ding had made a debut on Kuaishou's live-streaming platform, setting the trend for senior management to go live for good recommendations recently.
TENCENT (700.HK) is interested in becoming iQIYI's largest shareholder for cost saving and less market competition, Reuters citing insiders. The giant strives to have a bite of the fast-growing mobile video market during the quarantine period. TENCENT would like to acquire iQIYI shares from Baidu, which owns 56.2% of the online video platform, according to the report.
NTES-S (9999.HK) announced the debut of "Sound Street”, a tailor-made karaoke app for youngsters. The firm expected to invest RMB200 million of funds and resources in the app, where a hundred of music stars will be born in three years.
HK Administration said the upper limit of gathering participants in public premises is to be relaxed to 50, effective 00:00 on 19 June, as the Government hopes to reboot economic and social activities as much as possible. The Executive Council has meanwhile decided to stretch the gathering ban waiver to catering premises, so that people from all walks of life may hold different banquets or weddings, also with effect from 00:00 on 19 June, added Chan.
While caterers are set for a waiver in terms of patron entry, they still need to set their tables 1.5 m apart or with partitions in between as stipulated in the guidelines and restrictions under Prevention and Control of Disease.