Apr 8 Asian Macro Initial Thoughts A mixed open with HK/China still weak

08 Apr

Mixed open expected;
Australia Market futures indicate a slightly higher open.
Japan Nikkei futures opened +10pts and are rising ahead of premarket current account data.  Expect cautious trading ahead of earnings season which starts next week as the surge in covid cases also -VE for sentiment.  Downside limited by share buybacks taking place.
S Korea Expect markets to open higher on +VE announcements from Samsung and LG on earnings. But upside limited due to rising covid cases and the weak showing in the US overnight.  Worth noting that trading volumes have been moderate recently reflecting local investor caution as Foreigners continue to buy.No data due
Taiwan Market to open to open higher with support from Tech as local companies continue to report good revenues and improvnig outlook.  Tension with China remains a concern as China ramps up activity.
China Market to open lower with concerns over international relations and PBOC tightening remain.
HK ADR’s -153pts @ 28,521 with Chinese Financial and Ecommerce names weak; Tencent after shareholder places stock.  Concerns over PBOC tightening and international relations remain.  
US Futures Opened Dow +20pts,  S&P and NDX +0.1%

A joint China-World Health Organization (WHO) study into COVID-19 has provided no credible answers about how the pandemic began, and more rigorous investigations are required - with or without Beijing’s involvement, a group of international scientists and researchers said on Wednesday.

DOW +0.05%, NDX -0.07%, S&P +0.15% new high, Russel 2K -1.6% 
US markets effective traded around flat all day. Fed minutes (out lunchtime) showed it was committed to accommodative policy until the US saw a full economic recovery and expected a substantial rebound in 2021 that will led to the labour market recovery.
Pre market Airlines and Cruise operators +VE, Bond Yields were easing and JPM’s Dimon said he was optimistic about the US recovery in his annual letter.
Banks JPMorgan Chase +1.6%, Citigroup +0.1% Wells Fargo +0.4%, AMEX +0.7%
Work from home names: Facebook +2.2%, Apple +1.3%, Amazon +1.7%, Netflix +0.5%,  Disney -1.1%, Zoom Video -2%, Alphabet +1.4% and Microsoft +0.8%,
NXP Semi -0.4%, Nvidia +2%, Micron +0.5%, AMD +0.9%, Skyworks -0.9%
Re-opening stocks  
Boeing -1%, Caterpillar -0.1%, Simon Property +0.5%, Kohl’s +2.3%, Nordstrom -1.3%, Gap -0.2%, United Airlines +0.2%, Carnival +1.4%, Wynn Resorts -2.7%, Chevron +0.6%, Exxon Mobil +0.4%,  Lock down names Campbell Soup -1% General Mills -0.6%, JM Smucker flat
MBA Mortgage Applications -5.1% vs -2.2% prior and 30 yr Mortgage Rate 3.36% vs 3.33% prior
Balance of Trade Feb $-71.1b vs -67.8b Jan revised (F/cast was -69.8b)
Export Feb $187.3b vs 192.2b Jan revised (F/cast was 187.1b)
Imports Feb $258.3b vs 260.1b Jan revised (F/cast was 256.9b)
EIA Crude Oil stocks change -3.522m vs -0.876m prior (Consensus was -1.436m)
EIA Crude Gasoline stocks change +4.044m vs -1.735m prior (Consensus was -0.221m)
FOMC Minutes out lunchtime
Consumer Credit Change Feb $27.58b vs +0.09b Jan revised from -1.31b (F/cast was 5.2b)
USD was flat vs Yen & Euro. Bitcoin -3.4% @ 56,171.40, VIX -5.3% @ 17.16, US T10 @ 1.679%
OIL Brent +0.67%, WTI +0.7% on the improving outlook but rising gasoline inventories a concern
Gold -0.17%, Silver -0.15%, Copper +0.22% Platinum +0.21%, Palladium -2.3%.
AHEAD Initial Claims, Four Week Average Claims, Continuing Claims,EIA Natural Gas Report.

DAX -0.24%, CAC -0.01%, FTSE +0.91% 
Market open mixed following the US overnight and the mixed handover from Asia; PMI data was generally good although the UK’s missed slightly. But FTSE opened higher as the weak GBP supported stocks and rallied small before trading sideways but DAX and CAC opened flat and traded around flat all day with concerns on the inoculation roll out. As German Chancellor Angela Merkel on Wednesday threw her weight behind a “short, uniform lockdown” as the country grapples with a high level of coronavirus cases fueled by the spread of a more contagious variant first detected in Britain.
Healthcare lead the laggards and Insurance the leaders.
Prosus sank following news it was selling a 2 per cent stake in Tencent, which would reduce the Dutch tech group’s holding in the Chinese conglomerate from 30.9 per cent to 28.9 per cent. “The proceeds of the sale will increase our financial flexibility, enabling us to invest in the significant growth potential we see across the group, as well as in our own stock,” said Bob van Dijk, chief executive.
Deliveroo climbed on the first day that about 70,000 retail investors, who were sold £50m worth of shares in the meal-delivery group, would be allowed to begin trading the stock.
Services PMI Mar 49.6 vs 45.7 Feb (F/cast was 48.8)
Composite PMI Mar 53.2 vs 48.8 Feb (F/cast was 52.5)
Services PMI Mar 51.5 vs 45.7 Feb (F/cast was 50.8)
Composite PMI Mar 57.3 vs 51.1 Feb (F/cast was 56.8)
Services PMI Mar 48.2 vs 45.6 Feb (F/cast was 47.8)
Composite PMI Mar 50 vs 47 Feb (F/cast was 49.5)
Services PMI Mar 56.3 vs 49.5 Feb (F/cast was 56.8)
Composite PMI Mar 56.4 vs 49.6 Feb (F/cast was 56.6)
EUROZONE Construction PMI, PPI
GERMANY Factory Orders, Construction PMI
FRANCE Balance of Trade, Current Account, Construction PMI
UK Construction PMI

Nikkei futures opened +10pts and have risen slightly.  Expect cautious trading ahead of earnings season which starts next week as the surge in covid cases also -VE for sentiment.  Downside limited by share buybacks taking place.Yen currently 109.84
Data out pre market
Current Account Feb 2916.9b vs Y646.8b Jan (F/cast was 1900b)
Foreigner Stock Investment Y978.4b was Y-852.4b prior
Foreigner Bond Investment Y377b vs Y+200.7b prior
Tokyo announced 555 new covid cases and Osaka 878 (a new high vs 719 Tuesday) nationwide total was over 3,000 for the first time since Jan 30; with many areas reporting new highs.  -VE for sentiment
Osaka on Wednesday cancelled Olympic torch events scheduled across the prefecture, as record coronavirus infections prompted its government to declare a medical emergency.
PM Suga said on Wednesday he wanted to make a decision on the contaminated water from the Fukushima nuclear plant soon; likely to be a next Tuesday’s cabinet meeting.
Tokyo Electric Power Co (TEPCO) announced it will accept a penalty imposed by regulators over sloppy anti-terrorism measures at another nuclear plant it runs, a step that will prevent its desperately sought restart of the facility for at least a year. -VE
PM Suga considering a visit to India during Japan’s holiday period late April
Trade Minister Hiroshi Kajiyama said on Wednesday he would closely monitor a deal to take Toshiba Corp private by CVC Capital Partners as the company is involved in a number of infrastructure projects.
Regulators will heighten scrutiny on high-risk trades by domestic financial institutions in the wake of the Archegos fallout, the Nikkei business daily reported on Wednesday.  -VE Banks/Brokers
Press reports Dana and other parts of the Auto supply chain moving away from just in time deliveries to asking supplies to hold inventory on behalf of the firm.  Building in more reliance and squeezing margins.  Slight -VE for profitability and +VE for reliance
Chubu Electric Power Miraiz Co Inc and Mitsubishi Corp have established a new joint-venture company that will specialize in providing assisted-living services across Japan. Named Chubu Electric Power Miraiz Connect Co Inc (CEPM Connect), the new company provides a wide range of services designed to improve citizens' quality of life, including monitoring of elderly relatives, assistance with child raising, and general food and healthy-lifestyle services. +VE

Expect markets to open higher on +VE announcements from Samsung and LG on earnings. But upside limited due to rising covid cases and the weak showing in the US overnight.  Worth noting that trading volumes have been moderate recently reflecting local investor caution as Foreigners continue to buy.
No data due
KDCA reported 668 new covid cases the highest in 3 months -VE
President Moon Jae-in’s party suffered a crushing defeat in a special election for key mayoral posts amid a spate of political scandals and policy blunders, exit polls showed on Wednesday. -VE
SK Innovation, apparently buoyed by its recent battery patent victory at the US trade court against LG Energy Solution, reiterated Wednesday that it will “respond sternly” to any attempt by its rival to “hamper its business with legal issues.”  It said it is in talks to purchase more cathodes, one of the four key components of lithium-ion batteries, as an apparent demonstration of confidence in future orders.  President Biden has until 11April to veto the US trade court’s decision to sanction SKI from doing business in the US for 10 years. -VE
Hyundai Motor is temporarily halting some of its key production lines this month as chip shortages halt production. The suspension raised the alarm not only for the auto company but also for its subcontractors and local staffers.  -VE
SK hynix  is in talks with German auto parts giant Bosch GmbH over a long-term supply of automotive memory semiconductors, industry sources said Wednesday.   It is reportedly seeking to supply automotive DRAM chips to Bosch for at least 10 years, the sources said.  It also said it has reached a settlement with US-based Netlist Inc. over memory technology patents, with the two sides agreeing to a patent cross license covering chip technologies of both companies..+VE
South Korea will launch a pilot study into dual-use solar farms where panels are installed above crops so as to maximize the use of limited land space while striving towards a renewable future.  Hanwha Q Cells will join a consortium led by Yeungnam University to research and develop necessary systems and standardize the solar farm model. MDS, a local solar company, is also participating in the project. +VE
LG Electronics Inc. on Wednesday introduced its new solar modules that boast high efficiency as the South Korean tech giant aims to expand its presence in the clean energy sector. +VE
LG Electronics Inc. also said it  expected its best-ever quarterly performance in the first quarter as its home appliance and TV sales apparently basked in pent-up demand amid the pandemic.   In its earnings guidance, the South Korean tech firm projected its operating profit at 1.51 trillion won ($1.3 billion) for the first three months of 2021, up 39.2 percent from a year earlier. +VE follows Samsungs +VE announcement yesterday of  the company’s Q1 earnings guidance; its revenue is projected to reach 65 trillion won. It is believed to have recorded an operating profit of 9.3 trillion won ($8.3 billion) in the first three months of 2021 +VE
Korea Hydro & Nuclear Power (KHNP) is interested in developing clean energy projects in Poland, including possibly taking a slice of Warsaw’s multi-billion nuclear plans, the company’s chief executive said.
Naver Corp said Wednesday it has made a strategic investment of $150 million in Indonesian media giant Emtek to strengthen its foothold in the Southeast Asian market. +VE
Christian Dior Couture Korea, announced 104.7 billion won ($93.2 million) in operating profit last year despite the coronavirus pandemic, according to data from the Financial Supervisory Service.
HYBE, the company behind BTS, continues to rise after it announced last week plans to purchase media company Ithaca Holdings.  With both HYBE and Ithaca Holdings owning multiple labels including Big Hit Music, SB Projects and Source Music, to name a few, they boast some of the biggest names in pop music including BTS, Ariana Grande and Justin Bieber. +VE

Expect market to open higher with support from Tech as local companies continue to report good revenues and improvnig outlook.  Tension with China remains a concern as China ramps up activity.
Data due after market 
Wholesale Prices, Inflation rate
After market WednesdayForeign Exchange Reserves Mar $539.04b vs 543.33b Feb (F/cast was 548b)
Comes after 21 consecutive months of growth, the central bank said yesterday. It attributed the decline to capital outflows caused by foreign portfolio managers, mutual funds and domestic life insurers after 10-year US Treasury yields rose above 1.7 percent and the US dollar index gained 2.59 percent.  Fund outflows reached US$8.9 billion and foreign portfolio managers cut their holdings in local shares by NT$150 billion (US$5.28 billion), mainly in heavyweight tech plays, data compiled by the Financial Supervisory Commission and the Taiwan Stock Exchange showed.
Taiwan worked with other democracies to help its diplomatic ally Paraguay get COVID-19 vaccines after China put pressure on the South American country to ditch Taipei in exchange for shots, and India stepped in to help, Taiwan’s foreign minister said.-VE for China’s international reputation and shows the extent of its vaccine diplomacy.
Taiwan says it will fight to the end if China attacks adding that the US can see a danger that this could happen amid mounting Chinese military pressure, including aircraft carrier drills near the nation.  Taiwan has reported repeated military activities by Beijing in the past few months, with the Chinese People’s Liberation Army Air Force making almost daily forays in Taiwan’s air defence identification zone.-VE
Taiwan has spotted Chinese drones circling the Taipei-controlled Pratas Islands in the South China Sea and may shoot them down if they stray too close, a government minister said on Wednesday, a move that could dramatically increase tensions with Beijing.
United Microelectronics Co yesterday reported record monthly revenue of NT$16.62 billion (US$584.66 million) for last month, up 14.06 percent from NT$14.57 billion a year earlier and 11.17 percent from NT$14.95 billion in February. In the first three months of this year, cumulative revenue grew 11.43 percent to NT$47.1 billion from NT$42.27 billion a year earlier, UMC said in a statement. Cumulative revenue grew 3.98 percent quarter-on-quarter, in line with the company’s forecast. +VE
Macronix International which supplies memory chips for Japanese gaming console maker Nintendo Co, yesterday reported that its revenue dropped 7.1 percent annually, but increased 19.8 percent monthly to NT$3.61 billion last month. The company said cumulative revenue in the first quarter was NT$9.63 billion, the best revenue for the first quarter on record. +VE
Yageo Corp yesterday said that its revenue more than doubled to NT$8.73 billion last month from NT$4.03 billion a year earlier and grew 24.6 percent from NT$7.01 billion in February. Yageo attributed the growth to an increase in the number of working days and healthy demand. Cumulative revenue in the first quarter soared 137 percent annually to NT$23.74 bn; the second-highest quarterly revenue in the company’s history, +VE
Walsin Technology said that its revenue jumped 53.7 percent year-on-year and 25.7 percent month-on-month to NT$3.76 billion last month. Walsin said demand has increased due to a stay-at-home economy and cloud-computing devices. Q1 revenue expanded 64.1 percent year-on-year to NT$10.46 billion from NT$6.37 billion. +VE
Gogoro Inc on Tuesday reported a healthy increase in electric scooter sales last month, thanks to the rollout of its VIVA MIX series and the renewal of government subsidies. The company sold 5,945 units, up from 1,107 in February.  That enabled Gogoro to secure an 8.4 percent share of Taiwan’s overall scooter market, up from 2.6 percent a month earlier.
Quang Viet Enterprise yesterday said revenue would expand at an annual rate of at least 25 percent this year as customers are betting on pent-up demand in light of the stabilizing COVID-19 situation worldwide. The company said that outdoor garment vendors are adding orders for shipments this month and that it has seen “the light at the end of the tunnel.” +VE
Adimmune Corp has won a bid to supply 3.68 million flu vaccines to the Ministry of Health and Welfare, which would generate revenue of NT$885.18 million (US$31.14 million), it said. That would account for 58 percent of the 6.32 million flu shots the ministry plans to purchase this year, with the remainder to be provided by TTY Biopharm Co and Sanofi SA, ministry data showed. +VE
Revised property tax to start on July 1.  The integrated house and land transaction income tax has been amended as the real-estate market heats up because of high liquidity and low interest rates.  Lawmakers across party lines yesterday agreed to July 1 as the provisional date on which a draft amendment to the Income Tax Act is to come into effect, with the aim of curbing real-estate speculation. +VE
A pig carcass found in New Taipei City on Sunday has been confirmed to be infected with African swine fever (ASF), the Council of Agriculture said on Tuesday.  Local pig farms have been cleared of the disease, the council said after testing.  It is possible that the carcass drifted from another country and was washed ashore, but the center would still conduct more tests on pig farms in Taoyuan and New Taipei City this week to gain a better understanding of the situation, the center said.  Genome sequencing of the virus found in the carcass showed a partial match for two different strains, both of which were previously recorded in China, it said.

Expect market to open lower with concerns over international relations and PBOC tightening remain. 
No data due
After market
WednesdayForeign Exchange Reserves Mar $3.17tn vs 3.205tn Feb.(F/cast was 3.2tn)
China reported 12 new coronavirus disease infections in the mainland for April 6, down from 24 a day earlier. The National Health Commission, in a statement, said Wednesday, two of the new patients were local infections. Both were reported in Ruili, a city in southwestern Yunnan province that borders Myanmar where a new cluster emerged last week. The number of new non symptomatic patients, which China does not classify as confirmed, fell to eight from 17 a day earlier.
The United States on Tuesday said it aimed to discuss a common approach with its allies towards participation in the Beijing 2022 Winter Olympics, as China’s foreign ministry warned that the world would not accept a boycott.   Difficult to see how you cannot accept a boycott?
President Xi Jinping told German Chancellor Angela Merkel on Wednesday that he saw "various challenges" in relations between China and the European Union and hoped the EU could "independently" make correct judgements, a Chinese government statement said. -VE as CAI could be in trouble.
FT Reports Turkey rebukes China ambassador in rare dispute. Tweets against policy on Uyghurs are defended by Ankara but anger Beijing -VE
China sent 15 fighter jets into Taiwan's air defence zone on Wednesday in a stepped up show of force around the island Beijing claims as its own, and Taiwan's foreign minister said it would fight to the end if China attacks.   Comes as China confirmed that it had tracked a US warship as it traversed the Taiwan Strait on Wednesday, a move the US described as a routine freedom of navigation exercise and Beijing denounced as destabilising to the region. -VE
Australia’s trade minister has told Australian businesses to “step up to the plate” in repairing ties with China amid the worst bilateral relations between the two countries in decades, as he put forth recommendations on how Australia can better engage with Asia.  He launched a final joint report by Asia Society Australia and the Business Council of Australia, detailing how Australian businesses, the government and academia can work together to increase trade in Asia via a “Team Australia’’ approach. The report, “A Second Chance: How Team Australia can succeed in Asia”, makes 24 recommendations on how Australia can diversify its trade across Asia by employing a “China and” rather than a “China or” strategy, while also acknowledging that Asia, with China at the forefront, “is not waiting for us”. +VE
Uygur ex-head of Xinjiang education department gets suspended death sentence  Sattar Sawut found guilty of separatism and taking bribes linked to publication of ‘problematic’ school textbooks, court says.  Five other Uygurs given heavy sentences, while former head of Xinjiang department of justice gets suspended death sentence in separate case.  Likely to raise further concerns about policy in Xinjiang -VE
China’s Tibetan government has issued a set of bans to tighten controls on areas bordering India, weeks after the two countries’ troops disengaged from a disputed part of their frontier following a months-long confrontation. On Tuesday it introduced 15 border regulations “to maintain security and stability of the border area”, the official Tibet Daily reported. A military insider said the regulations – reiterating that  actions such as moving border markers and damaging military facilities were illegal – were aimed at “preventing any infiltration activities”. -VE
China ‘could start easing international travel restrictions by next spring’ if it hits coronavirus vaccination targets  The country aims to inoculate at least 70 per cent of its population by then, which would allow China to start negotiating an end to border restrictions.  But Zhang Wenhong, head of Shanghai’s Covid-19 team, warns that it risks falling behind other major economies if take-up rates stay low
China's once-a-decade census is expected to show a further fall in the percentage of young people in its fast-aging population as high living costs and an aversion to having children among urban couples push China closer to a demographic crunch. Slight -VE

ADR’s -153pts @ 28,521 with Chinese Financial and Ecommerce names weak; Tencent after shareholder places stock.  Concerns over PBOC tightening and international relations remain.  
Data due pre market 
PMI March (Feb was 50.0 F/cast is 51)
Short Selling Wednesday 18.1% vs 18.7%Thursday
Top Shorts  Ping An (2318) 38%, Bud Pac (1876) 35%, Bankcomm (3328) 32%, Sands China (1928) 31%, Ali Health (241) 31%, ICBC (1398) 30%, Hang Lung Ppty (101) 30%, Wuxi Bio (2269) 28%, Sunny Optical (2382) 27%, CCB (939) 27%, Galaxy Ent (27) 27%, NWD (17) 25%.
Electoral Changes 
Hong Kong electoral changes about driving city back to straight and narrow, says senior mainland Chinese official. Deputy director of liaison office Tam Tieniu compares Hong Kong to car during seminar organised by Chinese General Chamber of Commerce ‘One man, one vote’ not equal to democracy, which takes many forms, he said.He rejected suggestions the move was a step backwards for democracy, arguing there were many forms of democracy and it was not only about one-person-one-vote.  “If you are driving a car and you see that the road you have been taking is getting more difficult and dangerous, will you still follow the route? For certain, you will take a turn and return to a safe and correct road … I do not think it is very difficult to understand,” he said.
Authorities will look into regulating the act of organizing or inciting voters to cast blank or invalid votes during elections, Secretary for Constitutional and Mainland Affairs Erick Tsang Kwok-wai said. These acts might affect the result of the elections, therefore it could constitute electoral fraud, he explained.
TENCENT (00700.HK)'s substantial shareholder Prosus, through its subsidiary MIH TC Holdings, intends to sell up to 191.89 million shares of TENCENT, foreign media reported. Upon completion, the shareholding of Prosus in TENCENT dropped to 28.9% from 30.9%.   Prosus promised not to sell any TENCENT's shares for at least the next three years.  The block was placed at prices of $575-595 per share, representing a 5.5-8.7% discount to the closing price $629.5 today, to cash in up to roughly $114.175 billion, according to sales prospectus.
Nokia has settled a multi-year patent fight with China's Lenovo Group, the world's biggest PC maker, resolving all pending litigation across all jurisdictions, the companies said on Wednesday. +VE
GEELY AUTO (00175.HK)  announced that the total sales volume of the Group for the month of March 2021 was 100,000 units, an increase of approximately 37% from the same period last year and up approximately 30% from February 2021.+VE
BYD (1211) said vehicle sales rose 33 percent year-on-year to 40,817 units with new-energy vehicle sales surged 97.6 percent to 24,218 in March. Production grew 26.4 percent to 39,007 units. First quarter sales jumped 70 percent, production increased by 75.7 percent and new-energy vehicle sales surged 147 percent. +VE
SUNAC (01918.HK)  announced that in March 2021, the Group achieved contracted sales value amounted to approximately RMB47.86 billion, representing year-on-year increase of 55%, and contracted sales area amounted to approximately 3.276 million sq.m., with contracted average selling price of approximately RMB14,610 per sq.m..
AliExpress Russia posted gross merchandise volume (GMV) of US$3 billion for FY2020-21, indicating the online retailer has become one of Russia’s leading e-commerce players.

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