May 18


Covid-19 Globally over 4.67m cases, 314k deaths
WHO meeting Monday likely to put pressure on China over an independent investigation in the source and spread of covid-19
US Futures opened higher +205pts along with S&P and Nasdaq futures as the Feds Powell's interview on CBS’s ’60 Minutes’ was aired. He said the economy will claw it way back but not fully recover until there is a covid-19 vaccine, maybe not until the end of 2021. Slight +VE for sentiment ahead of Asia opening

Trump over the weekend said at a press conference announcing more measure to fast track a vaccine that covid-19 will ‘go away at some point’. A number of US states ease lock-downs without seeing a reduction in new cases -VE
After market Friday the House Democrats passed a $3tn covid-19 relief package
Buffett sold most of his stake in Goldman Sachs and reduced his stake in JPMorgan
GOLD saw record inflows ($9.2bn) in April after the price fell in March as investors seek inflation hedge.
FT also said that Corporate bonds also saw record inflows but probably due to increased issuances as companies sought to raise funds and the Fed it would buy corporate bond ETF’s.

DOW +0.25%, NDX +0.79%, S&P +0.39%, Russel 2K +1.57% Market opened lower on poor data. Retail Sales saw a record drop although the sector worked its way back from the initial lows. Plus Trump announced tighter controls on Huawei and US suppliers to it which prompted rumours of retaliation from China. Chipmakers were weak; Qualcomm -5%, Lam Research -6.4%, Qorvo -4.2% and Skyworks -2%, Applied Materials -4.4% (despite good earnings) along with the Philadelphia Semiconductor index. But later the Michigan Consumer Data came out better that expected and markets put the bad news behind them and worked back the earlier losses. Which suggests that there is a lot of cash sitting on the sidelines looking to get invested. Overall for the week the US markets closed lower.
JC Penny +21% files for Chapter 11 after making a key $17m interest payment on Thursday although it had missed some rent payments. Other retail +VE Best Buy +1.8%, Walmart +2%, Kohls +5.1%, Nordstrom +4.9%, Lowes +3%, Home Depot +2%
But VF Corp -6.3% (Vans and Timberland) said quarterly sales were -10% and guided lower.
DATA
Retail Sales Apr -16.4% MoM vs -8.3% Mar (F/cast was -11.8%)
[Apr -21.6% YoY vs -5.7% Mar (F/cast was -16.3%)]
Retail Sales Ex Auto Apr -17.2% MoM vs -4% Mar (F/cast was -8.6%) Much worse than expected; panic buying of groceries eased MoM, clothing & accessories -90%, BUT non store vendors +21%. I still think consumer spending is going to remain weak until job security rises significantly and that is likely to take many months.
NY Empire State Manufacturing Index May -48.5 vs -78.2 Apr (F/cast was -65)
Industrial Production Apr -11.2% MoM vs -4.5% Mar revised (F/cast was -12.3%) [Apr -15% YoY vs -4.9% Mar revised (F/cast was -16.4%)]
Manufacturing Production Apr -13.7% MoM vs -5.5% Mar revised (F/cast was -10.8) [Apr -18 YoY vs -5.8% Mar revised (F/cast was -14.2)]
Capacity Utilisation Apr 64.9% vs 73.2% Mar revised (F/cast was 65%)
JOLTs Job Openings Mar 6.191m vs 7.004m Feb revised up (F/cast was 3.1m)
Business Inventories Mar -0.2% MoM vs -0.5% Feb revised lower (F/cast was -0.5%)
Michigan Data Preliminary
Consumer Expectations May 67.7 vs 70.1 Apr (Consensus was 71.8)
Current Conditions May 83 vs 74.3 Apr (Consensus was 75)
Inflation Expectations May 3.0% vs +2.1 Apr
5 Yr Inflation Expectations May 2.6% vs 2.5% Apr
Consumer Sentiment May 73.7 vs 71.8 Apr (F/cast was 65)
Baker Hughes Total Oil Rig Count 339 vs 374 prior
Foreign Bond Investment Mar $-299.3b vs $4.9b Feb
Overall Net Capital Flows Mar $349.9b vs -13.4b (F/cast wa -145b)
Net Long Term Tic Flows Mar $-112.6b vs 49.4b Feb
USD was weaker vs Yen & Euro. Bitcoin +0.4% @ 9406.00, VIX -2.2% @ 31.89, US T10 0.644%
OIL Brent +3.7%, WTI +5.9% as crude demand in China rises
Gold +0.76%, Silver +5.7%, Copper -0.6%. Gold hits a 7 yr high as US/China tensions rise
AHEAD NAHB Housing Market Index,

DAX +1.24%, CAC -0.11%, FTSE +1.01% Markets opened higher but initially drifted lower on weak data but then trended higher in the afternoon as US markets reversed early loses only to sell off into the close. Basic resources lead the market and retail was the laggard. Economic recovery and covid-19 weighting on investor sentiment, with Germany reporting a transmission rate of below 1 +VE. Economic data was weak as was the US data which gave some cause for concern.
EU policy chief says member states must remember the ‘collective discipline’ as China attempts to ‘divide and rule’.
GEA +9% (Factory equip maker) on strong Q1 earnings and guidance.
Hammerson +10% after recent weakness
WH Smith -8.8% 1H results show an 85% fall in sales but some transport stocks rallied National Express +13.3% April revenue done but inline. Trainline +11% on news Transport of London got a GBP1.6bn government bailout to keep it running until at least September
LafargeHolcim -6%
Richemont -2% announced FY results which missed forecasts and said manning to halve it dividend. -VE cross read Luxury brands
DATA
EUROZONE GDP Growth Rate 2nd est. Q1 -3.8% QoQ vs +0.1% prior (F/cast was -3.8%) [Q1 -3.2% YoY vs +1% prior (F/cast was -3.3%)]
Balance of Trade Mar Euro 28.2b vs 23.7b Feb (F/cast was 22.9b)
Employment Change Prel Q1 -0.2% QoQ vs +0.3% prior (F/cast was -0.6%) [Q1 +0.3% YoY vs +1.1% prior (F/cast was +0.1%)]
GERMANY PPI Apr -0.7% MoM vs -0.8% Mar (F/Cast was -0.6%) [Apr -1.9% YoY vs -0.8% Mar (F/Cast was -1.8%)]
GDP Growth Rate Flash Q1 -2.2% QoQ vs -0.1% prior (F/cast was -2.4%) [Q1 -2.3% YoY vs +0.4% prior (F/cast was -2.6%)]
FRANCE Inflation Rate Final Apr 0% MoM vs +0.1% Mar (F/cast +0.1%) [Apr +0.3% YoY vs +0.7% Mar (f/cast +0.4%)]
Harmonised Inflation Rate Final Apr 0% MoM vs +0.1% Mar (f/cast +0.1%) [Apr +0.4% YoY vs +0.8% Mar (f/cast +0.5%)]
AHEAD GERMANY No data due
FRANCE No data due
UK No data due

JAPAN Expect Nikkei to open flat Yen currently 107.18 The pre market GDP data will set the tone for todays trading. More companies and stores re-opening
Data due GDP DATA (Growth rate, Growth Annualised, Price Index, Capital Expenditure, External Demand, Private Consumption). Later Tertiary Index
Sunday Tokyo saw 5 new covid-19 cases lowest since March 22 +VE. Osaka reported zero infections for the first time in two months
Govt likely to come under pressure on reports that doctors and other front line staff lack fresh marks and hazard pay.
TRAVEL Govt in talks with S Korean and China about relaxing border controls to help business people travel and revive business activities +VE
BANKS Japan’s three megabanks put aside a collective ¥1.1tn in loan loss provisions. Reflects their worry about the losses that could occur in the Japanese economy. Key is that they have been vague about how they have calculated the amount needed. Has a -VE cross read to the smaller regional banks.
FARMERS are having to dump produce with restaurants closed and imports of fruits are in short supply due to the reduction in flights and even Asahi Shuzo Co., famous as the brewer of Dassai brand sake, has stepped up sales of its Yamada Nishiki rice to be used as food, instead of in the production of sake amid a decline in sake consumption.
RENOWN Inc. said Friday that it has effectively gone bankrupt with debts totaling ¥13.8 billion, following a slump in sales due to the COVID-19 epidemic. It will be de-listed on June 16. Expect more to follow.
BIG FIRMS survey shows they are hiring about hiring graduates this year while the global outlook is unclear.

SOUTH KOREA Expect markets to open lower as investors worry about US/China relations, local sentiment slight +VE with only 5 new covid-19 cases reported on Sunday and those are still connected with the Itaewon cluster surge. But the economic fall out from covid is a concern with rising unemployment and expectations of Govt cutting its economic outlook.
No data due

Schools plan to reopen on Wednesday
The Financial Services Commission has vowed to gain control over the country’s overheated exchange-traded funds ETF’s), even at the cost of a temporary market contraction.
South Korea’s financial authorities have slashed government subsidies for foreign banks (-VE for Citi and Standard Chartered) that they view as “passive” toward the need to support small businesses hit by COVID-19, officials said Sunday. They have re-allocated the balances to local banks who today will accept applications from owner-operators who face liquidity shortages amid the prolonged fallout from COVID-19.
KT to co fund with the B&M Gates Foundation a mobile app to help with early detection of infectious diseases using AI data surveillance and analysis.
HOME APPLIANCEs Survey shows increased popularity of electronic goods helping household chores (washing machines, dish washers, water purifiers, fridges etc.) and less demand for grooming and beauty-related products. Laptops, computer game consoles etc also rose.
Doosan Heavy Industries, said Friday that it swung to a net loss in Q1 due to increased one-off costs; it posted a net loss of 371.4 billion won (US$302 million), shifting vs a net profit of 52.8 billion won a year earlier; mainly blamed on severance payments and losses from equity ties with Doosan Bobcat Co. Slight -VE
Korea Electric Power Corp. said Friday in Q1 it recorded 430.6 billion won ($350.1 million) in operating profit, swinging back into the black in three years; thanks to lower oil prices +VE
SsangYong Motor reported on Friday that its net loss sharply widened in the first quarter compared to a year earlier, marking the 13th consecutive quarter in the red, amid growing worries over the coronavirus outbreak. -VE

TAIWAN Expect market to open flat with concerns over TSMC and its ability to supply Huawei as the US tightens its regulations.
No data due

Sunday saw no new covid-19 cases reported, for the ninth day.
TSMC Friday announced plans to invest US$12bn to build a US plant to build 5 nanometer fab, with construction due to start next year. +VE
BANKS Local banks continued to accelerate approvals of loans to businesses affected by the COVID-10 pandemic, with cumulative lending totaling NT$530 bn (US$17.7 bn) as of Wednesday, +48% from two weeks earlier, Financial Supervisory Commission data showed. +VE
Hon Hai Friday reported Q1 net profit -89.5% YoY, EPS NT$0.15; lowest since 2008 due to falling demand and production disruptions in China (70% of production). Margins dropped and revenue was -12% YoY. Said this quarter gross margin should return to normal levels. Looking to improve bottom line by cutting staff 30%-50% -VE for China. FT Weekend article on Apples AirPods maybe one are, notes how often they are lost and replaced. Also notes the batteries tend to die after 3 years and most people upgrade then rather than replace the batteries. Which is the same cycle for Apple to release upgrades.
Fuel prices rise for a third consecutive week; gasoline and diesel prices +NT$0.9 per litre.
BizLink on Friday reported Q1 profit -28.63% YoY in the first quarter, but provided no guidance for the second quarter due to the COVID-19 pandemic. It blames fewer working days and lower utilization levels. Said it would take tie for global supply chains to return to normal but was upbeat for its businesses in the electric vehicle, semiconductor equipment and medical device areas, after work resumed to normal levels from the end of last month, it added. Slight +VE
StarLux Airlines plans to resume operations next month by offering three flights from Taiwan to Macau each week and one weekly flight to Penang, Malaysia, citing easing conditions amid the COVID-19 pandemic. +VE
Giant and Merida last week reported annual declines in net profit and revenue in the first quarter due to the COVID-19 pandemic. However, demand for bicycles is expected to increase in the US and Europe once lockdowns are lifted +VE

CHINA Expect market to open lower as tensions with US rise. Reported 5 new cases on Sunday down from 8 on Saturday; says risk of second wave remains -VE
Data due Pre Market House Price Index

China Sunday says it firmly opposed to the US tightened up its rules on supplying tech to Huawei and other Chinese companies. It says it will take action to safeguard Chinese firms rights. After on Saturday saying the US needs to stop ‘unreasonable suppression’ of Chinese companies like Huawei. But in reality it can’t do much. Key is that if TSMC can no long supply the company it’s a big -VE. Its only response is to target US firms like Apple and others with increased inspections etc but that would only accelerate companies leaving China… at a time when it will need all the jobs it can get!
SMIC; Chinese state-backed funds invested US$2.25 bn to support advanced chip manufacturing, as Washington tightens technology restrictions on China. SMIC plant’s registered capital jumped from US$3.5 bn to US$6.5 bn the company said in an announcement on Friday. The chipmaker’s stake in the Shanghai facility would fall from 50.1% to 38.5%, it said. The plant has capacity to produce 6,000 14 nanometer wafers a month and plans to increase that to 35,000.
Policy advisor to the PBOC Ma Jun warns agains the PBOC buying special treasury bonds as he feels these could lead to inflation risks and asset bubbles in the future. Interesting comments just ahead of the NPC and CPPCC meeting which start at then of this week.
State media launched an attack on Trump saying that America know about the virus in January this year and that he and other US politicians are lying.
Chinese ambassador to Israel found dead at home. Comes just days after he condemned comments from US Sec Of State Pompeo over Chinese investments in Israel.
China fired 5 health officials in Jilin the centre of the recent outbreak; analysts think the policy could result in cover up and fewer cases being reported which would be counter productive.
China admits it destroyed covid-19 samples on Jan 3 at unauthorised labs ’to prevent risk to labs bio safety and prevent secondary disasters’ but not part of a cover up. Which to me doesn’t quite make sense. Why did ‘unauthorised’ labs have the samples and what were they doing with them and why destroy them rather than send them to authorised labs. Will put more pressure on China to allow an independent inquiry.
China/Australian relationship under pressure with Camberra calling on Beijing to return senior ministers calls aimed at trying to resolve the disputes over beef imports and the threat to barley imports -VE.
Govt urges food companies to increase inventories of grains and oilseeds as possible second waves worldwide may impact supply chains. Interesting considering the threat to cut barley imports from Australia; reflects the position China is finding itself in with limited responses.

HONG KONG ADR’s -195pts at 23,602 although ADR’s closed before the final uptick in US markets BUT sentiment is cautions on US/China relationship and an increase in anti-government protests in HK. No new local covid-19 cases and 3 imported cases reported
No data due

After Market Friday GDP Growth Rate Flash Q1 -5.3% QoQ vs -0.5% prior (F/cast was -5.3%) [Q1 -8.9% YoY vs -3% prior (F/cast was -8.9%)]
The recession deepened in Q1, covid-19an associated measures taken disrupted the local economy and supply chains in the region. To reflect the new data the Govt forecast rates of underlying and headline consumer price inflation for 2020 as a whole are revised downwards to 2.2% and 1.4% respectively, from 2.5% and 1.7% as announced in the budget. The govt thought a V shaped recovery unlikely and the recovery is likely to take time.

PROFIT WARNING After market Friday FAIRWOOD HOLD (52.HK) PROFIT WARNINGS expecting a significant decline of 65% to 75% in the profit for the year ended 31 March 2020, vs profit for the year ended 31 March 2019. Mainly attributable to the severe drop in foot traffic and revenue since the outbreak of novel coronavirus; the decline in gross profit margin that was mainly due to rising rental and labor costs; and the adoption of Hong Kong Financial Reporting Standard 16, “Leases”, which took effect on 1 January 2019.
Short Selling HSI Friday 18.7% vs 16.2% Thursday
Top Shorts Hang Seng Bank (11) 53%, Wharf REIC (1997) 47%, HSBC (5) 41%, ICBC (1398) 41%, Country Garden 33%, SHKP (16) 33%, Hengan (1044) 31%, Galaxy Ent (27) 30%, CCB (939) 28%, MTRC (66) 27%, Want Want (151) 27%, HKEX (388) 27%, CNOOC (883) 26%, NWD (17) 26%, BOC (HK) (2388) 25%, CK Asset 25%, BankComm (3328) 25%.

INDEXES HANG SENG INDEXES Review for the quarter ended 31 March 2020. All changes will come into effect on 8 June 2020 (Monday). HSI no change. Hang Seng China Enterprises Index. Changes
Inclusions are CHINA UNICOM (762.HK), SHIMAO PROPERTY (813.HK) and MENGNIU DAIRY (02319.HK)
Exclusions are NCI (1336.HK), CHINA COMM CONS (1800.HK) and HAITONG SEC (6837.HK).
For Full review click the link https://www.hsi.com.hk/static/uploads/contents/en/news/pressRelease/20200515T000000.pdf

WATCH
WEEKEND PROPERTY SALES MIXED Wheelock reported selling 13 out of 101 units offered on Saturday at Grand Marini, Lohas Park. The same project sold 90% of its offerings last month with a significant over subscription (aprox 18 buyers per unit). BUT these are the ‘left over units’ that didn’t sell in previous releases and so buyers may be expecting better discounts. CK Asset is expected to launch its Sea to Sky apartments (Total size 1,422 units) in the same neighbourhood next month Slight -VE
SHKP (16) released 70 units in the second price list for Wetland Seasons Oark Phase 2 in TinShui Wai. The first two batches were oversubscribed 8.5 times. Its show flat for Aquila Square Mile in Tai Kok Tsui saw around 2,000 visitors over the weekend.
RoadKing (1098) sold 11 flats at Crecent Green over the past three days.
Secondary deals announced by Centraline Properties were -13.6% WoW.
CHINA SOUTH AIR (1055.HK) said in April 2020, passenger capacity (measured by available seat kilometres -64.86% YoY. In terms of cargo operations, cargo capacity (measured by available tonne kilometers) -27.91% YoY.
NETDRAGON (777.HK) said it with CHINA UNICOM (762.HK) and National Engineering Research Center for E-Learning and National Engineering Laboratory For Educational Big Data reached a strategic cooperation agreement on the establishment of a smart education joint venture - Yunqi Smart Education Technology Company Limited, fostering education information 2.0 and achieving education modernisation.
PROPERTY There are thought to be 9 tenders for the site Lot No.1069 in Survey District No. 3, off Anderson Road, Kwun Tong, Kowloon which closed today. Sole-basis bids from Chinachem, GRAND MING (1271.HK), K. WAH INT'L (173.HK) and SINO LAND (83.HK)
Joint-basis from the consortium of HENDERSON LAND (00012.HK), FE CONSORT INTL (35.HK) and Empire Group.
CHINA OVERSEAS (688.HK) has submitted tender without disclosing its investment basis.
Centa-City Leading Index (CCL) last stood at 175.94, +0.54% weekly.
CCL Mass last recorded at 178.74, +0.62% WoW.
CCL (small-and-medium units) last posted at 176.67, +0.58% weekly.
The three major indices notched 11-week high, signalling property prices are gaining momentum to go up they said.