May 19


Covid-19 Globally over 4.75m cases, 316k deaths
Massive rally on the basis of a potential vaccine and no second wave in the US.
US Futures open flat
WHO rebukes China over excluding Taiwan from its meeting. President Xi called for international co-operation. He supported an inquiry but only after the virus has been brought under control
ASIAN AIRLINES weak as Thai Airways Int files for bankruptcy rehabilitation -VE

DOW +3.9%, NDX +2.4%, S&P +3.2%, Russel 2K +6.1% Markets gapped higher on positive results from a phase 1 covid-19 vaccine trial by Moderna +20% (but off initial highs and easing in after market). That was on top of the futures already having moved higher on comments from the Feb Chair Powell that he was cautiously optimistic that the US could call its way back. Markets rallied through the day with a slight dip into the close.
Economy 're-open names' rallied Disney +7.2%, MGM Resorts +10.5%, Carnival +15.2%, Delta +13.9%, United +21% American Airlines +9.2% along with the banks; Wells Fargo +8.8%, BoA +6.9%, Citi +8.9%, JPM +5.3%, Goldmans +5.8%.
Netflix -0.4%, Facebook +1.1%, Amazon +0.7%, Apple +2.4% as it outlined procedures for opening stores.
Long term Electric games plays Activation Blizzard -1.4%, Zynga -1%, ahead of new consoles and systems from Sony and Microsoft +1% that will allow games to be played on laptops, tablets and mobile phones. Nvidia +3%
Uber +3.4% announced to cut 3,000 more jobs.
DATA
NAHB Housing Market Index May 37 vs 30 Apr (F/cast was 32)
USD was slightly weaker vs Yen & Euro. Bitcoin -0.1% @ 9680.79,
VIX -8% @ 29.3,
US T10 +0.726% Yields jump on vaccine hopes
OIL Brent 7.1%, WTI +8.1% although off day highs (+13%). May contract expiry today
Gold -0.7%, Silver +2.7%, Copper +3.9%
AHEAD Building Permits, Housing Starts Redbook, API Crude Oil Stock Change

DAX +5.7%, CAC +5.2%, FTSE +4.3% markets opened higher on +VE comments from Fed Chairman Powell that the US economy could ‘claw its way back’ plus more easing of lock-downs in Europe and then news of a positive phase 1 covid-19 vaccine trial. They closed at day highs. All sectors rallied, especially oil. Worth noting that there was public unrest in a number of countries over the weekend due to the current lock-downs.
RyanAir +15.8% Q1 profits rose but it warned of a difficult year ahead. It’s negotiating pay cuts, unpaid leave and up to 3,000 job losses.
Hammerson +22.4% on hopes of easing lock-downs
Elekta +15.8% on securing a US$200m order
ISS +14% on bid hopes after announcing Jacob Aarup-Anderson its new CEO
Tui +14%
DATA No data
AHEAD

EUROZONE New Car Registrations, Construction Output, ZEW Economic Sentiment Index
GERMANY ZEW Economic Sentiment Index and Current Conditions
FRANCE No data due
UK Employment Change, Ave Earnings Inc and Ex Bonus, Unemployment Rate


JAPAN Expect Nikkei to open higher following the US & European moves. Yen slightly stronger currently 107.29 The massive rally in Europe and US likely to spill over into Asia although without as much upside.
Data due at lunchtime Industrial Production and Capacity Utilisation
Yesterday’s data showed Japan slipped into recession as people limited spending and companies cut Capex and many expect more downside ahead.
Japan will postpone a bid to raise the retirement age of public prosecutors, media said on Monday, given an intense public backlash fuelled by fears for judicial independence.
SoftBank Group Corp reported a stunning $18 billion loss at its giant Vision Fund, pushing Masayoshi Son's conglomerate to a record loss and highlighting the deepening crisis at its portfolio companies from the global downturn. It is taping its Alibaba stake to raise $11.5bn after the loss and Jack Ma is to leave the board. -VE
Panasonic reported FY Net Profit -21%; weak auto electric parts sales and poor factory equipment sales plus covid-19 -VE. One piece of good news was that it was reopening its talks with Tesla regarding a Gigafactory.

SOUTH KOREA Expect markets to open higher but upside limited by concerns over the US/China relationship.
No data due

SK Hynix & Samsung saw weakness on Monday as US tightens curbs on supplies to Huawei. The issue will be over the use of US technology in making the chips they supply to Huawei.
Doosan Heavy & Construction said Monday that it will put about 400 employees under paid suspension as part of its self-rescue efforts amid a prolonged slump. Slight +VE
SK Engineering and Construction said Monday it has won a construction deal worth $7.55 million for a mega-sized Propane Dehydrogenation plant in Saudi Arabia. +VE

TAIWAN Expect market to open higher following the US & European rally but upside constrained by the US tightening on supplying Chinese Tech companies -VE for TSMC and others.
No data due

Dropped its bid for observer status as the WHA meeting but agreed with the WHA to resume its bid for acceptance later this year.
TSMC halts new Huawei orders; orders already received and those in production are not affected -VE
MediaTek which designs chips used in mobile phones, yesterday launched its new 5G Dimensity 820 system-on-chip (SoC), targeting mid-range to high-end smartphones. The company expects the penetration of 5G technology to gain pace quickly this year and not be affected too much by the COVID-19 pandemic. +VE

CHINA Expect market to open higher but investors remain cautious ahead of PBoC Prime loan rate decision Wednesday and the NPC and CPPCC meetings at the end of the week
No data due

President Xi addressed the WHO and deflected criticism but remains under pressure. He agreed to an investigation once the virus was under control. Later China imposed tariffs on Australian Barley in response to Australia’s demand for the investigation into the source of Covid which reveals the duplicity of Xi, calling for an international effort, agreeing obviously reluctantly and them imposing tariffs.
Huawei said its business will be unavoidably undermined by the recent restriction of the US, yet it voiced confidence in finding solutions soon. The US requires licenses for sales to Huawei of semiconductors made abroad with American technology, effective last Friday, with a 120-day grace period. Huawei Rotating Chairman Guo Ping said the company will make its best efforts to observe the US rules, while largely raising R&D and inventory. This will have a significant impact to the suppliers to Huawei going forward.
China’s Tianqi Lithium Corp (002466.SZ), one of the world’s biggest lithium producers, said on Monday its controlling shareholder planned to sell around a sixth of its holding, which could raise more than $200 million in much-needed cash. Tianqi has admitted liquidity problems following a deep fall in prices for lithium, used in electric vehicle batteries. It said on Friday it was talking to banks about easing the terms of its debt, which includes a $3.5 billion loan to buy a stake in Chilean miner SQM (SQMA.SN) in 2018.
US reported to be considering paying US companies to move operations out of China via tax breaks, subsidies etc -VE for China.

HONG KONG ADR’s +380pts to open at 24,314 with all ADR’s in the green except CKH (1 HK). Expect an initial short squeeze especially in the Chinese Banks which saw significant shorting on Monday. Alibaba upside may be curtailed as Softbank says it will raise $11.5bn using its holdings in the company; but did not make clear if via a sale or loan but news that WVR stocks would be allowed in the HSI index although limited at 5% +VE
Data due
after market Unemployment Rate

Short Selling HSI Monday 21.1% vs 18.7% Friday
Top Shorts Wharf REIC (1997) 56%, Want Want (151) 45%, CKI (1038) 40%, Hengan (1044) 34%, HSBC (5) 34%, CK Asset (1113) 25%, Galaxy Ent (27) 33%, BankComm (3328) 33%, BOC (HK) (2388) 33%, ICBC (1398) 30%, CCB (939) 27%,Geely (175) 27%, Country Garden 26%, Tencent (7000 26%, Sunny Optical (2382) 26%, Bank of China (3988) 26%.
INDEXES Hang Seng Indexes said WVRs and secondary-listed companies coming from the Greater China region will be included in the HSI and the HSCEI universes. This decision is strongly supported by the market, with more than 90% of respondents in favour. Starting from the August 2020 index review. As some investors perceived that the management structures of WVRs are different from those of traditional institutions, Hang Seng Indexes Company decided to cap the weighting of individual WVRs in HSI and HSCEI universes at 5% at the initial stage based on prudential principle. +VE but with the weighting at a max of 5% unlikely to have significant initial interest.

WATCH
CHINESE BANKS saw significant short selling Monday ahead of the PBoC setting the Prime Loan Rate on Wednesday; many are a expecting a significant cut, which would be good for the economy but -VE for banks. Looks like a crowded trade now.
TENCENT (700.HK) Chairman and CEO Pony Ma Huateng submitted seven written proposals to the Two Meetings of the PRC, namely NPC and CPPCC Meetings, for this year, touching hot issues such as industrial Internet, rural revitalization, fintech, medical services, small-and-micro enterprise development, regional development, ecological environment protection and so on, Southern Metropolis Daily reported.
PICC GROUP (1339.HK) aggregate premiums income as derived from PICC P&C, PICC Health and PICC Life for the period from 1 January to 30 April 2020 was RMB237.942 billion, +2.3% yearly.
PICC P&C (2328.HK) original insurance premium income for the period from 1 Jan 2020 to 30 April 2020 was RMB164.721 billion, +2.9% yearly.
VTECH HOLDINGS (303.HK) annual results ended March 2020. Revenue +0.2% YoY to US$2.166 billion. Net profit amounted to US$191 million, +11.3% yearly. EPS was US75.7 cents. Final DPS was US36 cents. Together with interim DPS of US17 cents, full-year DPS was US53 cents.
COUNTRY GARDEN (2007.HK) stated that it has put all its projects in Guangxi on hold and mounted probes and checks on all projects across the country on 17th-22nd to identify and make up for latent safety loopholes. In response to an incident of an elevator crumbling in a Guangxi.
The Government announced today (May 18) that certified public accountants (practising), partners, directors or employees of registered practice units of the Hong Kong Institute of Certified Public Accountants (HKICPA) who are required to travel to the Mainland to conduct audit work for companies listed in Hong Kong with Mainland operations may apply for exemption from the compulsory quarantine arrangement.