May 18 Asian Macro Initial Thoughts Japan GDP data in focus.


18 May

This and previous notes can be found at SubStack
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Asia
Expect cautious trading as covid remains an overhang. Key today will be the Japan GDP data.
S Korea and HK will be closed Wednesday for Budda’s birthday.

Australia Futures indicate the market to open +16pts although I would expect caution ahead of the RBA meeting notes. Oil and Gold higher overnight +VE BeachEnergy, Woodside, Evolution, Northern Star etc. EML Payment expected to resume trading. South32 expect a +VE reception to the announcement it was divesting its coal business.
RBA Meeting Notes
Japan Nikkei futures opened +18pts but risen to +73 pts but expect flat open with caution ahead of the GDP data and margin call pressure on retail investors.  The falling number of new covid cases a slight +VE for sentiment.
S Korea Expect markets to open lower with inflation concerns still prevalent and margin call pressure
Taiwan Market to open lower with more margin call pressure after Monday’s 473pts fall. Worth noting that foreigners were net buyers Monday. Sentiment cautious on fears of more power cuts as a heatwave hits with no expectation of rain this week.
China Market to open higher if Team China continues to support the market. Concerns remain new covid cases, government support for the recovery, debt defaults and PBoC tightening.
HK ADR’s +137pts at  28,331 but with CCB, CBC, Baba and CKH weak. Expect the market to follow the lead from China
Europe
The European Union has agreed to a partial truce with the United States in a dispute over metal tariffs imposed by former president Donald Trump and to start discussions on global overcapacity and China’s “trade-distorting” policies.
US Futures
Opened Dow +50pts, S&P and NDX +0.1% but then eased to Dow+17pts, S&P and NDX flat

WHO warns the pandemic is far from over; with the triple mutant covid variant from India a potential global health risk.
Biden agrees to donate 80m covid vaccine doses.

Gojek and Tokopedia tie up to create a regional play in the space +VE to backers Tencent, Alibaba and Softbank.

DOW -0.16%, NDX -0.38%, S&P -0.25%, Russel 2K +0.11%
Markets opened lower and trended lower through the morning with Tech under pressure and Home Depot -1.1% off midday lows ahead of earnings Tuesday. But stocks worked higher from lunchtime time in choppy trading. Media in focus as AT&T -2.7% (was +5% pre market) is in advanced talks to merge WarnerMedia, which includes HBO, with Discovery -5% (was +16% pre market). Bitcoin volatile with uncertainty over whether Tesla -2.2% still holds bitcoin; Musk Monday said it had not sold any bitcoin. Which just adds to the confusion because in their last earnings they reported that they had. Also Michael Burry revealed he was holding a $530m short position in the stock.
MicroStrategy -6.1% (off midday lows) amid a slide in the price of bitcoin to the lowest level in more than three months. The business analytics company holds roughly $5 billion worth of bitcoin.
Marathon Petroleum ++3.8% after the company announced a modified Dutch auction tender offer for up to $4 billion of its common shares. But Federal Trade Commission officials said it’s sale of Speedway gas stations to the parent of the 7-11 chain may be illegal on competitive grounds. The $21 billion deal closed on Friday, but the officials say they will continue to investigate.
Earnings :
Hostess Brands -1.6% despite beating on the top and bottom lines of its quarterly results.
Lordstown Motors +14.6% after earnings.
Tencent Music Entertainment Group (TME.N) +0.6% in normal hours; on Monday beat quarterly results estimates, driven by strong growth in subscription and advertising revenue from its music streaming platform. Q1 revenue +40% to 1.69b Yuan. Although paying users for its music platform jumped, monthly active users (MAUs) for both music and social entertainment platforms declined by 6.4% and 14.2%, respectively. It also announced that it had with Sony Music signed a multi-year extension of their digital distribution agreement. +VE cross read to Tencent (700 HK). Stock initially sold down in after hours but then recovered.
Banks JPMorgan Chase +0.4%, Citigroup +1.1% Wells Fargo +2%, Amex -0.3%
Work from home names: Facebook -0.2%, Apple -0.9%, Amazon +1.5%, Netflix -0.9%,  Disney -2.1%, Zoom Video +0.3%, Alphabet +0.5% and Microsoft -1.2%,
Tech NXP Semi -0.6%, Nvidia -0.5%, Micron +0.9%, AMD +0.1%, Skyworks -0.5%
Re-opening stocks  Boeing -0.2%, Caterpillar +1%, Simon Property +0.1%, Kohl’s +4.5%, Nordstrom +5.3%, Gap +1.7%, United Airlines +2.3%, Carnival +1.1%, Wynn Resorts -1.5%, Chevron +1.2%, Exxon Mobil +2.3%,  
Lock down names Campbell Soup +0.2% General Mills -1.1%, JM Smucker -1.3%
DATA
NY Empire State Manufacturing Index May 24.3 vs 26.3 Apr (F/cast was 25)
NAHB Housing Market Index May 83 vs 83 Apr (F/cast was 83)
After market
Foreign Bond Investments Mar $118.9b vs -65.5b Feb
Overall Net Capital Flows Mar $146.4b vs +73.7b Feb revised from +73.6b
Net Long-term Tic Flows Mar $262.2b vs +4.2b Feb
USD was flat vs Yen & Euro. Bitcoin -3.6% @ 43,869.71, VIX +4.8% @ 19.72, US T10 @ 1.652%
OIL Brent +1.25%, WTI +1.55% as Europe lifts restrictions and rising US demand.
Gold +1.6%, Silver +3.5%, Copper +1.4%, Platinum 1.8%, Palladium +0.3%.
AHEAD Housing Starts, Building Permits, Redbook, API Crude Oil Stock Change
Earnings Walmart, Home Depot, Macy’s, Baidu, Take-Two Interactive, Trip.com, NetEase

DAX -0.13%, CAC -0.28%, FTSE -0.15%
Markets opened higher but drifted lower then sold down late morning. Around 1:30pm markets worked higher and traded around flat from 3pm onwards. No European data but weak data out of China and an increase in covid cases a worry especially the presence of the Indian covid variant as UK pubs and restaurants re-open. Inflation concerns remain ahead of the FOMC minutes. The sell off in bitcoin also a concern.
Earnings from Ryanair -0.6% off initial highs, who said it had seen a “strong snap back” in bookings in recent weeks, but reported a full-year net loss of 815 million euros ($989 million) as Covid-19 restrictions saw its traffic levels -81%.
Diploma +7% after reporting a rise in fiscal first-half profit and projecting full-year earnings ahead of expectations.
Kinnevik -38% as it it transferred its stake in online retailer Zalando to its shareholders.
No Data released
AHEAD
EUROZONE 
Balance of Trade, Employment Change, GDP Growth Rate
GERMANY No data due
FRANCE No data due  
UK  Claimant count, Employment Change, Ave Earnings (Inc & Ex Bonus), Unemployment Rate, Labour Productivity, 20 year Gilt auction

JAPAN
Nikkei futures opened +18pts but have 
risen to +73 pts expect a flat open with caution ahead of the GDP data and margin call pressure on retail investors. The falling number of new covid cases a slight +VE for sentiment.
Yen currently 109.20
Data due pre market
GDP Q1 Data Prelim
Growth Rate Q4 was +2.8% QoQ F/cast is -1.1%
Annualised Q4 was +11.7% F/cast is -4.8%
Price Index Q4 was +0.3%
Capital Expenditure Q4 was +4.3% QoQ Consensus is +1.1%
External Demand Q4 was +1.1% QoQ Consensus is -0.2%
Private Consumption Q4 was +2.2% QoQ Consensus is -2%
Later Tertiary Index Mar Feb was +0.3% F/cast is +0.7%
Tokyo reported 419 new covid cases (-123 DoD) below 500 for the first time in 3 weeks; Osaka 382 and Hokkaido 372. Nationwide 3,677 +VE for sentiment.
Opposition to holding grows to over 80% according to a poll by the Asahi Shimbun daily which found 43% of respondents want the 2020 Games cancelled, with 40% wanting a further postponement.
Mitsubishi UFJ Financial Group Inc (MUFG) posted Monday a better-than-expected +47% rise in FY net profit to 777bn Yen (US$7.11bn) vs 528.2bn Yen last year after earnings were hit by an impairment charge on its units in Southeast Asia. It said it will aim for net zero emissions in its finance portfolio by 2050, responding to pressure to align its business with the targets set in the Paris Agreement on climate change.

SOUTH KOREA 
Expect markets to open lower with inflation concerns still prevalent and margin call pressure
No data due
KDCA reported 619 new civid cases on Monday; 
above 600 for a third day.
SK Hynix Inc (000660.KS), has requestd talks to acquire South Korea-based Key Foundry, 
a chip contract manufacturer, a South Korean newspaper reported on Monday. SK Hynix has expressed intention to negotiate for the full acquisition of the 8-inch wafer foundry, Korea Economic Daily reported on Monday citing unnamed sources in the tech and investment banking industries. Potentially +VE
Coupang is offering discounts of up to 40% on overseas direct purchases and Coupang direct import items for three days through through Wednesday, as part of its “Global Shopping Day.”
Samsung Electronics is expected to announce its own investment plans as early as this week and investors are watching to see how they compare with TSMC’s announced spending.
SK Chemicals said Monday that it acquired a 10 percent stake in Shuye, a Chinese firm that specializes in recycling plastic waste, to commercialize eco-friendly plastic called glycolmodified polyethylene terephthalate, or PETG.
South Korean airlines will raise fuel surcharges on international routes next month amid rising jet fuel prices, industry sources said Monday.
SsangYong Motor said Monday its Q1 net losses narrowed to 86.29 billion won ($76 million) vs 193.54 billion won Q1 2020. Sales fell 17 percent to 535.83 billion won from 649.19 billion won over the cited period. The company is currently in court receivership.
Samsung Display Co. and LG Display Co. on Monday said they will unveil their latest innovations at the world's leading exhibition for display panels to be held virtually this week.  Samsung Display said its exhibitions will include a 7.2-inch display with a multi-folding design. It allows a mobile device to be used like a smartphone when folded twice and used like a tablet when completely unfolded. Such an OLED display product, called the "S-foldable," was rumored to be used for Samsung Electronics Co.'s upcoming foldable smartphone. LG Display, the world's biggest OLED panel maker, said it will introduce an 83-inch OLED TV panel with enhanced luminous efficacy. +VE

TAIWAN 
Expect market to open lower with more margin call pressure after Monday’s 473pts fall. Worth noting that foreigners were net buyers Monday. Sentiment cautious on fears of more power cuts as a heatwave hits with no expectation of rain this week.
No data due
Taiwan reported 333 new covid cases Monday and announced school closures and entertainment venues
Taiwan Power Co. (Taipower) initiated a power outage starting at 8:50 pm. Monday in certain parts of Taiwan due to a sudden surge of electricity consumption, the company said in an emergency notification. 
The emergency measure was carried out in areas categorized as C and D zones for power rationing, and ended up being a single round of blackouts that affect 660,000 households, Taipower said. -VE
Employers are obligated to grant eligible employees "disease prevention childcare leave" following the announcement by Taipei and New Taipei that all schools in the two municipalities will be closed, from elementary to high school level, for two weeks starting Tuesday to curb the coronavirus outbreak, the Ministry of Labor (MOL) said Monday. -VE
Pegatron Corp., one of Taiwan's largest contract PC makers, said Monday that one of its employees has tested positive for COVID-19 as an alert among PC producers has been raised to contain the disease.  Pegatron said it was informed by health authorities on Sunday that the employee, who worked in the company's headquarters in Guandu in the northwestern part of Taipei, was a weak positive for the disease and a second test is being done to confirm the result. Slight -VE
The production value of Taiwan's semiconductor industry is expected to rise more than 18% YoY in 2021 due to strong global demand for computers and internet-related devices, according to the Industrial Economics and Knowledge Center (IEK). +VE

CHINA 

Expect market to open higher if Team China continues to support the market. Concerns remain new covid cases, government support for the recovery, debt defaults and PBoC tightening.
No data due
China will tread carefully in relaxing its birth policies for fear of harming social stability, 
even as the latest census highlights the urgency to address the country’s declining birth trends and ageing population, policy sources said.
Philippine President Rodrigo Duterte barred his cabinet from talking about the South China Sea in public on Monday after weeks of strong rebukes by his ministers against China’s conduct in the contested waters.
Brazil will receive ingredients from China to produce up to 25 million doses of the AstraZeneca (AZN.L) and Sinovac (SVA.O) COVID-19 vaccines on Saturday and early next week, Health Ministry and political officials said on Monday. +VE for vaccine diplomacy.

HONG KONG  
ADR’s +137pts at  28,331 but with CCB, CBC, Baba and CKH weak. Expect the market to follow the lead from China
No data due
Earnings VTech (303), CarInc (699), Truly (732)
Tencent due to report Thursday

Short Selling Monday 16.5% vs 16.9% Friday
Top Shorts 
Bud Apac(1876) 48%, Hengan (1044) 40%, Shenzhou Int (2313) 38%, MTRC (66) 38%, Sunny Optical (2382) 37%, Bank of China (3988) 36%, CK Assets (1113) 35%, Hang  Seng Bank (11) 31%, HK & China Gas (3) 29%, Bank Comm (3328) 28%, Galaxy Ent (27) 28%, Baba (9988) 28%, CLP (2) 27%, Petrochina (857) 27%,  Wharf REIC (1997) 27%, NWD (17) 26%, AIA (1299) 25%, Henderson Land (12) 25%, SinoBioPharm (1177) 25%, CKH (1) 25%.
WATCH
NEW WORLD DEV (00017.HK) disclosed that "The Pavilia Farm III", the residential property project co-developed with MTR CORPORATION (00066.HK) atop Tai Wai Station, 
has secured pre-sale consents. The Pavilia Farm III offers a total of 892 units in two towers.
BOC Hong Kong's (2388) loan business in Q1 was +3.9% YoY vs the market average growth of 2.4 percent, deputy chief executive Wang Bing said. Among them, loans related to property investment and stocks outperformed, as personal housing mortgages are also growing 0.8 percentage point faster than the market, the lender said at its annual general meeting yesterday. The bank's asset quality is expected to remain healthy in the first half since the industries pushing the growth of loan business were not affected much by the Covid-19 pandemic.
The bank will balance the increase in loans in China, Hong Kong and Southeast Asia, and believes that the full-year loans growth will reach mid to high single digits, Wang said.
JD LOGISTICS (02618.HK)'s IPO has registered nearly $98.9 billion margin as at around 5:30 pm Monday.
Based on the public fundraising amount of approximately $792 million, the IPO has been over-subscribed by more than 123.8 times so far.
Hong Kong Disneyland reported that FY20 revenue went down 76% yearly to HK$1.4 billion.
Earnings before interest, taxes, depreciation and amortization (EBITDA) was negative HK$1.5 billion, and net loss was HK$2.7 billion. During the year, park attendance was 1.7 million, a drop of 73 percent compared to prior year.
GOLD PEAK (00040.HK) said that Asia has been its biggest market over the past three years, making up around 45% of the total turnover. Equally, the Company wishes to be one of the world's top-five consumer battery suppliers in 2025
Under structural overhaul, CATHAY PAC AIR (00293.HK) plans to trim the ground service unit's headcount to four grades from five, reported Apple Daily.  Accordingly, the titles "Supervisor" and "Service Leader" for the department will be combined into "Service Excellence Lead", with effect from this September.

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