May 19 Asian Macro Initial Thoughts HK & S Korea closed. Expect a weak open and light T/O.

19 May

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S  Korea  and Hong Kong closed for Budda’s Birthday.

Australia Futures indciate the market to open -74pts following overnight weakness and caution as we could get Consumer Confidence, Inflation Expectations, Lending Index and Wage Price Index data.  Oil weaker but Gold firm.  Results from Webjet and a resumption of trading for EML payments.
Japan Nikkei futures opened +58pts and have been rising; currently +98pts before suddenly crashing to flat.  Expect market to open flat and work cautiously higher  with selective bargain hunting.
S Korea Markets closed for Budda’s birthday re-open Thursday
Taiwan Market to open flat following the strong rebound on Tuesday and after weak US Markets overnight.
China Market to open lower following the US and news that the EU is likely to freeze its investment agreement with China.  But the wild card  remains Team China
HK Markets closed for Budda’s birthday
US Futures
Opened Dow -40pts S&P +0.2% and NDX+0.1% but have eased Dow -25pts, S&P -0.1% and NDX +0.05% Caution ahead of FOMC minutes and more retail earnings.  Earnings season wrapping up means more focus on data; especially inflation related which could put more pressure on large tech.

Lamborghini plans to invest US$1.5 billion to produce an entirely gas-electric hybrid lineup by 2024, but its first fully electric model will not appear until the second half of the decade, the brand's CEO said, Reuters reports.

DOW -0.78%, NDX -0.56%, S&P -0.85%, Russel 2K -0.73%
Markets opened slightly higher but Dow and S&P dropped into red.  Dow traded in the red, S&P traded around flat and the Nasdsaq worked initially higher.  In early trading weak housing data -VE for sentiment although good pre market earnings from Macy’s HomeDepot and Walmart countered the downside.   Growth stocks mired as investor try and get a handle on inflation.  But all turned weaker around 1pm after Yellen speech calling on business leaders to support Biden’s higher taxes to pay for Government stimulus, she also called for stronger unions and lowering barriers to foreign competition.  Big tech especially under pressure.
They rebounded mid afternoon but then sold off into the close; ahead of Wednesday’s FOMC minutes.
Pre market
Macy’s -0.4% off initial highs after earnings & revenue topped beat plus SSS +60% it also raised its full-year forecast.
Home Depot -1% off initial highs on strong earnings & revenue beat and SSS +31%. (+VE cross read to Techtronics (669 HK))
Walmart +2.2% as earnings & revenue and SSS of +6% beat. It also raised its Q2 and FY outlook.
Tesla +0.2% off initial lows after Michael Burry announced a large short
Fisker +8.8% on earnings where the loss was less than expected but there were concerns as it left its capex forecast unchanged for the year.
Toyota was strong after hitting a new high in Japanese market trading, after forecasting a return to pre-pandemic profitability levels and dealing successfully with the global semiconductor shortage.
Banks JPMorgan Chase -1.4%, Citigroup -1.1% Wells Fargo -2.2%, Amex +1.1%
Work from home names: Facebook -1.7%, Apple -1.1%, Amazon -1.2%, Netflix -0.5%,  Disney -0.2%, Zoom Video +1.3%, Alphabet -1.2% and Microsoft -0.9%,
Tech NXP Semi flat, Nvidia -1.1% (announced seeking to make its chips less useful for digital mining), Micron -1.9%, AMD -0.3%, Skyworks -0.7%
Re-opening stocks  Boeing -0.2%, Caterpillar -2.2%, Simon Property +0.3%, Kohl’s -3.5%, Nordstrom -2.6%, Gap -3.7%, United Airlines -0.3%, Carnival +1.7%, Wynn Resorts -1.1%, Chevron -3%, Exxon Mobil -2.8%,  
Lock down names Campbell Soup -1.1% General Mills +0.2%,  JM Smucker +0.2%
Housing Starts Apr -9.5% MoM vs +19.8% Mar revised (F/cast was-2.8%)
Building Permits Apr +0.3% MoM vs +1.7% Mar revised (F/cast was -0.9%)
Redbook +12.6% YoY vs +13.3% prior
After Market
API Crude Oil Stock Change +0.62m vs -2.533m prior (Concensus was +1.68m)

USD was weaker vs Yen & Euro. Bitcoin -2.9% @ 42,055.09, VIX +8.2% @ 21.34,
US T10 unch at 1.64% but hit 1.651% intraday
OIL Brent -1.1%, WTI -1.1% off the two month high of $70 on the expectation of better demand as news that the US and Iran are progressing a deal on Iran’s nuclear capability that could allow Iran to sell more oil. After market API data showed a small build than expected.
Gold +0.1%, Silver -0.1%, Copper -0.2% Platinum -0.1%, Palladium unch%.
AHEAD MBA Mortgage Applications and 30 yr Mortgage Rate, EIA Oil Report, FOMC minutes.
Earnings Target, Lowe’s, JD.Com, Cisco, Shoe Carnival, TJX, Eagle Materials, Analog Devices, L Brands

DAX -0.07%, CAC -0.22%, FTSE +0.02%
Markets opened higher but drifting lower through the day and traded around Monday’s close for the last couple of hours as data showed the Euro zone entered a technical recession. Travel & Leisure lead with Oil & Gas strong but Telco weak after poor earnings from Iliad and Vodafone.
Vodafone weak after it missed expectations to report a 1.2% drop in full-year adjusted earnings with capex on 5G rollout seen as an issue. Iliad very weak after missing first-quarter revenue expectations.
Sonova strong after projecting strong full-year growth on the back of the market recovery and new product ranges.
Earnings out from Engie +3%, Homeserve -8.5% and Imperial Brands +1.5%
Balance of Trade Mar €15.8B vs €23B Feb revised (F/cast was €26.5B)
Employment Change Prelim Q1 -0.3% QoQ vs +0.4% Q3 (F/cast was +0.5%)
Employment Change Prelim Q1 -2.1% YoY vs -1.9% Q3 (F/cast was -1.4%)
GDP Growth Rate 2nd est Q1 -0.6% QoQ vs -0.7% Q3 (F/cast was -0.6%)
GDP Growth Rate 2nd est Q1 -1.8% YoY vs -4.9% Q3 (F/cast was -1.8%)
Claimant count change Apr -15.1K vs -19.4k Mar revised F/cast was +25k)
Employment Change Feb 84k vs -73k Jan (F/cast was -42k)
Ave Earnings (Inc Bonus) Mar +4% vs +4.5% Feb (F/cast was +4.4%)
Ave Earnings (Ex Bonus) Mar +4.6% vs +4.4% Feb (F/cast was +4.5%)
Unemployment Rate Mar +4.8% vs +4.9% Feb (F/cast was 5%)
Labour Productivity Prelim Q1 +0.8% QoQ vs-4.3% Q4 ( F/cast was +2.9%)
20 year Gilt auction +1.392% vs 1.223% prior
EUROZONE New Car Registrations, ECB Financial Stability Review, Core Inflation Rate, Inflation Rate.
GERMANY No data due
FRANCE No data due
UK Inflation Rate, Core Inflation Rate, PPI Core Output, Retail Price Index, PPI Output and Input.

Nikkei futures opened  +58pts and have been rising; currently +98pts before suddenly crashing to flat.  Expect market to open flat and work cautiously higher  with selective bargain hunting. 
Yen currently 108.90
Data due during lunch
Industrial Production March (Feb was-1.3% MoM F/cast is +2.2%) (Feb was -2% YoY F/cast is +4%)
Capacity Utilisation March (Feb was -2.8% F/cast is +3%)
Tokyo reported 732 new covid cases (+313 DoD) 
Aichi 539, Hokkaido 533, Osaka 509 and the national total was 5,205
The Tokyo Medical Practitioners Association representing about 6,000 primary care doctors called for the Olympic’s to be cancelled 
saying that hospitals in the Games host city "have their hands full and have almost no spare capacity" amid a surge in infections.
The economy shrank more than expected in Q1 as a slow  vaccine rollout and new COVID-19 infections hit spending on items such  as dining out and clothes (although not as much as forecast) raising concerns the country will lag others emerging from the pandemic.  Of concern was the drop in Capex which had been expected to rise.
Government said the economy has potential to recover though and it will be vigilant to the impact new state of emergency curbs could have on the outlook, Economy Minister Yasutoshi Nishimura said on Tuesday.  “The government will act flexibly as needed, tapping into reserves (set aside for COVID-19 response) with a close eye on the pandemic and its impact on the economy,”
Government on Tuesday withdrew a bill that would have made it easier to deport failed applicants for refugee status, officials said, after the death in March of a Sri Lankan woman at an immigration detention centre sparked criticism.
Maruti Suzuki India Ltd., a unit of Japan’s Suzuki Motor Corp has resumed operations at three vehicle assembly plants in India, company officials said Monday.  Losses minimised by moving up maintenance-related shutdowns. +VE
Toyoda Gosei Co Ltd has established a new plant in Mexico, the TAPEX Mexicana, S.A. de C.V. (TAPEX) Monterrey Plant, and started its production of the bags that are a main component of automotive airbags. +VE

Markets closed for Budda’s Birthday
No data due
President Moon Jae-in is hoping to use his first summit with US. President Biden this week to revive long-stalled talks with North Korea 
and urge the White House to embrace the issue with more urgency.
Developing trusted supply chains is one area that South Korea and the United States can work together to reduce economic dependence on China, a joint report by Korean and American experts showed Tuesday.
Hyundai Motor, Kia tense over production delay of newly-launched EV models amid signs of early subsidy exhaustion.  Some customers are even considering turning to alternative choices currently available, instead of waiting for the new models amid a stalled manufacturing timeline. -VE
Local demand for biotech company GC Pharma‘s experimental plasma treatment against the new coronavirus remains even after the company failed to receive conditional use approval here, according to industry sources Tuesday. +VE
Bithumb Holdings, the operator of cryptocurrency exchange Bithumb, saw a surge in sales and net profit in the first quarter of 2021, its largest shareholder’s financial results showed on Tuesday.
Underlines the interest in Crypto in S. Korea.

Expect market to open flat following the strong rebound on Tuesday and after weak US Markets overnight.
No data due
The CECC reported 245 new covid cases Tuesday
(240 local).
The Mainland Affairs Council (MAC) yesterday expressed regret over the Hong Kong government’s decision to close its trade office in Taiwan,
adding that Taiwanese officials in the territory would continue performing their duties.   The HK Government gave no reason but it is likely to be because of the support Taiwan has given pro democarcy supporters.
Synnex Technology International yesterday said that it expects to book a gain of NT$727 million (US$26 million) from the disposal of some Concentrix Corp shares listed on the NASDAQ Composite.  The Taipei-based company said in a statement that the transaction is part of its financial management.  Synnex distributes a wide range of electronic products, from Fitbit Inc’s wearable devices to Asustek Computer Inc’s notebook computers.
Hon Hai Precision Industry and automotive manufacturing giant Stellantis NV have agreed to form a joint venture to develop “digital cockpits” that enrich the driving experience with smart technology borrowed from consumer electronics, they said in a joint statement yesterday.    The two companies have signed a memorandum of understanding to form Mobile Drive, a 50-50 joint venture aimed at bringing “innovative in-vehicle user experiences enabled by advanced consumer electronics” to Stellantis, as well as other automakers, the statement said. +VE
Apple is grappling with continued supply chain constraints for its new high-end iPad Pro, potentially compounding an already month-and-a-half wait for the company’s priciest tablet. It officially goes on sale in about a week, but buyers might not be able to get their hands on one until well into July. Delivery dates for pre-orders are stretching into late next month to early July.
The primary issue: Producing the 12.9-inch model’s new MiniLED screen has so far been challenging with suppliers struggling to produce the more intricate screens in larger quantities, people familiar with the matter said. -VE for the ipad supply chain companies
Gogoro Inc  yesterday announced partnerships with Yadea Technology Group and Jiangmen Dachangjiang Group Co to introduce its battery-swapping platform to China.
The announcement came just three weeks after Gogoro clinched its first major overseas deal with India’s biggest motorcycle maker, Hero MotoCorp Ltd, which plans to adopt the battery-swapping platform by December at the earliest. +VE
O-Ta Precision Industry  a producer of golf club heads and putters, yesterday said that revenue this quarter is likely to be better than last quarter thanks to robust orders. Chairman Li Kong-wen told an annual general meeting that orders placed by US and Japanese clients have left the company working at full capacity.  +VE

Expect market to open lower following the US and news that the EU is likely to freeze its investment agreement with China.  But the wild card  remains Team China
No data due
The European Parliament is expected to pass a motion on Thursday pushing to formally freeze the EU’s investment agreement with China
, in the wake of what MEPs describe as Beijing’s “baseless and arbitrary” sanctions on EU lawmakers earlier this year. -VE
The United Arab Emirates announced Tuesday it will offer a third shot to recipients of the Chinese state-backed Sinopharm coronavirus vaccine six months after their initial two-dose regimen. The move appears to make the UAE the first country worldwide to formally introduce the booster.  Comes after some concerns about an insufficient antibody response. China’s top disease control official acknowledged last month that the country’s locally produced vaccines offer low protection against the virus, adding to growing questions over the shot’s efficacy.  -VE for Sinopharm vaccine
Kong Xuanyou urged Tokyo to depart from the Quad and US-aligned diplomacy and strengthen ties with Beijing by exerting ‘strategic independence’  The envoy to Japan also said he expects Japan to ‘successfully host the Olympics in a safe and secure manner’.  He criticised the Quad  grouping comprising the United States, Japan, India and Australia as representing a “cold war mentality” and “100 per cent outdated.” Slight -VE
The US administration extended the deadline to ban American investors from certain Chinese companies by two weeks as Biden’s team tries to clarify the scope of policies made under the Trump administration.  In an announcement on Tuesday, the Treasury Department said US investors were allowed to trade securities in subsidiaries of Chinese companies that were on a blacklist until June 11.  Slight +VE but practically no one will be placing a big bet before the final decision is released
China is resisting bilateral talks with the United States on nuclear weapons, the U.S. disarmament ambassador told a U.N. conference on Tuesday, as Washington seeks to advance efforts to reduce nuclear arms stockpiles. “Despite the PRC’s dramatic build-up of its nuclear arsenal, unfortunately it continues to resist discussing nuclear risk reduction bilaterally with the United States,” said Robert Wood, referring to the People’s Republic of China. -VE
U.S. House of Representatives Speaker Nancy Pelosi on Tuesday called for a U.S. diplomatic boycott of the 2022 Winter Olympics in Beijing, criticizing China for human rights abuses and saying global leaders who attend would lose their moral authority. -VE
US. Senate Democratic Leader Chuck Schumer unveiled revised bipartisan legislation late Tuesday to approve $52 billion to significantly boost U.S. semiconductor chip production and research over five years. A key tenent being to compete with China. -VE
Apple Inc stores data from its Chinese customers on servers owned by a Chinese state-owned company, potentially making it easy for Beijing to gain access to the information, the New York Times has reported.  The data deal, in response to a 2017 Chinese law, is one of several concessions to the government that the iPhone maker has made over the past five years to do business in China, the Times said on Monday, citing internal company documents and interviews with current and former employees, as well as cybersecurity experts.  The policy for Chinese consumers stands in contrast with tougher privacy standards for US users, the report said.  Slight -VE for Apple
FT article on President Xi grand plan to develop Xiong’an and how it is currrently struggling as companies resist the governments call to relocate  ‘‘Invisible hand’ of the market pulls brake on Xi’s green development’   Also refelcts the commercial slowdown in China due to the pandemic -VE
FT article Poetic flourish costs Meituan founder $2bn
Reaction to Wang’s perceived criticism of Beijing highlights investor fears over crackdown -VE
China has offered to host talks between the parties in  Afghanistan  and pledged to help its anti-terrorism effort, in a move seen as Beijing positioning itself as a conflict mediator.
In a call with his Afghan counterpart Mohammad Haneef Atmar on Monday, Chinese Foreign Minister Wang Yi said China would continue to support Afghanistan and South Asian countries in fighting the pandemic, and was willing to deepen anti-terrorism cooperation with Afghanistan. In a separate call on the same day, Wang told Afghan national security adviser Hamdullah Mohib: “China is willing to facilitate intra-Afghan negotiations, including creating necessary conditions for holding the talks in China.” Slight +VE as Afghanistan is an important link in the Belt and Road but China is risking becoming a terrorist target.
Germany’s Free Democratic Party (FDP) on Sunday removed the “one China” policy from its campaign platform ahead of general elections in September and declared its support for the right of Taiwanese to decide their own future.
The Human Rights Network for Tibet and Taiwan on Monday called on Beijing to provide details on the 11th Panchen Lama, who was kidnapped by the Chinese government 26 years ago.  
The 11th Panchen Lama, born Gedhun Choekyi Nyima, was abducted along with his family by the Chinese Communist Party (CCP) in 1995 when he was six years old.
In the Gelug school of Tibetan Buddhism that is practiced in Tibet, the Panchen Lama is responsible for seeking out the next reincarnation of the Dalai Lama, and his authority is second only to the Dalai Lama.

Markets closed  Budda’s Birthday
ADR’s flat at 28,593; mixed; Chinese Financial mostly weaker, E-Commerce mixed
No data due
Short Selling Tuesday 15.5% vs 16.5% Monday
Top Shorts  
Shenzhou Int (2313) 36%, Bud Apac(1876) 35%, Bank Comm (3328) 35%, ICBC (1398) 32%,  Bank of China (3988) 31%, Country Garden (2007) 30%, Sands China (1928) 26%, Hang  Seng Bank (11) 25%, Sinopec (386) 25%.

National Security
A spokesman of the police anti-triad unit said they have found no wrongdoings of a senior officer in the force's National Security Department,
after he was caught in a raid on an unlicensed massage parlor, which was said to have been used as a vice establishment.  The force stressed that visiting an unlicensed parlor is not an offense. The spokesman also confirmed that during the raid, six local females were arrested.
Hong Kong’s top treasury official rejected concerns that the expansive Beijing-imposed security law will damage the city’s status as an Asian hub for business and finance, Bloomberg reports.  In an interview on Monday, Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said he’s heard no concerns in contacts and engagements with the business community.
After Market Tuesday
BIDU-SW 1Q21 Non-GAAP NP Adds 39.4% YoY
to RMB4.297B
Quarterly revenue +25% to 28.1 billion yuan (US$4.4 billion) vs an average estimate of 27.3 billion yuan from analysts’, extending its recovery from the COVID-19 pandemic. Net income 25.7 billion yuan, mostly boosted by gains in the value of long-term investments, including in recently listed Kuaishou Technology. Baidu has predicted sales of 29.7 billion yuan to 32.5 billion yuan for this quarter, versus the 30.2 billion yuan estimated by analysts. +VE
The Financial Services Development Council (FSDC) published the market study report on REITs. Although Hong Kong is one of the earlier markets to have rolled out its REITs regime in 2003, it is still falling behind other markets so far. FSDC proposed the authorities to refine the REITs value proposition and regulatory system, hence attracting REITs from across the globe to list in Hong Kong. Equally, it proposed to include REITs as eligible securities under the Stock Connect schemes, thereby allowing two-way REITs investment.
NTES-S (09999.HK) announced its financial results for the first quarter ended March 31, 2021. Net income was RMB4.439 billion, up 25% yearly. Diluted net income per share equaled RMB1.31. A dividend of US$0.06 per share (US$0.3 per ADS) was declared.
CHINA TAIPING (00966.HK) announced that the gross premium income of Taiping Life Insurance, Taiping General Insurance and Taiping Pension for the first four months of 2021 aggregated RMB80.751 billion, up 3.53% yearly.
The Chinese government is in initial stages of rectifying CHINA HUARONG (02799.HK), who has more than US$40 billion of debt inside and outside China, The New York Times citing two insiders. In other words, both domestic and foreign bondholders could be subject to significant investment losses.
The Hong Kong Tourism Board (HKTB) announced that the provisional visitor arrivals for April were 5,706, a 38.3% increase on the same month in 2020.
ZIJIN MINIG (02899.HK)'s gold mine in Buritica, Colombia is exposed to output loss due to illegal mining, said Reuters. Losses amounted to 20% of the total production, a local executive told the press.

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