May 26 Asian Marco Initial Thoughts flat to lower open;Team China the wild card


26 May

This and previous notes can be found at Sub Stack
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Asia
Australia Futures indicate market to open -34pts, news of a new covid cluster in Melbourne -VE for sentiment. Oil names flat but gold higher.  Earnings from Link Administration and ALS.  Data due Construction Work Done, Leading Index

Japan Nikkei futures opened  +5pts but have eased back to -23pts expect market to open lower with cautious trading.

S Korea Expect markets to open slightly lower as Business confidence misses but downside limited as US Fed speakers talk down inflation fears

Taiwan Expect market to open flat following the US overnight

China Market to open flat but the wild card remains Team China

HK ADR’s -17pts at 28,892  I would expect the market to drift lower but if China moves higher expect HK to follow  

US Futures
Opened slightly higher Dow +53pts S&P +0.19% and NDX +0.26%

DOW -0.24%, NDX -0.03%, S&P -0.21%, Russel 2K -0.97%
Markets opened higher but drifted lower.Fed  sepakers continue to play down inflation worries and Tech/Internet names seing support from that but Value plays under some pressure.

Lordstown Motors -7.5% after stating that it would have to cut its planned production of Endurance, an all-electric pick-up truck, by half compared with its previous forecasts. “We have encountered some challenges, including Covid-related and industry-wide related issues,” said chief executive Steve Burns.

Banks JPMorgan Chase -1%, Citigroup -1% Wells Fargo -0.3%, Amex -0.4%

Work from home names: Facebook +1%, Apple -0.2% , Amazon +0.4% but off lows as Washington attoney general suing on anti trusts grounds, Netflix -0.3%,  Disney +1%, Zoom Video -0.1%, Alphabet +0.1% and Microsoft +0.4%,

Tech NXP Semi +0.2%, Nvidia +0.2%, Micron -2%, AMD +0.5%, Skyworks +0.7%

Re-opening stocks  Boeing +1.4%, Caterpillar -0.8%, Simon Property -0.3%, Kohl’s -1.2%, Nordstrom -2.9%, Gap -0.4%, United Airlines +1.5%, Carnival +2.4%, Wynn Resorts -0.3%, Chevron -1.6%, Exxon Mobil -2.3%,  
Lock down names Campbell Soup -0.5% General Mills -0.3%,  JM Smucker -0.2%

DATA
Redbook  +13.6% YoY vs+12.6% prior F/Cast was +12.1%
Case-Shiller Home Price Index Mar +13.3% YoY vs +12% Feb revised (F/cast was +12.1%)
Case-Shiller Home Price Index Mar +2.2% MoM vs +1.3% Feb revised (F/cast was +0.9%)
House Price Index Mar +1.4% MoMvs +1.1% Feb revised (F/cast was +0.8%)
House Price Index Mar +13.9% YoY vs +12.4% Feb revised (F/cast was +13%)
Consumer Confidence May 117.2 vs 117.7 Apr revised (F/cast was 122)
New Home Sales Apr -5.9% MoM vs +7.4% Mar revised (F/cast was -10%)
Richmond Fed Manufacturing Index May 18 vs 17 Apr (F/cast was 15)
2 yr Note Auction +0.152% vs +0.005% prior
After market API Crude Oil Stock Change -0.439m vs +0.62m (Consensus was -1.279m)
USD was weaker vs Yen & Euro. Bitcoin -1.8% @ 38,050.52, VIX +2.4% @ 18.84, US T10 @ 1.56% after Fed speakers play down inflation fears.
OIL Brent +0.25%, WTI -0.8%
Gold +0.8%, Silver +0.5%, Copper -0.3% Platinum +1.8%, Palladium +1.7%.

AHEAD MBA Mortgage Applications and 30 yr Mortgage Rate, EIA Oil Report, 2 yr FRN Auction, 5yr Note Auction

Fed Speakers None
Earnings:
NVIDIA, Snowflake, Bank of Montreal, Capri Holdings, Abercrombie and Fitch, Dick’s Sporting Goods, American Eagle Outfitters, Workday, Pure Storage, Designer Brands  

DAX +0.18%, CAC -0.28%, FTSE -0.31%
DAX opened higher hitting a new high but drifted lower FTSE & CAC opened slightly higher but traded around flat all  day.  German GDP growth data slightly weaker that F/cast but Ifo data overall was positive. Caution as EU to set out sanctions on Belarus and possibly Russia. German in an awkward position wants a tough response but will not want to jeopardise the Nord 2 pipeline. Talk that inflation fears are easing.

Deutsche Wohnen +15.7% after announcing that it had agreed to a $22 billion takeover bid from Europe’s largest residential property company Vonovia -6%.

Royal Mail +6.6% after Peel Hunt upgraded the stock to “buy,” and looks likely to be promoted back to the FTSE 100 in the U.K. index’s reshuffle next week.

Aveva Group +1.6% off initial highs after reporting what Numis described as “robustly” improved underlying growth in the second half of its fiscal year. The engineering and industrial software company, which completed its purchase of OSIsoft in mid-March, also posted adjusted earnings before interest, taxes, depreciation and amortisation of £226.4m, a rise of 4.4 per cent on 2020.

Trainline -8% continued weakness from the UK government’s planned overhaul of its rail system.

 DATA
GERMANY
GDP Growth Rate Final Q1 -1.8% QoQ vs+0.5% Q4 (F/cast was -1.7%)
GDP Growth Rate Final Q1 -3.1% YoY vs -3. 3% Q4 (F/cast was -3%)
Ifo
Business Climate May 99.2 vs 96.6 Apr revised (F/cast was 98.5)
Expectations May 102.9 vs 99.2 Apr revised (F/cast was 100.9)
Current Conditions May 95.7 vs 94.2 Apr revised (F/cast was 95.1)

UK
CBI Distibutive Trades May 18 vs 20 Apr F/cast was 34)

AHEAD
EUROZONE 
No data due  
GERMANY 
No data due  
FRANCE 
Business & Consumer Confidence, Business Climate Indicator.
UK 
No data due  

JAPAN
Nikkei futures opened +5pts but have eased back to -23pts expect market to open lower with cautious trading.
Yen currently 108.77
Data due 
Coincident Index, Leading Economic Index, BoJ’s Suzuki Speech

Tokyo reported 542 new covid cases (+202 DoD) and Hokkaido 459.  National total was 3,900

Gov't to decide Friday on extending state of emergency for  Tokyo, Osaka and seven other prefectures.

Japan stands to lose 1.8 trillion yen ($16 billion) if the Olympics were cancelled, but that would pale in comparison to the economic hit from emergency curbs if the Summer Games turned into a super-spreader event, said Takahide Kiuchi, executive economist at Nomura Research Institute and a former Bank of Japan board member.  He said that the first nationwide state of emergency last spring had caused an estimated 6.4 trillion yen loss. Further losses have resulted from the second and presently third running state of emergency.  Press reports increasing support for the games to be cancelled.

Japan’s JX Nippon wants to sell its British North Sea oil and gas assets including stakes in some of the basin’s biggest fields in a deal that could fetch up to $1.5 billion, five banking sources said.  The sale is the latest deal in the North Sea marking the handover of assets from oil majors to private companies, which say they can better exploit remaining reserves than huge companies focusing on the energy transition.

Fast Retailing Co Ltd, parent company of global apparel retailer UNIQLO,  announced Tuesday that it is providing urgent support worth approximately 220 million rupees (around U.S. $3 million) for those   affected by this crisis.  

SOUTH KOREA
Expect markets to open slightly lower as Business confidence misses but downside limited as US Fed speakers talk down inflation fears
Data out 
Business Confidence May 96 vs 96 Apr (F/cast was 98)

KDCA reported 516 new covid cases Tuesday, (vs 538 Monday) below 600 for a third day.

South Korea will introduce real-time search and notification alerts for COVID-19 vaccination no-shows, in a bid to not waste a single dose. The services will launch on the country’s largest web portal Naver and No. 1 messenger app KakaoTalk at 1 p.m. Thursday, allowing all Koreans to check on the real-time availability of leftover vaccines nearby.

South Korean Foreign Minister Chung Eui-yong on Tuesday said Seoul refrained from touching on Chinese human rights issues in the joint summit statement with Washington in light of its special relations with Beijing. Slight -VE

Naver unveiled a supersized artificial intelligence platform on Tuesday  that can process massive amounts of data, saying it aimed to lead the  era of “hyperscale” AI.   Dubbed HyperCLOVA, the firm’s latest AI  tool is not only the local industry’s most advanced but is also the  first large-scale AI trained in the Korean language, Naver said. +VE

The Fair Trade Commission of South Korea is expected to survey the local digital advertising market to uncover any unfair practices on the part of major platform operators such as Google and Facebook.  According to government officials Tuesday, the antitrust watchdog has commissioned research on potential antitrust issues in the local advertising market. It will include in-depth interviews with advertisers, ad agencies and consumers. Slight -VE

South Korea plans to provide tax incentives and financial support to makers of automotive chip parts and other key parts and materials, the finance minister said Tuesday.  Hong Nam-ki said the country plans to offer support to corporate projects to develop eight key parts and materials, including automotive chip parts and rare-earth permanent magnets used for electric vehicles. +VE

Samsung Electronics Co. maintained its status as the world's leading TV vendor with a record market share in the first quarter, a Omdia report showed Tuesday, as the tech giant posted robust growth on the back of its QLED and large TVs. Samsung represented 32.9 percent of the global TV market in terms of sales revenue in the January-March period, its largest share for a first quarter.  +VE

TAIWAN
Expect market to open flat following the US overnight
No data due
CECC reported 542 new covid cases on Tuesday (
2 imported)  281 were newly confirmed cases and 261 were from a backlog of confirmed test results over the past several days, the CECC said.
School closures extended until June14 Slight -VE
Taiwan Taxi drivers have begun delivering food
amid soaring demand for takeout food after the CECC raised the COVID-19 warning to level 3 on Wednesday last week.

Business sentiment among local manufacturers improved slightly last month, as tech and non-tech firms were upbeat about business going forward, but textile product makers turned conservative, a Taiwan Institute of Economic Research (TIER) survey showed yesterday. +VE

Suppliers of automobile and truck tires from Taiwan and three other countries are facing anti-dumping tariffs after US authorities upheld a preliminary ruling accusing them of selling products at unfairly low prices in the US.  The decision by the US Department of Commerce released on Monday states that anti-dumping tariffs of 14.62 to 101.84 percent would be imposed on tire makers from Taiwan, South Korea, Thailand and Vietnam, with Taiwan facing the highest penalties. Cheng Shin Rubber Industry and Nankang Rubber Tire Corp, the two mandatory Taiwanese respondents, face anti-dumping tariffs of 20.04 percent and 101.84 percent respectively, while other Taiwanese exporters face an 84.75 percent penalty. -VE

United Renewable Energy Co (URE), the nation’s biggest supplier of solar cells and modules, yesterday said that it is considering raising prices further in the second half of this year due to rising raw material costs.  Prices of solar modules increased 15 percent in the first half of this year, following a spike in prices of polysilicon and ethylene vinyl acetate film, URE chief financial officer Pan Lay-lay told an online investors’ conference yesterday.  As of the end of March, prices of polysilicon had surged 140 percent to US$17.8 per kilogram from US$7.5 in July last year after Chinese suppliers cut production, Pan said. +VE

Housing loans rose last month despite credit controls, while construction financing lost momentum slightly as developers became more cautious about cost hikes, the central bank said yesterday.  Housing loans increased 9.51 percent year-on-year to NT$8.25 trillion (US$295.95 billion), the highest since September 2006, as real demand continued to bolster housing transactions, the central bank said, adding that a low comparison base last year also contributed to the impressive showing. Slight -VE

More small merchants, stores and vendors have adopted contactless payment methods amid rising domestic COVID-19 infections.  “The number of stores that have asked about our service and were interested in using our electronic payment tool has risen more than 40 percent since the COVID-19 alert was raised to level 3 nationwide last week,” Line Pay Taiwan Ltd said in a statement yesterday.  Line Pay Taiwan said that most of them are small or medium-sized stores or online merchants, which are generally more hesitant about accepting virtual payments than larger stores. +VE

E.Sun Financial Holding Co on Monday reported net fee income of NT$5.27 billion (US$189.1 million) for the first quarter of this year, the highest quarterly figure in its history, thanks to contributions from E.Sun Securities Co as more investors participated on the local stock market.+VE


CHINA 
Expect market to open flat but the wild card remains Team China
No data due but Thursday we get Industrial Profits


US efforts to address competition with China progressed on Tuesday when the chairman of the House of Representatives Foreign Affairs Committee introduced sweeping legislation to boost economic competitiveness and push Beijing on human rights.  
Representative Gregory Meeks introduced the “Ensuring American Global Leadership and Engagement Act,” or EAGLE Act, as the U.S. Senate separately heads toward a vote on its own legislative package seeking to counter China. -VE

Industrial and Commercial Bank of China (601398.SS) (ICBC) said on Tuesday its unit had received approval to set up a foreign-controlled wealth management firm with Goldman Sachs Asset Management. The unit of U.S. banking giant Goldman Sachs Group Inc (GS.N) will offer a 51% funding contribution ratio, while the wealth management unit of ICBC will offer 49%, the Chinese bank said in a exchange filing.

China’s foreign minister says EU parliament is wrong to tie investment deal to Xinjiang ‘Attempts … to link up issues of different nature and turn trade issues into political ones are not acceptable,’ Wang Yi tells Munich Security Conference. Parliament voted to halt consideration of Comprehensive Agreement on Investment until China drops sanctions against EU officials -VE

China rejected Lloyd Austin’s phone calls ‘after US defence secretary requested wrong person’  Asking to speak to Central Military Commission vice-chairman instead of Defence Minister Wei Fenghe was seen as diplomatic faux pas, source says.   Beijing has reportedly rejected Austin’s request for a conversation three times, although restraint by both militaries has kept tensions in check -VE

A leading scientist on the WHO’s COVID-19 mission to China said on Tuesday that a follow-up trip could be helpful to gather additional research on the origins of the disease, but should be separate from any audit of information provided by Beijing.

Stay alert to new pandemic risk after Russian bird flu cases, warn Chinese experts.  The first human infections from a highly infectious influenza virus needs constant vigilance, the pair warn in a letter to Science magazine.   Public health specialists say increased monitoring of poultry farms, markets and wild birds will be needed -VE

Tesla Inc (TSLA.O) said on Tuesday it had established a site in China to store car data locally, as automakers come under growing scrutiny over how they handle information collected by vehicle cameras and sensors.  Tesla said in a Weibo post that data generated by all cars it sells in China, where it is making Model 3 sedans and Model Y sport-utility vehicles, would be stored in the country. Slight +VE

A surge of Chinese fishing vessels has entered the waters near the sea border between South and North Korea, reigniting a long-standing maritime dispute South Korean authorities and fishermen say the boats enter under the cover of darkness and ‘sweep up everything’ in their path, while leaving a trail of environmental destruction behind them  -VE

HONG KONG  ADR’s -17pts at 28,892  I would expect the market to drift lower but if China moves higher expect HK to follow  
No data due


Short Selling  Tuesday 16.8% vs 20.1% Monday
Top Shorts 
Shenzhou Int (2313) 38%, Hengan (1044) 37%, Country Garden (2007) 37%, AIA (1299) 34%, Anta Sports (2020) 31%, Henderson Land (12) 31%, Ping An (2318) 30%, Haidilao (6862) 29%, Bank Comm (3328) 27%, ICBC (1398) 27%, Petrochina (857) 25%, CKI (1038) 25%, CITIC (267) 25%.

WATCH
CHINA GAS HOLD (00384.HK) announced that it had repurchased 2.172 million shares 
through the Stock Exchange today (25 May), involving around $61.8209 million

Responding to the recent report by Reuters regarding SAMR launching an anti-monopoly investigation on housing broker KE Holdings (BEKE.US) , the company deems the report saying "KE Holdings is under investigation by SAMR" to be untrue. KE Holdings later reiterated on their official Weibo account that such report is false.

CK Hutchison (0001) has further reduced its stake in AlipayHK, a joint venture established with Ant Group, to less than 20 percent, local media reported, citing a document from the Companies Registry.

ICBC (01398.HK) announced that ICBC Wealth Management, a wholly-owned subsidiary of the Bank, received the China Banking and Insurance Regulatory Commission’s approval, that ICBC Wealth Management is approved to cooperate with Goldman Sachs Asset Management to establish a Sino-foreign joint venture wealth management company. The funding contribution ratio of ICBC Wealth Management and Goldman Sachs Asset Management will be 49% and 51% respectively.

KINGSOFT(03888.HK) announced the first quarter results ended March 2021. The revenue rose 33.1% year-over-year to RMB1.56 billion. The net profit amounted to RMB117 million, reflecting a 1763.1% increase year-over-year. EPS was RMB0.09.

Spot USD/CNY closed at 6.4078, up 215 bps, setting a new high in nearly three years. As at 16:46, USD/CNY rose 118 bps in the night session. USD/CNH stood at 6.3989, up 90 bps.

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