Jan 4 Asian Macro Initial Thoughts Asia to open mixed. US Futures flat.


04 Jan

Asian Futures Nikkei Futures opened -30pts but eased to flat,  HK ADR’s -184pts and Australia trading higher in early trades.   S Korea to open 1 hour late due to annual opening ceremony.
US Futures opened flat Dow -37pts, S&P and NDX down small. Concerns over the spike in covid cases and Trump’s attempts to reverse the US election results -VE for sentiment.
Europe expected to extend lockdowns as Covid cases surge. -VE for Asian Exporters

JAPAN Nikkei Futures opened -30pts but working back to flat; expect market to open flat with caution having closed Wednesday just off it’s 30 year high and with the Govt considering a new emergency covid declaration. PMI data due after the market open will be important too.  Yen closed Thursday 103.20. 
Data due Manufacturing PMI (Nov was 49 and F/cast is 49.7).  
PM Suga due to speak.
Tokyo reported 816 new covid cases Sunday vs 814 Saturday down from the record of 1,337 Thursday.  Fears are the numbers will increase this week after the New Year’s gatherings at shrines.
Japanese business leaders pledged Friday to revive the country's economy dented by the novel coronavirus pandemic this year through digital and sustainable innovation. In a New Year message, Hiroaki Nakanishi, chairman of the Japan Business Federation known as Keidanren, underlined the importance for both the public and private sectors to jointly make all-out efforts to stem further virus infections and revive the economy. Citing digital transformation, deregulation and greener policies.
Japan Times reports 72% of Japanese firms expect moderate economic growth in 2021 but 29% doubt sales will return to pre pandemic levels.
A Yomiuri Shimbun investigation showed that China is using its network of researchers to hire talented foreign personnel.  China has been implementing the Thousand Talents Plan since 2008, aiming to become a strong nation in science and technology. It is estimated that more than 7,000 foreign researchers, mainly from the United States and Europe, participated in the project through 2018.  With 44 Japanese researchers also found to have taken part.
Tokyo Olympics could be jeopardised by a further covid declaration if the government decides to make one; slight -VE.
Nissan Motor is planning to further reduce its presence in Europe and outsource the sales and manufacturing of its cars to alliance partner Renault, the daily Yomiuri newspaper reported on Friday. As part of its global turnaround plan, which is reversing a rapid expansion led by the ousted former chairman, Nissan will cut its distribution channels in thirty countries, mainly in East Europe. It is also planning to close its Avila plant in Spain and convert it into a warehouse, the report said.

SOUTH KOREA Markets open an hour later than normal after the ceremonial opening event. Having closed Wednesday at a new high expect markets to open higher after Friday’s good traded data.  PMI also due this morning.  The late opening will also mean traders will be influenced by Japan.  A key support for the markets are retail investors who continue to invest as the Govt restrictions on real estate make equities appealing.
Data due 
Manufacturing PMI (Nov was 52.9 and F/cast is 51)
Out Friday 
Balance of Trade Dec $6.94b vs 5.93b Nov (F/cast was 5.7b)
Exports Dec +12.6% vs +4% Nov revised (F/cast was +5.1%)
Imports Dec +1.8% vs -2.1% Nov (F/cast was -3.2% )
Hit the largest surplus since Sept.
Govt will expand a ban on private gatherings larger than four people to include the whole  country, and extend unprecedented social distancing rules in Seoul and neighbouring areas until Jan. 17, the health minister said on Saturday.  The country reported 824 new cases as of midnight on Friday vs 1,029 Thursday, a drop that officials said was likely due to less testing over the New Year holiday.
Electric vehicle business, expecting a bumper year on the back of prolonged government subsidies and carmakers’ paradigm shift towards ecofriendly vehicles.  It will be interesting to see the winners as the Govt seeks to ensure that subsidies benefit local firms rather that the likes of Tesla.
TELCOs +VE as the number of fifth-generation network users in South Korea surpassed 10 million as of the end-November, according to data released Sunday by the Ministry of Science and ICT.  The number of 5G subscribers in November reached 10.9 million, up 930,000 from the previous month. By companies, SK Telecom secured 5.05 million users, accounting for 46% of the market. KT and LG U+ followed with 3.33 million and 2.54 million users.  The ICT Ministry explained the increase was largely due to the launch of iPhone 12, Apple’s first mobile device with 5G support.
Samsung Electronics has begun offering digital certificates via its biometric authentication program Samsung Pass, heating up the local market for online ID certification.  The service, launched by Samsung Pass on Dec. 30, enables users of Samsung Galaxy models to obtain certificates on their mobile devices after updating the application. Samsung Pass users can use the digital certificates for the annual tax return process, which starts in January.  +VE
BUT Samsung Electronics is expected to report a smaller-than-earlier operating income estimate due to the weakness of the US dollar, industry sources said Sunday.
LG Display said Sunday it will showcase a 48-inch flexible display that can generate sound without speakers which is optimised for gaming, at the Consumer Electronics Show (CES) 2021, which will be held online from Jan. 11 to 14; the world's largest tech expo.
Oil refiners -VE  as their low refining margins ate into their profitability, industry sources said Sunday. Whipsawed by weak oil prices and sluggish refining margins, industry leader SK Innovation Co. and three other players are projected to have posted a combined net loss of more than 5 trillion won ($4.6 billion) last year. -VE
South Korea's three electric vehicle (EV) battery makers are expected to report robust or improved fourth-quarter earnings results on growing demand for electrified vehicles, analysts said Sunday.  LG Energy Solutions Ltd., SK Innovation Co. and Samsung SDI Co. likely performed well in the October-December period as carmakers are adding more battery-powered models to their lineups due to emissions restrictions, they said. +VE
Shipping Antitrust watchdog is likely to complete the review of the merger between two South Korean shipbuilding giants in Q1: industry sources said Sunday, possibly paving the way for the creation of the world's largest shipyard. -VE
Ministry of Science and ICT said Sunday it will spend 5.8 trillion won ($5.3 billion) on science and information and communication technology (ICT) research this year as the country fosters new tech industries under its digital New Deal drive and targets going carbon neutral. The earmarked amount is a 12% rise from 2020 and focuses on basic scientific research as well as new technologies, such as artificial intelligence (AI) and 6G wireless networks.

TAIWAN Expect market to open slightly higher with Tech in focus.
Data due Manufacturing PMI (Nov was 56.9 and F/cast is 55)
A US defense policy bill containing sections supportive of Taiwan was passed into law on Friday as the US Senate voted to override a veto by US President Donald Trump. +VE for sentiment
Taiwan is ready to have “meaningful” talks with China as equals as long as they are willing to put aside confrontation, President Tsai Ing-wen said on Friday, offering another olive branch to Beijing in her New Year’s speech.
Central bank fights industrial land hoarding; Trade groups have urged the government to step in, as firms seeking to move production lines home have had difficulty finding land. Thursday’s meeting with eight private lenders, four life insurers and four payment companies came just two days after the nation’s top monetary policymaker sat down with eight state-run banks to convey the same message. The central bank said that it urged the financial institutions to practice self-discipline and to demand concrete property development plans from borrowers seeking land financing.
Companies in the financial sector reported mixed performance in the first 11 months of last year, with banks reporting an 8.9% annual decline in combined profit to NT$351.04 billion (US$12.31 billion) due to the COVID-19 pandemic, while securities brokerages and insurance firms saw double-digit percentage growth in earnings, data released on Tuesday by the Financial Supervisory Commission (FSC) showed.
CPC Corp, Taiwan and Formosa Petrochemical Corp  Sunday announced that they would increase gasoline and diesel prices for the sixth week in a row, effective today.
Chilisin Electronics to continue to benefit from steady demand for inductor components due to the work-from-home economy, while high-margin molding chokes and low-temperature cofired ceramic (LTCC) components are expected to become new revenue drivers, analysts said.  But the announcement last month that it would spin off chip resistor maker Ralec Electronic Corp and acquire networking transformer supplier Bothhand Enterprise Inc would result in the company’s revenue dropping this year.

CHINA Expect market to open lower having rallied on Thursday with encouragement that the EU/China Comprehensive Agreement on Investment was agreed (although not yet ratified) but concerns after Thursday’s weak PMI data.  Real Estate weak on more caps on bank lending to the sector. Concerns over US/China relations as US delists Chinese Telco’s and Beijing says it will retaliate.
Data due Caixin Manufacturing PMI (Nov was 54.9 and F/cast is 54.6)
Govt announced 24 new covid cases on Saturday; 8 local infections (vs 22 Friday).
China approved its first COVID-19 vaccine for general public use on Thursday, a shot developed by an affiliate of state-backed pharmaceutical giant Sinopharm, as it braces for greater transmission risks over the winter.  Beijing, started vaccination of key groups of individuals on Friday for the new corornavirus pandemic control and prevention, the China Daily reports. According to the authority, there are nine key groups, including inspection workers at customs dealing with imported cold-chain products, porters at entry ports and those who work in the international and domestic transportation industries.
China has expanded the power of its Central Military Commission (CMC) headed by President Xi Jinping; to mobilise military and civilian resources in defence of the national interest, both at home and abroad.  Revisions to the National Defence Law, effective from January 1, weaken the role of the State Council; China’s cabinet in formulating military policy, handing decision-making powers to the CMC.
For the first time, “disruption” and protection of “development interests” have been added to the legislation as grounds for the mobilisation and deployment of troops and reserve forces. -VE for foreign sentiment.
Chinese regulatory bodies are probing the equity investment owned by Ant Group in dozens of companies, Reuters cited people familiar with the matter.  If any breaches are uncovered, for example creating unfair competition in the market, Ant Group may be required to abandon some of its investment, primarily investment in technology and fintech startups. -VE.   Comes at Jack Ma was absent from the African talent show that he created, signalling the extent of his fall from grace with the Chinese administration.
China's factory activity expanded in December as hot export demand fueled a recovery in the world's second-largest economy from the coronavirus slump, although higher labour and transport costs slowed the pace of growth.
China’s regulators are to impose caps on banks’ lending to the real-estate sector for the first time, in their latest efforts to prevent systematic risks after a series of property curbs in recent years did little to damp buyer enthusiasm. Under the new mechanism that took effect yesterday, loans to developers are to be capped at 40 percent for the nation’s largest state-owned lenders, while banks’ mortgage lending should be no more than 32.5% of their outstanding credit, the People’s Bank of China and the China Banking and Insurance Regulatory Commission said in a joint statement on Thursday. Those exceeding the cap are to have a grace period of up to four years to meet the requirements.
Beijing will take “necessary measures” to safeguard the interests of its companies after the New York Stock Exchange began delisting three Chinese telecom firms that Washington says have military ties, the country’s commerce ministry said on Saturday. While the ministry said it will take action to protect its firms, it also called on the United States to meet China half-way and put bilateral trade relations back on track.
China’s relationship with the United States has reached a “new crossroads” and could get back on the right track following a period of “unprecedented difficulty”, senior diplomat Wang Yi said in official comments published on Saturday.
China has rebuffed the latest offer of talks from Taiwan, saying the government was engaging in a “cheap trick” and provocation by seeking confrontation with China at every turn.  It is difficult to see how Taiwan is provoking China, especially in the light of Chinese incursions across the Taiwan straits. But it shows how Beijing is playing news to its local audience. 
Huawei looks to cloud services in 2021 as US sanctions strangle smartphone business. Founder Ren Zhengfei says the Chinese giant should learn from global leaders Amazon and Microsoft
The China-Mauritius free-trade agreement; Beijing’s first ever with an African country, took effect on Friday, opening up a market of 1.4 billion Chinese consumers to the tiny island nation in the Indian Ocean. As a result of the deal, within seven years, 96 per cent of the more than 8,500 products Mauritius sells to China will be duty-free, according to the island’s foreign affairs ministry. Duties on 88% of the tariff lines would be eliminated with immediate effect, with the rest following over a five- to seven-year period, it said.
Fosun Int is acquiring a 70% controlling stake for 4.53bn Yuan in Sichuan Tuopai Shede Group, boosting its presence in the coveted baijiu liquor sector as the Chinese conglomerate led by billionaire Guo Guangchang pivots inward for growth. This is the second such investment in 2020 by the Fosun Group after it bought a 30 per cent stake in another maker of the fiery wine – a hot favourite in China – in July.  The transaction underscores the domestic push under way at the insurance-to-tourism conglomerate as the Chinese economy rebounds from a pandemic-induced slowdown.FT Reports  
Regional governments in China are evading borrowing limits by transferring assets on to the books of local investment companies to lower debt-to-asset ratios. The practice allows local government finance vehicles to raise more money for infrastructure and other projects to boost the economy in the wake of the pandemic. -VE

HONG KONG  ADR’s -185pts at 27,046  Telco’s weak on US delisting but Macau +VE as GGR beats forecast.  National Security concerns raised as Jimmy Lai’s bail is revoked.
Data due after market Retail Sales (Oct was -9.3% YoY F/cast is -9%)
Govt announced 35 new covid cases on Saturday vs 42 on Friday.
SHORT SELLING  Thursday 14.9% vs 14.4% Wednesday 
Top Shorts MTRC (66) 58%, Png An (2318) 39%, Bud Apac (1876) 33%, Bank of China (3988) 31%, Hengan (1044) 29%, BABA-SW (9988) 28%, Country Garden (2007) 27%, Hanng Lung PPTY (101) 27%, Mengniu Dairy (2319) 24%

NATIONAL SECURITY LAW The Court of Final Appeal granted the Department of Justice's appeal so that NEXT DIGITAL (00282.HK) founder Jimmy Lai's case will be trialed on 1 February 2021. An interim remand order was issued at the same time, by which Lai should be remanded in custody immediately pending trial.  The DOJ had earlier made an appeal against the High Court's order to allow bail of Lai, and applied for an interim remand order.  The appeal came after the decision to allow bail was criticised on the Mainland Chinese Press and raises concerns about the judicial independence of HK. -VE for investor sentiment

BUYBACKS/INSIDER DEALING 
CK ASSET (01113.HK) announced that Li Ka Shing Foundation Ltd acquired a total of 289,500 shares in CK Asset at the average price of HK$39.2, HK$39.62, HK$39.1151 and HK$39.26 per share on 24 December, 28 December, 29 December and 30 December 2020 respectively. As a result, the deemed interests of Li Ka-shing and Victor T K Li in CK Asset increased from 35.89% to 35.898%, and increased from 35.95% to 35.96%.
WATCH
Telcos weak as New York Stock Exchange is kicking off the process of delisting three Chinese telecom firms, namely China Telecom (CHA.US)  +0.030 (+0.109%)   , China Mobile (CHL.US)  +0.260 (+0.919%)   and China Unicom (CHU), due to US President Donald Trump's ban. The trading of these stocks will be suspended on 7 January or 11 January.  Slight -VE
CHINA LONGYUAN (00916.HK)  announced the agreement of intent that the Company and PZER (000780.SZ)  are considering to absorb and merge PZER through share swap by the issuance of A shares by the Company.
Macau's DICJ announced that the city recorded December GGR of MOP7.818 billion, +15.8% MoM and hitting a single-month high since the Covid outbreak.  +VE
Centaline Property Agency recorded 20 secondary transactions at 10 blue-chip housing estates over the weekend, up by two transactions from a week before; in addition to the 9 deals on New Year's Day
FIRST TRACTOR (00038.HK) announced that it received government grants relating to the income of about RMB12.59 million in aggregate from 25 December 2020 up to now. +VE
CHINA RAIL CONS (01186.HK) announced that it, CHINA LIFE (02628.HK) and Tianjin Hengtongda established the partnership enterprise China Life CRCC (Shenzhen) for an operating term of 35 years.  The Company, as a limited partner, proposed to make capital contribution of RMB12.6 billion.
FOSUN PHARMA (02196.HK)  announced it has received the formal approval from China Securities Regulatory Commission for the issuance of not more than 110 million new H Shares.
PCPD (00432.HK)  announced the proposal to issue 793 million Rights Shares by way of the Rights Issue on the basis of 1 Rights Share for every 2 Existing Shares at the price of HK$0.82 per Rights Share. The net proceeds will be HK$644 million.
STARRISE MEDIA (01616.HK) announced it is considering a possible issue of new shares under general mandate to be subscribed by Jinbi Market, an independent third party, in order to raise additional capital.
CASH FIN SER GP (00510.HK) announced that five existing shareholders had sold a total of 11.136 million shares to CELESTIAL ASIA (01049.HK), at a cash consideration of HK$8.35 million. Upon completion, CELESTIAL ASIA will hold 38.33% of the Company's share capital, possibly triggering a conditional mandatory cash offer at HK$0.75 per share.
AMBER HILL-NEW (00033.HK) announced the results of the Rights Issue. The Company had received valid acceptances for a total of 118 million Rights Shares, representing 29.35% of the total number of Rights Shares offered.
JUTAL OIL SER (03303.HK) has resolved to declare and pay an interim special dividend of HK$0.15 per share.
VONGROUP (00318.HK)  announced the results for the half year ended 31 October 2020. Net profit grew 372% yearly to $12.51 million with EPS of 6.5 cents. No interim dividend was declared.
BGMC (01693.HK) announced the results for the year ended 30 September 2020. The loss expanded to MYR194 million. LPS equaled 10.75 sen. No final dividend was declared.

From Thursday 
DOW +0.65%, NDX +0.14%, S&P +0.64%, Russel 2K -0.26%  Covid concerns continued. Sentate voted to override Trumps veto of the US Defence Policy Bill. Initial claims were better than forecast but that might just reflect the Christmas seasonal period. Financials and Utilities lead the gains.
Banks JPMorgan Chase +1.4%, Citigroup +1.3% and Wells Fargo +1.5%, AMEX +1.2%
Work from home names: Facebook +0.5%, Apple -0.8%, Amazon -0.9%, Netflix +3.1%,  Disney flat, Zoom Video -4.6%, Alphabet +0.9% and Microsoft +0.3%,
Tech NXP -0.2%, Nvidia -0.7%, Micron +4.5%, AMD -0.6%, Skyworks +0.1%
Re-opening stocks  Boeing -1.2%, Caterpillar +1.1%, Simon Property +1.6%, Kohl’s -1.6%, Nordstrom -1%, Gap -1.4%, United Airlines -3.1%, Carnival -0.6%, Wynn Resorts -0.5%, Chevron -1%, Exxon Mobil -0.9%,  
Lock down names Campbell Soup +0.7% General Mills +0.4%, JM Smucker +0.8%After Market (Saturday) Tesla annual sales +36% YoY but missed its 500k vehicles
DATA
Initial Claims 787k vs 806k prior revised (F/cast was 815k)
Initial Claims 4 week average 836.75k vs 819k prior revised (F/cast was 843k)
Continuing claims 5.219m vs 5.322m prior revised (F/cast was 5.29m)
EIA Natural Gas Stocks change -114Bcf vs -152Bef (Consensus was -125Bcf)
USD was weaker vs Yen & Euro.
Bitcoin +5.3% @ 33,996.25 with many watching to see if it does its usually January sell off; could this year be different? It was +65% in December.
VIX -0.1% @ 22.75, US T10 @ 0.916%
OIL Brent -1%, WTI -0.3% Gold +0.43%, Silver -0.18%, Copper -0.82%
AHEAD Manufacturing PMI, Construction Spending, Total Vehicle Sales (after market).

DAX -0.31%, CAC -0.86%, FTSE -1.45%  DAX opened flat and traded sideways but sold off into the close. FTSE opened lower initially sold down, support around 3,665 and then worked higher but sold down into the close. CAC opened lower worked back to flat but then sold down into the close.
UK banks, retail and home builders were weak on further lockdown concerns and Brexit.
Airbus -1.6% as US trade officials said they were increasing tariffs on certain EU products including wine and aircraft parts from France and Germany.
AHEAD
EUROZONE Manufacturing PMI
GERMANY Manufacturing PMI
FRANCE Manufacturing PMI, New Car Registrations
UK BoE Consumer Credit, Mortgage Lending, Manufacturing PMI, Mortgage Approvals, Net Lending to individuals.

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