US closing prices distorted by the S&P rebalance and the inclusion of Tesla; Plus after market the Fed Bank Stress Tests allowed for share buy backs to resume in Q1, prompting most to rally after hours
Sentiment remains cautious going into the Christmas week about whether Congress can agree the stimulus package. The reality is that for many poorer American’s, reliant on Govt help, the delay by Congress means it will not be a happy Christmas; the question is really now whether 2021 will see an improvement.
Europe still has Brexit in the balance along with rising covid cases. The shortened Christmas week likely to also highlight how much the Travel and Leisure industry is being impacted with Ski resorts effectively empty hurting both hoteliers and travel operators.
The potential deal between the EU and China also in focus. Europe hopes to get better access to China and a negotiating lever with the US on relations going forward. Interestingly China hopes much the same; better access to Europe and a negation lever or maybe a wedge, for its relations with the US going forward.
In Asia the surge in covid cases in Japan and S Korea is having a negative impact on sentiment. Japan’s heavy snowfall may also add to disruptions and be -VE for business. Shortened trading weeks’ for S Korea and Hong Kong but Japan, Taiwan and China will be open all week; even if a lot of international PM’s will be on holiday; so likely to see slightly lighter trading volumes.
China remains under pressure from Trump’s sanctions and it is interesting to note Biden’s silence on the issue. He will be happy in two respects; Trump is setting the benchmark for what Biden can do on taking office and secondly that when in office he can say that these were Trumps actions but he will need to see significant concessions from China in order to justify removing them.
On Friday China’s annual Central Economic Work Conference in Beijing set out 8 key areas as it seeks to push forward with its steady economic recovery and high-quality development. It said it would keep its macro policies consistent, stable, and sustainable in 2021. But it noted the challenging global economic situation. It said China will adopt a fiscal policy in 2021 that offers stronger financial guarantees to major national strategies, promotes science and technology innovations, accelerates economic structural adjustment, and adjusts income distribution in a proactive manner.
A great plan but the implementation will be difficult with US sanctions, strained diplomatic relations especially is Biden negotiates with the US allies, concerns over the health of its credit markets and over the historically implied government guarantees.
All that said, at this stage I think Asia will open flat on Monday. Enjoy your weekend.
DOW -0.41%, S&P -0.35%, NDX -0.35%, Russel 2K -0.41% opened slightly higher at new highs but trended lower as investors worried that Congress will not agree a deal although they say they are close.
Trading did see an uptick in the last 30 minutes in part due to the S&P 500 rebalance and specifically the inclusion of Tesla +6% which will be seventh largest constituent which caused a huge increase in volume (Tracking funds needed to buy an estimates US$85bn of Tesla). It also coincided with other index rebalances and Quadruple Witching.
Trump placed another 60 Chinese companies on the 'Entity List’ which means US companies will have to apply for licences to supply them equipment or technology -VE for SMIC, DJI, Beijing Institute of Technology, China Communications Construction Company and more than a dozen research institutes linked to the China State Shipbuilding Corporation.
Nike +5.6% after hours (-2.3%in normal hours) as Q2 net income +12% YoY US$1.3 billion. Diluted EPS +11% to US$0.78, beating US$0.62 in consensus; offered bullish outlook due to online sales +84% with China sales +19% +VE for HK Footwear and Apparel makers like Yue Yuen etc.
Banks JPMorgan Chase -0.5%, Citigroup -1.6% and Wells Fargo -1.6%, AMEX 1.2% but all rallied in after market as Fed Stress tests gave the green light to resuming share buybacks in Q1 even though they could face $600bn in pandemic related loan losses.
Work from home: Facebook +0.7%, Apple -1.6%, Amazon -1.1%, Netflix +1.6%, Disney -0.4%, Zoom Video +1.1%, Alphabet -0.8% and Microsoft -0.4%,
Tech NXP -1.6%, Nvidia -0.5%, Micron -1.1%, AMD -1%, Skyworks +1.8%
Re-opening stocks Boeing -0.7%, Caterpillar +1%, Simon Property -4%, Kohl’s -1.1%, Nordstrom -4.3%, Gap -2.6%, United Airlines -2.5%, Carnival -0.8%, Wynn Resorts +1%, Chevron -1.4%, Exxon Mobil -1.7%,
Lock down Campbell Soup -0.4% General Mills -0.5%, JM Smucker +0.5%
Current Account Q3 USD-178.5b vs -161.3b Q2 revised (F/cast was -180b)
CB Leading Index Nov +0.6% MoM vs +0.8% Oct revised (F/cast was +0.4%)
Baker Hughes Total Rig Count 346 vs 338 prior
Fed Bank Stress Test Results Second Round.
USD was slightly stronger vs Yen & Euro. Bitcoin +0.3% @ 23,145, VIX -1.6% @ 21.57, US T10 @ +0.945%
OIL Brent +1.48%, WTI +1.49%
Gold -0.2%, Silver -0.7%, Copper +1.1%
AHEAD Chicago Fed National Activity Index
DAX -0.27%, CAC -0.39%, FTSE -0.33% Saw a weak open but markets initially trended higher into the green before trading sideways around flat. Then sold down into the close. German Ifo data was better than f/cast +VE UK Consumer Confidence saw its sharpest rise in 8 years but retail sales missed.UK calls on EU to compromise on fisheries or no deal -VE for sentiment.
US FDA approved Moderna’s vaccine. Retail lead the declines but Travel and Leisure also weak, Telcoms +VE. US stimulus in focus with hopes of a deal.
CD Projekt -20% after Sony removed Cyberpunk 2077 from its online PlayStation store and offered full refunds to disappointed customers. The title would not be on sale “until further notice”, Sony said. It is currently still available inward copy and on Microsoft but could be pulled there too because of glitches.
Lloyds Bank -3.6% cancelling all staff bonuses.
Current Account Oct Euro 34.1b vs 33.5b (F/cast was 36.3b)
PPI Nov +0.2% MoM vs +0.1% Oct (F/cast was +0.2%)
PPI Nov -0.5% YoY vs -0.7% Oct (F/cast was -0.5%)
Ifo Business Climate Dec 92.1 vs 90.9 Nov revised (F/cast was 90)
Expectations Dec 92.8 vs 91.8 Nov revised (F/cast was 92.5)
Current Conditions Dec 91.3 vs 90.0Nov (F/cast was 88.9)
Consumer Confidence Dec -26 vs -33 Nov (F/cast was -30)
Retail Sales Nov -3.8% MoM vs +1.3% Oct revised (F/cast was -2.8%)
Retail Sales Nov +2.4% YoY vs +5.8% Oct (F/cast was +3.2%)
Retail Sales Ex Fuel Nov -2.6% MoM vs +1.4% Oct revised (F/cast was -2%)
Retail Sales Ex Fuel Nov +5.6% YoY vs +7.8% Oct (F/cast was +6.5%)
CBI Industrial Trends Orders Dec -25 vs -40 Nov (F/cast was -27)
EUROZONE Consumer Confidence
GERMANY No data due
FRANCE No data due
UK CBI Distributive Trades
JAPAN Likely to open slightly lower following Friday’s pattern; as weakness in the US continues as Congress fails to agree a deal and the surge in covid cases locally. T/O on Friday was up DoD and although Tokyo is open all week many international funds will be closing for Christmas so volumes are likely to be lighter. Yen closed 103.31 its strength recently has been +VE for the Auto makers and some other exporters. Heavy snow also a -VE for sentiment as covid cases rise.
No data due
Friday Govt reported 664 new covid cases the third day above 600 -VE
Government on Friday raised its economic growth forecast for the next fiscal year from April 2021 to 4% thanks to its latest stimulus package aimed at speeding up the recovery following the damage wrought by the coronavirus pandemic.
BoJ has launched o review of its monetary policy for the first time since 2016 after the impact of the covid pandemic. It highlights concerns over deflation and the inability to achieve its goals. Report expected by March 2021; Slight -VE for sentiment.
Sony Slight -VE its removing Cyberpunk 2077 from its online PlayStation store. Just a week before Christmas and offering full refunds to disappointed customers. The game developed by CD Project Red (shares were -20% Friday and 40% since the game launched). It was one of the most expensive and anticipated titles in industry history was hit by glitches.
Mizuho Securities to train employees using an AI system in fiscal 2021 for employees in charge of sales activities. It’s aimed at Wealth Management staff and the AI system will analyze data such as the number of times sales employees have contact with clients and their past sales figures. Then decide training programs that best fit each employee’s characteristics, makeup and capabilities will be introduced.
Hotel and Travel names -VE following the suspension of the Go To Travel campaign across the nation from Dec. 28 to Jan 11. In the latest move, the Land, Infrastructure, Transport and Tourism Ministry announced Wednesday that it will exclude trips to Hiroshima City from the governmental subsidy campaign between Wednesday and Dec. 27.
SOUTH KOREA Expect markets to open flat as investors hope of a US stimulus package to be agreed but are aware of the increase in local covid cases and a shortage of hospital beds. Shortened trading week for Christmas with markets closed on Friday.
No data due
Govt reported 1,053 new cases the fourth day above 1,000. Govt admits that many cannot be admitted to hospital due to the shortage of beds and press reports 6 people died whilst waiting. -VE for sentiment. There are also reports of panic buying on the expectation of harsher lock down restrictions.
Ministry of Finance in its monthly economic report, the “Green Book,” it has upgraded its concerns by a notch, saying that the uncertainties are “expanding.” Previously said that the uncertainties were “continuing”. “Despite a steady recovery of exports due to a resurgence of COVID-19 since mid-November and stricter social distancing rules, uncertainties surrounding the nation’s real economy, especially domestic consumption, has been expanding,” the report said. -VE
The union representing workers for General Motors Co in South Korea have voted in favour of a preliminary labour deal with the automaker, a union official told Reuters on Friday. +VE
Hyundai Motor Group said Friday it has developed a Korean-English translation app to support smooth communication among its employees in local and overseas offices. Slight +VE
SK Innovation’s aggressive battery investments have trickle-down effects for local businesses in Korea and the US, the firm claimed Friday, as it sought to burnish its contributions to the economy ahead of a lawsuit ruling with LG Chem in the US. If it losses the new US plant in Georgia could suffer.
TAIWAN Expect market to open flat as CIER raises its forecast for economic growth.
Data due after market Export Orders
The Chung-Hua Institution for Economic Research (CIER) Friday forecast that the economy would grow 2.38% this year and 3.73% next year, up from its October estimates of 1.76% and 3.42% respectively. Stronger-than-expected exports are driving growth this year, while domestic demand would lift it next year. +VE
ASE Technology Friday said it is to raise employees’ monthly wages by between 3% and 5% for entry-level positions at its Kaohsiung fabs. The fourth consecutive year of salary hikes in the same range as the firm seeks to retain talent. It is also to give an extra bonus, or “red envelope,” of NT$10,000 (US$351) for each employee on top of their regular year-end bonuses, +VE
Winstrom An Indian labor office’s preliminary investigation into violence last weekend at its factory found several labour law breaches by the Taiwanese supplier of Apple and its vendors, a report reviewed by Reuters said. The report notes attendance records not maintained, non payment of overtime, also that its contract employment providers in India exceeding hiring quotas and that attendance machine or software had a glitch which resulted in the under payment. -VE for Winstrom but also likely to highlight issues within the Indian systems and adherence by local companies; like the local employment contractors exceed their quotas. This could be a big issue for companies looking to relocate production to India and something only the government can really address.
Fubon Financial yesterday announced that it plans to acquire at least a 50% stake in Jih Sun Financial via a public tender offer valued at NT$24.53 billion (US$861 million), the first merger or acquisition of a financial holding company in the nation. Fubon eventually aims to fully acquire Jih Sun, in a deal that would cost NT$49.04 billion. Fubon said it had received approval from the Financial Supervisory Commission (FSC) to proceed with the deal. +VE
CHINA Expect market to open lower on news that Trump added 60 companies to the entity list and signed the Holding Foreign Companies Accountable Act.
Data due Loan Prime Rates 1 and 5 year (no change expected)
Beijing reported one new confirmed Chinese coronavirus patient, who is from Hebei province, local health authorities announced at a press briefing Friday. The 48-year-old woman, was a close contact of an imported patient reported on Monday, Pang Xinghuo, deputy director of Beijing's center for disease control and prevention, told reporters. Forty-three close contacts have been initially traced. Compares to 12 reported on Thursday.
US placed more Chinese companies on the entity list they include SMIC, DJI and Beijing Institute of Technology, China Communications Construction Company and more than a dozen research institutes linked to the China State Shipbuilding Corporation. -VE.
Trump also signed the Holding Foreign Companies Accountable Act, which will remove Chinese and any other foreign company from American stock exchanges if they fail to comply with US auditing oversight rules within three years -VE
China’s State Councillor & foreign minister Wang Yi said on Friday that the United States should choose dialogue and consultation with China instead of pursuing “unacceptable” unilateral sanctions against Chinese companies.
China will keep its macro policies consistent, stable, and sustainable in 2021 to push forward steady economic recovery and high-quality development, according to a statement Friday after the annual Central Economic Work Conference in Beijing. Noting the challenging global economic situation, it said China will adopt a fiscal policy in 2021 that offers stronger financial guarantees to major national strategies, promotes science and technology innovations, accelerates economic structural adjustment, and adjusts income distribution in a proactive manner. Slight +VE
HK Standard report on the 8 priorities can be found at the following link:https://www.thestandard.com.hk/breaking-news/section/3/161517/Eight-priorities-outlined-for-China's-economy-in-2021
Canadian PM Trudeau on Friday said China undermined its own interests and alienated other nations when it detained two Canadians almost two years ago, after Canada had arrested a Chinese executive on a U.S. arrest warrant.
China will focus first on vaccinating high-risk groups over the winter and spring before widening the inoculation to the general public, a senior health official said on Saturday. They include workers in the cold chain industry, customs, healthcare, markets and public transport.
Travelers arriving in China from Taiwan will be denied entry if they provide a nucleic acid report that refers to the “Wuhan virus” instead of the name officially designated by the WHO as “coronavirus disease 2019,” or COVID-19 in abbreviated form. The new measure, effective immediately, was announced in separate statements on Thursday by three Chinese carriers — China Southern Airlines, Air China and Shenzhen Airlines — that currently operate flights to and from Taiwan.
US prosecutors on Friday charged Xinjiang Jin, a former China-based executive at Zoom Video Communications Inc with disrupting video meetings commemorating the 31st anniversary of the Tiananmen Square crackdown at the request of the Chinese government. The software engineer, Zoom’s main liaison with Chinese law enforcement and intelligence, helped terminate at least four video meetings in May and June. Jin allegedly fabricated violations of Zoom’s terms of service to justify his actions to his superiors. -VE for sentiment, highlights China’s abuse of Western Freedoms.
Chinese filmmaker Du Bin detained in Beijing a month before the Taiwan launch of his book on the rule of Soviet leader Vladimir Lenin. He has been accused of ‘picking quarrels and provoking trouble’ a charge widely used in China to stifle dissent. -VE
HONG KONG ADR’s +125pts at 26,623 Telcos were weak along with CCB, Xiaomi and CNOOC. But expect market to trade around flat as Chinese/US tensions remain high and the scope for more sanctions from Trump is seen as increasing in his final days.
Data due after market
Inflation Rate (F/cast +0.5%)
IPO JACOBIO-B (01167.HK), to be listed on Monday, opened at $16.48 in grey market, up 17.7% against the listing price $14, and last stood at $20.9, up 49%, on volume of 1 million shares, PhillipMart data showed.
SHORT SELLING Friday 16.6% vs 15.2% Thursday
Top Shorts Country Garden (2007) 36%, Wharf REIC (1997) 36%, Hang Lung Ppty (101) 35%, Bud Apac (1876) 35%, NWD (17) 33%, Ping An (2318) 33%, Baba-SW (9988) 31%, Hang Seng Bank (11) 30%, Sino BioPharm (1177) 26%, Bank of China (3988) 25%, MTRC (66) 25%.
EVERGRANDE (03333.HK) acquired 1.04 million shares, 2.845 million shares, 3.276 million shares, and 3.17 million shares of EVERG VEHICLE (00708.HK) from Tuesday (15th) until today (18th), involving about $296 million in total, according to HKEX's disclosure of interests.
S HARBOURHOLD (01663.HK) announced that Wong Lam Ping, the Company’s chairman and substantial shareholder, had acquired 884,000 shares in the open market on 18 December, involving $132,600.
Li Ka-shing and Victor T K Li, through Li Ka Shing Foundation Limited, acquired a total of 690,000 shares in CK ASSET (01113.HK) at the average price of HK$42.9529, HK$42.25, HK$41.7933 and HK$41.1937 per share on 14 December, 15 December, 16 December and 17 December 2020 respectively. As a result, the deemed interests of Li Ka-shing and Victor T K Li in CK Asset increased from 35.85% to 35.86%, and increased from 35.91% to 35.93%, respectively.
PAX GLOBAL (00327.HK) announced declaration and payment of special dividend of $0.1 per ordinary share, payable on 22 January 2021. +VE
CTIHK (06055.HK) PROFIT WARNING expecting a decrease in net profit in the range of 65% to 75% for the year ending 31 December 2020 as compared to that of the year of 2019.
SWIREPROPERTIES (01972.HK) announced the cooperation with SINO-OCEAN GP (03377.HK) to develop the sites in vicinity of Indigo, Beijing as an extension to the project. The expansion project, in an expected investment size of RMB23 billion, will be held as to 35% and 64.79% by SWIREPROPERTIES and SINO-OCEAN GP.
MEITUAN-W (03690.HK) to bolster its leadership hierarchy building further by establishing a unit for middle-level and top-level management development. The division will be headed by the group's Co-founder Mu Rongjun In the meantime, MEITUAN-W Co-founder and Senior Vice President Wang Huiwen will officially step down.
The Central Harbourfront commercial land parcel, located at the heart of Hong Kong with Victoria Harbour views, sounds very appealing to developers, opined Dorothy Chow, senior director of valuation and advisory at JLL. However, she foresaw rather conservative prices offered by developers under an office and retail market downcycle. Centaline Commercial estimated the floor price of the Central Harbourfront commercial land king at around $38,000, with a land premium of about $61.1 billion.
The two-envelope tender of Site 3 of the New Central Harbourfront will close on June 18, 2021.
BABA-SW (09988.HK) In response to foreign media report that Chinese joint investigation unit is probing into the group, stated that the news is untrue and that it will hold the rumourmongers accountable.
BABA-SW (9988) reported in the press as having facial recognition technology which can specifically pick out members of China's Uighur minority, surveillance industry researcher IPVM said in a report. Alibaba itself said it was "dismayed" a unit developed software which can tag ethnicity in videos, and that the feature was never intended to be deployed to customers, Reuters reports. The report comes as human rights groups accuse China of forcing over 1 million Muslim Uighurs into labour camps in the region of Xinjiang, and call out firms suspected of complicity. China has repeatedly denied forcing anyone into what it has called vocational training centres, and has also said Xinjiang is under threat from Islamist militants.
HK to tighten arrival restrictions in view of the global developments and severity of the COVID-19 pandemic situation, to include Canada as a specified place starting from December 25 to more effectively combat the epidemic, said the Food and Health Bureau.According to the latest specifications, a traveller who, on the day on which the traveller boarded a civil aviation aircraft that arrives at, or is about to arrive at, Hong Kong (specified aircraft), or during the 14 days before that day, has stayed in one of the aforementioned specified places must provide negative test results for COVID-19 and confirmation in English or Chinese of room reservation in a designated quarantine hotel/guesthouse in Hong Kong.
CBHB (09668.HK announced that the net profit amounted to RMB6.55 billion during the first nine months of 2020.
Shenzhen Yilite Entertainment a wholly-owned subsidiary of Tencent Music, was incorporated today with a registered capital of RMB5 million, according to TianYanCha. The arm is engaged in artistic and literary creation
Tencent Music announced that a consortium, which is led by TENCENT (00700.HK), exercised its call option to acquire an additional 10% equity interest in Universal Music Group (UMG) from France's Vivendi, at the same enterprise value of EUR30 billion as in the initial acquisition that closed in March 2020.
Airport Authority Hong Kong has communicated with suppliers to collaborate on transporting the first COVID-19 vaccine shots, which are expected to arrive in January 2021. The authority aims to deliver the vaccine at the earliest convenience. AAHK has roughly 30 refrigerated trucks, each capable of storing 150,000-300,000 vaccine doses.
Centa-City Leading Index (CCL) last posted at 176.54, down 0.68% weekly. For the recent nine weeks, CCL +0.4%, CCL Mass +0.3%, CCL (small-and-medium units) +0.4%. The readings indicated the first weekly condition after the 4th COVID-19 outbreak, said the research department of Centaline Property.
Chief Executive Carrie Lam's popularity rating has dropped to 25.6 points out of 100, with over 60 percent of the respondents dissatisfied with the performance of the government, a recent public opinion survey has found.
Among the HKSAR administration, finance chief Paul Chan Mo-po scored the highest of 30.2 points, followed by Chief Secretary for Administration Matthew Cheung Kin-chung’s 26.9 points. While Secretary for Justice Teresa Cheng Yeuk-wah scored the lowest of 19.9 points among the four.