Dec 23 Asian Macro Initial Thoughts, Asia to open mainly flat but work higher


23 Dec

Asian Futures Nikkei Futures opened flat,  HK ADR’s -86pts and Australia opened flat but moving higher in early trades.  I expect to see Japan, S Korea and Taiwan  markets rebound on bargain hunting.  China and Hong Kong to remain weak on concerns over more Trump action during his last days in office.
US Futures opened flat Dow +6pts S&P and NDX flat.

OverviewThe sell off due to the new covid mutation seems unjustified but reflects the nervousness of investors with many markets trading at highs.  The evidence available of Monday showed that mutation had been identified since September and has also been discovered in Belgium, Netherlands, Italy Denmark and Australia, the banning of UK flights therefore seems to be governments seeking to be seen to be doing something, whereas in fact they are creating panic. A similarly virulent strain, but not the same was identified in S Africa but without similar travel banks which suggest the French reaction was more about Brexit negotiation tactics than public health and highlights the additional risk to investors from governmental political agenda’s which take priority over the public good.  China is the same; with its embargo on Australian coal as winter approaches and power cuts become more common.

DOW -0.67%, NDX +0.51%, S&P -0.21%, Russel 2K +1% Markets opened around flat and traded sideways for the day.  The Dow and S&P trading just below/around Monday’s closed and dipped into the close. The Nasdaq traded just above. Congress passed the stimulus bill but that had been largely factored in.  Travel names remained weak on concerns over the new covid strain despite assurances the current vaccines would be effective.
The drop in US Consumer Confidence, that came out mid morning ddi prompt markets to dip and is a concern.
Banks JPMorgan Chase -1.5%, Citigroup -3.2% and Wells Fargo -2%, AMEX -1.6%
Work from home: Facebook -2.1%, Apple +2.9% on news of moving into EV's, Amazon flat, Netflix -0.3%, Disney -0.1%, Zoom Video unch, Alphabet -0.8% and Microsoft +0.6%,
Tech NXP -0.4% but off early highs, Nvidia -0.4%, Micron -1.4%, AMD -0.1%, Skyworks +1.1%
Re-opening stocks  Boeing -0.2% off initial high on Alaska Air Order,  Caterpillar -2%, Simon Property -0.1%, Kohl’s -0.5%, Nordstrom -2%, Gap -1.6%, United Airlines -2.5%, Carnival -6%, Wynn Resorts +0.1%, Chevron -2%, Exxon Mobil -1.7%,  
Lock down names Campbell Soup -1.2% General Mills -0.7%, JM Smucker +0.3%
DATA
Corporate Profits Final Q3 +27% QoQ vs -10.7% Q2 (F/cast was +27.5%)
GDP Price Index Final Q3 +3.3% QoQ vs -1.4% Q2 (F/cast was +3.3%)
GDP Growth Rate Final Q3 +33.4% QoQ vs -31.4% Q2 (F/cast was +33.1%)
PCE Prices Final Q3 +3.7% QoQ vs -1.6% Q2 (F/cast was +3.7%)
Core PCE Prices Final Q3 +3.4% QoQ vs -0.8% Q2 (F/cast was +3.5%)
Redbook -0.9% MoM vs -2.2% prior [+6.5% YoY vs +2.5% prior}
Existing Home Sales Nov -2.5% MoM vs +4.3% Oct (F/cast was -2%)
Consumer Confidence Dec 88.6 vs 96.1 Nov (F/cast was 95.1)
Richmond Fed Manufacturing Index Dec 19 vs 15 Nov (F/cast was 11)
5 Yr TIPS Auction -1.575% vs -1.32% prior
API Crude Oil Stock Change +2.7m vs +1.973m Prior
USD was unchanged vs Yen & Euro. Bitcoin +2.4% @ 23,441.75, VIX -3.7% @ 24.23, US T10 @ 0.921%
OIL Brent -2.1%, WTI -2.5% rising covid cases raises demand concerns again.
Gold -1%, Silver -4%, Copper -1.9%
AHEAD 
MBA 30 yr Mortgage Rate, Personal Income & Spending, PCE Price Index, Core PCE Price Index, House Price Index, New Home Sales, Michigan Consumer Confidence Data (Consumer Expectation, 5 year Inflation Expectations, Consumer Sentiment, Inflation Expectations, Current Conditions), EIA Oil & Gas Report, Baker Hughes Total Oil Rig Count.

DAX +1.3%, CAC +1.36%, FTSE +0.57%  Markets DAX and CAC opened higher, FTSE lower but all initially traded higher through the day. Covid still in focus but revelation that the strain had been around since September and that the current vaccines would be effective easing concerns. Brexit negotiations on going but UK offering concessions; stick point still seems to be fishing. Sterling continues to weaken.   Bank and Tech leading the gains. UK supermarkets weak on shortage worries.
DATA
GERMANY
Consumer Confidence Jan -7.3 vs -6.8 Dec revised (F/cast was -9.2)
UK
Business Investment Final Q3 +9.4% QoQ vs -25.4% Q2 revised (F/cast was +8.8%)
Business Investment Final Q3 -19.2% YoYvs -25.2% Q2 revised (F/cast was -20.7%)
Current Account Q3 GBP -15.7b vs -11.9b Q2 revised (F/cast was -10.7b)
GDP Growth Rate Final Q3 -8.6% YoY vs -20.8% Q2 revised (F/cast was -9.6%)
GDP Growth Rate Final Q3 +16% QoQ vs -18.8% Q2 revised (F/cast was +15.5%)
Public Sector Borrowing Nov GBP -31.6b vs -21.7b revised (F/cast was -28.6b)
AHEAD
EUROZONE No data
GERMANY Import Prices
FRANCE PPI
UK Car Production

JAPAN Nikkei Futures opened flat -5pts and trading around there.  Expect to see a rebound on bargain hunting after Tuesday’s sell off on the new covid strain.  Yen currently 103.63
Data due pre market BoJ Monetary Policy Meeting Notes  
At lunch Coincident Index and Leading Economic Index
Tokyo reported 563 new covid cases on Tuesday (vs 460 Monday)  concerns remain high.
PM Suga aims to meet with Biden as soon as possible to discuss the U.S.-Japan security alliance, the coronavirus pandemic and global warming.Final Tokyo Olympic budget +22% to Yen 1.64tn; The added amount is the cost of the one-year delay. Added expenses come from renegotiating contracts and measures to combat the COVID-19 pandemic according to the organising committee
SoftBank may cut monthly 5G service fee by Yen 1,900 a month to Yen 6,580 with unlimited use of 5G, making it cheaper than NTT DoCoMo and KDDI.

SOUTH KOREA Expect markets to open flat but trade higher with some bargain hunting after Tuesday’s sell off.
No data due
Govt has shut ski resorts and winter tourist spots to curb the covid virus from spreading and announced another measures but would not tighten existing rules; dining in groups of five or more will be prohibited nationwide from Thursday until Jan. 3. Hotels and other accommodation facilities will also be required to accept guests at only 50 percent of capacity. Popular tourist destinations and national parks will be closed.
Korea Disease Control and Prevention Agency (KDCA) reported 869 new covid cases to Midnight Monday, down from the daily record of 1,097 reported over the weekend.
Finance Minister Hong Nam-ki said Tuesday that the government will provide 460,000 housing units next year, while strengthening monitoring on manipulation attempts in the real estate market.
Dongbu Corp led consortium was picked Tuesday as the preferred bidder for the controlling stake of Hanjin Heavy Industries & Construction Co., the troubled shipbuilder said. +VE
LG Energy Solution +VE as Chile's SQM said on Tuesday it had inked a long-term agreement with LG Energy Solution to supply the South Korean battery maker with ultralight metal lithium, a main ingredient in powering electric vehicles. +VESK Materials said Tuesday it has invested $17 million in a US-based startup OVP Venture Partners, developing advanced materials that can enhance the energy density of lithium-ion batteries by 50%.  The investments will allow Group14 Technologies to ramp up its pilot production facility and help with the startup’s groundbreaking of a large-scale plant in Washington next year. +VE
Bibigo owner CJ CheilJedang said sales of Bibigo dumplings stood at 1.03 trillion won ($930 million) in 2020, with 65% of the revenue coming from overseas. +VE
Hyundai Motor said Tuesday it will suspend one of its domestic plants for two weeks to control inventories amid the COVID-19 pandemic.
Business groups protest against industrial accident bill.  Envisioned legislation could place top company executive behind bars for major failure in safety management.  “We fully agree to the legislative intent to better protect workers’ safety and to prevent industrial accidents,” said the country’s key business groups in a joint rally held at the Korea Federation of SMEs headquarters in Yeouido, western Seoul. “But it is excessive to lay all the blame upon the management and to hand down quadruple sanctions including criminal punishment, corporate fines, administrative sanctions and punitive damages.”

TAIWAN Expect market to open higher with bargain hunting after Tuesdays late selling.
Data due after market 
Industrial Production, Retail Sales
Taiwan reported its first covid case in 253 days.
Tatung Co chairman Lin Wen-yuan has been dismissed after just 50 days on the job,  Lin made the announcement at a news conference in Taipei yesterday. Lin said that he had “minor differences of opinion” with Tatung’s leading investor, Shanyuan Group chairman Wang Kuang-hsiang, who informed Lin on Monday last week that he would be replaced. Wang wants to be Chairman.  It will raise questions about Chinese influencing control over the company that was recently subject to investigation over its AGM voting practices -VE
Realme Mobile adopted MediaTek 5G chips for its new smartphones launched in Taiwan yesterday in a joint effort to expand their share of the 5G smartphone market. Realme’s new flagship model, the Realme X7 Pro, is equipped with MediaTek’s 5G system-on-a-chip (SoC) Dimensity 1000+, the latest premium SoC from the Taiwanese chip designer. The Dimensity 1000+ is also used in Xiaomi Corp’s Remi K30 Ultra and Vivo IQOO Z1 in China, as MediaTek aims to grab a 50% share of China’s 5G smartphone chip market.
Quanta Computer is stepping up COVID-19 prevention measures after an employee at one of its subsidiaries contracted the novel coronavirus in the first case of community transmission in Taiwan in 253 days. The woman was infected by case No. 765, an EVA Airways Corp pilot from New Zealand.
Securities companies in Taiwan reported that net profit last month soared compared with October thanks to an increase in turnover on the TAIEX, the Taiwan Stock Exchange (TWSE) said on Monday.  Local securities firms posted a combined net profit of NT$9.17 billion (US$321.25 million), +142.4% MoM as aggregate turnover on the market rose 41.31% month-on-month to about NT$4.8 trillion, TWSE data showed.

CHINA Expect market to open lower with concerns about more Trump action.  News that China may ease back on steel production a -VE.
No data due but the National People’s Congress standing committee started their five-day meeting Tuesday, which will run until this Saturday; so watch for sound bites.
China says it is on high alert but has not suspended flights from the UK saying the genome for the new strain had not been found in any of its tests on people, freight or goods entering the country.
'Good riddance,' China says as Germany leaves U.N. Security Council, the German UN Envoy had appealed to China to release the two detained Canadians.  -VE for sentiment.
Huawei and ZTE  excluded from 5G in Sweden after appeals court upholds ban on security grounds.  Also public opinion in Sweden see human rights and democracy as the top priorities in dealing with China.  Swedish public opinion of China is one of the most negative in Europe.
Two key US Republican lawmakers on Tuesday urged the Trump administration to strengthen new rules adopted Friday aimed at preventing China’s biggest chipmaker SMIC from getting access to advanced U.S. technology, saying the Entity List should be rewritten to close dangerous loopholes. -VE for sentiment
Bloomberg reports that less western business people are prepared to travel China citing the risk of being detained by security agents
China's State Administration for Market Regulation (SAMR) and Ministry of Commerce (MOC) convened an Administrative Guidance Meeting for Standardizing Community Group Purchase, Xinhua News Agency reported. BABA-SW (09988.HK), TENCENT (00700.HK), JD-SW (09618.HK), MEITUAN-W (03690.HK), Pinduoduo and Didi partook the event. The Meeting guided such internet platforms to follow strictly the "Nine Don'ts"; for example, they should not abuse the self-pricing right by low-price dumping, and should not bar or restrict competition.
Sinovac might release its phase 3 human trial data on Wednesday but little else is known publicly about the vaccine candidates
High iron ore prices may correct in the coming year as Chinese demand for the steelmaking ingredient is expected to ease, though aggressive speculation through iron ore derivative trading could thwart that outcome, according to analysts.  Press reports the China Iron and Steel Association (CISA) held talks last week with Australia’s Rio Tinto
and BHP over how to control iron ore prices, prices have increased to near their highest levels since 2011. That would suggest less infrastructure projects -VE for Heavy Machinery companies like Sany, Zoomlion, Lonking etc.

HONG KONG  ADR’s -86pts at  26,033 broad based weakness; ADR’s that closed in the green were HSBC, Sinopec and AIA.  Expect some initial margin call selling but key for sentiment will be holding above 26k.  E Commerce should rebound after the SAMR and MOC meeting over 'Community purchases’.
No data due but after market Tuesday 
Current Account Q3 HK$96.5b vs 60.52b Q2 (F/cast was -5b)
SHORT SELLING Tuesday 14.2% vs 12.9% Monday 
Top Shorts  Bud Apac (1876) 48%, Wharf REIC (1997) 45%,  Country Garden (2007) 40%, Hengan (1044) 39%, Bank of China (3988) 37%, Bank of China (3988) 37%, Sands China (1928) 32%, CKI (1038) 31%, Ping An (2318) 30%, AAC Tech (2018) 29%, CCB (939) 29%, AIA (2018) 28%, HK & China Gas (3) 27%, Power Assets (6) 27%, BankComm (3328) 26%, CLP (2) 25%,  MTRC (66) 24%,  
LOCAL GOVERNMENT  Beijing to rule on district councilors' oath taking, disqualifications expected.  KEY here is that Beijing is looking to reverse the significant loss of control the pro Beijing party suffered in last years local elections by disqualifying many pro-democracy  councillors and overturning the public’s choice.
WATCH
FTSE Russell announced that it will remove SMIC (00981.HK) and HIKVISION (002415.SZ), two Chinese companies sanctioned by the United States, from the FTSE China A50 Index and the FTSE China 50 Index, effective 7 January 2021. -VE
The Macau government announced that, in order to prevent the spread of COVID-19 in the city, the Chief Executive had approved two instructions as laid out in the Macau Official Gazette Tuesday. Starting 00:00 on 23 December 2020, all residents of Mainland, Hong Kong and Taiwan who have been to countries or regions outside of China over the past 21 days will be banned from entering Macau. -VE Casino namesHang seng index review increase number to 80 Bberg
BYD COMPANY (01211.HK)  will build a new-energy-powered battery production base in Lingang Industrial Park, Economic Development Zone, Bengbu City, Anhui Province, for the manufacturing of core products, such as new energy battery cells, modules and related supporting industries. The total investment amounted to RMB6 billion.
AEON CREDIT (00900.HK) announced results for the first three quarters ended November 2020. Net profit amounted to $230 million, down 17.4% yearly. EPS equaled 55.01 cents. Slight -VE
After MTR CORPORATION (00066.HK) announced that 37 EOIs had been received for the Wong Chuk Hang Station Phase 5 project,  CK Asset (01113 HK) said it had submitted a bid.  James Cheung, a surveyor at Centaline, commented that the market response was in-line with the consensus.  No indication yet of the level of bidding but I would not expect bullish bids at this stage. 
K. WAH INT'L (00173.HK) assumed Hong Kong property market to be on track of recovery next year, when property prices may go up roughly 5%, after the pandemic comes under control and effective vaccines hit the market.  The key for investors is that the property companies do not expect prices to fall; despite the pandemic +VE the Developers many of whom have locked in substantial pre sales the only risk is inflation which means they will not immediately benefit from any upside.  Investors will be Abel o tell when their sentiment has turned as they will no longer apply for pre-sale consent but want to wait for ‘occupaitonal permits’ before selling!

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