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Market trended lower for the first hour finding support at 7,380 before rebounding. Initially to the 7,400 level before working higher to 7,420 level.
Weakness in Financials and Materials (Iron ore weak although Lithium miners are rallying after Pilbara sells spodumene concentrate at a higher than expected spot price.)
Leaders Healthcare and IT
WiseTech +VE on broker upgrade following good results.
Consumer Confidence Index Sept 106.2 vs 104.1 Aug (F/cast was 102)
Consumer Confidence Change Sept +2% vs -4.4% Aug (F/cast was -2%)
Consumer Inflation Expectations Sept vs +3.3% Aug (F/cast was +3.2%)
New Home Sales Aug MoM vs -20.5% Jul (F/cast was -9%)
Nikkei opened lower at 30,464 and trended lower for the first two hours after weak initial data and poor data out of China but then rallied back to the opening levels going into lunch. PM trading around 30,500 (-155pts or -0.5%)
Topix traded in the morning in a similar fashion. PM is trading sideways currently -24pts (-1.1%) @ 2,095
Shippers (Bulk especially) +VE but Laggards: Property, materials and energy . Tech weakness after the disappointing Apple launch. Data
Tankan Index Sept 18 vs 33 Aug (F/cast was 39)
Machinery Orders Jul 11.1% YoY vs 18.6% Aug was (F/cast was 16%) Machinery Orders Jul 0.9% MoM vs -1.5% Aug (F/cast was +2.9%)
Tertiary Industry Index Jul -0.6% vs +2.3% Jun (F/cast was +1.4%)
Kospi opened slightly lower but rallied to test 3,160 in the first hour but choppy trading. Sold down to 3,140 level on news of N Korean missile launch but then rebounded back to trade around 3,160 level.
Kosdaq traded in a similar way, seeing resistance at 1,044; currently +6pts (+0.6%) @ 1,044
Foreigners small net buyers mainly Tech. Weakness in Internet, Steel and Chem (LG Chem -3%)
Leaders Phama and Utilities
Unemployment Aug 2.8% vs 3.3% Jul (F/cast was +3.7%)
Taiex opened flat but sold down to 17,315 in first hour but then worked slightly better to trade sideways around 17,380 level. Small rally going into the close to 17,400 but closed -40pts (-0.2%) @ 17,385
CSI 300 opened lower at 4,903 but sold down to 4,870 in early trades before rebounding after the weak China data and especially weak Retail Sales data. I would expect Team China funds being put to work. Still no clarification from Beijing about policy support. I still think that the implementation of Dual Circulation is going to hurt the economy but the ideology is now paramount.
Concerns remain regarding the covid outbreak especially ahead of Mid Autumn festival and Golden Week.
Home Price Index Aug 4.2%YoY vs 4.6% Jul (F/cast was +4.6%)
Home Price Index Aug +0.16% MoM vs 0.3% Jul
NBS Press Conference
Fixed Asset Investment (YTD) Aug 8.9% YoY vs 10.3% Jul (F/cast was 9.5%)
Industrial Production Aug 5.3% vs 6.4% Jul (F/cast was 6%)
Retail Sales Aug 2.5% vs 8.5% Jul (F/cast was 7.5%)
Unemployment Rate Aug 5.1% vs 5.1% Jul (F/cast was 5.1%)
Pre market opened 25,310 -192pts vs -193pts ADR’s but sold down to 25,131 in early trades with Macua names hit down on news of more control of the sector. Market rebounded after the weak data back to 25,400 but then trended lower into lunch. PM opened slightly lower but the trend is lower. Southbound Connect closes tomorrow and resumes Sept 23 after the long weekend in China.
Just announced that Evergrade tells Banks it will not pay interest due in Sept.
Expect markets to open lower following the weakness in Asia and especially the China data which could hurt the global growth outlook
Eurozone Industrial Production, Labour Cost Index, Wage Growth.
Germany No data due
France Inflation Rate
UK Inflation Rate, Core Inflation, PPI Core Output, PPI Input/Output Retail Price Index,
Opened Dow +20pts, S&P +0.08% and NDX +0.11%.
Ahead MBA Mortgage Applications & 30 yr rate, Export/Import Prices, NY Empire State Manufacturing Index Industrial & Manufacturing Production, Capacity Utilisation, EIA Oil Stock Change Report.
Joe Biden’s suggestion of summit with Xi Jinping falls on deaf ears
US president proposed face-to-face meeting in call last week but Chinese leader did not respond instead Xi wanted the US to act towrds China in a more relaxed matter.
There are a huge range of issues to be addressed and many of them China views as internal affairs and not for external discussion. But Xi also has to consider how it would look to his domestic audience especially if he fails to get any meaningful concessions from the US.
A good read. I also think to some extent the party propergander machines has painted China into a corner on some issues and finding a ‘face saving’ way out will be difficult.
Chinese land auction blunder undercuts Xi’s inequality crusade
New rules to contain soaring house prices in big cities suspended after having opposite effect.
The idea was to try and reduce the cost of land by having 3 larger auctions rather than smaller monthly ones. That the hope was would result in cheaper house prices. But it didn’t basically without an increase in the total amount of land being offered developers continued to push prices higher.
An interesting read. It concludes
‘The ministry adviser, however, was sceptical that the latest measures would prove effective. As local governments derive the bulk of their fiscal revenues from land sales, they might be tempted to simply raise asking prices. “There is too much at stake,” he said. “The central government can’t expect to control everything.”’
I think that adviser will be surprised because under dual circulation that is exactly what the central government wants to do.
China exploits anti-fraud app to trail readers of foreign news
• Police say overseas scams are rising
• Visitors to financial sites questioned
‘Chinese police are using a new anti-fraud app installed on more than 200m mobile phones to identify and question people who have viewed overseas financial news sites, according to individuals summoned by the authorities. The app was launched in March by the public security ministry’s National Anti-Fraud Center and blocks suspicious phone calls and reports malware.’
The police says its to combat fraud which they say is perpertrated by Chinese and Taiwanese nationals. Whilst the ministry only recommended the adoption of the app authorities have made it mandatory for some like; local government agencies workers and those they work with. Others have also had to download it like parents wanting to enrol students and some tenants before being allowed to sign leases.
The article notes that the can has various options that can be enabled like live monitoring of call logs, text messages, coversations and more.
It seems to be in line with the new controls being pushed on the tech companies to with algos that will promote content that the party likes and negate that it does not.
The real question is that now the social contract is being written how much will be tolerated by Chinese citizens. President Xi is presuming that the majority will back his vision but only time will tell.
Chevron triples clean energy pledge to $10bn but sets no new net zero targets.
‘The clean energy spending pledge is more than three times the amount previously committed but on an annual basis amounts to less than a tenth of its planned capital spending of about $15bn a year between now and 2025.’
It notes that the US groups are lagging their European rivals who are looking to diversify into solar and wind which probably reflects the historic pattern of talking about moving to clean up opertions and green power whilst paying more to lobbyist to push for government support for oil, which was quite successful under the Trump adminiistration.
Pace of US consumer price rises moderates
Looks at yesterday’s data, key seems to be that some re-opening and pandemic bottlenecks have eased but people are still expecting inflation to be prevelent over the short to medium term.
Shinsei hires Morgan Stanley for ‘poison pill’ against SBI
New also that its considering issueing new shares to dilute the SBI stake, all part of the playbook that Japanese firms used to use to fend off unwanted approaches but which have been discouraged in recent years but shows that old Japan still plays on. It is interesting that the bid comes after failed efforts to create a closer relationship between the two. Which was rebuffed and Shinsei started talks with SBI’s rival Monex.
It notes that SBI has a reputation of building stakes in several weak Japanese banks and that has won him favour with Japan’s Financial Services Agency.
It is clear that Japan’s bank need to consolidate and improve their profitability but it appears that in Shinsei’s case the board is more interested in protecting its position than looking at the longer term prospects.
Investors bet cosmetic surgery craze is next on China’s hit list
Biggest medical aesthetics stocks shed $17bn in face of growing scrutiny from Beijing.
An interesting read and its worth noting that there was an article in the People’s Daily regarding cosmetic surgery, which seems a popular way for the government to test policy. The article noted that ‘cosmetic surgery industry advertising had “crossed the regulatory bottom line”.’
It is worth noting that Beijing has commented about the growth of illegal surgery at unlicensed clinics and sought to bring action against them.
It’s an interesting read not least because it reflects how Chinese society as it becomes more affulent is looking for things to spend money on and in many respects following the trends seen in the west. It also reinforces the Dual Circulation premise that the party is looking to take control of everything.
Evergrande faces demonstration outside headquarters as liquidity crunch worsens
The extent of Evergrande’s problems is snowballing. It’s hired advisers as the problems escalated but there is still the potential for default. It is also interesting to note that it is not just Property exposure but wealth management products in addition to its bond issues.
Also worth noting that Beijing yesterday announced that it was bringing in its own team to assess the situation.
Plus the fact that, as I have been writting recently, property is no long seen as a key driver for the Chinese eceonomy. It is now being seen as a sponge of money and President Xi would prefer that cash be directed to enabling China to move up the advanced manufacturing ladder.
The size of Evergrande’s problems may make it too big to fail but I doubt the government will step in; more likely is that other deverlopers will be pushed to bail it out which would probably be a slight negative for the sector. Longer term I expect the developers to be less profitable especially as it is likely that China will introduce a property tax as part of its common prosperity theme.
Bureaucratic inertia threatens corporate governance in Japan By Nicholas Benes chief executive of the Board Director Training Institute of Japan.
Compares and contrasts the codes of conduct of UK and Japan; where ‘codes of conduct for companies and shareholders, three words have echoed around the corporate landscape — “engagement”, “taiwa” (discussion) and “stewardship”.’ Japan’s codes were brought in 2014/15 but unlike the UK’s they have proved to be more burdensome than the UK’s
An interesting read. Show’s how established Japan can take something could be progressive and twist it into something that is not.
Alipay break-up is a power grab by Beijing
Transactions data offers new opportunities for state surveillance
Two key elements to the editorial being that China can change the rules without the consultative process that is normally seen the west, allowing a opportunity for rebuttal or compromise. Secondly that the data from Ant will allow the Government a further insight into its citizen’s private lives. Combine that with the traceability that a digital currency will give and it gives the State almost full insight. Again as menetioned above the reaction of the people is unknown but the insideous way the social contract is being re-written is concerning.