Sept 23 Asian markets mixed, FT Evergrande, Fed, Taiwan CPTPP application, Japan under owned

23 Sep

This and previous notes can be found at  Substack ( Asian Market Sense )
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Market climbed in early trades to 7,350 and then worked better to trade around 7,375 level from around 11am.  Oil names +VE but Gold weak.
Flash PMI’s
Manufacturing Sept 57.3 vs 52 Aug (F/cast was 51)
Services Sept 44.9 vs 42.9 Aug (F/cast was 44)
Composite Sept 46 vs 43.3 Aug (F/cast was 44)
Japan Market closed; re-opens Friday
S Korea 
Kospi re opened after Chuseok holiday opened lower and dipped to test the 3,110 support around 9:30am after a couple of tests the market worked back to trade in the range 3,120-3,130 Currently -11pts (-0.3%) @ 3,129
Kosdaq opened lower initially rose to 1,043 before dipping to 1,036 but then rebounded and traded in the range 1,040-1,042; currently -4pts (-0.4%) @ 1,042
Taiex opened higher and rallied to 17,100 in early trades, eased before testing to 17,145. Then eased back and traded in the range 17,050 - 17,100 and closed +152pts (+0.9%) 17,078
After Market data due
Interest Rate Decision, Retail Sales and M2 Money Supply.
CSI 300 opened higher and tested to 4,877 in the first 30 mins but then trended lower to 4,840 before bouncing into lunch. PM opened higher but drifting lower currently +34pts (+0.7%) @ 4,856
Pre market opened @ 24,614 +393pts vs +278pts ADR’s a broad rebound although there is still a lack of clarity on Evergrande. Market drifted lower through the morning.
A rebound of the Property Developers and Macau names after news that Evergrande would make some payments for the onshore bonds. Ecommerce, Auto and Consumption names the laggards
Flash PMI data along with the BoE Interest rate decision.
US Futures
Dow futures +105 points. S&P 500 futures and Nasdaq 100 futures both traded in positive territory. 
Initial claims data, Flash PMI’s, EIA gas report and Kansas Fed Manufacturing Index and 10 yr TIPS auction.

On line
Xi Jinping weighs future of Evergrande as he targets third term

China’s president fears bailout of property developer will set an expensive precedent
Looks at the dilemma facing Beijing in Evergrande. The pros and cons of stepping in. Key being the precedent it would set and the fact that there are a number of other developers that are in precarious situations as well. But the fact that so many people have paid deposits and bought wealth management products means the issue has to be addressed.
The stock has had a huge rally on the open with a big pickup in volume but it is drifting lower trading at HK$2.57 a long way from its high in 2020 of HK$20.25
Worth a read.

More Fed officials see first interest rate rise in 2022
Chair Jay Powell says central bank could ‘easily move ahead’ with taper announcement in November.
Powell once again has encouraged the market by explaining his intentions and in doing so is averting the market tantrums seem in the past. It also helps that so many agree that the course being followed by the Fed is correct albeit that some think the pace at which they are moving is wrong.

Print Edition
Front Page
Biden makes peace offering to Macron after Aukus pact clash
• France outraged by exclusion • US highlights common ground • Summit next month.
Biden seeking to find an acceptable solution to all the parties involved.

SoftBank follows Gulf states to back Mnuchin’s $2.5bn private equity fund  An interesting read as Mnuchin follows other former Treasury secretaries who have turned to private equity after leaving office.

Taiwan vies with Beijing to join trade pact
Requests for membership of CPTPP add to rivalry between the adversaries.
Treatment of the application will be interesting to watch coming two weeks after China’s and whether China will seek to use its clout to try and get Taiwan’s application refused.

US and China raise hopes in run up to COP26
Beijing coal plan and Biden funding vow foster optimism ahead of Glasgow meeting.
US’s pledge to increase funding and China saying it would stop funding for international coal fired power stations gives a boost to the hopes of a wider climate deal and the Glasgow summit in 5 weeks time. It notes that there are a lot of other issues that have to be resolved.
It also means that countries like Indonesia, Pakistan, Vietnam and Bangladesh will have to find alternative sources of funding or power.
Opinion  - Forget COP26 boasts — decarbonising requires tiny, boring steps  An interesting read about the ways BMW, Iceland and others are cutting their emissions.

Sony’s India unit in $1.6bn Zee move
Sony Pictures Networks India has proposed a deal to take control of Zee Entertainment, India’s largest listed media company, whose founding family is resisting a rare revolt by foreign shareholders.
Most seem to think the deal makes sense; it concludes
'“The merger has a compelling industrial logic,” said one investor. “If you put Sony and Zee together, they’ll control a third of the Hindi entertainment market in India, which is very valuable to control. Hindi is where per capita incomes are low — and have a lot of room to grow. The real question is whether shareholders want this deal to go ahead. The market is telling you that investors want these guys out.”'

Evergrande creditors weigh prospects for restructuring
Beijing will be keen to limit damage in any reorganisation of the debt-laden developer.
A detailed look at the possible options under a number of headings
What does it own and owe?
What would a rejig look like?
How might Beijing intervene?
Who would lose out?
An interesting read as the Evergrande story continues to unfold.

Japan stocks are underrated and under-owned  By Miyuki Kashima Head of Investments for Japan at Fidelity International
Looks at areas that the incoming LDP leader should address:
Fiscal policy changes to encourage the spending of capex.
The green transition getting companies and investors on board to achieve the government’s targets.
Narrowing the gender gap.
It concludes ‘The next administration must ensure that companies feel confident and incentivised to deploy capital expenditure and foster innovation, mandate female representation and gender equality at the highest levels of management, and ensure a greener and more sustainable economy. This is the Japan of the future.’

The end of ‘build, build, build’
Valued at $41bn in 2020, the spectacular unravelling of Evergrande exposes deep flaws in China’s growth strategy. But will Beijing be able to pivot safely away from its reliance on property development?

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