Sept 9 Asia retrenches China to avoid profit. FT Talaban, LDP leadership, Blackrock in China

09 Sep

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Market trended lower throughout the session before finding some support around 1:30pm around the 7,380 level.  Financials weak with CBA leading the big four lower.  Miners also weak.
Victoria reports 324 new covid cases. NSW’s restrictions will ease on the Monday after 70 per cent of NSW’s eligible population is fully vaccinated. Current forecasts predict NSW will reach this target in mid-October.
Nikkei opened lower at 29,960 but has worked better through the morning.  Still optimism for that new post LDP leadership election will result with new polices saw the market hold above 30,000 in the am session. Seeing rotation out of cyclicals into defensives and the Power names on hopes Kono wins the leadership.  Travel names weak as JAL raises funds.  Tech lower on China concerns.  PM opened lower and selling down currently -239 (-0.8%) @ 29,939
Topix opened 2,066 but rallied to 2,075 in early trades and then drifted lower. PM selling down currently -18pts (-0.9%) @ 2,062
TEPCO +VE along with other power cos as Kono says he’d ok Nuclear power station restarts
JAL weak on news its looking to raise 300b Yen
Foreign Bond Investment ¥1043.1B vs ¥-546.9B prior revised
Foreign Stock Investment ¥421.6B vs ¥24.1B prior revised
Later Machine Tool Orders
S Korea 
KDCA reported 2,049 new covid cases and 37.2% of the population now having been vaccinated.
Kospi opened lower but rallied to 3,158 in early trades before selling down to 3,135 level and trading sideways for a while before trending lower. Tech weak as the China news adds to the local on-line platform operators yesterday; mkt currently -39pts (-1.3%) @ 3,123
Kosdaq traded in a similar pattern, initially dipped to 1,031 before rallying to 1,042 but then eased back to re-test the morning low before trading sideways Currently -5pts (-0.5%) @ 1,032
Taiex opened lower and tested 17,150 level before rallying to 17,320. Early buyers as the rumours about a spike in covid cases was untrue. Market then eased back to flat currently +8pts (unch) @ 17,279
CSI 300 opened lower at 4,953 and trending lower in choppy trading; closed at lunchtime -31pts (-0.6%) @ 4,942.  The rise in PPI a further concern; inflation eased probably as food prices eased after early floods disrupted supplies. We could get New loans and Total Social Financing data at any time.  Investors still trying to assess the implications for ‘common prosperity’ and Dual Circulation.
Inflation Aug +0.8% YoY vs +1% Jul (F/cast was 1%)
Inflation Aug +0.1% MoM vs +0.3% Jul (F/cast was +0.4%)
PPI Aug 9.5% YoY vs +9% Jul (F/cast was +9.1%)
CSI 300 opened
Pre market opened @ 26,077 -244pts vs -177pts ADR’s with Ecommerce names weak alone with Energy (Sinopec and Petrochina ExDiv). But Macau names +VE along with Tectronics and Anta.
Market initially tested 26,100 but then sold down and testing 26,000 support, that broke around 11am and the market trended lower to 25,860 before a small bounce into lunch; -422pts (-1.6%) @ 25,899. Ecommerce weak after regulator told them not to focus on profit. Education still under pressure. Dual circulation will focus on ideology over accelerated growth; old economy stocks should see interest. The big issue with ideology over growth I think will be generating jobs.
Bill Gates Family office buying into Four Seasons Hotels and Resorts should be a slight +VE for Shangri La -0.2% and HK & Shanghai Hotels -0.5%, Mandarin unch: viewing a rebound of tourism.
Focus on the ECB meeting and weakness from Asia.
Eurozone ECB rate meeting
Balance of Trade, Imports, Exports, Current Account
US Futures
Opened Dow -9 pts. S&P 500 futures flat and Nasdaq 100 futures -0.07%. 
Initial Jobless Claims, 4 wk average, Continuing Claims, EIA Oil Report

FT Generally a news light day for Asia.

Bataclan trial opens in Paris

US risks running out of cash by October, Treasury chief warns
• Sovereign default fears • Pressure on Biden agenda • Investors wary of debt deadline

SEC threatens to sue Coinbase over launch of crypto lending yield product
‘SEC jurisdiction revolves around whether a product such as Lend is an  “investment contract”, which would make it a security under federal law.  The Supreme Court has ruled that such a contract exists when “a person  invests his money in a common enterprise and is led to expect profits  solely from the efforts of the promoter or a third party”.’

US criticises Taliban’s government line-up

Caretaker regime causes dismay in west but China offers guarded embrace.
Of all the international countries it seems to be the only one giving support as it offers food and medical supplies.
Also read Kabul cabinet picks expose west’s lack of clout
Islamists have selected an all-male team dominated by ethnic Pashtuns and US foes.

Companies & Markets
Hardliner aims to be first woman PM
Profiles ‘Sanae Takaichi, a hardline nationalist with outspoken views on national security, has entered the contest to succeed Yoshihide Suga as she aims to become Japan’s first woman prime minister.’

BlackRock’s China mutual fund hits $1bn
Asset manager presses on with expansion despite Beijing crackdown fears. An interesting move I mentioned yesterday about Dual Circulation and how ideology was now the focus not growth. Overnight the Ecommerce companies were called in by the regulator and told to enforce the new rules; also they were told to avoid profit, money worship, violence and effeminency. Which seems to re-inforce what I said that rapid growth is no longer on the agenda and social cohesion is where the party is now looking to get its legitimacy from. For investors I think it means rethinking their portfolios to account for the fact that rapid growth is no longer the objective of party. The best policy is likely to be investing in companies that align with party policy but profit margins are likely to be set by the government. That is likely to make a number of other EM/Frontier markets more attractive; namely those that are benefiting from companies moving their operations out of China.

PayPal agrees $2.7bn deal for Japanese buy now, pay later start-up 
Acquiring Paidy, a Tokyo-based buy now, pay later (BNPL) group, for ¥300bn ($2.7bn) in what looks to be industry consolidation in the crowded sector.

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