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Market moved higher initially and trended higher through the day but in choppy trading (7,405 - 7,376) and closed +17pts (+0.2%) @ 7,397
Health, Consumer Staples and Energy the leaders. Miners remain weak with Iron Ore futures remaining weak.
Crown +16% on news that Blackstone had offered $12.50 a share, prompting a spike in the market. Altium hit a new high after its positive guidence with Jefferies hiking their target price to a street high of $43.69.
Treasury Wine +VE on Napa Valley premium wine purchase. But
Commbank +0.4% today but down around 9% on the week and Nanosonics -5% after warning profit margins would decline
Russell/Nomura index review implimented MOC prompted a rally into the close. PM Kishida confirmed Y79tn stimulus, with Y56tn for fiscal spending. Results and buyback news also in focus.
MSCI announced their factor related index review in the morning, to take effect MOC 30 Nov.
Nikkei opened higher on higher than expected stimulus spending prompting an initial spike to 29,730 before easing back and then working higher. Inflation was weaker than expected an slight drag on the market. Tested 29,750 ahead of lunch but failed to break out and eased back. PM tested 29,750 there times but failed to break and hold above; closed +147pts (+0.5%) @ 29,746
Topix saw an initial spike too, to 2,042 but then eased back to trade around flat. PM opened higher and traded above 2,040 and worked higher in the last hour to close +10pts (+0.5%) @ 2,045
Leaders Mining, Trading Houses, Precision Instruments, Non-Ferros and Autos
Laggards Airlines, Paper/Pulp, Brokers, Rail and Insurers
Mizuho -1.9% on rumours (denied) that CEO to step down after repeated system failures. Nomura -0.7% on news it’s to enter China Investment Banking.
Data pre market
Inflation Rate Oct 0.1% YoY vs 0.2% Sept (F/cast was 0.1%)
Inflation Rate Oct -0.2% MoM vs 0.4% Sept (F/cast was 0.1%)
Core Inflation Rate Oct 0.1% YoY vs 0.1% Sept (F/cast was 0.1%)
Inflation Rate Ex Food/Energy Oct -0.7% YoY vs -0.5% Sept (F/cast was -0.3%)
Local Institutions small rotation out of Game/NFT & Chemical and into Tech & Pharma. Foreigners rotate out of Chem and Financials and into Pharma. Having been quiet in the morning they turned buyers in the PM.
LTE +VE on news Apple accelerating their EV car into autonomous.
Hyundai +VE on share buyback news
Kospi spiked higher initially to 2,972 before selling back down to flat in the first 45 mins but then worked better through the day to 2,975 just before the close before easing back to finish +23pts (+0.8%) @ 2,970
Kosdaq spiked on the open but then sold down to 1,030 before working higher but then saw resistance around 1,042 which it tested a number of times, eased at the end to close +9pts (+0.9%) @ 1,042
Data pre market
PPI Oct 8.9% YoY vs 7.6% Sept revised (F/cast was 8.4%)
PPI Oct 0.8% MoM vs 0.4% Sept revised (F/cast was 0.5%)
Taiex opened higher and tested to 17,986 following strong moved in US tech after the Nivida numbers but then trended lower to test 17,800 support, which was tested a number of time, once easing to 17,786 before a uptick to close -23pts (-0.1%) @ 17,818
CSI 300 opened lower but worked back to 4,860 before easing back to trade around 4,850 through the morning. PM saw the market spike after 40 mins from 4,840 to 4,890 and then traded sideways to close +52pts (+1.1%)
Pre market opened 24,934 -385ptsvs -182pts ADR’s with Alibaba responsible for -200pts and not helped by margin call selling. Tried to regain 25,000 in early trades but failed and dipped to trade around 24,880 through the morning. PM saw a rally back to trade around the 25,000 level.
Expect a weak open following Asia. Covid and inflation remain the overhangs on the markets.
Eurozone Current Account
Opened Dow +20pts, S&P and NDX both +0.1% but with US Options Expiry today expect more volatility.
Putin warns over Ukraine
Vladimir Putin speaks to an audience of foreign policy officials yesterday where he warned that Russia would react “appropriately” to what he described as “provocative” activity by the west in Ukraine.
Increased posturing between Europe and Russia which while there are gas shortages seems to be negotiating tactics, albeit not very nice ones. But the further annexation threat cannot be dismissed.
Read also Putin vows to maintain Ukraine ‘tension’ Russian president also complains Moscow’s ‘red lines’ dismissed by west
Fresh Turkey rate cut sends lira to new low and stokes inflation fears
• Currency down 30% this year • Price growth already 20% • Move mystifies economists.
More pressure on the Turkish economy.
Paytm’s share price plunges 27% on trading debut after India’s biggest IPO
The first day performance may reflect the uncertainty over how successful it will be going forward and its ability to compete with rivals like Google. It started as a first mover but has lost ground in the meantime.
Key being ‘The IPO is the most important in a string of listings by loss making, richly valued internet start-ups in India. Shares in Zomato, the food delivery company, beauty ecommerce group Nykaa and insurance aggregator Policy-Bazaar all rose from their issue price.’
With regulatory changes in China many are looking to see whether India can offer similar growth opportunities but it would appear that the sector is already crowded.
See Lex Paytm/Ant: Uttar confusion
Concludes ‘The local market is competitive. Well-funded rivals include PhonePe, which was acquired by Walmart in 2018. Shares trade at a steep 72 times book value, seven times that of global peers such as PayPal.
They have further to fall.’
US embarks on Asia ‘course correction’
Tokyo visit by trade envoy Katherine Tai viewed as attempt to draw line under Trump era but with limitations.
Notes that Tai set out that the US was not considering joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) but wanted to increase ties to the region. Tai ‘argued there were other structures better placed to address challenges than a trade deal negotiated more than eight years ago.’ Also that ‘a focus of her visit, which comes amid a phase of greater Chinese assertiveness, had been to impress upon partners such as Japan the “durability” of US trade policies.’
It is interesting that Biden has chosen not to join the CPTPP which was the successor to the Trans-Pacific Partnership which Obama had instigated. The article mentions ‘Even if the Biden administration thought there was no better option than joining the CPTPP, analysts said, domestic pressures meant it could not pursue regional trade pacts.’ That suggests that administration really does not feel it has a long term mandate or that it feels direct deals are more likely to survive a change of government after its current term.
‘Tai said the global and regional situation — in particular relating to the environment and pandemic recovery — was now very different from when the original 12-member partnership was negotiated more than eight years ago.’ That is certainly true but I would suggest that addressing them was easier within a trade organisation that already had common links that by other means.
Worth a read.
Shipping costs to push up inflation, UN warns
‘The surge in freight rates is likely to push up global consumer prices by an additional 1.5 per cent should they remain high for the next year, according to estimates by the United Nations Conference on Trade and Development (Unctad) in a report yesterday.’
Key being that it will hit developing countries economies more others ‘Consumer prices are expected to rise by an estimated additional 2.2 per cent for the world’s 46 least developed nations and 7.5 per cent for small island developing nations such as Fiji, Mauritius and Jamaica, the report showed.’
Outlines that for some products, freight cost do add significantly to inflation. We are currently seeing freight rates are falling but remain at elevated levels. Resolving supply chain bottlenecks and supply routes will be important but this shows that inflationary pressures are growing.
Read also Empty boxes pile pressure on US supply chain
Port operators scramble to shift containers that are exacerbating the chronic lack of truck drivers. Explains the how and why empty containers are piling up in the wrong places.
A great read, evidently the Ocean carriers have ‘arranged for six “sweeper ships” to pick up about 17,500 20-foot equivalent units of empty containers, he added, and another two are on the way’; shows the extent of the problem. One wonders why the normal operation has broken down so badly. Chassis on which containers travel are at 90% capacity up from 75%. With a lot more traffic going by truck than rail to inland points. Also notes that since China cracked down of import of recyclable materials in 2018 there have been a lot more empty containers going back to China.
The fundamental point being that empty containers have been building up initial at inland points and then the ports.
I wonder if that means that US exports have been higher than normal, which would be +VE for US earnings or that the shippers have not been prepared to take empty containers. A good read, I’m reaching out to a friend at Sealand America’s to try and get some more insight.
Well worth a read but raises more questions than it answers.
Investors in China Oceanwide turn to $1.3bn US deal for ‘last hope’ of redress
Property developer’s sale of media group IDG to Blackstone brings chance to recoup unpaid debts.
A useful insight into the financial woes of a number of Chinese developers and suggests that some of these were akin to pyramid schemes and that much better oversight is required of Chinese property companies especially in terms of financials reporting and it should also raise questions about why the developers are issuing Wealth Management Products if their developments are in such demand? Where has the money gone? Into property projects that have not sold? Or just siphoned off by the founders?
The risk for President Xi is social unrest, the article quotes an investors ‘One 39-year-old investor, who says he spent Rmb3m on a wealth management product recommended by a friend, said that local authorities had “gone to great lengths to prevent investors from organising themselves”.’ Also ‘Another investor in a big eastern city in China said that after payments stopped and they reported the issue to police, they were targeted for government surveillance. When they travelled to Oceanwide’s headquarters in Beijing, they said they were followed by seven officials from their home city.’
“The local government has invested heavily in making us behave rather than solving our problems,” the person said. “That’s because they could be punished if we keep reporting our case to the central government.”
That is a serious worry because it infers that if these people do link there is going to be some serious unrest.
Worth a read
Tennis body says it cannot locate Chinese star
‘The Women’s Tennis Association says it is still unable to independently locate star Chinese player Peng Shuai, weeks after the professional athlete made allegations of sexual assault against a former Chinese government official.’
Comes after the star made an allegation against former Chinese vice-premier Zhang Gaoli on her Weibo account, which was quickly deleted. Yesterday ‘Chinese state media published a screenshot of a message purporting to be from the tennis player. The statement, released on state broadcaster CGTN’s Twitter account, quoted Peng as saying she was neither missing nor unwell and that she was resting at home.’
This could turn into another embarrassment for Xi and whilst within China it may be possible to contain the information individuals within the tennis world are likely to have their own networks. Just like the government was caught out by Falun Kong, a religion the party started, which then turned up in Beijing to complain; without the security services being aware. Which underlines the limitations of much of the security apparatus. I worry, to too with the wealthy middle class in China; with Xi re-writing the social contract, that group of society knows ways to avoid the party’s tracking, as so if they are unhappy with the changes it could turn ugly quickly.
Companies & Markets
INSIDE BUSINESS TECHNOLOGY
Nvidia’s hopes of buying Arm fade under rain of regulatory blows
by Richard Waters.
An interesting read. The key concern seems to be ‘Antitrust regulators in Europe, the US and China are laser-focused on a single issue: how can intellectual property that other chipmakers may rely on be allowed to pass into the hands of a single group, giving Nvidia the power to curb its rivals’ access to the technology?’
Other tech sectors seem to be able to address that like Amazon Web Services, Samsung, Qualcomm.
‘None of these are perfect comparisons, but they highlight two big differences with Nvidia.
One is that the various businesses of these companies are in some degree of balance, giving them strong incentives to maintain a degree of neutrality. That would not be the case for Nvidia: the Arm licensing operations would begin as little more than a rounding error, increasing the risk of Nvidia keeping the technology for itself.
The other big difference is that they were not the result of acquisitions. Had they been, regulators might well have stepped in to prevent such corporate combinations from happening.’
He concludes ‘the prospects for one of the biggest ever transatlantic acquisitions are fading fast.’
That would be a set back for Softbank because the deal is stock and cash and Nvidia’s stock has soared since it made the offer!
Alibaba hit by Chinese spending slowdown
Looks at the results out yesterday that disappointed the market, stock is currently -16%, and those analysts that have updated their models keep it as a buy although lower their target prices.
Key points seem to be that it’s facing more competition in most of it business lines an trying to cope with a slowing Chinese economy. The exception was it’s cloud business which grew significantly.
Most people feel that that ‘Beijing’s regulatory assault on the internet sector was over.’ I am not so sure. I think the worst of it probably is over but I think you will see much more pressure from the government to control the amount of profit that goes to investors as it seeks to ensure ‘common prosperity’ works in favour of the staff and consumers.
If the analysts are right now looks like a good time to accumulate.
Central banks must evolve for the era of digital currencies By Fabio Panetta is a member of the executive board of the European Central BankPuts forward the case for retail CBDCs and answers some of the doubts that some people have about them. Worth a read.
Russia’s energy deals with China may backfire on the Kremlin
By Alexander Gabuev a senior fellow at the Carnegie Moscow Center
He concludes ‘ China has diversified its sources of hydrocarbon imports, and it will be able to leverage market access in order to extract commercial and political concessions, just as it does already with Australia and other countries.
If one day, for example, Beijing wants Russia to stop arming India and Vietnam, how will Moscow refuse if the Chinese market is the major source of revenues filling the Kremlin’s coffers?
Arguably, the Russian leadership might be aware of this risk. All the same, long-term thinking appears to be in short supply in Moscow — rather like gas in Europe right now.
Those Russian policymakers who voice caution are likely to lose the internal battles in the Kremlin’s corridors of power. The winners will be the people whose overriding goal is to build a pipeline through half of Eurasia at an inflated price.’
Worth a read.