Market trended lower, finding support at 7,340 after about an hour, rebounded to 7,374 and then traded sideways for most of the session but then dipped into the close. -43pts (-0.6%) @ 7,353
Energy names leading the declines but travel and leisure also weak Miners seeing some interest as Iron Ore prices rebound. Crown Resorts eased back after Friday’s rally; its being encouraged to allow Blackstone inspect its books in hopes that might result in an even higher offer. Nuix weak after confirming a class action claim being filed against it. Anteris strong on successful placing its 3D heart valve into 5 patients. AMP Capital reported keeping its Office Fund after exploring options for selling it.
Nikkei opened lower and initially tested 29,550 but worked better through the morning and broke into positive territory in the PM session; currently +41pts (+0.14%) @ 29,785 but seeing resistance approaching 29,800.
Topix opened lower, tested 2,030 in early trades before working higher and pm testing flat; currently -0.6pt (unch) @ 2,044
Shippers +VE along with Healthcare, Financials and Property.
Weakness in Energy, Materials, Communications and Consumer Staples.
Expect cautious trading into the close ahead of tomorrow’s holiday. Market re-opens Wednesday.
Foreign & Local Institutions buying Tech (SEC & Hynix +VE) but Gaming/NFT’s seeing profit taking after recent rally (Giant, Kakao Games, COM2US etc weak). Auto’s +VE on expectations that chip shortage will ease next year.
Kospi opened higher but saw some resistance approaching 396 but then broke above that level mid morning and worked higher to 398 and then traded sideways.
Kosdaq opened +VE but sold down to 1,023 by late morning before a bounce to 1,030 and then traded sideways.
Taiex opened higher and tested 17,840 in early traded but then sold down to 17,790 before rebounding. Effectively trading sideways around flat and closed -15pts (-0.1%) @ 17,804
DRAMS +VE as Micron CEO says shortages easing +VE Nanya Tech and Winbond. Shipping +VE as freight rates remain high. Compeg +VE as a megaverse play
CSI 300 opened higher after +VE comments in PBoC quarterly report about policy easing and the recovery although RRR cut in Q4 ruled out. Loan Prime Rate remained unchanged. Market worked better to 4,920 just before lunch. PM market trading weaker; currently +20pts (+0.4%) @ 4,910
Leaders CATL, Moutai (price rise hopes), Metaverse plays, Semiconductors.
Laggards Metals, Property, Tourism and Chinext names.
Hong Kong Pre market opened @ 25,057 +7pts vs -180pts ADR’s but saw some choppy initial trading before selling down mid morning to 24,922 lead lower by Wuxi Bio, Meituan (reports this week) and HSBC. Hardware (on the tech easing) and Macau names (on vaccination rate above 70% makes border opening more likely) +VE. PM saw initial selling to 24,870 before bouncing. GreatWall Mtr +VE after releasing a new NEV at the Guangzhou motor show. ECommerce weak on news of more fines for past uncleared acquisitions. Coal levels stabilising but thermal coal futures -60% from the peak. Pork prices said to have risen 35% from five weeks ago.
Bilibili weak after US$1.4bn convertible senior notes offering
HSI Index review names seeing some interest; effect 3 December.
Leaders Macau names, Gas, Machinery
Laggards Airlines, IPPs, Metals.
Futures indicate a higher open; FTSE +10pts, CAC +6pts and DAX +14pts but an increase in protests against covid lockdowns a concern for the market as some nations tighten up social distancing requirements.
Julius Baer releases its latest earnings and data out on Monday includes the latest flash euro zone consumer confidence reading for November.
Futures opened slightly higher ahead of the holiday shortened trading week. Dow Futures +55pts, S&P +0.1% and NDX+0.2%
Peng concerns IOC speaks to missing star In addition to the state media machinery swinging into action the president of the IOC said he had spoken with Peng. But there are still concerns about her ability to speak freely. Comes after she revealled she had been assualted by former Chinese vice premier Zhang Gaoli and had hada long running affair with him. An embarrassing revelation for Xi and the party ahead of the Winter Olympics and his appointment as President or Chairman for life. It draws into question the power of the leadership who are supposed to be worthy of leadership without the checks and balances leaders in the West face. As a senior party official Zhang Gaoli would not be allowed to have an extra marital affair but it is felt such things happen and go un-reported because of the power of the party apparatus. Other pictures and video’s have also been released but concerns remain.
China missile fired during flight by hypersonic weapon confounds US
• Pentagon caught off guard • Projectile’s purpose unclear • Beijing builds up nuclear forces.
It makes a change to have the US perplexed about the advances in Chinese technology but they are definitely concerned about these developments.
HSBC fears its size will stop auditing rivals from taking on PwC for account
Makes some interesting points; conflict of interest, scale of resources required along with the number of locations/jurisdictions that it operates out of, all making it difficult for it to attract alternative auditors.
Covid curbs protests spread across Europe
Imposition of restrictions to tackle rising cases cause unrest in several countries; including Netherlands, Austria, Italy and Croatia. Comes as Europe sees a significant resurgence in covid cases and countries raise social distancing rules, especially for the unvaccinated: such as in Greece and Belgium.
See also Editorial Austria’s vaccine order is an admission of failure
Europe resorts to ever tougher measures to contain Covid-19
US bosses fear loss of staff when vaccine mandate hits home
Looks at the potential impact on companies employing more that 100 people must either evidence of vaccination from each of them or proof of a negative test every week. The issue being that a lot of staff could easily find employment in small companies not covered by the requirement. Which raises the question of why companies employing less than 100 people are not covered, especially as the aim is to have the population vaccinated?
Companies & Markets
Investors eager for Samsung to use $100bn cash pile
S Korean conglomerate on the lookout for investments after missing out on wave of M&A. Along with an announcement over the location of a new US facility.
Speculation about putting the war chest to work; ‘Soon after his release, Samsung announced a $206bn, three-year investment plan to expand its footprint in semiconductors, biopharmaceuticals, artificial intelligence and robotics.’ Although the fact that Lee Jae-yong is still facing legal action means that its not all plain sailing.
‘“They have too much cash and are not allocating capital efficiently,” said James Lim, an analyst at US hedge fund Dalton Investments. “There are concerns that Samsung may fall behind in the memory race, while investors seem unconvinced that it can become a leading player in non-memory,” he added, referring to chips used for data processing.’
It also quotes CLSA’s Seoul head of reserch “It is very important for Samsung to acquire a non-memory company. Samsung is the global leader in memory chips but the non-memory market is much bigger,” said Paul Choi’
It also has had bad M&A experiences in the past which is also a -VE
The stock is +VE today but putting its cash to work is important in what is a very competitive space.
HK regulators examine Rusal spin-off plan
It wants to spin off its high-carbon smelters and refineries into a separate company that will be listed in Moscow. The reason cited for the review being ‘a complaint from Odey Asset Management, according to emails seen by the Financial Times. The London-based hedge fund believes a recent agreement between Rusal’s two biggest shareholders means they should not be allowed to vote.’ That would mean the minorities would hold the influence.
An interesting read and notes that ‘Rusal’s spin-off plan comes after the EU launched a carbon border adjustment mechanism that will force importers of steel, cement, aluminium and fertiliser to pay the same carbon costs faced by European industry. The prospect of the levy has alarmed Russian businesses, which have said they would be the worst hit.’
Also worth noting that the company has not been paying a dividend, instead preferring to pay down debt.
S Korea labels rush to list amid K-pop boom
Music agencies’ shares hit record highs as artists resume live concerts.
The sector is hugely popular with both institutional and retail investors and seen as having more potential as live concerts resume. DearU listed recently and has continued to do well but valuations are rich and investors will be watching to see if the trend continues; today the stock is very weak as more competition lines up.
FT BIG READ. CAPITAL MARKETS
The Spac machine cranks up again
The market for blank-cheque companies is reviving following a series of scandals and regulatory scrutiny. While supporters say they are just another fundraising tool, many of the problems remain.
The miserly Y43 cost of bullet-train efficiency
‘Petty. Embittered. Absurd. There are plenty of words that have been applied to the legal skirmish centring on an unnamed bullet-train driver, a slightly overdue arrival at a depot in western Japan and the Y43 ($0.37) his employer docked from his wages.’
An interesting read about how Japanese companies are able to leverage their staff to high standards if efficiency.
There is no easy escape from the global debt trap By Ruchir Sharma, Morgan Stanley Investment Management’s chief global strategist. ‘One of the big mysteries in the global economy is why, though inflation is making a strong comeback, longterm interest rates have barely budged in recent months.’
‘Now, much milder tightening could tip many countries into economic trouble. The number of countries in which total debt amounts to more than 300 per cent of GDP has risen over the past two decades from a half dozen to two dozen, including the US. An aggressive rate rise could also deflate elevated asset prices, which is usually deflationary for the economy as well. Those vulnerabilities would explain why the market appears so focused on the “policy error” scenario, in which central banks are forced to raise rates sharply, tripping the economy and eventually pushing rates back down.
In effect, the world is stuck in a debt trap, which suggests that while the refusal of long-term rates to rise significantly is new and unexpected, it may also be entirely rational.’
US commission heralds coming capital wars By Rana Foroohar
Looks at the recent ‘US-China Economic and Security Review Commission report, issued to Congress last week, which recommended a host of new limits on business between the two countries, not just on goods and labour, but also capital flows.’
It concludes ‘Anyone who thinks that there won’t be more constraints on business between the two countries would be wise to read the report carefully.’