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Markets reacting to the Fed minutes and USD strength and lighter volumes with US investors quiet due to Thanksgiving.
Market opened tested higher in early trades but then sold down to 7,370 level through the morning before rebounding to 7,410 at midday. PM has traded in a tight range and currently +4pts @ 7,403 Financials, Consumer Staples, Energy and Gold weak but Tech seeing interest.
AGM’s from Evolution Mining, financial services company IOOF Holdings Limited and struggling ecommerce company Kogan.com Ltd.
Data due shortly
Building Capital Expenditure Q3 -0.2% QoQ vs +4.2% Q2 Revised
Plant Machinery Capital Expenditure Q3 -4.1% QoQ vs +2.7% Q2 revised
Private Capital Expenditure Q3 -2.2% QoQ vs +3.4% Q2 revised (F/cast was -1.5%)
Nikkei opened higher and trading sideways around 29,500 level through the morning. PM opened higher and trading around 29,520 level.
Topix also range bound currently +8pts (+0.4%) @ 2,027
Leaders Brokers, Miners, Wholesale and Oil/Coal
Laggards Airlines, Pulp/Paper, Services, Rubber.
PPI Services Oct 1% vs 0.9% Sept (F/cast was 0.9%)
Due later Coincident Index, Leading Economic Index, Nationwide Department Sales, Tokyo Department Store Sales, Machine Tool Orders.
BoK raised rates as expected; banks mixed. Foreigners & Local Institutions selling Semiconductors. Kospi 200 December additions +VE along with Metaverse names.
Kospi opened higher but sold down as the BoK raised rates as widely expected. Morning low was 2,973 before a small bounce and now trading sideways -13pts (-0.4%) @ 2,985
Kosdaq opened higher but sold down after 45 mins and found support 1,016 level bounce to flat but then sold down again currently -3pts (-0.2%) @ 1,018
Taiex opened higher and tested to 17,425 but then sold down to 17,610 level before rebounding to trade just above flat; Currently +7pts (+0.1%) @ 17,658
Chip makers under pressure as US puts more Chinese companies on the entities list. Metaverse names +VE. Delta +VE on outlook for energy storeage business. Nuvoton launches 3rd Generation auto use BMS IC +VE
CSI 300 opened flat but sold down to 4,890 level before a small bounce into lunch.
Pre market opened @ 24,700 +14pts vs -58pts ADR’s Macau names +VE as CS upgrades and AIA leading. Tencent +VE despite havign to halt newApps, Baidu +VE on autonomous taxi approval and Meituan slight -VE ahead of earnings Friday. Property and Energy laggards but Kaisa +21% on resumption of trading. Education names +VE on re-orientation of business.
Eurozone ECB Monetary Policy Meeting Accounts
Germany GfK Consumer Confidence, GDP Growth Rate
France Unemployment Benefit Claims, Jobseekers Total
UK CBI Distributive Trades
US Markets closed
Not hearing much being talked about China fining companies that support Taiwan independence. I think this could become an important issue and is a further step in Beijing controlling the dialogue on what it considers to be its affair. Follows news in the local Taiwanese press that China would be increasing the pressure on Taiwan to become part of China, that followed the ‘summit’ between Biden and Xi, from which each side took what it wanted.
The other part of the problem is that supply chains in China are seeing rising labour and sourcing costs in addition to the significant freight costs. Those costs and the delays associated with shipping these days will put pressure on company accounts because whereas manufacturers are finding shipping delays mean that credit days are being used up in shipping times. Overall production in China is less attractive with many considering dual sourcing until shipping and other bottle necks are resolved.
South Korea longs for Trump’s North Korea focus as efforts to engage Pyongyang stall
Seoul complains Joe Biden’s policy is aimed at managing rather than solving the problem.
US braces for ‘fifth wave’ of Covid on eve of Thanksgiving
Health officials warn of surge in infections as millions of Americans travel for the holiday
More than 30 migrants die trying to cross Channel to UK
• Tragedy hits small boat from France
• Worst accident in surge of crossings
Highlights the problems of people smuggling and the difficulty in preventing such events.
Dimon apologises to China after saying JPMorgan will outlive Communist party.
Key being the risk of upsetting Beijing and the impact that can have on business. A quick apology may suffice in this instance but only time will tell. Interest as it comes as the Peng Shuai assault case continues to attract global interest in how China deals with news it doesn’t like.
Coalition agreed Scholz clears path to succeeding Merkel as chancellor A ground breaking coalition that reportedly will take a harder line on China.
More articles on page 2
UK gains from third jab rollout as infections surge in Europe
Early push on boosters puts Britain on different trajectory to neighbours. An interesting read looking at the different approaches to dealing with covid. A key contrast not mentioned is the fact that apart from China no one believes that a zero covid policy is the way forward.
Tennis star assault claim prompts west rethink on China
Key point being that the Women’s Tennis Association has shown more concern not only for her safety but also an investigation into her claims and not prepared to just accept the response from Chinese officials whilst the International Olympic Committee has shown itself to be more easily satisfied.
It notes ‘Women’s Tennis Association — demanding not only her safety but also an investigation of the allegations — has shattered a taboo of how companies and organisations operate in the world’s biggest consumer market.
“Of course it’s only what they should be doing, but it’s noteworthy because virtually every other sports league, company, even government caves rather than pissing off the authorities and risking access to Chinese markets,” said Jonathan Sullivan, director of the University of Nottingham’s China Policy Institute.’
Particularly interesting because China is home to around 25% of the world’s tennis players and seen as crucial to expanding the sport. As well as ‘In 2018, the WTA signed a 10-year deal for Shenzhen, a city of 12.6m in southern China, to host the blue-ribbon WTA Finals series.’
It will be interesting to see if the WTA’s stance makes countries and companies re-evaluate their responses to Beijing. Also mentioned is the Winter Olympic’s and the fact that the US is considering a diplomatic boycott, allowing athletes to attend but not officials. Some sponsor companies may also be reviewing their position.
China’s official response is too ‘dismissed questions over Peng’s case as “not a diplomatic matter” and on Tuesday criticised “malicious hyping” and “politicisation” of the issue.’
Worth a read, especially as China has also this week started to fine companies that support Taiwan independence; that, I think, is going to cause a lot of companies and shareholders an issue and could impact the willingness of companies to have factories in China.
Read also Editorial Unanswered questions of the Peng Shuai case
Tennis star’s disappearance poses dilemma for foreign groups in China. ‘Her case has shown the dilemmas of dealing with a country that has a vast and growing market, but scant respect for human rights, freedom of expression or the rule of law. One international sporting body — the Women’s Tennis Association — handled its dilemma well. Another — the International Olympic Committee — did not.’
It concludes ‘Even a co-ordinated diplomatic snub might not concern Beijing unduly. Yet until the Games are over, not just politicians but corporate sponsors, governing bodies and athletes will have a powerful voice. They should consider how to use it.’
Companies & Markets
Tencent must submit apps for approval by Beijing
Beijing has told Tencent to halt new Apps and even updating existing ones on concerns about how it users consumer data. The latest in a string of moves against the Ecommerce sector. Interesting as Beijing is seemingly concerned about how the company uses or handles personal data which I presume is to try and encourage its citizens to adopt the digital Yuan which will allow the government a lot more insight into peoples lives.
Interestingly ‘Martin Lau, Tencent’s president, said yesterday that stricter regulation was “the new normal”.’ But for investors it makes it more difficult to get comfortable with the investment model, with many simply not investing until they can get more certainty on what is the ‘new normal’ and when will the regulators stop announcing new measures.
Japan sheds hostile takeover taboo as Shinsei chokes on poison pill
A good read, key is whether the about face came because of ‘the forces of change or the backroom machinations of Old Japan won the day.’
He notes that Yoshitaka Kitao is known for his stated aim to upgrade his various online businesses into Japan’s “fourth megabank” and willingness to disrupt the status quo. He also notes that ‘That ambition, for which effective control over Shinsei would be the linchpin, has so far involved buying a series of minority stakes in ailing regional banks — with, many observers suspect, a tacit nod of political gratitude.’
It’s a interesting read and concludes ‘Finally, they argued, the fear of state disapproval of hostile bids, which has long constrained companies and private equity, would lift and Japan would evolve a long-absent market for corporate control.
They might be correct, but sceptics suggest this outcome would feel more plausible with a hostile takeover that raised fewer questions over the desirability of its end result. Particularly troubling is the implied government endorsement of a deal that does not look like a step forward for governance or protection of minority shareholders.
The number of former, and potentially highly influential, senior bureaucrats, drawn mostly from the financial services regulator, on the board of SBI and its group of companies has not gone unnoticed.
“I fear that this may be seen as a stick of Brighton Rock with ‘conflict of interest’ written all the way through,” said CLSA analyst Nicholas Smith’
Seems that change in Japan remains as difficult as ever but some changes are needed.
Global banks bet long-term on China’s big bang
Beijing’s lifting of restrictions on foreign lenders brings opportunity to sell their expertise to fast-growing businesses.
An interesting read that notes that western banking operations in China often experience early losses but the size of the potential market once established makes it worth while, at least that is what they believe. ‘In fact, of the seven global banks that own investment banking operations in mainland China, just three, Goldman, UBS and Deutsche Bank, have been profitable in the past three years. The businesses controlled by JPMorgan, Morgan Stanley, Credit Suisse and HSBC are all in the red.’
Historically the banks got good fees from US IPO’s but that business has dried up and the question now is whether they can really make money via other operations. The hope is for more opening up of business in China but it is a little worrying that China has recently been keen to curtail companies offshore activities. The foreign banks also have to compete with the national rivals like Citic Securities and CICC and notes ‘The banks face an uphill battle, putting to work global underwriting standards of quality and independence in a far less developed and faster-moving market.’
It concludes ‘“Banks in Europe and the US are used to a kind of centralised decision-making based on the highest regulatory standards globally,” said one former executive who walked away from a senior role at a global bank in China.
“This has conflicts with the current practices in China, where sometimes you don’t even have rules written down. I didn’t feel like we could develop fast enough to catch the opportunities. Eventually this comes down to a clash of philosophies between two civilisations.”’
It sounds like it is a long term bet many of which have been made in the past based on the size of potential in China. Many of those failed because China often is not willing to pay for high standards where local ones suffice.
FT BIG READ. ENERGY
The race to harness the power of the sun hots up
Advances in technology and funding have sparked optimism that nuclear fusion — an area that has promised much but delivered little in six decades — could yet provide clean, limitless electricity.