This and previous notes can be found at Substack ( Asian Market Sense )
Check out ERI-C.com for interesting research and trading analysis
Asia Japan closed but re-opens tomorrow. Thursday will see Singapore, Malaysia and India closed.
Market tested higher in early trades with broad buying after the RBA scrapped the bond yield projection policy although Tech remained weak; seeing resistance at 7,400 in the first 30 minutes, then pushed higher with resistance around 7,430 level. Tested there for about an hour unable to break out and then drifted lower initial to 7,400 and then 7,380 level and closed +68pts (+0.9%) @ 7,393
Goodman tested a new high after a profit upgrade but Tyro -15% after not giving guidance. Lithium miners strong.
Construction Index Oct 57.6 vs 53.3 Sept (F/cast was 55)
Services PMI Oct 51.8 vs 45.5 Sept (F/cast was 52)
Composite PMI Oct 52.1 vs 46 Sept (F/cast was 52.2)
Building Permits Sept -4.3% vs +7.6% Aug revised (F/cast was-2.1%)
RBA Chart Pack
Markets closed for Culture Day
Foreigners selling heavily in reaction to the BOK minutes that were released after market Tuesday. Local Institutions also net sellers.
Tech weak, EV/Battery names mixed, Kakao Pay strong on its debut.
Kospi opened higher but sold down initially to 3,000 level which held for about 80 minutes before selling down to 2,975 level. Trading around there for the rest of the session.
Kosdaq opened higher, dipped to 1,005 before a rally to 1,013 then back to 1,005 and traded sideways.
Foreign Exchange Oct $469.21b vs 463.97b Sept (F/cast was 466.38b)
Market opened higher and tested to 17,140 in early trades; tested there a few times in the first hour but unable to break out and dipped down to test 17,080 level over the next hour but then rebounded but resistance at 17,120 level. Choppy trading throughout the session and closed +56pts (+0.3%) @ 17,122
Initially tested higher to test 4,860 helped by good Caixin data but then sold down in reaction to the warning from Premier Li about downward pressure on the economy and the need for fiscal moves to help small businesses. PM saw the market dip to 4,805 before bouncing.
PBoC drained around 150bn yuan.
Solar names weak as Bberg reported that Longi (601012) may see its products stopped at the US border. Concerns also about the MoC notice about stabilising prices but that helped food growers and coal names.
Leaders Energy, Property and Healthcare.
Laggards Industrial, Materials and Consumer
Caixin Services PMI Oct 53.8 vs 53.4 Sept (F/cast was 53)
Caixin Composite PMI Oct 51.5 vs 51.4 Sept (F/cast was 51)
Pre Market opened 25,060 -39pts vs -174pts followed the mainland; initially rallied to 25,190 level before selling down to test 24,800 level and trading in a band 24,800/900
PMI Oct 50.8 vs 51.7 Sept (F/cast was 51.5)
Futures indicate a flat open ahead of the Fed rate decision.
Earnings due from Suez, BMW, Zalando, Lufthansa, Geberit, Wolters Kluwer, Next, Smurfit Kappa and Intesa Sanpaolo on Wednesday.
Eurozone Unemployment and Lagarde speaks
France Budget Balance
UK Nationwide Housing Prices, Composite and Services PMI
US Futures indicate a flat open
MBA Mortgage data, ADP Employment Change, Composite and Services PMI, Factory Orders, ISM Non Manufacturing Data, EIA Oil Stock data, Fed Rate Decision
Earnings: Qualcomm, CVS Health, Humana, Marriott, Etsy, Electronic Arts, Booking Holdings, Take-Two Interactive, Fox Corp, Roku, MGM Resorts, Allstate, Virtu Financial, Exelon, Wingstop, BorgWarner, Brinker International, Pitney Bowes, Scotts Miracle-Gro, Steve Madden, Cabot Oil, Cheesecake Factory, Pioneer Natural, Hyatt Hotels, CF Industries
Russia deaths Covid qualms take heavy toll
Looks at the problem of people not getting vaccinated.
Inside Russia excess deaths soar amid jab hesitancy Latest curbs bring some signs of progress but only a third of population is fully vaccinated
Banks under fire for diluting green pledges since Paris climate accord
• Pressure to cut links to polluters • Vows have ‘wriggle room’ • ‘Double standards’ alleged
The reality is that the world is not currently in a position to give up fossil fuels yet and so it makes sense to continue financing such projects. As China is prone to say the modern coal fire powered power stations are cleaner than the old. I believe the process will be gradual and the banks are committed to green which is the important thing.
A lot more articles inside on the COP26 Summit
US sues to halt publishing megamerger on fears of harm to writers and readers.
Looks at the Penguin Random House and Simon & Schuster potential merger.
Light show India readies for Diwali
Preparation for Diwali; key is that tomorrow Singapore, Malaysia and India will be closed. India doesn’t re-open until Monday.
Fed prepares to begin tapering as inflation fears persist
Expectations on whether interest rates will rise sooner than thought are shifting.
Conjecture on what the Fed may announce tonight, we will know in a few hours time.
Chinese told to store food as Covid restrictions bite
Public urged not to be alarmed but to avoid being caught out
Although its actually an annual warning this year its getting a lot more attention with concerns over a surge in covid cases prompting concerns about lockdowns inspite of the fact the notice did not mention such things.
It also mentions the draconian rules China has adopted to try and keep covid under control. But inspite of those rules it has failed to prevent outbreaks.
The low reported numbers are said to evidence the success of the policy but despite that China is building a number of mega hospitals for covid cases which would suggest that they are experiencing more cases than reported.
For investors the policy is putting the economy under additional pressure and the data is beginning to show the recent data.
Australia’s central bank moves to stem post-crisis price rises
Looks at yesterday’s change in policy by the RBA which is seen as a tightening of policy. It is also thought to add pressure on the BoE at their meeting tomorrow. Listening to the RBA governor it would appear that they were just reacting to their local conditions and every country has slightly different conditions.
Key is that it remains committed to keep rates low and allowing inflation to run at between 2% and 3%. It is watching wage inflation as an important consideration for raising rates.
Companies & Markets
Beijing policies force international law firms to tread a fine line
Looks at the predicament of Mayer Brown in representing HK University. It starts ‘In March, when China slapped sanctions on Essex Court, the UK barristers’ set, Guy Sandhurst QC issued a warning. “Today, it is the members of Essex Court Chambers who are sanctioned,” the former chair of the Bar of England and Wales said. “But tomorrow it might be Clifford Chance, Fresh-fields or some other major city law firm or chambers of barristers which wittingly or otherwise offends the Chinese state.”’
Key quote ‘Antony Dapiran, a longtime Hong Kong lawyer, argues: “It’s possible to be a ‘good corporate citizen’ in the US or in China but not both.”’
I think the current policies will be bad for Hong Kong and China as they are likely to limit the talent pool; good people will be less inclined to work under such conditions.
US carriers weigh seat sales against staff shortages
Concerns grow that tight labour market will worsen disruption over holiday season.
An interesting read adding to the woes facing the airlines, who earlier encouraged staff to take early retirement. The other big factor that is hurting the airlines must be the rising fuel prices.
Maersk braced for lengthy supply chain crisis
Key being their CEO saying “The ports are not working as well as they should do, so we can’t discharge containers as fast as we would like. It’s hard to see exactly when the situation will improve,” he added.
Suggests the outlook for shippers remains good but that inflation attributed to bottlenecks will be around for longer.
TikTok owner restructures after tough year
The government crack down has pushed the company to split itself into six business units in order to try and maximise its potential. It notes the new divisions should make the it ‘“more intelligible for investors looking at any potential prospectus, making it easier to find cash cows and future growth engines”.’
It will be interesting to see if the other Ecommerce companies follow suit.
Citi prepares for Asia retail retreat as bids for consumer units roll in
US group to part company with 16,000 regional staff and offload underperforming businesses.
Disposing of much of its retail business but keeping ‘operations in Hong Kong and Singapore, its largest consumer markets in the region. The group will continue to provide wealth management services to clients across the region, and will maintain its institutional business that includes investment banking, corporate lending and treasury solutions.’
Makes it clear that Citi and the other banks are keen to try and secure business in China but other markets in Asia are not seen as being so lucrative.
Global investors turn cautiously upbeat on China after regulatory shock abates
Follows what HSBC’s Herald van der Linde, chief Asia equity strategist was saying on bloomberg yesterday.
Key for him is that the leadership will want a more settled year in the lead up to the 20th congress meeting.
Mentions that Fidelity, Nomura and Goldman’s are also turning positive but that Credit Suisse remains more cautious.
I think the radical changes being undertaken, coupled with covid impact, could have unforeseen consequences. There will be good opportunities but investors are going to have to due their due diligence and understand the implications of the ‘dual circulation’ and ‘common prosperity’.
Today Premier Li warned of downward pressure on the economy and was looking to fiscal policy to help support the economy which underlines the issues China is facing.
The Big Read Media
South Korea plots its next blockbuster
Having given the world K-pop, the Oscar-winning Parasite and Netflix hit Squid Game, the industry and the government now want to create global platforms to distribute content. But how easy will that be?