Oct 27 Asia mainly trends lower. FT Energy in focus and the new book on Xi

27 Oct

This and previous notes can be found at  Substack ( Asian Market Sense )
Check out ERI-C.com  for your research needs

Asian markets generally weak
Market opened flat rallied to test 7,475 a few times in the morning before reversing and tested support at 7,420 before recovering to flat and trading around there, to close +5pts  (+0.1%) @ 7,449.
Inflation concerns raised as the data showed a higher than expected rate. Energy and Miners +VE Woolworths -3.2% warned about rising prices and a return to more normal shopping habits; Coles -1%. Telstra +3.2% on upgrades after Digicel purchase.
Nikkei opened lower and after an initial spike trended lower to 28,870 before a small bounce into lunch.  PM continued to work higher.
Topix traded in a similar pattern.
Leaders Food, Auto, Insurers and Chemicals
Laggards Shippers, Non Ferros Metals,Electric Appliances
S Korea 
Foreigners and Local Institutions net sellers focused on large caps selling Chem and Tech but buying Shipbuilders and Pharma.
Kospi opened lower and trended lower to 3,019 around 1pm before rebounding.
Kosdaq traded in a similar pattern.
Taiex opened flat but drifted lower in the morning to 16,975 before rebounding close +40pts (+0.2%) @ 17,075
CSI 300 opened lower and trended lower; finding support at 4,900 in the AM but dipped below in the PM. Industrial profits dropped but beat forecasts. Concerns over US/Sino relations after the FCC banned China Telecom. Building materials weak along with Coal names as NDRC to crack down on coal hoarding.
Hong Kong
Pre market opened @ 25,795 -243pts vs -111pts ADR’s with weakness in Ecommerce. HSBC +0.1% having repurchased GBP10m worth of shares. Market eased back to 25,600 level and trading sideways.
Futures indicate a lower open
US Futures
Indicate a flat open.

Front Page
Princess defies custom to wed

Comments on the marriage of Princess Mako. Concludes ‘The public backlash against the couple since they announced their engagement four years ago had left the pair “horrified”, the newly titled Mako Komuro said. The two plan to relocate to the US at Mako’s request.’
See also inside Japanese royal defends marrying commoner a sad reflection on society that fails to accept an individual’s freedom of choice.

Gazprom offered Moldova cheaper gas in return for loosening EU ties
• Russia group wants market reform delayed • Chisinau fears unrest over energy prices.
Russia using its gas supplies as a political weapon.
China sets peak emissions goal as UN chief warns over vague climate targets
Much anticipated but lacking firm commitments; the article concludes “The plan is not sufficient,” he said. “It’s urgent that global emissions peak and that is hard to accomplish if China’s emissions continue to increase.”
The problem is that at present alternative energy sources are not able to meet the current demand and whilst most want to try and reduce emissions keeping businesses going and home warm are seen as more important.

China accused of cancelling events for German book on Xi
A new book Xi Jinping — The Most Powerful Man in the World by Adrian Geiges, Stern magazine’s China correspondent, and Stefan Aust, former editor-in-chief of news magazine Der Spiegel was due to hold a number of launch events but they have been cancelled as the behest of China.   An interesting read as it puts the spotlight on the role  of the Confucius Institute and the freedom with which it operates.
It is also interesting the on-line version has a quote ‘Piper Verlag quoted an employee of the Confucius Institute as saying that “one can no longer talk about Xi Jinping as a normal person — he should not be touched or spoken about”.’ Which reflects the status in which he is held by officials. The real question is whether the people of China feel the same? If they do then the re-writing of the social contract and adoption of ‘common prosperity’ will happen, if they don’t then President Xi and China face unrest. At present it is not clear.

Covid restrictions hinder South Korea growth
Looks at yesterdays GDP data; key being ‘strong exports were offset by weak domestic consumption due to tough Covid curbs.’ Also worth noting that the BoK warned about the Chinese energy crunch and property problems. It was also quite optimistic that vaccinations and the new policy of ‘living with covid’ would be effective and against that background further tightening was to be expected.

Companies & Markets
Wealth unit helps UBS race past estimates for quarter

• Profits tally increases 38% to $2.9bn
• Covid cash swells rich clients’ assets
Doesn’t mention that on Bloomberg Mamers said he was bullish on China but Chinese clients seem to be turning more cautious.
LEX UBS: wealth’s good health  ‘Some investors are waiting for a December appeal decision in the French courts on a €4.5bn tax fraud case before committing more money to the shares. UBS is itself waiting for that decision before committing itself to raising payouts. Shareholders who stay put should get a bumper bonus sometime next year.’

Toyota lawsuit indicates change of direction in corporate Japan
Looks at the background to Nippon Steel suing Toyota over concerns that Baoshan Iron and Steel was infringing the Nippon patent. Suggests that historic norms are changing which will probably be a good thing.

Cross asset. Resources benefit
Indonesia’s stocks and currency boosted by China energy crunch
Rupiah rebound leads regional forex gains as coal lifts biggest economy in south-east Asia
Benefiting from China’s need for coal and the fact that China closed the door on coal imports from Australia. Also it notes that its steel companies have also seen increased demand from China. The limiting factor seems to be the weather.
But is also notes that the demand from China could be short term and that the exports are at odds with Indonesia’s green ambitions.
For investors it underlines the opportunities that arise in Asia from events in China.

Fixed income
Modern Land becomes latest Chinese developer to miss a bond payment
It missed a Monday deadline saying there was a liquidity issue and prompted weakness in the Chinese property stocks on Monday. Despite the assurances from PBoC officials that the Evergrande situation is containable the concern is that there are more defaults to come.
Yesterday the NDRC called on firms to optimise foreign debt structures and asks some firms to prepare for off-shore bond repayments along with asking Evergrande founder to pay down the company debt from his personal wealth.
The issue is large and it is interesting to note that at present it has not spread to the banks but it still could. The fact that local authorities control pricing and discounts is to an extent giving a false sense of security the fact is that if people loose confidence in property then the government will face a huge problem.
LEX  Japan shippers: game of chicken
Suggests that investors should consider taking profits ahead of results which start next week with Kawasaki Kisen. It notes ‘Kawasaki Kisen, is expected to report a record pre-tax profit for the quarter to September. Its stock and that of Nippon Yusen, the largest of the trio, have risen more than 300 per cent in the last year. Shares in middling Mitsui OSK have doubled.’

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