Aug 10 Asian Update muted trading, FT: Warming warning, China Tech losses, Delta impact

10 Aug

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

Market opened higher and rallied to 7,576 in early trades (a new high) lead by miners, banks and CSL and then traded sideways for the first hour.  But then trended lower back to flat around lunchtime and then sideways with resistance around 7,550. James Hardie upgraded its guidance +VE
Business Confidence Jul -8 vs +11 Jun (F/cast was 14)
Building Permits Jun -6.7% MoM vs -7.6% May (F/cast was -6.7%)
Due New Home Sales Jul (Jun was +14.8% F/cast is +13%)
Nikkei opened higher and rallied to 28,100 level in the first hour. It tested that level over the next hour before selling back down to the opening level and then dipped and bounced going into lunch.  PM opened lower and trading sideways.
Topix traded in a similar pattern.
Earnings in focus with 336 companies due to report today with Softbank a key one. Covid cases running high but seemingly priced in.
Pre Market
Current Account Jun ¥905.1B vs ¥1979.7B (F/cast was ¥850B)
Bank Lending Jul +1% YoY vs +1.4% Jun (F/cast was+1.3%)
Eco Watchers Survey (Current and Outlook)
S Korea 
KDCA reported 1,540 new covid cases (+48 DoD)
Krafton IPO trades lower.
Kospi opened higher but sold down to 3,236 level in the first two hours and then traded sideways. Kosdaq traded in a similar pattern.
Krafton IPO traded lower and Kakao Bank weak after 2 days of rallying. Broadbased selling by Foreigners and Local Institutions.
Taiex opened slightly higher ticked to 17,500 but then sold down to 17,350 in the first hour. Then traded sideways until midday when it sold down to trade just below 17,350.
Due after market GDP Growth Rate
Policy concerns remain talk that packaging might be another sector under pressure.
CSI 300 opened lower and sold down to 4,950 in the first 30 minutes ticked higher but then sold down to 4,945 before working back to the opening level. But then trended lower into lunch. Concerns about slowing; PBoC suggests it has the tools to cope; raising hopes of more RRR cuts. It does appear that government policy is currently being tested through the media.
Pre market opened 26,457 +173pts vs +89pts ADR’s an initial squeeze but then sold down to 26,140 level before bouncing back into the green and trading sideways into lunch. Evergrande names strong on talk of asset sales; including its stake in EV and property projects.
ECommerce +VE as policy seems clearer. Packaging suggested at another area that might be probed. Macau weak; CS downgrade.
Earnings at lunchtime from Wharf, China Telecom
HK administration to adopt the Chinese Anti Saction law likely to be seen as -VE.
Markets likely to open lower with focus on the data and the impact of covid. 
Eurozone Zew Economic Sentiment Index
Germany Zew Economic Sentiment Index and Current Conditions
US Futures
Opened  Dow +22 points, or 0.04%. S&P 500 futures ticked up 0.01% and Nasdaq 100 futures slid 0.03%.
Ahead NFIB Business Optimism Index, Unit Labour, Non Farm Productivity, Redbook, API Crude Oil Stock Change

World likely to be 1.5C warmer by 2040, UN’s science panel warns

• ‘Code red for humanity’ • More extreme weather expected • Call for urgent emission cuts.
Looks at the very stark report which will no doubt be used encourage counties to get more aggressive in achieving the goals. For investors it means that new energy plays become more crowded.

China’s billionaire tycoons lose $87bn since July following tech crackdown
Looks at the impact of the recent crackdown/pull-back intech names.
It is interesting to remember that Pony Ma from Tencent was a seller of his stock last year, makes you wonder if he knew it was coming. Whislt the impact on the top guys is significant it will not leave any of them destitute; it might not be the same for the ordinary investors who held their stock. For many ordinary investors the situation is much harsher. It will be interesting to see whether ordinary citizens remain as keen on the markets going forward.

Taliban sweeps across northern Afghanistan
Militant group captures five provincial capitals as US forces prepare to leave. They obviously have no interest in a negotiated settlement realising the military advantage they have over the Afghan forces without the support of the US.
The swiftness with which they have acted raises questions as to how committed they ever were to a peaceful power sharing negotiated outcome. Possibly always expecting to be able to take advantage that the previous warlords who were part of the Northern Alliance lost their power to the Kabul Government in the hope of developing a new and better Afghanistan.
Going forward it will be interesting to see how the Taliban’s relations with China and Russia develop.

Spread of Delta variant dents China’s economy
Looks at the surge in cases in China and Beijing’s reaction to try and control it’s spread. Coming as the recovery from the initial covid outbreak is showing signs of slowing as seen in the Trade data but with strong PPI reading, suggesting inflation. Policy going forward will be fraught as the delta variant continues to impact global demand and supply chains. At this stage the PBoC is suggesting further RRR cuts. China’s biggest issue going forward is likely to be job creation as it clamps down on the private sector.

Music streaming service axes $1bn Hong Kong flotation
Cloud Village, the music streaming business of NetEase, would not go ahead with its IPO that was scheduled to launch this week due to a disappointing response from investors, according to three people familiar with the matter.
It had been hoped that with US listing being made more difficult that companies would be able to switch to HK. This is only one listing and the lack of interest could be for a number of reasons but the big concern will be that it is because of either Chinese policy uncertainty or more worryingly; concerns about the US/China relations and further restrictions on stocks that US investors can invest in. As I have written before it makes little sense for the US government to ban chinese companies to list in the US becuase they want to protect US investors and then let US investor invest in those same companies but outside the US.

Companies & Markets
Samsung chief Lee to be freed early from jail for bribery
• Term cut in traditional act of mercy
• Korea split on ‘chaebol’ head’s release
Makes the point that it will raise questions about the adminstrations committment to reforming the chaebol. Many hope that his release from jail will mean Samsung being more able to make key development decsision. But as he is only out on parole, not a pardon, he is not officially allowed back into his office. For that he will need a justice department concession. Additionally he still faces other charges. Stock did spike on the open but not trending lower.

Lenders fear the threat posed by central bank digital currencies  by Jonathan.
Looks at the impact of Central bank digital currencies on existing lenders and the expectation that Central Banks would become deposit takers undermining the core business of the existing banks. Whilst that is only part of existing lenders business there are other disrupters also looking to take sections of their business. An interesting read.

Crypto businesses race to enter sports arena
Cash-hungry clubs attract nascent sector that is keen to engage a global audience.
An interesting confluence; sports clubs short of money and crypto’s having seen a rally. Makes the point that crypto’s can be volatile and that the dvertising regulators are becoming more aware of misleading adverts.
Worth a read becuase it illustrates that in association with a favourite football team there are opportunities for crytpo’s to make people more aware of what the digital tokens can do.

Renault joins forces with Geely on hybrid cars
Effectively Geely replaces Dongfeng and it will have an link into the S Korean markets which will be +VE for Geely via its Lynk brand. It marks another step forward for Geely as it seeks to position inself for the swtich into EV’s. Geely’s stock is down today but the trend from May has been upward.

Internal strains over compliance test SoftBank
Deals highlight difficulty in balancing highly competitive, instinct-driven Son culture with need for stronger governance.
A good read, I think many have worried about the approval process at Softbank and the influence of Masa Son on the process. I still tend to think that there is a lack of a strong and strict compliance culture. A timely artilce with Softbank earnings due today.

Alibaba fires manager accused of rape
Looks at the case that is further tarnishing Alibaba’s image. Whilst the company is in the spotlight, it is probably more than just a Alibaba thing. At annual dinners in Chinese companies toasting colleagues and heavy drinking are common. What makes this different is what happened afterwards and the action taken by those in charge.
Western companies have seen similar examples of abuse taking place. Going forward higher standard are required from us all.

For interest
Fixed income. Soured bets
Reflation trade losses pile up for hedge funds in July
Fall in Treasury yields proves costly with more pain in sight given elevated short positions.
An interesting read about the gryrations taking place in the markets.
Nice quote ‘Jay Powell, the Fed chair, also recently admitted that there was not a “real consensus” as to what was moving markets, calling out investors who had pointed to “technical factors, which is where you put things that you can’t quite explain”.’

China’s power over African debtors raises concerns
Looks at the lack of openess about Chinese loan terms and the fact that China does not participate in the Paris Club. Notes that the IMF has called ‘for all creditors — including from China — to work together on debt relief.’

Pyongyang resists ‘maximum pressure’
Kim Jong Un’s isolated regime is finding inventive ways to get around sanctions and keep developing its weapons programme, prompting calls for the Biden administration to overhaul its approach.

* The email will not be published on the website.