Aug 11 Asia @ lunch and FT Softbank waits on China, Vaccine, diplomacy and balancing

11 Aug

This and previous notes can be found at Substack ( Asian Market Sense )
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Australia Market opened higher slightly stronger than the futures and tested 7,600 initially thanks to the good results from CBA kicking off the bank’s reporting.  It then consolidated back slightly before working better to 7,615 but now trending lower. Tech also firm and earnings from James Hardie, Challenger, and Megaport supportive too
Consumer Confidence Change Aug -4.4% vs +1.5% Jul (F/cast was +0.2%)
Consumer Confidence Index Aug 104.1 vs 108.8 Jul (F/cast was 109)
Japan Nikkei opened slightly higher and traded in a range 28,090/ 27,975; another big day for earnings and lots of results from yesterday to digest along with the +VE implications from the US infrastructure plan.  But volumes muted.  Softbank -1.1% post earnings
Topix trended higher to close +19pts (+1%) @ 1,955
Due later Machine Tool Orders
S Korea 
Pre market unemployment data better than expected but KDCA announced 2,223 new covid cases a new high.
Kospi opened slightly lower new covid cases hitting a new high and off-sets the fall in unemployment. It spiked to 3,250 briefly before selling back down to 3,227 before working back to 3,240 but now trending lower currently -12pts (-0.4%) @ 3,230.
Samsung opened lower on their ‘unpack’ day having been usurped by Xiaomi’s release last night foreigners selling Tech. Vaccine names +VE
Kosdaq opened lower and tested lower to 1,050 then rebounded to 1,056.
Then traded effectively sideways currently +3pts (+0.3%) @ 1,055
Taiex opened slightly lower and tested down 17,170 before rebounding but unable to break above yesterday’s close; which it tested twice before trending lower. Currently -123pts (-0.7%) @ 17,200 with Tech names and traditionals weak but Financial outperforming along with Petrochems
CSI 300 opened lower and traded in a tight range. Initially rebounded to 5,060 in early trades consolidated to flat but sold down around 10:30am to morning low of 5,020 before a bounce into lunch -6pts (-0.1%) @ 5,037.
Pre market opened @ 26,492 -114pts vs -24pts ADR’s
Market then rallied to flat and then to test 26,800 before trending lower into lunch +55pts (+0.2%) @ 26,661
Evergrande (3333) +6.6% confirms in talks to sell assets +VE cross read for the sector.
Liquor names -VE as State Media says drinking culture is bad. Petrochems +VE.
Results in focus due at lunch Lenovo +7% HK EX +0.4%, Cathay Pac +1.5%, Hysan Dev +0.2%.
Key will be the German inflation data and then caution ahead of the US inflation data.
US Futures  
Opened Dow slightly higher, S&P 500 futures and Nasdaq 100 futures were flat. Caution ahead of inflation data tonight.

Front Page
Afghans flee Taliban tide

The tragedy of the Taliban using force over the previously free people of Afghanistan; some have fled others are reported to be hiding in their houses.

Biden buoyed by Senate backing for $1tn infrastructure package
• Bill to fix crumbling networks • Bipartisan support seals passage • Push for House vote
For investors it sparked interest in the infrastructure play; like Caterpiller in the US and Komastsu in Japan, Cement, Steel and other plays in focus too.
The bill included a clause that crypto transactions had to be reported to the IRS; which garnered some outrage but those taxes will be used to help fund the wider spending.

SoftBank to ‘wait and see’ on China investments until tech sector calms
Results disappointed and the extent of the exposure to China became apparent. Son hopes to see things improve in a year or two. Size of the buybacks also disappointed and Son investing his own money along side a worry to investors although Son said it was a sign of confidence.
Interesting that Cathie Woods also now taking a wait and see approach to China. The recent regulatory and doctrinal moves have left many uncertain about what the final objective is and hence sitting on the sidelines.
See Lex SoftBank: tunnel vision  Concludes ‘SoftBank shares have dropped more than 30 per cent. Its net asset value  of $239bn is more than double its stock market value. The only  meaningful turnround in the past two years resulted from buybacks,  rather than record profits or Son’s vision. The tech entrepreneur is  losing his ability to surprise and delight his fans.’

China recalls envoy after Lithuania plan to open Taiwan office
China claims that such actions ‘“severely undermining China’s sovereignty” and demanded that the Lithuanian government recall its ambassador.’
It follows China’s demands that governments deny Taipei any treatment suggesting  sovereignty.  Despite the fact that Taiwan is an independent nation.  Beijing sees this an attempt by Taipei to pursue de jure independence when in fact it is just Taipei exercising its sovereign right.
Interesting that increasingly the Baltic states, that were illegally annexed by Russia, are taking China to task and giving support to Taiwan.

Delta outbreak fuels concerns over China vaccines
Research into homegrown jabs’ efficacy against variant has not faced peer review.
The surge in new delta variant in China is raising concerns about the efficacy of the domestically developed vaccines because of the lack of research. The fact that discussion of the efficacy on the domestically developed vaccines has been dampened down also raises concerns.
It notes ‘they acknowledge the prevention rate is falling, a trend that risks undermining the vaccination drive. “If you reveal data that shows the efficacy rate is getting lower, then you send a message domestically that could slow efforts to achieve herd immunity,” Huang said.’
The lack of research is also impacting demand overseas for the Chinese vaccines and that could hurt China’s international image.

Belt and Road dam project in Cambodia branded a ‘disaster’
‘Human Rights Watch claims the construction of the Lower Sesan 2 dam at the confluence of two tributaries of the Mekong “washed away the livelihoods” of communities that relied on fishing, forest-gathering and farming when the areas upstream were flooded.’
An interesting read, many experts are saying such dams are a bad thing the key will be when such projects get caught up in ESG. Hydro electric power has always been a popular energy source but the longer term impact of such generators can have profound effects on people and the environment.

Launch misfire Tencent-backed maker of battleground game disappoints on debut  Looks at the poor debut of Krafton on Tuesday which closed -9% from the debut price and is a further -5.7% at the moment.
Concerns about the crack down in China amongst the reasons cited along with being priced expensively. Always a dilemma for the bankers trying to sell IPO’s.

The Hong Kong balancing act just got harder for multinationals
Looks at Hong Kong’s adoption of the mainland’s anti-sanction law which ‘could leave companies wedged between complying with US regulations and being sued in Chinese courts.’
Makes the point that the law is vaguely worded but that it may be more ‘bark than bite’. But the reality is that we do not know an until the law is implemented and a case prosecuted. But it will be one more factor that investors and companies will have to take into account when deciding to locate in Hong Kong. Previously Hong Kong was a much easier place to invest in and live.

For interest
Covid casts light on port infrastructure crisis
Online boom increases burden on docks and puts the need for investment into sharp focus.  An interesting  look at the current strains many of which were actually pre covid.Cargo a bright spot as Etihad halves losses  
An interest read ahead of the Cathay Pacific earnings today.

Khan’s battle to revive antitrust in America
The new FTC chair is challenging a consensus on consumer-first competition policy that goes back to the Reagan era. But her plans have already provoked opposition from business groups and Republicans.

Beware the fairy tales about inflation By Chris Giles
Concludes ‘Mistakes are likely to happen and should be expected. The fact that financial markets expect the authorities to judge things perfectly is, itself, a reason for concern.’

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