This and previous notes can be found at Substack ( Asian Market Sense )
Check out ERI-C.com for your research needs
India re-opens and looks to play catch up.
Market trended higher in the first hour touching 7,512 led bWesfarmers, Woolworths and CSL before reversing and dipping into the red around 1pm (7,457). NSW announced new restictions as covid cases continue at elevated levels. Iron ore prices remain weak on concerns about the Chinese economy. Energy small weakness. Support from Consumer Staples and Discretionary. It then saw a bounce and is currently trading sideways just above flat. Cochlear -7.5% even after reporting record $1.4b revenue and a $1.40 dividend, but still undershooting consensus expectations
Auto names and most of the supply chain remain weak after the Toyota news yesterday; Denson Corp -7% but Renesas Electron +1.7% who will benefit from the chip shortage. Nintendo +1.5% on talk of NKY225 inclusion again. Shippers seeing some profit taking Nippon Yusen -6.4% covid and China slowing prompting the selling.
Nikkei opened slightly lower, ticked up to 27,320 in initial trades before trendng lower to 27,035 before a bounce to 27,100 level at lunch. PM opened flat and dipped but likely to trade sideways. Currently -193pts (-0.7%) @ 17,095
Topix traded in a similar fashion currently -9pts (-0.5%) @ 1,888
Inflation Jul -0.3% YoY vs -0.5% Jun revised (F/cast was -0.1%)
Inflation Jul +0.2% MoM vs +0.1% Jun revised (F/cast was -0.2%)
Core Inflation Jul -0.2% YoY vs -0.5% Jun revised (F/cast was -0.3%)
Inflation Ex Food & Energy Jul -0.6% vs -0.9% Jun revised (F/cast was -0.6%)
Monday we get the flash PMI data
Foreigners still selling tech along with Steel on China growth concerns. Pharma also seeing some profit taking. Game names that were popular yesterday under pressure. Kakao Bank mutes despite potential W200bn MSCI inflow expected MOC.
Kospi opened higher and after an initial dip touched 3,120 in the first hour before reversing down to 3,060 in the next 45mins. Now trading sideways 3,060/80
Kosdaq traded in a similar pattern; tested 1,000 in the first hour. Then sold down to 970 and currently -14pts (-1.4%) @ 977.
PPI Jul +0.7% MoM vs +0.5% Jun revised (F/cast was +0.4%)
PPI Jul +7.1% YoY vs +6.6% Jun revised (F/cast was +6.3%)
Taiex opened higher and tested to 16,500 in initial trades. Then sold down first support 16,320 but then down to 16,250 before a strong rebound to 16,420 and has sinced worked higher. Currently +75pts (+0.5%) @ 16,440 Shipping and Paper leaders. Support from Tech Hon Hai +1% but UMC flat TSMC +0.4%
Export orders after the close.
CSI 300 opened lower and trended lower through the morning. At lunch -117pts (-2.4%) @ 4,745
China Telecom debut in Shanghai saw the stock rally 16% before a trading halt. Sentiment weak as Government clampdown continues and concerns remain about the strength of the recovery. Liquor names continued to see selling pressure.
Prime Loan Rates left unchanged 1 yr @ 3.85%, 5 yr @ 4.65%
HK Pre market opened @ 25,241 -75pts vs -16pts ADR’s
Market trended lower through the morning to test 24,600 before lunch but closed -577pts (-2.3%) @ 24,740. With this level of selling there could be margin calls in the PM session. Health care names weak on concerns of more regulation.
BEA +3.8% after good earnings.
Expect as cautious open following Asia.
Out UK Consumer Confidence Aug -8 vs -7 Jul (F/cast was -6)
UK Retail Sales, Public Sector Borrowing
Opened Dow -3pts, S&P and NDX +0.1%
Ahead Kaplan speech and Baker Hughes oil rig count
Focus still on Afghanistan.
Notes that many people are showing a defiance to the Taliban takeover.
Toyota move to slash output 40% adds to jitters over global growth
• Carmaker cites Covid surge • Fears rise of cut to US Fed stimulus • Traders pile into dollar
I think the market reactions show how nervous investors are about the current situation; with many markets trading at highs and the change in policy from China and to an extent Central Banks, all against the backdrop of covid and climate change. Without doubt there are an increased number of factors that need to be accounted for when making investment decisions. Made harder by the fact that just putting your money in the bank is not really an option.
The article concludes “Investors worry that the best of the recovery . . . is behind us and are turning more cautious on their allocation,” said Emmanuel Cau, head of European equity strategy at Barclays.
Certainly markets have largely recovered from the lows we saw when covid first hit and before effective vaccines were in place so whilst much of the recovery might be over we are facing the more normal investment cycle albeit with the new variable of the covid virus.
Antitrust watchdog refiles suit against Facebook ‘buy or bury’ policy on rivals.
The first case for new FTC chair Lina Khan. The new lawsuit looks to have been better structured than the first one. The outcome likely toset the benchmark for the adminstrations approach to large ecommerce companies going forward. The parallels with China’s new approach to its big ecommerce companies will be closely watched.
Rising infections in double-jabbed reinforce calls for boosters
Studies suggest that vaccine efficacy may be lower than scientists thought.
Underlines how little we still know about the virus and its ability to mutate and about the efficacy of the vaccines. No doubt over time the vaccines will continued to be developed and refined. The important fact is that we have effective vaccines and as more people are vaccinated we have a better chance of bringing the virus under effect control. But I do think that like the flu, this is never going to be totally erradicated.
Suga drops Epstein contact to lead digital body
'Japan’s prime minister has been forced to make a U-turn just as his government was about to confirm the appointment of an associate of the late paedophile Jeffrey Epstein to lead the country’s first digital agency, according to people with knowledge of the talks.'
Underlines how politically insecure PM Suga is, making the forthcoming general election more important than ever. It will be interesting to see how the new digital body works when it is launched in two week’s time. The importance of digitalisation has been rightly identified by the administration finding the correct head could be just as important.
Companies & Markets
Huarong set for bailout following $16bn loss
Looks at what is likely to Beijing’s preferred way of dealing with problem companies. The real question is how many firms out there are in serious problems. Evergrande is also under the spotlight but it is liklely that there are more to come and then it will be matter of whether the resources are available.
Beijing orders Evergrande to tackle debt
Active effort needed to diffuse risk and maintain stability, developer told.
The story has been on-going for ages; in the past the company was able to rely on its associations but that has changed. At the heart of it is the change of policy from Beijing and if Beijing is worried about the debt levels of the Chinese Developers then it is something that investors should worry about too. It is probably linked to President Xi’s wish to impose a property tax but in order to do that he needs to know that the developers are healthy. The failure of a large developer would have significant knock on effects both to the economy and public confidence.
Baidu’s $1bn bond sale draws strong demand despite China tech crackdown
A solid response but it notes a lot of questions about ‘the impact of regulatory announcements and regulatory uncertainty’. Pricing was lower than originally expected.
The success I think underlines that whilst there will be more regulation ahead Beijing does not want to destroy these businesses. They have been world leaders and ideally Beijing wants that to continue. For Baidu it is seeking to move away from its search engine history and more into AI a sector that Beijing is keen to develop.
For investors it underlines the need to get a clear understanding of policy from President Xi. Currently much of that policy is being tested for public opinion via media outlets and so being aware of what is in the media is important. For example in today’s People’s Daily there are articles critical of internet platforms and their ‘youth mode’ implementation which is aimed at preventing addiction. It also has a article looking at on-line drug sales. The Securities Times has an article on ride sharing. Lastly the Economic Daily is talking about the opportunities following the recent regulatory changes in the internet space. Just goes to show that being widely read is now more important than ever.
The case for continuing QE is hard to fathom By John Plender
Concludes ‘The temptation for policymakers is to muddle on and perpetuate the boom, bust and bailout cycle. That way ultimately lies the balance sheet recession — a downturn caused by debt burdens — to end all recessions. The imperative should rather be to ensure that the post-pandemic debt splurge finds its way into productive investment along with planning debt reconstruction and the re-equitisation of the economy.’
FT BIG READ. AFRICA
Fintech fuels Nigeria start-up boom
Although the oil-dependent economy is struggling, its fintech groups have attracted more than $1bn in venture capital in the past two years. However, some question the values attached to these companies.