Aug 9 Asian Market +VE China CPI & PPI FT Thoughts Bytedance IPO, Taliban, China's Olympics, Supply chains and more


09 Aug

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

Australia
Market opened higher and tested to 7,567 in the morning session lead by financials  with materials the laggards.  It then reversed back down to almost flat at midday before trading sideways.
Suncorp strong after announcing a $25m share buyback after lifting its full-year profit by 13% to $1.03b. The company lifted its final dividend to 40¢ a share, and will also pay a special dividend of 8¢ a share
Transurban reported a $3.27b statutory full-year profit thanks to the $3.72b sale of a stake in its North American assets in December. The firm will pay a 21.5¢ final dividend for the six months to June 30, up from 16¢.
Japan
Market closed re-opens Tuesday
S Korea 
KDCA reported 1,492 new covid cases (-237 DoD)
Kospi opened lower support at 3,250 level and then rebounded and worked back to flat and then traded sideways. Currently +4pts (+0.1%) @ 3,272
Kosdaq sold down initially to 1,056 and traded sideways for the first hour before trading higher into the red but then eased to trade around flat.
Taiwan 
Taiex sold down on the open to 17,350 but then bounced to 17,450 and traded sideways currently dipping lower, currentlt -65pts (-0.4%) @ 17,462
China 
Inflation and PPI data on the open where strong than expected and followed trade data over the weekend that showed some slowing.
CSI 300 opened lower but worked higher through the morning currently +63pts (+1.3%) @ 4,984
Inflation Rate Jul 1% YoY vs +1.1% Jun (F/cast was +0.9%)
Inflation Rate Jul +0.3% MoM vs -0.4% Jun (F/cast was +0.3%)
PPI Jul 9% YoY vs +8.8% Jun (F/cast was 8.7%)
Hong Kong 
Pre market opened @ 25,969 -210pts vs -31pts ADR’s (which closed before China’s Weekend data. Ecommerce names started under pressure for a variety of reason but rebounded; Baba handling of rape allegations, Tencent regulatory probe, Meituan facing a fine for market domination. Chip sector under pressure as regulator said to be watching for hoarding.
Evergrande rebounded from recent weakness.
HSI rebounded on the strong CPI and PPI data and then traded around the 26,400 level.
China Tower results out at lunch Net Income 3.46b Yuan +16% headline beat estimates 2.98b Yuan
Europe
Focus on German trade data for signs of bottlenecks hampering the recovery.
US Futures
Futures opened flat; Dow +2pts, S&P and NDX slighly -VE infrastructure bill in focus.

Gold and precious metals under pressure after good US jobs data raises expectations of Fed tapering sooner.


Front Page
ByteDance revives listing plans despite China’s tech crackdown
• Hong Kong debut lined up • TikTok owner liaising with Beijing • New York IPO ditched
An interesting contrast to the situation at Didi and if the listing does go ahead likely to give investors confidence that companies that work with the regulators can still prosper. Key from the article seems to be the handling of data and working with the regulator. Whilst a successful listing would be a positive for investor confidence there is still the overhang of a change in social policy that has to be priced in.
The listing in Hong Kong will obviously benefit HK Exchange.

Westerners told to leave Afghanistan after Taliban seizes provincial capitals.  There is a war on the ground and the Taliban is keen to take control and overthrow the elected government.  It was interesting to note that the Afghan government did warn Beijing that the Taliban could not be trusted.  Something that is evident from their unwillingness to adhere to the deal they had agreed with the Trump admistration.
It seems increasingly likely that there will be an ongoing civil war in the country and so it will be interesting to see how China looks to protect the Belt and Road investments that it has made in the county. It was already in talks with the Taliban when it made the investment so it has lines of communication.
The big losers as the article notes will be the women, girls and civil rights.

INSIDE
Vietnam Covid surge hits supply chains
Adidas and Nike among brands looking for other sources as factories close. Other brands impacted include Samsung. An increasing problem for companies especially becuase now is a key time for Christmas supplies. With the resurgence in so many countries it is difficult to see how companies will be able to move production.

Politics lurks beneath the veneer of China’s medal success  
Looks at the concerns about China using the event to ‘whip up nationalist sentiment’. Notes the difficult balance between winning medals whilst ‘ignoring physical activities for the masses’. Although the recent edict about improving sporting facilties and getting people fit is maybe a recognition of that; especially if they are going to clamp down on online entertainment.
It also mentions about how some athletes also came under if the nationalists deemed them disloyal; with the example of wearing nike shoes.
This issue is likely to remain on the agenda in the run up to the Beijing Winter Olympics which shows that everyone is prepared to use the event as a way to achieve their objectives.

Beijing’s private tutoring crackdown raises job fears
Lack of graduate posts risks increasing the high number of under-25s out of work
Whilst the policy is supposed to encourage parenting it might actually make the situation worse because around 17% of university graduates were employed in the sector. Without jobs they are likely to delay marriage and parenting. It also mentions that internet companies are also likely to see a drop in advertising revenues; since the tutoring firms were aggressive advertisers.
Some say the move also threatens to aggrevate the rising dissatisfaction among young Chinese. As with all policy moves there is always the chance of unintended consequences. Policy was made with the bst intention but it is possible that the upper echelons of the party have lost touch with the ordinary people. That is something that Presdient Xi told Biden was the reason for the spring uprising.

Hot metal Aluminium prices approach 10-year high as recovery gathers pace
Notes how prices are near 10 year highs partly because of the drought in China’s Yunnan province which hurt the supply the hydro electric power and prompted government to ask the smelters to cut production. ‘Yunnan was due to account for 50 per cent of the global growth in aluminium production between 2020 and 2023, so any shortfall there had global impact’
Worth noting that Chalco (2600 HK) is still around 30% offits 2017 high.

Alibaba employee accuses supervisor of sexual assault 
News that was going viral on Chinese social media. Unwelcome news but the company has been moving quickly to try and address the issue. It has fired the employee accused and forced the resignation of others involved in what it considers the mis-handling of the complaint.
It seems that China will no longer accept the workers being taken advantage of the tech sector it will be interesting to see whether this leads to China seeing a ‘me too’ moment and if it does how Beijing will deal with it.

Maersk looks to build land-based logistics
World’s largest container group is in the market for acquisitions, says CEO.
An interesting read about how its not building new ships but looking at other avenues like warehousing, distribution and airfeight.
Expects demand to continue through this year but not willing to forecast past that citing the unique situation we are currently experiencing. It CEO notes that just in time supply chains were conceived when interest rates were much higher. With rates now close to zero businesses can afford to hold inventory. A good read




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