Apr 2 FT On-line Highlights & Cyber Attacks, Biden's package, HK activists guilty, China Taiwan


02 Apr

MARKETs 
AUSTRALIA market closed re-opens on Tuesday
JAPAN Nikkei opened higher (29,705) following the rally in US markets and initially tested 29,800 but unable to hold above, it drifted lower into lunch.  PM worked slowly higher trading around 29,800 for an hour before breaking above. Closed +465pts (+1.6%) @ 29,854
Topix opened higher at 1,975 and spiked to 1,980 but then reversed back down to the opening level as quickly. It then trended lower into lunch; 1,969. But initially selling down to 1,965 before working better but resistance at 1,972. Closed +14pts (+0.7%) @ 1,971
Finance minister says Japan is looking into the financial losses incurred by MUFG -0.4% and Nomura -1.8% through deals related to an unnamed US client, and will gather and share information on the matter with the Bank of Japan and overseas authorities. I would expect Mizuho -0.8% too now that is has revealed a $90m loss too.
Softbank +4% saw good interest after Compass real estate which it back traded above its IPO price in NY. That is after it cut the size of the offering and reduced the target price.
Japan will receive bigger shipments of Pfizer Inc’s COVID-19 vaccines to immunise the elderly faster, the government said on Friday after negotiating the increase in supplies. +VE as Govt reports 440 new covid cases (down 35 from Thursday)
Market open Monday and we get Services and Composite PMI data.
S KOREA  
Pre market inflation data, slightly stronger than expected. Markets closed at a 6 week high with strong foreign buying on the back of Biden’s infrastructure stimulus plan. Moderate volumes, with retailers the only net sellers. Earnings being raised ahead of reporting session helped. Autos +VE on good sales data, Tech also +VE
Hyundai Motor denied a rumour that it is about to establish a joint venture with US tech giant Google to develop a self-driving service.
Mayoral elections underway.
Kospi market opened higher and rallied to test 3,120 which it did a few times over the first hour but not enough pressure to break above the from about 10:15pm it trended lower to 3,102 around 1:45pm before working higher to close +25pts (+0.8%) @ 3,113. Highest since Feb 17
Kosdaq opened higher and initially spiked to 971 the day high, but unable to hold and trended lower 966 which it tested for about 40 mins from 12:25 before working higher to close +4pts (+0.5%) @ 970
Data
Inflation Rate Mar +1.5% YoY vs +1.1% Feb (F/cast was +1.4%)
Inflation Rate Mar +0.1% MoM vs +0.5% Feb (F/cast was -0.1%)
KDCA reported 558 new covid cases Friday (vs 551 Thursday) highest in 42 days.
Market open Monday and beget Foreign Exchange Reserves data
TAIWAN 
Opened higher following the US and yesterday’s good PMI data. Initial resistance at 16,565 which it tested a couple of times before reversing and tested support 16,500. Then rallied again to 16,602 day high but couldn’t hold and trended lower back to16,500 around 11am before working higher with resistance around 16,570 it traded sideways to close +140pts (+0.9%) @ 16,571.
Market closed on Monday for Qingming Festival
CHINA 
CSI 300 opened higher following the US and trended higher through the morning to 5,170 around 11am but unable to break above and sold down slightly into lunch at 5,156. PM opened lower sold down to 5,133 in the first 40 minutes before working higher to close +51pts (+1%) @ 5,162
Shanghai Comp +18pts (+0.5%) @ 3,484
Shenzhen Comp +143pts (+1%) @ 14,123
ChiNext +37pts (+1.3%) @ 2,852
Market closed on Monday for Ching Ming Festival
HONG KONG 
Market closed re-opens Wednesday
ADR’s closed +117pts @ 28,496 broadly positive but with weakness in Tencent, BoC HK, HSBC and Sinopec.
EUROPE 
Markets closed re-open Tuesday
US Equity markets closed bond markets open
Payrolls data along with ISM New York to be released.
US will brief South Korea and Japan on Friday on President Joe Biden’s long-awaited review of North Korea policy in talks on Friday that will also cover concerns about a shortage of semi-conductor chips, a senior administration official said on Thursday.
Market re-opens Monday and we get Services and Composite PMI data, Factory Orders and ISM Non Manufacturing data.

Cyber attacks 
I  was listening to a presentation recently titled "Cybersecurity, Cryptocurrencies and Safely Navigating the Metaverse: Does blockchain offer better data security as well as payments architecture?”  By Sean Maher of Entext, which was very good and I if you would like to know more about it or the services they offer just send me an email to andsullivan@gmail.com.
But one thing that was mentioned in the questions element was the impact of the recent state led hacks on US systems; the recent Russian hack on SolarWinds systems vs the Chinese attack on Microsoft Exchange. He said that the top US guys were saying that the Russian attack was typical KGB, go in quietly, take what you want, leave as little trace as possible, shut all the doors and windows behind you and leave.The Chinese went in, got discovered, fled and left all the access points open and invited every hacker in the world to go in and get what they could!
The US is now saying that that sort of behaviour cannot be allowed and so are considering striking back as a warning. Doing the same to a Chinese system as an example of ‘if you do it to us, expect the same back’. They worry that if they don’t do anything then state backed hackers will just trash foreign systems regularly because there is no penalty.
That to me is a major progression in the cyber arena especially as it is not clear whether that will deter similar attacks in the future. Obviously the fact that there have been hacks on hospital systems and even major infrastructure elements demonstrates that the stakes are being raised and will get higher as IT and automation increase their presence in every day life.
It would appear that the world needs a 'rules of engagement’ protocol or Geneva convention for cyber before lives are lost.

FT On line. (No print issue today)
Top billing
Biden faces clash with business over proposed tax increases
Corporate lobbyists welcome infrastructure spending but want other ways to pay for it.
Basically they don’t want to be paying for it via a rise in corporate taxes, although they are likely to be the major beneficiaries. Biden in unveiling the package did directly mention Amazon for not paying enough Federal taxes. The article quotes David Kamin, deputy director of the National Economic Council, who said “This is a totally reasonable set of reforms that actually would get rid of a bunch of bad incentives that corporations now have and would finance critical investments that would put the US in a better position,”
The reaction from corporate America would suggest that Biden’s honeymoon is over. They now claim they need the low tax rates to be competitive. Others are saying that they expected a wider mix of user fees and higher individual taxes rather than corporate tax increases alone. Key here is that infrastructure benefits business and so its reasonable for business to pay. Biden is also due to releases another package aimed at families and expected to be paid for by increases taxes on the wealthy.
If the business sector digs it heels in that is likely to embolden the Republicans to oppose the bill and that means nobody wins and America continues to have third rate infrastructure and the wider economic recovery is put into question.
In my view as long as the corporate tax increases are used for the improvement in infrastructure then US companies should be willing to pay, it would be good to see the ESG lobby get behind this too because the package contains a number of element that are both environmental and social.
American business maybe needs reminding of John F Kennedy’s words ‘ask not what your country can do for you, ask what can you do for your country’
As the country recovers from the pandemic companies maybe shouldn’t be looking for ways to avoid paying tax but should look to pay what is asked and reasonable; especially when it is for the greater good.

‘He never struck me as a big risk-taker’: Bill Hwang blows up
Fund manager’s comeback ends with fire sale of tens of billions of dollars in stock
A more personal look at the man behind the margin call sell off on Wall Street.
See also Opinion Shadow Banking. 
Archegos avalanche shows cracks are hidden under the surface by Gillian Tett
There are worrying pockets of bizarre price behaviour in the shadow banking world.
She concludes 'But the key point is this: the Archegos rubble shows that years of excessively loose monetary policy have not just left asset prices elevated but created half-concealed pockets of leverage, too. When the two collide, disaster can erupt. And the big headache today is that while price froth is visible, it is frustratingly hard to tell where the pockets of excessive leverage lie, or how exposures are interconnected, since the shadow banking sector is so untransparent. It is thus a tragedy that the Trump administration so badly undermined the Office for Financial Research, the body created after the 2008 crisis to monitor interconnected risks. Doubly so, since if the Federal Reserve (and other central banks) keeps negative interest rates in place, this financial froth could soon outstrip anything seen in 2000 or 2007. As with snow, a sparkling market surface can conceal hidden, and widening, cracks.’
As I wrote earlier this week; when the administration tightens up on how the banks make money in one area they will look for new areas. Their desire and the incentive of money drives them to find new ways to generate profit. That is usually greater than the regulator’s desire or ability to keep the system safe.

S&P 500 closes above 4,000 for first time
Tech stocks lead US market higher as pandemic trade returnsLooks at Thursday’s trading in the US. Initial Claims improved but missed forecasts, Treasury yields eased. Employment many believe now is the key measure for the Fed and especially wage inflation. Payrolls data due out later today.

Greensill Capital’s administrator unable to verify Gupta invoices
Exclusive: Grant Thornton has received denials from companies listed as debtors to steel groupAnother spin in the on-going scandal; some companies are denying invoices that were used to claim payments.

Snap looked at ways of circumventing Apple’s new privacy rules
Owner of Snapchat has explored how to track users with data from third party companies.
A number of Chinese companies have already developed ways to circumvent Apple’s new rules but Snap would be the first US one to admit having done so. 'After being contacted by the FT about its plans, Snap acknowledged it had run a probabilistic matching programme for several months to test the impact of Apple’s new policies, but said it had always intended to discontinue the program after Apple introduces its changes, as such a system would not be compliant.'
On Thursday, Apple started warning developers against probabilistic matching, and sending letters saying they should remove any code “that support this functionality.”
As an apple user I must say its heavy methods of policing its systems can be annoying. It says that this move is to protect users. It has certainly highlighted the issue but one cannot help but think ultimately this is about Apple’s best interests not mine.

Russia strides into diplomatic void after Myanmar coup
Moscow sees opportunity to expand influence as others send mixed messages on junta

ASIA related
Western brands caught between US and China over human rights
Companies in invidious position as both sides ratchet up pressure over Xinjiang
Principles or profits; as the a number of western countries increase the pressure on China about what is happening in Xinjiang and to the Uyghurs. Initially in the firing line was H&M and Nike but others are being drawn in too; like VF Corp (North Face), PVH (Calvin Klein). Some are trying to remain quiet on the matter but it looks like between the activists and Chinese there will be no hiding. The ultimate key decider will be the paying public.
Additional what has started over cotton could move wider; mentions how Xinjiang is also important for the production of polysilicon used in solar panels.
Says that Sophie Richardson, China director at Human Rights Watch, who is receiving a deluge of calls from various companies (banks, manufacturers, investment managers, etc) as pressure mounts.
It is also escalating as US Senator Marco Rubio is pushing a bill to ban imports unless companies can certified they are not using forced labour. It notes he 'called on Ed Bastian, chief executive of Delta Air Lines, to speak out about “genocide” in Xinjiang after the airline commented on voting rights in the US. “Far too many multinational corporations are too eager to make their voices heard on the work issues of the day in the US, but remain stunningly silent, or in Delta’s case, complicit, in real, ongoing atrocities in countries like China,” Rubio wrote in a letter to Delta. “One can only conclude that you believe standing up to the Chinese Communist party would be bad for Delta’s business in China.”
That is the key for most companies; the cost of not doing business in China. Made more difficult because of the number of supply chains that run through China.
Trump issued ' “withhold release orders” that require US Customs and Border Protection to block imports of cotton and tomato that use forced labour from Xinjiang. But companies have raised concerns because they are not clear about how to comply with the requirements.
It sounds like there is going to be a whole new business line checking of supply chains; similar to the requirements placed on Hong Kong companies a few years ago to check the work hours and practices of their mainland operations.
One of the historic problems with cotton is that so much of it is blended, just to make it more interesting and although modern tech can be used to trace origin it all comes at a cost. It it also worth remembering that most of the worlds cotton is grown in the US, followed by Uzbekistan, China and India. Other big producers are Brazil, Pakistan and Turkey.
Another complication is that China recently introduced a law that lets Chinese companies sue foreign companies that operate in China that comply with US sanctions

Hong Kong court convicts veteran activists over 2019 protests
Media mogul Jimmy Lai and ‘father of democracy’ Martin Lee among group of seven found guilty. Martin Lee helped write the handover agreement. All had pleaded not guilty. A sentence hearing will take place on April 16.
Ironic that the announcement was made on April 1, All fools day.
It mentions a separate case concerning 'Andy Li, an activist who was part of a group captured by China’s coast guard last August while attempting to escape the city by speed boat, has raised questions about the integrity of Hong Kong’s respected legal system. The group of 12 was intercepted while trying to flee to Taiwan and detained in Shenzhen, the Chinese city across the border from Hong Kong. Police have returned 10 of them to the territory, but Li’s family has been unable to ascertain his whereabouts. The family said a lawyer who represented Li at a hearing was not appointed by them, in a highly unusual legal procedure.’
The legal system that has been the main tenant behind Hong Kong’s success is at risk of being trashed by the recent moves by Beijing. More than anything else that could undermine Hong Kong’s status as an international finance centre. If, as seems to be happening, the legal system ameliorates into the Chinese one then one of the main reasons for Hong Kong is gone. Many will look to relocate to Singapore or put more business through the city state because of its legal system and its more balanced but not as free as Hong Kong’s was atituded to free speech. Already Singapore is making gains in the centre for arbitration an area that Hong Kong has held prominence.

China chemical merger to create group with $152bn sales
Sinochem shares rise by maximum 10% after regulator approves tie-up with ChemChina
The deal had been discussed for years and now has approval and will create another state backed champion to challenge international brands. The aim being to try and protect China’s domestic market from foreign competition as it opens up its boarders to foreign companies; 'a level playing field with Chinese characteristics’.

China manoeuvres near Taiwan fuel concerns of potential attack
Beijing has stepped up military posturing in recent days, raising worries it could invade
Looks at the increased activity in the past week with both Taiwan and Japan reporting an increased number of incursions on the same day.
I still think we are entering a period of increased risk with the approach of the Communist Party’s anniversary and President Xi facing deteriorating international relations he needs something to please the domestic audience and the military. Worth noting that there will be no military parade on the party’s 100 th birthday, a break with the tradition of having one every 10 years. Maybe because this year they are focused on Taiwan?

Taiwan train derailment kills at least 36 and injures scores more
Accident at start of holiday weekend could be worst rail disaster in decadesSeems to have been caused by a construction vehicle crashing off the notoriously dangerous Qingshui coast road.

‘Where the magic happens’ — inside BioNTech’s innovative vaccine plant
Marburg facility in Germany is first to make approved coronavirus vaccine using mRNA technologyAn insight into the changes in vaccine production.

Covid has been a catastrophe. Can it also be an opportunity?  By Tim Harford
‘Without diminishing its terrible health and economic costs, there are also reasons to be cheerful’
Starts with ' “What does not kill me makes me stronger.” Philosopher Friedrich Nietzsche’s aphorism is inspiring — although as anyone suffering from long Covid can tell you, it is not always true. Sometimes what does not kill you just makes you weaker.’
Looks at the downside to start with before going onto look at the positives and uses the example of Keith Jarrett’s 1975 improvised solo piano performance in Cologne as an example to demonstrate that 'when our old solutions are closed off, we find new ones. Sometimes the new ones would have been better all along.’ He also notes that algorithms without randomness get stuck and so do we.
Notes for example how the internet has replaced traveling to work, lowering our impact on the planet. He also cites the fact that ‘Applications to set up a business in the US, steady at around 300,000 a month (seasonally adjusted) before the pandemic, briefly dipped before leaping to more than 550,000 in July and remaining well above pre-pandemic levels ever since.’
Which he qualifies by saying 'Some of these applications are no doubt born of necessity and come from people who have lost jobs and are looking for a new way to make a living. But many also seem to be genuine signs that new business ideas are flourishing: the pattern for “high propensity” businesses, those likely to employ staff, shows the same dip and then surge.’
So there is hope but hope can be squandered, let's hope we don’t.

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