Jan 8 FT: Trump & riots, concedes defeat. Beijing media line on BABA, Lex HSBC +VE, HK Crushing opp

08 Jan

MARKETs at 2:30pm HK time 
Asian markets mainly higher as Biden confirmed and Democrats win control of both houses, raising expectations of more stimulus in the US; seen as positive for the global recovery.  HK rallied strongly despite continued concerns on political arrests and worries about whether Trump will sanction more Chinese companies in his final days.
Nikkei 225 opened higher following the US rally and on good pre market data and worked gradually higher through the morning session. PM opened slightly higher from the morning close and quickly tested 28,000 but then sold down to 27,900 before working higher and breaking above 28,000 and trading sideways to close +649pts (+2.4%) @ 28,139
Topix traded in a similar pattern and closed +29pts (+1.6%) @ 1,855
Data Pre market
Household Spending Nov +1.1% YoY vs +1.9% Oct (F/cast was -1.2%)
Household Spending Nov -1.8% MoM vs +2.1% Oct (F/cast was -1%)
Foreign Exchange Reserves Dec $1394.7b vs 1384.6b Nov
During market hours
Coincident Index Prelim Nov 89.1 vs 89.4 Oct (F/cast was 92.5)
Leading Economic Index Prelim Nov 96.6 vs 94.3 Oct (F/cast was 93.2)
Hyundai +22% reported to be in talks with Apple over electric car tie up.
Kospi opened higher and rolled strongly in the first 25 minutes to 3,090 it then eased slightly before working better through he rest of the day with an acceleration around 3pm. Currently +117pts (+3.9%) @ 3,148
Kosdaq opened higher and tested 995 but then sold down to 978 before working back flat at around 1pm but unable to break above and eased back; currently -2pts (-0.2%) @ 987
Data pre market
Current Account Nov $8.97b vs 11.66b Oct (F/cast was 9.5b)
Opened higher and traded sideways for more to the day but rallied around 1pm. Currently +250pts (+1.6%) @ 15,464
Data due after market
Balance of Trade, Exports and Imports
CSI 300 opened slightly higher but sold down through the morning to 5,460. PM session opened lower but working higher Currently -23pts (-0.4%) @ 5,490
Pre market opened @ 27,630 +82pts vs -207pts ADR’s. Market trended higher through the morning to test 27,900 before lunch. PM saw the market rested 27,900 but failed to break above and consolidated to 27,750 before working higher again.
ECommerce names rebounding, Autos +VE Geely +17% on broker upgrades. HSBC seeing interest +VE LEX comment. But Telcos still weak with MSCI to remove them from index.
A favourite of mine Techtronics +6% hitting a new high.
Expect markets to open higher following the US and Asia. Concerns over covid remain but sentiment improving.
Data due
EUROZONE Unemployment Rate
GERMANY Balance of Trade, Exports, Imports, Current Account Industrial Production,
FRANCE Industrial Production, Balance of Trade, Current Account, Household Consumption.
UK Halifax Price Index.
US Futures 
Opened flat but worked higher in Asian time currently Dow +165pts S&P and NDX both higher. Trump admitting defeat in the election a positive but concerns remain. Payrolls data today and investors will increasingly be watching earnings to asses the impact of the covid pandemic.
Data due
Non Farm Payrolls, Unemployment Rate, Average Weekly Hours, Average Hourly Earnings, Participation Rate, Wholesale Inventories, Baker Hughes Total Rig Count, Consumer Credit Change.

Front Page
Trump condemned after Capitol riot.   Senior aides abandon president • Democrats call for impeachment • Facebook follows Twitter in blocking accounts.The incitement by Trump has been widely condemned and I think reflects the desperation of Trump.  Probably because he is worried about what life after the White House will mean for him and his businesses without the protection of the Presidential office.  This morning Trump finally admitted defeat in the election. There are a number of other articles in the paper on the incident Moderates and hardline conspiracists take blame Merging of different groups makes it hard to spot one organising influence.  Storming of Capitol marks dangerous new low for norm-busting president Scenes of Washington mob mayhem are unprecedented in country’s modern history. Politicians and mayor critical of security ‘failure’ at complex.  Also Assault on Congress widens Republican split. Question of blaming Trump bedevils party that fears being outflanked on right.  Autocracies gloat at Washington’s unease while dismayed allies hope US will re-engage. Another one Facebook blocks Trump account until term ends Zuckerberg says president is using platform ‘to incite violent insurrection’. Opinion The nightmarish end to Trump’s term. Also Tech platforms are not entirely to blame for the unrest and Republican party must break president’s stranglehold.  LEX Wall Street/Trump: the quieter riot

Beijing orders media to take party line over Alibaba probe as Ma still missingHaving cracked down on Mr Ma’s business empire it is now clamping down on the reporting of it too.  Key elements are to “strictly invoke” the official line on the investigation into Alibaba and to “not make changes or engage in extended analysis without permission”.
“If any company announcements oppose the official stance, do not publish, do not repost, do not quote foreign media,” the directive said, according to two people who read it.
The People's Daily has criticised the tech sector for “ever-higher market concentration”, saying that increasing market supervision is important for the healthy development of the economy.The crackdown would suggest that Beijing see’s a threat from Mr Ma and Alibaba.

Medics’ vaccine scepticism raises alarm. Staff in parts of Europe and US unwilling to have jab despite rise in cases.  Looks at how polls show that medical working are unwilling to be vaccinated.  The reasons cited being concerns over the new mRNA technology, used by the two EU-approved vaccines BioNTech/Pfizer and Moderna. Other reasons were concern over the long term side effects, many female nurses expressed concerns over ability to get pregnant.  It also notes that many had viewed anti-vaccination videos online.
For investors it is difficult to see whether this will have big impact on stock markets. I think a lot of people will sign up for the vaccines but there are always going to be some who are reluctant. The key is that effective vaccines are available. It is true that the long term effects of using them are unknown but for many at risk, especially the elderly they will take vaccine; at least going from the reaction of my own aunts and uncles; they are willing and keen to take the vaccine and get on with life. But as the article makes clear many looking at the statistics and deciding to take their chance.
On the positive side, whilst the long term effects are unknown it is worth remembering that we are likely to need annual boosters in a similar way to which flu jabs are administered each year. So over time expect more acceptance.
Read also Australia speeds up rollout to fight variants Key being that 'the government said yesterday it was not seeking emergency authorisation of vaccines or “cutting corners” in distribution, a strategy pursued by some countries facing a third wave of cases.’  Perception is key, the testing of the vaccines has shown that they are effective and that to date there have been few adverse side effects.  Long term effects will only be know with the benefit of time.

LEX HSBC/StanChart: democracy dividend. Looks at their recent rebound and the hope that the worse is past for them; especially as Beijing seems more focused on Alibaba and Ant which could benefit them. 'There are other reasons to stick to HSBC and StanChart. Trading volumes and fees from Asia have grown. China has recovered quickly from the pandemic fallout. A return of payouts is on the cards as regulators soften their stance. Both banks face hefty long-term challenges. Pressure on net interest income will persist and impairments will rise. But while the Chinese Communist party is cutting local tech giants down to size, foreign-based banks remain the safer bet.'

Japan announces ‘soft’ emergency in Tokyo. Rather than a nationwide state of emergency Japan has adopted a selective one; confined to Tokyo and Kanagawa, Saitama and Chiba; valid until Feb 7.  It reflects the Governments desire to see as much of Japan remain open as possible in order that businesses can try and keep going. The government is also relying on wider public co-operation to try and control the spread of the virus. It is targeting restaurants noting that most untraced infections were linked with dining out.  
PM Suga also insisted that the Olympics would go ahead although that still remains in doubt.It is estimated that the economic impact from the state of emergency will be much less than that seen last year, especially with the expectation that vaccinations will begin after Q1.

Trump’s latest call for China blacklist weighs on Alibaba and Tencent stock Share were sold down yesterday on the news and also it raises concerns that Trump could add more Chinese companies to the list during his final days in power.

Editorial The gradual crushing of Hong Kong’s opposition. US and EU need joint strategy on China and to avoid double standards. Notes how China leapt on the opportunity to compare the storming of the US capitol with the occupation of Hong Kong’s legco building. But the editorial makes the point that apart from visual similarities the incidents were very different.  In Hong Kong the move was about defending democracy, that was and is being snuffed out on Beijing’s orders. Further more the arrest of 53 pro-democracy politicians came before the events happen in Washington.
Whilst not surprising it notes that the arrests are shocking; because those arrested are moderates. Their detention relates to ‘involvement in a primary run-off last year to determine which opposition figures would run in Legco elections that were later postponed due to Covid-19. That this is now said to constitute “subversion” highlights the draconian nature of the national security law China imposed last year.’
It puts forward that the actions show how worried Beijing is; that despite the Hong Kong voting system being skewed in favour of pro-Beijing candidates that there the likelihood that they would lose in an election which could have resulted in Carrie Lam being forced to step down and placed Beijing in a very awkward position.The recent actions by Beijing it sets out, undermine the Basic Law. It furthers that the clampdown is proof that there is a confrontation between Beijing and the West over values. 'Xi Jinping’s China sees itself as engaged in an ideological struggle with what the president has called the “extremely malicious” ideas of liberalism and democracy. While Beijing no longer talks of exporting revolution as in the Mao era, it presents its own one-party system as a superior model.
’That it says poses a dilemma for the West; they rely on China as a source of growth for their companies; in a way that was never the case with soviet Russia. That limits the west’s power of influence. That it says is why it is important that the US and Europe have joint approach to China. They should use that leverage carefully to avoid the appearance of hypocrisy or doubt standards. Which makes last week China/EU deal ill timed. 'The European Parliament, which must ratify the deal, cannot ignore China’s rights record.’
It concludes; 'The US and EU should also make use of their powers to impose “Magnitsky” sanctions on western-held assets and travel of senior Chinese and Hong Kong officials guilty of rights abuses. With thousands of offspring of China’s ruling class attending western universities, for example, that is one area where sanctions could have a real impact.’
It is interesting that whilst President Xi holds up the Chinese system as a superior model his own daughter attended a US university and from the last report I saw currently resident in the US. Having decided that she preferred life there. Whilst there are no doubt plenty of supporters Chinese system, without a free vote one will never know whether the majority actually support it.
Read also on-line edition Hong Kong police widen purge to eliminate pro-democracy camp. After detaining big-name activists, authorities hunt down those on periphery of protest movement.
Also Last orders for Hong Kong taken at Club 71. The demise of a famous watering hole symbolises Beijing’s crackdown on free speech in the territory

Trouble brewing Kirin under fire as probe into Myanmar unit fails to determine military ties. Having instructed Deloitte Tohmatsu Financial Advisory to conduct a strategic review of its business in the country last year; it now says that the results are inconclusive. Kirin is said to be reviewing its options but is likely to face increasing pressure from Human Rights groups. The investment in the two Myanmar Brewing companies accounted for less than 2% of Kirin’s revenue in the period Jan - Sept last year.

LafargeHolcim agrees $3.4bn Firestone Building Products deal  Key for LafargeHolcim is that the acquisition would allow the company to strengthen its position in the US market by breaking into the lucrative flat roof market.  Firestone specialises 'in roofs that can be equipped with solar panels, thicker insulation and greenery, would add a further $1.5bn in value, said chief executive Jan Jenisch.
“The future of the roof is flat, green and insulated,” he said.’Firestone already has a big presence in the US and LafargeHolcim hopes to make a push into Latam and Europe. Crucially the market is currently fragmented and it hopes to become the market leader. It mentions that the deal in a sign of confidence in the recovering construction sector, which is likely to be boosted by government stimulus programmes in many countries.
LafargeHolcim has reduced its debt levels since 2016 and had a relatively strong 2020.  Now the company sees itself in a good position to make further ‘bolt on’ acquisitions.  The stock rose 1% on the news.It illustrates how a number of companies are now looking for opportunities to grow their businesses now that the worst of the pandemic seems to be over as vaccinations get underway.  But as the article on vaccinations illustrates getting a large proportion of the people to get vaccinated will be key.  Also read LEX Cement/climate change: hard questions

LVMH picks new team to run Tiffany after takeover. Looks at the choice of the new leadership; which has plenty of experience and notes that they will be looking to take the brand more upmarket to secure better margins.  Key to its future will be the expansion in Asia.  It also mentions the success they had when they acquired Bulgari in 2011 and will no doubt seek to reproduce that success.
Underlining the importance of the wealth in Asia. For investors it is always worth remember the importance of Asia for high end luxury. The pandemic will have caused changes spending patterns, the reversal of the trend seen over recent years of preferring to buy luxury goods overseas and bring them back to Asia. That was already starting, especially in China after the government cracked down to ensure individuals were paying tax on luxury good bought whilst on holiday. But for luxury retail they are further exploring the internet market of their products having previously shunned it.

Blue sweep of Congress adds to dollar gloom Losing streak set to continue given outlook for inflation and ultra-loose monetary policy.  With Democrats now in charge of both houses analysts are wondering if their previously poor expectations should revised still further down.  Key being that Biden’s pledge to expand the Stimulus programme are likely now to get put into action and so raise expectations that the government spending will lead to rising inflation. That could erode the value of USD assets. That coupled with the Fed’s commitment to allow the economy to 'run hot’ and exceed to 2% inflation target is a cause for concern.
Another example of how united consensus is over the outlook. But some are noting that the markets may be under estimating the potential for more risks associated with the virus. For the moment though the view is that the USD continues to weaken.

For interest Tech bubbles in a time of pandemic have echoes of the dotcom era. Looks at how there is a lot of money looking for investment opportunities and the potential is that a lot of money could be lost.  In the case of Spacs; it notes 'If the deals are not all crammed into the next two years, then that money has to be handed back to investors, creating classic incentives for a bubble.’  An interesting read, which highlights the need for investors to be vigilant in examining the proposals and business plans of companies that they are thinking of investing in. It concludes b saying 'Tesla may one day dominate a global electric-car market, and bitcoin may become a permanent fixture in the world of digital money. But as each soars towards $1tn, they look like the clearest examples of the pandemic era’s spreading financial bubbles.’
Also read Snowflake backers set for ‘spectacular’ returns. Easing of trading curbs allows early investors in US software group to tap exceptional gains.  Which looks what haas become a very successful company and the means to allow some investors to begin realising some of their gains.

Miners face mounting pressure to widen targets on climate change. Only Glencore and Vale have goals that include ‘Scope 3’ emissions generated by customers.   Looks at the issues facing miners and the fact that unless they come up with workable strategies they are likely to come under increasing pressure from investors.  Whilst it notes that many companies cannot get answers from their customers investors will expect them to be drawing up measures.  Quotes Adam Matthews, director of ethics and engagement at the Church of England Pensions Board and co-chair of the Transition Pathway Initiative.“We absolutely recognise that Scope 3 emissions are challenging and miners are not in control of their customers,” he said. “But they must still devise strategies to mitigate and reduce those emissions. I think companies that do that will carry the confidence of investors.”

Biden stimulus will not end the bond bull run. By Steven Major global head of fixed income research at HSBC.  Noted that 'Once again it appears that the market consensus is projecting bond yields will move still higher, ending the multi-decade bull run in bonds. By contrast, we believe 2021 will see a continuation of the lower-for-longer theme for rates.’  He sets out 5 points as to why.
He says 'To understand falling real rates we must not lose sight of the longer term secular backdrop. In addition to the overhang of debt weighing on future growth, there are a number of trends that will not suddenly disappear. For example, ageing populations require greater savings. This will push more money into bond markets, depressing yields. Greater savings also means less of a consumption boost for the economy. And technological change will continue to have a deflationary impact.Our lower-for-longer view will be wrong if the new US administration manages to deliver the right policy mix.’
I think the fact that the depressed bond yields could mean less money goes into bonds as funds and pensioners look for alternative means to fund their retirement. An interesting read

Norway’s investment chief eyes active approach. Nicolai Tangen, the former hedge fund manager now chief executive of Norway’s $1.3tn oil fund, has indicated he might take a more active approach to investing. But this risks greater political interference.

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