Sept 7 FT HK Protests, Softbank now -7.8%, Iran/China, India/China, US/China and more


09 Sep

Sept 7 FT HK Protests, Softbank now -7.8%, Iran/China, India/China, US/China and more

MARKETs as at 12:45pm HK time 
JAPAN opened lower but worked back to flat only to sell down into lunch as the China trade data came out.  PM re-opened a little higher but trending lower,
Nikkei Currently -0.3%
Softbank now -7.8%
S KOREA opened slightly higher as the Govt proposes another budget (worth Won 7tn) and covid cases ease.  Initially sold down to Fridays closing level but then worked higher  
Kosdaq currently +1.4% and the Kospi followed a similar pattern currently +0.6%.
TAIWAN opened higher and has traded in a tight range for most of the session 12,650 - 12,725 but dipped lower in the last hour; currently -0.2% CHINA CSI 300 opened lower, initially rallied into the green but then sold down ahead of  the Trade data and bounced on its release but failed to get back into the green. Currently -0.3% at lunch
HONG KONG Opened lower inline with the ADR’s and initially rallied but then sold back down to just below Friday’s closing level ahead of the China data and due to some margin call selling.  Small bounce after the China trade data but basically at lunchtime +0.1%.  
SMIC (981 HK) -19.8% on threat of possible US sanctions.
EUROPE I would expect the markets to open flat. Having sold down into the closed Friday and not having seen the US recover and with Asian markets slightly +VE
Data due German Industrial Production and UK Halifax House Price Index.
US Market Closed re-opens Tuesday

China Data
Balance of Trade Aug $58.93B vs $62.33b Jul (F/cast was for $47b)
Exports Aug +9.5% YoY vs +7.2% July (F/cast was +6.5%)
Imports Aug -2.1% YoY vs -1.4% July (F/cast was +0.1%)

HK protesters remain defiant. 289 people arrested the first major protest since the National Security Law came into effect. It was on the day that the local elections were due to have taken place. Most were arrested on the grounds of ‘illegal assembly’ but at least one for chanting 'pro Hong Kong independence' slogans .
Seems to show that many in Hong Kong are not happy with the how the administration has acted.

SoftBank up $4bn on founder’s aggressive US stock options bet. Seen as a high-risk strategy, with a heavy focus on tech companies. Market sell off last week threatens returns. Looks at the trading that was uncovered last week. The fact that the strategy has been publicised could further impact its success. But many will be wondering if this is going to be a core activity of the company. At this stage the FT article estimates it could be sitting on $4bn in gains having taken a notional exposure of $30bn in call options; some of which has been hedged.
It is evidently causing some division within Softbank but considering that Softbank hired a number of people from the Deutsche Bank derivative team it shouldn’t come as a complete surprise.
As expect the share this morning in Tokyo was trading lower by 7.8% at the time of writing

Iran looks to China as US sanctions bite. Beijing offers counterweight to European ties and stays out of Tehran’s domestic affairs. Looks at since the US abandoned the Nuclear deal in 2018 Tehran is looking for support and looking to China and Russia. Key is that China’s aid does not interfere in Iran’s politics. The FT article suggests that areas of potential co-operation include 'energy, petrochemicals, nuclear energy, technology and military sectors and maritime projects, to promote Iran’s role in China’s Belt and Road Initiative.’
It notes that China is already Iran’s biggest trading partner accounting for nearly 25% of Iran’s total trade. BUT it notes that whilst this is a business decision for China actual investment into Iran is still limited because Chinese institutions would still run the risk of US sanctions if they invest in Iran.
It also notes that much of the trade will be linked with oil exports to China.
But it is interesting that the article suggests that Iran is not entirely enamoured by China:
'Iran lacked trust in global powers, the person said, but saw the US as a “giant wolf” and China like “an army of ants”. “Both will empty our silos, but we are horrified when we look at that wolf but not too scared of those ants,” he added.’

Himalayan border tension is ‘accident waiting to happen’. Looks the recent escalation of tension along the India/China border. This time as India occupies some of the heights in the Chushul area to gain a strategic advantage. The Indian view seems to be that China is trying to ‘unilaterally decide where the line of actual control lies in Ladakh’ something that is not acceptable to India. It is a stance that China has increasingly adopted in the South China Sea and elsewhere. The fact that the issue has run on for so many years underlines the contention between the two sides of the area and the potential strategic advantages that are at stake. Which is no doubt why many think the potential for an accident is increasing. Hong Kong press reported a possible case of some Indian men being abducted in the disputed area but this hasn’t been confirmed. The fact that it has now also spilled over into commerce makes a swift resolution look very unlikely.
The fact that it hasn’t gone to international mediation is not mentioned but I would guess that China would be reluctant to go down that path as it would set a precedent for the settlement of other possible land/island disputes and China knows that a lot of its claims would not be endorsed.

Nissan delays production date of flagship vehicle in UK. It was due to start production in October but has now been delayed to mid 2021. It had been heralded as Nissen’s commitment to the UK post Brexit and the decision has been attributed to the covid situation. But it will give Nissan more time to assess the impact of trade tariffs. The plant is important to the UK government and to Nissan in terms of access to Europe, so progress will be watched carefully by a number of companies considering the stance of the UK post Brexit.

Opinion China wants to decouple from US tech, too. Notes that Beijing’s use of export controls shows that it is looking to decouple from the US. It says that emerging markets are already bigger markets for China than the US. The rise of the digital renminbi should help its growth in Africa and the Middle East too. It notes that by denying chips to Huawei that US has only sold up China’s efforts to develop its own chip industry. Actually this has been a priority for China for sometime but it is a very tough ambition because of the advances in the tech the dominance of US tech and the fact that the sector is constantly moving forward, not allowing new entrants the chance to catch up.
It notes that China has accessed some US know how and developed its own too and asks whether the US is still the cutting edge for innovation. I think that has always been questioned many great inventions originated outside the US but the US had the capital to develop and refine them. That to an extent is the real skill that the US has and it’s one reason that Chinese companies love listing there. Access to capital these days is as important as the idea.
The article notes that China may be better positioned to ramp up innovation using its exiting resources and 'slap its own consumer brands on products churned out by an already robust and largely self-sufficient manufacturing industry.’ It is likely to find that easier than for the US to rebuild supply chains; because it says the US abandoned a coherent national industrial policy in favour of free markets. Which usually work well but not in crisis it says. It makes the point that this is not just a Trump issue but has been a long term trend in the US. So in bad times it has retrenched but not re-skilled as others like Germany have done.
So it contends; the US, China and Germany are in a similar position to the one they were in back in 2008. Germany set to enjoy a V shaped recovery as furloughed workers benefit from new business as Asia and China recover. China’s exports increase as global demand returns. But the US will languish again in the jobless recovery.
It thinks the US is heading for recession and that is why China is looking to protect its tech and that China’s immediate future is looking better than that for the US.
I’m not sure I agree with that. The key to me is the access to capital and the US and the US dollar are key. That is Trump’s ultimate weapon. Equally there are signs that we could see twin track tech in many fields as China seeks to set ‘industry standards’ in 5G and AI but as Huawei has found it is not just the design of the chips but the ability to produce them too that is key.
Equally on the global recovery and Chinese exports this morning’s trade data would indicate that the recovery may not be happening as quickly as some would like. Exports were flattered by medical equipment and a continuing robust demand for electronics; rather than a broader general recovery.


For interest.
Opinion Abe’s successor must maintain a delicate balancing act. Looks at what PM Abe managed to achieve with his international diplomacy and how his successor will need to continue that leadership in order to maintain Japan’s standing both with the US as an independent ally and with resilience to China.
Three key points he makes
1. TPP PM Abe managed to salvage and develop this despite Trump’s withdrawal; showing what Japan could achieve and its standing amongst Asian nations.
2. Standing up to China on the basis of co-existance
3. Middle ground on domestic politics; reining in the nationalists, preventing division. Drawing a line under the past and trying to push Japan forward.
Worth a read

Etihad chief calls for health visa system. Looking for a standardisation to systems along the same lines that airports have adopted common security systems. It would make more sense than the so called ‘air corridors’ between countries. He did accept that business travel had been hurt by video conferencing but thought Etihad had opportunities because of the increased spacing; relative to others, between passengers.

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