Nov 6 FT Thoughts Ant, Nintendo, Techlash, Reflation, Gold and Lunch updates


11 Nov

Nov  6 FT Thoughts Ant, Nintendo, Techlash, Reflation, Gold and Lunch updates

MARKETs @ 1:15pm HK time
ASIA was expected to open higher but Trump giving an impromptu address from the White House alleging the vote counting was not being carried out fairly triggered caution.
JAPAN opened lower despite the futures being +120pts and pre market data +VE But market worked better to a day high at lunchtime (24,376). Opening lower in the PM but working higher Currently +1% @ 24,356
S KOREA Markets opened higher initially spiked but then sold down into the red to a low around 10am before bouncing back
Kospi bounced back to flat and traded sideways; currently +0.1% @ 2,415.
Kosdaq bounced back to failed to regain the green and eased back to trade sideways around 840 level currently -0.7% @ 839
TAIWAN opened higher and worked higher to test 13,00 but failed to break out and retrenched to 12,930 level before working higher again currently +0.2% @ 12,937
CHINA opened higher but sold down initially to 4,870 level before bouncing back into the green but it was short lived and sold down to trade sideway 4,880/870 for most of the rest of the morning before selling down into lunch Currently +0.8% @ 4,849
Expect caution in the PM ahead of data out Saturday: Balance of Trade, Exports, Imports, Foreign Exchange Reserves
HONG KONG Opened @ 25,750 +54pts vs +238pts ADRs @ 25,933 with weakness in Alibaba. Market initially sold down to 25,650 before bouncing back to the day high 25,800 only then to sell down to the day low 25,605. Then traded sideways 25,700/625 into lunch. With At Alibaba and E-commerce names weak along with Autos as CAAM said Oct sale -0.8% MoM.
Sportwear makers +VE along with China Tower (on CKH Eurpoean deal) and Zijin Mining as gold in focus.
EUROPE I would expect markets to open lower on the prospect that the US results are going to take longer as Trump reverts to legal action. Covid and earnings in focus as UK endures its second day of lockdown.
Data Due
GERMANY Industrial Production
FRANCE Balance of Trade, Current Account, Private Non Farm Payrolls
UK Halifax House Price Index,
US Futures opened -50pts and have eased to -115pts with the S&P and NDX lower too. Trumps impromptu address from the White House raising the prospect that he will not be leaving easily. There is also a slim chance the Democrats win the Senate still.
Data due Non Farm Payrolls, Unemployment Rate, Ave Weekly Hours, Participation Rate, Wholesale Inventories, Baker Hughes Total Oil Rig Count
Earnings Allianz, Virtu Financial, Zimmer Biomet, Honda


Still major coverage of the US election where the final results are still being awaited. Trump spoke from the White House this morning basically making allegations that the whole process was set out to cheat him. I think it is a shame that he should cast aspersions on those hard workers that are counting the votes and trying to ensure that all Americans who chose to vote should have their vote counted.

Ant faces slashed valuation and long delay for listing to meet Beijing rules. More on the fall out from the listing being pulled. The bottom line is that Ant will continue to build its business, it will be subject to new regulations and requirements and time will tell whether it gets another opportunity to list. Read also Lex Ant Group/Alibaba: inspect an insect. Key being 'The more Ant resembles a bank, the lower its return on capital and the more its rating will shrink. Beijing’s scrutiny means potential investors will read risk warnings in future prospectuses a lot more carefully.'

Super sized Nintendo profit targets up 50% as games prove a popular diversion in lockdown. Bearing in mind that this comes from a usually conservative company when it comes to forecasts this is either a radical change or could mean that the profits could be even better. That said analysts forecasts were still above the company’s guidance.

Techlash appears to have eased but sector threats remain. Looks at the recent rally in Big Tech and the five major’s. Notes that there are some good fundamental reasons for the bounce although the valuations may look stretched. Key being that without the ‘blue wave’ regulatory reform may have less of an impact than before. That is not to say it is not coming but that for the moment the horizon looks better than it did before and it could be a couple of years before the administration has to decided about possible sanctions and it is impossible to prejudge that.

US election results suck the air out of reflation trade. Prospect of a divided Congress and modest stimulus package sees rapid shift in investor bets. An interesting look at the whether the reflation is dead or just on pause as the expected 'Blue Wave’ failed to materialise. Good points on both sides; I still think that inflation pressures are building but with Senate expected to be controlled by the Republican’s fiscal stimulus is likely to be kept in check. UBS’s Seth Carpenter says the reflationary trade is dead. Other hold different views like Sonal Desai of Franklin Templeton who views it as delayed. Nice quote from Michael de Pass, global head of Treasury trading at Citadel Securities, said: “The reflation trade was a popular trade, and what happens to popular trades during periods of uncertainty? They get challenged. That is exactly what is happening here.”

Barrick forecasts fresh peaks for gold as buyers seek refuge from virus turmoil. Good results from the group and a positive outlook for gold prices. On the graph gold looks to have broken out from its recent downward track and so has the potential to retest the recent highs. Also worth noting that Bitcoin saw a significant uptick over night and is now trading above US$15,000 up from $14,000 at the beginning of November.

AstraZeneca on track for Covid vaccine trial results this year. At the results announced it expects results from trials of the coronavirus vaccine it is developing with Oxford university by the end of the year. It still faces issues over then producing and distributing the doses but remain confident it can delivery. Whilst yesterdays results showed the impact of covid on its normal business it remained confident about its full year guidance.

SocGen back in black as equity trading revives. Good Q3 numbers as equity derivatives business bounced back by simplifying its structured products. It also reported a sharp rebound in equity trading with revenues +5.1% YoY. Fixed income and FX was +9% YoY which was another improvement. Key going forward will be for the bank to continue to improve its products and trading.

BlackRock outpaces peers in time of upheaval. Biggest fund manager continually adds sources of growth, most recently from technology services to investors. An interesting red on how the company continues to re-invent itself. Seldom defensive the article looks at the possible areas of future acquisition and growth. Key amongst them is China and its growing operations there. Worth a read


For Interest
New narrative emerges of investors bullish over divided US government. 
Looks at how bad the opinion polls on the US election were and whether investors were sucked into trades because to them. It largely thinks that many investors just sat it out on the sidelines. But a nice quote from Paul Donovan chief economist at UBS regarding the potential for Trump leaving the White House and his ability to trip up the markets in his final weeks “Trade policy falls under commander-in-chief powers and is an obvious focus,” A good warning

Opinion Divided States How America can move forward from a nail-biter result. Sets out a Republican and Democrat view of the post election landscape.

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