Aug 3 FT HSBC earnings miss, Trump Tik Tok, China Corn Prices and more

05 Aug

Aug 3 FT HSBC earnings miss,  Trump Tik Tok, China Corn Prices and more

MARKETs as at 12:30pm HK time 
JAPAN opened higher, pre market GDP was in line and there was initial bargain hunting after Fridays sell off. Market worked high for most of the morning and eased slightly into lunch. PM has seen the market ease back a little  Currently +1.9% off the highs.
S KOREA  Kospi opened higher but initially sold down to test the lows in the first hour then rebound back into the green but eased back into the red and now trading sideways; currently -0.1%
Kosdaq opened higher tested Friday’s closed and then worked higher currently +1%.
TAIWAN opened lower, rallied to test Friday’s close but unable to break above and then trended lower for the rest of the day, currently -1.1%
CHINA opened higher Caixin PMI data was stronger than F/cast. CSI300 traded sideways in choppy trading then rallied from10:30am to the day high 4,764 around 11:15am before selling down into lunch. Currently +1%
HONG KONG Opened -29pts @ 24,567 vs -155pts ADR’s @ 24,440 Initial tick up to 24,650 level but unable to hold and sold down into the red.  Tried to regain Friday’s closing level a couple of time without success and then sold down to 24,250 level before  bouncing back to 24,465 level.  But then eased lower into lunch. Currently -0.9%Sentiment cautious ahead of HSBC earnings out at lunchtime,  slightly worse than expected with 1H profit Before Tax -65% to US$4.318b. (most were expecting -60%) -VE
EUROPE Expect markets to open lower FTSE will be under pressure after HSBC 1H earnings miss.
US Futures opened +30pts but then reversed to -53pts before easing back to flat.  I would expect a slightly lower open with covid and earnings in focus.

Earnings today include AIG, Clorox, Cirrus Logic, KLA, Rambus, Virgin Galactica, Take-Two Interactive, Mosaic, Vornado, Eastman Chemical, Leggett and Platt, Hyatt Hotels, McKesson, Tyson Foods, Tenet Healthcare, Ingersoll-Rand, Marathon Petroleum,

FT Print
Trump threatens broad attack on China groups despite TikTok plea.
No ban yet on Tik Tok despite Trump’s threats on Friday but ByteDance in in talks with Microsoft with a deal expected. But it seems now that Trump has broadened his action to take in other Chinese apps on the basis of national security.

Melbourne and Okinawa impose tough virus curbs. New measure to try and contain the latest outbreaks. Okinawa introduced it’s own state of emergency requiring residents to stay at home for two weeks. Many of the cases in Okinawa have been traced back to the US marine base there, with Japanese officials complaining about the US not taking preventative measures.

China’s rising corn prices prove fertile ground for speculators. Corn futures in Dalian have risen 20% since February whereas they have fallen 12% in the US. It’s putting pressure on food inflation and Beijing has limited options apart from buying more abroad as it is run down its government stockpiles in recent year to try and reduce the state’s influence on the crop prices. To quote FT 'The Ministry of Agriculture and Rural Affairs said this month that it was “not appropriate” for traders to hoard the commodity. State media has also urged authorities to crack down “severely” on speculation.’
But some question the rally saying that demand for pig feed in which corn plays a large part is weak as Chinese pig herds struggle to recover from last years African Swire Flu. But other sectors that use corn products are also struggling.
It would seem it is just speculators managing to hoard stocks as one of them says the key is ‘when to exit’.

Lex. {Face masks: trash talking}. Looks at the amount of rubbish that is produced from face masks; most of which are made from polypropylene and cannot be conventionally recycled. A worrying read.

Schroders chief blasts companies using pandemic as an excuse to cut dividends. Notes that whilst some companies have little choice others are using covid as an excuse. Whilst the complaints may be valid it will be interesting to see whether the mutual funds vote with their feet and sell those companies they believe are cutting the dividend because they can rather than need too.

For Interest
ECONOMICS The anatomy of a very brief bear market. 
Economists are trying to work out what happened; has the sell off and rebound been rational in terms of growth expectations.
It works from the premise that the stock market’s total value represents the present value of the future benefits (earnings and dividends) and that value is determined by the equity discount rate. Which it defines as the ‘return on safe assets like Treasuries plus what investors expect to be paid for the extra risks — losses, bankruptcy — of owning shares.’
It sets out that the changes in growth expectations don’t explain stock market moves. IT suggests that part of the reason was the structure of the financial system, the cut in risk capital to the bond market which undermined confidence. Hence the Fed’s emergency easing in March addressed some key problems and eased volatility. Its commitment to take further action should ensure that future volatility is eased too.
It’s a very technical look at the market. As a trader I think it had less to do with valuations of future income streams and much more to do with liquidity and knee jerk decisions. Still an interesting read.

US regulators wrong to dismiss ESG investing for pensions by Cyrus Taraporevala of State Street. In their view 'In an uncertain world in which ESG matters more, not less, to strong corporate resilience and sustainable performance, promoting material ESG considerations in investment decision-making is good for the long-term retirement security of millions of American savers.’

Vanguard veteran blazes global trail Norris targets China, Australia and Europe in push for new clients. Worth a read as the company recently tied up with Ant Group.
Regarding China he sees it as driven by trading and similar to the US in the 1970’s
‘...dominated by retail investors buying and selling and losing money to professionals.
That was the high point for active management and it is now [harder] to deliver alpha [market beating returns] because the US market is so much more professional. But it will not take 50 years of evolution for the Chinese market to move to where the US is today,” he says.’
I think he is right on that point China’s markets are changing but it will take a while for real change to take place.

Hope will not save US commercial properties. Looks at the outlook for commercial mortgage-backed securities which is not good and restructuring is not going to be easy.

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