July 27 FT Covid new cases HK & China, Chinese US listings, HSBC denies entrapment
JAPAN re-opened at its lows and as worked better through the session. Currently -0.3%
S KOREA Market opened higher and rallied for most of the session, he Kosdaq currently +1.1% and the Kospi which is starting to trend lower +1%.
TAIWAN Market opened higher and has traded sideways/slightly lower, currently +2.5%
CHINA Market opened higher but trended lower in very choppy trading. Morning low was just above Friday’s closing level. I would expect more downside in the PM Closed for lunch at +0.3%
HONG KONG Opened higher but sold down to below Friday’s closing level in the first hour. Bounced but again trended lower to a new day low before lunch. Close for lunch at -0.1%
EUROPE I would expect Europe to open flat with investors watching US/China tensions, new Covid cases and earnings.
US Futures opened -60pts but have worked higher since then and are currently +140pts with S&P and NDX also indicating higher. Gold continues to move higher as US/China tensions rise. Investors will be watching new covid cases and earnings with McDonald’s, Pfizer, Alphabet, Apple and AMD amounts others due to report this week. Traders are watching for new of news stimulus as Mnuchin says Republicans had finalized a bill for about $1 trillion in coronavirus relief funds, which he hopes will find bipartisan support. But many doubt that as a wide gap exists between the GOP and Democrats, especially on unemployment benefits and state and local gov’t aid.
FT On line
Coronavirus latest: China and Hong Kong report hundreds of new cases
Hong Kong recorded 261 covid-19 cases over the weekend with clusters around an abattoir, a police station and a university hall of residence amongst others. The government announced new rules which mean ships crews will now have to stay abroad their vessels, If crews are being changed then they can only leave the ship when direct transport to the airport has been arranged.
China reported 57 new covid-19 cases in Xinjiang and Liaoning. It still seems strange to me that Hong Kong should see such a surge in new cases and yet China seems to be unaffected. I was wondering if the surge in new cases was as a result those allowed to travel across the border for business? Many of the new cases are not imported but must be coming from somewhere suddenly. China’s numbers remain low. Underlying how little we know about how this virus really spreads.
Chinese listings surge on Wall Street despite tensions. IPOs more than double this year even as Beijing’s relations with Washington plummet. The rush to list in American seems at odds with the current threat that some Chinese firms will be forced to delist due to auditing standards. To my mind it highlights how China knows it needs the US capital fro its companies to grow and that the way currently relations are that source of funds is under threat of being cut off. The US is th biggest source of liquidity and they want to tap it while they can. For investors I think they should be seeking a higher risk premium to reflect the political risk that should be added to the mix. Trump has ‘advised’ government funds not to invest in Chinese companies; ‘advising’ private money to do the same is only a small step further down that line and can be done without time consuming legislation, under the banner of saving US jobs.
HSBC denies Huawei entrapment claim Allegations in Chinese media rejected as bank is dragged into Sino-US fight. At the weekend HSBC posted a message on WeChat saying that it was not involved in th decision to investigate Huawei or arrest Ms Meng. This was in response to claims in the State controlled Global Times that is was involved. The share price dropped 2.2% in trading this morning, reflecting investor concerns that the bank is falling out of favour with Beijing. It is currently trading at a 5 year low.
Rapid fund churn fuels equity rally in China. Notes that Chinese funds that were launched in Q1 have seen massive outflows in Q2. The ease with which investors can enter and exit funds is undermining them. It mentions E Fund Management, China Universal and GF Fund Management as examples. It notes that the relationship managers who advise clients can earn lucrative commissions by getting clients to buy into new launches and get fees from their clients selling out too. In only one quarter it is hard to believe that investors had time to see any sort of performance; good or bad, that might drive them to exit a product so quickly.