July 12 FT Thoughts & Asia update. Softbank, Sony, Taiwan, China regulations and more

This and previous notes can be found at Substack ( Asian Market Sense )
Check out ERI-C.com  for your research needs

Asian markets at 11:30am. Markets opened strongly but order pads seem light. Initial bargain hunting evident but little activity from long only funds. I think caution ahead of US earnings, China’s GPD data and Powell’s testimony.

Market opened strongly at the day high (7,273) with strength in iron ore miners (helped by the Chinese RRR cut), banks and energy names.  It has drifted lower with news of more covid cases making it likely the current lock down will be extended.
Wesfarmers announced a $1.38 per share bid for Australian Pharmaceutical Industries, valuing the Priceline owner at about $687 million. Shares in API were 20% at the open
Building Permits May -7.1% vs -5.7% Apr (F/cast was -7.1%)
Markets opened strongly on good pre market data, saw increased initial volumes.
Nikkei opened 28,413 and worked higher through the morning session. +640pts  (+2.3%)  @ 28,581
Topix similar, opened at 1,943 worked higher but resistance at 1,955 and then worked sideways into lunch.
Machinery Orders May +7.8% MoM vs +0.6% Apr (F/cast was +2.3%)
Machinery Orders May +12.2 % YoY vs +6.5% Apr (F/cast was +6%)
PPI Jun +5% YoY vs +5.1% May revised (F/cast was +4.9%)
PPI Jun +0.6% MoM vs +0.8% May revised (F/cast was +0.5%)
Due later
Machine Tool Orders Jun (May was +140.7% and F/cast is +85%)
S Korea 
Opened strongly after good July 1-10 export/import data and news that Hynix was starting mass production of 1ANM DRAM using EUV. Signs of bargain hunting. New covid cases reported at 1,100 above 1,000 for a sixth day.
Kospi a strong open initially to 3,240 and then worked higher but seeing resistance as it approaches 3,250 but good support at 3,242
Kosdaq opened higher, initially to 1,034 but then rallied again to 1,037 around 9:40am before easing back to trade around 1,036 for around 40 minutes, it then eased again back to trade around the 1,035 level.
July 1-10
Daily Average Exports +21.1% YoY
Exports +14.1% YoY
Imports +33.3% YoY
Taiex opened higher at 17,843 and rallied to 17,948 in the first 15 minutes but then trended lower, as some profit taking appeared. Currently +111pts (+0.6%) @ 17,769
Buying focused on Large Cap Tech, Shipping and Steel
Hon Hai and TSMC to donate 10 million doses of COVID-19 vaccine to Taiwan +VE for sentiment.
CSI 300 opened higher but saw some initial selling to test Friday’s close. It then rallied to 5,154 over the next hour, with most of the buying taking place around 10am. It then traded sideways into lunch; +80pts (+1.6%) @ 5,149
Yunnan's National Health Commission reported, as of yesterday (11 July), 9 new covid cases along with 3 new imported confirmed cases.
Hong Kong 
Pre market opened 27,672 +328pts vs +280 pts ADR’s
It then trended lower for the first 30 minutes to 27,456 before a bounce but it was short lived and it dropped back to 27,470 level.
Initial interest in E-Commerce, financials, healthcare, consumer disretionary and property. Weakness in telco’s.
Europe markets likely to open higher following Asia no data due.
US Futures
Opened Dow +25pts S&P +0.1% and NDX +0.2% as US earnings season kicks off. Consumer Inflation Expectations due today.  Focus this week likely to be Powells testimony and PPI data

FT Front PageBranson scales new heights
Records his successful flight to suborbital space; grabbing bragging rights from Jeff Bezos.

Brussels targets aviation fuel tax in drive to cut carbon emissions
• EU-wide kerosene levy proposed • Exemptions for green fuel • Plan needs full bloc support
Welcomed by most nations but a worry for the airlines who are still struggling to come up with a viable and less polluting alternative.

SoftBank splashes out $13bn as new fund ramps up pace of investments
A dramtic increase in investments reportedly into more than 50 companies with many of the investments not yet announced. It notes that the moves come as a number of other funds have also been active in investing into startups. More interestingly it says the strategy of the second vision fund is more reserved than the first fund and has targetted healthcare and software vs urban mobility and heavy industry which has been the first funds focus.
Opinions remain mixed towards Softbank and it has struggled to raise new funds after disappointments and some poor investments although recent good listings have helped.
I would remain cautious as the overall investment strategy remains erratic.

Taiwan tempers welcome of Hong Kong exiles
Qualms about riling Beijing are added to fears mainland agents have penetrated movement.
Makes the point that there is a gap between the words and actions coming out of Taiwan as it tries to walk the fine line between supporting some of the Hong Kong protestors and annoying China.
It is also worried about ‘becoming an outpost for anti-Chinese-Communist-party activity just as the People’s Liberation Army steps up military posturing against the country.’ They are also concerned about being infiltrated by Chinese agents.
An interesting read about the difficulties faced by Taiwan that are unlikely to change until Taiwan is formally recognised by the UN and gets more direct international support. Even then it is likely to face pressure from China.

Xi and Rubio share common ground on Chinese listings in US
Looks at the change in stance from Beijing under the banner of national security. It may highlight the recognition of how much information can be gleamed from seeminly innocent data. It also raises the question of whether China needs foreign capital to fund its companies. To a degree Trump started the process which is now being played out. The implication for international investors could be more restrictions on investing in good Chinese companies.

Companies & Markets

China’s cyber regulator turns up heat over foreign listings
• Lengthy security review mandated
• Edict highlights CAC’s growing clout
Looks at the new procedures and the fact that it will make it more difficult for companies to raise money overseas. Time will tell if this results in a slow down in innovation in the Chinese tech sector or whether companies will be able to raise enough money locally. I think that may be problematic. China has tried to replicate the Nasdaq in China with the Chinext and the more recent Starboard but neither has yet met with significant success. It would seem that international investors are still happier investing the new tech firms than domestic chinese investors.
It could be a benefit to Hong Kong which is not considered an overseas market as the HK Exchange tries to position itself as a tech investment hub.
Banner quarter Wall Street looks forward to bumper earnings season for USA Inc
High expectations for Q2 earnings which means there is also scope for disappointment. It will also be interesting to see the guidance for the rest of the year; which I expect will indicate that growth is slowing and likely to return to more normal levels.
Investors are therefore likely to start reappraising their portfolios which could re-ignited the momentum vs growth debate.
Read also Lower credit losses set to flatter lenders’ results
Bank results likely to be flattered by smaller credit losses but the demand for loans also weak.  I will be interested to see whether they talk about the Property sector and mortgages as rules over evictions come to a close.

Sony steps up plant automation amid focus on online sales and data analysis
An interesting read about how the company hopes to develop its business. In addition to using robots in manufacturing it is expecting to see a further shift into online sales and data analysis to improve products.
It is looking to try an build a ecosystem to keep customers involved. Critics point out that its weakness in systems and digital platforms was part of the reason it lost out to Apple’s ipod and Amazon’s Kindle. Also it’s ‘hierarchical and siloed structure’.
Sony says that is changing ‘“By being together under a single entity and governance structure, we are now able to co-operate organically to create something new. That applies not only to making products but also to purchasing, manufacturing, product development and sales,” Kimio Maki, head of Sony’s electronics businesses, said ’
Time will tell but change in Japan does not seem to come easily. Sony’s share price has trending higher over the past year; so worth watching.

Equities are the only sensible foundation for private pensions By Martin Wolf
A good read about the ‘equity risk premium’.
‘So, equities may offer a free lunch. But you must be able to wait for the meal. This creates an opportunity and a danger. The opportunity is for an investor with a sufficiently long time horizon to make extraordinary returns. In a well-ordered world, multi-generation pension funds ought to be such investors.
The danger is that such funds (and still more so individuals investing on their own) will exhaust their room for manoeuvre before their investments pay off. Fears of a huge bear market, not unrealistic at current valuations, might force them into the bond or cash traps. How to handle these dilemmas will be the subject of my next piece on pensions.’