July 21FT & Asia mixed: Climate, Taliban, China spying and more

This and previous notes can be found at  Substack ( Asian Market Sense )
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Asian markets mixed; last day of trading this week for Japan.
Internet stocks in HK likely to be week on news they have been fined over Child pornography. Chinese developers seeing a bounce from yesterdays’s weakness.

Market opened higher with blue chips in demand but saw resistance around 7,350 and eased back to 7,319 as Retail Sales data missed.  Market bounced from that level and working better, currently  +82pts (+1.1%) @ 7,334.  Covid cases remain a concern with NSW reporting 110 new cases.  Autodesk dropped its bid for Altium
Leading Index Jun -0.07% MoM vs -0.06% May
Retail Sales Jun -1.8% MoM vs +0.4% May (F/cast was -0.6%)
Pre market Traded data was mixed.  After lunch Suzuki announced a joint briefing with Toyota at 3:30pm.  Markets will be closed  Thursday and Friday; re-open Monday
Nikkei opened higher  and traded sideways for the first two hours before selling down into lunch.  PM opened lower but trending higher.
Currently +175pts (+0.6%) @ 27,560
Similar pattern for the Topix currently +19pts (+1%) @ 1,908
Data Pre Market
Balance of Trade Jun ¥383.2b vs ¥-187.1B May (F/cast is ¥400B)
Export Jun +48.6% vs 49.6% May (Consensus was +46.2%)
Imports Jun +32.7% vs +27.9% May (Consensus was +29%)
BoJ minutes
S Korea
PPI pre market was stronger than expected and first 20 day Export/Import data was good. But new covid cases hit a new high @ 1,784  
Kospi opened higher but sold down through the morning to 3,216 and then traded sideways. Currently -10.5% (-0.4%) @ 3,220.
Kosdaq traded in a similar pattern currently flat @ 1,044
Data pre market
PPI Jun +0.4% MoM vs +0.5% May revised from+0.4% (F/cast was +0.1%)
PPI Jun +6.4% YoY vs +6.6% May revised from +6.4% (F/cast was +6.7%)
Taiex opened higher after good export data out after market Tuesday and the US rebound but has trended lower throughout the session. Currently -162pts (-1%) @ 17,367
Rains increasing and could see Typhoon warnings being raised.
CSI 300 opened higher despite concerns over covid surging, power shortages and international relations. Seems Team China active. Market rallied to 5,159 in the first 30 mins before easing back to 5,130 level and then worked higher into lunch +35pts (+0.7%) @ 5,144
Hong Kong 
Pre market opened @ 27,339 +80pts vs +79pts ADR’s but market trended lower until around 11am when the market bouncedback to 27,200 before easing into lunch. Healthcare and Telco’s weak.
Ecommerce/Internet names weak headlines about being fined for Child Pornography. Tech and Auto’s +VE Education in focus as China aims to make rearing children cheaper.
Earnings in focus and expect a slightly better open.
US Futures
Opened in Asian time Dow +40pts. S&P 500 +0.15% and Nasdaq + 0.1%, earnings remain in focus.
AHEAD MBA Mortgage Applications and 30yr Mortgage Rate, EIA Oil Report, 20yr Bond Auction

Front Page 
Giant step for Bezos’s vision
Records his 11 minute trip to space.

Kerry warns Beijing it must act fast to forestall climate ‘chaos’
• Biden envoy seeks carbon border tax talks • Issue threatens to spoil US-China accord.
Key being that China I think is living in hope that having made bold claims about emissions that technological advances will help achieve them. In the meantime their efforts are as the edges. They are still building coal fired power stations but saying that the new ones are cleaner than the old ones. Which is little comfort when you are trying to save world. Worth noting that Biden is ‘on board’ just trying to work out how to pay for it.

Olympics opening ceremony becomes ‘planning nightmare’ as composer quits
Composer Keigo Oyamada resigned following an uproar over past comments about bullying disabled classmates in his youth; just one more hiccup for the organisers.

Taliban rockets target presidential palace
Islamist insurgents hit border crossings first and are closing in on capital ahead of US exit.
No doubt a prelude of what is likely to become a bigger issue. At the moment it is the Taliban making waves, which could be seen as being good for China as they have held talks with the them and reached an understanding. But I worry that it will not be long before the other warlords start to make their presence felt too. So far the taliban have taken over key border posts thus depriving Kabul of income. It seem the Taliban have also abandoned talks; aiming instead to takeover the country. It will be interesting to see how it reacts with China when it is in control.

China hits back at US-led accusations over cyber attacks.
China seems to have been caught off guard by the co-ordinated and unified accusation. It claimed that the accusations were “groundless” and a “malicious smear” but when endorsed by so many countries the rebuke had less impact. It also claimed that it to was a victim; no doubt hoping that the domestic audience would be swayed.
The accusation was backed up with the issuing of arrest warrants for 4 Chinese nationals in connection with cyber security and Biden mentioned that the investigation was on-going. I think that until China knows the full extent of what it is accused of it will keep the rhetoric as general and vague as possible for fear of further embarassment later.

Distrust of junta spurs Myanmar virus surge
A worrying read, from doctors in hiding, clinic’s closed as staff are detained to equipment being confiscated. With pourous boarders it will be a thorn in the side of its neighbours.

Companies and Markets
Sales at two Evergrande projects suspended

Looks at the reasons behind the sell off in Evergrande and highlights the debt issues the developers face. China is cracking down on debt and these guys have used a lot of it to enable their growth. A big problem is that quite a lot of it is offshore.
Within China it is an issue too and the moment one debtor decides to try and secure assets it is likely to trigger a run. That is something the government is trying to avoid but it is a fragile situation that could have significant impact on the financial system. It is also something that impacts public opinion and that makes dealing with the situation even more important for Beijing.
Historically chairman Hui Ka Yan has been able to use his status and friendships to outplay short sellers but it would appear that he is now struggling.

Delta variant and recovery fears delay party for stocks
Stumble drags previously high-performing sectors into correction territory. Looks at the sell off in the US on Monday but the bounceback on Tuesday raises more questions. I think Monday’s selling reflects the nervousness of investors. Its breath may also indicate the fact that people are largely invested in ETF’s but happy to sell them like single stocks.

Miners struggle in face of voracious iron ore demand from China mills
Reflecting the under investment in resources sector in recent years. It mentions labour shortages and bad weather but net net it comes down to a lack of investment and the fact that the ‘easy’ resources have already been mined. I guess the surprise has been the fact that China’s demand has been constant despite covid. An interesting read and short term underline that the miners are quiet currently attractive positioned

Money must adapt to new technology
The time to embrace central bank digital currencies is here — but they have to work for society as a whole By Martin Wolf.
A good read that focuses on the need for Central Bank Digital Currencies. Not mentioned but I think it that advances that China has made in this area. The risk being that it gains first mover advantages and sets the standards.

LEX China power companies: coal-ing down
Looks at the power outages in China and the issue of being dependant on coal powered power stations
‘The problem is that while input prices continue to rise, electricity prices are set by the government. In the past, that made shares of local power companies a safe bet. Net profit at China Power International Development rose a third in 2020. Its share price, which offered a dividend yield of about 9 per cent, rose a fifth in the past year. Peers China Resources Power, China Shenhua Energy and GD Power Development also gained.
But Beijing worries about inflation. Power groups’ inability to lift electricity prices limits their ability to cover any shortfall. Moreover, the costs of the transition to clean energy are high. Net income margins at China Power International Development have halved to 6 per cent in five years. And sales from clean energy are relatively low. After the sector’s hot run in the past year, expect it to cool markedly.’