June 30 FT HK get's a new Law, Li Ka-shings Techie, India bans Apps and more.


June  30 FT HK get's a new Law,  Li Ka-shings Techie,  India bans Apps and more.

Markets
Opened higher
following the US rebound overnight and with better than expected China PMI data.
JAPAN Opened higher Unemployment data was in-line but Industrial Production remained weak and missed forecasts. Markets trades sideways for most of the day and dipped into the close.
S KOREA Opened higher despite the weak pre market data. Kosdaq initially sold down into the red before rebounding. Kospi trended higher all day before diving slightly towards the close.
TAIWAN Opened higher and initially drifted lower but from mis morning worked higher.
CHINA Opened higher and worked higher, good PMI data was encouraging but it should be noted that this is pre the recent covid-19 outbreaks.
HONG KONG Opened higher inline with the ADR’s and traded sideways for the morning but sold off after lunch as is was announced that the NPC has passed the National Security Law to be imposed on Hong Kong. Hong Kong is closed tomorrow and many expect protests despite the police banning them

EUROPE looks to open higher on the good China PMI data
US Futures opened higher but have dropped back to flat.


China Data
Manufacturing PMI Jun 50.9 vs 50.6 May (F/cast was 50.2)
Non Manufacturing PMI Jun 54.4 vs 53.6 May (F/cast was 52.1)
Manufacturing
Better than expected a government lifted covid-19 restrictions
Output grew the most in three months (53.9 vs 53.2 in May),
Improving New orders (51.4 vs 50.9) and buying levels (51.8 vs 50.8) went up for the fourth month in a row and at a faster pace.
Export sales (42.6 vs 35.3) and employment shrank at softer rates (49.1 vs 49.4), with supplier's delivery time was unchanged (at 50.5).
Prices data showed input cost advanced for the second month running and at a faster pace (56.8 vs 51.6), while selling prices rose following a fall in May (52.4 vs 48.7). Looking ahead, sentiment eased but remained solid (57.5 vs 57.9).
Non Manufacturing
This marked the fourth consecutive month of growth in the service sector and the strongest since January.
New business expanded further (52.7 vs 52.6 in May), amid softer declines in both overseas sales (43.3 vs 41.3) and employment (48.7 vs 48.5). Meantime, suppliers' delivery time shortened (52.1 vs 52.9). On the price front, input cost increased for the second time in four months (52.9 vs 52.0), while selling prices decreased the least since January (49.5 vs 48.6). Finally, sentiment weakened but remained noticeably solid (60.3 vs 63.9).

On line Edition
Beijing passes national security law for Hong Kong. But full details of the new law will not be available until after the NPC meeting closes. Key now will be how international governments react. A number of pro-democracy groups have disbanded in order to try and reduce to personal safety of those engaged in democratic resistance.
I think most people will now wait to see what happens during tomorrows holiday. The police have already erected barriers around the HK convention centre, where the Hong Kong flag raising ceremony is due to take place tomorrow morning. They have already said extra police officers will be on duty despite having banned all protest marches; citing public health concerns under the covid-19 legislation and previous violence at marches. This has annoyed many residents who see it as the administration using the public health legislation as a way to curb public opinion.

New China security law could stifle research in HK, say analysts. Whist the details of the new National Security Law are unknown there is speculation that it could lead to analysts increasing self-censorship of research. The article cites one economist as saying the concerns are about ’stepping on a landmine’. One only has to think back to the sensitivities about the use of certain phrases over the past 12 months to understand why. The result could be that research out of Hong Kong becomes ‘institutionalise’ and hence less relevant to investors.
To a degree it has already been seen with the banks not referring to the protests in opposition to the new legislation.
The article also points out the other risk is that Chinese companies get away with fraudulent activities as a result. It cites Hindenburg Research, a short seller, who says they would not open and office in Hong Kong just as they wouldn’t open an office in China.
Without knowing the details of the new law it is very difficult to make a call. Some think that China will be pragmatic and not seek to undermine Hong Kong’s status. I doubt that only because I don’t think China understands the value of free speech it only sees the danger of opposition. The reality is that if the research gets dumbed down then it impacts not only Hong Kong but China; especially if we then get accounting scandals; especially in ‘politically linked’ firms. Whilst I think China wants improved standards it is not always prepares to accept the cost of that is the freedom to be critical.
Another worry is that critical analysts may not get visa’s to go and visit companies in China or to remain in Hong Kong if they are foreigners. I would imagine a number of US and Canadian analyst are concerned that their 'fact finding trips' to China could be considered spying. To say nothing of the risk of ’Tit for Tat’ arrests
The real influencers though are going to be the guys who run the indices. If they were to reduce China’s weighing in the index because of the lack of good research that would make an impact on China and potentially a difference. But I fear the reality is that for China it is not a worry at the present time.
If you look at much of the research in China; it is largely targeted at retail investors; it often lacks depth and substance, which is a further worry.
Good analysts; who are investigative and prepared to question and be critical management will always be in demand; the real problem for Hong Kong is will they want to come here now?

Zoom investment shines light on the woman behind Li Ka-shing’s tech bets. A look at Solina Chau who is a director at Li Ka Shing’s Horizon Ventures; (a company she co-founded in 2002, which invests Li Ka-shing’s personal wealth and doesn’t raise money from outside investors. Its a good read. The key trait seems to be that she is an energetic dealmaker who gets closely involved with the deals she makes and that she keeps out of the family politics. It is also notable that the investments mentioned in the article are Tech. Li Ka-shing is best know for Property and the conglomerate Hutchison. It is a testament to his shrewdness that he has focused on the areas he knows but hasn’t ignored areas which are not in his expertise but instead partnered with someone whose expertise they are. That I would say in some regards is what sets him apart from the likes of Warren Buffett.

Print Edition
India bans TikTok and dozens of other Chinese mobile apps over privacy fears.
A further escalation of the tension between the two countries. Privacy fears causing a ’national security risk’. I think Modi is under pressure to send a strong signal to China because of the nationalist sentiment. Both India and China have these forces at work and the danger is not being able to appease them; which could lead to more problems ahead.

Beijing races to pass Hong Kong security measures Looks at why they were in such a hurry; basically the fear that if they didn't do it now then there was arise that in the forth coming Hong Kong elections they could loses their engineered majority and then Hong Kong would draft a National Security Law that was acceptable to the majority of Hong Kong people but not Beijing. It looks at the concerns over the ‘blurring’ of the legal systems and the establishment of 'a national security agency in Hong Kong, the head of which will arguably be the territory’s most powerful person, and appoint a representative to a national security committee chaired by Ms Lam.’
It notes that tomorrow could see an even greater display of defiance than that seen on June 4’s commemoration of Tiananmen Sq.

Olympus braced for rise in surgical operations. A likely beneficiary of ‘pent-up’ demand. Covid-19 put many surgical operations on the back burner but now hospitals are looking at resuming some procedures with cancer treatments and procedures such as colonoscopies that are critical for early diagnosis. That is good news for Olympus. It’s share price is back to its highs having just agreed to dispose of its camera business. So it will be interesting to see how much of the good news is already in the price.

LEX Nissan: hit the brakes. Looks at the plan outlined to shareholders for the company’s recovery but Lex is unconvinced. There is little new in the plan and a significant rise in costs associated with the plan. The share price has fallen 50% in the last year with dividend payments pushed back; lex can se no reason to hang around.

FT BIG READ. PERSONAL FINANCE Raiding the pot. The pandemic has deepened the crisis for pensions. With returns set to stay low and workers drawing down funds to survive the lockdown, the pressure on private and workplace schemes has intensified.
An interesting read but another reason to expect consumer spending to remain low as we exit the covid-19 crisis. Many people having been forced to raid their savings will be keen to try and rebuild them and hence discretionary spending is likely to be capped. A reason I am not confident about a simple V shaped recovery.

For Interest
Private capital looks uniquely placed to prosper after pandemic
by Robin Wigglesworth. Despite recent bad press Private Capital looks like it is about to become more popular. Sets out '“Private capital” is handy short code for virtually any asset that is not publicly traded like stocks and bonds. It ranges from private equity and real estate to fast-growing areas including infrastructure and “private credit” — bespoke loans arranged between corporate borrowers and investment funds.’
The key being that if you are seeking returns above 7% then private capital is one of the few places you can find them.

Feedback and Comment welcomed