May 28 HK in focus, Renault/Nissan new start? Yen snoozing, Gold changes and more


Most Asian markets are trending lower waiting to see what action Trump will retaliate with over China’s imposition of a National Security Law on Hong Kong.  

The exception is Japan which opened strongly, rallied and whilst it is off the highs it is still up over 1%.
S.Korea saw the Kospi open in the green but sell off and the Kosdaq open flat and trend lower.
Taiwan opened higher but has trended lower and is currently below the important 11,000 level.
Hong Kong opened flat (even though the ADR’s were -VE) saw some initial upside but has trended lower currently through the morning and was -1.8% at lunch
China Opened flat and saw some initial upside but has reversed and turned negative
US Futures are indicating a higher open, currently +150pts

HK’s trade status in peril as US says it is no longer autonomous from China. Looks at US Sec State Pompeo’s address to Congress yesterday. It puts Hong Kong’s future trading status with the US in jeopardy. Of more concerns to Asian investors is how Trump will respond to China’s intention to force a National Security Law on Hong Kong. All of this goes to show how successful President Xi has been at deflecting criticism regarding the covid-19 outbreak in China or the need to make statements about large government stimulus. Also HK police mobilise to stop anthem dissent and Beijing selects ‘nuclear option’ in quest for stability All look at the current situation in Hong Kong.
KEY is that Everyone is now waiting for Trumps response and then Beijing response to Trump’s response and so on.

Licensing deal win for HKEX triggers share price tumble for Singapore rival. Looks at how HK EX won the MSCI derivatives licensing agreement. A positive move for HKEX in diversifying its revenue stream and it should bolster Hong Kong’s standing as an international finance hub; although that might be undermined by China’s imposition of a National Security Law on Hong Kong. See also the Lex Hong Kong/HKEX: future planning.. 'Betting on HKEX’s future now looks as risky as the derivatives contracts the exchange will take on.'

Renault and Nissan scrap Ghosn drive to tighten links. The new plan was revealed yesterday with the firms now carving out areas of responsibility vs Ghosn's aim of getting teams to work together. IT also ruled out a full merger of the companies. They hope to be ablate cut costs of new vehicle development by 40%. The new responsibilities are that;
Renault to focus on Europe and Russia and take the lead on smaller cars and diesel models
Nissan on China, US and Japan with a focus on larger models
Mitsubishi will focus on Southeast Asia and focus on hybrid development of sport utility vehicles.

Japanese broker to ‘crowdsource’ ideas from retail investors for activist fund Monex is intending to set up a new fund in June which will invite retail investors to suggest what company executives could do to improve performance. The fund aims to focus on companies where they saw the chance to unlock significant value. It is an interesting idea and one that no doubt will be watched with interest. It comes at a time when retail investors have been increasing their presence in the Japanese stock markets. The aims are laudable the question will really be about whether the company’s it invests in are prepared to make the required changes; something historically they have not been open to.

Yen’s snooze reveals lack of conviction among investors. Notes that despite the significant equity market moves the Yen has not reacted as historically one might have expected it to do. Macro data and events, so far, have not had the impact they historically did either. I think that is because Covid-19 has impacted all economies and at present there are no really safe haven countries. As economies re-open and we are able to see the real and longer term impact from covid-19 then the volatility may return.

Opinion Business is squeezed in the US-China fight. Looks at the impact of the current US/China fall out is having on companies. It thinks that the China market is too large and companies have invested too much to shut down now. Also the current hostilities are deep rooted on both sides. The likely outcome is a two track world.

Ackman dumps stake in Berkshire Hathaway. Obviously disappointed that Buffett has been active in doing deals as he was back in 2008. Ackman noted that Pershing Square could be more nimble. He also revealed that some of the earlier purchases into equities had been scaled back. The fund is currently +22% YTD net of fees vs the S&P 500 which is -7%.

March ructions deter bullion banks from gold futures. Dislocations during pandemic crisis lead to slide in trading volumes on Comex exchange. Looks at developments in the way that big bullion banks hedge their trades. It used to be via futures but due to covid-19 that is changing. An interesting read. Highlights that gold has become more popular the question will be whether that popularity remains as lock downs ease. That I think will depend on whether we see signs of inflation or deflation in the coming months.

Special Report Supply Chain Disruption. Covering a number of issues:
Will Covid-19 sink globalisation? With goods trade in freefall, governments and companies have many lessons to learn, says Alan Beattie
Flexible networks hold up as storm buffets foodmakers. Food producers Agility proves crucial, as parts of the chain struggle to adapt, writes Judith Evans
Be wary of scapegoating ‘just-in-time’
Production ‘pivots’ ease pressure but can be costly. Manufacturing What are the costs of switching and how easy will it be to resume normal production, asks Nick Huber
And more