ASIAN MACRO INITIAL THOUGHTS 16 JUNE 2020
Covid-19 Globally over 7.95m cases, 434k deaths
DOW Futures opened +100pts but have eased to +25pts
DOW +0.62%, NDX +1.43%, S&P +0.83%, Russel 2K +2.3% US markets opened at the lows and worked better through the day to close at the day highs after the Fed announced buying individual corporate bonds.
Re-opening names saw weakness but close off initial lows as new covid-19 cases rise; Carnival -2.7%, Royal Caribbean -0.6%, United Airlines -1.7% (plans to sell new shares, tap $4.5bn in US taxpayer-backed loans and borrow $5bn from banks including Goldman Sachs by pledging the airline’s mileage programme as collateral) American Airlines -0.2%, Kohls -1.9% Gap -0.5%
Stay at home names led the gains Facebook +1.7%, Amazon +1.1%, Netflix +1.8% and Apple +1.2%
Worth noting that Investopedia reports a surge in searches for day trading techniques.
NY Empire State Manufacturing Index Jun -0.2 vs -48.5 May (F/cast was -30)
Foreign Bond Investment Apr US$-176.7b vs -299.3b Mar
Net Long Term TIC flows Apr US$-128.4b vs -112.6b
Overall Net Capital Flows Apr US$125.3bn vs +349.9b Mar
USD was slightly stronger vs Yen & Euro. Bitcoin +1.2% @ 9,447.75,
VIX -4.7% @ 34.4,
US T10 0.72% as the Fed announced to buy individual corporate bonds up to US$750bn worth.
OIL Brent +2.5%, WTI +2.4% on signs of improving demand and OPEC+ members complying with cuts which outweighed covid-19 concerns.
Gold -0.6%, Silver -0.9%, Copper % on talk that inflation is collapsing; Albert Edwards of Soc Gen wrote a good article regarding deflation last Thursday 'US has fallen into the deflationary abyss ahead fo the Eurozone'; worst a read.
AHEAD Retail Sales Data, Redbook, Industrial Production, Manufacturing Production, Capacity Utilisation, NAHB Housing Market Index, Business Inventories, API Crude Oil Stock Change
DAX -0.32%, CAC -0.49%, FTSE -0.66% Markets opened around the the lows and worked better to close around the day highs but still in the red. Covid-19 concerns after new cases in Beijing and increased hospitalisations in the US. UK saw the re-opening of non essential shops although with social distancing measures in place.
EUROZONE Balance of Trade Apr Euro +2.9b vs +28.2b Mar (F/cast was 16.2b)
EUROZONE ZEW Economic Sentiment Index, Labour Cost Index, Wage Growth
GERMANY Inflation Rate, Wholesale Prices, ZEW Economic Sentiment Index
FRANCE IEA Oil Report
UK Claimant Count Change, Employment Change, Average Earnings (Inc Bonus & Ex Bonus), Unemployment Rate.
JAPAN Expect Nikkei to open higher following the rebound in the US markets but expect some caution ahead of the BoJ announcement and due the rise in covid-19 case in Tokyo.
Yen currently 107.43
Data due BoJ Interest Rate Decision No rate change expected watch for more clarity on buying long dated JGB’s and more assistance to SME’s.
Tokyo report 48 new covid-19 cases on Monday, following 47 on Sunday. 20 of the new cases were host club employees.
Japanese Defence Minister said on Monday that he had suspended plans to deploy two U.S.-made Aegis Ashore air defence radar stations designed to detect and counter North Korean ballistic missiles due to costs and technical reasons.
Japanese Foreign Minister said on Monday it was not true the government had decided to ease an entry ban, which was implemented to prevent the spread of the new coronavirus, for people from certain countries but is discussing possibilities
Mitsubishi Aircraft Corp said on Monday it will focus on work this fiscal year towards obtaining type certification for its SpaceJet M90, and also announced executive changes as it seeks to weather challenges brought by the coronavirus pandemic.
Nissan launches the new Rogue SUV which executives say is crucial to its US model lineup and turnaround.
Japan Airlines Co said Monday it will resume at full capacity boarding and security operations for domestic flights at Tokyo's Haneda airport in July with traffic expected to increase as coronavirus restrictions are gradually lifted.
The Fukuoka municipal government has decided to allow the use of “co working spaces,” known to be used by a wide range of people as a place of work, to foreign residents for up to one year when they establish a business.
SOUTH KOREA Expect markets to open higher with a focus on tech following the US rebound with bargain hunting in Tech after yesterday’s sell off. I would expect a number of investors to remain cautious after 3 days of losses; yesterday’s trading volume was high. Local concerns on more covid-19 outbreaks remains high too.
No data due
President Moon urged North Korea on Monday to refrain from raising tension and return to dialogue, after threats trumpeted by state media in Pyongyang to cut ties and take military action.
South Korea is seeking to launch negotiations for a bilateral free trade agreement with Cambodia next month, hoping to increase its economic influence in Southeast Asia, according to top officials Monday.
Samsung A civilian committee plans to issue a decision next week on whether Lee Jae-yong, the de facto leader of Samsung Group, should be indicted over his alleged involvement in a merger and accounting fraud, informed sources said Monday. Slight -VE
Samsung unveiled a special edition of its Galaxy smartphones and earbuds in collaboration with K-pop sensation BTS. +VE
Mediforum, previously C-TRI, said Monday that it has signed for the domestic rights to LMTX, a pioneering Alzheimer’s disease treatment being developed by Singapore’s TauRX. The full acquisition to be completed by Q3. +VE
Aekyung Industrial said Monday it has launched its flagship cosmetics brand Age 20’s on Amazon, entering the US market for the first time. +VE
HiteJinro Beverage, the beverage arm of HiteJinro, said Monday that it is launching Black Bori, its barley tea product, in the US via retail giant Trader Joe’s. +VE
AUTO exports -57.6% YoY in May due to falling demand. Local carmakers shipped 95,400 units of cars overseas last month, according to the data compiled by the Ministry of Trade, Industry and Energy. -VE
Asiana Airlines held an extraordinary shareholders meeting Monday, and voted to raise capital by increasing shares and issuing convertible bonds. Difficult to know if this will be enough in the current circumstances, I remain -VE
TAIWAN Expect market to open higher following the US rebound
No data due
Chinese Nationalist Party (KMT) Chairman Johnny Chiang in a meeting with American Institute in Taiwan (AIT) Director Brent Christensen, expressed hope that the US would support with concrete action the nation’s belief in the pursuit of freedom, democracy and human rights, the party said yesterday.
Lite-On Technology yesterday gave a hazy outlook for business in 2H due to the COVID-19 pandemic. “From what we know, the coronavirus is still spreading, with new cases in Beijing, as well as in the US and South America… There is a lot of uncertainty which is fostering [economic] instability from a global perspective,” Although Lite-On has good order visibility for the third quarter, Chen expressed doubts about its future performance. Slight -VE
Taiwan Semiconductor Manufacturing Co a number of its Taiwan-based suppliers said they would invest in the US to supply TSMC’s planned US$12 billion fab in Arizona. They include Semiconductor equipment supplier Marketech International Corp, automation equipment maker Mirle Automation Corp and electrical systems integration engineering services provider United Integrated Services Co. It is expected that material suppliers, including Kanto-PPC Inc, Chang Chun Group and Shiny Chemical Industrial Co would also support TSMC’s US fab.
China Airlines Ltd is to offer one direct weekly round-trip flight between Taipei and London next month, the airline announced yesterday.
Giant Manufacturing +VE on increased orders from Europe and US
D-Link Corp chairman John Lee and his allies, led by Taiwan Steel Group, yesterday won six seats on D-Link’s board at a shareholders’ meeting, which outranked the three seats held by former chairwoman Lori Hu and her allies. With the seats, including three independent directors, Lee and his allies would control the board. Lee yesterday was also re-elected as chairman at a board meeting. Hu and her son, Howard Kao, were also elected as directors on the board. Slight +VE
CHINA Expect market to open higher following the US but upside capped by concerns of further covid-19 outbreaks.
No data due
US Secretary of State Pompeo expected to hold talks with Yang Jiechi, a member of the Communist Party Politburo in Hawaii on Wednesday Slight +VE for relations.
US on Monday confirmed it will amend its prohibitions on US companies doing business with China’s Huawei [HWT.UL] to allow them to work together on setting standards for next-generation 5G networks. Key her is that China has been setting the lead the for 5G standards having learnt the lesson from 2G when it designed its own system but it didn’t get international recognition. So over the past couple fo years it has been involved in setting the international standards for 5G so its systems will be the standard. This will only mean that US companies can engage in the setting of the standards.
Sentiment encouraged by Monday’s Industrial recovery data which suggests China continues to focus its recovery efforts on state investment, government debt and construction projects but there are concerns that domestic consumption remains weak.
Beijing will begin auctions this week of a planned issue of 1 trillion yuan (US$141 billion) of special treasury bonds to help finance recovery from the coronavirus pandemic, sources told Reuters on Monday.
HONG KONG ADR’s +298pts to open at 24,074 with a strong rebound which is likely to trigger a short squeeze but still expect some margin call selling initially. Expect some weakness in Tencent on news that Pony Ma has continued to sell down his holding. Property may also weakness on news that Swire Properties will take a provision against a negative property revaluation with other Property Investors likely to follow suit.
Cafe de Coral weak on suspending the dividend.
Data due after market HK Unemployment May (vs 5.2% Apr, F/cast is 5%)
Short Selling HSI Monday 21.4% vs 20.7% Friday
Top Shorts Wharf REIC (1997) 38%, HSBC (5) 35%, Hang Seng Bank (11) 33%, MTRC (66) 33%, ICBC (1398) 31%, CLP (2) 31%, Ping An (2318) 29%, Want Want (151) 27%, CCB (939) 27%, China Shenhua (1088) 27%, Hang Lung Ppty (101) 27%, Sunny Optical (2382) 26%, NWD (17) 26%, Galaxy (27) 26%, China Res land (1109) 25%, Mengniu Dairy (2319) 25%
TENCENT (700.HK) Chairman Pony Ma Huateng reduced his stake further this year. According to the Stock Exchange, Ma unloaded a total of 9.6478 mn shares on market between 9-12 June, cashing in over $4.269 bn. His shareholding in the company cut to 8.42% from 8.52%.
Chief Executive Carrie Lam called for support for the Hong Kong National Security Law in a video clip, which is a minute and 10 seconds long. The clip will be played as an announcement in the public interest from tomorrow (16 June). Lam stressed the legislation is aimed at punishing an extremely small amount of national security offenders. The law will neither undermine Hongkongers' rights and freedom in accordance with law, nor affect the city's business environment. But the press this morning announced that Beijing will retain jurisdiction over ’serious cases’ without defining what those would be which means it would effective undermine Hong Kong’s independent judiciary.
SWIRE PACIFIC A (19.HK) May take a HK$4.3b provision It made an announcement to give further information about the financial performance of certain Swire Pacific group companies in the first half of 2020. Demand for oil has fallen significantly this year, principally as a result of COVID-19. Business conditions in the offshore supply industry and the outlook for the industry have deteriorated substantially. All this has a significant influence on the value of Swire Pacific Offshore’s fleet. Accordingly, a review of the carrying value of the fleet has been undertaken. As a result of the review, impairment charges currently estimated at approximately HK$4.3 billion are expected to be made against the consolidated profits of Swire Pacific for the first half of 2020. Swire Pacific Offshore is also expected to continue to make a recurring loss during the period.
SWIRE PROPERTIES (1972.HK) PROFIT WARNING expected a substantial decrease in the profit for the six months ending 30th June 2020, as compared to the same period in 2019. It is expected that there will be a loss on revaluation of investment properties, net of deferred tax, of HK$2.6 bn in the first six months of 2020, compared with a profit on revaluation of investment properties, net of deferred tax, of approximately HK$3.6 billion in the first six months of 2019.
KEY expect other property investment companies and even the developers to be considering taking provisions against negative property revaluations
CAFE DE CORAL H (341.HK) -VE announced to suspend dividend payment.
Reason being covid-19 which had eaten into past earnings and slashed annual earnings to around $74 million; without sales improvement during April and May. Lo depicted the epidemic as the gravest challenge since listing, much worse than the SARS episode. He also said it spends roughly $200 million per month on salary payment, and had signed up for the Employment Support Scheme, and the group may receive $80 million of monthly subsidy during the first three months. Staff wages have been frozen and his wage was cut by 36% while some workers were furloughed. As at end-March, average meal prices were brought down by $0.5, mainly attributable to various discounts offered at their menus.
CHINA SOUTH AIR (1055.HK) in May 2020, the passenger capacity (measured by available seat kilometres) -52.94% YoY. During the month, passenger traffic (measured by revenue passenger kilometres) -61.38% YoY.
CHINA TAIPING (966.HK) gross premium income of its subsidiaries for the period from 1 January 2020 to 31 May 2020. The income generated from Taiping Life Insurance was RMB 76.755bn, -0.83% YoY. Taiping General Insurance RMB11.273bn +0.79% YoY and Taiping Pension RMB2.414bn, +0.96% YoY
BABA-SW (9988.HK)'s Alipay said it will be distributing nationally applicable vouchers for 17 straight days beginning 1 July, totaling RMB10 billion.
HK Tourism launched ‘Holiday at Home’ to try and promote local venues as foreign tourists numbers have plummeted.