ASIAN MACRO INITIAL THOUGHTS 3 June   Dow futures turn +VE

Covid-19 Globally over 6.3m cases, 376k deaths but no longer a large market factor seemingly for the US and Europe on the basis we know more about the disease and believe it contained or containable.  But still taken more seriously in Asia.

US protests continues; Former president Obama, said that the protests were a “genuine and legitimate’ 'the vast majority of the demonstrators were peaceful and criticised the “small minority of folks” who resorted to violence. The same being true, but for different reasons, in HK and the level of violence seen in HK was nowhere near as extreme as that being seen in the US.

US futures opened slight lower but now +70pts effectively flat but trending higher ahead of ADP jobs number, Services PMI and ISM Non Manufacturing.

DOW 1%, NDX +0.6%, S&P +0.8%, Russel 2K +0.9% Dow & S&P opened higher but after an initial rally eased back and traded sideways. NDX opened lower initially traded sideways and then sold down. Markets all rallied in the last 30 minutes into the close. Concerns over the protests and US/China relations overhang the market. Covid-19 concerns easing as states re-opening.

Facebook +0.4%, Netflix +0.3%, Apple +0.5%, Amazon +0.1% but had been in the red for most of the session. Re-opening beneficiaries JPM +0.3%, Citi +2.8%, BoA +0.9% Gap +7.7%, Southwest Airlines +2.6%.

Wells Fargo +1.1% one of the biggest lenders for new and used car purchases in the US, sent letters to hundreds of independent auto dealerships last month telling them that the it was dropping them as a customer, according to people with knowledge of the situation. Highlights the worries over loan defaults ahead.

Western Union strong on news its made approaches to acquire MoneyGram

Mohamed El-Erian warns that current Fed policy is too focused on company’s and not enough on jobs. Negative interest rates are not necessary but jobs will be.

US Secretary of State Pompeo and a senior congressional leader have reprimanded China for bullying behaviour towards India during a military standoff on their disputed border.


Redbook 30 May -7.2% YoY vs -5.5% prior ( -1.4% MoM vs -1.5% prior)

ISM New York Index May 19.5 vs 4.3 Apr (F/cast was 19.1)

API Crude Oil Stocks -0.5m vs 8.7m prior

USD was weaker vs Yen & Euro. Bitcoin -6% @ 9,524.29 saw a significant pull back VIX -4.9% @ 26.8, US T10 0.687%

OIL Brent +2.7%, WTI +3.9% continues to rebound expectation major producers will extend the current production cuts.

Gold -0.9%, Silver -1.9%, Copper +0.04%

AFTER MARKET Total Vehicle Sales due at 8am HK time.

AHEAD Mortgage Applications and 30 yr Mortgage Rate, ADP Employment Change, Services and Composite PMI, ISM Non-Manufacturing Data (Business Activity, Prices, New Orders, Employment, PMI) Factory orders, EIA stock change data (Crude and Gasoline)

DAX +3.75%, CAC +2%, FTSE +0.9% Germany played catch with news of a possible Euro 80bn stimulus plan; seen as upbeat for all. Markets worked higher from their opening level. Covid-19 concerns easing and investors focusing on the recovery. US unrest a concern as Trump threatens using the military to quell the unrest. AUTO stocks strong and lead the gains but all sectors positive except Healthcare. UK travel names +VE on news the UK was considering ’transport corridors’.

Hammerson +34.4% announced its sites will re-open from June 15 +VE cross read to British Land and Land Securities along with news from Unibal-Rodamco-Westfield +9.4% on news of it centres re-opening

Aroundtown +11.4% on sharebuy back news

Tecan -5.1% and Biomerieux -5.7%


UK Nationwide House Prices May +1.8% YoY vs +3.7% Apr (F/cast was +2.6%) [May -1.7% MoM vs +0.9% Apr (F/cast was -1.1%)]

Mortgage Lending Apr GBP 0.3b vs 4.8b Mar (F/cast was 1b)

Mortgage Approvals Apr 15.8k vs 56.136k Mar (F/cast was 20k)

BoE Consumer Credit Apr GBP -7.4b vs -3.841b Mar (f/cast was -4.2b)

Net Lending to Individuals Apr GBP -6.9b vs 1b Mar (F/cast was -1.8b)


EUROZONE Services and Composite PMI, Unemployment Rate, PPI

GERMANY Services and Composite PMI, Unemployment Rate

FRANCE Services and Composite PMI

UK Services and Composite PMI

JAPAN Expect Nikkei to open flat on news of more covid-19 cases in Tokyo. Pre market data will also influence todays trading. Yen currently 108.65
Data due
May Services (Apr was 21.5 F/cast is 25.3) and Composite PMI (Apr was 25.8, F/cast is 27.4)

Covid-19 More than 30 new coronavirus infections were reported in Tokyo on Tuesday, Japan's NHK public broadcaster said, marking the first time the number of daily cases has topped 30 in 19 days. Comes as Japan on Tuesday approved saliva-based tests for the coronavirus, offering a safer, simpler way to diagnose infection than nasal swabs as it looks to boost its testing rates.

WTO Japan's top government spokesman Yoshihide Suga on Tuesday called South Korea's decision to restart proceedings against Japan over export controls on some high-tech materials, at the World Trade Organization (WTO) "extremely regrettable”.

TSE First Section Almost 30% of companies listed posted net losses in January-March, due mainly to the fallout of the novel coronavirus crisis, it was learned Monday. -VE for sentiment.

Business Failures As of Monday, 202 business failures linked to the crisis had been confirmed. The accommodation sector had the largest number at 39, the restaurant sector followed, with 25 cases, while the number stood at 16 among clothing, sundry goods and shoes retailers. -VE for sentiment

East Japan Railway Co. will accelerate plans to open 100 unmanned convenience stores within the next four years, sources close to the matter said Tuesday, as it takes advantage of the need to reduce human contact amid the coronavirus pandemic. Slight +VE

SOUTH KOREA Expect markets to open slightly higher but investors to look to consolidate after recent gains.
Data out 
Foreign Exchange Reserves May US$407.31 vs 403.98b Apr (F/cast was 403.9b)

South Korea being invited to the G-7 meeting is a step toward a new international order that will raise the country to a new level in international society, Government said Tuesday.

SHIP BUILDERS Slight +VE as Qatar’s state-run LNG producer signed agreements with South Korea’s “Big 3” shipyards on Monday to secure more than 100 ships through 2027, in the largest-ever single LNG vessel order. Daewoo Shipbuilding & Marine Engineering Co Ltd (042660.KS), Hyundai Heavy Industries Holdings Co Ltd (267250.KS) and Samsung Heavy Industries Co Ltd (010140.KS).

Doosan Heavy Industry & Construction said Tuesday that has provided 200 billion won ($164 million) in emergency funds to its Indian affiliate that has suffered from a liquidity shortage brought on the novel coronavirus pandemic.

Hyundai Steel has halted production of its electric arc furnace plant on South Korea's western coast due to weak demand. -VE

Binex, a contract development and manufacturing organization for biologics drugs, said Tuesday that it has joined a consortium of companies pursuing mucosal vaccine for COVID-19. +VE

LG Household & Health Care said Tuesday it has gained a business license to sell GlaxoSmithKline’s skin care brand Physiogel in Asia and North America, for 190 billion won ($155 million). +VE

Lotte Shopping said Tuesday it has introduced a new remote working system for its 3,200 employees working at its headquarters, whereby they can work at home once a week.

TAIWAN Expect market to open flat and trade sideways but above the important 11,000 level, T/O to remain moderate.
No data due

The Central Epidemic Command Center (CECC) yesterday reported no new cases of COVID-19, while expressing its gratitude to mask manufacturers for meeting domestic demand and producing extra for nations in need. +VE for sentiment.

The US decision to leave the WHO could derail Taiwan’s ambitions to being given observer status -VE for sentiment

Carrefour announced on Tuesday an EUR97m (USD108m) takeover of Wellcome Taiwan from Dairy Farm International after it had withdrawn from Chinese market last year. The French supermarket chain expected to remove Wellcome and replace Jasons with Carrefour Premium within 12 months after completing the equity transfer.

Kwang Yang Motor and Ministry of Transportation and Communications data showed Sales +0.4% YoY reaching 69,242 units, up from 66,487 in April Slight +VE

Elan Microelectronics reported revenue +63% YoY for last month as the COVID-19 pandemic stimulated demand for laptops and boosted consumption of the company’s products. +VE

CHINA Expect market to open flat ahead of Caixin data; if the data beats then expect some upside but limited as US/China tension continues to worry investors.
Data due
May Caixin Services (Apr was 44.4, F/cast is 48.6) and Composite PMI (Apr was 47.6, F/cast is 49.1)

Chinese Foreign Ministry criticized Trump's action, regrading delaying Septembers G7 meeting and inviting more countries but not China saying it is cliquey and unpopular for the US to pick on China.

China Association of Automobile Manufacturers (CAAM), in a post on its official WeChat account, said vehicle sales were estimated to rise to 2.14 million in May +11.7% YoY. It said the numbers were based on sales data it had collected from key companies, without giving further details. +VE

Chinese Banks being told to limit to limit high yielding structures deposits as companies look to park funds raised at low rates.

HONG KONG ADR’s +270pts to open 24,266 but to trade sideways after the initial short covering rally. Volumes likely to be light with margin accounts committed to Netease IPO. News of extending social distancing rules -VE. Carrie Lam heads to Beijing to comment on proposed national security law. One wonders if she and her team will quarantine after the visit?
Data due
pre market May PMI (Apr was 36.9 F/cast is 38.0)

Short Selling HSI Tuesday 18.2% vs 18.3% Monday Top Shorts Geely Auto (175) 46%, Wharf REIC (1997) 43%, ICBC (1398) 38%, Want Want (151) 36%, Country Garden (2007) 34%, Galaxy Ent (27) 33%, Petrochina (857) 32%, HK & ChinaGas (3) 32%, Shenzhou Int (2313) 29%, HSBC (5) 27%, MTRC (66) 26%, China Shenhua (1088) 25%.

BUYBACKS/INSIDER DEALING Li Ka-shing and Victor T K Li CK ASSET (1113.HK) they acquired a total of 1.3525m shares

IPO Haina Intelligent Equip (1645) debut Offer price HK$1.38, reported in the media that the grey was -15%


NTES-S (9999.HK) recorded around $29bn in margin from 15 brokers as of around 6pm today, representing roughly 43.8 times of over-subscription in the public offering based on the fundraising amount of $648.9m.  It also announced that Cloud Music has reached a KRW7.5 bn (roughly HKD48.65m) cooperation agreement with a Koran agency firm CUBE Entertainment, which will fall due on 30 September 2023, Yonhap News Agency reported.
YIP'S CHEMICAL (408.HK) aims to spin off its ink business for listing in Shenzhen as the firm's capital is mainly used for its Mainland development, opined Deputy CEO Ip Kwan. In addition, the launch of registration-based IPO system on ChiNext is conducive to the firm's listing, which is expected to wrap up by the end of 2021. Ip has not weighed up special dividend payment to shareholders upon a successful spin-off.
HKEX (388.HK) announced the launch of Silver Futures contracts settled in US dollars (USD) and Offshore Renminbi (CNH), starting 8 June 2020, further expanding its commodities product suite. The new Silver Futures will be physically settled in Hong Kong with its contract months covering the spot month and the following 11 calendar months.
HKMA says its not seeing any capital flight from HK but Singapore Bank deposits show foreign-currency deposits almost quadrupled in April.  Whilst money may not be leaving leaving HK is could be that people are wary about holding new cash here.
HK Govt said Group gathering ban extended for two weeks to 18 June. Also that HK needs to maintain its restrictions around population flow between Hong Kong and rest of the world. BUT at the initial stage, convenience could be offered to personnel who must travel between Guangdong-Hong Kong and Hong Kong-Macau. 
David Webb told Bloomberg that the city is suffering a talent outflow. Along with local talents migrating overseas, international firms find it harder to attract professionals. Upon the legislation of National Security Law, Hong Kong is set to see an accelerated "brain drain", said Webb.

PROPERTY EVERGRANDE (3333.HK) Group’s contracted sales for May 2020 RMB60.22 bn +12.5% YoY

The Land Registry announced that the number of sale and purchase agreements for all building units received for registration in May was 6,885 (+41.5% MoM but -33.5% YoY). Among the sale and purchase agreements, 5,984 were for residential units (+45.9% MoM but -27.1% YoY).