June 29 ASIAN MACRO INITIAL THOUGHTS US Futures open lower
Covid-19 Globally over 10m cases, 500k deaths with 25% in the US. Some say the second vase has already started in the US.
US Futures opened -180pts with S&P and NDX lower too as a number of ‘re-opened’ states show rising covid-19 cases
Association of Southeast Asian Nations (ASEAN) said in a statement issued by Vietnam on behalf of the 10-nation bloc that a 1982 UN oceans treaty should be the basis of sovereign rights and entitlements in the disputed waterway. “We reaffirmed that the 1982 UNCLOS is the basis for determining maritime entitlements, sovereign rights, jurisdiction and legitimate interests over maritime zones,”
US Two aircraft carriers kicked off joint exercises in the Philippine Sea on Sunday, a day after Southeast Asian leaders delivered some of their strongest remarks opposing Beijing’s claim to virtually the entire South China Sea on historical grounds.
JAPAN Expect Nikkei to open lower with concerns over rising covid cases; Friday’s new cases topped 100. Yen closed Friday in US 107.21
Data due Retail Sales May (Apr was -13.7% YoY (F/cast is -6.8%) [Apr was -9.6% MoM F/cast is +3.6%]
Tokyo Govt confirmed 60 covid-19 cases on Sunday following 57 on Saturday, the highest daily tally since the nationwide state of emergency was lifted on May 25. -VE although not thought to be a second wave it is a concern.
Govt to issue its second harshest message should China pass a national security law for Hong Kong. It is intending to step up its representations to Beijing by expressing “regret” (Its harshest message after “condemn” ) and a harsher posture than the “grave concern” expressed in a joint statement by the Group of Seven nations on June 17 over China’s decision to impose the law on Hong Kong.
The Kremlin said on Friday it had a sovereign right to carry out work in the Sea of Okhotsk off Russia’s far eastern coast after a Japanese official objected to Moscow conducting a geological survey there. -VE
Tokyo has told Washington it opposes a suggestion by US President Trump to add Seoul to the Group of Seven summit, diplomatic sources said, in a move likely to further chill already frozen ties with South Korea. -VE
Daiichi Sankyo Co is in discussions to provide supplies of a potential coronavirus vaccine now being developed by AstraZeneca Plc and the University of Oxford for use in Japan. +VE
Nissan Motor; shareholders meeting Monday, To outline new strategy away from the past expansionist policy. To explain its new four-year, mid-term business plan, named 'Nissan Next' which carries it through until fiscal 2023.
NEC and Samsung to benefit from the growing pressure to bar Huawei from 5G networks, although it is not a simple task +VE
Central Japan Railway Co. is expected to delay its planned opening in 2027 of a high-speed maglev train line between Tokyo and Nagoya, sources said Friday, after a local governor did not approve the start of preparatory construction work, citing environmental concerns. -VE
SoftBank and global retail giant Amazon have made approaches to Russian conglomerate Sistema about a possible acquisition of its online retailer Ozon, Sistema's majority owner Vladimir Evtushenkov said on Saturday.
Japanese startup Donut Robotics has developed an internet-connected “smart mask” that can transmit messages and translate from Japanese into eight other languages. +VE
Japanese Autos are suffering an extended slump in South Korea amid a protracted trade row between the two Asian neighbors and the coronavirus pandemic, industry sources said Sunday. -VE
Nintendo theme park at USJ won’t open this summer Slight -VE
H.I.S. Co. plans to close around 80 to 90 outlets in Japan, or about a third of its locations, within a year as part of cost-cutting efforts after the major travel agency was left reeling due to the effects of the coronavirus pandemic.-VE
SOUTH KOREA Expect markets to open lower with concerns over rising covid cases which were 51 according to data released Saturday. Trading volumes to remain moderate with the focus on large caps.
No data due
South Korea has added Gilead’s anti-viral drug remdesivir to its coronavirus treatment guidelines in its first revision of recommendations since the outbreak began and urged caution in the use of the steroid therapy dexamethasone.
Govt plans to bolster ties with neighboring countries Japan and China in the field of marine shipping to overcome the pandemic-caused challenges, by utilizing smart technologies and promoting non-contact cooperation.
The Ministry of Science and ICT announced Friday that the ministry’s research and development budget for 2021 is set at 21.6 trillion won ($18 billion), +9.7% from 19.7 trillion won in 2020. The additional funds would be spent on high-priority areas such as disease research and cutting-edge technologies such as AI, fifth-generation wireless networks, self-driving vehicles and next-generation semiconductors. +VE
Samsung An external review panel in South Korea recommended that prosecutors should not indict Samsung Group heir Jay Y. Lee over a 2015 merger and alleged accounting fraud, the Supreme Prosecutors' Office said on Friday. But their decision is not legally binding in the past despite the recommendation prosecutions has still followed.
Retailers see sales boost during the first weekend of the government-led K-Sale period, locally dubbed “Donghaeng,” which kicked off Friday. Lotte Department Store said sales rose 21% YoY from Friday to Saturday. +VE
Korean tech giants expected to report improved earnings in Q2 suggesting they have at least avoided the worst-case scenario amid the protracting COVID-19 pandemic, due to the semiconductor industry’s outperformance, according to brokers data released on Sunday. +VE
Samsung Electronics Co. is expected to launch two new foldable smartphones in the second half of the year, with an affordable foldable handset model likely to come out next year, industry sources said Sunday. +VE
Duty-free stores saw their sales rebound slightly in May after dipping below the 1 trillion-won ($804 million) mark in April amid the new coronavirus pandemic, industry data showed Sunday. +VE Lotte Shopping and Hotel Shilla
Major mobile carriers are expected to report improved bottom lines in Q2 on the back of a rise in subscribers to 5G network services amid the pandemic, analysts said Saturday. The combined net profits of the country's three major carriers: SK Telecom Co., KT Corp. and LG Uplus Corp. are estimated at 711 billion won ($591 million) in the April-June period, vs 561 billion won from the previous year, according to a poll by Yonhap Infomax, the financial news arm of Yonhap News Agency.
TAIWAN Expect market to re-open after being closed for two day
Data due Jun Consumer Confidence at 8am (May was 64.87 and the F/cast is 75)
Taiwan led the world in IC wafer capacity last year, and it is expected to retain this position through 2024, semiconductor market research company IC Insights said. Taiwan accounted for 22% of the global wafer capacity last year, followed by South Korea with 21%, Japan with 16% and China with 13.9%. +VE
TSMC may benefit from Apple switching to its own chip say some analysts.
TSMC announced its expects its sales this year to grow 14% to 19% and could spend up to US$3.52 bn on R&D, leaving its rivals far behind. It also reported that the US last year approved 99 percent of its patent applications, which placed the tech giant among the top patent holders in the US +VE
Ministry of Education yesterday said it would launch a project to ensure that each classroom in the nation’s public elementary, junior-high and high schools are equipped with air-conditioners by 2025. Involves over 100,000 units; +VE Air Conditioner makers like Daiken and others.
CTBC Bank and 16 other banks granted Innolux Corp a syndicated loan of NT$37.5 billion (NT$1.27 billion) to help the LCD panel maker boost its operating capital +VE
Merida Industry Co’s bicycle orders have increased 25.3% YoY as governments worldwide ease coronavirus lockdowns, and its order visibility is likely to extend well into next year prompting +VE
Domestic gasoline and diesel prices are this week to increase by NT$0.3 per liter to reflect a steady increase in global crude oil prices, CPC Corp and Formosa Petrochemical Corp announced separately yesterday.
CHINA Expect market to re-open lower after being closed for two days with concerns over the rise in covid case -VE for sentiment after confirming 21 additional COVID-19 cases Friday, including 17 local infections (all in Beijing) and four imported cases. No deaths were reported yesterday.
No data due but out Sunday Industrial Profits (YTD) May -19.3% vs -27.4% Apr F/cast was -22%. Better than forecast +VE; an improving trend +VE, and follows the trend seen in the Industrial Production Data. BUT partly due to a fall in purchase prices and with the recent resurgence of covid-19 cases in June PLUS the fact that the recent Retail Sales data was -VE, so the upside of this data is limited.
China National Biotec Group (CNBG) said on Sunday that early human test results for a coronavirus vaccine candidate suggested it could be safe and effective, the second vaccine candidate from the firm to show encouraging results in a clinical trial.
NPC reviewed a draft of the HK National Security Law, Xinhua reported Sunday and is expected to pass the bill before the end of its special session ends on Tuesday. Accordingly, US Secretary of State Mike Pompeo announced visa restrictions on Chinese officials undermining the territory's high degree of autonomy. Chinese Embassy to the United States voiced unswerving opposition against the US side's erroneous act, adding external forces are not allowed to meddle with Hong Kong's affairs, which are China's internal affairs. It was interesting to the HK NPC delegates travelled to Beijing from Hong Kong in Business class and that Tam Yiu-chung HK’s sole deputy to the NPC said is seeking for the National Security Law to be retroactive. Also that he will not be reflecting the opinion of the 57% of Hong Kong people who oppose the legislation he said “It’s meaningless to include dissenting voices...” Which probably explains why Beijing does not understand Hong Kong.
Pakistan wants to renegotiate Belt and Road repayments after it alleged that Chinese companies had inflated power project costs by billions of dollars. -VE for China’s image on Belt & Road.
EUROPE warns China that Investment talks are entering a crucial stage; they’ve been talk for 6 years! It expects China to address issues related to subsidies, forced technology transfer and market access for EU companies into China.
Weekend Press reports that Projects in Africa are being squeezed by both the Chinese Banks and the Nation States. Plus many in China are saying that the money should be spent funding China’s economic recovery.
China/India Chinese troops used in border patrols to be taught mixed martial arts techniques but members of the Enbo Fight Club. Nationalists call for troops to be given more powers.
China/Canada China lashed out at Canada on Saturday over criticism about Chinese prosecution of two Canadians, saying the matter is based on evidence and urging Ottawa to cease “megaphone diplomacy.” Although the treatment of the two men and fact that the trial were carried out in secret does open the process to suspicion.
US food and feed exporters are shipping goods to China with letters assuring the safety of their cargo in lieu of official declarations requested by Chinese authorities that guarantee coronavirus-free shipments, a US agricultural export group said on Friday.
FT article Battle to topple Arm China chief leaves SoftBank facing the void Multiyear legal case awaits Japan group and mainland investor after Wu refuses to leave. Highlights one of the problems of doing business in China. -VE
Luckin Coffee withdrew its delisting hearing request submitted to the Nasdaq. The coffee chain will halt trading next Monday and issue a delisting notification after the appeal period expires. In addition, Luckin Coffee will force out Chairman Charles Zhengyao Lu at a board meeting on 2 July.
SCMP article Big data behind rapid response to Beijing market coronavirus cluster BUT it raises concerns raised about the use of surveillance technology in the fight against Covid-19 and how it will be used in future. Interesting read
HONG KONG ADR’s -183pts to open at 24,366 Expect more down side. Potential margin calls and increased turnover with the re-opening of the connect flows. I would also expect caution ahead of July 1 when the law is due to come into effect after 53 people were arrests on Sunday at a silent protest against the proposed law. I think we may see mainland flows increase to try and support the market.
Data due after Market Balance of Trade, Exports and Imports
IPO's HYGEIA HEALTH (6078.HK), Debut today. On Friday opened at $22 in gray market, up 19% against the listing price of $18.5, and last traded at $23.55, up 27% against the listing price, on volume of 560,000 shares, PhillipMart data showed.
KANGJI MEDICAL (9997.HK), Debut today On Friday opened at $24 in gray market, up about 73% against the listing price of $13.88, and last traded at $24.4, up nearly 76% against the listing price, on volume of 3.12 million shares, PhillipMart data showed.
Short Selling HSI Friday 14.7% vs 17.5% Wednesday
Top Shorts Hang Seng Bank (11) 44%, MTR (66 HK) 34%, Wharf REIC (1997) 31%, Mengniu Dairy (2319) 27%, China Shenhua (1088) 245, Shenzhou Int (2313) 24%, Country Garden (2007) 24%.
National Security Law HK Police ban July 1 March citing public health concerns and violence in previous demonstrations
A government spokesman said the government urges the US Congress to immediately stop interfering in HKSAR's internal matters. The "Hong Kong Autonomy Act" and the so-called "sanctions" are totally unacceptable and will only harm the relations and common interests between Hong Kong and the US. The spokesman reiterated that foreign legislatures should not interfere in any form in the internal affairs of the HK SAR.
HYSAN DEV (14.HK) PROFIT WARNING it expects to record a loss for the six months ending 30 June 2020, as compared with a profit for the corresponding period in 2019. This is caused by fair value loss for the period which is expected to be approximately HK$4 billion upon revaluation of investment properties due to the adverse economic conditions from the outbreak of COVID-19. I still expect the other HK Property investors to warn. -VE Especially follow the closure of Victoria Secrets on Friday.
CK ASSET (1113) sold 456 of the 462 unit available on Saturday; the first and second release was 28x over subscribed. Its released a further 238 units in the third price list.
Secondary Property Transactions Centaline recorded 15 deals (-16.7% WoW) in most cases the prices of the units had been cut.
The Government announced that as the COVID-19 outbreak in Hong Kong started to stablise, the use of Chun Yeung Estate in Fo Tan as quarantine centre will be ceased in end July. After clearing and thoroughly disinfecting the relevant units, the Estate will be immediately handed over to the Hong Kong Housing Authority. It is estimated that prospective tenants of the Estate will move in by two batches, striving for intake of the first batch prospective tenants commencing in late August.
TENCENT (700.HK) will roll out an American video streaming business similar to Amazon's Twitch, reported Bloomberg. It has been testing its video streaming service in the US since March, according to the report.
CKH HOLDINGS (1.HK) stated that Vodafone Hutchison Australia (VHA) has welcomed the announcement that the Supreme Court of New South Wales today made orders approving the scheme of arrangement between VHA and TPG Telecom (TPG). The Scheme is to be implemented on 13 July 2020.
LUK FOOK HOLD (590.HK) annual results ended March 2020. Revenue -29.2% yearly to HK$11.234 billion. Net profit HK$866 million, -42% yearly. Basic EPS equaled HK$1.48. Final DPS was HK$0.5, vs HK$0.6 a year ago. Full-year DPS was HK$1 vs HK$1.15 in the previous year.
Christine Lagarde: World Probably Passes Worst Days of Coronavirus Crisis The world should have sailed past the worst of the coronavirus crisis, said European Central Bank President Christine Lagarde, who predicted economic recovery to be "incomplete" and probably "transformational”. I think a bold statement considering how little we know about covid-19.
Michael Wong: announced the Land Sale Programme for the second quarter of Year 2020/21, when the Government plans to sell two commercial sites situated in New Central Harbourfront and Tung Chung, measuring 267,000 sq.m. in total. In particular, the 150,000-sq.m. New Central Harbourfront site is to be developed as a landmark, which will provide large-scale public open space and landscaped decks on top of offices and commercial facilities, and be sold in a "two-envelope" tendering approach. Land disposal income is not the only concern for the Government when it comes to strategic commercial sites, furthered Wong.
Also he announced Sai Kung, Tai Po Residential Sites by Tender in 2Q of 2020/21, Involving 160 Units. MTR to Sell Lohas Park Phase 13 by Tender in 2Q of 2020/21, Involving 2,550 Units
CHINA GAS HOLD (384.HK) annual results ended March 2020. Net profit HK$9.188 bn, +11.7% yearly. EPS was HK$1.76. Final DPS was HK40 cents. Full-year DPS was HK50 cents, up 13.6% yearly.
HKMA: Retail Banks' 1Q Pre-tax OP Slips 7.7% YoY; No Notable Fund Outflow from Banking System. The aggregate pre-tax operating profit of retail banks declined by 7.7% year-on-year in the first quarter of 2020, according to Hong Kong Monetary Authority's quarterly report. Total deposits remained stable in the first quarter. Among the total, both Hong Kong dollar deposits and US dollar deposits only edged down by 0.1%. Fluctuations during the period were within normal ranges, and there was no noticeable outflow of funds from the banking system.
Centa-City Leading Index (CCL) last printed at 181.12, a 30-week high, up 0.21% weekly. CCL Mass rose 0.13% weekly to 184.96.
CCL (small-and-medium units) climbed 0.13% weekly to 182.33.
CCL (large units) lifted 0.65% weekly to 174.73.
The four major CCL indices rallied for two weeks to set new highs,
Markets of Friday
DOW -2.84%, NDX -2.59%, S&P -2.42%, Russel 2K 2.44% Futures had been choppy pre market but stocks opened higher but then sold down through he day to close at their lows. The second weekly loos in three weeks and many think that there will be further selling at the month end portfolio rebalancing. The rise in covid-19 case and the halting of lifting restrictions and in some case their re-introduction worrying investors. Plus I think the results from Nike that show the recovery is not a straight bounce back; drawing the V shape hopes into question. The closing of bars in Texas and Florida another -VE to Brewers Molson Coors -3.2%, United Breweries -2.8% but also to the normal ‘re-opening’ plays. United Airlines -5.2%, American -6% and Delta -4%, Norwegian Cruise line -5%, Kohls -5.7%, Simon Property -4.7%. BUT GAP +18.8% but off initial highs on news of a partnership with Kanye West’s Yeezy label to launch a co-branded apparel line.
FED bank stress test results showed some banks could get close to minimum capital levels in scenarios related to the coronavirus pandemic which means banks must suspend share repurchase programs and cap dividend payments at current levels for the third quarter. Some think Wells Fargo -7.4% and Capital One -8.9% may be forced to cut their dividends. Bank of America -6.4%, JPMorgan Chase 5.4%, Goldman Sachs -8.7%.
Data was mixed; Personal spending was +8.2% but missed forecasts; but Personal Income was slightly better. Michigan Final data missed slightly.
Nike -7.6% Q4 loss surprised the market, revenue was -38% YoY and puts the retail recovery in question. I think especially after the recent riots and looting. It said it plans for resources consolidation and even considers layoffs to drive online sales -VE
Facebook -8.3% under pressure as more firms withdraw advertising said it will revise its policy to ban all posts in breach of rules, including ads regarding color, nationality, gender, etc., said CEO Mark Zuckerberg.
Microsoft said Friday it is permanently closing nearly all of its physical stores around the world.
Personal Income May -4.2% MoM vs +10.8% Apr (revised) (F/cast was -5.6%)
Personal Spending May +8.2% MoM vs -12.6% Apr (revised) (F/cast was +9.5%)
PCE Price Index May +0.5% YoY vs +0.6% Apr (revised) (F/cast was +0.3%) [May +0.1% MoM vs -0.5% Apr (F/cast was +0.3%)]
Core PCE Price Index May +1% YoY vs +1% Apr (F/cast was +0.9%) [May +0.1% MoM vs -0.4% Apr (F/cast was +0%)]
University of Michigan Final Data
Consumer Expectations Jun 72.3 vs 65.9 May (F/cast was 73.1)
5 yr Inflation Expectations Jun +2.5% vs +2.7% May (F/cast was +2.6%)
Current Conditions Jun 87.1 vs 82.3 May (F/cast was 87.8)
Inflation Expectations Jun +3% vs +3.2% May (F/cast was +3%)
Sentiment Jun 78.1 vs 72.3 May (F/cast was 78.9)
Baker Hughes Total oil rig count 265 vs 266 prior
USD was slightly stronger vs Yen & Euro. Bitcoin -0.2% @ 9144.21,
VIX +7.8% @ 34.73,
US T10 0.64% yield falls as Texas curbs reopening due to rising covid cases
OIL Brent -0.3%, WTI -0.6% on rising covid-19 cases in US and China as stock levels remain around highs
Gold +0.8%, Silver +0.3%, Copper -0.4% Gold rebounds on haven status with many expecting it to hit $2000 by year end.
AHEAD Pending Home Sales, Dallas Fed Manufacturing
DAX -0.73%, CAC -0.18%, FTSE +0.2% Markets opened higher despite the recent IMF warning after ECB’s Lagarde said the worst was over (which I think is a bold call as we are still learning about covid) but she added that the recovery would be restrained as households save rather than spend. Markets initially dipped but then rebounded. They were around 1% higher mid session before selling down in the PM to close at day lows on concerns over rising US covid-19 cases. Europe has also reimposed some covid restrictions in Germany and Portugal.
Wirecard -64% filed for bankruptcy a big win for short sellers but will leave many mutual funds embarrassed and the regulator under pressure.
Lufthansa -6.2% despite acceptance of the bailout plan by a major shareholder as analysts still see risks in the plan.
Air France KLM -3.4% on news the Dutch government agreed a 3.4bn Euro rescued plan.
Weir Group +5% on news of its $950m refinancing of a revolving credit facility and a $248m term loan.
Intu +54.5% going into administration; it owns a number of UK shopping centres -VE
EUROZONE Loans to Households May +3% YoY vs +3% Apr (F/cast was +3.1%)
Loans to Companies May +7.3% YoY vs +6.6% Apr (F/cast was +7.2%)
M3 Money Supply May +8.9% YoY vs +8.3% Apr (F/cast was +8.8%)
GERMANY \ Import Prices May +0.3% MoM vs -1.8% Apr [May -7% YoY vs +6.6% Apr (F/cast was +7.2%)}
FRANCE Consumer Confidence Jun 97 vs 93 May (F/cast was 94)
UK Car Production May -95.4% YoY vs -99.7% Apr (F/cast was -78%)
EUROZONE Business Confidence, Consumer Confidence, Economic, Industrial & Services Sentiment, Consumer Inflation Expectations
GERMANY Inflation Rate
FRANCE No data due
UK Mortgage Approvals and Lending, BoE Consumer Credit