June 5 ASIAN MACRO INITIAL THOUGHTS
Covid-19 Globally over 6.54m cases, 387k deaths
US Futures open slightly higher
FT Reports that Hedge Funds expect another slump in markets as surging stock prices do not reflect the economic data and potential problems ahead. GMO has cut exposure; Jermny Granthan says stock markets are “lost in one-sided optimism”
Notable quote from Phil Blancato, CEO of Ladenburg Thalmann Asset Management. “I’ve never seen the market trade on this kind of euphoria without real data to back it up. We’re looking at the worst data in our lifetime. Yet, here we are at all-time highs,” Blancato added. “Those two don’t normally go together. The market either knows something we don’t or we’re trading on extreme optimism.” My feeling is that markets are trading on extreme optimism
DOW +0.05%, NDX -0.69%, S&P -0.34%, Russel 2K unchanged markets opened lower and initially rallied into the green briefly as the Challenger data beat forecasts and news of the ECB expanding its bond buying programme by more than expected but then declined as initial claims missed and other data was mixed. They then saw a further sell off in the last hour with a small uptick into the close. Tech names under pressure; Facebook -1.7%, Netflix -1.8%, Amazon -0.7%, Alphabet -1.7% and Apple -0.9%.
Back to work stocks continue to see good interest American Airlines +41% said it fly more that half its domestic flights in July, Delta +13.7%, United +16.2%, Southwest +5.1%. JPMorgan +2.1%, Citigroup +4.3%, Wells Fargo +4.8%, Bank of America +3.8%, MGM Resorts +7.2%.
Challenger Job Cuts May 397.016k vs 671.129k Apr (F/cast wa 810k)
Balance of Trade Apr US$-49.4b vs -42.3b Mar (F/cast was -54.3b)
Initial Claims 1.877m vs 2.126m prior (F/cast was 1.79m)
Unit Labour Costs Q1 Final +5.1% QoQ vs +2.2% Prior revised, (F/cast was +4.8%)
Non Farm Productivity Final Q1 -0.9% QoQ vs +1.2% Prior (F/cast was -2.5%)
Exports Apr US$151.28b vs 190.18b Mar (F/cast was 131.4b)
Imports Apr US$200.69b vs 232.52b Mar (F/cast was 185.7b)
EIA Natural Gas Stocks Change 29 May 102Bcf vs 109Bcf prior (Concensus was 110Bcf)
USD was weaker vs Yen & Euro. Bitcoin +1.8% @ 9,780.71, VIX +0.6% @ 25.81,
US T10 @ 0.81% as ECB boosts bond buying programme
OIL Brent +0.2%, WTI +0.3% as traders seek clarity on the output cuts
Gold +0.5%, Silver inch, Copper -0.14% but copper still seeing good demand from China
AHEAD Non Farm Payrolls, Unemployment Rate, Ave Weekly Hours, Average Hourly Earnings, Participation Rate, Baker Hughes Total Rig Count, Consumer Credit Change
DAX -0.45%, CAC -0.21%, FTSE -0.64% Markets opened lower and trade sideways testing Wednesday’s closing level a number of times but unable to break above. ECB expanded its bond buying programme (The PEPP) by Euro 600bn; more than expected but that failed to inspire the market. ECB President Lagarde said the Euro Zone faced and ‘unprecedented contraction’ and it expects the economy to contract by 8.7% this year before rebounding 5.2% in 2021 and 3.3% in 2022 which took the market by surprised and worried investors. The negative sentiment was added to by US initial claims coming in higher than expected. Autos led the markets lower.
Adidas +1.8% saying sales were back to normal in Greater China, where stores have been open since mid-April.
Remy Contreau +11.3% on earnings and the forecast of a strong 2H
Hammerson -13.7% following two strong days of upside.
FTSE 100 index review announced removal of Easyjet +6.2% and Carnival +1.7% but the stocks gained on re-opening hopes.
EUROZONE Construction PMI May 39.5 vs 15.1 Apr (F/cast was 34)
Retail Sales Apr -11.7% MoM vs -11.1% Mar revised (F/cast was -18.6%) [Apr -19.6% YoY vs -8.8% Mar revised (F/cast was -24%)
ECB Rate Decision unchanged but expanded the crisis bond-buying programme by more than expected
GERMANY Construction PMI May 40.1 vs 31.9 Apr (F/cast was 37.6)
FRANCE Construction PMI May 32.4 vs 3.8 Apr (F/cast was 33)
Retail Sales Apr -20% MoM vs -15.8% Mar revised (F/cast was -16.8%) [Apr -31.1% YoY vs -13.5% Mar revised (F/cast was -24%)
UK Construction PMI May 28.9 vs 8.2Apr (F/cast was 32)
New Car Sales May -89% vs -97.3% Apr (F/cast was -83%)
GERMANY Factory Orders
FRANCE No data due
UK Consumer Confidence released at 7am HK time (May -36 vs -33 Apr (F/cast was -34) Halifax House Price Index
JAPAN Expect Nikkei to open lower following the US. Key will be the premarket Household spending data but expect some consolidation ahead of the US jobs number and the weekend. Yen weaker currently 109.19 slight +VE for Exporters
Data due Pre market Household Spending (March was -4% MoM f/cast is -8.7%) Foreign Exchange Reserves, Later Coincident Index, Leading Economic Index.
Govt’s stimulus plans comes under fire from restaurant owners for favouring wagyu beef, melons and tourism rather than accelerating help for firms with burning cash needs; small businesses who employ 70% of the nations workforce and creates 17% of new employment.
Health concerns as Tokyo’s subway trains fill to almost normal levels as people return to work. Authorities had hoped to solve the problem with staggered hours and remote working but that is not working; rising covid-19 second wave concerns.
Japan has softened its stance on humanitarian grounds to allow foreign residents to re-enter the country regardless of their visa status. It also agreed to talks with New Zealand over easing travel restrictions.
Japan’s 3 major convenience store chains to charge for shopping bags from July 1, they will charge ¥3 for a plastic shopping bag, with ¥5 for extra large bags. Aeon Co. and leading drugstores have been charging for plastic shopping bags since April.
AUTO Toyota new car sales in China +20.1% YoY in May after +0.2% YoY in April having been -15.9% in March.
Honda Motor China new car sales -1.7% vs the -10% in April and -50.8% in March
Mazda Motor sales +31.6% to 22,886 units in May, highlighting that the car market has become robust in China with business activity returning to normal.+VE
SOUTH KOREA Expect markets to open lower following the US with Samsung under pressure. Markets closed Thursday closed a 100 day high; so expect some consolidation ahead of the weekend.
No data due
Samsung Group South Korean prosecutors have requested an arrest warrant for Samsung Group heir Jay Y. Lee, they said on Thursday, in the investigation of a 2015 merger and alleged accounting fraud in a suspected bid to aid his succession plans. -VE
LS Group three founding family members were indicted on Thursday for illegal inter-affiliate trading worth 25.5 billion won (US$20.9 million), prosecutors said. -VE
Inovio Pharmaceuticals Inc said on Thursday it plans to begin human trials of its potential COVID-19 vaccine in South Korea later in June, with support from Seoul-headquartered partner, non-profit organization International Vaccine Institute.
North Korea's leaders sister has warned South Korea to stop defectors from sending leaflets into the demilitarized zone separating the countries, saying it may cancel a recent bilateral military agreement if the activity persists. Interesting because it shows an increased presence just a month after there had been questions over the Supreme leader’s health.
South Korean game censorship body on Thursday gave an ultimatum to foreign firms that are distributing products here without receiving government ratings, launching a surgical strike on popular cloud platform Steam. Slight +VE for local game makers.
Doosan Heavy Industries & Construction Co.'s push to reshape its business portfolio is stirring concerns over the feasibility of the overhaul plan whose centerpiece is reduction of its mainstay coal and nuclear power businesses and expansion of its clout in the renewable energy realm. -VE
Samsung Display’s organic light-emitting diode display panels were acknowledged for their seamless performance during high-speed transmission, attesting their competency in the 5G network era, the company announced Thursday. +VE
The European Commission has resumed the screening of Hyundai Heavy Industries’ acquisition of Daewoo Shipbuilding & Marine Engineering after temporarily suspending the review amid the coronavirus pandemic, according to the commission on Thursday. -VE
TAIWAN Expect market to open lower following the US and the see some consolidation ahead of the data due after market , the US jobs data, and the weekend with China trade data due Sunday.
Data due after market Inflation Rate, Wholesale Prices, Foreign Exchange Reserves
The Coast Guard Administration (CGA) yesterday announced that it had dispatched ships to intercept Chinese dredging vessels operating in the nation’s territorial waters near Penghu and detained 10 crew members, who were transported to Kaohsiung. It was one of more than 20 dredging vessels in the area -VE for tension with China
Global smartphone shipments are to fall nearly 12 percent to 1.2 billion units this year, said IDC on Wednesday, citing lower consumer spending due to the economic effects of the COVID-19 pandemic. It follows a record 11.7% YoY drop in the three months ending March. The latest projections are a dramatic revision of an annual forecast by IDC in February, that predicted a -2.3% decline. Worth noting though that many people expect peripheries to see a sharp increase like bluetooth keyboards, Smartphone stands etc as aids for people working from home.
Property The government’s business climate monitor for the new property market in northern Taiwan last month flashed “yellow-blue” for the first time this year, as buying interest and supply both picked up on the back of improving sentiment and low interest rates, a report released yesterday by Chinese-language Housing Monthly. The monthly business gauge listed the market at 33.2, 2.2 points higher from a month earlier, ending five straight months of “blue,” which reflects a sluggish market.
Global semiconductor equipment billings +13% YoY to US$15.57 billion in Q1; with Taiwan remaining the top spender, trade group SEMI showed in a report released on Wednesday Taiwanese semiconductor makers spent US$4.02 billion on equipment in Q1, +6% YoY. Bolstered by TSMC’s investment in leading-edge technologies, including for 7-nanometer, 5-nanometer and 3-nanometer chips. +VE
The Financial Supervisory Commission (FSC) on Wednesday said that it would scrutinize the financial health of the buyer of Prudential Life Insurance Co of Taiwan after local media reported that potential buyers submitted bids on Monday.
Yageo Corp (MLCC), yesterday posted its strongest revenue since January last year thanks to a recovery in production capacity in China and robust customer demand. Revenue last month expanded 37.59 percent to NT$4.49 billion (US$150.04 million) from NT$3.26 billion in May last year. On a monthly basis, revenue rose 1 percent from NT$4.44 billion, despite fewer working days last month due to a longer Workers’ Day break in China. +VE
CHINA Expect market to open lower with investors cautious on US/China trade tensions and ahead of trade data due out Sunday.
No data due but due out Sunday Balance of Trade, Exports, Imports, Foreign Exchange Reserves
US Secretary of State Pompeo urged global stock exchanges to tighten rules for Chinese companies. He warned American investors on Thursday against 'fraudulent' accounting practices of China-based companies and suggested the Nasdaq's recent decision to tighten listing rules for such players should the standard. -VE for sentiment and US/China relations.
Facebook took steps on Thursday to reduce the role of state-backed media outlets from Russia and China; it will now add labels to the Facebook pages of Russia Today, Sputnik, Xinhua News and People’s Daily, among others, warning people that these were state-controlled outlets.
HONG KONG ADR’s -70pts to open at 24,296 but I expect more downside and possibly some early margin call selling and rotation selling especially as NetEase has tied up a reported HK$86bn in margin financing. Also concerns over the US jobs number and the weekend. Tiananmen Sq vigil saw thousands of defiant protesters ignored the police ban in Victoria Park and elsewhere but was peaceful.
Data due Foreign Exchange Reserves
Administration passed National Anthem Bill which criminalises ‘disrespect’ of China’s national anthem.
Short Selling HSI Thursday 20.8% vs 18% Wednesday Top Shorts Shenzhou (2313) 43%, Ping An (2318) 38%, ICBC (1398) 38%, China Res Land (1109) 38%, Wharf REIC (1997) 37%, AAC Tech (2018) 36%, Bank Comm (3328) 34%, Techtronics (669) 29%, CKI (1038) 29%, Henderson Land (12) 26%, MTRC (66) 26%, Galaxy Ent (27) 26%, Tencent (700) 26%, Bank of China (3988) 25%, CLP (2) 25%, Country Garden (2007) 25%.
INSIDER TRADING TENCENT (700 HK) Martin Lau sold 600k shares in his third sale this year and raised HK$247m as the stock rallied above HK$400 per share.
HKEX says many US listed Chinese companies are considering a HK listing due to US political pressure.
WANG ON PPT (1243.HK -69%) said that the Board has noted the decrease in the price and increase in the trading volume of the shares of the Company today (4 June). The Board confirms that it is not aware of any reasons for such decrease in the price and increase in the trading volume of the shares. Volume of 549 million shares and turnover of $230 million.
COUNTRY GARDEN (2007.HK) contracted sales in May RMB56.11 billion, +3.29% YoY
TRULY INT'L (732.HK) unaudited net consolidated turnover of the Group was HK$1.884 bn for May 2020 (-5.4% YoY) and its unaudited net accumulative consolidated turnover for the five months ended 31 May 2020 HK$8.398 bn (-0.6% YoY).
HKTV (1137.HK) the average daily order number in May was 30,400, +120.3% YoY average order value was $500, -8.8% yearly.
CH OVS G OCEANS (81.HK) Jan to May 2020, total property contracted sales RMB17.286 bn +4.6% YoY and the total contracted GFA reached 1.4994 million square meters, -2.6% YoY
SHIMAO PROPERTY (813.HK) May, contracted sales amounted RMB22.02 bn +37% YoY and the contracted sold area 1.26m sq.m +41% YoY The ave selling price was RMB17,469 per sq.m.
TENCENT (700.HK)-backed WeDoctor is seeking to go public in Hong Kong over the next few months that will raise US$700-800 million, the South China Morning Post citing insiders. The online digital healthcare service provider has tapped CM Bank, Citigroup and JP Morgan to help attract investors.
GEMDALE PPT (535.HK) May contracted sales RMB7.567 bn, +52.3% YoY
ONE MEDIA GROUP (426.HK) PROFIT WARNING, expecting to record an increase loss of 400% YoY from continuing operations for the year ended 31st March 2020 and an increased loss of 120% YoY loss for the year ended 31st March 2020. It is mainly attributable to the decrease in advertising revenue of the Group, as a result of the weakening local economy, and the non-cash provisions for impairment loss of approximately HK$10 million for intangible assets, right-of-use assets and property, plant and equipment.
Centa Valuation Index (Major Banks) (CVI) last printed at 88.93 -1.17 pts WoW. The reading implied the re-emerging social incidents, and banks' changing stance toward mortgage valuations in near term. Threats of COVID-19's resurgence have yet to be factored in. They expected the index to stand firmly aloft 80, foretelling a constant home price upswing.
Singapore Airlines announced resumption of Hong Kong flights starting from 10 June. Three flights will be running every week between Singapore and Hong Kong. +VE for re-opening theme