June 8 ASIAN MACRO INITIAL THOUGHTS Dow futures rallied to +190pts
Covid-19 Globally over 6.9m cases, 400k deaths
OPEC+ agreed to extend the current production cuts for a month.
DOW futures open +100pts and have rallied to +190pts at the time of writing; with S&P and NDX higher too
Key this week will be the S&P 3,200 resistance level, FOMC meeting and Inflation data.
HK Heavy rain over the weekend caused flooding and landslides and a heavy rain warning has already been issued this morning.
DOW 3.15%, NDX +2.06%, S&P +2.62%, Russel 2K +3.86% But markets closed off their highs. The payrolls number was much better than expected (but NB collecting the data was affected by the shutdown and doesn’t tally with recent Unemployment data) and the markets took the news positively. Nasdaq closed at an all time high and touched a new intraday record. Airlines continued to rally along with the cruise operators. Retail did well; Simon Property +15.4%, Kohl’s +11 and Nordstrom +6%. Banks rallied to; JPMorgan +4.5%, Citigroup +5.8%, Wells Fargo +4.8% and Bank of America +5%
Non Farm Payrolls May 2.509m vs -20.687m Apr (F/cast was -8.87m)
Unemployment Rate May 13.3% vs 14.7 Apr (F/cast was 19.5%)
Ave Weekly Hours May 34.7 vs 34.2 Apr (F/cast was 34.2)
Average Hourly Earnings May +6.7% YoY vs 8% Apr (revised) (Consensus was 8.5%) [May -1% MoM vs +4.7% Apr (revised) (Consensus was +1%)]
Participation Rate May 60.8% vs 60.2% Apr (F/cast was 60%)
Baker Hughes Total Rig Count 284 vs 301 prior
Consumer Credit Change Apr $-68.78b vs -12.04b (F/cast was -23bn)
USD was stronger vs Yen & Euro. Bitcoin -0.5% @ 9,608.79, VIX -5% @ 24.52,
US T10 0.893% bur did move above 0.9% after the jobs report
OIL Brent +5.2%, WTI +5.7%
Gold -2.2%, Silver -2.72%, Copper +2.1%
AHEAD Consumer Inflation Expectations
DAX +3.36%, CAC +3.71%, FTSE +2.25% Markets opened higher but then dipped (German factory orders were weak and UK Consumer Confidence missed but House prices beat) before working higher. Then boosted in the PM by the good US jobs data; to close at their highs.
GERMAN Factory Orders Apr -25.8% vs -15% Mar revised (F/cast was -21.3%)
UK Consumer Confidence May -36 vs -33 Apr (F/cast was -34)
Halifax House Price Index May -0.2% MoM vs -0.6% Apr (F/cast was -1%) [May +2.6% YoY vs +2.7% Apr (F/cast was +1.9%)]
EUROZONE No data due
GERMANY Industrial Production
FRANCE No data due
UK No data due
JAPAN Expect Nikkei to open higher following the US and China data but market will be influenced by the pre market GDP data which is expected to show a smaller contraction thanks to stronger business spending.
Yen currently 109.64
Data due GDP Growth Rate Data (Annualised, Price Index, Capital Expenditure, External Demand, Private Consumption) Current Account, Later Eco Watchers Outlook and Current.
Japan has decided not join the United States, Britain and others in issuing a statement scolding China for imposing a new security law, Kyodo news agency reported on Sunday, citing officials from countries involved. But Tokyo did see protests support of action against racism and police brutality.
Fujifilm Holdings (4901.T) research on Avigan as a potential treatment for COVID-19 may drag on until July, the company said on Sunday, a further setback in the Japanese firm’s race to find a vaccine. -VE
Takeshi Niinami, the head of Japanese drinks and food group Suntory Holdings and a government adviser, predicted on Friday that more than 20% of bars and restaurants could fail due to the coronavirus pandemic. -VE
Tokyo Governor warns that the Olympics are under threat unless there is a del on quarantine and travel. -VE
Resona plans to cut office work to zero in three to five years. I think slightly -VE
Nippon Steel to furlough workers through to March next year -VE
Japanese airlines promote anti-virus measures to get wary passengers back on board +VE
Companies complain red tape and costly commission fees involved in applying for state subsidies have led some Japanese companies hit by the coronavirus pandemic to give up on seeking support to retain their employees. Businesses say they cannot receive the much-needed funds because they need to hire licensed social insurance labor consultants to fill in the plethora of paperwork required, and that could cost more than the amount they receive. -VE
SOUTH KOREA Expect markets to open higher following the US jobs data and the good China trade data.
No data due; a light week for data only Unemployment and Import/Export prices this week
North Korea lashed out at South Korea for the second day in a row on Friday, threatening to close an inter-Korean liaison office and calling the South naive to think the North wants dialogue and negotiations right now. Slight -VE for sentiment.
Samsung reiterates that 2015 merger of Samsung C&T and Cheil Industries was legitimate. I think indicates the management is under pressure. Slight -VE
LG Plus renews supply deals with local 5G equipment firms Ubiquoss and Dasan Network Solutions to supply 5G equipment.
Hyundai Heavy warns that some customers have already asked for deferments on delivery and in making payments and that the recent deal over LPG carriers would no be enough to keep the sector going -VE f
Hyundai delays delivery of GV80 SUV due to engine vibration problems -VE
Asiana to resume flights to Hanoi in 3 months
TAIWAN Expect market to open higher following the US rally and good China trade data.
Data due After market Balance of Trade, Exports, Imports
After market Friday
Inflation Rate May -1.19% YoY vs -0.96% Apr (F/cast was -1.2%) [May -0.12% MoM vs -0.72% Apr (F/cast was -0.5%)]
Wholesale Prices May -11.6% YoY vs -10.75% Apr (F/cast was -10.4%)
Foreign Exchange Reserves May $484.41bn vs 481.78bn Apr (F/cast was 482bn)
Taiwan opposition candidate Han Kuo-yu was removed as mayor of Kaohsiung after heavy defeat in recall election. The defeated presidential contender was elected in a landslide less 18 months ago, but Saturday’s vote to remove him was even larger. The KMT politician was reportedly Beijing’s preferred candidate in January’s vote and analysts say scale of backlash shows growing resentment of mainland China’s actions. The party moved to distance itself from China as attitudes harden towards Beijing on the democratic island that is claimed by China, in a similar way to which it claims much of the South China Sea. President Tsai called for reconciliation between the parties going forward.
Quanta Storage a subsidiary of contract laptop maker Quanta Computer Inc Sid yesterday it could not accept a US federal appeals court’s ruling in a price-fixing case, and would continue to appeal. The company was shocked by the US Court of Appeals’ ruling on Friday to turn over essentially all of its assets to HP Inc to satisfy a US$439 million antitrust judgement handed down in January. Slight -VE
Formosa Plastics Group’s (FPG,) combine revenue of the four major subsidiaries last month fell by a double-digit percentage point from a year earlier, as the COVID-19 pandemic weakened downstream demand and reduced average selling prices. The consolidated revenue of Formosa Plastics Corp, Nan Ya Plastics Corp, Formosa Petrochemical Corp and Formosa Chemicals & Fibre Corp totalled NT$76.57 bn (US$2.57 bn), -40.4 percent, the firms’ stock exchange filings on Friday showed. -VE
Yageo Corp said that although order visibility for next quarter is vague, it is stepping up restocking in preparation for demand after the COVID-19 pandemic ends. The company has forecast double-digit percentage quarterly revenue growth this quarter on recovering customer demand, but is uncertain whether the momentum would extend into the second half of the year. Slight +VE
Largan Precision Friday posted May Sales -23% YoY, marking the company’s second consecutive month of annual declines. In line with the company’s expectation of a gradual monthly decline this quarter, due to strong market uncertainty fostered by the COVID-19 pandemic. This bucks what is typically a seasonal uptrend, as monthly sales usually increase from March onward as companies move to restock inventories ahead of new product launches in the third quarter.
Gasoline and diesel prices are to increase today by NT$0.7 and NT$0.6 per liter respectively to reflect a steady increase in global crude oil prices, CPC Corp, Taiwan and Formosa Petrochemical Corp announced Sunday.
CHINA Expect market to open higher on better than expected trade data. This week we get inflation data (Wednesday) and New Loans data (due Friday).
No data due
Out Sunday Balance of Trade May US$62.93bn vs 45.34bn Apr (F/cast was 41.8bn)
Exports May -3.3% YoY vs +3.5% Apr (F/cast was -8.4%)
Imports May -16.7% YoY vs -14.2% Apr (F/cast was -10.8%)
Foreign Exchange Reserves May US$$3.102tn vs 3.092tn (F/cast was 3.1tn)
Exports boosted by the dale of medical equipment and imposts by the drop in price for oil, natural gas and soy beans
China warns the US over comments on Taiwan saying it violates the one China principle. China is talking about calls for Taiwanese independence. Taiwan is independent; it does not relay on China for anything. In fact, in reality China relies upon Taiwanese companies to set up manufacturing in China; which is changing.
Press says that Covid-19 shows the global cost of heavy Chinese censorship.
China denies coronavirus cover-up and insists relations with rest of world have not been damaged. Beijing published a lengthy white paper defending its ‘transparency’ and ‘openness’ after reports World Health Organisation officials were frustrated by delays in releasing information. Foreign vice-minister says relations with most countries have improved but a ‘very few’ have ‘smeared’ China and forced it to defend itself
China warns against travel to Australia on the ground of discrimination and violence related to covid-19.
China will strengthen international cooperation in future COVID-19 clinical vaccine trials, building on earlier collaboration in vaccine development, the science and technology minister said on Sunday.
Huawei will today launch a campaign to try to save its role in Britain’s 5G networks, urging UK prime minister Boris Johnson not to “overestimate the risk of security and forget the economic impact” of delaying the rollout of superfast broadband, reprots the FT.
HONG KONG ADR’s +279pts to open at 25,049 but expect a further squeeze higher after better than expected China trade data. Petro stocks +VE as OPEC+ extend cuts.
No data due but After Market Friday
Foreign Exchange Reserves May US$442.3bn vs 441.2b Apr. +0.23% MoM (F/cast was 445b) includes unsettled foreign exchange contracts. The growth curve in reserves looks to be flattening; slight -VE
Short Selling HSI Friday 14% vs 20.8% Thursday
Top Shorts Wharf REIC (1997) 40%, Shenzhou (2313) 38%, China Res Land (1109) 31%, Ping An (2318) 25%, China Unicom (762) 23%, MTRC (66) 23%, Henderson Land (12) 23%, CSPC Pharma (1093) 22%, Galaxy Ent (27) 22%, ICBC (1398) 21%, Want Want (151) 21%.
Govt says its will not change its stance on the National Security Law in the face of labour unions and student groups intention to hold a referendum on June 14. Martin Lee accused Beijing of insincerity in saying that it was listening to public opinion.
Civil Service Chief says HK civil servants serve both the SAR and Beijing but unions call for clarification as the Basic Law only refers to the SAR government.
FIH (2038.HK) PROFIT WARNING expecting the Group’s revenue for the four months ended 30 April 2020 (YTD April 2020) is likely to be around US$2.4 billion, -42.86% YoY. Further, the Company expects the Group to record a consolidated net loss of around US$75.1 million for YTD April 2020, -13.08% YoY; I don’t think this will come as a total surprise but expect weakness in the stock and Hon Hai in Taiwan
HANG LUNG PPT (101.HK) and HANG LUNG GROUP (10.HK) PROFIT WARNING jointly announced that due to COVID-19, the 2020 financial results may be adversely affected by a revaluation loss of the investment properties in Hong Kong and Mainland China and the granting of support measures (including rent relief) to the Group’s tenants in Hong Kong and Mainland China. The Group expected to report a loss attributable to shareholders in the 2020 financial statements, mainly caused by a revaluation loss of the investment properties. I would expect more warnings from the other Property investors in the near future.
SHKP sold 680 out of 699 units at Wetland Seasons Park Phase 2 in Tin Shui Wai. It hopes to get pre-sale consent for Phase 3 (318 units) in the next quarter. +VE
Secondary Centaline say 13 transactions +18% WoW and for the month of May says secondary sales were +64% MoM +VE for sentiment.
CLP HOLDINGS (2.HK) and HK&S HOTELS (45.HK) Chairman expressed support for the Hong Kong national security law in an SCMP interview, but urged the government to ease the public's fears by revealing the details and secure their backing. Kadoorie is the latest local business tycoon to advocate Beijing's push for the legislation.
HK & CHINA GAS (3.HK) will likely record a single-digit fall in Hong Kong's 1H20 gas sales volume due to a plunge in the visitor number and a less frequent dinning-out amid the coronavirus pandemic, said Managing Director Alfred Chan. Hong Kong's FY20 gas sales volume was expected to slide about 2-3% along with a slowing outspread of plague, added Executive Director Peter Wong Wai-yee, assuming China's FY20 gas sales volume to grow 4-5% despite a 12% slump in 1Q20.
Chinese Ministry of Foreign Affairs news conference, spokesperson Geng Shuang stated that China as always holds zero tolerance against any shoddy financial practice behavior among listed companies and that the U.S. is wrong to accuse Chinese firms of not abiding by relevant US regulations. Washington's remark against Beijing is purely political manipulation of scrutiny issues, opined Geng, and she is going to undermine US investors' interest by kicking Chinese firms out from US bourses.
BYD COMPANY (1211.HK) said sales volume during the first five months of 2020 totaled 124,900 vehicles, -34.03% YoY
HENDERSON LAND (12.HK)'s "Double Cove" has sold ten specialty flats by way of tender within a month, cashing in over $350 million, revealed Thomas Lam, General Manager of Sales (1) Department at HENDERSON LAND. Of which, two specialty units with private parking space were sold at $42.259 million and $51.036 million, respectively, over the week.
JD.com on the first day of its 618 anniversary celebration (1 June), recorded a 266% YoY sales turnover growth in Hong Kong, and a 370% YoY spike in the number of Hong Kong users, setting a historical high.
Centa-City Leading Index (CCL) last printed at 180.26, surpassing 178.84 in February to a YTD peak and logging a 27-week high. The index +0.96% this week, the sharpest rise in 29 weeks. Home price rally ran on after the May Day holiday. CCL surged 2.45% in three weeks, with magnifying weekly growth of 0.91%, 0.56% and 0.96%. The impact of renewed social incident and local COVID-19 infection will be factored in CCL in the coming weeks.
UNITED AIRLINES to close cabin crew base in Hong Kong and other cities -VE for Hong Kong sentiment.
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