Asian markets Mixed
Japan encouragingly the Nikkei opened weakly but has traded higher building on yesterday’s close that was at a three month high.
S Korea is mixed the Kospi traded sideways in the green while the Kosdaq trended lower in the red.
Taiwan trading sideways but is holding above 11,000 although upside capped on concerns over China’s intentions.
HK opened higher but has trended lower. Local tensions are high ahead of the Legco debating a bill criminalising disrespect of China's national anthem and against plans by Beijing to impose national security laws.
China opened lower and trending lower with concerns over Washington retaliation vs stimulus from Beijing.
China-Australia war of words unnerves business. Contrasts the relationship in 2014 and now. Then they were friends and there was talk about deepening political trust and expanding co-operation. Today there is mainly distrust and hostility. To quote the FT 'The depth of Beijing’s hostility towards Australia is perhaps best illustrated by its state media, which have described Canberra as “a giant kangaroo that serves as a dog of the US”, and as “chewing gum stuck on the sole of China’s shoes”.’
It cites Rory Medcalf of the Australian National University “….. China has changed, with Xi Jinping taking it in a direction of internal repression and external assertiveness.” And Dave Sharma, an Australian government MP and former diplomat said “The wolf warrior diplomacy we are seeing in Australia is becoming replicated around the world,”
China is banking on its trade importance to Australia. To an extent it is working in that people and businesses are questioning the Australian governments policies towards China and the US in the light of the new sanctions. But it's a rift that has been growing for years; China’s aggression in the South China Sea, its attempts to build links towards a number of the Polynesian countries including wanting to build an undersea cable link between them and Australia. China’s growing interference in Australian politics and businesses which prompted Australia to introduce foreign interference laws and bank Huawei from its 5G networks. It is notable that China feels that it is well within its rights to promote is thinking and influence in other countries but will not allow anyone to do the same in China.
To my mind, much of the change came when Bo Xilai made a bid to oppose President Xi that triggered a change; President Xi went from just being president to seeing himself as the saviour of the true communist party and ways. He has in many ways followed Mao’s path from liberal reformer to dictator and I think, just as under Mao much good was done, so too was much harm.
Israel vetoes Hong Kong water plant bid under US pressure Looks at how the bid from CK Hutchison Holdings, controlled by Hong Kong billionaire Li Ka-shing was rejected after comments from US Sec of State Pompeo having previously been expected to win. The similarities between Trump’s policies and Xi’s are remarkable
China, the US and the threat to globalisation by Martin Wolf The world has been here before and knows that superpower rivalry can only bring ruin. Compares the rivalry of the early 20th century to todays situation and notes that 'A fascinating paper by Markus Brunnermeier and Harold James of Princeton University and Rush Doshi of Brookings argues that “the rivalry between China and the US in the twenty-first century holds an uncanny resemblance to the one between Germany and Great Britain in the nineteenth”.’ Cites a paper by Maurice Obstfeld, former chief economist of the IMF, which shows 'it took 60 years before economic integration returned to 1913 levels relative to global output. Globalisation then went far further, prior to the global financial crisis of 2008. In the process, it also brought about a large reduction in global inequality and mass poverty.’
It compares that to our current situation, notes that Larry Summers has argued that covid-19 could be a ‘hinge moment in history’. Not for changing trends but for accelerating them. It expects the world post covid-19 will be a lot less co-operative than it was before. It calls on us all to realise that history shows that there were a lot of terrible mistakes and we should seek to avoid those mistakes this time around. Not least that in the past the competition ended in war. Today’s weapons of war are far more destructive than last time. It calls on us to rise to the occasion.
Great words but the trouble is that the two people at the centre of the conflict do not listen to the opinions of reasonable people let alone ordinary people. A good read.
Japan reopens with karaoke masks in a ‘new kind of daily life’. Looks at how life in Japan will be now the State of Emergency has been lifted but before a vaccine is available. PM Abe wants people too have a new way of thinking. Industry associations have already set out over 100 guidelines and there is consensus on avoiding the ’ “three Cs”: closed spaces, crowded places and close-contact settings.’ The guidelines for Karaoke are now set with ‘peace of mind’ being the focus rather than enjoyment. It is apparent that in many actives that is the standard. Important to remember that these ‘guidelines’ are just that and should only be in existence until a vaccine and drug treatments are available. It’s probably also worth remembering that people have free will to take risks that they consider reasonable; that is after all the benefit of living in a free society. Read also Reality strikes for Italian workforce as meetings and coffee break banned. Which also notes how design is changing as a result of covid-19. The company makes door handles; going forward they will use more copper for its natural antimicrobial properties. Also the design is being changed to allow for elbow use rather than hand. The question will be how many of there’s are long term changes and how may just short term. A widespread use of copper could make a significant impact on global demand, as covid-19 could be just of the first of many variants to come.
Coronavirus spawns new generation of Japanese stock pickers. Notes that many ordinary Japanese people have opened stock trading accounts and been focused primarily on the Mother’s market ('321-member group of biotech, software, fintech and other start-up companies, many with fragile and untested business models.’). The market has seen increased trading volumes and sometimes trading more than the TSE Second section. The remarkable thing about it is that since the 1980’s the Japanese have been net sellers. So as Japan comes out of the State of Emergency it will be interesting to see if these new investors remain active.
Singapore fears biggest drop in GDP since independence. It’s revised its forecasts from a 1%-4% contraction up to a fall of between 4% -7%. Those are just the current revisions because there is still uncertainty over the outlook both in terms of length and severity of covid-19 and the speed of recovery. As with most economies there are some sectors that have been hit badly and others that have seen upside. For Singapore those hit include 'construction, transport, wholesale and retail.' The gainers are seen as' biomedical manufacturing, finance and insurance’. Singapore is slowly re-opening with schools and selective businesses restarting yesterday. With more expected to re-open next month.
Failed trades stress triggered urgent Wall Street clean-up. Massive volumes led to first emergency exercise to clear backlog of deals gone wrong. One reason why many will welcome the return to the office; the systems are better and the getting trades sorted can be done quicker. Also for banks and brokers there can be increased unknown risks because of unknown failed trades which can escalate into serious problems if not identified quickly, with some large costs involved too. Working from home is really only a temporary solution for a lot of brokers unless their companies have ensured they have the invested in the home solution. Some of the institutions in Asia have, with good broadband and sometimes a back up, along with a secondary power supply. Big brokers are unlikely to make such investments and hence the return to the office is inevitable. To say nothing about the advantage of the shared information on the desk.
Merck dashes hopes on vaccine timeframe. The CEO says the 12 -18 month vaccine timeframe that Trump wants to see happen for a vaccine to be produced is very aggressive, and has refused to signup for Trumps timetable. He makes the very sound point that very large clinical trials ar going to be needed and those can take months if not years. In his view the paramount concern should be that corners are not cut and that the vaccine is as safe as possible. Previous ‘rushed’ vaccines have been found to have some serious -VE side effects. He also mentioned that Merck is developing two possible covid vaccines and a drug for infected people. It comes as he announced the acquisition of Themis Bioscience who is also working on a covid-19 vaccine. See also Japan delays approval of Fujifilm flu drug. Trials take time
French tests show strong protection follows mild infection. Encouraging news but as the team points out too soon to know what the longer term implications. The question is now how long will the immunity last? Evidence from other coronaviruses suggests that it is not long lasting. So protection built up against the first wave might not last long enough to prevent infection in the second wave. So whilst positive it really just illustrates how little we really know about the virus so far. That should be a reason for investors to remain cautious about the speed and trajectory of a possible recovery.
FT BIG READ. US SOCIETY Fear of a post-pandemic exodus. As New York prepares to start easing lockdown, many are worried about a permanent flight of talent. Although the city has survived many crises, some believe it will need to reinvent itself again.
Obituary Tycoon who dominated Macau gaming industry Stanley Ho Businessman 1921-2020
A colourful man and I thought a generous man. My only experience of that being years ago when Ceril Moore was running Zung Fu and sponsoring a motor cycle team at the Macau Grand Prix. In all the organising he had forgotten to book his (and family) accommodation and transport to Macau, so he phoned up Stanley and asked if he could help. Within hours tickets arrived for the passage and rooms were secured. It was a great weekend at the old Lisboa. Approachable and friendly which no doubt aided him in his success as a businessman. Now with his death the family will be once again battling for control of his empire. Stanley Ho RIP.
Feedback and comments welcome