Market opened lower and sold down to 7,480 in the first 40 minutes before finding support and then rebounded to 7,514 around 1pm and now trending lower. Earnings remain the main focus with weakness in Appen, Endeavour, a2 Milk and Link, but Qantas and Woolies shares rose. Commodity names +VE as Oil and Iron ore prices rose.
Data Private Capital Expenditure Q2 +4.4% QoQ vs +6% Q1 Revised (F/cast was +2.6%)
Nikkei opened higher but trended lower through the morning to a low of 27,685 just before lunch. PM opened higher around flat.
Topix traded in a similar fashion currently -2pts (-0.1%) @ 1,934 but on very light volumes (-17% DoD).
Chip makers in focus on TSMC price hike and Western Digital/Kioxia merger news. Shippers seeing some weakness, Value/Rates names seeing +VE interest following the BoK rate hike.
PM Suga getting key LDP support slightly +VE for sentiment along with the drop in covid cases.
Flows show buying in Financials, Telcos, Electronics. Selling of Retail, Insurers and Metals
KDCA announced 1,882 new covid cases (-273 DoD) and 52.7% of people vaccinated. +VE BoK raised interest rate to 0.75% which surprised many and prompted a wave of selling coming as it does after warnings about the levels of household debt. Foreigner and Local Institutions selling
Kospi opened higher at 3,151 and initially ticked higher but then trended lower to -23pts (-0.8%) @ 3,123. NCSoft very weak as new game Blade and Soul 2 fails to get good traction. Tech trading around neutral. Steel weak.
Kosdaq traded up to 1,026 in early trades but sold down on BoK decision; rebounded but then trended lower again currently -1.4pts (-0.1%) @ 1,016 retesting the earlier low.
Taiex opened higher but sold down initial support at 17,000 but starting to see that fail. Tech under pressure after recent gains and news of price increases from TSMC and UMC. Shipping also seeing gains locked in.
CSI 300 opened lower and trended lower with selling until found support at 4,820 level At lunch -68pts (-1.4%) @ 4,830. Moutai names weak on expectation news of cutting prices ahead.
HK Opened @ 25,673 -20pts vs +71pts ADR’s results in focus with strength in Xiaomi and Mengniu Dairy (shorted recently). Market tested yesterday’s close in early trades but with out success and after 30 minutes the market trended lower, -370pts (-1.4%) @ 25,324; Healthcare and Ecommerce leading the declines. Evergrande -6.6% on profit warning, ACC Tech -12% and Sunny Optical -4%. Another big day for earnings.
Expect markets to open lower following the weakness in Asian, European data and ahead of US GDP, Initial Claims and Jackson Hole tomorrow.
Eurozone Loans to Households, Companies and M3. ECB Monetary Policy Meeting Accounts.
Germany Consumer Confidence
France Business Confidence & Climate Indicators
UK Car production
Opened Dow +25pts, S&P +0.03%, NDX flat, have since; Dow-30pts, S&P -0.2% and NDX -0.24%
Ahead AHEAD GDP Price Index, Corporate Profits, Initial Claims, 4 Week Ave, Continuing Claims, PCE Prices, Core PCE Prices, EIA Gas Report, Kansas Fed Manufacturing Index.
Earnings: HP, Dell, Gap, Abercrombie and Fitch, Dollar General, Dollar Tree, Hain’s Celestial, Ulta Beauty, Peloton, Workday, VMWare, Ollie’s Bargain, Marvell, Toronto-Dominion, Sanderson Farms
Biden’s CIA report on the origin of Covid is inconclusive as China says it will take action against those that seek to blame it for the outbreak.
SCMP has a number of interesting articles on local issues. Such as
No Link between national security law and exodus. Quotes Huang Liuquan deputy director of the State Council’s HK and Macua Affairs Office who said it was normal especially during amid the coronavirus pandemic. Comes after the Government announced 89,000 residents had left. Personally I think it has a lot to do with the new law after all from a covid point of view Hong Kong is one of the safest places in the world because a lot of residents experienced SAR’s. The big difference is that during SAR’s a number of expat families did leave but not permanently, that can be seen in the fact that they did not withdraw their MPF savings; which you can only do if you intend to permanently leave Hong Kong. So whilst official’s may have their view a lot of people in Hong Kong are expressing theirs. I would also point out that it is currently difficult to leave HK due to flight restrictions, so you can expect the number to rise in the months ahead.
Alliance behind June 4 vigil invested for collusion. National Security Police looking into events that pre date the laws inclusion into Hong Kong Ordinance; seeing information back to 2014, seven years ago. The group say the allegation is rediculous. It will be interesting to see whether they are empowered to look into cases that predate the law.
US will use covid-19 origins report as a political weapon Wang warns. Interestingly giving the warning before the US report was released. Also worth noting the VP Harris has not mentioned the source of covid in her speeches only supplying vaccines.
Xi,Putin agree co-operation on Afghan security risk. FT opinion makes the good point that everyone that borders Afghanistan will have threats.
Beijing Officials visit gets key message across. Suggests that that is not so much the 14th five year plan but that local officials should be pushing forward polices from a Beijing perspective so that cross-border economic development would develop under the new political climate. To me that seems aimed at eroding Hong Kong’s unique status.
Beijing to expand influence in Africa via digital policies.
Obviously digital is the key way forward but I think this is linked to Beijing’s desire to set the standard in Central Bank Digital Currencies and in so doing seek to squeeze the US dollar out of Asia and Africa and replace it with the digital Yuan. I’ve written about this before and it is a stated Chinese objective. If you’d like my previous article let me know.
There is also a headline Coal plant approvals drop after Xi’s climate pledge. Interestingly whilst approvals are down the provinces are will to finance coal powered projects.
China’s tutoring crackdown a boom to Indian start-ups looks at the wave of money focused on the sector. To me it also highlights that China could find it losing out to India and others due to the clampdown. The goal for China may be to increase the population but it could find that policy doesn’t work; especially after 30 years ofsaying one child. Worse still it might find itself reliant on factory robots designed or programmed by Indian’s.
FT Front Page
Harris tests mood in Asia
The US vice-president is on a tour of south-east Asia aimed at bolstering Washington’s influence in the face of increasing Chinese assertiveness, and to see first-hand the region’s recovery from the Covid-19 pandemic.
UK watchdog’s Binance warning raises alarm over crypto-platforms
• FCA sees risks to consumers • Exchange fails to answer queries • Group has no fixed HQ.
Makes the point that supervision of a company with no HQ is not really possible. Whilst Binance says it is co-operating it is likely to face further pressure to conform to the business norm of having an HQ in order to be accepted by regulatory authorities.
See also LEX FCA/Binance: flunked and incapable. It makes the point ‘In fairness to the regulators, their powers over cryptocurrency exchanges are circumscribed. But the problem here is not just that regulation needs to catch up with new technology. It is that new technology may be able to circumvent regulation altogether.’
Delta makes unvaccinated staff pay up as Biden pushes business to get tough With full FDA approval of a vaccine people have little excuse not to get vaccinated and authorities are going from the ‘carrots’ to the ‘sticks’ to get citizens vaccinated. The next stage is really for governments to accept that covid is something that we are going to have to live with and that once vaccinated citizens should have their freedoms returned including the ability to mix and travel.
Read also Goldman Sachs calls the shots on vaccines Wall Street banks lead way in requiring proof of jabs as FDA approves use of Pfizer version
Seoul urges Biden to end vaccine deadlock
Drug companies resist South Korea call to share production technology.
An interesting read about how the S Korean government wants the US government to force US companies to hand over the Intellectual Property (IP) for producing the covid mRNA vaccines. Raises the question of who owns the IP; made more interesting when you consider the funding that the US government provided some of the drug companies to develop the vaccines.
The key being that S Korean companies have not been able to secure IP licensing deals although it is not clear why.
Companies & Markets
OnlyFans scraps ban on explicit content
Platform’s U-turn follows ‘assurances’ of support from financial institutions. An interesting reversal following yesterday’s article.
Pinduoduo shares soar on $1.5bn charity donation plan Comes at Ecommerce companies embrace President Xi’s ‘common prosperity’ call. It follows Tencent and others who have also adopted similar plans and its worth noting that Alibaba founder had also been philanthropic.
For investors these donations will be seen as another cost of doing business in China which is likely to make the companies less attractive relative to international peers. The additional cost and the current regulatory clampdown I think will make it much more difficult for these companies to achieve the profit levels that investors expect. It is interesting to note another article that looks at the expansion of Indian learning apps.
Bain sheds control of S Korean Botox maker
Hugel sold down on the news on concerns over itsUS expansion plans without Bain’s backing. Bain though has done well receiving $1.5bn for a $816m investment in 2017.
High-speed traders bet launch of Pyth will ‘revolutionise’ deals data provision
A crypto project using blockchain for data distribution by pooling the resources from Jump Trading, Virtu Financial, GTS, Hudson River Trading and DRW Cumberland along with US stock exchanges IEX and MIAX Pearl, currency venue LMAX and crypto derivatives exchange FTX. It could be bad news for bourses who have increasingly made profits from the data they sell to market users.
Its built on the Solana blockchain which can handle 50,000 trades per second similar to the Visa network but faster than a lot of blockchain platforms. An interesting read.
Investors probe central banks for profound shifts By Karen Ward chief market strategist for Emea at JPMorgan Asset Management.
An interesting read about why it is important for investors to be aware of any changes in Central Govt policy; especially with so many markets are trading at highs and in the light of the Bank of Korea raising rates this morning.
Editorial Jackson Hole offers Fed a chance to provide clarity
Delta variant’s spread will overshadow the central banking jamboree Concludes ‘Powell’s speech this year may not be able to deliver such fireworks, but that does not make it less challenging. The Fed faces a very uncertain outlook but it can, at least, provide markets with a little more clarity.’
Opinion Pakistan has much to fear if Afghanistan descends into chaos By Maleeha Lodhi a former permanent representative of Pakistan to the UN and ambassador to the US and UK
An insightful read into the ‘witches’ brew of problems from the conflict and foreign interventions next door — militancy, extremist violence, narcotics, a “Kalashnikov culture” and playing host to more than 3m refugees.’
Notes that its not just Pakistan but each of Afghanistan’s neigbours will face threats.
It concludes ‘But if diplomatic incentives prove insufficient to press the Taliban to translate promises into action, a grim and uncertain future looms, not just for Afghanistan but for the region as a whole. That possibility has impelled Pakistan to fence the border and establish refugee camps in case the worst-case scenario unfolds. In this volatile region, history sadly often repeats itself as tragedy.’
FT BIG READ. AMERICAN BUSINESS
Banking on cannabis
Still illegal at the federal level, marijuana vendors have to pay high fees for financial services from less well-known firms. But a new network of lenders is sprouting up to cater to the semi-legal industry.