Asian +VE again. FT China Govt & Business warning, BYD chip muddle and more

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Asian Summary
Shippers mainly +VE as BDI rises for an 11th day. Re-opening stocks and Airlines +VE as FDA gives full approval to the Pfizer vaccine. Macau names strong on easing of entry rules for mainlanders. VP Harris’s speech in Singapore focuses on Security, Economic Partnership and Global Health but says China’s actions in the South China Sea are a threat to the rules based system.

Australia 
Market opened higher and rallied to 7,515 in opening trades. It then traded sideways around 7,510 for the morning before working higher seeing resistance at 7,520 but then managed to push above to 7,524 before trending lower; currently +22pts (+0.3%) @ 7,512 Leaders Energy, Info Tech and Materials. Laggards Consumer and Communication. Earnings in focus.
Japan
Earnings over and questions being asked about whether PM Suga can win his party’s nomination and an election. Pfizer’s vaccine getting full FDA approval +VE for re-opening stocks. Leaders Shippers, Iron/Steel, Airlines. Laggards Rubber, Banks, Precision Instruments and Pharma.  
Nikkei opened higher and worked higher through the morning before hitting resistance around 27,800 level. At lunch +269 pts (+1%) @ 27,763
Topix traded in a similar fashion. At lunch +20pts (+1%) @ 1,935
Yamaha Corp +4.6% selling stake in Yamaha Motor -6.4% and will use proceeds for a share buyback.
Mizuho -0.5% facing FSA enquires about system outages.
Showa Denko -11.5% to sell 109bn Yen worth of shares to fund capex on chip materials and other projects.  
S Korea 
Pre market weak Consumer Confidence but the survey co-incided with the surge in covid cases. Foreigners turn buyers.
BoK announced Q2 Household Debt +41.2t won
KDCA announced 1,509 new covid cases (+91 DoD)
Kospi opened higher at 3,120 and worked higher but resistance around 3,140 level. Around 12:30pm eased back currently +42pts (+1.4%) @ 3,133
Kosdaq trading in a similar pattern, resistance around 1,015 currently +19pts (+1.9%) @ 1,012
Taiwan 
Taiex opened higher and rallied to 16,904 in early trades. It then eased back to 16,800 and traded sideways for most of the morning. Currently +76pts (+0.4%) @ 16,808. Textile, Energy, Tech+VE Shipping drifting lower Laggards Industrial’s and Healthcare
China 
CSI 300 opened higher and rallied to 4,873 in early trades and then traded sideways but then worked higher going into lunch and tested 4,900 before easing back. At lunch +52pts (+1.1%) @ 4,887
No new covid cases +VE
HK 
Pre market opened @ 25,429 +319pts vs +163pts ADR’s
Recent shorts forced to cover. Macau strong as entry requirements will be eased from Wednesday midnight.
HSI rallied to test 25,600 in early trades. Eased back and traded around 25,500 through the morning. At lunch +392 (+1.6%) @ 25,502. Mainland delegation in town to advise lawmakers about the latest 5 year plan and explain Hong Kong’s role.
JD.Com +10% on good results, Baidu +8% broker upgrade, Nine Dragons Paper +4% positive profit alert.
Europe Expect markets to open higher following another +VE handover from Asia and FDA approval of the Pfizer vaccine. May see some caution depending on the German GDP growth rate and news that the US House will delay the vote to advance Biden’s infrastructure plan.
AHEAD
Germany GDP Growth Rate  
US Futures
Opened Dow +60pts, S&P and NDX +0.2%
AHEAD Redbook, New Home Sales, Richmond Fed Manufacturing Index, API Crude Oil Stock Change.
Earnings: Best Buy, Bank of Montreal, Nordstrom, Intuit, Urban Outfitters, Toll Brothers, Advanced Auto Parts, Medtronic


Kamala Harris, speaking in Singapore. Covered what they were doing in Afghanistan before going on to speak about the US commitment to the region. Saying they saw Asia as being an important part of US policy but that the US was not asking countries to chose sides. She said the US was committed to the region and working with partners in the region. She singled out China’s claims over the South China Sea saying China’s action was a threat to the rules based system by its rejection of the Permanent Court of Arbitration ruling, which she said was unlawful. It will be interesting to see the reaction from Beijing.

FT Front page
Green protest targets London
Protestors want to ensure climate change remains on the political agenda.

Biden squeezed between allies and Taliban over evacuation deadline
• UK and France to push for extension at G7
• New regime in Kabul likely to refuse
The first test of both parties stance is likely to be regarding the 31 August deadline that the US was originally working towards. Although the speed of the Taliban’s take over has surprised. They have also complicated the evacuation, especially of Afghan nationals.
One would hope the Taliban realise the importance of compromise.

Brisk expansion in business activity shows eurozone ‘firing on all cylinders’
Looks at the European Flash PMI data that came out yesterday. Key points being the positive impact of vaccinations and increased hiring. The data does though illustrate that there are still wider supply chain constraints, labour shortages and cost pressures. That contrasted with the weakness in the UK PMI data.

INSIDE
Taiwan reliance on US feeds complacency
Taipei has done little to ready its citizens for the possibility of an attack by Beijing.
Was in the online edition yesterday and covered in yesterday’s note. Key being that whatever China may say the majority of Taiwanese do not want to be part of China.

China warns thousands of officials over links with businesses
Focus on Hangzhou the home town of Alibaba and Jack Ma. A couple of years ago cadres were being encouraged to promote tech and facilitate their growth now the pendulum has swung to the other extreme.
It notes that ‘Under a recent revamp of party and government rules, senior officials are not allowed to regulate industries in which companies managed by their spouses or children also operate. Yet they can do so if their immediate family members serve in lower level positions or act as corporate “advisers”.’
The high level crackdown does hint at there is maybe a personality power struggle underlining the recent government moves.
For investors it is likely to mean that investment decisions are delayed as people avoid decisions that could be misinterpreted. That can slow progress and innovation. It is also likely to mean that investors are more cautious about investing as they try and fully understand the risks and opportunities.
It is worth noting that there is currently a mainland delegation in Hong Kong giving the HK administration details about the latest 5 year plan from China and what part Hong Kong has to play and how it can benefit from it.

Companies & Markets
Pfizer’s Covid vaccine first to receive full FDA approval

• Move likely to lift confidence in jab
• Employer mandates set to gain pace
Key being that by giving the vaccine full approval people who are currently un-vaccinated will be given the confidence to get vaccinated. It is also likely to mean that more companies and organisations mandate that their staff be vaccinated.

Toilet maker Lixil shifts to digital showrooms

Key being that during the pandemic people were reluctant to visit showrooms. In the future people will probably want a mix of both. It notes that others in the sector already offer such a service. Also that last year it decided that rather that attend the annual two week trade show in Germany it used that budget to set up the virtual showroom.
No doubt virtual showrooms are going to have not only an impact on physical ones but also on the Trade show business.

LEX China IPOs/car chips: the Muddle Kingdom
Looks at the fall out on listings as Beijing investigates law firms and investment bank’s handling of IPO’s. In its blanket approach it has delayed the listing of BYD’s chip unit at a time when Beijing is calling for self sufficiency in chips. Auto chips can be made using the older 28-nanometer technology that China already has access too. It concludes:
'In isolation, the suspension of the BYD Semiconductor float is no big deal. Regulators are probing the adviser, not the would-be issuer. But investors are rightly rattled by the totality of state action against business. This appears uncoordinated. Stocks subject to unpredictable political attacks are bad investments. Beijing is raising the cost of capital for its project to break free from US influence on key technologies.'

China crackdown delivers windfall to bitcoin miners
Producing digital coins has become more profitable as competitors are forced to exit.
An interesting read notes that a number of miners are migrating to countries with cheap power or greener hydro power. A lot of the Chinese miners were caught out by the clampdown and whilst some sort to move out of China to surrounding countries some found they were not allowed to relocate or transport their equipment. Net net it meant less machines fewer competitors and hence more profit for those remaining.
Also interesting to note that much of the mining operation now takes place in data centres. Data centres are popular with property investors currently, not least because securing the power to run them can take up to a year or more.

Green light for A-shares futures launch lifts HKEX
Looks at Friday’s news that the HKEX would be allowed to offer futures contracts linked to the MSCI China A50 Connect index.
Worth noting ‘Henry Fernández, chair and chief executive of MSCI, called the agreement “a positive step towards resolving one of the four market accessibility issues highlighted by global investors” during consultations on greater inclusion of Chinese shares in the company’s benchmark indices.’
HKEX was +5.7% on Monday, today it is +0.2%