FT & Asia update; HK Doxing concerns, China clampdown and the implications

This and previous notes can be found at Substack ( Asian Market Sense )
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Asia at lunchtime; as expected muted trading ahead of the weekend. S Korea focusing on earnings. China/HK concerns over defaults and clampdowns

Australia Market opened lower; coming off a new high as Flash PMI data missed expectations badly. The continued rise in covid cases and lockdowns also -VE. But after the initial weaknes market worked better and into the green around mid morning. Resistance approaching 7,400 tested a few times before selling back down. Dropped to 7,375 at 2:15pm before bouncing back to flat.
Leaders Healthcare and Tech; limiting the wider losses from Miners and Banks. Zip rebounding from yesterday’s weakness.
Data
Flash PMI’s
Manufacturing Jul 56.8 vs 58.6 Jun (F/cast was 57.5)
Services Jul 44.2 vs 56.8 Jun revised from 56 (F/cast was 55.5)
CompositeJul 45.2 vs 56.7 Jun revised from 56.1 (F/cast was 55.6)
Japan Closed re-opens Monday
S Korea
KDCA reported 1,630 new covid cases down DoD but still high and extended distancing measures. 
Kospi a weak open dipped into the red but then worked better to 3,264 in the first hour but then trended lower to flat around 1pm currently trading sideways in the green. Focus is on results. Currently +3pts (+0.1%) @ 3,254
Kosdaq traded in the same pattern currently +6pts (+0.6%) @ 1,056
Taiwan 
Taiex opened higher and worked better in the first hour but resistance at 17,670 level. Then trended lower with support at 17,510 level.
China 
CSI 300 opened lower and trended lower to 5,088 level before a bounce to 5,120 but didnt hold and solddown into lunch; -56pts -1.1% @ 5,095
Pressure on E-commerce and Financials (tighter control on Property financing and defaults) together with the implications of the flooding (-VE Insurers +VE Infrastructure) and general  caution going into the weekend.
HK 
Pre market opened @ 27,741 +17pts vs -104pts ADR’s
Market trended lower through the morning to27,400 before a small bounce into lunch. Broad weakenss; with Ecommerce and Healthcare leading the declines. Sportwear makers very weak and on increased volume as Olympics get underway without spectators.  
Europe
Futures indicating a slightly higher open
Ahead PMI data due along with UK Retail Sales and Consumer Confidence. 
US Futures
Opened higher Dow +52pts S&P +0.24% and NDX+0.33%.
AHEAD Flash PMI’s (Manufacturing, Services, Composite), Baker Hughes Oil Rig data 


Front Page
Games get off to wobbly start

ECB divisions open over shift in inflation and rate-setting stance
• Bond buying strategy to go on • More tolerance of price growth • Policy hawks voice dissent
It would appear that the new format failed to get resounding approval. It looks as if Lagarde is trying to put her stamp on the ECB which could lead to further discord ahead.

Lynch’s US extradition on Autonomy charges can go ahead, UK court rules
Likely to raise some heckles as the US legislation to extradite another UK citizen to stand trial for actions carried out and legal in the UK but not in the US. I still find it amazing that whilst the UK ratified its part of the treaty the US failed to do so but still takes advantage of the benefits.
It concludes
‘Lynch’s barrister, Alex Bailin QC, told the extradition hearing earlier this year that UK executives should be “held accountable here” because the “US is not the global marshal of the corporate world”.
The UK-US extradition treaty signed in 2003 has long been criticised by British lawmakers for being weighted in favour of the US.’

INSIDE
HK privacy law change will allow blocking of social media
Looks at the proposed new legislation alledgedly to combat ‘doxing’ but expected to have wider reaching impact.
Unlike historic legislation that has been precise in its wording the recent legislation has been much more loosely worded and vague; drawing widespread criticism from those outside the administration. ‘The AIC said the planned laws were too vague, as they did not explicitly define doxing or the “psychological harm” caused by it that would be used as a test for prosecution.’
Unfortunately in a society that has been used to historic freedoms the recent spate of having them curtailed is painful. The fact that Facebook, Google and Twitter have all raised concerns underlines the potential that if the law is passed those services will not be available. That is likely to further reduce Hong Kong’s appeal as an international city.

China rejects new phase of WHO Covid probe
China has no intention of allowing further investigation, although it does raise the question, if there is nothing to hide why not let the investigators in? If you are committed to a full understanding why not let the WHO have full access.
Part of being a world power is I think being open. The expectation is that this will be negative to us gaining a full understand of the virus and that makes us more liable to another virus in the future.

Didi shock pushes banks to Hong Kong for IPO deals
Beijing’s cyber security rules sever lucrative flow of tech listings to New York venues.
Looks at the fact that going forward Chinese companies are going to find it much more difficult to get permission domestically to list in the US. That is likely to be good for HK but probably not good for the companies as valuations are likely to lower and bankers as the fees are less.
An important aspect is Hong Kong continuing to be seen as an international centre, the clamp down on freedoms could put that in jeopardy in the longer time.

Thermal coal prices surge as China drives rebound in electricity demand
Underlines how despite the intention to go green it cannot be done overnight but takes time. In the meantime the climate and covid have meant demand has remined strong but those same factors have hampered production. Plus China’s self imposed import ban on Australia means other suppliers know they can push prices higher.

Investor bets on electric vehicles boost lithium miners and battery makers
Good news for ‘Ganfeng Lithium, China’s largest producer of the battery material, have risen 98 per cent this year,’ Also ‘CATL, the largest battery maker, have gained almost 38 per cent this year, lifting its market value to $200bn, which is $50bn more than VW.’
Notes that the lithium market has issues over production and mining which could put the auto makers aspiration in question.
For investors it looks that the future looks rosy until alternative power sources become widely available.

For Interest
Blockchain is shaking up global payments
Looks at how blockchain could replace SWIFT and the important of the USD. A good read. International and bank transaction are expensive, I recently sent Sterling 50 pounds from First Direct UK to Standard Chartered in HK. I did it all on the internet, First Direct and Standard Chartered didn’t charge me; but it went via HSBC in HK who took Sterling 24 pounds effectively for using their ‘pipe’. Notwithstanding that HSBC owns First Direct so it is effectively charging its own clients, even when they do all the work. If the transfer was a smaller amount they would have refused to do it! With costs like that is it not surprising that people want to use blockchain and its a reason the banks are worried about the disruption to their ‘nice little earners’ business.
Taken to its conclusion digital could remove much of the retail banks bread and butter business.
Worth a read

How the global semiconductor tussle is shaping ASML’s future
A good read about the entry barriers to the semiconductor business and how the US is weaponising it. Estimates that it will take China at least 20years to get a meaningful semiconductor business.
Concludes ‘ASML has done a neat job in building a dominant position in a critical, fast-growing, capital-intensive industry. But its future success will partly depend on it acquiring a new skill: how to play 3D geopolitical chess.’