FT thoughts Climate, Covid and Crypto

This and previous notes can be found at asianmarketsense.com
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Markets at 1:15pm HK time
Oil trading higher with Gold but resources weak
Market opened slightly lower but seen choppy trading, inital up to 7,042 level then down to 7,024 before rallying to test 7,060 then back to 7,035 before testing down to 7,015 around 1pm. Then worked back to test 7,050 and trade sideways currently +17pts (+0.2%) @ 7,048. Resources were weak but Gold seeing interest; helped I think by the bitcoin/crypto sell off. Kogan rebounded from Friday’s sell off and Commonwealth Bank tested new highs.
Nikkei opened lower but rallied to 28,584 in the first 20 minutes and then drifted lower through the morning with selling accelerating into lunch; 28,375. PM opened 28,455 but drifting lower currently +69pts (+0.2%) @ 28,389
Topix traded in a similar pattern high was 1,921 currently +10pts (+0.5%) @ 1,915
S Korea 
KDCA reported 538 new covid cases below 600 for a second day but investors remain cautious ahead of the BoK interest rate announcement Thursday. The slide in crypto names likely to have impacted retail investors.
Kospi opened slightly lower and trended lower in choppy trading. With support around the 3,140 level but much of the session trading between 3,150/3,155.
Kosdaq opened lower and sold down to 952 in the first 20 minutes before a bounce but then drifted lower currently -13pts (-1.4%) @ 952
Taiex opened lower but trended higher through the morning to test 16,400 around 11:35am but failed to break out and dropped back into the red before working better currently +38pts (+0.2%) @ 16,340
CSI 300 opened slightly better and trading around flat for the first 25 minutes but then sold down to 5,090 level before working back to flat at lunch time. PMopened slightly higher currently +5pts (+0.1%) @ 5,139
Pre market opened @ 28,418 -41pts vs -102pts ADR’s 
Market then sold down to 28,195 level which it tested a few times before working better into lunch 28,342 (still -116pts). PM opened higher currently -61pts (-0.2%) @ 28,397 E-commerce names weak; Phama mixed and consumer names seeing some weakness.
HSI index review additions +VE
CSPC PHARMA (01093.HK) quarterly results for the three months ended 31 March 2021. The total revenue +9.9% YoY to RMB6.734 billion. Net profit +26.9% YoY to RMB1.472 billion. EPS was 12.29 fen.
Futures indicating a slightly +VE open FTSE +7 points higher at 7,025, DAX +3 points at 15,437, CAC 40 +4 points at 6,383, according to IG. Expect light volumes with a number of markets closed for Whit Sunday in Germany, Switzerland, Denmark, Norway, Belgium and Austria.
Ryanair in focus after one of its planes was forced by Belarus president to land in Minsk.
US Futures 
Opened mixed Dow +44pts, S&P flat NDX -0.15
Data due Chicago Fed National Activity Index
Fed Speakers Atlanta Fed President Raphael Bostic Noon 
Kansas City Fed President Esther George After Market
Earnings: Lordstown Motors 

Front Page
Belarus arrests opposition activist after forcing flight to land in Minsk

• Lukashenko orders diversion • Europe leaders outraged • Dissident faces protest charges.
It appears that Belarusian president Alexander Lukashenko effectively hijacked the plane in order to arrest Roman Protasevich a resident in Lithuania.

Ma quits helm of elite business school as Beijing raises pressure on billionaire.
Not really a surprise but rather confirms that President Xi is worried about the influence that some people in China have, which he sees as a threat to his power base and the communist party.
It does make you wonder if President Xi is becoming more isolated.

Oz vineyards turn to Britain
Hopes that a trade deal with the UK could help offset the embargo with China. Read also
in the Companies & Markets section

Nations dispute IEA’s road map to net zero
Japan and Australia indicate continued investment in fossil fuels
The IEA’s report was radical in its objectives but failed to provide a road map of how to achieve the goals and alternative plans in case of obstacles. Nice quote from Bernard Looney CEO of BP ‘he respected the IEA and the report’s significance, but added that the world needed fewer scenarios and “more action”.’

EU leaders braced for clash on how to implement climate goals
In the same vein as reaction to the IEA report; only within Europe it will probably be divided across the richer northern countries and the poorer and more polluting southern ones. There is also the fact that there are still a lot of areas not covered by the EU’s carbon pricing mechanism. Clearly there are going to be a lot of issues to be resolved.
Key to me is that to get a cleaner world there are going to be costs and it seems reasonable that the nations that have acheived wealth through earlier use of polluting energy sources pay.
For investors it highlights the attractiveness of alternative energy plays and I think supports the expectation that demand for aluminium and copper is going to continue to rise.

China’s top diplomat heads to Moscow as ties strengthen
With Biden building more alliances China and Russia are increasingly turning to each other for support. How much real aid can come from the alliance is questionable. Russia has a lot of economic issues and more outward resentment towards the Putin adminsitration. China would in most areas have the stronger position. Both countries are coming under increased pressure over human rights.

Two pictures of Ghosn emerge at Tokyo trial
Former Nissan chief ’s presence looms over his ex-lieutenant’s case in Japan.
Seems the prosectution is pushing that Ghosn was a feared, greedy autocrat, whose plans would ultimately hurt Nissan. Whilst the defence sets out he was a key executive that Nissan could not afford to lose.
An interesting insight into Japanese corporate culture.

Companies & Markets
Cash glut Pressure rises on Fed as institutions swollen with liquidity compete to lend it out.
Looks at how the US financial institutions are having trouble lending out cash. The rise in cash is depressing short term rates.
Notes that the Fed has already expanded its reverse repro programme, so the next step could be increasing the rate it pays on reserves held at the central bank, or for the reverse repro programme.

Silicon Valley deals pioneer warns of froth
Rapid rise of Spacs and crypto craze are cause for concern, says tech veteran Sandy Robertson.
An interesting read he believes that we are in a forthy period; with key concerns the number of Spacs looking for acquisitions and the crypto craze.

Private spy agency hires Libor rigger as consultant
• Role for former UBS and Citi trader
• ‘New skills’ learnt during jail time
Tom Hayes, the former UBS and Citigroup trader convicted of a conspiracy to rig the Libor benchmark, has joined a corporate intelligence agency run by former Black Cube operative Seth Freedman.
Worth a read, he’s trying to get his conviction overturned.

The world’s back office gets a virus stress test
India’s standing as reliable outsourcer at risk as second wave overwhelms health system and vaccine shortage takes toll.
An interesting read about the impact on out-sourced services, operations that India is the world leader in.
The question really is similar to the supply chain distruption that China faced. A key advantage that India has and the reason it become the worlds back office is that it has a large base of highly skilled but low cost workers. I would add that most are English speaking.
I think the problem is more of a hiccup than a game changer. Operations around the world have been hit, the key for India will be for the government to take a more responsible attitude as well as investing more into its healthcare services.

Market questions. Crypto outlook
Investors leave off toasting bitcoin amid uncertainty

Last week was a testing time for cryptocurrencies such as bitcoin. I think that uncertainly will continue over the weekend Hong Kong said that crypto exchanges would need to be licenced. I certainly think there is a co-ordinated effort by central banks to try and limit the influence of crypto but how successful they are remains to be seen. In trading this morning Bitcoin is off its lows and back to US$35,750 level having touched US$31,230 levels. There were some good articles in the weekend FT on Bitcoin and comments from Larry Summer’s saying that crypto was here to stay. It is also worth making the distiction that some crypto is linked to the blockchain and serves a purpose.
How fast is Germany’s recovery? Highlights that this week we get the Ifo data on the German economy and GfK Consumer Confidence which should give a good indication of the strength of the economy. Although it like everywhere else will face disruptions are supply chain bottlenecks and shortages impact.
How long can the gold revival last? Opinions are mixed and much of it is linked to inflation expectations. Last week it hit a four month high.

Talks on salary cap for F1 drivers threaten rift over spending limits
Racing teams concerned as Liberty Media and regulators consider further cash curbs.
An interesting read.

Will we ever reach herd immunity?
New strains and persistent vaccine hesitancy by some groups mean that it might not be possible to stop transmission of the virus. These factors are complicating the plans of governments to reopen economies.
An intesting read but the key to me is summed up in:
‘The estimates about herd immunity vary so widely because they depend on two unpredictable factors: how the virus behaves and how humans behave. Scientists do not know the extent to which new variants will make the virus more transmissible, nor how many people will get the vaccine.’

A good chance to reform global corporate taxation
The world must engage with Biden’s proposal of a minimum rate.
Makes the point that Biden has got a lot closer to a global agreement by compromising and the world should realise there isnt going to be a perfect system but that this is a very good start.

Can anything control a new generation of tiger parents?
Looks at Amy Chua’s 2011 epitomy of Tiger Parenting and the recent move by China to curtail private tutoring. He asks whether the moves by China will prevail over the instincts of the China mums who believe in education.
He doesn’t really consider why China is doing it? It is not in my opionion for the benefit of the children but rather because the state cannot fully control the curriculum that private tutors teach.
In seeking to further control the middle classes aspirations the communist party increases the chance of alienating them and the presumed social contract; where the party rules but allows the people the freedom to spend their money as they see fit.

Washington needs a resiliency tsar By Rana Foroohar
An interesting read that picks up on the thoughts of a paper written in October 2012 ‘entitled “Anticipatory Governance”, which proposed ways to help the executive branch cope with “the increasing speed and complexity of major challenges”.’
‘As Fuerth (the author) puts it: “If we are to remain a well-functioning republic and a prosperous nation, the US government cannot rely indefinitely on crisis management, no matter how adroit. We must get out ahead of events or we risk being overtaken by them . . . Our 19th-century government is simply not built for the nature of the 21st-century challenges.”’

Beware the ketchup bottle effect in crisis recovery By Martin Sandbu
A nice anology between the current bottlenecks and what happens with ketchup. The upset caused by covid could result in a sudden oversupply as the ketchup comes out. Today’s shortfalls producing tomorrows gluts and that that will produce strong deflation pressures next year.
He also thinks that the standard arguement that because stimulus has been so big that there will be overheating. But he counters that the fiscal support will be withdrawn as the pandemic abates. It is then likely to be followed by tightening; which is likely to be deflationary.
He concludes ‘Theoretically, expectations of rising inflation could be self-fulfilling. But in the face of imminent ketchup-bottle supply and unprecedented fiscal tightening, it is odd to think such expectations are likely to take hold.’

There is logic to the arguement but I think the fact that this time so much money has been directed at individauls rather than financial institutions is going to mean that the financials stimulus cannot be withrdawn. The government cannot ask people to repay their stimulus cheques. The money has gone outside the financial institutions over which the Fed and Government has some control. To regain control over that money the government will be forced to exercise some form of financial repression; something that Russell Napier has been arguing for a while. Let me know if you would like more details.