Asian Macro Initial Thoughts; Does buying in China follow through.
NZX opened flat but dipped on the open but then rebounded to flat.
Asia
Today is reality day and it will be key to see whether we see follow through from the retail sector in China. I think the PboC’s announcement yesterday was timed to boost the markets ahead of the 75 anniversary of the founding of the party in China but I still think it was too little and too late and really failed to address the root cause which is the bankrupt property developers and crisis in the housing system. Lowering mortgage rates is unlikely to prompt more spending but I think more saving because the outlook for China export and domestic demands remains weak and uncertain.
Housekeeping
Thursday afternoon I will be on the RTHK’s 'The close’; with Nitin Dialis and drop a question here and you can listen to the show at
https://www.rthk.hk/radio/radio3/programme/the_close
On Monday morning I was on RTHK’s Money Talk; if you would like to listen you can find the show here
https://www.rthk.hk/radio/radio3/programme/money_talk
For leading independent research, check out http://ERI-C.com
It is a great platform where independent research vendors list their research and trading analysis. ERI-C is free to access, you can browse different independent research providers, most offer free trials; so take a look.
For macro assets allocation checkout Mark Tinker’s Market Thinking September issue https://www.market-thinking.com
His latest blog ‘Change of seasons’ He notes that that markets are shifting to a period of change - part seasonal, but also part structural. There is a lot in flux, globalists vs nationalist tensions continue; interest rates remain a quandary, along with the position/strength of the USD especially ahead of the US election. He discusses a lot more including why to reduce exposure to Japan, Robotics and Automation. European Financials and increase Global Fintech, Gold and EM’s ExChina. Well worth the read.
He was also on CNBC last week and you can watch it here
https://cnbcmediahub.com/item/821f9bdb-01b6-472b-b8c8-d0e045106343
MARKET opening indicators
New Zealand
NZX opened flat but dipped on the open but then rebounded to flat.
No Data due
Australia
ASX Futures indicate market opening up 25 pts 0.3% at 8,230 supported by Energy names and miners as resources rallied Tuesday after the PBoC’s announcement.
ExDiv Aurizon Holdings Ltd (ASX: AZJ), Coles Group Ltd (ASX: COL), Domino's Pizza Enterprises Ltd (ASX: DMP), Santos Ltd (ASX: STO), and Suncorp Group Ltd (ASX: SUN).
Data due after the open
Monthly CPI Indicator Aug vs 3.5% Jul (F/cast is 3.1%)
RBA Chart Pack
Japan
Futures indicate Nikkei to open lower -190pts -0.5% at 37,630
Chicago futures -60pts, -0.18% at 37,755
Yen closed overnight 143.02
Data out 10 mins before the open
Services Producer Prices Aug 2.7% YoY F/cast was 2.6%
S Korea
Futures indicate Kospi to open higher up 4.6pts 1.31% but upside limited
Data out pre market
Consumer Confidence Sept 100 vs 100.8 Aug (F/cast was 101)
Taiwan
Market to open higher
Data Due after market
Industrial Production Aug YoY vs 12.3% Jul (F/cast is 10.7%)
Retail Sales Aug YoY vs 3.4% Jul (F/cast is 2.7%)
China
CSI 300 to open higher after the Golden Dragon index closed up 540pts 9.1% at 6,458 but much of that was in reaction to the Tuesday’s rally after the PBoC’s announcement of policy measures to support the economy but we still lack real fiscal measures. I think today will be more muted and it will be interesting to see if retail sells into strength.
FTSE A50 Futures were 323pts 2.69% at 12,324
No Data due
Hong Kong
HSI to open higher, ADR’s closed up 665pts 3.52% at 18,912 with all the ADR’s in the green.
HSI futures +678pts 3.55% at 19,763
Again I think much of that was catchup for the rally seen in Asia, which included the short squeeze. Turnover hit HK$242.4bn Tuesday, today will be more muted
No Data due
Macau - No Data due
Singapore - No Data Due
Indonesia - No Data due
Philippines - Data Due
Budget Balance Aug vs PHP -28.8B Jul
Thailand
Data Due
Balance of Trade Aug vs $-1.37B Jul (F/cast is $0.45B)
Exports Aug vs 15.2% Jul
Imports Aug vs 13.1% Jul
New Car Sales Aug YoY vs -20.58% Jul
Malaysia - No Data Due
Cambodia - Market closed Constitution Day
Vietnam - No Data Due
India - No Data due
Europe
Eurozone No data due
Germany 7 year Bund Auction
France Unemployment Benefit Claims, Jobseekers Total
United Kingdom 10 year Index Linked Treasury Gilt Auction
United States
Futures indicate Dow -0.1%, S&P 0.02% and NDX 0.1%
Data Due MBA Data (30 yr Mortgage Rate, Applications, Market Index, Refinance Index, Purchase Index), New Home Sales, EIA Oil Report, 17 week Bill Auction, Building Permits Final, 2 & 5 year FRN Auction
HEADLINES and NEWS
AUSTRALIA
RBA says not to expect rate cuts soon and can’t rule out a recession. The RBA has kept interest rates at 4.35 per cent, saying while inflation will fall, it is unlikely to be “sustainably” low for some time.
Hubbl boss departs as Foxtel restructures again. Foxtel has overhauled its reporting structure after two senior executive exits.
Negative gearing in Labor’s sights as Albanese readies for election battle. The government has asked Treasury officials for expert advice on possible changes after years of dispute over billions of dollars in tax benefits.
Households surge ahead in rooftop solar as renewable projects break bottleneck. Consumers installed four times more electricity generation through rooftop solar in the first half of this year than all commercial projects combined.
JAPAN
The Bank of Japan can afford to spend time watching developments in financial markets and overseas economies as it sets monetary policy, Governor Kazuo Ueda said on Tuesday, suggesting that the central bank was in no rush to raise interest rates further. He also voiced hope of scrutinising service-price data for October, many of which are due out in November, in determining whether underlying inflation was accelerating toward the BOJ's 2% inflation target - a prerequisite for hiking interest rates. "October is a month when service-price revisions are concentrated in Japan, so we must scrutinise data carefully," Ueda told a news conference after meeting with business leaders in the western Japan city of Osaka. "While there are some elements we can estimate in advance, we need to look at actual data to confirm," he said, suggesting the BOJ will wait at least until December to hike rates again.
The BOJ next meets for a policy meeting on Oct. 30-31, when the board will also conduct a quarterly review of its growth and inflation forecasts.
Toyota Motor (7203.T) on Tuesday increased its share buyback plan through April 30 to up to 1.2 trillion yen ($8.31 billion) from 1 trillion yen in view of the latest share price. Toyota had decided on May 8 to buy back up to 410 million shares, or 3.04% worth of its outstanding shares excluding treasury shares. The Japanese automaker's shares have plunged 27% since then, closing at 2,617 yen on Tuesday.
Eli Lilly said on Tuesday Japan's health ministry has approved donanemab, its drug for Alzheimer's disease, providing patients with another treatment option after Eisai (4523.T), opens new tab and Biogen's Leqembi received the nod in September last year. Lilly said Japan is the second major market in which the drug has received approval, after the United States where it is sold under the same brand name Kisunla. The Alzheimer's Association estimates that more than 4.6 million people are living with dementia in Japan and it is expected to rise significantly as the country's population ages.
According to Japan's National Institute of Population and Social Security Research, people aged over 65 are expected to account for 32.3% of the country's population by 2035.
Nippon Steel said on Tuesday it would sell a total of 2.9 million shares in South Korea's Posco Holdings (005490.KS) in an effort to "improve asset efficiency”. The timing of the sale and its impact on financial results will be announced at a later date, Nippon Steel said in a statement. Japan's biggest steelmaker is reportedly planning to offload at least $211 million in assets this fiscal year to manage its debt ahead of a planned $14.9 billion takeover of U.S. Steel
At least two candidates vying to become Japan's next prime minister are planning to tackle one of the country's most sacred political cows: labour market reforms that would make it easier for businesses to hire and fire workers. Shinjiro Koizumi, the 43-year-old son of former premier Junichiro Koizumi, and Taro Kono, who as digital minister is trying to promote more innovation, have both called for relaxing Japan's rigid labour rules.
Those rules have been a feature of Japan's "salary-man" corporate culture for decades, dating from when the country's post-war population was growing and its traditional labour model of lifetime employment was effective.
But rigid labour rules have been more recently blamed for blocking the movement of labour from mature sectors into growing ones where employees are needed in a tight labour market. I think this would be good for the market and also for attracting more foreign investment into Japanese companies.
SOUTH KOREA
Samsung Electronics and the nation’s top five lenders have collaborated to create a 2 trillion won ($1.5 billion) fund to support small and medium-sized companies struggling to meet toughening carbon regulations at home and in overseas markets. On Tuesday, the tech giant, together with the nation’s top five financial groups and the Financial Supervisory Service, vowed to offer low-interest rates on loans to smaller businesses seeking to invest in low-emissions facilities, equipment or technologies. Samsung Electronics and its sister unit Samsung Display will deposit 80 million won and 20 million won, respectively, for the new Partner ESG Fund, while the five lenders -- KB, Shinhan, Hana, Woori and NH NongHyup -- will contribute 20 million each as loans.
The adviser of Young Poong Corp., the biggest shareholder of Korea Zinc Inc., on Tuesday defended Young Poong's joint tender offer to buy the top zinc smelter with private equity firm MBK Partners as an attempt to save the company. Chang Hyung-jin, son of Young Poong co-founder Chang Byung-hee, made the remark in a rare interview with the local wire Yonhap News Agency, as a management conflict flared up over the share purchase plan, which Korea Zinc has strongly protested as a "hostile takeover bid.” In collaboration with Young Poong, MBK Partners has announced plans to acquire up to a 14.6 percent stake in Korea Zinc through a 2 trillion-won ($1.5 billion) tender offer, a move which a top executive of Korea Zinc has called "predatory behavior.”
The South Korean government will look into ways to address issues regarding the national lottery, following the outcry over the relatively small jackpot and large numbers of first-place winners. The Korea Lottery Commission, under the Finance Ministry, announced Tuesday that it has posted a survey titled, “What are your thoughts on changing the first-place prize for the Lotto?” on the public forum run by the Anti-Corruption & Civil Rights Commission. Questions in the survey include what people consider to be an appropriate first-place prize amount and number of winners.
Kia is poised to enter Japan’s purpose-built vehicle market, a tricky segment already crowded with Japanese rivals. Kia said Tuesday it joined hands with Japan-based trading company Sojitz to launch its PV5 van, the carmaker's first PBV model built on an electric vehicle platform, in Japan in 2026. The car's Japanese debut hopes to benefit from the country’s net-zero goals. Currently, Japan offers hefty incentives to EV buyers to make battery-powered cars take up 30 percent of total car sales by 2030.
TAIWAN
Taiwan’s economy might grow 3.8 percent this year amid robust external demand, but might only gain 1.7 percent next year, as key export drivers such as chips are losing steam, Moody’s Analytics said yesterday. The Asia-Pacific region, including Taiwan, is outpacing most of the world’s economies with regional GDP growth expected to average 3.9 percent this year and 4 percent next year, faster than expected global GDP growth of 2.6 percent and 2.7 percent respectively, the research body said.
Export orders last month grew for the sixth straight month to US$50.22 billion, benefiting from strong demand for artificial intelligence (AI) chips and cloud-based servers, as well as robust inventory replenishment for new iPhones, the Ministry of Economic Affairs said yesterday. Last month’s orders increased 9.1 percent from US$46.04 billion a year earlier, the ministry said. Total orders in the first eight months of this year rose 3.5 percent year-on-year to US$375.11 billion, it said. However, economic conditions within the region vary widely, it said.
China targeting Taiwanese military: 22 GUIDELINES: The claims that the Taiwanese military was behind cyberattacks in China were likely made to influence William Lai’s Double Ten address, the expert said. Beijing is using its “22 guidelines,” designed to punish “die-hard” Taiwanese independence separatists, to target active-duty Taiwanese military personnel, a cross-strait expert said yesterday. Similar tactics by China intended to threaten or harm morale are expected to increase in the coming weeks ahead of Double Ten National Day next month, Taiwan Thinktank researcher Wu Se-chih said. The Chinese Ministry of State Security on Monday posted a message on WeChat accusing a hacker group called “Anonymous 64” of launching cyberattacks against China, Hong Kong and Macau starting earlier this year.
China are the real hackers not Taiwan and accusations from Beijing of a Taiwanese hacking group are fake news, senior government officials said in Taipei on Tuesday. China's national security ministry said on Monday a Taiwan military-backed hacking group called Anonymous 64 has been carrying out cyberattacks against targets in China, urging people to report "anti-propaganda sabotage.” It also named three Taiwanese it said were part of the group and published their pictures. Democratically governed Taiwan, which China claims as its own territory, frequently complains it is a victim of Chinese hacking and disinformation, but it is rare for Beijing to turn the tables and make the accusation back at Taipei. Speaking to reporters at parliament, Taiwan Defence Minister Wellington Koo said it was China who was the main hacker around the globe. "China is the first country when it comes to daily cyber attacks, doing it against Taiwan and countries with similar democratic ideals. They are the real originators," he said.
Solar power policy neglects environmental costs: A government program to promote solar panel deployment on farmland and fish farms has overlooked its environmental and economic costs on local communities, Citizen of the Earth, Taiwan said yesterday. The group’s comments came a month after the government unveiled proposed guidelines for the use of land for electricity generation as part of the policy’s public consultation period concluding next week. The solar power industry has a myriad of external costs that must be controlled, including predatory behavior of energy contractors and potentially negative impact on the local landscape, environment and livelihood, said Tai Hsing-sheng, a natural resources and environmental studies professor at National Dong Hwa University.
CHINA
China's financial regulators introduced today (24th) a combination of economic stimulus measures. USD/ CNH jumped up by more than 300 bps to above 7.03. It once peaked at 7.0268, being the first time since May 2023. It last traded at 7.0299.
Chinese wind turbine maker Sany is preparing to start production in Europe by 2026 and is in advanced talks with potential European customers, the company's Europe renewables manager said on Tuesday. The role of China in Europe's renewable power sector has come under scrutiny this year with the European Union in April launching an investigation into the subsidies received by Chinese turbine manufacturers as Europe seeks to safeguard its own industry. "We have trimmed down the number of potential locations to three. Germany is one of the first three ... Spain is also an option," Sany Renewable Energy's Managing Director for Europe Paulo Fernando Soares told Reuters at the Hamburg Wind Energy Fair. Soares said he expected the first European order to be finalised by the end of this year, adding that for initial orders, turbines would be shipped from China, while the company will offer its services through partners in Europe and its service centre in Germany.
China will launch an investigation into PVH, the parent company of Calvin Klein and Tommy Hilfiger, for suspected violations of market trading principles regarding Xinjiang-related products, the commerce ministry said on Tuesday. The U.S. company must provide documentation and evidence within 30 days detailing any "discriminatory measures" taken regarding Xinjiang products over the past three years, the ministry said in a statement. Additionally, the ministry noted in a separate statement that PVH is suspected of "unjustly boycotting" Xinjiang cotton and other products "without factual basis”.
China's Leapmotor (9863.HK) is set to start taking orders in Europe for a city car and an SUV, the automaker and its partner Stellantis (STLAM.MI) said on Tuesday, as they expand their budget electric vehicle (EV) offering in the region. Stellantis holds a 51% stake in their Leapmotor International joint venture and has exclusive rights to build, export and sell Leapmotor products outside China in the first such arrangement for a legacy Western automaker.
Roughly 60% of the foreign parts found in Russian weapons on the battlefield in Ukraine come via China, Ukraine's presidential adviser Vladyslav Vlasiuk told reporters on Tuesday. Russia began a full-scale invasion of Ukraine in 2022 and despite sweeping Western sanctions, Moscow has been able to replenish its military machine with western microchips and semiconductors. Ukraine has been struggling to keep up with Russia's onslaught. Kyiv says Moscow not only receives parts from and via China, but has also bought thousands of drones from Iran. “If you take all the usual types of weapons and count the foreign made components – about 60% would be coming from China. We have had lengthy discussions with some manufacturers about this," said Vlasiuk, who was in Brussels to meet with European Union and G7 members to discuss sanctions against Russia. "The PRC (China) is the biggest problem I would say.” China is itself supplying Russia, as well as being a transit route for western products. He said important parts used in surveillance, drones and missiles have also originated from the United States, the Netherlands, Japan, Ireland and Switzerland among other western countries.
HONG KONG
Buybacks
PACIFIC BASIN (02343.HK) repurchased 2.333 million shares on the Hong Kong Stock Exchange Tuesday (24th) at prices ranging from $2.1 to $2.15 per share, involving $4.983 million. Since the repurchase mandate resolution was passed on April 19, the company has repurchased a total of 94.717 million shares, accounting for 1.7994% of the share capital.
AIA (01299.HK) announced that it had repurchased 562,600 shares of the company Tuesday (24th) at $58.9-59.3 per share, involving a total of nearly $33.3085 million. Since the resolution of the repurchase mandate was passed, the Group has repurchased a total of more than 301 million shares, accounting for 2.6826% of its issued shares.
TENCENT (00700.HK) announced that it repurchased 2.53 million shares Tuesday (24th) at prices ranging from $389.6 to $402.2 per share, involving around $1 billion. Since the repurchase mandate resolution was passed on May 14, the company has repurchased around 170 million shares, accounting for around 1.81% of the issued share capital.
SWIREPROPERTIES (01972.HK)repurchased 600,000 shares on the Hong Kong Stock Exchange Tuesday (24th) at prices ranging from $14.98 to $15.26 per share, involving $9.0646 million. Since the passing of the ordinary resolution, the company has repurchased a total of 8.7786 million shares, accounting for around 0.15% of the share capital.
PRU (02378.HK) announced that it had repurchased 1.2508 million shares of the company on the London Stock Exchange Monday (23rd) at GBP6.28-6.38 per share, involving a total of GBP7.9293 million. Since the passing of the resolution granting the repurchase mandate, the company has repurchased a total of approximately 41.2823 million shares, representing approximately 1.5% of its issued share capital.
SINOPEC CORP (00386.HK) repurchased 7.8 million shares on the Stock Exchange Monday (23rd) at a price per share ranging from $4.64 to $4.71, involving $36.4845 million. Since the repurchase mandate resolution was approved on 28 June, the Company has repurchased approx. 86.192 million shares in total, accounting for approx. 0.07% of its issued share capital.
HSI Short Selling Tuesday 14% vs 15.5% Monday
Top shorts Wharf REIC (1997) 42%, New World Development (17) 34%, Zijin Mining (2899) 34%, MTRC (66) 33%, SHKP (16) 32%, Trip com (9961) 31%, Henderson Land (12) 29%, JD SW (9618) 28%, Haier Smartone (6690) 28%, Hansoh Pharma (3692) 25%.
WATCH
NTES-S (09999.HK) (NTES.US) announced an update to the function of its mobile game "Justice Mobile", which will integrate with the Douyin tipping ecosystem and open up a tipping mode among players, with both paid and free gameplay.
In order to further implement the deployment of Beijing Municipal Party Committee and Municipal Government's work in supporting Tibet, and to serve the economic and social construction and development of Tibet in the new era, BAIC Group recently signed a strategic cooperation framework agreement with the Lhasa Municipal People's Government, according to BAIC Group's announcement. Pursuant to the agreement, the two parties will cooperate in the upstream and downstream areas of the auto industrial chain, actively advance the promotion and application of NEVs in the region. The Group will provide products suitable for Lhasa's company vehicles and customized travel solutions according to the auto demand in Lhasa, and jointly construct a green, intelligent, efficient and convenient public transportation system, so as to promote the green upgrades for company cars, and realize the green development of urban transportation. BAIC Group will also set up an office in Tibet to continuously accelerate the development of the western market.
EUROPE & US RECAP
DAX 0.8%, CAC 1.28%, FTSE 0.28%
Markets opened higher on after the PBoC announcement but then drifted lower.
Mining stocks +4.5% led the gains as China’s stimulus measures provided a boost for commodities.
DOW 0.2%, NDX 0.56%, S&P 0.25%, Russel 2K 0.17%
US markets opened mixed; Dow traded sideways, NDX and S&P dipped then rebounded and traded sideways. US investors less enamoured by the PBoC announcement and more concerned about the state of the US economy as we head into Q3 reporting season. Ahead we had more housing data, initial claims and PCE data.
Banks JPMorgan Chase 0.07%, Citigroup -1.93% Wells Fargo -1.72%, Amex -0.41%
Ecommerce Meta -0.19%, Apple 0.4%, Amazon 0.04%, Netflix 2.39%, Disney 0.77%, Zoom Video 0.93%, Alphabet 0.35% and Microsoft -1%,
Tech NXP Semi 0.82%, Nvidia 3.97%, Micron 0.46%, AMD 1%, Skyworks 063%
Industrial/Discretionary Boeing -0.31%, Caterpillar 3.98%, Simon Property 1.17%, Kohl’s 4.33%, Nordstrom 0.91%, Gap 2.22%, United Airlines 2.43%, Carnival -1.27%, Wynn Resorts 4.93%,
Energy Chevron -0.06%, Exxon Mobil -0.26%,
Consumer Staples Campbell Soup -1.59% General Mills -0.57%, JM Smucker -1.3%
DAILY DATA
USD weaker vs Yuan, Bitcoin 1.65% at 64,432.29, VIX -3.15% at 15.39,
US T10 flat at 3.732% and T2 down 4 bpts at 3.536%
OIL Brent 1.66%, WTI 0.01% PBoC’s announcement +VE for demand along with rising Middle East Tension and Hurricane risk.
Gold 0.25%, Silver 0.15%, Copper 0.94% Platinum 0.42%, Palladium 0.42% other commodities also closed in the green.