Asia Market Update: US Equity and Treasury FUTs fluctuate amid uncertain Presidential election result; Asian equities trade mixed, Ant Financial News weighs on HK and CN; US dollar Index FUTs rise, EM currencies [particularly CNH and MXN] decline
General Trend:
- Hang Seng and Shanghai Composite lag amid weakness in the tech sector; Alibaba declines on the Ant Financial news; Financials trade generally higher
- South Korea chipmaker Hynix rises after Q3 results
- Japanese companies expected to report earnings include Mitsubishi Motors, Softbank Corp, Itochu, Ricoh, Mitsubishi Chemical, Tokai Carbon and Suntory Beverage
- Fast Retailing is due to report its Oct sales
- RBA is due to hold the first bond buying auction under its new QE program on Thurs (Nov 5th)
***Headlines/Economic Data***
Australia/New Zealand
-ASX 200 opened -0.2%
- (AU) AUSTRALIA Q3 RETAIL SALES EX-INFLATION Q/Q: 6.5% V 6.0%E
- (NZ) NEW ZEALAND Q3 UNEMPLOYMENT RATE: 5.3% V 5.3%E; Employment Change Q/Q: -0.8% v -0.7%e ; Y/Y: +0.2% v +0.2%e
- (AU) Australia Oct Final PMI Services: 53.7 v 53.8 prelim (confirms move back into expansion)
- WOW.AU Reports Q1 (A$) Rev 17.9B v 15.9B y/y
- (AU) Australia total payroll jobs change between Oct 3rd and Oct 17th: -0.8%; weekly total wages -2.1%
- (AU) New South Wales, Australia to open border with Victoria on Nov 23rd - Aussie press
Japan
-Nikkei 225 opened +1.4%
-(JP) Japan Fin Min Aso: Japan is not concretely considering 3rd extra budget at this time; wants to firmly implement existing economic measures
- 9434.JP Looking to invest ¥2.0T for 5G infrastructure - Nikkei
- (JP) Japan and Australia planning mid-Nov summit meeting in Japan – Nikkei
-(JP) Bank of Japan (BOJ) Sept Monetary Policy Meeting Minutes (2 meetings ago): Most members: BOJ easing are exerting intended effects
- (JP) Bank of Japan (BOJ) Gov Kuroda: Important to create environment where firms affected by coronavirus pandemic don't encounter a cash crunch; Inflation and economic risks are tilted to the downside
-(JP) Japan MoF sells ¥2.6T v ¥2.6T indicated in 0.1% 10-year JGBs; avg yield 0.046% v 0.024% prior; bid to cover 4.13x v 4.06x prior
-7270.JP Reports H1 Net ¥23.7B v ¥68.3B y/y; Op ¥30.6B v ¥94.9B y/y; Rev ¥1.22T v ¥1.61T y/y
Korea
-Kospi opened +0.8%
- (KR) South Korea Oct Foreign Exchange Reserves: $426.5B v $420.6B prior (7th consecutive increase, record high)
-000660.KR Reports Q3 (KRW) Net 1.1T v 493.2B y/y; Op 1.30T v 473B y/y; Rev 8.13T v 6.84T y/y
-(KR) South Korea Military: Conducting operation at North Korea border after unidentified person was detected
China/Hong Kong
-Hang Seng opened -0.6%; Shanghai Composite opened +0.1%
- (CN) CHINA OCT CAIXIN PMI SERVICES: 56.8 V 55.0E (Highest reading since June)
- (CN) China President Xi Jinping: China very likely to double economic output by 2035 - State Media
- 6688.HK Hong Kong IPO of Ant Group has also been suspended; Hong Kong IPO expected to be delayed half a year (implies could IPO in April or May of 2021)
- 6688.HK White House has paused effort to blacklist Ant Group after a phone call with company executives and Commerce Sec Ross – press
- (HK) Hong Kong Oct PMI (whole economy): 49.8 v 47.7 prior (highest level since March 2018; 32nd month of contraction)
- (CN) China PBoC Open Market Operation (OMO): Injects CNY120B in 7-day reverse repos v Injects CNY120B in 7-day reverse repos prior; Net inject CNY0B v Net inject CNY20B prior
- (CN) China PBOC sets Yuan reference rate: 6.6771 v 6.6957 prior
Other
- UOB.SG Reports Q3 (S$) Net 668M v 641Me; NII 1.47B v 1.69B y/y
- (SG) Singapore Oct PMI (whole economy): 48.6 v 45.1 prior (9th month of contraction, highest reading since Jan)
North America
- (US) Wisconsin election results not expected until 06:00 central time (07:00ET), Pennsylvania results could be reported as late as Nov 6th
-(US) House of Representatives to remain in Democratic control
- (US) Weekly API Crude Oil Inventories: -8M v +4.6M prior
- (US) Nevada Republican Party and Trump Campaign have filed emergency motion to limit processing of Mail in ballots in Clark County (Where Las Vegas is situated)
Europe
- (UK) Reportedly UK NHS has been told to prepare for vaccine deliveries as early as December - Sky News
-(UK) UK Negotiator Fox and EU Negotiator Barnier said to be expected to recommend a new round of talks between the parties in London this weekend - Press
-(DE) German regulator Bafin said to demand banks to restrain paying dividend - financial press
***Levels as of 12:15ET***
- Hang Seng 0.0%; Shanghai Composite +0.1%; Kospi +0.7%; Nikkei225 +2.1%; ASX 200 -0.1%
- Equity Futures: S&P500 +1.0%; Nasdaq100 +2.6%, Dax -0.0%; FTSE100 +0.5%
- EUR 1.1769-1.1605; JPY 105.34-104.38 ;AUD 0.7220-0.7050; NZD 0.6743-0.6615
- Commodity Futures: Gold -0.5% at $1,900/oz; Crude Oil +2.5% at $38.59/brl; Copper -0.3% at $3.09/lb
COVID confusion reigns in New York, as Gov. Andrew Cuomo changes the rules on travel while breaking his promise to revisit city indoor-dining capacity by Nov. 1.
The 14-day isolation “required” by his quarantine list discouraged most of America from visiting. He finally scrapped it as New York itself hit the marks that put a state on the list. But his new scheme is just as bad for business and hits right before the holiday season: onerous testing requirements.
Visitors, says the gov, must have proof of a negative test taken within three days of arrival, and still must isolate for three days, before getting another test on the fourth day. (A “positive” means 14 days’ quarantine.) Those rules also apply to New Yorkers who leave the state for 24 hours or more.
Yet the people most likely to be problems are also those most likely to laugh off the order. All Cuomo would say about enforcement is that “local health departments” carry responsibility. And no, he hasn’t offered any state funds to make that practical.
Oh, and neighboring states are exempt — though their positivity rates are far higher than the city’s. New Jersey and Pennsylvania had averages above 5 percent last week, vs. Gotham’s 1.58 percent.
Meanwhile, Cuomo broke his vow to rule on increasing indoor-dining capacity in the city by Sunday. The rest of the state reopened at 50 percent capacity in July, with no ill effects — but city spots only got a paltry 25 percent at the end of September. By refusing to give an update, the gov leaves these already-at-the-edge businesses in limbo, while city unemployment is twice the national rate.
All pretty rich from a guy now selling a book on leadership.
Closing Stock Market SummaryThe S&P 500 advanced 1.8% on Election Day, as investors bought the dip for the second straight day ahead of tonight's results. The Nasdaq Composite (+1.9%) and Dow Jones Industrial Average (+2.1%) eked out larger gains while the Russell 2000 (+2.9%) legged out the clear advantage.
Ten of the 11 S&P 500 sectors finished in positive territory with each rising more than 1.0%. The industrials (+2.9%), financials (+2.2%), and consumer discretionary (+2.0%) sectors increased at least 2.0%; the energy sector (-0.8%) was the only sector that closed lower despite higher oil prices ($37.62, +0.83, +2.3%).
While there was no specific catalyst today, the gains might have been aided by an acknowledgement that the market was still oversold on a short-term basis. In addition, there was a sense of optimism that an election outcome could be projected tonight or by tomorrow morning (or perhaps some relief that it's almost over).
The positive price action also contributed to continued selling in longer-dated Treasuries, which steepened the curve in a trade that benefited the financials sector. The 2-yr yield was unchanged at 0.16%, while the 10-yr yield increased three basis points to 0.88% to close at its highest level since June 8. The U.S. Dollar Index fell 0.7% to 93.51.
In the tech space, PayPal (PYPL 179.81, -7.95, -4.2%) and Skyworks (SWKS 138.80, -3.32, -2.3%) were notable laggards despite exceeding earnings expectations. PayPal, however, did issue downside Q4 EPS guidance. Arista Networks (ANET 249.49, +33.37, +15.4%) surged 15% following its upbeat earnings results and guidance.
Interestingly, the S&P 500 came within 12 points of its 50-day moving average (3400) shortly before the close. The catalyst that could propel the benchmark index above the key technical level is, of course, the election. As an aside, trading volume was comparable to previous sessions.
Reviewing Tuesday's economic data:
- Factory orders for manufactured goods increased 1.1% m/m in September, as expected, following a downwardly revised 0.6% increase (from 0.7%) in August. This is the fifth straight monthly increase in factory orders.
- The key takeaway from the report is the affirmation that business spending continued to increase in September, evidenced by a 1.0% increase in new orders for nondefense capital goods excluding aircraft, versus a 2.4% increase in August.
Looking ahead, investors will receive the ISM Non-Manufacturing Index for October, the ADP Employment Change Report for October, the Trade Balance Report for September, and the weekly MBA Mortgage Applications Index on Wednesday.
- Nasdaq Composite +24.4% YTD
- S&P 500 +4.3% YTD
- Dow Jones Industrial Average -3.7% YTD
- Russell 2000 -3.3% YTD
After Hours Summary: Pretty quiet news night ahead of election night; SUPN +22.3%, SMCI +12.2% up big on earnings; TRHC -9.7%, MRCY -7.2%, CLW -6.9% lower on earningsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: SUPN +22.3%, SMCI +12.2%, ORA +4%, HBM +3.3%, CC +3%, IOSP +2.8%, JBGS +2%, NP +1.7%, TX +1.3%, PRU +0.6%, ES +0.5%, MCY +0.5%
Companies trading higher in after hours in reaction to news: ITUB +7% (discloses internal discussions regarding the future of its XP investment), FAF +2.1% (increases dividend), CGC +2.1% (to transfer listing from NYSE to Nasdaq), SLNO +1.7% (presents body composition data from Phase III trial), NDAQ +0.9% (reports October 2020 metrics), LLY +0.2% (provides update on FDA general surveillance inspections)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: TRHC -9.7%, MRCY -7.2%, CLW -6.9%, NEX -5.3%, CORT -3.8%, DAR -3.1%, KAR -2.4%, BTG -1.1%, ZYME -0.7%, Y -0.5%
Companies trading lower in after hours in reaction to news: LVS -0.8% (files mixed securities shelf offering), GEO -0.2% (discloses ransomware attack details), ABM -0.1% (new COO), HII -0.1% (increases dividend), UVE -0.1% (authorizes new $20 mln share repurchase program)
China halts $37bn Ant Group IPO, citing ‘major issues’
Shanghai and Hong Kong stock exchanges postpone listing two days before trading was due to start
Ant Group’s $37bn public offering in Shanghai and Hong Kong has been suspended by Chinese regulators, one day after officials summoned Jack Ma and other Ant executives for an interview.
China’s largest financial technology company was set to list on Thursday in both cities in a record-breaking IPO.
The Shanghai stock exchange said in a statement that Mr Ma, Ant’s founder, had been called in for “supervisory interviews” and there had been “other major issues”, including changes in “the financial technology regulatory environment”.
“This material event may cause your company to fail to meet the issuance and listing conditions or information disclosure requirements,” the exchange said. “Our exchange has decided to postpone the listing of your company.” It told Ant and its underwriters to make an announcement about the suspension.
Ant said in a statement to the Hong Kong stock exchange that its offshore share offer had also been suspended because the company “may not meet listing qualifications or disclosure requirements due to material matters relating to the regulatory interview of our ultimate controller, our executive chairman and our chief executive officer by the relevant regulators and the recent changes in the fintech regulatory environment”.
“Further details relating to the suspension of the [Hong Kong] listing and the refund of the application monies will be made as soon as possible,” it added.
One broker in Hong Kong said there would be “quite profound” damage from the suspension for retail investors. “I've never seen an IPO suspended at this stage,” said a director at one Shanghai-based brokerage, who suggested it was a “very last minute thing”.
“It's in no one's interest to cancel the [completed share] allocations at this stage,” the director added, “but I don't think there's any precedent for this type of situation.”
Shares in Chinese ecommerce group Alibaba, which owns a 33 per cent stake in Ant, were down as much as 9 per cent in early trading in New York. A spokesperson for Alibaba said it would be “proactive in supporting Ant Group to adapt to and embrace the evolving regulatory framework”.
At the end of October, Mr Ma criticised China’s state-owned banks at a financial summit in Shanghai. Mr Ma suggested the big banks had a “pawnshop mentality” and that Ant was playing an important role in extending credit to innovative but collateral-poor companies and individuals.
On Monday, Mr Ma, together with Eric Jing and Simon Hu, Ant’s chief executive and chairman, were called in by the People’s Bank of China, as well as China’s banking, securities and foreign exchange regulators. Subsequently, Ant said it would “implement the meeting opinions in depth”.
Guo Wuping, an official at the banking regulator, advocated greater regulation of Ant and other financial technology companies in a commentary on Monday, noting their consumer lending products charged higher fees than credit cards issued by banks.
Mr Guo said fintech companies often lured young people into overspending so that “some people in low income groups and young people fall deep into debt traps”.
Meanwhile, the PBoC and China’s banking regulator jointly released new draft regulations on online lending on Monday, which will oblige Ant to cap loans at either Rmb300,000 ($44,843) or one-third of a borrower’s annual pay — whichever is lower. The rules could also make issuing loans across China’s provinces harder and analysts say they may dent Ant’s bottom line.
Ant apologised to investors and said it would “keep in close communications with the Shanghai Stock Exchange and relevant regulators, and wait for their further notice with respect to further developments of our offering and listing process”.