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CSCI Morning News Circular - 20180807

1. Macro News

• China’s Current Account Returns to Surplus on Trade Rebound. China’s current account returned to a surplus in the 2Q of the year, with a rebound in the goods trade making up for the continued deficit in services trade and income from overseas. The current-account balance stood at $5.8bn in the 2Q, according to a SAFE report on Monday.  [Bloomberg]    
• German Factory Orders Slump in June. German factory orders slid in June as demand from abroad slumped, signaling that concerns over escalating trade tensions may be starting to harm Europe’s largest economy. Orders dropped 4% from the previous month, when they rose 2.6%, the Economy Ministry in Berlin said Monday.  [Bloomberg]    
• Indonesia Posts Best Growth Since 2013 But 7% Goal Elusive. The Indonesian economy is offering some cheer to President Joko Widodo as he gears up to run for a second term, but he’s still got a long way to meet his growth promises. GDP rose 5.3% in the second quarter from a year earlier, the statistics bureau said in Jakarta on Monday.   [Bloomberg]    

1. Industry News

• China Tightens Controls to Slow Currency's Fall. China has tightened controls on trading in its yuan to discourage speculators after a decline against the dollar amid a tariff dispute with Washington fueled fears of a damaging outflow of capital. Traders must post a 20% deposit starting Monday for contracts to buy or sell yuan on a future date. [Bloomberg]    
• SGX to Amend Listing Rules To Strengthen Corporate Governance. Singapore Exchange will make amendments to its listing rules after Monetary Authority of Singapore’s accepted Corporate Governance Council’s recommendations to amend the Code of Corporate Governance and the rules, according to filing.  [Bloomberg]    
• Forex Risk Provision Collection Not Capital Control. The PBoC announced earlier to adjust the foreign exchange risk provision rate on forward foreign exchange selling from 0 to 20% with effect from 6 Aug. According to the spokesperson, such collection of risk provision is not setting scale restriction to exchange surrendering, options and swap transactions, as there is no approval requirement or bans on enterprises to have such transactions.  [AAStocks]   
• Corporate News
• Higher fuel costs to drag Cathay Pacific’s earnings as HK carrier presses on with cost-cutting to return to profitability. Higher fuel costs are expected to slow Cathay Pacific Airways’ return to profitability, with the airline sending mixed signals on its performance ahead of its half-year results, to be unveiled on Wednesday.  [SCMP]
• HSBC reports 5pc jump in 1H profits as it puts new strategy in play to boost its game. HSBC said on Monday its earnings for the 1H of the year rose 5% as Chief Executive John Flint begins to implement his strategy to reinvigorate the lender. It reported a profit of US$8.4bn in first six months of 2018. That compared with a profit of US$8bn in 1H17.  [SCMP] 
• Hang Seng Bank beats expectations to report 29 per cent increase in interim profit. Hang Seng Bank, a subsidiary of HSBC, Hong Kong’s largest bank, on Monday reported a better than expected increase in net profit for the first half of 2018, which rose by 29 per cent thanks to higher interest and fee income.  [SCMP]  
• Standard Chartered Bank sees virtual bank licence as ticket to new business worldwide. Standard Chartered Bank sees its decision to apply for a virtual banking licence in Hong Kong, the first traditional bank in the city to do so, as opening up new areas of growth both in the city and overseas.  [SCMP]   
• Brilliance China 1H May Beat Estimate, JV Details Key. Brilliance China’s 1H earnings may beat consensus based on BMW’s 2Q results, though recent share trading suggests shareholders require further clarity on ownership of its JV with BMW, Bernstein says.  [Bloomberg]   
• Google Is Said in Talks With Tencent, Inspur for China Cloud. Google’s plans for China are even more ambitious than previously understood. The internet giant is in talks with Tencent Hldgs, Inspur Group and other Chinese cos to offer its cloud services in the world’s second-largest economy, according to people familiar with the discussions.  [Bloomberg]   
• GCL-Poly’s $1.9 Billion Unit Sale to Shanghai Electric Nixed. China’s GCL-Poly Energy Holdings Ltd. and Shanghai Electric Group Co. terminated plans for the renewable energy company to sell the utility a controlling stake in a polysilicon unit worth about $1.9 billion.  [Bloomberg]   
• IPhone Chipmaker Races to Recover From Computer Virus. Taiwan Semiconductor Manufacturing Co.,which makes chips for the iPhone and other devices, detailed its progress in recovering from a debilitating computer virus and warned of delayed shipments and reduced revenue because of the impact on its factories.  [Bloomberg]   
• HK jeweller TSL targets China's middle class in expansion drive, unswayed by weaker yuan and trade tensions. Tse Sui Luen Jewellery Int’l is betting on China's rising middle class to expand in the face of a weakening yuan and trade war fears. The firm plans to add 100 stores in China over next two years to its existing network of 387 shops.  [Bloomberg]
• Daimler Is Said in Talks to Make Electric Smart Cars in China. Daimler AG is planning to manufacture battery-powered Smart cars in China with a local partner. The German luxury-car maker is in talks to set up a new JV with Beijing Electric Vehicle Co., a unit of its long-time Chinese partner Beijing Automotive Group Co., to make Smart Evs.  [Bloomberg]     
• HSBC to Pay $765M to U.S. DOJ as Civil Money Penalty on RMBS. HSBC reached a settlement-in-principle in July to resolve the DOJ’s civil claims of its investigation of HSBC’s legacy RMBS origination and securitization activities from 2005 to 2007, the bank says in its 1H earnings statement to Hong Kong stock exchange.  [Bloomberg]       
• S. LNG Seen Uncompetitive to China After 25% Import Tariff. China’s proposed 25% import tax on U.S. liquefied natural gas will lift prices by about $2/mmbtu, making it uncompetitive relative to pipeline gas and oil-linked LNG, Bernstein analysts including Neil Beveridge say in a note.  [Bloomberg]     
• China Vanke posts 12pc sales growth. China Vanke said sales for the first seven months rose 12% from a year earlier to 349.8bn yuan (HK$401.82bn). The Chinese real estate developer had an accumulated contract sales area of 23,422,000 square meters for the seven-month period. It has acquired 33 new projects during the period.  [The Standard]
• China Exim Bank's B&R loans up 37% in H1. The Export-Import Bank of China said its outstanding loans for the Belt and Road Initiative rose 37% YoY from a year ago by end of June. Special loans, totaling 130bn yuan, for projects discussed in the Belt and Road Forum for Int’l Cooperation last year, have all been clinched in agreements.  [China Daily]
• China Unicom, AliCloud team up. China United Network Communications Group Co Ltd, the country's second-largest telecom carrier by mobile subscribers, unveiled a joint venture with Ali-Cloud, the cloud computing arm of Alibaba Group Holding Ltd, on Friday, aiming to better tap into cloud business opportunities.  [China Daily]
• Rusal 1H18 Profit Up 1x to US$950M, Nil Div. Rusal announced in interim results ended June 2018 that net profit was US$952mn, up 1.03 times yearly. EPS equaled US6.27 cents. No dividend was declared. During the period, revenue grew 4.89% yearly to US$4.997bn, while gross profit margin improved from 27% to 27.9%.  [AAStocks]