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CSCI Morning News Circular - 20180816

1. Macro News

• Turkey increases tariffs on some US imports in retaliation for ‘economic attacks’. Turkey announced Wednesday it is increasing tariffs on imports of certain US products, escalating a feud with the United States that has helped trigger a currency crisis. Turkey’s Vice-President Fuat Oktay said that the tariffs on certain products were increased “within the framework of the principle of reciprocity in retaliation for the conscious economic attacks by the United States.” [SCMP]   
• Indonesia Fights Turkey Contagion With Surprise Rate Hike. Indonesia’s central bank surprised most economists by raising its benchmark interest rate a fourth time since May. The seven-day reverse repurchase rate was raised to 5.5% from 5.25% on Wednesday.  [Bloomberg]   
• India Trade Gap Biggest in Five Years as Rupee Woes Mount. India’s trade deficit in July widened to the most in more than five years, worsening the outlook for the rupee that hit a record low after a Turkish lira-led sell-off in emerging-market currencies. The trade deficit was $18bn in July, fanned by a higher oil import bill.  [Bloomberg]   

1. Industry News   

• Turkey Moves to Ward Off Financial Crisis as U.S. Spat Worsens. Turkey took its boldest steps yet to try to ward off a financial crisis by making it harder for traders to bet against the battered lira and easing rules on restructuring troubled loans that have already topped $20bn. The nation’s banking regulator published new rules that have so far succeeded at lifting the lira off record lows.  [Bloomberg]   
• China's power generation climbed 7.8% in first 7 months. China's power generation continues to expand, up 7.8% YoY in the first seven months of this year, the National Bureau of Statistics said. In July, China generated about 640bn kWh of power, up 5.7% YoY. The daily power generation reached 20.65bn kWh, the highest on record.  [China Daily]      
• HKMA Buys HK$2.159 Billion to Defend Currency Peg. The Hong Kong Monetary Authority buys HK$2.159 billion to support the local currency, according to the de facto central bank’s page on Bloomberg. Aggregate balance will decrease to HK$107.2 billion on August 16.  [Bloomberg]
• Corporate News
• Tencent Misses Market Forecasts. Tencent Holdings reported a 2% drop in 2Q profit on lower gaming revenue and investment-related gains. Net income was 17.9bn yuan in the quarter to June, compared with an average 19.3bn yuan of 12 analyst estimates compiled by Blomberg. Sales were 73.7bn yuan, missing analyst estimates.  [SCMP]
• Chinese Hot Pot Chain Said to Seek Approval for $1 Billion IPO. Haidilao International Holding Ltd., China’s biggest hot pot restaurant chain, plans to seek approval next week for a Hong Kong IPO that could raise as much as $1bn. The Beijing-based company is preparing to meet the HK stock exchange’s listing committee on Aug. 23.  [Bloomberg]
• Kroger Teams With China’s Alibaba to Expand E-Commerce Push. Kroger Co., the largest grocery chain in the U.S., is partnering with Alibaba on a pilot test of an online store. Kroger will sell products from its natural and organic private label, Simple Truth, for the test in China, which will be run through Alibaba’s Tmall Global platform.  [Bloomberg] 
• Trade War Spurs Chinese Sports Retailer to Shift Supply Chain. Anta Sports Products Ltd. is looking to move some of its manufacturing outside of China as trade tensions cause the country’s largest sportswear company to turn more cautious on its plans to expand in the U.S. The company is seeking to make its supply chain more global, considering Vietnam and other Southeast Asia locations for its production, according to Chief Financial Officer Lai Shixian.  [Bloomberg]
• Wealth Fund CIC Is Said to Back Takeover of China KFC Operator. China Investment Corp. is backing a potential takeover of Yum China Holdings Inc. The sovereign fund and DCP Capital are part of a consortium with Hillhouse Capital that’s considering a buyout of Yum China. The consortium is considering taking Yum China private with an eye to potentially relisting the business in Hong Kong at a later date.  [Bloomberg]  
• Buffett’s Berkshire Adds to Bets on Goldman Sachs, Southwest. Berkshire Hathaway Inc. added to its stakes in two of Warren Buffett’s most favored industries as the billionaire investor widened bets in banking and the airline industry. Berkshire boosted investments in Goldman Sachs Group Inc., US Bancorp, Delta Air Lines Inc. and Southwest Airlines Co. in the second quarter.  [Bloomberg]  
• Blackstone Agrees to Subscribe to $400m YiChang HEC Conv. Bond. Proceeds from the 7-year, 3% yielding H-share convertible bond will be spent on acquiring drugs, capital expenditure on production facilities, expanding sales networks and other purposes, YiChang HEC ChangJiang Pharma says in a statement.  [Bloomberg]
• Cerberus Said to Pursue Deal for HNA’s $3 Billion Swissport Unit. Cerberus Capital Management is among parties holding talks to acquire a stake in Swissport Group as embattled Chinese conglomerate HNA Group Co. weighs options for the airport luggage handler.  [Bloomberg] 
• China’s top ‘butcher’ WH Group posts worse-than-expected profit as trade war hurts US business. WH Group, the largest pork producer in China and the world, reported worse-than-expected results for the 1H of the year. The company reported a 7.7% drop in net profit to US$514mn from US$557mn in the year-earlier period as its US and European operations were hurt by lower margins.  [SCMP]
• Li Ning's apparel sector lifts H1 revenue. Li Ning has placed its confidence in its apparel business, which boosted its half-year revenue and helped it stand out amid fierce market competition. Revenue from the apparel business rose 30.7% YoY in first six months of year, accounting for the bulk of the total revenue, the sportswear brand reported. [China Daily] 
• Swire considers residential brand boost in mainland. Swire, a Hong Kong-based developer, owner and operator of mixed-use commercial properties, said it may consider introducing its residential brand to the mainland in addition to its commercial ones.  [China Daily] 
• Foxconn unit to focus on R&D. Foxconn Industrial Internet Co Ltd. will ramp up efforts to upgrade the application of its industrial internet based on cloud computing, the internet of things, big data and artificial intelligence, and will increase investment in research and development.  [China Daily]   
• Hua Medicine Seeks HK Listing Hearing Pass This Week. As reported by IFR Asia, Hua Medicine is in seek of passing the listing hearing of Hong Kong this week. If the company passes the hearing, it will begin roadshow as soon as next week. Net proceeds will approximate US$200mn.  [AAStocks] 
• China Coal 7M18 Commercial Coal Production Down 4.7%, Sales Up 22%. China Coal announced that the production volume of commercial coal for the first seven months in 2018 was 42.94 million tonnes, down 4.7% yearly, whereas the sales volume was 88.76 million tonnes, up 22% yearly.  [AAStocks] 
• China Southern Airlines's Passenger Capacity Up 13.3% YoY in Jul. China Southern Airlines announced that, in the month of July 2018, passenger capacity (measured by available seat kilometres) of the group increased by 13.3% as compared to the same period last year.  [AAStocks]