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Most APAC and all major US equity markets closed higher on the
day, while European markets were mixed. iTraxx and CDX indices
closed modestly tighter across IG and high yield, while benchmark
European government bonds were mixed and US bonds were close to
unchanged. Gold ended the day higher, while Brent/WTI and the US
dollar closed slightly lower. The main focus this week will be the
FOMC meeting which begins tomorrow (Tuesday).
Americas
US equity indexes closed higher; Russell 2000 +2.7%, Nasdaq
+1.9%, S&P 500 +1.3%, and DJIA +1.2%.
10yr US govt bonds closed +1bp/0.68% yield and 30yr bonds
flat/1.42% yield.
CDX-NAIG closed -1bp/69bps and CDX-NAHY -6bps/352bps.
DXY US dollar index closed -0.3%/93.09.
Gold closed +0.8%/$1,964 per ounce.
Crude oil closed -0.2%/$37.26 per barrel.
Speculative positioning provides a clear illustration of the
forces driving crude prices over the past 10 days. Money Managers'
net length in NYMEX WTI and ICE Brent plummeted ~68,500 contracts
and ~72,800 contracts last week, respectively, with the combined
drop making it the largest weekly pullback in speculative bullish
positioning since 2017. Crashing speculative appetite was driven by
nearly equal parts fading long appetite, with combined long
positions declining ~75,900 contracts, and resurgent short
positions, with combined short positions increasing by ~65,400
contracts. The latter trend is especially worrisome. As markets
transitioned out of the crash correction phase of the recovery and
into this fraught transition phase, we warned that any renewed
concerns over the recovery were liable to bring a return of the
"short-cycles" that typically define such market conditions, as we
last saw in 2017. With prices once again at the low end of the
recent price band, rebounding shorts will test the resolve of the
OPEC+ group and its ability to manage physical markets. (IHS Markit
Energy Advisory's Roger Diwan, Karim Fawaz, Justin Jacobs, Edward
Moe, and Sean Karst)
Gilead Sciences (US) has announced that it has entered into a
definitive agreement to acquire Immunomedics for USD88.00 per share
in cash - a 108% premium over the closing price on 11 September.
The transaction values Immunomedics at nearly USD21 billion and
will include first-in-class TROP-2 directed antibody-drug conjugate
(ADC) Trodelvy (sacituzumab govitecan-hziy), which was approved
earlier this year for breast cancer with clinical trials ongoing
for other indications. Immunomedics also has other ADCs in its
pipeline, including IMMU-130 in Phase II testing for colorectal
cancer (CRC), and pre-clinical candidate IMMU-140 for hematological
cancers. The acquisition was unanimously approved by both
companies' boards of directors and is anticipated to close in the
fourth quarter of 2020, subject to certain customary closing
conditions. The strategic USD21-billion acquisition will add the
promising ADC oncology therapy Trodelvy to Gilead's growing
immuno-oncology portfolio, and follows the company's
transformational acquisitions of Kite Pharma and Forty Seven. (IHS
Markit Life Sciences' Margaret Labban)
Delta Air Lines has turned its SkyMiles frequent flyer program
into a separate subsidiary and is pitching it as collateral for
$6.5 billion in new bonds and loans. The Atlanta airline said on
Monday it plans a private offering for senior secured notes and a
senior secured term loan, in the latest example of US carriers
getting creative to raise capital to survive the coronavirus
crisis. Delta is the third US airline to pledge its loyalty program
as collateral for fundraising in the debt markets. United Airlines
led the way in June, followed by low-cost carrier Spirit Airlines
last month. (FT)
Dow has agreed to sell three of its chemical storage terminals
on the US Gulf Coast for $620 million to a joint venture (JV)
between Vopak (Rotterdam, Netherlands) and investment firm
BlackRock (New York, New York). The transaction includes marine and
storage terminal operations and assets at Dow's sites at Plaquemine
and St. Charles, Louisiana; and Freeport, Texas, Dow says. The cash
proceeds will be used for "value-enhancing opportunities consistent
with Dow's capital-allocation priorities," and demonstrates the
company's "continued evaluation of non-revenue-generating assets
across its global portfolio," it says. The sale to the newly
established Vopak Industrial Infrastructure Americas (VIIA) JV,
owned equally by Vopak and BlackRock's worldwide energy and power
infrastructure fund, is expected to close before the end of this
year, subject to regulatory approvals and other closing conditions
in the US and EU. Dow and VIIA will enter into long-term service
agreements for storage and infrastructure services at the
terminals. "Dow expects Vopak's terminal expertise and capabilities
will deliver additional operational efficiencies and opportunities
for growth," says Vopak. The long-term agreements will ensure
"reliable and cost-advantaged services for existing Dow businesses
at the in-scope sites," according to Dow. Normal operations will
continue throughout the divestment process, it says. All three
terminals are situated alongside active Dow production complexes.
VIIA and Dow "are working closely to ensure a seamless transition,"
Vopak states. The total storage capacity of the terminals is
852,000 cubic meters. Dow's terminal at St. Charles is the largest
with 73 chemical storage tanks with a combined capacity of 409,000
cu meters, with its terminal at Plaquemine incorporating 30 tanks
with 303,000 cu meters of storage capacity for chemicals and
refined products in total, Vopak says. The terminal at Freeport has
53 tanks with a total chemicals storage capacity of 140,000 cu
meters, it says. The three assets also include 16.4 hectares of
expansion land, 36 vessel berths, multiple pipeline connections,
and rail and truck racks, Vopak adds.
Braskem has begun commercial production at its new
$750-million, 450,000-metric tons/year "Delta" polypropylene (PP)
plant in La Porte, Texas. The project, which began construction in
October 2017, was planned with the assumption that about half of
the plant's output would be exported to Europe, South America, and
Asia, but it will initially focus on the domestic market, owing to
current tight supply conditions. "While we have commitments to our
affiliates in other regions, our focus is really supplying the
domestic market over the near term and alleviating some of the
short-term supply situation," Mark Nikolich, Braskem America CEO,
told an online press conference Friday. "We were planning on having
a more broad-based approach in the early days of the plant,
supplying both domestic and export, but things are so tight right
now that we have to allocate all of this new volume to our domestic
clients to get the supply chain stabilized." Braskem's new Global
Export Hub in Charleston, South Carolina, will facilitate exports
as they ramp up. Announced in June and slated for completion during
the third quarter, the facility will have capacity to support
exports of up to 204,000 metric tons of product annually. Nikolich
said PP demand was extremely depressed during the second quarter,
with demand into automotive dropping as low as 15-20% of normal
levels, but it has rebounded quickly.
Financial research firm Hindenburg Research has issued a
statement questioning developments at electric vehicle (EV) startup
Nikola. Nikola has retained a lawyer and is taking the issue to the
US Securities and Exchange Commission (SEC). In the statement on
Nikola, Hindenburg Research questioned several developments at
Nikola, accusing the company of dishonesty and fraud. The
allegations are not based on an investigation led by any legal
authority in the United States, and the allegations in Hindenburg
Research's report may or may not be accurate. Hindenburg Research
describes itself as specializing in forensic financial research.
Nikola founder and CEO Trevor Milton initially posted to Twitter
that he would respond to each of the allegations and insinuations
in Hindenburg's report; however, later the company retained counsel
and, on advice received, declined to issue further comment. Nikola
issued a press release announcing its decision to retain a lawyer
as well as to raise the issue with the SEC. In the statement,
Nikola describes Hindenburg Research as "an activist short-seller"
and alleges it is aiming to create and profit from a decline in the
share price. It is unclear how this situation will affect Nikola or
on Nikola's relationships with General Motors (GM) in the US or CNH
in Europe. It is unknown if the allegations are accurate. The
situation arose only days after Nikola and GM announced a new
partnership in which GM will supply Nikola with fuel-cell electric
vehicle technology and manufacture Nikola's upcoming Badger pick-up
on a contract basis. (IHS Markit AutoIntelligence's Stephanie
Brinley)
Panasonic is planning to add a 14th production line at the
Tesla Gigafactory in Nevada, United States, which would come on
line in 2021, increasing the plant's capacity by about 10%,
according to a media report from the Reno-Gazette Journal. Along
with the new production line, Panasonic is reportedly planning
upgrades to the existing facilities to accommodate new battery
technology. The report quotes Carl Walton, vice-president of
production engineering and facilities for Panasonic Energy of North
America, as saying, "There's some construction work that needs to
take place over the next couple of months. Then early next year,
we'll be installing new equipment with production starting shortly
after that." The report states that the new line is expected to
boost production capacity, although Panasonic did not confirm how
many gigawatt hours the expansion would add; the plant's current
capacity is 35 gigawatt hours per year. Walton also confirmed that
Panasonic would increase its number of workers by about 100. The
reason for the planned expansion, Walton said, was expectations of
increased demand. Reportedly, he said, "The EV market throughout
the world continues to explode and the demand is there. This is our
way of helping our partner (Tesla) to continue supplying electric
vehicles to the market." The news comes ahead of Tesla's planned
Battery Day, scheduled for 22 September, when the electric vehicle
manufacturer plans to reveal new battery technology. (IHS Markit
AutoIntelligence's Stephanie Brinley)
Tesla is planning to export the Model 3 made in mainland China
to other markets in Asia and Europe, reports Reuters, citing two
sources familiar with the matter. The Model 3 produced at the
Shanghai Gigafactory is likely to be shipped to Japan and Hong Kong
SAR, markets in close proximity to mainland China. A Bloomberg
report on the same matter indicates that the target markets also
include Singapore, Australia, and New Zealand, as well as Europe.
Tesla did not comment on the report as of this writing. Tesla only
produces the Model 3 sedan in China at the Shanghai Gigafactory.
The first phase of the facility has an installed production
capacity of 200,000 units per annum (upa). With the second phase of
the Shanghai Gigafactory to be completed in late 2020 or early
2021, Tesla will be able to produce the Model 3 and Model Y at the
same facility and further reduce its production costs, as the two
models share more than 75% of parts and components. The facility is
likely to eventually have a production capacity approaching that of
the Fremont plant in the United States, which is able to produce
between 400,000 and 500,000 upa. (IHS Markit AutoIntelligence's
Abby Chun Tu)
Brazil will extend a tariff-rate quota (TRQ) for duty-free
imports of ethanol for 90 days as the as the US and Brazil embark
on negotiations for a longer-term agreement on market access for US
ethanol and Brazilian sugar, the Office of the US Trade
Representative (USTR) announced Friday (September 11). "Brazil and
the United States have held consultations regarding their bilateral
trade on ethanol. As a result, they have decided to conduct
results-oriented discussions on an arrangement to improve market
access for ethanol and sugar in Brazil and the United States," the
statement from USTR said. "They will also consider an increase in
market access for corn in both countries." The aim of talks,
according to USTR, is to find "ways to ensure there is fair market
access along with any increase in the consumption of ethanol, as
well as to coordinate and ensure that the ethanol industries in
both countries will be treated fairly and benefit from future
regulatory changes on biofuel products in Brazil and the United
States." Achieving "reciprocal and proportional outcomes that
generate trade and open markets to the benefit of both countries,"
is a top priority, it said. As talks take place, Brazil will extend
the TRQ that was in place through August 30, which allowed 198
million gallons of US ethanol to be imported tariff free each year.
Imports beyond the quota are subject to a 20% tariff. The
expiration of the TRQ August 30 meant all imports to the 20% duty.
The TRQ volume for the 90-day period will be "proportional" to the
annual volume that was previously in place, USTR noted. That means
that 16.5 million gallons of US ethanol could be shipped monthly to
Brazil over the 90-day period duty free or a total of 49.5 million
gallons. While the TRQ applies to all imports of ethanol by Brazil,
the US has been the primary user. (IHS Markit Food and Agricultural
Policy's Richard Morrison)
The Central Reserve Bank of Peru (BCRP) kept its policy rate
unchanged at 0.25% for the fifth consecutive month, after cutting
the policy rate by 100 basis points in April. (IHS Markit Economist
Claudia Wehbe)
To continue supporting liquidity injection operations, annual
interest rates on BCRP's window facility operations in domestic
currency with financial entities were left unchanged at 0.15% for
overnight deposits and at 0.50% for direct security/currency repo
and rediscount operations.
Annual consumer price inflation decelerated to 1.7% in August,
down from 1.9% in July. In a month-on-month comparison, the
seasonally adjusted national production index advanced for the
second consecutive month - at 14.56% in June - as multiple
non-essential businesses started to reopen operations.
IHS Markit's real GDP growth outlook stands at -14.2% for 2020,
currently under revision during our September forecast round. We
expect the BCRP to maintain its aggressive expansionary stance well
into 2021 to provide liquidity and help boost economic growth amid
signs of gradual economic recovery in July-August, although
domestic demand remains weak.
Europe/Middle East/Africa
European equity markets closed mixed; France +0.4%, Spain
+0.1%, and Italy/UK/Germany -0.1%.
10yr European govt bonds closed mixed; UK +1bp, Germany flat,
France -1bp, Italy -2bps, and Spain -3bps.
iTraxx-Europe closed -1bp/55bps and iTraxx-Xover
-8bps/318bps.
Brent crude closed -0.6%/$39.61 per barrel.
The eurozone's industrial production rose by 4.1% m/m in July,
matching the market consensus expectation (of 4.0% m/m according to
Reuters' survey) and the indications from member states' data
already released. (IHS Markit Economist Ken Wattret)
July's increase follows m/m gains of 12.2% and 9.5%,
respectively, in May and June, with the latter revised upwards
versus the initial estimate of 9.1%.
The exceptional nature of the coronavirus disease 2019
(COVID-19)-virus shock is illustrated by the evolution of the
levels of industrial production, particularly when compared with
prior recessions (see first chart below).
Although eurozone industrial production rose by a cumulative
28.0% from April's trough up to July, it remains 7.2% below
February's pre-pandemic level.
From peak to trough, between February and April, the eurozone's
industrial production plunged by 27.5%, an exceptionally large and
rapid contraction. This compares with an equivalent peak-to-trough
decline of 19.0% during the global financial crisis (GFC; see first
chart below), although the latter was spread over 10 months.
While this time it has taken three months for production to
return to a level roughly 7% below its pre-recession level,
following the GFC it took almost a year and a half.
July's rebound was broad-based across the major categories of
production but in all cases, m/m rates of increase have moderated
markedly compared with the initial rebounds in May and June.
Moreover, across all major categories of goods, levels of
production remain well below where they were in February, albeit
with some variations (see second chart below).
Production of non-consumer durables outperformed, with July's
level of production just 3.6% below February's pre-COVID-19-virus
peak. Production of capital goods (-7.8% below February's level)
and particularly intermediate goods (-9.7%) underperformed.
MAN Truck & Bus is the latest OEM to announce a program of
job cuts as a response to the new economic reality of the
post-COVID-19-virus world, according to an Associated Press News
report. The company is planning to improve its operating results by
about EUR1.8 billion (USD2 billion) and this will involve a
"fundamental restructuring" of all areas of its business. At the
core of this plan is a move to cut 9,500 jobs, mostly in Germany
and Austria, as a result. MAN said that the job reduction affects
all areas of the company, and that it hopes to transfer development
and production processes to other factories. The planned changes
are extensive and could involve plant closures. According to the
company, the prospects of its sites in Steyr, Austria, and in
Plauen and Wittlich, Germany, "are up for discussion". The company
plans to start negotiations soon with employee representatives at
the plants in question and with the representatives' works council.
MAN Truck & Bus CEO Andreas Tostmann said, "We are facing great
challenges due to technological transformation, with digitization,
automation and alternative propulsion." MAN is joining a number of
OEMs and tier-1 suppliers in planning significant headcount
reductions in order to adjust their operations for the current
economic environment, although the company also appears keen to
highlight the challenge of the technological changes the medium and
heavy commercial vehicle market also faces. MAN has faced
short-term challenges as a result of the impact of the
COVID-19-virus pandemic. In the first half the company recorded a
loss of EUR387 million. (IHS Markit AutoIntelligence's Tim
Urquhart)
The United Kingdom has signed its first major post-Brexit trade
agreement with Japan. According to Livemint, the deal, which has so
far only been agreed upon in principle and of which details are
scarce, will increase trade with Japan by around GBP15 billion
(USD19.2 billion). The deal is said to benefit the manufacturing,
food and beverages, and technology industries, with businesses set
to benefit from tariff-free trade on 99% of exports to Japan. The
two countries have been undertaking trade negotiations for quite
some time as the UK is now on course to the leave the European
Union by the end of 2020. In June, Japan was reported to be calling
for an early removal of tariffs on vehicles and auto parts during
discussions on a post-Brexit trade agreement with Britain. The
recently signed deal is likely to benefit Japanese firms in the UK,
such as Nissan and Honda, from reduced tariffs on parts coming from
Japan, and might result in further investments by Japanese
automakers in the UK. (IHS Markit AutoIntelligence's Nitin
Budhiraja)
Chinese renewable energy group Envision is looking to build a
battery factory in France to supply the growing electric vehicle
(EV) market, reports Reuters, citing a report by French newspaper
Journal du Dimanche (JDD). Several potential locations in France
for the factory have been identified, according to the JDD report,
and the new plant is expected to open in late 2023. Envision Group
acquired Nissan subsidiary Automotive Energy Supply Corporation's
(AESC) battery manufacturing operations in Tennessee (United
States) and Sunderland (United Kingdom), along with Nissan's
battery development and production engineering operations located
in Oppama, Atsugi, and Zama (Japan). The new plant in France will
enable the Chinese group to have a presence in Europe to serve the
booming EV market. Chinese battery makers are eyeing the vast
growth potential of the European market, as Europe is forecasted to
remain the second-largest EV market in the world through 2025.
Envision is not the only Chinese company making investments in the
region. Chinese battery makers Farasis Energy and Contemporary
Amperex Technology Co Ltd (CATL) are both building battery plants
in Germany to service key OEM clients in the region. Daimler AG
announced in July that Mercedes-Benz has acquired a 3% stake in
Farasis. The latter will be able to supply Daimler in Germany when
its plant in Bitterfeld-Wolfen, Germany, begins production. (IHS
Markit AutoIntelligence's Abby Chun Tu)
Chinese authorities have suspended poultry meat imports from an
establishment in the US, while at the same time approving eight
more suppliers in Russia. China's General Administration for
Customs (GACC) said a US poultry facility was suspended from 13
September. The plant's registration number corresponds to an OK
Foods plant in Fort Smith, Arkansas. OK Foods is a subsidiary of
Mexico-owned Bachoco. Meanwhile, GACC said eight Russian plants had
been cleared to start exporting frozen chicken meat from 11
September. The latest plant approvals will allow Russia to further
strengthen its position as a supplier of chicken meat to China. The
two countries held a videoconference on September 10, which dealt
with a number of ongoing meat trade issues. Moscow reassured
Beijing that it was taking all necessary steps to ensure meat
products are not contaminated with Covid-19. The two sides also
discussed ways to avoid trade disruptions via traceability,
electronic certification and mutual arrangements for inspecting
livestock products. China agreed to approve a list of bovine offal
products that can be supplied by Russia without posing a risk of
bovine spongiform encephalopathy (BSE). Rosselkhoznadzor said it
was also seeking Chinese approval for a list of finished meat
products that it deems to be of low biological risk. The agency
said China had also agreed to consider lifting disease-related
restrictions on the import of sheep and cattle, along with genetic
material from these animals. Meanwhile, China's State Technical
University is to inform Rosselkhoznadzor about the steps that are
necessary for China to recognize Russia's regionalization for
African Swine Fever (ASF). Rosselkhoznadzor said an agreement on
this would ultimately allow Russia to start supplying pork from
areas that are free of the disease. China currently bans imports
from entire countries when they are hit by ASF. Germany is the
latest country to feel the effects of this policy, as Beijing
recently confirmed a ban on German pork following the country's
first outbreak of the disease. (IHS Markit Food and Agricultural
Commodities' Max Green)
In July 2020, Turkey posted a current-account deficit of USD1.8
billion, pushing the cumulative shortfall through the first seven
months of the year to more than USD21.6 billion. Already in
January-July 2020, the current-account deficit had grown larger
than it has been since 2017 as a whole. (IHS Markit Economist
Andrew Birch)
A 15.1% year-on-year (y/y) collapse of merchandise exports in
the first seven months of the year triggered a USD10.9-billion y/y
widening of the merchandise trade deficit. Also contributing to the
deterioration of the trade gap, Turkey imported nearly USD6 billion
more of gold than it did in the same period of 2019. Demand for
gold imports has soared as consumers have lost faith in their lira
holdings and banks scramble to build reserve levels.
In the second quarter and the beginning of the third quarter,
the loss of tourism export earnings has begun to more heavily
affect the current account. In January-July 2020, Turkey earned
just USD3.9 billion in travel service exports, a mere 26.7% of what
it had earned in the same period of 2019. The resulting,
January-July 2020 services surplus of USD4.0 billion was down by
almost USD14.1 billion y/y.
In a small positive development, Turkey attracted a net inflow
of portfolio investment in July of a mere USD254 million. This was
only the second month of 2020 in which the net flow of portfolio
investment was inward. Nonetheless, for the year as a whole to
date, Turkey had still lost nearly USD12.5 billion in portfolio
capital, only minimally offset by a net inflow of USD2.2 billion in
foreign direct investment.
The rapid deterioration of Turkey's current-account deficit and
lack of foreign capital inflows are two significant causes of
ongoing lira instability. The turnaround in the flow of portfolio
capitals in July did contribute to the stabilisation of the Turkish
currency that month, but the meagre level and continued surge of
gold demand reflects the ongoing fragility of the lira.
We expect that net portfolio investment flows turned outward
once again in August, as reflected by the sharp collapse of the
lira once again that month. Similarly, demand for gold likely
remained high, keeping import growth somewhat elevated.
Asia-Pacific
Most APAC equity markets closed higher except for India -0.3%;
South Korea +1.3%, Australia/Japan +0.7%, Mainland China +0.6%, and
Hong Kong +0.6%.
Yoshihide Suga won 377 out of 534 votes in the Liberal
Democratic Party (LDP) leadership elections, indicating that he
will become the next prime minister of Japan following a vote in
the Lower House on 16 September, which the LDP is effectively
certain to win. Suga will serve until September 2021 when another
leadership election will take place, unless early elections are
called. The other two candidates, LDP policy chief Fumio Kishida
and former LDP secretary-general Shigeru Ishiba, secured 89 and 68
votes, respectively. Suga also won a majority among the LDP
prefectural chapters despite earlier indications that Ishiba would
be favored in the regional vote. Significance: Strong support for
Suga within the LDP, including among LDP prefectural chapters,
indicates a preference for policy continuity following the
resignation of Prime Minister Shinzō Abe. Of the three candidates,
Suga is likely to remain the most closely aligned with Abe on core
economic policies, foreign relations, and Japan's security
strategy. (IHS Markit Country Risk's Hannah Cotillon)
New home price inflation of 70 major cities across mainland
China surveyed by the National Bureau of Statistics (NBS) averaged
at 0.6% month on month in August, up by 0.1 percentage points from
July. Entering the second half of this year, local governments have
stepped up purchase restrictions in response to the resurgence of
speculative buying in certain regions as the economy recovers. (IHS
Markit Economist Lei Yi)
Up to 59 out of 70 surveyed cities reported higher new home
prices than the previous month. By city tier, the pickup in
month-on-month price inflation was led by tier-1 and tier-3 cities,
while tier-2 cities reported the same month-on-month price gain as
in July.
Year-on-year new home price inflation in August edged down
slightly to 4.7% on average, largely due to the weakness in tier-2
cities. As of August, year-on-year price inflation has been
declining for 16 consecutive months in tier-2 cities.
Recovery in the housing market will sustain in the remainder of
the year with declining inventory and relatively favorable credit
environment.
China's new aggregate financing, the widest measure of net new
financing to the real economy, increased CNY3.58 trillion in August
2020, up CNY188.6 billion from the previous month and CNY138.4
billion higher than the amount a year ago, according to the release
of the People's Bank of China (PBOC). The stock total social
financing (TSF) increased 13.3% year on year (y/y), 0.4 percentage
points up from July. (IHS Markit Economist Yating Xu)
Local government bond issuance reached CNMY1.38 trillion in
August, up CNY800 billion from a year ago and contributing around
0.4 percentage points to headline TSF growth. Meanwhile, new bank
loans continued to expand with CNY loans increased by CNY1.28
trillion and loan's structure further improved. Property market and
infrastructure investment supported households and corporates' long
and medium-term loans to increase further. Moreover, stock market
financing was five times the level a year ago, thanks to the easing
liquidity environment this year.
Off balance sheet financing, including entrusted loans, trust
loans and undiscounted bankers' acceptance, increased by CNY71
billion in August, compared with a CNY265 billion decline a month
ago and a CNY101 billion decline last year.
Broad money supply (M2) growth declined for the second
consecutive month to 10.4% y/y, down 0.7 percentage point from
June, while M1 growth rose by 1.1 percentage points to 8.0%.
Narrowing gap between M1 and M2 suggested improving liquidity
environment in corporate sector.
TSF increased by CNY25.3 trillion in the first eight months of
the year, with new bank loans reaching CNY14.4 trillion compared to
an annual target of CNY20 trillion.
CNOOC Ningbo Daxie Petrochemical Co. Ltd exported its first
toluene cargo on 11 Sep, paving the way for more outflow of
aromatics as China moves towards self-sufficiency, a company source
told IHS Markit on Monday. A 3,000 mt parcel was shipped from its
Ningbo, Daxie port to Vietnam, said the source. The price basis was
FOB Korea, but internal discussions are on-going about using a FOB
China moving forward. "This is a one-time spot deal but it does
open up export opportunities for us especially since the domestic
market is so weak," said the source. The 13% value-added tax on
goods, one of the barriers to export, was fully refunded, he added.
While exporting excess supply seems reasonable, the timing was
rather interesting as China domestic toluene price was higher than
the FOB Korea benchmark, said market observers. Also, the standard
parcel size for toluene was 2,000 mt, rather than the 3,000 mt
CNOOC exported, they added. On Friday, China domestic price closed
at RMB3,385/mt ex-tank ($417/mt on import parity basis) and FOB
Korea closed at $399.50/mt, according to the IHS Markit Daily Asia
Aromatics Report. China is Asia's largest toluene consumer,
responsible for 55% of regional demand in 2019, according to IHS
Markit World Analysis report. Demand is mainly from paraxylene
production and the recent start up of new large-scale PX plants
have led to higher consumption. CNOOC Ningbo Daxie is a subsidiary
of China National Offshore Oil Corp. It completed a $2 billion
modernization and upgrading program in July 2016, lifting its
overall crude processing capacity to 7 million mt/year. Its
aromatics capacity is 75,000 mt/year of benzene, 280,000 mt/year of
toluene and 340,000 mt/year of isomer-grade mixed xylenes. (IHS
Markit Chemical Market Advisory Service's Sok Peng Chua)
Chinese truck manufacturer FAW Jiefang has partnered with
autonomous truck startup Plus.ai to introduce the Level 3 automated
heavy-duty truck J7, reports China Internet Information Center. The
truck is being manufactured as part of the companies' joint venture
formed in 2019 to develop autonomous trucks for the Chinese market
(see China: 9 September 2019: Plus.ai, FAW Jiefang form JV to
develop self-driving trucks). The truck is deployed with seven
cameras, five-millimeter wave radars, and one lidar, as well as an
autopilot system. The J7 truck is built on Plus.ai's Level 4
autonomous technology stack and is capable of automatic overtaking,
lane changing, lane centering, adaptive cruise control, blind spot
monitoring, obstacle avoidance, and other maneuvers. The companies
also announced plans to conduct commercial operations for Level 4
autonomous trucks in 2023. The trucking industry is growing rapidly
in China. Driverless trucks can be very helpful in large warehouse
facilities for moving goods from one storage unit to another,
following fixed and dedicated paths. In 2018, FAW Group, Plus.ai,
Full Truck Alliance, and NVIDIA announced plans to expedite the
development and commercialization of autonomous trucks in China. In
April 2017, FAW Jiefang - one of China's leading truck-makers -
revealed an autonomous truck at FAW Tech Center in Changchun, which
passed a navigation test and is able to recognize obstacles, slow
down, speed up, and take detours. The truck also responded
correctly to traffic lights, adaptive cruise control, and remote
commands. Meanwhile, Plus.ai aims to make commercial freight
transportation safer, more efficient, and less expensive for its
customers. The company has raised USD200 million in funding over
three rounds. (IHS Markit Automotive Mobility's Surabhi
Rajpal)
Chinese automaker SAIC Motor plans to launch 10 fuel-cell
vehicles (FCVs) by 2025, aiming to secure a 10% share of the
segment in China. According to China Daily, the automaker announced
the ambitious target at the debut event of the Maxus Euniq 7, the
first fuel-cell multi-purpose vehicle (MPV) in China on 13
September. The Euniq 7 can provide a range of 605 km and be
refilled with hydrogen in less than five minutes. By 2025, SAIC
aims to achieve annual sales of 10,000 FCVs. The Euniq 7 is based
on SAIC's G20 MPV. The model represents the second mass-market
passenger vehicle powered by fuel-cell technologies in the Chinese
market. SAIC is a pioneer among Chinese automakers to push for the
commercialization of FCVs. Apart from the FCV80 and the Euniq 7
MPV, SAIC plans to roll out its first fuel-cell heavy truck in
China by the end of 2020. To support its growing FCV fleet, SAIC
opened a refueling station in Shanghai in September 2019. The
station, which is the largest in China, can serve up to 400
vehicles per day. FCVs currently only account for a small fraction
of new energy vehicle sales in China. From January to August, sales
of FCVs fell by 49% year on year to 578 units. (IHS Markit
AutoIntelligence's Abby Chun Tu)
WeRide.ai has launched a robotaxi service in villages of
Chinese city Guangzhou, according to a blog posted on the Medium
website. This indicates the company's autonomous cars can now
cruise in underdeveloped areas of cities characterized by high
population density, narrow roads, and disorganized traffic. In
June, the company opened a robotaxi service serving 144 square
kilometers across the Huangpu and Guangzhou Development districts
in Guangzhou. (IHS Markit Automotive Mobility's Surabhi
Rajpal)
Tata Motors Group is reportedly looking to cut over INR500
billion (USD6.7 billion) from its previously estimated capital
expenditure (capex) over the next three years in a bid to achieve
its zero-debt target, reports The Economic Times. The capex
reduction includes over INR420 billion for the Jaguar Land Rover
(JLR) unit and INR90 billion for its Indian operations. The
automaker stated that the guiding principle for capex has been
moved from "willingness to invest" to "ability to invest". Tata
Motors plans to manage its capex tightly in the coming years by
avoiding investments in non-core areas, and will prioritize capex
for new platforms and electric vehicles (EVs). For the current
fiscal year, capex for JLR is GBP2.5 billion and INR15 billion for
the Indian business. At its 75th annual general meeting last month,
Tata Motors Group revealed plans to significantly reduce its
consolidated automotive net debt of INR480 billion, excluding the
company's vehicle finance business, in the next three years. The
latest measures to reduce debt and generate free cash flow come as
Tata Motors' earnings have taken a severe hit with both its Indian
business and JLR, its UK subsidiary, facing headwinds. The company
implemented turnaround strategies for its domestic and JLR units
but the COVID-19-virus outbreak derailed its plans. (IHS Markit
AutoIntelligence's Isha Sharma)
MAN Energy Solutions and Wasco have signed a memorandum of
understanding to promote and commercialize power-to-x projects in
south-east Asia. The power-to-x technology converts electricity
into carbon-neutral synthetic fuels, gas or liquid, for use as a
clean, carbon-neutral energy source. Due to travel restrictions
triggered by the Covid-19 pandemic, the signing ceremony took place
as a digital event with representatives from both companies
participating via a live-video stream. MAN Energy Solutions has
been developing power-to-gas technology for several years and
commissioned a methanization plant to create green methane from
hydrogen back in 2013. Today, the company offers
industrially-scaled 50MW power-to-gas and power-to-x plants as part
of its product portfolio. Wasco is an integrated energy group that
provides among others pipe-coating, engineering and fabrication
services, and manufacturing pipes. (IHS Markit Upstream Costs and
Technology's Kamila Langklep)
Southeast Asia's ride-hailing companies Grab and Gojek have
resumed discussions about a possible merger, reports the Financial
Times. These discussions come after the companies' shareholders,
including Japan-based SoftBank 's CEO and founder Masayoshi Son,
are reported to be backing the deal. The development is the result
of a substantial fall in the companies' valuations in their
secondary market due to the COVID-19-virus pandemic. The companies
began their initial discussions about a merger in February; these
were then opposed by SoftBank and its Vision Fund. The merger deal
is expected to significantly accelerate both the companies' paths
to profitability as ride-hailing business has been battered because
of the COVID-19-virus pandemic. This year, Grab laid off 360
employees, representing 5% of its total workforce, owing to the
pandemic. Gojek has laid off 430 employees, representing 9% of its
total workforce, as part of cost-cutting measures in response to
the impact of the pandemic on the company's business. (IHS Markit
Automotive Mobility's Surabhi Rajpal)
Posted 14 September 2020 by Chris Fenske, Head of Capital Markets Research, Global Markets Group, S&P Global Market Intelligence
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