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How China perfected military outpost in South China Sea

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Soldiers of China's People's Liberation Army (PLA) Navy patrol at Woody Island, in the Paracel Archipelago, which is known in China as the Xisha Islands, January 29, 2016. The words on the rock read, "Xisha Old Dragon". Old Dragon is the local name of a pile of rocks near Woody Island.

Reuters

Soldiers of China’s People’s Liberation Army (PLA) Navy patrol at Woody Island, in the Paracel Archipelago, which is known in China as the Xisha Islands, January 29, 2016. The words on the rock read, “Xisha Old Dragon”. Old Dragon is the local name of a pile of rocks near Woody Island.

The numerous overlapping sovereign claims on islands, reefs, and rocks — many of which disappear under high tide — have turned the South China Sea into a virtual armed camp. And China has been quietly perfecting one of its key military outposts in the disputed waters.

The South China Sea, which is home to more than 200 specks of land, serves as a gateway to global sea routes through which approximately $3.4 trillion of trade passes annually.

China, the second-largest economy in the world, links its economic security closely to these waterways since more than 64 percent of its maritime trade transited through the region in 2016. The South China Sea is also a vital trade artery for Vietnam, Japan and South Korea.

The Spratly Islands, to which six countries lay claim, receive significantly more attention than other areas in the waters. Since there are more stakeholders involved with them, they are considered to be a more likely flashpoint for potential conflict.

Just north of the Spratly Islands lie the Paracels, where Beijing has quietly been building up a rugged power projection platform. Woody Island, the largest of the Paracels, lies at the center of China’s strategy.

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Shares of Japan’s Sony after firm raises annual profit forecast

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A man walks past the logo of Japans Sony displayed at the company’s showroom in Tokyo on October 28, 2020.

KAZUHIRO NOGI | AFP via Getty Images

SINGAPORE — Shares of Sony surged in Tokyo on Thursday, a day after the Japanese electronics giant raised its annual profit forecast.

Sony shares in Japan were up 6.3% in Thursday afternoon trade even though Japan’s broader index, the Nikkei 225, was lower by around 0.3%

On Wednesday, Sony raised its forecast for its annual operating income by 13% to 700 billion yen (approx. $6.7 billion). It came as the firm announced a operating profit of about 317.8 billion yen (around $3.04 billion) for the three months ended Sept. 30.

Jefferies Asia’s Atul Goyal told CNBC on Thursday that he’s “extremely bullish” on Sony. The firm owns the stock and currently has a “buy” rating on Sony, with a price target of 13,230 yen per share — more than 50% higher than where the price currently sits.

… this is one of the best companies that we have seen in our coverage.

Atul Goyal

Managing Director, Jefferies Asia

Sony is set to release its next generation video game console, PlayStation (PS) 5, which would come on the back of the blockbuster success of PlayStation 4.

“It is looking very solid, very strong for PlayStation 5 and the whole cycle that lies ahead of us for the next 5 to 6 years,” Goyal, a managing director at Jefferies Asia, told CNBC’s “Squawk Box Asia” on Thursday. He highlighted Sony’s claims that the company received as many preorders in 12 hours for the PS5 as it did in 12 weeks for the PS4.

“You would hear shortages of PlayStation 5 because there’s more demand than supply,” the analyst said.

It’s not due to supply disruptions as “they have been able to recover from the … supply-side shortages that they were facing early on because most of the assemblies are happening in China and most of the supply chains have recovered almost entirely in China.”

“Demand is so strong for the product that that will keep the news flow that this product is sold out in most places for a while,” Goyal added.

Coronavirus impact

The video game sector has been among the few that have benefited from more people staying at home as a result of the coronavirus pandemic. That has raised questions over the sustainability of that bounce in a post-pandemic environment.

“The increase of gaming that we have seen partly is because of stay home, not just working from home, but vacationing from home where people are not traveling, and even the weekends you stay home,” Goyal pointed out. “This increase, part of that will be reverted as and when Covid goes away, and in my base case it doesn’t go away entirely until the end of 2021.”

Still, he said some of these habits that have changed as a result of the pandemic “could last longer.”

“We’re not factoring in (the) next five, six years of Covid-driven earnings increase. What we are factoring is Playstation 5-driven upside, driven by digital sales,” the analyst added.

Looking beyond Sony’s gaming business, which accounts for a sizable chunk of its operating income, Goyal said the firm’s music business is “also spectacular” while its image sensing business is also set to recover.

“All in all, this is one of the best companies that we have seen in our coverage,” he said. “Businesses in these three areas are all duopoly or oligopoly, and Sony’s a leader in all of them, with meaningful growth ahead.”

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Boeing (BA) earnings Q3 2020 results: Another rough quarter

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Dow futures sink 500 points as Wall Street grapples with rising Covid cases

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U.S. stock futures fell sharply early Wednesday as investors feared an increase in coronavirus infections could halt the recovering economy.

Dow Jones Industrial Average futures fell 500 points, 1.8%. The loss pointed to a drop of more than 480 points at the open. S&P 500 futures lost 1.4% and Nasdaq 100 futures fell 1%. The Dow is already down 3% on the week, giving up its gain for October.

Daily U.S. coronavirus cases have risen by a record average of 69,967 over the past week, data compiled by Johns Hopkins University showed. Meanwhile, coronavirus-related hospitalizations are up 5% or more in 36 states, according to data from the Covid Tracking Project.

This uptick has led some countries to reinstate certain lockdown measures. In the U.S., the state of Illinois has ordered Chicago to shut down indoor dining.

Stocks that would be hurt most by lockdowns or a slowdown in the economy reopening were hit in premarket trading. Shares of Delta Air Lines fell 2.5% in premarket trading. Royal Caribbean shares lost 3%.

“Uncertainty about COVID-19-related mobility restrictions and US politics mean we should expect volatility to remain elevated for the balance of the year,” said Mark Haefele, chief investment officer for global wealth management at UBS, in a note. “However, we continue to see upside over the medium term.”

“With ten vaccine candidates in late-stage trials globally, our central scenario is that restrictions can start to be lifted by 2Q21, helping corporate earnings recover to pre-pandemic highs by around the end of 2021,” he said.

Dimming hopes for another fiscal stimulus before the election have also weighed on the market.

The Dow fell more than 200 points during regular trading Tuesday and the S&P 500 slipped 0.3%. The Nasdaq Composite, meanwhile, advanced 0.6%. Tuesday’s divergent market action came as names that would benefit from people staying at home — such as Amazon and Zoom Video — rose broadly while stocks dependent on the economy reopening declined.

Earnings

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