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StreetAccount Summary - Asian Market Recap: Nikkei +1.19%, Hang Seng +1.38%, Shanghai Composite +0.09% as of 04:10 ET

Aug 07 ,2024

• Synopsis:

  • Asian equities strengthened Wednesday. Nikkei swung sharply higher, though off intraday highs, following dovish remarks from BOJ's Uchida. Taiex outperformed and Kospi gained 1.83%, driven by big gains in semis. Hang Seng led gains in Greater China, while mainland markets were flat. India trading higher. US futures in positive territory. Treasury yields edged up while JGB yields were lower with yen weaker against dollar. Aussie and Kiwi stronger against greenback. Oil higher while gold down as China withheld buying for the third straight month in July. Bitcoin edging up.

  • Market sentiments were boosted by BOJ Deputy Governor Uchida's speech that central bank won't raise interest rates when financial markets are unstable. Yen retracement continues with currency erasing this week's gains versus dollar. Prior to his comments, majority of economists still expected BOJ to hike again by year-end though also acknowledged risk of policy backtrack amid market volatility.

  • In other macro developments, China trade data showed export growth unexpectedly fell in July, denting recent momentum attributed to stabilization in global trade and importer front-loading ahead of potential Trump tariffs. Import growth twice as strong as forecast following June's surprise contraction. New Zealand employment growth unexpectedly turned positive in Q2 while unemployment rate rose by less-than-forecast. Futures now pricing in ~60% chance of RBNZ rate cut next week vs 100% prior to data. Sell-side takeaways from RBA's hold decision on Tuesday leaned hawkish though economists stuck to calls for rate cuts in early 2025. Thailand headline inflation quickened in July due to higher energy and food prices but still below BOT's target range.

  • Softbank Group (9984.JP) announced share buyback worth up to JPY500B ($3.4B) amid push from activist investor Elliott. A version of Samsung Electronics (005930.KS) 5^th-generation HBM chips has passed Nvidia (NVDA)'s tests for use in AI processors. Cathay Pacific (293.HK) confirmed earlier report that it has placed $11B order for as many as 60 Airbus jets in expansion push.

• Digest:

  • BOJ Deputy Governor Uchida rules out rate hikes when markets are unstable:

    • In a speech, Deputy Governor Uchida emphasized that he believes BOJ needs to maintain monetary easing with the current policy interest rate for the time being, with developments in financial and capital markets at home and abroad being extremely volatile. Stressed this view remains consistent with guidance that rates would be raised further "if the outlook for economic activity and prices will be realized." Added that a change in the outlook and/or surrounding risk profile would "certainly change" the path of policy rates. In contrast with US and Europe, Japan not at risk of falling behind the curve in lifting rates at a certain pace. As such, "the Bank will not raise its policy interest rate when financial and capital markets are unstable." Suggested it is unlikely there have been significant changes in US/Japan economic fundamentals and reactions to US data for a particular month seems too large. In light of recent extreme market volatility, BOJ is monitoring developments in these markets and their impact on economic activity and prices with utmost vigilance, and will conduct monetary policy as appropriate

  • BOJ rate forecasts little changed despite market chaos:

    • Bloomberg survey (n=34) conducted Tuesday found some 65% of economists still expect a higher BOJ policy rate by year-end, little changed from the prior poll on 1-Aug. However, a majority noted risks to their forecasts as BOJ assesses latest market volatility. Some 71% of analysts see a risk that the BOJ may have to backtrack on policy, with some citing the 31-Jul hike as a factor spurring the yen surge against the dollar, which in turn contributed to the historic slump in Japanese stocks. Others dismissed such causality, showing a split in economist views -- 56% said the rate hike wasn't premature while 32% said it was. Some thoughts that political factors were behind the rate hike, which came days after two senior lawmakers made unusual remarks on monetary policy. Broader projections were unchanged with the median year-end rate still at 0.5% and terminal rate seen at 1%. Recall elevating attention on upcoming BOJ speeches, starting with Deputy Governor Uchida's appearance today in Hakodate city (Reuters). Government source indicated Governor Ueda is likely to attend a special parliament session later this month to discuss the market rout. Senior officials from the ruling and main opposition parties agreed on Tuesday to convene the lower house financial affairs committee session where Ueda will be asked to speak though the date is unclear.

  • Analysts see more upside for yen as carry trade-driven market unravels:

    • Nikkei discussed the yen outlook with the carry trade driven depreciation phase drawing to a close. Article noted that despite the USD/JPY retracement yesterday, few see momentum building. CFTC data already showed a rapid unwinding of speculative short yen positions into July-end, and Aozora Bank said the subsequent speed of yen appreciation suggests short positions have been largely liquidated. Cited a domestic life insurance source observing the yen market theme has shifted to narrowing US-Japan rate differential and seeking to cut positions in foreign bonds. Markets now fathoming yen upside. Story recalled prior carry trade liquidations have typically led to sharp yen strength. Net shorts in 2007 grew to about the same size as the current peak and the unraveling saw yen strengthen from 124 to 107, shortly followed by the 2008 Lehman shock when yen surged to 87. Carry trades were prolific in 1998 preceding the LTCM shock that led yen from 147 to 113 in the space of about three months. While current conditions are not portending an imminent financial crisis, geopolitical and other risk factors amplifying upward pressures. Mizuho Research & Technologies estimated USD/JPY fair value at 142~143 based on yield differentials. But prospects for a narrowing policy rate gap augurs for further yen appreciation and 130 level seen within sight.

  • Japan market volatility seen lingering this month:

    • Nikkei discussed analysts' expectations that volatility will continue in the near term with risk events, mainly an expected Fed rate cut in September, on the horizon. Nomura Securities suggested pressures from dealer short gamma and CTA shorts persist. Macro hedge funds also building short positions while retail investors forced to close positions. Yen volatility also contributing to feedback loop. Cited Citigroup equity strategy team noting they do not see any meaningful stabilizing catalysts until September, when confirmation of positive real wage growth stands to provide a tailwind for domestic demand optimism. Noted UBS downgraded year-end projections for Nikkei 225 to 39K from 42K, and Topix down 2,800 from 3,000 though sees yen strength as largely priced in. Mitsubishi UFJ Morgan Stanley sees Nikkei downside as low as 30K if yen strengthens to ~140 vs dollar. BNP Paribas said the speed of US 10-year Treasury yield declines suggestive of flight-to-quality. Noted hopes for Japanese institutional investors turning to buyers of domestic stocks would offer a sign of stability. Jeffries observed 'quality' trades in Japan equities gained historic momentum on Monday.

  • China imports beat expectations while exports growth miss:

    • China's imports jumped 7.2% y/y in July, beating Reuters forecast of 3.5% and reversing 2.3% drop in prior month; while exports rose 7% and came below 9.7% consensus and 8.6% growth in June. Exports also grew for fourth straight month. Trade surplus stood at $84.65B, below $99B expected and $99.05B in June, which was at record high since at least 1990. Bloomberg added Chinese economy was heading to a bumpy start to Q3 while grappling with weak domestic demand and prolonged property market doldrums. Boom in exports was one of few bright spots this year however is increasingly inviting more tensions with EU and US. SCMP citing analysts noted export growth would likely decline in H2 due to high base effect and tariffs from the west. NBS data also showed ASEAN, EU and US were top three trading partners in first seven months of 2024, which Beijing enjoying a growing surplus with all three; South Korea came as distant fourth which China has a deficit.

  • Notable Gainers:

    • +10% 4005.JP (Sumitomo Chemical): to sell 22.5% stake in Petro Rabigh to Saudi Aramco for ~$702M

    • +9.8% 7751.JP (Canon): to conduct share buyback of up to 32M shares for up to ¥100B

    • +8.2% 068270.KS (Celltrion): reports Q2 revenue KRW874.74B vs FactSet KRW789.79B

    • +5.5% 006800.KS (Mirae Asset Securities Co.): launches 10.0M-share buyback, to run from tomorrow through 7-Nov

    • +5.5% 8766.JP (Tokio Marine Holdings): reports Q1 ordinary profit ¥265.03B, +55% vs year-ago ¥171.36B

    • +4.7% 9434.JP (SoftBank Corp): reports Q1 operating income ¥303.93B vs StreetAccount ¥258.43B

    • +3.8% 669.HK (Techtronic Industries): reports H1 revenue $7.31B vs FactSet $7.26B

  • Notable Decliners:

    • -24.9% 090430.KS (Amorepacific): reports Q2 revenue KRW904.75B vs StreetAccount KRW1.003T

    • -10.8% 9613.JP (NTT DATA Group): reports Q1 operating income ¥58.63B vs FactSet ¥67.51B

    • -9.9% 6367.JP (DAIKIN INDUSTRIES): reports Q1 operating profit ¥115.41B vs FactSet ¥124.25B

    • -2.5% 293.HK (Cathay Pacific Airways): reports H1 net income attributable HK$3.61B, (15%) vs year-ago HK$4.27B; to purchase 30 Airbus A330-900 aircraft

    • -0.8% 3034.TT (Novatek Microelectronics): reports July revenue NT$9.27B, (4.2%) y/y

• Data:

  • Economic

    • China

      • July trade balance $84.65B vs consensus $99B and $99.05B in prior month

        • Exports +7.0% y/y vs consensus +9.7% and +8.6% in prior month

        • Imports +7.2% y/y vs consensus +3.5% and (2.3%) % in prior month

    • New Zealand

      • Q2 employment +0.4% q/q vs consensus (0.2%) and (0.2%) in Q)

        • Unemployment rate 4.6% vs consensus 4.7% and 4.3% in Q1

  • Markets:

    • Nikkei: 414.16 or +1.19% to 35089.62

    • Hang Seng: 230.52 or +1.38% to 16877.86

    • Shanghai Composite: 2.55 or +0.09% to 2869.83

    • Shenzhen Composite: (0.93) or (0.06%) to 1566.10

    • ASX200: 19.20 or +0.25% to 7699.80

    • KOSPI: 46.26 or +1.83% to 2568.41

    • SENSEX: 557.80 or +0.71% to 79150.87

  • Currencies:

    • $-¥: +2.63 or +1.82% to 146.9480

    • $-KRW: (1.95) or (0.14%) to 1373.1200

    • A$-$: +0.00 or +0.57% to 0.6549

    • $-INR: (0.00) or (0.00%) to 83.9560

    • $-CNY: +0.03 or +0.46% to 7.1803