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StreetAccount Summary - Asian Market Recap: Nikkei +0.68%, Hang Seng +1.44%, Shanghai Composite (0.27%) as of 04:10 ET

Aug 22 ,2024

• Synopsis:

  • Asia stocks finished mixed in a rather directionless session Thursday. Among the gainers, Japan's Nikkei and Topix, Australia, South Korea, and Hong Kong, which saw a strong afternoon session; major boards in the red included mainland China, Taiwan and Singapore. Jakarta notably lower amid fresh political protests. US futures lower, Europe opened higher again. US dollar a little stronger but little movement in Asia currencies. Treasury yields higher across tenors, JGB yields mixed. Crude oil, precious metals lower, industrial metals mixed.

  • Asia markets traded with a high degree of caution ahead of Fed Chair's Powell key speech at the Jackson Hole economic gathering, and Governor Ueda's testimony to Japan's Diet both due Friday. Today, the Bank of Korea left its base rate unchanged, as widely expected, but its statement and subsequent press conference leaned dovish. Economists now expect the bank to cut in October once house price cooling measures have had time to work. Japan flash manufacturing PMI shrank again but at a slower pace as output swung to growth. Other flash PMIs showed Australia's manufacturing also shrinking again but at a reduced pace, while India's expanded once more but at a slower pace. Service PMIs expanded in all three countries.

  • Toyota's (7203.JP) Vanderlande unit is in discussion to purchase Siemens Logistics' (Siemens, SIE.GR) business. Alimentation Couch-Tard's (ATD.CN) proposal to acquire Seven & I (3382.JP) will likely face regulatory scrutiny under Japan's forex laws. Japan Tobacco (2914.JP) is to acquire Vector Group (VGR) for around $2.4B in an all-cash deal. Xiaomi (1810.HK) posted EV earnings and margins above expectations, and an almost 40% rise in Q2 group net profits; stock rose sharply. AirAsia (Capital A, 5099.MK) has raised $443M in a dual-tranche financing round to refurbish planes.

• Digest:

  • Bank of Korea leaves rates unchanged, trims FY growth forecast:

    • Bank of Korea left its benchmark interest rates unchanged at 3.5%, as expected by most economists amid surging home prices and household debt. Bank's statement tilted dovish as it removed pledge to keep rates steady "for sufficient period of time" while Governor Rhee later said inflation conditions were appropriate for a rate cut. Vote to hold was unanimous. Bank also cut its FY24 GDP growth forecast to 2.4% y/y on technical grounds from 2.5% forecast three months ago, kept FY25 GDP growth at 2.1%; inflation targets unchanged at 2.5% for FY24, 2.1% for FY25 (Yonhap). BOK grappling with recent spike in Seoul home prices that led to property cooling measures and sharp increase in mortgage-related household debt, but sharp decline in July manufacturing employment suggested tight monetary policy weighing on economy, according to Moody's analyst. Economists said bank may cut in October once home price cooling measures bed in, after Fed potentially begins its easing cycle in September (Bloomberg).

  • Economists call for Beijing to increase deficit ceiling to help consumers and local governments:

    • Bloomberg summarized views from several Chinese economists who called on Beijing to raise 3% budget deficit ceiling stipulated in government work report and opened door to more central government borrowing to boost economy. Noted Zhang Ming of Chinese Academy of Social Sciences said Beijing can consider doubling or tripling this year's special sovereign bonds to as much as CNY3T ($420B) to subsidize consumers and reduce local government debt. Deficit ceiling of 3% to GDP should be increased to give MOF more policy flexibility; added current ceiling under a slowing economy led to fiscal spending contraction and became pro-cyclical. Zhang's view echoed by ex-finance minister Lou Jiwei and ex-PBOC advisor Yu Yongding. Economists from China Securities Co. and a former Goldman China strategist who now runs macro hedge fund all called for fiscal policy to be more active and strengthened. Said government could steer funds toward boosting consumption and improving social safety net. Reuters reported last week that talks of cash or vouchers emerged in state media amid another round of underwhelming macro data.

  • China regulatory body official says PBOC warnings on longer-dated bonds to curb systemic risks:

    • In an interview with PBOC-backed FinancialNews, Xu Zhong, deputy secretary general of National Association of Financial Market Institutional Investors (NAFMII), said China will keep cracking down on speculative trading in longer-duration bonds, aiming to curb potential systemic risks and maintain market order. Noted some small institutions generate more than 50% on bond investments for their revenues. Meanwhile added PBOC has not set a target range for long-term bond yields, highlighting Beijing's approach is different from some other countries that have implemented unconventional monetary policies to control government bond yield curves. Cautioned financial institutions shouldn't go to opposite extremes of halting bond trading completely. Recall China's long-duration CGBs have surged this year as investors seek haven assets amid faltering economy, triggering series of warnings and actions from PBOC. Measures have pulled yields off record lows but traders waded back into government bonds amid bets of further monetary easing. Xu implied efforts to rein in bond risks, from macroprudential perspective, don't necessarily contradict monetary easing, aiming to boost economy.

  • China sanguine on banking sector, extends upgrade program to energy sector:

    • Xinhua cited upbeat remarks from NFRA on banking sector developments, noting assets continue to grow steadily this year. Disclosed aggregate assets expanded 7% y/y at July-end to CNY423.8T ($59.4T). NPL ratio was 1.61%, down 8 bp on the year, with capital adequacy ratio at 15.53%, which the regulator said indicates sufficient ammunition to withstand risks. NFRA also noted bank net profits rose 0.4% y/y in H1 and deemed to be in a reasonable range, while acknowledging slow growth in recent years due to lower lending rates and narrowing NIMs (Xinhua). Regulator also updated progress on the real estate whitelist scheme, having approved 5,392 projects for a value of CNY1.4T (Xinhua). Separately, NDRC and National Energy Administration unveiled a plan to promote large-scale equipment renewal in the energy sector as part of carbon reduction goals. Energy-related equipment investment estimated to grow by more than 25% in 2027 over 2023. Focus includes transformation of coal-fired power generation units, as well as equipment renewals and technological upgrading of wind power, solar power, hydropower and other areas. Notably, this initiative will be backed by fiscal, tax and financial support.

  • Japan flash manufacturing PMI declines ease marginally as services strengthen:

    • Flash manufacturing PMI was 49.5 in August, up from 49.1 in the previous month, marking the second straight month in contraction territory. Output swung to growth. Declining new orders eased though exports logged stronger decrease. Notably, finished goods inventories turned negative amid sharper declines in input purchases. Report noted higher labor capacity was conducive for clearance of backlogs. Services PMI strengthened to 54.0 from 53.7 as output growth picked up despite aggregate demand remaining neutral. Job growth eased, accompanied by anecdotal evidence indicating concerns over labor constraints. Uniform developments in inflation metrics saw softer output price increases to its lowest since Nov-23, combined with the fastest input price growth in 16 months. Margin compression implied companies partially absorbing cost increases to remain competitive. Composite PMI rose to 53.0 from 52.5 on the back of services strength. Aggregate expansion generally supports consensus forecasts for Q3 GDP growth but description of inflation dynamics could complicate cost passthrough dynamics that has been a key element justifying BOJ policy normalization.

  • Notable Gainers:

    • +13.9% 9698.HK (GDS Holdings): reports Q2 adjusted EBITDA CNY1.31B vs StreetAccount CNY1.25B

    • +9.0% 1810.HK (Xiaomi): reports Q2 adjusted net income CNY6.18B vs StreetAccount CNY5.04B

    • +6.0% 425.HK (Minth Group): reports H1 revenue CNY11.09B vs FactSet CNY11.06B; launches up to HK$500M on-market share buyback under general mandate

    • +5.5% 1299.HK (AIA Group): reports H1 OPAT $3.39B vs StreetAccount $3.33B

    • +1.4% 2914.JP (Japan Tobacco): Vector Group to be acquired by JT Group for $15.00 per share in cash or around $2.4B of total equity value

  • Notable Decliners:

    • -10.7% 2013.HK (Weimob): reports H1 revenue CNY867.4M vs StreetAccount CNY1.31B, adjusted EBITDA (CNY52.8M) vs StreetAccount CNY63.5M

    • -8.5% 2269.HK (Wuxi Biologics (Cayman)): reports H1 adjusted net income attributable CNY2.25B vs StreetAccount CNY2.36B

    • -1.3% 7012.JP (Kawasaki Heavy Industries): discovers misconduct in testing of marine diesel engines

    • -0.2% 5401.JP (NIPPON STEEL): Whitehaven Coal sells 30% of Blackwater coal mine for $1.08B (A$1.60B) to Nippon Steel and JFE Steel

• Data:

  • Economic:

    • Japan August flash manufacturing PMI 49.5 vs 49.1 in prior month

      • Services PMI 54.0 vs 53.7 in prior month

      • Composite PMI 53.0 vs 52.5 in prior month

  • Markets:

    • Nikkei: 259.21 or +0.68% to 38211.01

    • Hang Seng: 249.99 or +1.44% to 17641.00

    • Shanghai Composite: (7.81) or (0.27%) to 2848.77

    • Shenzhen Composite: (16.33) or (1.07%) to 1505.08

    • ASX200: 16.50 or +0.21% to 8027.00

    • KOSPI: 6.54 or +0.24% to 2707.67

    • SENSEX: 174.10 or +0.22% to 81079.40

  • Currencies:

    • $-¥: +0.16 or +0.11% to 145.4290

    • $-KRW: (2.10) or (0.16%) to 1334.8700

    • A$-$: +0.00 or +0.07% to 0.6750

    • $-INR: +0.08 or +0.09% to 83.9670

    • $-CNY: (0.00) or (0.00%) to 7.1329