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StreetAccount Summary - Asian Market Recap: Nikkei (0.66%), Hang Seng +1.06%, Shanghai Composite +0.04% as of 04:10 ET

Aug 26 ,2024

• Synopsis:

  • Asian equities ended mixed Monday as traders digested Fed Powell's comments on rates Friday. Hang Seng led the region as REITs and property developers rose sharply; mainland boards recovered to the flatline by the close from a wobbly opening. Gains for Taiwan, Australia, India and Southeast Asia; Indonesia at record high. South Korea slightly lower, Japan finished down but well off their lows. US futures turning higher, European markets opened lower with the UK closed. US dollar flat to follow a weaker opening, AUD giving up recent gains, yen and yuan flat. Treasury yields higher at the short end, lower at the long. Crude contracts higher on Middle East fighting escalation, gold at fresh record high, base metals mixed with copper ascending but iron ore lower.

  • Asia equities improving over the day following a mixed start with many benchmarks either closing off their lows or gaining a little. Fed Chair Powell's comments at Jackson Hole Friday, reinforcing expectations for a 25 bps cut, taken as a positive for equities and bonds, as well as for Asia forex, which rose across the board late Friday. Hong Kong's property stocks led the region as authorities on Friday ordered an expansion of a program to sell finished apartments to stabilize the sector.

  • Today, the PBOC left its MLF rate unchanged and drained a net CNY101B from the financial system, while setting the yuan midpoint at its strongest since mid-June. Separately, mainland press reports said Beijing had conducted stress tests of financial institutions to ensure they can withstand sudden sharp rise in yields. CGBs unmoved on the day. Few other catalysts today although Singapore factory output surprised on the upside as electronics production increased.

  • Didi Global (DIDIY) is in advanced talks to sell its smart driving and cockpit navigation assets to state-backed Navinfo (002405.CH). Sinopec (386.HK) reported marginally higher H1 profits as upstream operations offset affects of a slowing economy, launched A-Shares buyback scheme. Pilbara Minerals (PLS.AU) said full-year profit fell 89% y/y following a sharp drop in lithium prices. State Street Corp (STT) has acquired a 5% stake in fintech platform Raiz (RZI.AU).

• Digest:

  • Economists trim China 2024 activity growth forecasts:

    • A Bloomberg survey highlighted increasing pessimism toward China's domestic demand this year as economists downgraded their 2024 projections for inflation, investment and consumption, despite expected rate cuts. Retail sales seen growing 4% this year, down from 4.5% last month as H2 projections were slashed. This would mark the softest growth on record going back to 1999 outside of the pandemic. Fixed asset investment growth was lowered to 4.2% from 4.4%. CPI inflation estimates were shaved to 0.5% from 0.6% as an expected turnaround in PPI was pushed back by a quarter to 1Q25. Revisions broadly stem from ongoing reverberations from recent weakness in the high-profile data. Article noted the contrast between softening economic data and expectations for more easing, as the survey panel looked for 10 bp reductions to the 7-day reverse repo rate in Q4 and 1Q25, contrasting with prior projections for more gradual cuts in 1Q25 and 2Q26. Economists continue to anticipate 25 bp RRR cuts in Q3 and 1Q25. Noted rising likelihood of Fed rate cuts is encouraging views that this would give more leeway for PBOC easing. Elsewhere, the poll showed Q3 and Q4 GDP growth forecasts were also trimmed to 4.6% y/y from 4.7%. Export growth seen slower at 5.5% y/y in Q3 vs 6.0% and 4.4% in Q4.

  • Little attention on MLF operation with rate steady:

    • MLF operation which was delayed from the usual 15th of the month attracted little attention Monday. Operation was CNY300B ($42.1B) in size and rate unchanged at 2.3%, alongside a CNY471B injection via 7-day reverse repos with its rate also steady at 1.70% (Reuters). Recall PBOC substituted liquidity on the 15th with CNY577.7B in 7-day reverse repos. Fading attention stems from a policy overhaul seeking to gradually downplay MLF and transition toward the 7-day reverse repo as the primary policy rate. MLF operation follows steady LPR fixings last week that matched unanimous expectations. Broader monetary policy narrative remains unchanged -- while economists broadly anticipate further moderate easing, they see scope limited by low banking sector NIMs while earlier concerns about FX implications have diminished with the yuan approaching YTD highs versus dollar. Attention remains on how the policy transition phase will play out. Recall Governor Pan recently said the central bank will orchestrate a gradual shift away from quantitative targets, place greater emphasis on the use of price-based tools such as interest rates and enrich its monetary policy toolkit, albeit there were no specifics.

  • China conducts stress tests with financial institutions on bond holdings:

    • ShanghaiFinancialNews reported China has conducted stress tests with various large- and medium-sized financial institutions to make sure they can withstand short-term interest rate reversal (a 10, 20 or even 50 bp sudden rise) or sharp volatility, rather than putting a stop to legitimate bond investments and trading. PBOC-backed FinancialNews citing sources noted central bank wary of one-sided bets in long-duration government bonds and its intention may not necessarily be to significantly push yields higher. Added crowded holdings could easily turn into "stampede" if there was sharp rate reversal that could lead to liquidity crisis and threaten financial stability. Bloomberg added rally in CGBs has stalled after various cooling measures and trading volumes fell sharply over last two weeks. Reuters reported two money brokers said they will ensure anonymity in bond quotation process after some traders have been selecting long-term bond trading counterparts by adding special tags such as "no state banks" during quotation process, a practice seen hurting liquidity.

  • PBOC to push for supportive monetary policy as financial risks ease, says Governor:

    • China local government debt has fallen and number of risky small- and medium-sized banks 'almost halved', according to PBOC Governor Pan in a CCTV interview this weekend. Pan said maturing debt of local government financing vehicles (LGFVs) had either been extended, restructured or replaced with financing costs for local government debt falling "significantly". He added bank will continue with supportive monetary policy to aid economic recovery, guiding for 'reasonable' credit growth and steady decline of financing costs (SCMP). Pan said financial institutions encouraged to increase support for 'weak links' or in key areas, and to satisfy 'reasonable' consumer financing demands in targeted way. Follows bank loan data last week at 15-year low CNY260B despite bank lowering 7D repo rate in July for first time in almost 12 months. Pan also said bank will maintain 'basic stability' of yuan in forex market.

  • BOJ Governor Ueda's comments offered little clarity on rate hike trajectory:

    • Nikkei discussed BOJ Governor Ueda's remarks last week. Article led with the hawkish tilt reaffirming further rate hikes are on the cards if economic and price developments track their outlook forecasts. Sees rates moving to the neutral level in this scenario. Recalled Ueda's belief that sharply negative real rates are maintaining accommodative conditions. Yet, the article also noted Ueda's assessment that markets remain unstable, echoing Deputy Governor Uchida's earlier speech, adding they are both on the same page. Cited a BOJ source indicating the MPC can evaluate recent market volatility at the September MPM and the key will be Ueda's next public appearance in Osaka scheduled for later that month. While this event potentially coincides with the LDP leadership vote on 27-Sep, article noted the government has not voiced much opposition to recent normalization measures. If anything, Prime Minister, cabinet ministers and senior LDP officials have made statements following the July rate hike that could be interpreted as support. Still, story cautioned the election poses the risk that the new administration could voice strong support for easing. Reuters cited a BOJ notification that Deputy Governor Himino will address a financial conference in Kofu city on 28-Aug followed by a press conference in the afternoon.

  • Notable Gainers:

    • +6.3% 1797.HK (East Buy Holding): reports FY cont'd adjusted net income CNY709.4M vs FactSet CNY664.6M

    • +7.0% 2689.HK (Nine Dragons Paper Holdings): guides FY net income attributable CNY700-800M vs FactSet CNY782.6M

    • +4.4% 2888.TT (Shin Kong Financial Holding): CTBC Financial Holding to acquire Shin Kong Financial at NT$14.55/share in cash and share

    • +3.4% 8227.JP (SHIMAMURA): reports August Shimamura existing-store sales +5.5% y/y

    • +2.1% 003670.KS (POSCO Future M Co.): reportedly to sell its 51% stake in P&O Chemical to OCI for KRW50B

    • +1.4% 386.HK (Sinopec (China Petroleum & Chemical)): reports H1 IFRS net income attributable CNY37.08B vs year-ago CNY36.12B; launches A-share buyback of CNY0.8-1.5B, to run for three months

    • +1.3% 9602.JP (Toho Co): forms capital and business alliance with BANDAI NAMCO via off-auction acquisition of shares

  • Notable Decliners:

    • -13.2% 300003.CH (Lepu Medical Technology (Beijing)): reports H1 net income attributable CNY697.2M, (27%) vs year-ago CNY961.5M

    • -5.3% 7272.JP (Yamaha Motor): Toyota, Yamaha Corp, MS&AD Insurance to conduct secondary offer of 37.9M Yamaha Motor shares; price TBD

    • -2.6% 1099.HK (Sinopharm Group): reports H1 net income attributable CNY3.70B, (10%) vs year-ago CNY4.10B

• Data:

  • Economic:

    • Singapore July

      • Manufacturing production y/y +1.8% versus (4.3%) in prior month

  • Markets:

    • Nikkei: (254.05) or (0.66%) to 38110.22

    • Hang Seng: 186.63 or +1.06% to 17798.73

    • Shanghai Composite: 1.15 or +0.04% to 2855.52

    • Shenzhen Composite: 6.27 or +0.42% to 1512.50

    • ASX200: 60.60 or +0.76% to 8084.50

    • KOSPI: (3.68) or (0.14%) to 2698.01

    • SENSEX: 676.93 or +0.83% to 81763.14

  • Currencies:

    • $-¥: (0.49) or (0.34%) to 143.8600

    • $-KRW: (0.76) or (0.06%) to 1323.8600

    • A$-$: (0.00) or (0.21%) to 0.6779

    • $-INR: +0.07 or +0.09% to 83.8857

    • $-CNY: (0.00) or (0.06%) to 7.1191