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StreetAccount Summary - Asian Market Recap: Nikkei +0.90%, Hang Seng (0.05%), Shanghai Composite (1.15%) as of 04:10 ET

Jun 06 ,2023

• Synopsis:

  • Asian equities finished mixed Tuesday. Japan markets opened slightly lower but finished on fresh 33-year highs. Hang Seng did the reverse, opening brightly before closing down a few points; mainland bourses also down. ASX lower post RBA, Taipei higher but Apple suppliers under pressure. India lower, Southeast Asia mixed. Seoul closed for a holiday. US futures flat, Europe pared opening losses. US dollar flat, AUD higher post RBA, yuan at 7.12 per dollar - weakest since Nov-22. Treasury yields higher at the short end, lower at the long; Australia 10Y yield at 3M high. Crude blends lower, industrial metals mixed, precious metals also mixed. Cryptocurrencies consolidating overnight losses.

  • Asia equities struggling for direction Tuesday as profit takers arrive in Hong Kong but the Nikkei again stretched its outperformance. Nikkei's gains again on weak yen, improving corporate fundamentals and underlying GDP growth, somewhat in contrast to economic data today that showed household spending fell by more than expected, and real wages fell for a 14th consecutive month and below persistently high inflation.

  • RBA hiked cash rate by 25 bp and flagged some further tightening may be required. Hawkish guidance fits with latest sell-side expectations of a peak rate of 4.35%, which would imply another rate hike in August and/or September. Australia net exports to act as less of a drag on Q1 GDP compared to expectations. Local China press discussed expectations of a Chinese RRR and interest rate cut in H2 in a bid to spur credit growth, Bloomberg reported late that PBOC had asked its banks to cut deposit rates to boost the economy. Singapore May PMI fell slightly but was a still-expansive 54.5 with new orders growing at their fastest rate all year. May inflation prints fell again: Thailand slowed sharply to 0.5%, its lowest in 21 months, Philippines headline and core lower, Taiwan CPI at just 2.0%.

  • Stocks in several Apple (AAPL) suppliers fell after the launch of Apple's Vison Pro device failed to convince investors due to its high price, long waiting time, lack of use in everyday life; Pegatron (4938.TT), Hon Hai (2317.TT) among the decliners. TSMC (2330.TT) said it expects its H2 performance to be better than H1 after saying revenue is expected to drop 10% y/y in H1, lowered capex outlook. Korean Air Lines (003490.KS) CEO said he is willing to make concessions to international regulators to smooth the passage of its merger with Asiana Airlines (020560.KS). Adani Group said it had completed a $2.65B deleveraging programme, paying off margin-linked share-backed financing and almost $1B in debt and interest payments.

• Digest:

  • RBA raises cash rate, flags some further tightening may be required:

    • RBA raised cash rate by 25 bp to 4.10% at its 6-Jun policy meeting. Views were split on whether RBA would hold or tighten at today's meeting. However, central bank opted to hike with inflation still too high. Noted recent data indicates upside risks to inflation outlook have increased and acknowledged risk of a wage-price spiral. Pointed to brisk growth in unit labor costs at a time when productivity growth remains subdued. Noted recent increase in minimum wage and an expectation of a further increase in public sector wages. Still aims to keep economy on an even keel but path to soft landing remains narrow. Continues to highlight pressure on housed spending and uncertainties regarding global economy, but its priority remains on inflation. Noted some further tightening may be required and will do what is necessary to return inflation to target.

  • China asks its biggest banks to cut deposit rates to boost economy:

    • Bloomberg reported Chinese authorities have asked its biggest banks to cut deposit rates for second time in 12M, marking significant ramp-up in efforts to boost economy. Article said Bank of China (3988), ICBC (1398.HK), and Bank of Communications (3328.HK) were last week advised to cut rates on range of products including on demand deposits by 5bps; 3Y and 5Y time deposits by at least 10 bps. Request communicated through PBOC's interest rate self-disciplinary mechanism. Banks said to be assessing request, may adjust rates as soon as this week, will aid in alleviating pressure on lenders as margins shrink amid directives to increase lending support. Big banks last lowered rates in Sep-22 for first time since 2015. Comes as speculation mounts over RRR or interest rate cut to support economy that has stalled in recent months.

  • China likely to cut RRR, interest rates in H2:

    • China Securities Journal quoted several experts saying China is likely to cut RRR, interest rates in H2 while monetary policy will continue to focus on structural policy tools for now. This came before release of May credit data later this week which is expected to rebound on m/m basis, however likely to be lower on y/y basis due to a high base and slowdown in economic recovery. Minsheng Bank economist Wen Bin noted medium and long-term corporate loans will continue to grow in May amid policies to support manufacturing and infrastructure. Some other experts noted there is room for RRR and interest rate cuts considering low inflationary pressure, likely in H2. Also coincided with US may enter cycle of rate cuts in Q4. Reiterated PBOC's stance to implement targeted prudent monetary policy and stable use of re-lending and rediscount facilities to support the real economy.

  • Chinese Mainland investors "buy the dip", snap up most Hong Kong shares in two years:

    • Mainland China investors bought the most Hong Kong shares on Monday since Feb-2021 via Stock Connect, worth a net HK$10.9B ($1.53B). Came after Hang Seng surged 4% last Friday, biggest rally since early March (Bloomberg). Noted Hang Seng lost 19.2% on 31-May from 27-Jan peak, while Hang Seng Tech Index dropped by 23.9% over same period as initial euphoria over China's post-Covid reopening waned amid a raft of disappointing economic data. Meanwhile, ChinaSecuritiesJournal noted multiple institutional investors saying there is more optimism on Hang Seng entering June. Soochow Securities economist noted Hong Kong stocks are attractive with cheap valuations and prices amid improving corporate earnings. Added more positive signs with HKSE to launch HKD-RMB dual counter model on 19-Jun, likely to attract more mainland funds. However, brokers including Morgan Stanley and Goldman Sachs both lowered target for MSCI China Index, citing delayed earnings recovery, weak yuan outlook and geopolitical risks (Bloomberg).

  • Japan wage growth sees no meaningful upshift, household spending sags:

    • Nominal average wages rose 1.0% y/y in April, below consensus 1.8% and follows revised 1.3% in the previous month. Details showed a marginal improvement in regular earnings back into the 1% range for the first time in four months, driven mainly by scheduled work, which was partly offset by a slight decline in overtime payments. Headline attention on real wages falling for the 13th consecutive month. Recall recent attention on wage data after shunto talks yielded biggest pay raises in more than 30 years. Total hours worked edged down for the first time in three months, posing a marginal drag. Household spending also disappointed, dropping a sharp 4.4% y/y vs expected 2.4% decrease and following 1.9% decline in March. Translated to a 1.3% m/m slide, marking the third straight contraction and a slow start to Q2. Weakness was led by sharply lower housing, apparel and leisure. Recall that consensus looks for Q1 GDP growth to be revised up to 1.8% q/q annualized from first estimate of 1.6%, mainly owing to stronger capital spending. Following confirmation of Q1 momentum on 8-Jun, attention will shift to forward estimates from Q2 for any shift in trend growth perceptions.

  • Notable Gainers:

    • +3.9% 2333.HK (Great Wall Motor): reports May sales volume 101,020 units, +26.2% y/y

    • +2.6% 2345.TT (Accton Technology): reports May revenue NT$6.47B, +5.1% y/y; reportedly guides better performance in June

    • +1.8% 6752.JP (Panasonic): reportedly accelerates plans to increase battery production at Nevada plant

    • +0.9% 2330.TT (Taiwan Semiconductor): reportedly sees inventory decreasing at customer side with rising end demand

  • Notable Decliners:

    • -1.5% 3008.TT (LARGAN Precision): reports May revenue NT$2.63B, (16.6%) y/y

    • -1.2% 7733.JP (Olympus): completes previously announced acquisition of Odin Medical

    • -0.5% 8411.JP (Mizuho Financial): ISS reportedly recommends Mizuho Financial holders vote against reappointment of chairman Seiji Imai, president Masahiro Kihara

• Data:

  • Economic:

    • Japan April

      • Nominal average wages +1.0% y/y vs consensus +1.8% and revised +1.3% in prior month

        • Real wages (3.0%) y/y vs consensus (2.0%) and revised (2.3%) in prior month

      • Household spending (4.4%) y/y vs consensus (2.4%) and (1.9%) in prior month

        • Spending (1.3%) m/m vs (0.8%) in prior month

    • Australia Q1

      • Current account balance A$12.3B vs consensus A$15.0B and A$14.1B in Q4

        • Net exports to detract 0.2 ppt from Q1 GDP vs consensus 0.5 ppt detraction and 1.1 ppt addition to Q4 GDP

  • Markets:

    • Nikkei: 289.35 or +0.90% to 32506.78

    • Hang Seng: (9.22) or (0.05%) to 19099.28

    • Shanghai Composite: (37.10) or (1.15%) to 3195.34

    • Shenzhen Composite: (35.08) or (1.73%) to 1998.62

    • ASX200: (86.70) or (1.20%) to 7129.60

    • KOSPI: Closed

    • SENSEX: (138.12) or (0.22%) to 62649.35

  • Currencies:

    • $-¥: (0.46) or (0.33%) to 139.1370

    • $-KRW: (1.73) or (0.13%) to 1299.5300

    • A$-$: +0.00 or +0.67% to 0.6663

    • $-INR: +0.09 or +0.10% to 82.6030

    • $-CNY: +0.01 or +0.16% to 7.1167