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StreetAccount Summary - Asian Market Recap: Nikkei (1.82%), Hang Seng +0.80%, Shanghai Composite +0.08% as of 04:10 ET

Jun 07 ,2023

• Synopsis:

  • Asia equities ended mixed Wednesday as profit taking took hold in Japan but the Hang Seng rose again. As well as gains in Hong Kong, Shanghai rose but several other mainland indices fell in a mixed day for Chinese assets. A small gain for South Korea, Taiwan hit 13-month highs. Australia closed a few points lower, Southeast Asia also mixed as Malaysia hovered at a 3Y low. India higher. US futures nudging lower, Europe weaker at the open. US dollar flat, yen strengthened, yuan weakened again. Treasury yields higher at the short end, lower at the long. Crude, industrial metals and precious metals all under pressure, wheat futures consolidating overnight gains on Ukraine dam break, poor China weather. Cryptocurrencies back under pressure.

  • With the lack of firm catalysts, Asia markets continued recent trend, ex Japan which saw profit taking on a modest yen strengthening. Overnight handover was broadly positive if a little flat with the VIX at its lowest since Feb-20. The S&P 500 failed again to cross the bull-market line by the close as worries over the Ukrainian dam breach and its effects on food prices capped gains. Giving Hong Kong support was a downward tick in US-China tensions as US Secretary of State Blinken confirmed he will travel to Beijing and the government gave more signals on state support for the economy, this time asking for dollar deposit rates to be lowered to give the yuan support. China exports weaker than expected, sustaining concerns about global and China growth momentum. Australia Q1 GDP slightly under expectations, logging softest growth since the Covid lockdown; RBA Governor Lowe echoed guidance that more tightening may be needed as inflation remains too high.

  • Pirelli (PIRC.IT) CEO said Sinochem (600500.CH) is attempting to influence the Italian tyre maker in ways forbidden by its shareholder agreement. Prada (1913.HK) and Ermenegildo Zegna (ZGN) said they've acquired a minority stake in family-owned knitwear company Luigi Fedeli e Figlio. The City of New York is to sue Hyundai Motor (005380.KS) and Kia Motor (000270.KS) over negligence by selling cars that are too easy to steal. Estia Healthcare (EHE.AU) said it would accept an improved takeover offer from Bain Capital.

• Digest:

  • China trade surplus shrinks as exports see bigger-than-expected drop:

    • Exports fell 7.5% y/y in dollar terms, compared to consensus drop of 1.8% and follows an 8.5% growth in prior month. Imports shrank 4.5%, versus consensus of an 8% drop and the surprising 7.9% drop in the previous month. As a result, China's trade surplus fell to $65.81B, down sharply from last month's $90.21B. The larger-than-expected drop in exports reversed the robust growth seen in the previous two months as global demand weakens and adds to a series of disappointing economic data, including official manufacturing PMI that showed manufacturing activity in contraction for two consecutive months. Bloomberg noted growing speculation that Beijing may roll out further stimulus to bolster growth with some economists expecting PBOC to cut RRR in coming months. Some others argue an interest rate cut may be necessary as early as next week.

  • Australia GDP posts weakest growth since 2021 Covid lockdown:

    • Q1 GDP expanded 0.2% q/q, compared to consensus 0.3% and follows revised 0.6% in the previous quarter. Capital investment was the main driver on the back of strength in equipment and non-dwelling construction. Housing investment fell, reflecting lower levels of property market activity following recent interest rate rises. Domestic consumption was subdued as private spending slowed, adding only 0.2 ppt to growth, as discretionary spending fell below essential spending for the first time since the Delta-variant lockdowns. External demand was a drag of 0.2 ppt as import growth outpaced exports. Silver lining in exports was services strength, reflecting continued recovery in education related travel as more international students returned to Australia for on-campus learning. Import growth partly explained by pent-up flows due to prior China manufacturing disruptions in communications equipment, while autos and other machinery held up by biosecurity cleaning requirements. Terms of trade rose 2.8% as import prices fell more sharply than export prices.

  • RBA Governor Lowe reiterates some further tightening may be required:

    • In a Wednesday speech, RBA Governor Lowe discussed latest economic developments, noting they remain on a narrow path with significant risks. Particular attention on the risk of inflation remaining too high for too long. Noted ongoing tightness in domestic supply-demand balance with unemployment at nearly 50-year lows. Clarified that desire to preserve labor market improvement does not equate to higher tolerance for inflation overshoot. Evidence indicates rate hikes to date are working and inflation coming down. Acknowledged latest monthly inflation reading was higher than expected, though it has not changed RBA assessment that inflation is trending lower as illustrated by ex-volatile items. Also highlighted contrast between clear declines in prices of key commodities (oil, wheat, beef), shipping freight costs vs accelerating market services, rents and electricity. Concluded that it is too early to declare victory in the fight against inflation. Repeated language used in the monetary policy statement that some further tightening may be required, but dependent on how the economy and inflation evolve.

  • OECD reiterates China to see strong growth this year but India to outgrow all of Asia:

    • Latest economic forecasts from OECD show global economy set to continue recovery from Covid lockdowns and Russia's war in Ukraine, but average growth still below pre-pandemic levels. Organization forecasts World to expand 2.7% in 2023, 2.9% in 2024 and versus average of 3.4% in seven years prior to pandemic. In Asia, India growth forecast at 6.0% this year, 7.0% next; China growth 5.4% in FY 2023, 5.1% in 2024. Indonesia estimated to see 4.7% growth in 2023, 5.1% in 2024. Below this, next best is Australia with 1.8% growth this year, 1.4% next. OECD said inflation likely to remain headache for economies throughout forecast period, central banks face "long road ahead" to attain strong and sustainable growth. Added global economy in precarious state, faces substantial growth slowdown later this year as interest rate rises start to bite.

  • Blinken set to visit Beijing in coming weeks:

    • Bloomberg sources said Secretary of State Blinken plans to visit China in coming weeks for talks with top officials, possibly including President Xi Jinping. Recalled that a tour planned in February was scrapped after US identified what it said was a Chinese spy balloon crossing over the continental US. Exact schedule for a Blinken visit still said to be fluid and State Department said there was nothing to announce yet. Developments follow growing geopolitical tensions as National Security Council spokesman Kirby warned of a "growing aggressiveness" by China after interceptions of a US ship and surveillance aircraft in recent weeks. At the same time, Kirby said the two sides were making progress in opening other channels towards setting up visits for US Cabinet secretaries. Despite concerns after China rebuffed US efforts to arrange a meeting between respective defense ministers at a forum in Singapore last week, high-level contact has resumed in other areas. Reuters noted statements from Washington and Beijing on meetings between Daniel Kritenbrink, assistant secretary of state for East Asian and Pacific Affairs, and Chinese officials including Vice Foreign Minister Ma Zhaoxu were positive, describing the talks as candid and productive.

  • Notable Gainers:

    • +2.0% 003490.KS (KOREAN AIR LINES Co.): CEO Walter Cho says he is going to push for merger with Asiana Airlines "all the way" regardless of what may have to be given up to win over regulators

    • +1.7% 373220.KS (LG Energy Solution): Novonix, LG Energy Solution enter into Joint R&D agreement for artificial graphite anode material for lithium-ion batteries and $30M investment agreement

  • Notable Decliners:

    • -12.8% 2121.HK (Qingdao Ainnovation Technology Group): 19.9M-share placement priced at HK19.70/share

    • -3.4% 2772.HK (Zhongliang Holdings Group): reports May contracted sales CNY3.19B; StreetAccount notes year-ago figure was CNY6.0B

    • -0.8% 1913.HK (Prada): Prada Group, Ermenegildo Zegna reach agreement to acquire minority stake in Luigi Fedeli e Figlio; terms undisclosed

    • -0.6% 8601.JP (Daiwa Securities): 2030 target for 80% of PBT from asset management and retail services

    • -0.6% 9201.JP (Japan Airlines Co.): Japan Airlines, All Nippon Airways reportedly in talks to buy planes from Boeing, Airbus

• Data:

  • Economic:

    • China

      • May trade balance $65.81B vs consensus $95.45B and $90.21B in prior month

        • Exports (7.5%) y/y vs consensus (1.8%) and +8.5% in prior month

        • Imports (4.5%) y/y vs consensus (8%) and (7.9%) in prior month

    • Australia

      • Q1 GDP +0.2% q/q vs consensus +0.3% and revised +0.6% in prior quarter

        • GDP +2.3% y/y vs consensus +2.4% and +2.7% in prior quarter

  • Markets:

    • Nikkei: (593.04) or (1.82%) to 31913.74

    • Hang Seng: 152.72 or +0.80% to 19252.00

    • Shanghai Composite: 2.42 or +0.08% to 3197.76

    • Shenzhen Composite: (3.34) or (0.17%) to 1995.28

    • ASX200: (11.60) or (0.16%) to 7118.00

    • KOSPI: 0.19 or +0.01% to 2615.60

    • SENSEX: 186.30 or +0.30% to 62979.18

  • Currencies:

    • $-¥: (0.21) or (0.15%) to 139.4530

    • $-KRW: +3.19 or +0.25% to 1302.7600

    • A$-$: +0.00 or +0.04% to 0.6675

    • $-INR: (0.02) or (0.02%) to 82.4980

    • $-CNY: +0.00 or +0.05% to 7.1239