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StreetAccount Summary - Asian Market Recap: Nikkei +1.97%, Hang Seng +0.47%, Shanghai Composite +0.55% as of 04:10 ET

Jun 09 ,2023

• Synopsis:

  • Asian equities ended higher Friday after a strong handover from Wall Street overnight. Hang Seng posted another positive day despite opening in the red, mainland China benchmarks also modestly higher. Gains in Australia, South Korea and Taiwan as tech stocks rose post a solid day for the Nasdaq Thursday, Southeast Asia mixed, India nursing some losses. Japan reversed Thursday's losses. US futures slightly lower, Europe opened with modest losses. US dollar slightly stronger post overnight declines, yuan weaker on inflation, yen weakened again on BOJ Governor's reiteration of easy monetary policy. Treasury yields higher across tenors. WTI lower but Brent oil higher, industrial metals paring gains, precious metals inching higher.

  • Higher-than- expected US jobless claims Thursday led to a big decline in Treasury yields overnight giving Wall Street tech stocks support as bets rose the Fed would pause on rate hikes next week. This gave Asia's technology-orientated benchmarks a pillar of support Friday, pushing the Kospi to year-long highs and giving another leg up for Japan's exporters as the yen weakened further. China equities brushed off soft inflation data that reminded investors of the spectre of deflation and which also led to a government advisor to call for the PBOC to cut interest rates.

  • China CPI did increase in-line with forecasts but PPI deflation worsened by more than expected. Australian recession now seen as a 50-50 outcome with yield curve fully inverted. US-China tensions remain elevated despite White House denial Cuba is set to host a China spy base. BOJ Governor Ueda said there he saw little need to tweak YCC anytime soon, weakening yen in afternoon trade. Secretary of State Blinken to visit Beijing as soon as next week, underlining efforts to resume top-level re-engagement. South Korea's current account swung into a deficit in April. Malaysia's May industrial output contracted unexpectedly but its jobless rate fell. Philippine imports and exports fell the most in three years as trade conditions deteriorate further.

  • Domestic Japanese investors are to sue a MUFG (8306.JP) unit over the sale of AT1 bonds of Credit Suisse. Tokyo Gas (9531.JP) is to spend $1.4B on renewable energy sources over the next three years. NTT Corp (9432.JP) is to launch its own generative AI tool later this year. Tokio Marine (8766.JP) is to sell off its Southeast Asia life insurance business within the next two months.

• Digest:

  • China PPI declines accelerate, CPI inflation edges up:

    • PPI fell 4.6% y/y in May, weaker than consensus 4.3%, accelerating from a 3.6% decline in the previous month. Marks the eighth straight drop at the fastest pace in more than two years. Softness was broadly based as deeper declines in upstream prices (energy and steel processing) accompanied by a downturn in downstream prices. Latter driven mainly by outright decreases in consumer durables, while increases in food and clothing easing. NBS cited general weakness in international commodity prices and goods demand. Noted that base effects were more slightly more unfavorable, accounting for more than half of the headline drop, though underlying prices saw sharper deterioration. CPI rose 0.2%, matching expectations, following a 26-month low 0.1% in April. Core inflation slid to 0.6% from prior 0.7%. No major developments but broad categories were mostly softer as consumer goods swung to declines, though double-digit declines in fuel remain a key drag. On implications, weaker inflation helps to sustain PBOC easing expectations.

  • BOJ sees little need to tweak Yield Curve Control now, sees overshoot in inflation:

    • Bloomberg reported BOJ officials see little need to adjust its yield curve control at its meeting next week given improvement in bond market function, smooth shape of yield curve. Officials also said to recognize inflation running stronger than expected, raising possibility of BOJ upgrading inflation forecast in quarterly economic outlook report in July. Article said sources not confident achievement of 2.0% inflation target in sight, leaving door open for continued easy monetary policy. BOJ due to meet for two-day meeting on 16-Jun, final policy decision to be made after assessing economic data and financial markets right up until final moment. Reuters added Ueda said corporate pricing-setting behaviour showing signs of changes that could push up inflation by more than expected, resolved to keep ultra-loose policy, to ensure companies raise wages enough to offset inflation burden.

  • Blinken may visit Beijing as soon as next week:

    • Politico, citing two people familiar with the matter, reported Secretary of State Blinken is planning to visit China as soon as next week. Blinken said to be on track to arrive in Beijing following his current trip to the Middle East. Story noted there was no confirmation from the State Department or China's Embassy in Washington. Encouraging signs of top-level re-engagement marred by latest reports Beijing is in talks with Cuba to establish a foothold to spy on the US, though denied by Pentagon (Reuters). Follows visits to Beijing by US officials earlier this week, where one of the goals was to ensure lines of communication remain open and discuss potential for future visits by higher level officials. Yet, Chinese Foreign Ministry officials have publicly rebuffed Biden administration outreach in recent weeks citing everything from US export restrictions on high tech semiconductors, ongoing arms sales to Taiwan and the Biden administration's rallying G7 countries last month to work on "de-risking and diversifying" their economies to rely less on China. Beijing's denial of a request by Defense Secretary Lloyd Austin to meet with his counterpart Li Shangfu at the Shangri La Dialogue defense summit in Singapore suggested that bilateral ties remained tenuous.

  • Japan nominal GDP growth seen picking up to post-bubble highs:

    • Narrow Nikkei poll of 10 economists found consensus forecast looks for nominal GDP growth of 4.0% in FY23, which would be the strongest since 1991. Contrasts with FY23 real growth of 1.2%, edging down from 1.4% in FY22. Inflation remains the underlying theme and higher nominal growth seen as a reflection of companies passing on higher costs and raising wages. Story suggested broadly mixed fiscal implications as inflation implies higher growth in both expenditure and tax revenues. Still, economist consensus is now well above the government's most recent forecast of 2.1%, offering positive signs for the fiscal austerity goal to achieve a primary balance in FY25. However, policies to address declining birthrate looms as another source of structural spending growth as details are yet to be finalized. Moreover, the article noted ongoing concerns about a slowdown in external demand amid central bank tightening, posing a threat to the cyclical recovery.

  • Hong Kong Chief Executive Lee says city to deepen financial market links with Mainland China:

    • At Caixin Summer Summit, Hong Kong Chief Executive John Lee promoted Hong Kong's role in connecting financial markets between China and overseas, saying city will continue to expand and optimize various mutual market access plans with Mainland China. Lee highlighted southbound Bond Connect, wealth management connect scheme in Greater Bay Area, inclusion of ETFs in Stock Connect, and recent launch of northbound trading of Swap Connect. Added HK is studying possibility of adding RMB stock trading counters in Stock Connect, discussing launch of treasury bond futures. Lee said goals are to provide foreign investors with more risk management products, promote further opening of mainland financial market, and inject impetus into Hong Kong market. On RMB internationalization, Lee said city will consolidate hub status of offshore yuan, promote more issuance and trading of RMB securities, and support more Mainland China institutions to issue offshore yuan bonds in Hong Kong.

  • Notable Gainers:

    • +4.1% 1929.HK (Chow Tai Fook Jewellery Group): reports FY net income attributable HK$5.38B vs StreetAccount HK$6.80B; reports April-May key operational data:

    • +1.8% 9432.JP (Nippon Telegraph & Telephone): reportedly to come up with generative AI tool this year

    • +1.8% 6669.TT (Wiwynn): reports May revenue NT$15.52B, (23.3%) y/y

    • +1.2% 8766.JP (Tokio Marine Holdings): reportedly to launch sale of its Southeast Asia life-insurance business within two months

    • +0.9% 9531.JP (Tokyo Gas Co.): to spend $1.4B on renewable power over next three years

    • +0.8% 2914.JP (Japan Tobacco): reportedly among companies looking at buying majority stake in AIR, a tobacco firm

  • Notable Decliners:

    • -1.0% 1928.JP (Sekisui House): reports Q1 net income attributable ¥41.93B vs FactSet ¥45.07B, revenue ¥708.28B vs FactSet ¥728.27B

• Data:

  • Economic:

    • China May

      • CPI +0.2% y/y vs consensus +0.2% and +0.1% in prior month

      • PPI (4.6%) y/y vs consensus (4.3%) and (3.6%) in prior month

  • Markets:

    • Nikkei: 623.90 or +1.97% to 32265.17

    • Hang Seng: 90.77 or +0.47% to 19389.95

    • Shanghai Composite: 17.82 or +0.55% to 3231.41

    • Shenzhen Composite: 14.12 or +0.71% to 2006.45

    • ASX200: 22.80 or +0.32% to 7122.50

    • KOSPI: 30.31 or +1.16% to 2641.16

    • SENSEX: (140.20) or (0.22%) to 62708.44

  • Currencies:

    • $-¥: +0.78 or +0.57% to 139.6820

    • $-KRW: (4.43) or (0.34%) to 1291.6900

    • A$-$: (0.00) or (0.01%) to 0.6711

    • $-INR: +0.00 or +0.01% to 82.4650

    • $-CNY: +0.01 or +0.16% to 7.1236