Back to Daily DR Market Summary

StreetAccount Summary - Asian Market Recap: Nikkei (0.05%), Hang Seng +2.17%, Shanghai Composite +0.74% as of 04:10 ET

Jun 15 ,2023

• Synopsis:

  • Asia equities ended mixed Thursday as China economic data and rate cuts, blended together with a 'hawkish pause' by the Fed. Hang Seng led China markets higher as consumer and property stocks outperformed on hope of fresh stimulus, mainland markets led by cyclicals as overseas net fund inflow surged to highest since February. Australia gained, Taiwan chip makers dragged Taipei higher. Elsewhere weaker with losses for South Korea, Southeast Asia and India. Japan flatlined. US futures turning soft, Europe opened with some losses. US dollar higher, NZD lower on GDP data, yen significantly weaker, yuan firmed. Treasury yields higher across tenors, Australian yield curve inverted for first time since 2008 on employment data. WTI and Brent crude higher, precious metals down, industrial metals under pressure although iron ore is higher in China. Cryptocurrencies adding to sharp overnight losses.

  • A 'hawkish pause' by the Fed overnight that left the dot-plot pointing at two more rate hikes before a terminal is arrived at; Fed Fund Futures show a 72% chance of a single 25 bps hike in July before an extended pause, a rate cut this year is now off the table. Overnight, bonds and stocks sold off sharply on the Fed news before recovering, with the former selling down in Asia trading Thursday to send yields to their highest level since March's banking crisis. But Asia stock benchmarks (and US futures) appear hesitant in deciding which way to go next with the Nikkei up almost 1% at one point today before selling down to the flatline, tech stocks in Taipei and Seoul variable.

  • Added to the mix today, the PBOC cut its 1Y MLF rate by 10 bp to 2.65%. The move was expected following a 10 bps trim to 7D rates Tuesday, and it also paves the way for 3Y and 5Y LPRs to be similarly cut next week. And, China's May activity data, which was directionally expected to have slowed significantly from April and did, but also leaned weaker against even those pessimistic forecasts. Separate data showed home prices rose marginally m/m but property investment fell at the fastest pace since 2001. The data only played into expectations of substantial stimulus to be announced soon, boosted further by reports Beijing has asked business leaders and economists for ideas on how to boost the economy, and a pledge late on by the commerce ministry to back supportive consumer policies.

  • Australia employment surprisingly strong leading to unexpected decline in unemployment rate but this also had the effect of cementing expectations of another RBA rate hike. New Zealand Q1 GDP contracted more than expected, edged the country into a technical recession. Japan export growth slowed but the trade gap narrowed, core machinery orders came in above consensus. Yen much weaker overnight and again today on widening yield differentials, led to a brief government comment describing excessive forex movement as 'undesirable'. Ahead today ECB (25 bps hike and hawkish comment expected), tomorrow BOJ (no change and dovish comment expected).

  • Chow Tai Fook Jewellery (1929.HK) said it expects FY 24024 to be the year of recovery and normality. CK Hutchison (1.HK) said Vodafone and Three UK were to merge with CHK Hutch owning 49% of the new company. ZTE (763.HK) stock benefited from rumors of AI server price increase from a rival Chinese manufacturer.

• Digest:

  • Yuan firms and China stocks advance as 'stimulus trade' gathers steam:

    • Chinese assets rose Thursday on increased expectations of central government stimulus following weak May economic activity, and cut to MLF rate by PBOC this morning. Hang Seng up 2.0%, taking another leg higher late afternoon on commerce ministry pledge to launch policies aimed at improving consumption; led consumer stocks on Hang Seng to outperform. Property stocks also higher on hopes of added support for developers following May economic data that showed property investment at lowest since 2001, home price growth also slowing. CSI 300 and Shenzhen benchmarks up around 1.7% each; equity trading volumes rose above CNY1T for second successive day, overseas funds had largest net inflow into A-Shares since 9-Feb (SecuritiesTimes). Yuan firmed by 0.1% against dollar index also higher over day. State Council meeting Friday to be closely tracked for any stimulus announcements, sectors targeted, follows reports business leaders and economists consulted recently on ways to boost economy (Bloomberg).

  • China activity data confirms softening momentum:

    • Industrial production rose 3.5% y/y in May, in line with expectations, following 5.6% in the previous month. Double-digit growth in solar cells, power generators, and autos were bright spots. Steel products broadly weaker while smartphones fell moderately. Retail sales expanded 12.7%, below consensus 13.7% and follows 18.4% in April. Catering surged 35.1%, indicating post-Covid recovery in dining remains strong. Autos and communications equipment growth was also well in double digits. Softness seemingly came from food & beverages and housing materials. Fixed asset investment was up 4.0% YTD, weaker than consensus 4.4%, following 4.7% through April. Fits with somewhat deeper declines in real estate with aggregate sales marginally lower in floor space terms, though logged the third straight rise in value. New construction starts remained depressed. Infrastructure increased 7.5%. Unemployment rate was steady at 5.2% as expected. NBS overall economic assessment reiterated international environment is complex and severe, while domestic fundamentals not yet solid.

  • PBOC cuts MLF rate as expected:

    • In Thursday's MLF operation, PBOC cut the 1-year rate 10 bp to 2.65%, matching expectations, while rolling over CNY237B vs CNY200B in maturing loans. Reuters consensus poll showed unanimous expectations for a cut to the MLF rate with almost all looking for a 10 bp reduction, matching moves in the 7-day reverse repo rate and SLR on Tuesday. Lower rate points to follow-through decreases in LPRs due 20-Jun opening up some debate about the split between 1y and 5y rates. Recent expectations have been weighted towards the 5y tenor that would support the property market. Recall recent narrative rapidly shifted towards monetary easing, particularly after PBOC Governor Yi's recent comments re-emphasizing stronger counter-cyclical adjustments was interpreted as a signal. In the lead-up to the repo rate cut, commercial banks announced a series of deposit rate cuts, taken as a sign of easing preparation. Latest data disappointment came from monetary data that showed softer than expected new loans and M2 money supply growth.

  • China new home prices rise at slower pace in May:

    • NBS data showed China new home prices in 70 cities rose 0.1% in May m/m, fifth consecutive month of improvement, but slowed from April's 0.4% growth (Reuters). On y/y basis, prices rose 0.1% versus April's 0.2% drop, first rise in annual terms since Apr-22. 46 of 70 cities saw m/m price increases, down from 62 in April; 26 cities saw y/y price increases, up from 22 in April. Noted slower rise in home prices adding to strains on property sector, which Goldman analysts expected sector to be persistently weak for years and assumed an "L-shape" recovery (Reuters). Pimco also said sector needs a more comprehensive policy approach and wider usage of different funding channels for a meaningful recovery (Bloomberg). Noted PBOC cut MLF rate for first time in ten months, paving way for first reductions in LPR since Aug-22 on 20-Jun. Expectations arise for more property stimulus, including some easing in home purchase curbs in top-tier cities.

  • Australia employment rebounds strongly, jobless rate unexpectedly declines:

    • Headline employment rose 75.9K m/m in May, above consensus 17.5K, rebounding from 4.3K decline in the previous month. Main driver was full-time jobs +61.7K outpacing part-time work +14.3K. Participation rate was 66.9%, above consensus and prior month's 66.7%. Unemployment rate unexpectedly fell to 3.6% vs consensus and prior 3.7%. However, some signs of softness as total hours worked fell 1.8% m/m while underemployment rate rose to 6.4%. ABS noted some volatility associated with a bigger than usual drop last month around Easter, though monthly average growth remains almost on par with the annual trend. Also highlighted total employment reached 14M for the first time, compared with almost 13M before the pandemic. Early takeaways hawkish as tighter than expected labour market supports the RBA's hawkish stance. Australian 3y/10y yield curve inverted for the first time since 2008 following the data (Bloomberg).

  • Notable Gainers:

    • +7.3% 601888.CH (China Tourism Group Duty Free): China reportedly plans to adjust duty free policy

    • +5.3% 1476.TT (Eclat Textile Co.): reportedly sees company to return to 2021 level in 2Q24 the latest

    • +4.9% BN4.SP (Keppel Corp.): 49%-owned JV with Decarb Corp. secures two EaaS contracts in Thailand

    • +3.4% 539150.IN (PNC Infratech): KKR reportedly in discussions to buy 12 road projects

    • +1.1% 1929.HK (Chow Tai Fook Jewellery Group): expects FY24 to be year of recovery and normality

  • Notable Decliners:

    • -19.9% 189.HK (Dongyue Group): guides significant y/y decrease in H1 net income attributable

    • -13.2% 1382.HK (Pacific Textiles Holdings): guides FY net income attributable HK$269M vs year-ago HK$573M

    • -1.8% 9984.JP (SoftBank Group): subsidiary of SoftBank Group to acquire Balyo at €0.85/share

    • -0.5% 1.HK (CK Hutchison Holdings): Vodafone UK and Three UK to merge; Vodafone will own 51% of the combined business and CKHGT 49%

• Data:

  • Economic:

    • China

      • May industrial production +3.5% y/y vs consensus +3.5% and +5.6% in prior month

        • Retail sales +12.7% y/y vs consensus +13.7% and +18.4% in prior month

        • Fixed asset investment (YTD) +4.0% vs consensus +4.4% y/y vs +4.7% in prior month

        • Unemployment rate 5.2% vs consensus 5.2% and 5.2% in prior month

      • May new house prices +0.1% m/m vs +0.4% in prior month

        • House prices +0.1% y/y vs (0.2%) in prior month

    • Japan

      • May trade balance (¥1,372.5B) vs consensus (¥1,286.6B) and revised (¥432.3B) in prior month

        • Exports +0.6% y/y vs consensus (1.2%) and +2.6% in prior month

        • Imports (9.9%) y/y vs consensus (10.3%) and (2.3%) in prior month

      • April core machinery orders +5.5% m/m vs consensus +3.0% and (3.9%) in prior month

      • April tertiary sector activity index +1.2% m/m vs consensus +0.5% and (1.7%) in prior month

    • Australia May

      • Employment +75.9K m/m vs consensus +17.5K and (4.3K) in prior month

        • Unemployment rate 3.6% vs consensus 3.7% and 3.7% in prior month

        • Participation rate 66.9% vs consensus 66.7% and 66.7% in prior month

    • New Zealand Q1

      • GDP (0.1%) q/q vs consensus (0.1%) and revised (0.7%) in prior quarter

        • GDP +2.2% y/y vs consensus +2.6% and revised +2.3% in prior quarter

    • Singapore Q1

      • Unemployment Rate (Final) 1.8% versus consensus 1.8% and 1.8% in prior quarter

  • Markets:

    • Nikkei: (16.93) or (0.05%) to 33485.49

    • Hang Seng: 420.50 or +2.17% to 19828.92

    • Shanghai Composite: 23.99 or +0.74% to 3252.98

    • Shenzhen Composite: 24.15 or +1.18% to 2062.95

    • ASX200: 13.60 or +0.19% to 7175.30

    • KOSPI: (10.54) or (0.40%) to 2608.54

    • SENSEX: (107.24) or (0.17%) to 63121.27

  • Currencies:

    • $-¥: +1.25 or +0.89% to 141.3170

    • $-KRW: +4.51 or +0.35% to 1278.8700

    • A$-$: +0.00 or +0.21% to 0.6817

    • $-INR: (0.02) or (0.02%) to 82.0260

    • $-CNY: (0.01) or (0.17%) to 7.1513