Back to Daily DR Market Summary

StreetAccount Summary - Asian Market Recap: Nikkei (1.45%), Hang Seng (1.71%), ASX 200 (1.37%) as of 04:10 ET

Jun 23 ,2023

• Synopsis:

  • Asian equities ended sharply lower Friday on concerns central banks are set to extend their tightening cycle deeper into H2. Japan saw a steep loss Friday that led to its first weekly loss in almost three months. Australia also down sharply for the second day in a row. Hang Seng again sharply lower to record a loss of almost 6% for the week. South Korea and Taiwan also down, Southeast Asia lower but at a more moderate pace, India also modestly lower. Mainland China and Taiwan closed for a holiday. US futures lower, European markets opened with steep losses. US dollar sharply higher; yen, offshore yuan, AUD all lower. Treasury yield curve steepening. Crude blends lower again, industrial metals under pressure, gold flat. Cryptocurrencies steady.

  • Rate hikes by the Swiss, Norwegian and UK central banks Thursday prompted fresh fears that rates hikes are set to continue deep into the second half of the year. The BoE move was particularly troubling, with the 50 bps hike yesterday now accompanied by a 70% chance of a similar move in August. The hawkish policies placed more upside pressure on yields, steepening already inverted yield curves in several major developed economies, and increasing talk of a recession later this year/next.

  • Different story in Japan, where the BOJ is still talking up its easy monetary policy. Core inflation data out Friday remained above the BOJ's 2% target and the BOJ-watched 'core-core' inflation rose to 42-year high, triggering a sharp correction in equities, a decline in JGB 10Y yield, and another round of yen weakening. Japan flash manufacturing PMI also fell back into contraction in May. Also a different story in China as the offshore yuan weakened again today to its lowest since Nov-22, and talk turned to Beijing perhaps tolerating an orderly depreciation to support exports.

  • Mitsubishi UFJ Financial Group (8306.JP) is in talks with companies behind global stablecoins over issuing tokens via the bank's blockchain platform. Japan's nuclear regulator has reconfirmed its approval of Tokyo Electric Power (9501.JP) to run nuclear power plants. Alibaba (9988.HK) CEO likely to work closely with Jack Ma, according to reports, with Ma pushing the company to refocus on small and medium-sized Taobao sellers rather than big brands that dominate Tmall. Cathay Pacific (0293.HK) said it now forecasts its first half-year profit in three years as travel rebounds. Sinochem (600500.CH) is expected to keep its stake in Pirelli (PIRC.MI) despite the Italian government moving to limit the company's influence.

• Digest:

  • Japan CPI mostly in line:

    • Core CPI rose 3.2% y/y in May, compared to consensus 3.1% and follows 3.4% in the previous month. While slight moderation in core inflation was confirmed after surprising strength in April, ex-fresh food & energy prices accelerated further to 4.3% from 4.1% vs consensus 4.2%. Marks the first back-to-back readings in the 4% range for the first time since 1981. Energy drags increased meaningfully -- to 0.69 ppt from 0.37 ppt driven mainly by electricity reflecting government energy relief measures. However, prevailing prices remain higher than estimated drags from policy support (energy and accommodation via travel subsidies). Elsewhere, non-fresh food prices continue to pick up steadily. Press takeaways continue to highlight core inflation running above the BOJ's 2% target for the 14th consecutive month (Reuters). BOJ projection for prices to fall back below 2% toward mid-FY23 coming under scrutiny as economists predict further upward revisions, and this recalibration has been cited as the basis for a possible YCC tweak in July.

  • Japan flash manufacturing PMI slips back into contraction:

    • Flash manufacturing PMI was 49.8 in June, down from 50.6 in the previous month, marking a return to contraction since April. Reflects downturns in output and new orders, while exports fell at a faster pace. Input and output prices both logged softer increases. Finished goods inventories swung to growth following prior declines. Non-manufacturing PMI also softened to 54.2 from 55.9. Composite PMI declined to 52.3 from 54.3, marking the softest reading in four months. Manufacturers cited relatively muted demand at home and abroad. Nothing specific behind softer non-manufacturing growth, still buoyed overall by post-Covid recovery tailwinds. Report noted some firms expressed more caution around the outlook due to strong cost pressures and lingering global economic uncertainty. But inflation pressures easing, with aggregate input prices softening to a 22-month low while output prices logged smallest gain since January.

  • RBA rate hike expectations are mounting:

    • RBA terminal rate forecasts nudging higher with economists and markets projecting 2-3 more increases by end-2023. Hawkish rate repricing has also corresponded with Australian yield curve fully inverting for first time since 2008, tying into concerns of a hard landing. June RBA minutes marginally dovish after members noted decision to hike was "finely balanced", but central bank's assessment that inflation risks have shifted to the upside reinforced expectations of additional tightening. Still-tight Australian labor market and larger-than-expected rise in FY23 minimum wage playing into wage-price spiral risk given low productivity growth. Another RBA concern revolves around surging migration levels that are fueling upward pressure in rental growth, Similar dynamic is driving a quicker-than-expected rebound in house prices, which is a factor in RBA's assessment of the inflation outlook.

  • Philippine central bank governor says bank has done enough to tame inflation, signals 2023 pause:

    • In a Bloomberg interview, Philippine central bank (BSP) governor Felipe Medalla said policymakers have done enough after 425 bp hikes and won't need to match any further rate hikes by Fed if it stays within 25 bp moves. BSP will likely keep benchmark rate steady for rest of 2023 before considering easing in early 2024 if "current conditions remain". Remarks came after BSP kept overnight reverse repo rate at 6.25% for second successive meeting Thursday. Medalla said future policy decision largely driven by inflation data, on track to fall within BSP's 2-4% target by Q4 on current forecast after having cooled for four months in a row in May. Medalla's term set to end in July, wasn't confident of being reappointed. Meanwhile, Philippine Stock Exchange Index came close to technical correction, plagued by inflation and monetary tightening. Recent tax plan on food products and investigation on Cebu Air (CEB.PM) also weighed on sentiments (Bloomberg).

  • Japan FY23 global capital spending set for record:

    • A Nikkei survey of 857 Japanese companies showed capital investment set to grow 16.9% in FY23 to a record JPY31.6T ($223B). Noted broad-based strength across domestic (making up two-thirds of the total) and overseas segments, both projected to expand by double digits. Offshore focus is on western markets -- Investment in the US (incentivized by the Inflation Reduction Act) is expected to climb 30.7% to more than JPY1T. EU investment seen rising 36.8%, but China seen dropping 7.5%. Cited easing semiconductor shortages and accelerating global demand for EVs as tailwinds. Sectors led by electronic equipment and autos, while only pulp & paper, real estate and construction anticipate decreases. Recall the March BOJ Tankan survey (most widely watched) indicated FY23 capex growth in the low single digits on all-industry basis, though with a much larger survey sample, forecasts subject to seasonality over the course of the year, and covers domestic investment. BOJ MPC has maintained their view the outlook for capex remains positive on the back of prior profit growth.

  • Notable Gainers:

    • +6.3% 9501.JP (Tokyo Electric Power Co. Holdings): Japan's Nuclear Regulation Authority reportedly decides to reconfirm its eligibility as nuclear power operator

  • Notable Decliners:

    • -6.2% MZH.SP (Nanofilm Technologies International): Downgraded to fully valued from hold at DBS

    • -5.0% 1310.HK (HKBN Ltd.): Resumed underweight at JPMorgan; prior rating was overweight

    • -4.9% 011170.KS (Lotte Chemical): Target price lowered at Kiwoom Securities

    • -4.6% 001230.KS (Dongkuk Holdings Co.): Holder disposes 6.9M shares

• Data:

  • Economic:

    • Japan

      • May nationwide core CPI +3.2% y/y vs consensus +3.1% and +3.4% in prior month

        • CPI excl. fresh food & energy +4.3% y/y vs consensus +4.2% and +4.1% in prior month

        • Overall CPI +3.2% y/y vs consensus +3.2% and +3.5% in prior month

      • June flash manufacturing PMI 49.8 vs 50.6 in prior month

        • Services PMI 54.2 vs 55.9 in prior month

        • Composite PMI 52.3 vs 54.3 in prior month

    • Singapore May

      • CPI 5.1% y/y versus consensus +5.4% and +5.7% in prior month

  • Markets:

    • Nikkei: (483.34) or (1.45%) to 32781.54

    • Hang Seng: (328.38) or (1.71%) to 18889.97

    • Shanghai Composite: Closed

    • Shenzhen Composite: Closed

    • ASX200: (96.30) or (1.34%) to 7099.20

    • KOSPI: (23.60) or (0.91%) to 2570.10

    • SENSEX: (129.55) or (0.20%) to 63109.34

  • Currencies:

    • $-¥: (0.14) or (0.10%) to 142.9500

    • $-KRW: +7.53 or +0.58% to 1306.1300

    • A$-$: (0.01) or (0.89%) to 0.6694

    • $-INR: +0.12 or +0.15% to 82.0330

    • $-CNY: (0.00) or (0.01%) to 7.1789