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StreetAccount Summary - Asian Market Recap: Nikkei +1.70%, Hang Seng +2.06%, Shanghai Composite +1.31% as of 04:10 ET

Jul 03 ,2023

• Synopsis:

  • Asian equities higher across the region Monday on follow through from Friday's Wall Street gains. Region led higher by Hong Kong, which rose around 2%, mainland stocks also better. Japan gapped higher first thing and closed strong. Australia ended with gains on corporate action, commodity price strength. South Korea and Taiwan also higher while India's Sensex broke to fresh record highs. Southeast Asia also higher on the main boards. US futures a few points higher, Europe opened with modest gains. US dollar flat, yuan steady on PBOC support, AUD lower ahead of RBA decision tomorrow. Treasury yields a few points higher across tenors. Crude blends lower, industrial metals higher led by copper. Precious metals flat.

  • Asian equities off to a strong start to H2 on follow through from Friday's session on Wall Street as Japan advanced on tech's read through to the Nasdaq's gains, while the Hang Seng rose sharply on encouraging factory output data. The catalyst for Friday's move was the core inflation component of May's PCE price index, which rose just 0.2% m/m and 4.5% y/y, its lowest such gain in almost a year. Bond yields and Fed Fund Futures were largely unchanged so the story remained a largely equity one but with the S&P moving to multi-month highs again, sentiment remains positive.

  • BOJ Tankan showed a larger than expected rise in large manufacturer and non-manufacturer sentiment, and a surge in projected capex. China Caixin manufacturing PMI fell by less than expected with the sector remaining in expansion. Asia ex-China PMIs softened but continued to expose the split between north and south Asia. Japan final manufacturing PMI shrank in-line with preliminary read. Australian building approvals rebounded strongly alongside housing finance approvals as national home prices rose for a second month. In other developments, Treasury Secretary Yellen confirmed she will visit Beijing this week in latest US effort to resume regular high-level communications with China. Beijing appointed Pan Gongsheng as next CCP chief and governor of PBOC while the bank is said to have queried foreign banks about their dollar deposits as offshore yuan trades near lowest since early Nov-2022.

  • Z Holdings (4689.JP) Yahoo Japan is considering not renewing its search-technology business with Google. China Vanke (2202.HK) chairman said China's home market is currently "worse than expected", followed data Friday showing new home sales value had fallen again. XPeng (9868.JP) and Li Auto (2015.HK) among auto stocks higher Monday on June delivery data. Wynn Macau (1128.HK) and Galaxy Entertainment (27.HK) among the casino operators higher Monday on better-than-expected casino traffic data. United Malt Group (UMG.AU) said it had agreed to a A$1.5B ($1B) takeover from French agribusiness InVivo to create the world's largest malt producer.

• Digest:

  • China Caixin manufacturing PMI in expansion for second straight month but growth slows:

    • Caixin manufacturing PMI was 50.5 in June, versus consensus 50 and 50.9 in May, indicating a marginal expansion in factory activity. Expansion of both manufacturing output and new orders softened. Muted sales growth led to a cautious approach to employment, which fell for fourth month in a row. Downward pressure remained on prices with input costs falling steepest pace since Jan-16. Increased competition led to reduced selling prices. New export orders came in just slightly above 50 as weak global economy had damped foreign demand. Optimism down to eight-month low as some expressed concerns about slower-than-expected economic recovery. Followed last Friday's official manufacturing PMI reading of 49 which showed manufacturing activity remained in contraction for third straight month. Economists noted recent data suggests China's recovery has yet to find a stable footing, with increasingly dire job market, rising deflationary pressure and waning optimism, which calls for stronger policy support and higher implementation efficiently.

  • Beijing promotes Pan Gongsheng to PBOC party secretary:

    • Confirming earlier press reports, PBOC announced Deputy Governor Pan Gongsheng was appointed central bank party secretary on Saturday, replacing Guo Shuqing. Governor Yi Gang stepped down as party deputy secretary. Pan reportedly set to succeed Yi as governor in a return to the historical norm in recent decades of having both top jobs held by one person (Bloomberg). Appointment seen reinforcing policy stability, consistent with PBOC's recent approach of only modestly cutting interest rates and encouraging banks to lend more to targeted areas. Some questions raised over Pan's relatively weak party ranking -- having not been named in the party's Central Committee last year -- suggesting PBOC could have less influence in economic decision making. As deputy governor, Pan has led the imposition of guardrails on the property market. Also some attention on the fact that Pan is currently head of SAFE amid recent yuan weakness, though there was nothing specific.

  • BOJ Tankan headline metrics beat, despite some soft details:

    • Headline business conditions index for large manufacturers was 5 in June, above consensus 3 and follows 1 in March. Broadly confirms the first improvement in seven quarters. Outlook index points to further improvement to 9 in September. Most sectors contributed positively, though skewed by a 40-point surge in petroleum & coal. Autos were a notable bright spot. Similarly, large non-manufacturers DI rose to 23 in June from 20 vs consensus 22, though outlook more conservative at 20. Sectors were mostly narrowly mixed, though highlight was 36-point jump in accommodation & dining (consistent with resurgence in tourism after border controls were lifted and Covid alert status was downgraded). Small firms also registered some improvement. However, underlying supply-demand conditions worsened both domestically and overseas while finished goods inventories rose. Still, another bright spot was FY23 large firms' capex projected to grow 13.4%, beating consensus 10.1% and follows 3.2% in March. Current profit forecast revised to a smaller decline on the back of mildly firmer sales growth. Output gap proxies benign with both all-industry production capacity and employment DIs flat. Input and output prices eased as 1-year and 3-year inflation expectations edged lower though remain above the BOJ's 2% target.

  • Asia-ex factory activity data for June continues to show north-south split:

    • June S&P Global PMIs reflected continued contraction in north Asia manufacturing, contrasting once again with mild improvement in ASEAN. South Korea PMI reading at 47.8 from 48.4 in May, 12th consecutive month of decline; sustained contraction in total new orders, new export orders sharply lower m/m, output and outlook also fell, business confidence at YTD low; positives included lower inflationary pressures. Taiwan at 44.8 from 44.3, more rapid declines in new orders, output, and purchasing activity; business confidence, employment also fell. Thailand's expansion decelerated to 53.2 from 58.2, export orders, supply conditions improved but business confidence declined on political and economic outlook. Indonesia up to 52.5 from 50.3, new orders and output expanded, employment rose for first time in nine months. Philippines 50.9 from 52.2 as production, factory orders improved offset by weaker underlying demand. Malaysia 47.7 from 47.8 for tenth consecutive decline, new orders fell sharply. Vietnam 46.2 from 45.3.

  • China on LNG buying spree, on track to be top importer in 2023:

    • Bloomberg reported China is on track to become world's top LNG importer in 2023. Policymakers continue to back efforts by state-owned energy companies to sign long-term contracts and invest in facilities. Noted Chinese companies have signed more such contracts than any other nation for third straight year. Rystad Energy estimated China LNG imports could double current levels to 138M tons by 2033. Added Qatar is in discussions with several Chinese buyers for 20-year supply contracts and Sinopec holding talks to invest gas development in Saudi Arabia. More gas production at home and potential more pipeline shipments from Russia may risk LNG import terminals to sit ilde, but analysts highlighted energy security as priority for China, which having ample supply helps in managing future volatility. Recall lack of coal and drop in hydropower output triggered power shortages in past years. Having more deals would also give Chinese buyers more negotiation power.

  • Notable Gainers:

    • +39.4% 5NG.SP (Healthway Medical Corp.): OUE Healthcare launches conditional exit offer for the proposed voluntary delisting of Healthway Medical at SG$0.048/sh in cash

    • +20.4% 086520.KS (ECOPRO Co.): KRW360B capital increase among Ecopro group companies

    • +16.5% 9868.HK (XPeng, Inc.): reports June deliveries 8,620 vehicles

    • +8.8% 2015.HK (Li Auto): delivers 32,575 vehicles in June, +150.1% y/y

    • +5.3% 4689.JP (Z Holdings): Yahoo Japan reportedly considering not renewing search-technology deal with Google

    • +4.1% 1128.HK (Wynn Macau): Macau June GGR +513.9% y/y to MOP15.21B

    • +0.6% 032640.KS (LG Uplus): LG Uplus, Kakao Mobility set up charging service JV with total KRW50B investment

  • Notable Decliners:

    • -8.2% 6699.HK (Angelalign Technology): CEO Li Huamin to resign, effective 31-Jul

    • -1.7% 004310.KS (Hyundai Pharmaceutical Co.): reportedly recalls bottles of Minoxidil for hypertension also used for hair loss amid reports of dementia tablets found in Minoxidil bottle

• Data:

  • Economic:

    • China June

      • Caixin manufacturing PMI 50.5 vs consensus 50 and 50.9 in prior month

    • Japan

      • BOJ June Tankan large manufacturers business conditions index 5 vs consensus 3 and 1 in March

        • September large manufacturers business conditions forecast 9

        • June large non-manufacturers index 23 vs consensus 22 and 20 in March

          • September large non-manufacturers forecast 20

        • FY23 large enterprise capex projection +13.4% vs consensus +10.1% and +3.2% in March

        • June final manufacturing PMI 49.8 vs preliminary 49.8 and 50.6 in prior month

    • Australia

      • June ANZ-Indeed job advertisements (2.5%) m/m vs +0.1% in May

      • May building approvals +20.6% vs consensus +3.0% and revised (6.8%) in April

      • May housing finance +4.8% m/m vs (2.9%) in April

    • New Zealand May

      • May Building Permits m/m (2.2%) versus (2.6%) in prior month

  • Markets:

    • Nikkei: 564.29 or +1.70% to 33753.33

    • Hang Seng: 390.16 or +2.06% to 19306.59

    • Shanghai Composite: 41.91 or +1.31% to 3243.98

    • Shenzhen Composite: 10.90 or +0.53% to 2060.13

    • ASX200: 42.80 or +0.59% to 7246.10

    • KOSPI: 38.19 or +1.49% to 2602.47

    • SENSEX: 470.42 or +0.73% to 65188.98

  • Currencies:

    • $-¥: +0.49 or +0.34% to 144.8010

    • $-KRW: (9.00) or (0.68%) to 1307.3000

    • A$-$: (0.00) or (0.20%) to 0.6650

    • $-INR: (0.19) or (0.23%) to 81.9110

    • $-CNY: (0.00) or (0.03%) to 7.2515