Back to Daily DR Market Summary

StreetAccount Summary - Asian Market Recap: Nikkei +1.49%, Hang Seng +2.60%, Shanghai Composite +1.26% as of 04:10 ET

Jul 13 ,2023

• Synopsis:

  • Asian equities ended sharply higher Thursday on the back of Wall Street's strong rally. Hong Kong led the way with more gains for technology stocks while mainland names also rose more than 1%. Very strong day in Australia as IT and commodity stocks rallied, gains in Seoul and Taipei. Japan benchmark bounced from a one-month low. India's Sensex hit fresh record high, Southeast Asia mixed as Thailand underperformed on step down in political impasse over PM role. US futures higher, Europe modestly higher after flat early trades. US dollar lower again after hefty overnight losses, Asia currencies stronger. Treasuries mixed. Crude oil contracts, industrial and precious metals all a little higher.

  • Asia markets taking the baton from Wall Street and running higher over the day. Lower-than-expected US CPI boosted hopes of Fed reaching terminal rate post this month's likely hike, and increased expectation the US economy can hit a soft landing. Fed Fund Futures now price in just a 13% chance of a 25 bps hike in September with a 93% chance of one this month. The CPI reading also sent Treasury yields sharply lower and along with them came the dollar to a 15-month low, boosting Asia currencies in turn and providing the region's equities with an extra tailwind.

  • BOK left rates unchanged as expected following June inflation drop. Decision unanimous with BOK reiterating its pledge to maintain rates at restrictive level for considerable period. China exports shrank at a steeper-than-expected pace in June. Lead indicators point to more softness ahead with new export orders contracting in recent months amid deteriorating external demand. China technology stocks continued recent outperformance with sector up around 9% WTD. China Premier Li Qiang pledged more support in his meeting big tech executives on Wednesday. Elsewhere, Thailand's MFP PM nomination Pita put forward as sole candidate for role but thought unlikely to win congress vote later today.

  • Sony Group (6758.JP) is to invest ¥300B into its games business for into R&D for its extended reality over the next year. Temasek's PSA unit has shelved plans to sell its minority stake in CK Hutchinson (1.HK) after valuations were lower than expected. IMAX (IMAX) will acquire the full ownership and of IMAX China (1960.HK) for $10 per share in cash. Celltrion (068270.KS) has confirmed it is looking to merge its three business entities into one, has appointed Mirae as advisor.

• Digest:

  • China trade data disappoint again:

    • Customs exports fell 12.4% y/y in June marking the sharpest decline in almost three years, compared to expectations of a 9.5% drop. Follows 7.5% decrease in the previous month. Consensus had looked for the weakest reading since January as estimates were shaped by official manufacturing PMI. Bloomberg noted weakness was broadly based with US shipments down almost 24% and extending declines to an 11th straight month. Several other major developed markets also fell by double digits. Imports fell 6.8% vs consensus (4.0%) and (4.5%) in prior month. Reinforces grim takeaways on domestic demand, underscored by softening CPI inflation. Post-Covid recovery performance has been less than convincing, prompting stronger calls for additional stimulus. While policymakers have talked up the prospect of more support, uncertainties remain while announcements to date have been piecemeal (mainly small rate cuts) and seen as insufficient to bolster economic growth. Still, despite some downgrades to economists' forecast for Q2 GDP, 2023 estimates remain at ~5.5%, above the government growth target of 'about 5%.'

  • Bank of Korea keeps base interest rate unchanged as inflation cools:

    • Bank of Korea kept its 7D repo rate unchanged at 3.5% as largely expected amid sharp decline in inflation during June, recently stable won, and uncertain economic growth outlook. Fourth consecutive meeting BOK has held rates steady, consensus now sees bank holding for remainder of year. South Korea economy narrowly avoided recession in Q1 with growth of just 0.3%;still mired in declining export spiral despite signals in June contraction may be slowing, June core inflation fell to 4.3% from 4.6% and headline rate to 2.7% from 3.3%. However, won recently stabilized to trade in range since February despite differential to US at widest in history. Bank said it will maintain restrictive policy for considerable time, risks to some non-bank financial sectors expanded. Expects economic growth to recover gradually, GDP and inflation forecasts unchanged but core inflation could be higher than May's estimate. Said will monitor household debt risks following recent rise.

  • Falling US inflation boosts stocks, bonds, weighs on dollar:

    • US CPI underpinning risk appetite in Asian trade Thursday after annualized inflation fell to lowest since Mar-2021 and core inflation dropped to its smallest since Oct-2021. Smaller-than-expected increase in CPI strengthened disinflation narrative while prospect of Fed nearing end to its tightening cycle plays further into expectations of a soft landing. Yield curves bull steepening as markets pare odds of a second Fed rate hike beyond July and bring forward expectations of rate cuts to Mar-2024 from May-2024. Dollar index down 2% week-to-date, trading at its worst level since Apr-2022. Dollar weakness most pronounced on yen cross as traders focus on narrowing US-JPY yield differentials, attributed in part to lingering speculation of a near-term BOJ policy tweak. USD depreciation has also corresponded with strength in commodity markets, where copper, gold and crude are all tracking for solid weekly gains.

  • More signs of China LGFV debt fragility:

    • Bloomberg discussed shortening duration and higher coupons of LGFV bonds add to signs of ongoing market caution against this segment of public debt. Average tenor of onshore LGFV bond issuance fell to 2.51 years, a record-low going back to 1999, from 2.95 years last year. Average coupon rose sharply to 4.39% vs 3.94% last year. Article noted increased investor caution points to looming refinancing challenges for a sector considered China's top financial stability risk. While no LGFV has yet defaulted on a public bond, the majority of regional governments face a severe funding crunch. A 6.5% decline in overall net refinancing in H1 seen as a reflection of difficulties that could force LGFVs to turn to other channels. Citing S&P data, LGFVs had about CNY13.5T of outstanding onshore bonds as of 2022-end, representing about 40% of China's non-financial corporate bond market. Vast majority held by domestic investors of all types, which could pose systemic risks. Still, credit spreads indicate no market panic partly as regions appear to be prioritizing timely bond payments (though underpinned by the strong belief in government implicit guarantees). On the margins, Bloomberg sources said National Council for Social Security Fund has advised asset managers to sell some bonds including those from riskier LGFVs and private developers.

  • BOJ public opinion survey shows inflation expectations remain elevated:

    • BOJ public opinion survey for June showed individuals reported an average 14.7% y/y price increases, edging up from 14.6% in March. Breadth was also firmer with 95.5% saw some increase in prices compared with a year earlier. Follows 94.5% in March. Increase driven by growing cohort reporting 'significant' increases. Going forward, prices expected to rise 10.5% in one year, down from 11.1% in March. Responses backed up by 86.3% anticipating increases, mostly looking for 'slight' changes. 5-year outlook dipped to 7.5% from 8.1%. Strong majority 86.0% view current inflation as 'unfavorable.' Longer term projections attributed largely to recency bias (79.8%) -- consistent with past BOJ rhetoric attributing a high weighting to the 'adaptive formation mechanism,' which had been deeply entrenched to the low side. Elsewhere, land price outlook DI rose to a 10-year high 17.6, in positive territory for the third straight quarter. Recall latest BOJ speeches have been more open to upside risks to inflation, while recent yen strength has been attributed to reinvigorating speculation of a possible YCC shift ahead of this month's policy meeting.

  • Notable Gainers:

    • +5.3% 039860.KS (NanoenTek): SK Square to sell NanoEntek to A Plus Life for KRW51.50B after sale to J&W Partners delayed

    • +5.2% 4568.JP (Daiichi Sankyo): receives NMPA approval for Enhertu as monotherapy for patients with HER2 low metastatic breast cancer

    • +4.5% 6758.JP (Sony): reportedly to invest ¥300B in games business R&D this year

    • +3.3% 1970.HK (IMAX China Holding): Imax announces intent to acquire full ownership of Imax China for HK$10/share in cash

    • +2.3% 068270.KS (Celltrion): confirms review of merger between operating companies, completes selection of merger manager

    • +1.7% 9613.JP (NTT DATA Group): reportedly to spend ¥500B on M&As to expand in North America

    • +1.4% 1.HK (CK Hutchison Holdings): PSA International reportedly shelves plan to sell its 20% stake in CK Hutchison's ports business

  • Notable Decliners:

    • -1.5% 352820.KS (HYBE Co.): Netmarble reportedly considering selling its 18.2% stake in Hybe

    • -1.1% 8267.JP (AEON Co.): reports Q1 net income attributable ¥17.73B, (9%) vs year-ago ¥19.37B

• Data:

  • Economic:

    • China June

      • Trade balance $70.62B vs consensus $74.80B and $65.81B in prior month

        • Exports (12.4%) y/y vs consensus (9.5%) and (7.5%) in prior month

        • Imports (6.8%) y/y vs consensus (4.0%) and (4.5%) in prior month

  • Markets:

    • Nikkei: 475.40 or +1.49% to 32419.33

    • Hang Seng: 489.67 or +2.60% to 19350.62

    • Shanghai Composite: 40.35 or +1.26% to 3236.48

    • Shenzhen Composite: 28.23 or +1.39% to 2059.00

    • ASX200: 111.20 or +1.56% to 7246.90

    • KOSPI: 16.51 or +0.64% to 2591.23

    • SENSEX: 549.00 or +0.84% to 65942.90

  • Currencies:

    • $-¥: (0.07) or (0.05%) to 138.3760

    • $-KRW: (6.99) or (0.55%) to 1267.0200

    • A$-$: +0.00 or +0.74% to 0.6837

    • $-INR: +0.05 or +0.06% to 82.0800

    • $-CNY: (0.01) or (0.08%) to 7.1603