Back to Daily DR Market Summary

StreetAccount Summary - Asian Market Recap: Nikkei (1.23%), Hang Seng (0.13%), Shanghai Composite (0.92%) as of 04:10 ET

Jul 20 ,2023

• Synopsis:

  • Asian equities mostly lower Thursday. Hang Seng turned into negative territory in the afternoon, erasing early gains and mainland stocks also lower. Nikkei underperformed while ASX closed flat. Korea finished lower. Taiwan and southeast Asia mostly higher. India trading higher. S&P 500 and Nasdaq futures weaker. Europe opened higher. Treasury yields higher across tenors. Dollar weaker against most major currencies, weakest against Aussie, however stronger against Korean won. Yuan stronger. Crude, precious metals and industrial metals all higher.

  • Initial enthusiasm about China's plans to boost private businesses gave way to skepticism and failed to gain traction in markets, as markets pointed to lack of specific measures. China LPRs unchanged as expected. Stimulus calls mounting but authorities have so far only rehashed existing pledges to boost consumption and private sector. Politburo meeting slated for late-July the next opportunity for meaningful policy guidance, though expectations remain modest. Offshore yuan making biggest daily gain since March after PBOC stronger-than-expected midpoint fix and tweak rule to allow companies to borrow more from overseas. There are also media reports that China considering easing homebuying restrictions in its top-tier cities.

  • Australian economy added more jobs than forecast in June while unemployment rate unexpectedly held at May's downwardly revised level. Hawkish market reaction suggests increased odds of RBA hiking again in August. Japan cut 2023 growth forecast but expects inflation to hit 2.6% this year, well above BOJ's target. Japan's exports grew much less than expected in June while also posting first trade surplus in nearly two years. Political turmoil in Thailand continues as its parliament to hold another vote for PM next week which will not include Pita.

  • Nissan (7201.JP) will adopt Tesla's (TSLA) charging standards for its electric vehicles sold in North America from 2025. Mizuho Financial Group (8411.JP) raised JPY261B ($1.9B) by selling AT1 bonds, becoming the third Japanese bank to issue such notes after collapse of Credit Suisse. TSMC (2330.TT) projects a 10% fall in sales this year, versus a previous guidance of single-digit decline, as global chip slump persists. Tencent (700.HK) head Pony Ma penned an op-ed endorsing Beijing's promise to support its private businesses, Xiaomi (1810.HK) boss Lei Jun likened Beijing's policies to a manifesto for quality growth and innovation.

• Digest:

  • PBOC steps up yuan support with stronger fixing, capital inflow tweak:

    • PBOC set yuan fixing at 7.1466, 680 pips stronger than Bloomberg estimate and largest bias since November. PBOC also raised so-called macro-prudential parameter for companies and banks' cross-border financing to 1.5 to 2.5, allowing them to borrow more from overseas and opening up door for more foreign capital inflows. Noted central bank made a similar move in October to prop up yuan, when it fell to fresh lows against dollar since 2008. Reuters also reported major China state-owned banks seen selling dollars to buy yuan in offshore spot market. Both offshore and onshore yuan jumped as much as 7% Thursday morning. Moves to support yuan come amid Beijing vows to boost private businesses, bolster confidence. Strategists noted yuan's slide Wednesday was worrisome for PBOC, which prompted it to act more forcefully today. Direct intervention unlikely, but measures like cut of FX holdings reserve ratio possible. Meanwhile markets believe today's move only a short-term measure, adding yuan likely to weaken again if disappointment in lack of China stimulus grows, US-China rate gap widens.

  • China considers easing home purchase restrictions in top-tier cities:

    • Bloomberg citing people with knowledge reported Chinese authorities are mulling easing home purchase restrictions in tier 1 cities, including Beijing and Shanghai. Regulators could scrap rules that disqualify people who've ever had a mortgage, even if fully paid, from being considered first-time buyers in top cities. Currently buyers with a mortgage record who don't own a property have to pay a much higher down payment and face more restrictive borrowing limits when buying a second home. Noted China's existing measures have failed to generate a sustained recovery in property market. Home buying restrictions in smaller cities have been eased but those for top cities have remained intact, therefore potential move could remove a longstanding hurdle that has curbed demand. Recall PBOC senior official said real estate policies would be "tailored" to cities last Friday. Investors will also keep close watch on upcoming Politburo meeting for clearer policy guidance.

  • China LPRs unchanged as expected, more rate cuts seen in H2:

    • Loan prime rates were left unchanged with 1y at 3.55% and 5y at 4.20%, both matching expectations (Reuters). Follows preceding MLF operation where the 1y rate was kept steady, combined with general skepticism policy rates would be lowered consecutively after last month's cuts. Macro narrative remains bearish in the wake of soft Q2 GDP data, prompting economists to downgrade their 2023 growth forecasts and some warning the government growth target of 'around 5%' may be under threat without more stimulus. Takeaways generally reaffirmed views that more support is warranted, though large-scale measures are still seen as unlikely. Still, PBOC head of the monetary policy department Zou Lan was recently quoted as saying they were prepared to use toolbox comprehensively, including RRR, MLF, and OMO. Economists' PBOC policy forecasts for H2 featured a 25 bp RRR cut (seemingly indicating stronger consensus) and 10~20 bp of policy rate easing. Hopes shifting more towards fiscal policy, as any further interest rate cuts could put the yuan currency under more pressure from a widening yield gap with the US.

  • Hot Australian labor market increases pressure on RBA to hike again in August:

    • Australian economy added 32.6K jobs in June, less than May's 76.5K increase but more than double consensus for a 15.0K gain. Driven by 39.3K increase in full-time jobs while part-time employment fell 6.7K. Unemployment rate unexpectedly held at May's downwardly revised 3.5% (from 3.6%). Prior to data market was pricing in slim chance of RBA rate hike in August but odds of an increase next month have since risen to more than 55%. RBA left rates on hold in July but reiterated some further tightening may be required depending on evolution of economy and inflation. Indicated August is 'live' with members having added benefit of updated economic forecasts. In May RBA projected year-end unemployment rate of 4.0% but latest figures suggest labor market remains very tight. Additionally, jobless rate is well below 4.5% rate incoming governor Bullock said is consistent with full employment.

  • BOJ policy change forecasts pushed back further:

    • Latest Bloomberg poll found some 82% of 50 economists expect the BOJ to keep policy unchanged at the July MPM meeting. Proportion anticipating YCC revisions this month shrank to 18% from almost a third. Shift comes as Governor Ueda continues to reaffirm support for status quo and as bond market functioning has generally improved. Article highlighted October is now the modal response for a likely policy change, now at 28%, up markedly from last month as July calls recede. September forecasts were marginally higher, though this group much smaller than October. Still, cumulative spread of those looking for some change in policy over July-October now stands at 54%. But in a sign of changing perceptions over YCC, 94% said they expected monetary easing to continue even after the yield cap is tweaked or abandoned. Story noted that many economists until recently were envisioning a change this month because the BOJ is expected to revise up its inflation forecasts. Yet majority of analysts have seen signs of inflation peaking in Japan, signaling a shift in the phase of the economy.

  • Notable Gainers:

    • +6.7% 011200.KS (HMM): SM Group considering acquiring HMM, but for not more than KRW4.5T

    • +4.5% 3877.HK (CSSC (Hong Kong) Shipping Co Ltd (Hong Kong)): guides H1 net income attributable +18-21% vs prior year's HK$873.4M, implying HK$1.03-1.06B

    • +1.4% 7201.JP (Nissan Motor): reaches agreement with Tesla to adopt NACS for Ariya, future EV models; terms undisclosed

    • +0.6% 1211.HK (BYD Co. Ltd.): China announces up to CNY30K tax break for NEVs for 2024-2025, up to CNY15K for 2026-2027

  • Notable Decliners:

    • -13.8% 2382.HK (Sunny Optical Technology (Group)): guides H1 net income attributable CNY407.4-475.3M vs FactSet CNY1.09B

    • -3.8% 1368.HK (Xtep International Holdings): provides Q2 Mainland China operational update for core Xtep brand

    • -1.1% 9602.JP (Toho Co): to acquire 100% stake in Gaie Co; terms undisclosed

• Data:

  • Economic

    • Japan

      • June trade balance (¥43.0B) vs consensus (¥46.7B) and revised (¥1,381.9B) in prior month

        • Exports +1.5% y/y vs consensus +2.4% and +0.6% in prior month

        • Imports (12.9%) y/y vs consensus (11.3%) and revised (9.8%) in prior month

    • Australia

      • June employment +32.6K m/m vs consensus +15.0K and revised +76.5K in May

        • Unemployment rate 3.5% vs consensus 3.6% and revised 3.5% in May

        • Participation rate 66.8% vs consensus 66.9% and 66.9% in Ma

  • Markets:

    • Nikkei: (405.51) or (1.23%) to 32490.52

    • Hang Seng: (24.29) or (0.13%) to 18928.02

    • Shanghai Composite: (29.31) or (0.92%) to 3169.52

    • Shenzhen Composite: (21.44) or (1.05%) to 2015.65

    • ASX200: 1.30 or +0.02% to 7325.00

    • KOSPI: (8.01) or (0.31%) to 2600.23

    • SENSEX: 276.68 or +0.41% to 67374.12

  • Currencies:

    • $-¥: (0.11) or (0.08%) to 139.5650

    • $-KRW: +4.59 or +0.36% to 1272.5000

    • A$-$: +0.01 or +0.82% to 0.6827

    • $-INR: (0.04) or (0.05%) to 82.0350

    • $-CNY: (0.04) or (0.59%) to 7.1844