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StreetAccount Summary - Asian Market Recap: Nikkei (0.57%), Hang Seng +0.78%, Shanghai Composite (0.06%) as of 04:10 ET

Jul 21 ,2023

• Synopsis:

  • Asian equities finished mixed Friday in a polarized trading day. Japan's Nikkei closed lower but its Topix remained flat following Wall Street's mixed performance overnight. Taipei sharply lower on TSMC's poor guidance and investment delay, South Korea finished a few points higher. India lower as Infosys dragged, profit takers entered after six consecutive record highs. Southeast Asia mixed. Greater China markets mixed with mainland lagging Hong Kong. US futures a few points higher, Europe opened with losses. US dollar DXY index above 101, yen weakened substantially past 141 per dollar after BOJ said it saw little need to act on YCC for now. Treasury yield curve steepened. Crude blends higher, industrial metals mixed, lithium futures limit down on first day of trading in China; precious metals lower.

  • Asia stocks struggled for direction Friday as China investors shrugged off the latest promise of economic stimulus and awaited more substantive measures from Beijing. For the week, Greater China markets firmly lower under the weight of Monday's poor economic data together with growing impatience for concrete supportive measures. Focus now on upcoming Politburo meeting with investors looking for direct relief for consumers, homebuying incentives, and infrastructure spending. But markets also braced for disappointment following recent discussion over local government debt burdens acting as a constraint on policy.

  • Asia technology stocks taking a lead from Wall Street which saw the Nasdaq suffer its worst single day since the SVB crisis in March as bond yields implied a rising chance of a second 25 bps hike by the Fed to follow next week's likely move. Yield curve steepening again today in Asia with 2Ys at post GFC highs and Fed Fund futures pointing to a 99.8% chance of a hike next week, and 35% after that having been 30% on Wednesday.

  • Japan core inflation rose in-line with forecasts while ex-food and energy fell slightly. Majority of economists expect BOJ will raise near-term CPI forecasts next week but leave YCC settings unchanged. South Korean exports in first 20 days of July shrank at fastest pace since March, driven by another big drop in chip shipments. Thailand's Move Forward Party will give coalition partner chance to nominate its candidate as PM. TSMC posted disappointing guidance late Thursday and signaled a postponement of its Arizona investment, Infosys also warned on sales growth today.

  • SK Chemicals (285130.KS) signed a contract with AstraZeneca (AZN.LN) for the supply of a diabetes drug. Guangzhou R&F (277.HK) co-chairman Zhang reached an agreement with the US AG on bribery charges and will avoid jail. TSMC (2330.TT) cut its Q3 outlook and postponed production at its new Arizona project to 2025; stock sharply lower. Infosys (500209.IN) cut its annual sales forecast to between 1-3.5% through to Mar-24; shares fell sharply.

• Digest:

  • BOJ sees little need to act on effects of yield curve control:

    • BOJ officials say they see little need to address side effects of its yield curve control programme for now although said they will continue to discuss issue. Officials said still not confident of hitting inflation goal stably and views easing policy as import amid economic progress, will reach final decision after viewing latest economic data; discussion at board meeting next Friday still likely as several favor acting early on YCC. Officials view overall assessment of financial markets as unchanged, shape of yield curve remains smooth, market functioning not showing signs of any major issues. Officials said to be concerned tweak now would signal start of tightening moves even if adjustment aimed at enhancing sustainability of BOJ stimulus, important to continue with monetary easing as economy finally showing signs of long-sought changes including wage growth (Bloomberg). Yen notably weakened on reports Friday post close of equity markets.

  • China rolls out measures to boost auto, electronics consumption:

    • China unveiled various measures to bolster auto and electronics consumption, latest efforts by authorities to shore up economy after raft of weak economic data pointed to a faltering post-Covid recovery. Multiple ministries involved with economic planner NDRC took leading role, which called for optimization of automobile purchase restrictions, support sales of secondhand vehicles and enhance consumer credit support. Reuters noted policymakers have identified auto as key lever to drive growth and extended tax break in June on EV purchases until 2027. For electronics, authorities said they would encourage market entities to proactively apply domestic AI technology to improve intelligence levels of electronic products and support home appliance purchases in rural areas. Moves came after NDRC's pledge earlier in the week to roll out consumption support policies without delay (Reuters). However, economists noted plan lacked direct cash support that many investors were hoping for and were considered "very small steps" (Bloomberg).

  • China slowdown looms over global corporate earnings:

    • Reuters discussed concerns that China's soft growth momentum could weigh on multinational companies with country exposure, posing a headwind for the upcoming quarterly earnings reporting season. Compounds expectations for a steep drop in Q2 US earnings, with profit margins expected to be hurt by US inflation and weaker spending. Noted that early indications have been on the soft side. Article highlighted results from NXP Semiconductors (NXPI) and Texas Instruments (TXN) next week will serve as barometers for chip demand given much of their revenues come from China. Refinitiv consensus looks for revenues to fall 3.2% at NXP and 16% at TXN, which would be the sharpest drop since 2009. Apple (AAPL) sales seen declining 1.7% to a two-year low. Nikkei noted Chinese companies also struggling amid growing deflationary pressure. Listed companies, especially in industrial sectors, have issued profit warnings for H1, raising questions about the government's optimistic depiction of the economy.

  • International investors remain relatively cautious on China:

    • FT discussed ongoing underperformance in China equity portfolio inflows as foreign investors have allocated more money in other Asian emerging markets for the first time in six years, reflecting waning optimism about China growth. Citing Goldman Sachs data, 12-month cumulative net foreign inflows to EM Asia ex-China were more than $41B, topping ~$33B into mainland China equities via Hong Kong Stock Connect. Follows prior 12m net outflows of $76.6B from EM and $42.8B inflows to China. Shift reflects disappointment over China's post-Covid recovery and highlights how other regions are benefiting from shifting supply chains and strong US semiconductor demand. Article also cited BofA's Asia fund manager survey that showed slight majority of respondents cut China exposure to underweight. Still, strong majority project Asia-Pacific ex-Japan markets to rise over the next 12 months, partially due to undervalued perceptions. India mentioned as a bright spot, as well as Taiwan/South Korea on AI-driven tech demand.

  • South Korea exports fall again in first 20 days, producer inflation falls:

    • Exports from South Korea in first 20 days of July fell 15.2% y/y as slump in semiconductor sales continued. Overseas shipments totaled $31.2B versus $36.8B in same period 2022 with chip exports plummeting 35.4% to $4.3B (Korea Customs). Substantial falls in steel (-15.2%) and petroleum products (-48.7%) shipments y/y but automobiles exports rose 27.9% to $3.4B. By destination, shipments to China fell 21.2% to $6.34B while those to the EU and US fell around 7-8%. Imports fell 28% to $32.6B. Separate data Friday showed South Korea June PPI fell 0.2% y/y, first fall since Nov-2020, agriculture and petroleum products prices fell sharply. Manufactured products' prices slid further from May's -3.2% to June's -4.7%. Services costs' decreased at slower pace, utilities' prices increased after government allowed electricity generators to hike prices. On m/m basis, prices fell 0.2% from May's downwardly revised -0.4%.

  • Notable Gainers:

    • +14.5% 300601.CH (Shenzhen Kangtai Biological Products): guides H1 net income attributable CNY480.0-540.0M vs FactSet CNY422.0M

    • +10.4% 6594.JP (Nidec): reports Q1 net income attributable ¥64.04B vs StreetAccount ¥34.90B, revenue ¥566.06B vs StreetAccount ¥536.06B

    • +7.9% 285130.KS (SK Chemicals Co.): signs contract with AstraZeneca for supply of Sidapvia for diabetes

    • +1.7% 4568.JP (Daiichi Sankyo): FDA approves Daiichi Sankyo's VANFLYTA (quizartinib) for the treatment of newly diagnosed FLT3-ITD positive AML

    • +0.9% 1801.JP (TAISEI): planning to reduce cross shareholdings by ¥200B to improve asset efficiency

    • +0.0% 2777.HK (Guangzhou R&F Properties): co-chairman Zhang Li reaches agreement with US Attorney's Office

  • Notable Decliners:

    • -5.9% 011200.KS (HMM): holders KDB, KOBC put 398.8M HMM shares combined (convertibles included) up for sale

    • -3.3% 2330.TT (Taiwan Semiconductor): reports Q2 EPS NT$7.01 vs FactSet NT$6.6, revenue NT$480.84B ($15.68B) vs FactSet NT$479.22B and prior guidance $15.2-16.0B; guides Q3 revenue $16.7-17.5B vs FactSet $17.41B and FY23 revenue (10%) y/y vs prior guidance for decline of low to mid single digit % in US$

• Data:

  • Economic:

    • Japan June

      • Nationwide core CPI +3.3% y/y vs consensus +3.3% and +3.2% in prior month

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

        • Overall CPI +3.3% y/y vs consensus +3.2% and +3.2% in prior month

  • Markets:

    • Nikkei: (186.27) or (0.57%) to 32304.25

    • Hang Seng: 147.24 or +0.78% to 19075.26

    • Shanghai Composite: (1.78) or (0.06%) to 3167.75

    • Shenzhen Composite: (3.82) or (0.19%) to 2011.83

    • ASX200: (11.10) or (0.15%) to 7313.90

    • KOSPI: 9.53 or +0.37% to 2609.76

    • SENSEX: (629.82) or (0.93%) to 66942.08

  • Currencies:

    • $-¥: +1.55 or +1.11% to 141.6230

    • $-KRW: +5.78 or +0.45% to 1283.1000

    • A$-$: (0.00) or (0.43%) to 0.6750

    • $-INR: (0.14) or (0.17%) to 82.0130

    • $-CNY: (0.00) or (0.03%) to 7.1757