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StreetAccount Summary - Asian Market Recap: Nikkei (0.40%), Hang Seng +1.41%, Shanghai Composite +1.84% as of 04:10 ET

Jul 28 ,2023

• Synopsis:

  • Asian equities ending mixed Friday in a strong catalyst-based trading day. Nikkei and Topix closed lower on BOJ YCC news but rallied sharply in the final hour of trading and came close to erasing losses at one point. Greater China indices regained strong upward momentum on signals Beijing is following through with pledges to help the property sector. Australia closed lower to follow developed markets' lead overnight. Seoul was a few points down, Taipei a little higher. India extending opening losses to cap a negative week, Southeast Asia mixed with Thailand closed. US futures indicate a positive open, European markets down as they catch up with Wall Street's late drop. US dollar higher, yen stronger on BOJ moves initially before reversing to be weaker on the day, AUD fell sharply post retail sales data. Treasury yields mixed, JGB yields hit nine-year high with 10Y at 0.56% before settling back. Crude blends lower, precious metals higher, industrial metals mixed with copper higher but iron ore lower.

  • Asia markets dominated by Bank of Japan moves and signals Beijing was ready to follow through with Politburo promises. A weak handover from Wall Street on reports the BOJ was set to tweak its yield curve control caused Tokyo to gap lower first thing, taking another leg down after the BOJ announced it would increase flexibility around its YCC target, adding it would treat the 0.5% upper and lower bounds as "references" rather than "rigid limits". The bank also upgraded its FY23 CPI forecast to around 3.0%. Greater China regained momentum after a wobble Thursday on reports the housing ministry was preparing follow-through moves to help the property sector, and the PBOC told banks to help the tech sector with R&D and M&A.

  • Tokyo core CPI came in higher than expected for July with ex-food and energy inflation topping 4.0% for the first time since Jan-82. Australian retail sales unexpectedly shrank in June, driven by sharp falls in discretionary goods spending. South Korean industrial production fell by more than expected amid a sharp drop in auto output.

  • Sumitomo Electric (5802.JP) is to begin making energy-efficient silicon carbide wafers for next generation semiconductors that will extend the mileage of EVs by 10%. Panasonic (6752.JP) is considering supplying EV batteries to Subaru (7270.JP). China Evergrande New Energy Vehicles (78.HK) said it had fulfilled all trading resumption guidance and resumed trading in Hong Kong but the stock fell more than 60%.

• Digest:

  • BOJ increases flexibility of yield target band:

    • Consistent with the Nikkei top story, BOJ kept short and long term rate targets unchanged, as well as the tolerance range of 50 bp around the yield target. However, it will conduct YCC with greater flexibility as the band will now be regarded as reference points, rather than hard limits. An unexpected development was fixed-rate purchase operations will continue though bid price revised to 1% from 0.5%. Statement contained more positive assessment of inflation, noting support from shunto wage talks and signs of change in corporate wage and price setting behavior. Maintaining easing aimed as insurance to provide extra support via lower real rates if positive momentum continues, while also underpinning support if downside risks (still seen as significant) materialize. Guidance was unchanged, reiterating patience with easing aimed at achieving 2% target in a sustainable manner, accompanied by wage increases. BOJ will continue with QQE/YCC for as long as necessary until target is achieved in a stable manner. Also repeated they would not hesitate to add easing if necessary. Outlook Report showed FY23 core inflation revised up to 2.5% from 1.8%, while FY24 shaved to 1.9% from 2.0%, and FY25 unchanged at 1.6%. GDP projections were little changed.

  • Tokyo core inflation eases as ex-food & energy reaches 4%:

    • Tokyo core CPI rose 3.0% y/y in July, compared with consensus 2.9% and follows 3.2% in the previous month. In contrast, ex-food & energy inflation picked up to 4.0% (from 3.8%) for the first time since January 1982. Energy drags widened notably by 0.30 ppt on the month, reflecting sharper declines in electricity and gas prices. Elsewhere, accommodation rates rose sharply after government travel subsidies mostly wound up by the end of June. Mobile phone prices also accelerated notably, while non-fresh food prices continued to pick up. Looking ahead, economists are apt to forecast a similar dip in nationwide core inflation, though would still be in the 3% range with ongoing media attention on the overshoot vs the BOJ's 2% target for what would be the 16th consecutive month. BOJ Outlook Report showed FY23 core inflation forecast revised up to 2.5% from 1.8%, while FY24 was shaved to 1.9% from 2.0%, and FY25 unchanged at 1.6%. Compares with latest JCER consensus of 2.6% in FY23, 1.7% in FY24, and 1.4% in FY25.

  • China asks internet giants to showcase investments in consumer, telecom and media companies:

    • Bloomberg reported China's Ministry of Commerce and economic planner NDRC have asked tech companies including Tencent (700.HK) and Meituan (3690.HK) to provide case studies of their most successful startup investments in consumer, telecom and media companies, seen as a sign that authorities ready to back such deals after a years-long crackdown. Recall authorities introduced a red-light, green-light metaphor in late 2021 to indicate how state would guide private investment decisions to rein in "disorderly capital". Noted NDRC earlier highlighted case studies of investments in robotics and semiconductor industries by internet platform companies on its official WeChat account, as China tries to steer investors toward areas it views as strategic. Move came after China took steps trying to restore confidence in private sector in recent weeks as it ended regulatory probes into Tencent and Alibaba (9988.HK)' AntGroup and issued a statement vowing to treat private companies the same as SOEs.

  • Sharp fall in Australian retail sales adds to case for RBA pause:

    • Australia June retail sales shrank 0.8% m/m in June compared to consensus for a flat result and May's upwardly revised 0.8% increase. Decline driven largely by discretionary goods spending, reflecting payback for May when promotional activity and discounting inflated sales. Clothing, footwear and personal accessory (-2.2%), department store (-5.0%) and other retailing (-2.2%) categories all registered steep falls over June while household goods retail fell a more modest 0.1%. Food-related retail was mixed with spending on cafes and restaurants easing 0.3% and food retailing up 0.1%. Data adds to evidence rate hikes and cost of living exerting more meaningful downward pressure on consumption, which is likely to inform RBA's assessment of the economy at next Tuesday's policy decision. Dovish market reaction fits with views central bank will remain on hold after Q2 CPI this week also came in below expectations.

  • China housing ministry reinforces calls for property support:

    • Following the latest Politburo meeting, Xinhua cited minister of housing and urban-rural development Ni Hong at a recent symposium with property developers, urging continued efforts to consolidate the recovery trend of the property market. Called for full implementation of measures, including lower down payment ratios and mortgage rates for first-time home buyers, and promised efforts to ensure the delivery of presold homes. Such measures were among the suggestions from economists on possible additional measures. Also dovetails with a recent Bloomberg report suggesting regulators are weighing an ease in the classification of a first home buyer. However, economists noted the focus on Tier 1 cities would limit the economic impact. Housing minister also urged building companies and property developers to actively participate in affordable housing projects, the renovation of villages in cities, and public facility construction. This echoes the Politburo statement and analysts noted more details would be needed to assess implications.

  • Notable Gainers:

    • +8.4% 010140.KS (Samsung Heavy Industries Co.): reports Q2 operating income KRW58.9B vs FactSet KRW42.05B, revenue KRW1.946T vs FactSet KRW1.960T

    • +3.9% 2888.HK (Standard Chartered): reports Q2 underlying EPS $0.37 vs FactSet $0.35, underlying operating income $4.56B vs consensus $4.37B

    • +2.3% 2518.HK (Autohome): reports Q2 non-GAAP EPADS CNY4.61 vs FactSet CNY4.2, revenue CNY1.83B vs FactSet CNY1.80B

    • +3.6% U11.SP (United Overseas Bank Ltd. (Singapore)): reports H1 NPAT SG$2.93B, +45% vs year-ago SG$2.02B, net interest margin 2.13% vs year-ago 1.63%

    • +1.3% 096770.KS (SK Innovation): reports Q2 operating profit (KRW106.80B) vs StreetAccount KRW247.04B; decline in operating profit from its refining business is due to refining margin drop, decline in E&P business operating profit is due to plunging oil and gas prices

  • Notable Decliners:

    • -61.3% 708.HK (China Evergrande New Energy Vehicle Group): fulfills all resumption guidance; resumes trading

    • -9.6% 7205.JP (Hino Motors): reports Q1 operating profit ¥1.13B vs FactSet ¥7.28B, records (¥13.06B) as domestic certification-related losses in extraordinary losses

    • -8.1% 051900.KS (LG H&H): reports Q2 operating profit KRW157.8B vs StreetAccount KRW182.64B, revenue KRW1.808T vs StreetAccount KRW1.827T

    • -5.4% 316140.KS (Woori Financial Group): reports Q2 net operating revenue KRW2.473T vs StreetAccount KRW2.558T, NII KRW2.194T vs SA KRW2.205T

    • -3.8% 1913.HK (Prada): reports H1 net revenue €2.23B vs StreetAccount €2.27B

• Data:

  • Economic:

    • Japan July

      • Tokyo core CPI +3.0% y/y vs consensus +2.9% and +3.2% in prior month

        • CPI excl. fresh food & energy +4.0% y/y vs +3.8% in prior month

        • Overall CPI +3.2% y/y vs consensus +2.9% and revised +3.2% in prior month

    • Australia

      • June retail sales (0.8%) m/m vs consensus 0.0% and +0.7% in May

      • Q2 PPI +0.5% q/q vs +1.0% in Q1

        • PPI +3.9% y/y vs +5.2% in Q1

    • South Korea

      • June industrial production (1.0%) m/m vs consensus (0.9%) and revised +3.0% in prior month

        • Industrial production (5.6%) y/y vs consensus (5.5%) and revised (7.6%) in prior month

  • Markets:

    • Nikkei: (131.93) or (0.40%) to 32759.23

    • Hang Seng: 277.45 or +1.41% to 19916.56

    • Shanghai Composite: 59.25 or +1.84% to 3275.93

    • Shenzhen Composite: 24.89 or +1.23% to 2052.62

    • ASX200: (52.30) or (0.70%) to 7403.60

    • KOSPI: 4.51 or +0.17% to 2608.32

    • SENSEX: (277.92) or (0.42%) to 65988.90

  • Currencies:

    • $-¥: +0.45 or +0.32% to 139.9440

    • $-KRW: (3.50) or (0.27%) to 1280.6400

    • A$-$: (0.01) or (1.27%) to 0.6625

    • $-INR: (0.09) or (0.11%) to 82.2870

    • $-CNY: (0.01) or (0.14%) to 7.1638