Back to Daily DR Market Summary

StreetAccount Summary - Asian Market Recap: Nikkei Closed, Hang Seng (0.90%), Shanghai Composite (2.01%) as of 04:10 ET

Aug 11 ,2023

• Synopsis:

  • Asian equities ended mostly lower Friday. Greater China led lower by mainland stocks as the Shanghai Composite fell more than 2%, Hong Kong remained under pressure from its real estate names. Australia closed the day down, Seoul reversed early gains to trade lower, Taiex was also down. Singapore underperformed on weak GDP report, the rest of Southeast Asia was lower with India also down. Japan closed for a holiday. US futures turning higher, Europe opened slightly lower. Treasury yields higher across tenors. Dollar steady, Asia currencies also flat but yen still hovering close to the 145 per dollar mark. Crude oil flat, precious metals and industrial commodities also struggling for direction.

  • Further weakness in Greater China stocks today, compounded by heavy overseas selling of A-Shares, to complete a miserable week for the country's stock markets. Property stocks weighed by news of Country Garden's potential restructuring and rating agency downgrade following on from its bond payment miss this week. Other listed developers dragged lower in its wake with many contending with liquidity pressures just as China junk dollar bonds trade near their lowest since Dec-2022. Bloomberg noted CSRC's corporate bond division to meet with property firms today, notably sans Country Garden.

  • A slightly uneven handover from the US overnight gave little positive direction at the bell. CPI data largely supported the disinflation narrative and Fed Fund Futures now show a 90% chance of the Fed standing pat in September. However, the initial optimism faded with core services inflation signaling an underlying stickiness. This led to higher bond yields over the day and a lackluster end to the equities trading day.

  • Asia developments dominated by Chinese property moves. In other macro developments, RBA Governor Lowe said the board is in wait-and-see mode as it assesses data but did not rule out further rate hikes amid risk of services inflation remaining high. South Korean exports fell again over the first 10 days of August due to another sharp drop in semiconductor shipments. New Zealand food prices fell for first time since Nov-2021. Singapore narrowed its GDP growth forecast range due to weak external demand.

  • Alibaba (9988.HK) said it had returned to growth across its main divisions and reported a better-than-expected 14% rise in revenue in Q2. Country Garden (2007.HK) may be heading for financial restructuring, according to local media, and will book a H1 loss of CNY45-55B. Fantasia (1777.HK) said the stock exchange had agreed it had fulfilled its resumption guidance and resumed trading but the stock dropped around 55%. Strike action at Woodside Energy (WDS.AU) and Chevron's (CVX) Australia-based LNG facilities remained a possibility after the union said it applied for a protected action ballot. Star Entertainment (SGR.AU) reached an agreement in principle with the New South Wales Treasurer over a proposed increase in casino duties; stock sharply higher.

• Digest:

  • Selloff in China property developers deepens:

    • China property stocks remain under pressure with Hang Seng Mainland Properties Index down more than 10% this week and nearing its lowest since Nov-2022. Late Thursday Moody's downgraded Country Garden (2007.HK) to Caa1 from B1, reflecting elevated refinancing risks (Reuters). Comes after company missed coupon payments this week and revealed it expects to record $7.6B loss in H1. Yicai also reported company preparing debt restructuring. Market attuned to contagion risk as selloff extends to other real estate developers, underscoring liquidity pressures from shrinking home sales. Stress is building in China's credit market with junk dollar bonds sliding to their lowest since Dec-2022 (Bloomberg). CSRC was set to meet with property developers on Friday as authorities face calls for more financing support (Bloomberg). PBOC Governor Pan Gongsheng met with property industry executives last week, though lack of detail and follow-through on prior support pledges has been met with disappointment.

  • Country Garden guides H1 net loss, credit rating downgraded by Moody's:

    • Country Garden (2007.HK) issued a statement signaling greater operating pressure that will lead to a significant loss of CNY45-55B in 1H23, compared with CNY1.91B profit a year earlier. Cited decrease in gross profit margin in real estate business, impairments of property projects stemming from falling sales, as well as FX losses. Continuous reduction in funds on hand due to deteriorating sales and refinancing environment are resulting in "phased liquidity pressure." Company to communicate with stakeholders and consider adopting various debt management measures. Also set up a special task force to navigate through the difficulties. Expects nearly 700K homes to be delivered this year, the same number as 2022. Vowed no efforts will be spared to ensure deliveries nationwide. Noted the group currently has sufficient net assets (CNY309.6B) and abundant land reserves. Preceding the statement release, Moody's downgraded the corporate family rating by three notches to 'Caa1' from 'B1' with a negative outlook, citing heightened liquidity and refinancing risk after the company missed bond payments (Reuters).

  • China to allow local governments issue bonds to repay LGFV debt:

    • Bloomberg reported China will allow provinces to raise about CNY1T ($139B) via bond sales to repay LGFV debt and other off-balance sheet issuers. Quota has been set for each region which allows all provincial governments except four places to use proceeds to repay "hidden debt", in effect shifting debt burden to provincial governments, considered a small step in addressing a thorny issue to financial stability. Noted amount accounts for only a small share of total CNY66T (IMF estimate) of debt LGFV will hold by end-2023, also smaller in size than a similar initiative in 2015. Local governments face falling revenues amid property slump and oversized pandemic spending. Still swap program may help bring down financing costs on hidden debts, extend payment duration, and improve funding conditions. However it may squeeze room for local governments to sell more bonds to fund infrastructure investment and spur growth as the program intends to make use of unused quotas from prior years instead of issuing extra quotas. FT added State Council is sending officials to more than 10 financially weakest provinces to scrutinize their books and find ways to cut their debts.

  • RBA Governor Lowe doesn't rule out further tightening, but economy on path to soft landing:

    • In opening remarks to House parliamentary committee, RBA Governor Lowe noted board has judged now is time to sit and assess lagged effect of rate hikes, pointing out policy is currently in restrictive territory. Said it is possible some further tightening will be required to ensure inflation returns to target within a reasonable timeframe. Said this will depend on data and board's assessment of outlook and risks. Noted recent data consistent with economy straddling narrow. path (to soft landing). Highlight both upside and downside risks to consumption and warned risk of services inflation remaining high. Added RBA's forecasts assume pickup in productivity growth to pre-pandemic level, but high inflation likely to persist if this doesn't eventuate. This would risk increase in medium-term inflation expectations, likely leading to a sharper slowing in output and greater loss of jobs.

  • Singapore narrows full-year growth forecast, downgrades export estimates:

    • Singapore's ministry of trade and industry (MTI) lowered FY 2023 GDP growth forecast to 0.5-1.5% from 0.5-2.5% as external demand outlook for remainder of year remained weak. MTI said performance in advanced economies resilient but growth expected to weaken in H2, China growth also expected to moderate as consumer confidence deteriorates, recovery in services slows. Added expects global electronics downturn to be protracted. Inward factors such as tourism remained buoyant, domestic consumer-facing sectors also positive. MTI also lowered Q2 growth to 0.5% from initial 0.7% estimate, still higher than Q1 0.4% contraction, as goods-producing industries shrank 5.5%, manufacturing fell 7.3% to sharpen contraction from Q1 (BusinessTimes). Enterprise Singapore also Friday narrowed FY forecast for non-oil domestic exports to contraction of 9-10% from 8-10% contraction forecast in May; total merchandise trade also forecast to contract 9-10% y/y.

  • Notable Gainers:

    • +2.6% 2207.TT (Hotai Motor): reports H1 EPS NT$21.74; StreetAccount notes year-ago figure was NT$6.37

    • +1.3% 9988.HK (Alibaba Group): reports Q1 non-GAAP EPADS CNY17.37 vs FactSet CNY14.59, revenue CNY234.16B vs FactSet CNY224.75B

    • +0.7% 2331.HK (Li Ning): reports H1 net income attributable CNY2.12B vs StreetAccount CNY2.11B, revenue CNY14.02B vs StreetAccount CNY13.62B

    • +0.1% 041510.KS (S.M. Entertainment Co.): to regain 42.04% SM Brand Marketing stake from HYBE for KRW53.89B

  • Notable Decliners:

    • -55% 1777.HK (Fantasia Holdings Group): fulfils resumption guidance; resumes trading

    • -5.8% 2007.HK (Country Garden Holdings): guides H1 net income (CNY45-55B) vs year-ago CNY1.91B

    • -3.4% 023530.KS (Lotte Shopping Co.): reports Q2 operating income KRW51.49B vs FactSet KRW73.69B

    • -1.9% 035720.KS (Kakao): founder reportedly under FSS search and seizure over SM stock manipulation

    • -1.5% 9CI.SP (CapitaLand Investment): reports H1 operating PATMI SG$344M vs year-ago SG$346M, revenue SG$1.35B vs year-ago SG$1.35B

• Data:

  • Economic:

    • No economic data today

  • Markets:

    • Nikkei: Closed

    • Hang Seng: (173.07) or (0.90%) to 19075.19

    • Shanghai Composite: (65.31) or (2.01%) to 3189.25

    • Shenzhen Composite: (39.12) or (1.92%) to 2002.29

    • ASX200: (17.30) or (0.24%) to 7340.10

    • KOSPI: (10.30) or (0.40%) to 2591.26

    • SENSEX: (182.27) or (0.28%) to 65505.91

  • Currencies:

    • $-¥: (0.18) or (0.13%) to 144.5690

    • $-KRW: +5.41 or +0.41% to 1322.9500

    • A$-$: +0.00 or +0.09% to 0.6524

    • $-INR: (0.08) or (0.10%) to 82.7690

    • $-CNY: +0.01 or +0.14% to 7.2271