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StreetAccount Summary - Asian Market Recap: Nikkei (1.46%), Hang Seng (1.36%), Shanghai Composite (0.82%) as of 04:10 ET

Aug 16 ,2023

• Synopsis:

  • Asian equities ended lower almost everywhere Wednesday. Hong Kong stocks fell once again to reach ten-week lows while mainland markets also fell sharply. Japan benchmarks gapped lower and closed on their troughs, Australia's ASX broke a support line to end at one-month lows. Rest of Asia led lower by Seoul with losses here exacerbated by a mark-to-market from yesterday, Taipei a relative outperformer to close near the flatline. Southeast Asia down, India treading water, Philippines only major benchmark to see a gain. US futures now higher after being lower earlier, Europe pared early losses. US dollar DXY index slipped from six-week highs but holding 103 for now, NZD higher on RBNZ comments (NZ bond yields at 12-year highs), yuan and yen steady. Treasurys yield curve steepening. Oil blends and precious metals flat, industrial metals mixed.

  • Global equity markets continue to struggle this week with many bourses reaching multi-week or multi-month lows amid deepening concerns over the health of China's economic recovery, while rising European gas prices and spiking bond yields are also contributing to the general risk-off sentiment. More evidence this morning of problems in China, this time with house prices contracting for the first time this year in July, and an admission by a large trust fund that it has failed to make dozens of payments due since the end of July. Brokers made further downgrades to China GDP growth forecasts with analysts casting doubt the country will achieve its FY growth target of 5%. Several economists also said they expect further reductions to loan prime rates and RRRs over Q3 in a bid to stimulate the economy to follow from Tuesday's MLF cut.

  • Elsewhere, RBNZ left OCR on hold as expected though tweaked rate projections higher and updated OCR curve that pushed back rate cuts to 2025 from late 2024 previously. Reuters Tankan showed Japan manufacturer sentiment jumped in August as economy continued its post-Covid rebound. Ahead tonight, Fed minutes from its July meeting.

  • KWG Group (1813.HK) is to sell a 50% stake in two residential projects to joint venture partner Greentown China Holdings (3900.HK) for more than CNY2B. Hong Kong Exchange & Clearing (388.HK) missed Q2 profit estimates as low number of IPOs offsets recovery in investment income. SEA (SE) shares slid substantially overnight in New York after the company missed on Q2 revenue and announced a fresh investment plan.

• Digest:

  • Zhongrong admits it has missed dozens of payments as shadow bank's troubles grow:

    • Bloomberg reported official at Zhongrong International trust said company has missed dozens of payments on batch of products on 8-Aug, adding to delays on at least 10 others dated from July. Board secretary Wang Qiang said at least 30 products are now overdue, Zhongrong also halted redemptions on some short-term instruments; added company has no immediate plan to cover payments since short-term liquidity suddenly dried up. Said company was being inundated with investor queries, asked for patience as firm looks to recoup investments but denied company had stopped making payments on all products. Said company now looking to ensure stability of operations which will help with payments. Article said comments signal troubles at Zhongzhi Enterprises, which owns Zhongrong, deeper than initially thought as only three clients thus far revealed missing payments. Zhongrong has CNY 39.5B ($5.4B) due this year on 270 high-yield products.

  • China home prices fall for first time this year:

    • Average new home prices in 70 of China's biggest cities fell 0.2% y/y in July versus flat reading in June, according to Reuters calculations. On m/m basis, prices fell 0.1%, first time in 2023 prices have fallen. Prices in Shenzhen fell most, -2.8% from -2.4% in June; and in Guangzhou, -1.3% from -0.8%. In contrast, prices in Beijing gained 3.5% to add to June's 3.5% gain; and Shanghai, where prices rose 4.5% from 4.8% in June. Prices fell in 49 of 70 cities versus 38 cities in June, prices in secondary market fell 0.5% , according to NBS data. Analysts cited by Bloomberg said lackluster market may continue in short term given it takes some time for local policy support to emerge. Decline in prices comes amid weak property investment that declined more than 8% y/y in July, debt problems at major developers, sliding home sales.

  • RBNZ on hold, tweaks OCR projections higher:

    • RBNZ left OCR unchanged at 5.50% as expected, and reiterated policy settings to remain restrictive for foreseeable future. Assessed inflation risks as balanced, though noted near-term risk activity and inflation do not slow as much as expected. Growth slowing in parts of the economy as supply-demand imbalance moderates. However, core inflation remains too high and prolonged period of subdued spending growth is still required to reduce inflation pressures. Central bank tweaked OCR curve in Monetary Policy Statement, modeling peak rate of 5.59% and delaying projected rate cuts to 2025 from late 2024 previously. While Governor Orr downplayed signal value from the tweak, some economists argue it conveys RBNZ's concerns current policy settings not sufficiently constraining activity (Bloomberg). RBNZ upgraded 2024 inflation forecast and is now predicting a shallower downturn, citing earlier-than-expected stabilization in house prices and economic boost from high net migration.

  • Another round of China GDP forecast downgrades:

    • Bloomberg reported disappointing China activity data prompted downgrades to GDP growth forecasts. Main takeaway was the government 5% growth target is increasingly under threat without more concerted policy actions. JPMorgan now looks for 4.8% in 2023 (extending a series of downward revisions from 6.4% as recently as early may) and 4.2% in 2024. Barclays revised down 2023 by 0.4 ppt to 4.5%, while maintaining below-consensus 4% for 2024. Cited disappointing data and absence of effective stimulus. Mizuho Financial cut 2023 growth to 5.0% from 5.5%. Property sector risk was broadly cited as a key factor as well as concerns about contagion from Country Garden's liquidity crisis. Meanwhile, Standard Chartered reaffirmed 5.4% growth this year amid optimism on reopening boost to the services sector and increased policy stimulus. UBS also maintained at 5.2%, noting further policy support and relaxation of property market rules could help growth rebound in H2.

  • More China rate cuts expected, RRR calls converging to Q3:

    • Following the cuts to the China MLF and 7D reverse repo rates, Deutsche Bank forecasts 25 bp RRR cut in Q3 and another 15 bp MLF rate cut in Q4. Warned biggest negative risk factor is a free-fall in property market leading to a fully fledged crisis. JPMorgan forecasts asymmetric LPR cuts of 15 bp in 1y and 20 bp in 5y as the longer tenor would provide more support for the housing market, which is seen as the biggest near-term headwind. Also expects 25 bp RRR cut in Q3. Barclays looks for 25 bp easing in RRR in the coming week, another 10 bp of policy rate cuts in Q4 and 1Q24, and further 25 bp RRR cut in 1Q24. Goldman Sachs anticipates symmetric 15 bp easing in 1y and 5y LPRs, presaging broader monetary/fiscal policy support, though stimulus magnitude should be smaller than previous cycles. Nomura projects another 15 bp MLF rate cut and 20 bp reduction in 7D reverse repo rate before year-end. UBS predicts 10-15 bp easing in MLF rate and 25 bp RRR cut this year. UOB looks for symmetric 15 bp reductions in 1y and 5y LPRs, and a 25 bp RRR ease in Q3.

  • Notable Gainers:

    • +6.9% VIC.VN (Vingroup): VinFast and Black Spade Acquisition Co announce closing of business combination, as expected

    • +4.2% 2013.HK (Weimob): reports H1 adjusted net income (CNY254.2M) vs StreetAccount (CNY337.0M), revenue CNY1.21B vs StreetAccount CNY1.09B

    • +2.8% 1813.HK (KWG Group Holdings): sells 50% stake in Hangzhou residential project to JV partner Greentown Real Estate for CNY1.18B; sells stakes in two Suzhou residential projects to partner Greentown for total consideration of CNY895.4M

    • +0.6% 8233.JP (Takashimaya Co.): reports July Takashimaya sales +10.1% y/y

  • Notable Decliners:

    • -6.6% 148.HK (Kingboard Holdings): guides H1 net income of more than HK$1.3B, (46%) y/y

    • -6.1% 042660.KS (Hanwha Ocean): reports Q2 Operating profit (KRW159.01B) vs year-ago (KRW99.51B), revenue KRW1.821T vs FactSet KRW1.973T

    • -5.4% 068270.KS (Celltrion): reports Q2 operating income KRW182.99B vs FactSet KRW191.81B, revenue KRW523.98B vs FactSet KRW604.56B

    • -4.4% 1208.HK (MMG Ltd): reports H1 net income attributable ($58.8M) vs year-ago $79.5M

    • -3.7% 271560.KS (ORION Corp (Korea)): reports July net revenue KRW233.6B

    • -0.5% 388.HK (Hong Kong Exchanges & Clearing): reports Q2 revenue HK$5.02B vs FactSet HK$5.09B, EBITDA HK$3.65B vs FactSet HK$3.67B

• Data:

  • Economic:

    • Japan August

      • August Reuters Tankan manufacturers' sentiment index +12 vs +3 in prior month

        • Service sector index +32 vs +23 in prior month

  • Markets:

    • Nikkei: (472.07) or (1.46%) to 31766.82

    • Hang Seng: (251.81) or (1.36%) to 18329.30

    • Shanghai Composite: (26.05) or (0.82%) to 3150.13

    • Shenzhen Composite: (18.80) or (0.95%) to 1967.64

    • ASX200: (109.80) or (1.50%) to 7195.20

    • KOSPI: (45.23) or (1.76%) to 2525.64

    • SENSEX: 25.03 or +0.04% to 65426.95

  • Currencies:

    • $-¥: (0.13) or (0.09%) to 145.4430

    • $-KRW: (2.71) or (0.20%) to 1334.6500

    • A$-$: +0.00 or +0.21% to 0.6473

    • $-INR: (0.25) or (0.30%) to 83.1250

    • $-CNY: +0.01 or +0.11% to 7.2907