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StreetAccount Summary - Asian Market Recap: Nikkei (0.44%), Hang Seng (0.01%), Shanghai Composite +0.43% as of 04:10 ET

Aug 17 ,2023

• Synopsis:

  • Asia equities traded mostly lower Thursday. Mainland China benchmarks finished higher and Hong Kong rallied to the flatline in a volatile day's trading after gapping down at the open only to rally on reports of refinancing in Zhongzhi. Taiwan another exchange to finish higher as its tech stocks rose, other benchmarks down but mostly off their lows of the day. Thailand another notable gainer as the recent political impasse shows signs of movement. US futures higher, Europe opened with some losses as they caught up with US action post their close yesterday. US dollar flat, AUD under more pressure post jobless data, NZD reaching nine-month low, yen and offshore yuan steady as state-owned Chinese banks seen selling dollars for second time this week. Treasury yields mixed, 10Y at 4.3% to hit 15-year highs for a time. Crude oil now higher, precious metals mixed, industrial metals found buyers.

  • Despite the rally in China assets, Asia equities continue to show signs of strain, as investors react to soaring bond yields by adopting a risk-off approach to emerging markets. The Hang Seng brushed against a technical bear market at one point before rallying as news broke shadow bank Zhongzhi had met with debt experts over a restructuring. The yuan hit a fresh 16-year low against the dollar despite reports of state-owned banks intervening by selling dollars but affect seemed to be minimal as the offshore yuan weakened slightly again.

  • In Asia macro news today, Australian employment shrank by most in a year and jobless rate rose by more than expected. Japan exports shrank for first time since early 2021, reflecting weaker demand from Asia, and Singapore non-oil exports slumped amid a sharp fall in electronics shipments. Japan core machinery orders rebounded but by less than forecast.

  • Globally, equities under pressure with many bourses seeing muti-week or even multi-month lows. Higher rates back in focus after FOMC minutes showed most members remained concerned about upside risks to inflation. The US dollar plateauing at six-week highs but Treasury yields higher across tenors with the yield curve steepening again. Markets still see rates on hold as the base case but odds of another Fed rate hike in September now 13% from 8% earlier this week, and 46% by November; either way, the base case now also pricing in higher-for-longer. Attention now centers on Fed Chair Powell's speech at next week's Jackson Hole Symposium, though there is skepticism he will explicitly signal rates have peaked.

  • China Evergrande (708.HK) said its Hengda Real Estate unit had received notification it was being investigated by the China securities regulator. Country Garden (2007.HK) warned on "major uncertainties" over its bond payments and said several of its local notes will remain suspended from trading. Samsonite International (1910.HK) said it had no plans for a US listing, denying earlier reports. Woodside Energy (WDS.AU) and Chevron (CVX) said they had no updates on wage disputes at several of Australia's largest LNG facilities but unions had filed a safety complaint against the former.

• Digest:

  • Troubled shadow lender Zhongzhi plans debt restructuring:

    • Bloomberg reported Zhongzhi Enterprises hired KPMG in late July to review balance sheet amid worsening liquidity crunch with company planning to restructure debt, sell assets post review to repay investors. Sources said Zhongzhi suspended payments on nearly all products but wasn't immediately clear how many it has defaulted on or whether has sufficient assets to cover shortfall if liquidated. Earlier this week, regulators set up task force to examine risks at Zhongzhi, other trust firms, as many backed by real estate projects run by troubled developers. One trust, Zhongrong International, backed by Zhongzhi, has already missed payments on dozens of products, said to have no plans to make whole. Report comes day after retail investors with exposure to Zhongzhi lodged formal complaints with regulators against company over its missed payments (FT) and protestors were seen outside offices of Zhongrong over missed payments on matured products (Bloomberg).

  • Yuan flirts with 16-year low as PBOC steps up efforts to slow depreciation:

    • PBOC stepping up efforts to stem currency weakness by setting Thursday's daily midpoint with strongest bias since last October (Bloomberg). PBOC has engaged in a series of actions recently aimed at stemming yuan's depreciation, including stronger-than-expected fixings, and an additional bill sale in Hong Kong that drove a measure of yuan borrowing costs to highest in more than a year. Reuters also reported major state-owned banks were seen selling dollars in onshore and offshore markets this week to buy yuan. Remains unclear whether latest actions will halt broader yuan downtrend given pressures from slowing Chinese economic growth, capital outflow risks, and expectations of more PBOC easing. Treasury 10Y yield premium over China equivalent widened to highest since Feb-2007 on Wednesday, a reflection of US economy's relative outperformance and Fed-PBOC policy divergence (Reuters).

  • Japan exports turn to declines, machinery orders trajectory remains soft:

    • Customs exports fell 0.3% y/y in July. While close to expectations of a 0.2% decline, follows 1.5% growth in the previous month and marks the first negative print since early 2021. Main drivers were sharp drops in metallurgical fuel and semiconductor-related items. Autos continued to log strong growth. Imports slid 13.5%, somewhat better than expected 15.2% contraction, though still deepening from a 12.9% in June. Fossil fuels remained the primary factor. Export weakness mainly reflects Asia demand, where declines accelerated in contrast to ongoing growth in western markets. China-bound exports fell double digits for the second consecutive month. BOJ real trade indices showed moderate sequential growth in both exports and imports, marking a positive start for Q3. Core machinery orders rebounded 2.7% m/m in June, below consensus 3.5%, following 7.6% decrease in the prior month. Mostly driven by a rebound in nonmanufacturing while manufacturing saw moderate growth. In contrast, government and overseas orders fell. Going forward, survey projection points to core orders contracting 2.6% after declining 3.2% in Q2.

  • Australian employment unexpectedly contracts:

    • Australian employment fell 14.6K in July against consensus for a 15K gain and June's 31.6K increase. Marked largest drop in employment in a year, driven by a 24.2K fall in full-time jobs. Unemployment rate rose to 3.7% from June's 3.5%, higher than consensus for a 3.6% rate. While July is typically a weak month for jobs, data adds to nascent signs labor market is loosening. Follows recent softening of lead indicators such as job vacancies and advertisements, and anecdotal reports firms are finding it easier to hire workers. Also comes after wage price index surprised to the downside in Q2 with yearly rate of growth coming in below RBA's forecast. August RBA minutes reiterated possible some further tightening may be required, though policy decisions will depend on upcoming data and evolving assessment of risks. Mixed views on rate outlook with some economists predicting another rate hike (likely in November) but others arguing tightening is finished.

  • China housing market slump could be worse than official data shows:

    • Bloomberg discussed Beijing's trend of hiding data from analysts as it seeks to manage narrative over weaker economy, saying in second article country's housing slump likely to be much worse than official data indicates. Said official prices show new home prices down 2.4% from Aug-21 high, existing homes down 6.0%. However, property agents and private data firms show existing home prices falling at least 15% in some prime areas. Observers say official indexes likely understating depth of downturn as survey-based methodology struggles to capture market turning points; raises questions over whether policymakers have accurate understanding of housing market. Criticism comes as Beijing this week abruptly stopped publishing youth unemployment data, adding to information on land sales, currency reserves, bond transactions, Covid deaths that have been restricted in recent years. Said under Xi, Beijing restricting wider range of sensitive data, especially when unflattering to economy.

  • Notable Gainers:

    • +9.9% 1910.HK (Samsonite International): reports H1 adjusted net income $170.9M vs StreetAccount $142.8M; reportedly says it has no current plans for US listing

    • +9.5% 3228.JP (Sanei Architecture Planning Co.): Open House Group to make tender offer to acquire all of Sanei Architecture Planning Co. at ¥2,025/share

    • +9.0% 1458.HK (Zhou Hei Ya International Holdings): reports H1 revenue CNY1.42B vs SA CNY1.42B and guidance CNY1.40-1.42B, net income attributable CNY101.7M vs StreetAccount CNY97.0M

    • +1.3% 700.HK (Tencent Holdings): reports Q2 revenue CNY149.21B vs FactSet CNY151.70

    • +0.6% 7532.JP (Pan Pacific International Holdings): revenue ¥1.937T vs guidance ¥1.920T and FactSet ¥1.943T, operating income ¥105.26B vs guidance ¥97.7B and FactSet ¥102.76B

  • Notable Decliners:

    • -6.0% 182400.KS (NKMAX Co Ltd (South korea)): US subsidiary NKGen Biotech approved for Nasdaq listing

    • -1.8% 2618.HK (JD Logistics): reports Q2 revenue CNY41.03B vs StreetAccount CNY41.15B, non-IFRS profit CNY825.7M vs StreetAccount CNY585.5M

    • -1.0% 6606.HK (New Horizon Health): issues clarification regarding short seller report claiming the company fabricated its revenue in FY22; wishes to clarify that the allegations in the report are blatantly false

• Data:

  • Economic:

    • Japan

      • June core machinery orders +2.7% m/m vs consensus +3.5% and (7.6%) in prior month

        • Q3 survey projection (2.6%) q/q vs actual (3.2%) in prior quarter

      • July trade balance (¥78.7B) vs consensus ¥47.9B and revised (¥43.1B) in prior month

        • Exports (0.3%) y/y vs consensus (0.2%) and +1.5% in prior month

        • Imports (13.5%) y/y vs consensus (15.2%) and (12.9%) in prior month

      • June tertiary sector activity index (0.4%) m/m vs consensus (0.2%) and revised +1.0% in prior month

    • Australia

      • July employment (14.6K) m/m vs consensus +15.0K and revised +31.6K in June

        • Unemployment rate 3.7% vs consensus 3.6% and 3.5% in June

        • Participation rate 66.7% vs consensus 66.8% and 66.8% in June

    • New Zealand Q2

      • PPI Input (0.2%) versus 0% in prior quarter

      • PPI Output +0.2% versus +0.2% in prior quarter

    • Singapore July

      • Non-oil domestic export y/y (20.2%) versus (15.6%) in prior month

  • Markets:

    • Nikkei: (140.82) or (0.44%) to 31626.00

    • Hang Seng: (2.67) or (0.01%) to 18326.63

    • Shanghai Composite: 13.61 or +0.43% to 3163.74

    • Shenzhen Composite: 16.66 or +0.85% to 1984.30

    • ASX200: (49.20) or (0.68%) to 7146.00

    • KOSPI: (5.79) or (0.23%) to 2519.85

    • SENSEX: (420.55) or (0.64%) to 65118.87

  • Currencies:

    • $-¥: (0.20) or (0.14%) to 146.1530

    • $-KRW: (2.11) or (0.16%) to 1340.0000

    • A$-$: (0.00) or (0.50%) to 0.6400

    • $-INR: (0.18) or (0.22%) to 83.0780

    • $-CNY: +0.01 or +0.09% to 7.3045