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StreetAccount Summary - Asian Market Recap: Nikkei +1.73%, Hang Seng +0.97%, Shanghai Composite +1.13% as of 04:10 ET

Aug 28 ,2023

• Synopsis:

  • Asian equities ended higher Monday. Hang Seng gapped higher by 3% at the open but tapered off over the day to finish finish around 1% up, similar pattern in mainland markets. Gains elsewhere led by Japan on read through to the those on Wall Street on Friday, Southeast Asia led by Singapore, India extending morning gains. Seoul outperformed Taipei but both were higher. US and futures higher, Europe opened with strong gains. US dollar steady, yuan and yen unmoved, AUD conceded early gains. Treasury yields higher at the short end. WTI and Brent futures higher. Precious metals and industrials mixed.

  • Asia markets Monday boosted by a strong end to trading on Wall Street Friday and futures contracts that point to a bright opening again today. The optimism comes after Fed Chair Powell said the Fed would 'proceed carefully' on whether to raise interest rates again, and after Beijing moved over the weekend to shore up its capital markets. With the former, Powell said the Fed was prepared to hike rates further if appropriate with markets now pricing in a more than 50/50 chance of a rate increase by November. With the latter, the Chinese securities regulator cut stock trading stamp duty for the first time since 2008 and said it would slow the IPO pipeline in moves to improve liquidity.

  • Elsewhere in Asia, BOJ Governor Ueda said continuation of ultra-loose policy is justified by underlying inflation running below central bank's target. China industrial profits contracted for a seventh consecutive month as slumping demand weighed on manufacturer profits. Australian retail sales rebounded by more than expected amid jump in discretionary goods sales. Evergrande shares were down 80% after resuming trade following a 17-month suspension. US Commerce Secretary Raimondo talked up importance of US-China ties during her visit to Beijing for talks.

  • SoftBank (9984.JP) backed Neumora Therapeutics has filed for a US IPO although date, size and price were not revealed. BYD's (1211.HK) Electronic unit that makes components for iPads is to buy a Singapore-based company that owns manufacturing businesses in China to expand its smartphone components business. China Evergrande (3333.HK) resumed trading Monday after posting a $4.5% H1 loss but the stock plunged around 80% over the day. Xpeng (9686.HK) is to take over Didi's smart EV unit, intends to launch new car brand in 2024; shares surge. A strike at Hyundai Motors (005380.KS) edged closer after unions were given permission to strike by the national labor relations commission. Siam Cement (CSS.TB) said it will not proceed with the IPO of its chemical unit because of unfavorable market conditions. Fortescue Metal's (FMG.AU) CEO resigned less than six months into her new role with no reason given for her departure; shares sharply lower.

• Digest:

  • China Evergrande plummets on trade resumption:

    • China Evergrande (3333.HK) dropped as much as 87% early Monday after lifting its trade suspension. Decision to resume trading came Friday after concluding results of their rectification measures sufficiently addresses all major findings in the Group's internal control system and processes. Also reported H1 net losses narrowed to CNY33.01B ($4.53B) from CNY66.35B a year earlier. Revenues increased to CNY128.18B vs year-ago CNY89.28B reflecting similar growth in property sales. Statement noted active plans for the resumption of housing sales and captured market strength earlier this year. Added they have been actively seeking new financing or additional capital injections through various channels with some success. Bloomberg reported Evergrande delayed key votes on its offshore debt restructuring plan to late September, citing allowance for creditors to evaluate recent developments including today's share price action. Reuters noted earlier that courts in Hong Kong and the Cayman Islands will decide in early September whether to approve an offshore debt restructuring plan involving $31.7B worth of instruments including bonds, collateral and repurchase obligations. Creditors voted on the plan last week and the developer has yet to disclose the result.

  • China regulators announce series of market reforms:

    • Following on from recent pledges to support markets, Finance Ministry announced stamp duties on security transactions will be halved (to 0.05% from 0.1%) effective today. CSRC lowered the minimum margin ratio for securities purchases to 80% from 100% starting after the market close on 8-Sep. Noted aggregate margin balances currently "relatively high" and risks are manageable. CSRC also signaled pace of IPOs will be tightened in stages given recent market conditions. Firms facing large refinancing will be required to provide guidance via pre-communication mechanism. Financing will be restricted for risky companies which will be more closely supervised on their usage of funding. Funds raised strictly required to be allocated to core business to limit diversification. Furthermore, CSRC rushing to amend rules so that shareholders cannot sell stakes in secondary markets if a company's share price falls below IPO or net asset levels over the past three years. Also applies to those that do not pay cash dividends or if the dividends are lower than 30% of average net profit.

  • Offshore yuan seen falling to record-low, major stimulus still unlikely:

    • Bloomberg cited its Markets Live Pulse survey showing global investors look for offshore yuan to trade at a record 7.6 vs dollar before year-end, 4% weaker than Friday's close of 7.29. Underlining the bearish macro outlook, just 19% of respondents plan to increase China exposure over the next 12 months (vs 25% in March), while 24% plan to reduce their holdings. Noted sentiment fits with recent stock price target reductions from Morgan Stanley and Goldman Sachs. Higher US rates adding pressure on yuan with US 2y yield almost 3 ppt higher than equivalent China notes, the biggest premium since 2006. Only 11% of respondents expect policymakers to unveil "bazooka-like" stimulus, with the majority predicting moderate measures targeting specific industries. Another 32% said any policy rescue will be too little, too late. On tail risks, about 31% said the MSCI China Index would need to drop another 20% in the next month to trigger a global rout, while another 33% said Chinese equity losses won't lead to any significant contagion.

  • China industrial profits drop for seventh month while pace of decline eases:

    • Profits at industrial firms in China declined 15.5% y/y in Jan.- Jul, slower than 16.8% drop in Jan.-Jun. Profits for July alone fell 6.7% y/y, versus 8.3% drop in June and pace of decline has dropped consecutively for five months. NBS statistician noted lower commodity prices eased pressure on raw material costs in midstream and downstream industries, leading to first y/y drop in unit costs in 2023. State-owned enterprises saw profits drop 20.3% in Jan.-Jul, while foreign firms posted 12.4% fall and private enterprises recorded a 10.7% drop. Reuters noted profits dropped for 28 of 41 key industrial sectors during the period with ferrous metal smelting and rolling processing falling most at 90.5%. Bloomberg industrial production was likely impacted by heavy rains and severe flooding in July. China's economic recovery lost further steam in July, with consumption, industrial output and investment all struggling. Consumer and producer prices also saw first synchronized drop since late 2020.

  • Chinese companies pledge $1.4B in share buybacks after CSRC amended rules:

    • Nikkei reported Chinese companies have committed CNY10.1B ($1.39B) in share buybacks in the wake of the CSRC's proposal to ease rules, though noted this has so far done little to restore investor confidence. Tallied at least 72 companies listed in Shanghai and Shenzhen announcing buyback plans in the week after the regulator's announcement. Article implied the collective action may have been orchestrated, given their sheer number in a short timeframe, buybacks are unusual in China, particularly in sizable amounts, while companies offered similar justification in their statements. Cited four senior executives at Shenzhen-listed Changchun High-Tech citing one reason for its proposed CNY200M buyback was "to boost market confidence," the same phrase used by regulators. Other common reasons include maintaining the interests of all shareholders and executives' belief in the company's long-term value. Biggest size mentioned where Rongsheng Petrochemical (002493.CH) at CNY2B and Ease Money Information with CNY1B. Most proposals at the 72 companies were approved within days, and at least three Shanghai-listed companies have already started their buybacks.

  • Notable Gainers:

    • +10.6% 9868.HK (XPeng, Inc.): to acquire DIDI'S smart auto development business assets for total consideration of HK$5,835M ($744M)

    • +2.7% 386.HK (Sinopec (China Petroleum & Chemical)): reports H1 CAS net income attributable CNY35.11 vs year-ago CNY43.53B;to launch A-share buyback of CNY800M-1.5B through centralized bidding

    • +2.1% 003670.KS (POSCO Future M Co.): reportedly aims to reach KRW43T in sales, KRW3.4T in operating profit by FY30

    • +1.1% 015760.KS (Korea Electric Power): South Korean government reportedly passes resolution to recommend candidates for KEPCO's president including former lawmaker Kim Dong-chul

    • +0.0% 285.HK (BYD Electronic (International)): enters into agreement to acquire Juno Newco Target Holdco Singapore from Jabil Circuit (Singapore) for CNY15.8B ($2.2B)

  • Notable Decliners:

    • -79.4% 3333.HK (China Evergrande Group): fulfils resumption guidance; reports H1 net income attributable (CNY33.01B) vs year-ago (CNY66.35B)

    • -10% 603486.CH (Ecovacs Robotics): reports H1 net income attributable CNY584.1M, (33%) vs year-ago CNY876.9M

    • -1.3% SCC.TB (The Siam Cement Public): The Siam Cement Public will not proceed with SCGC IPO at this time; president & CEO Roongrote Rangsiyopash to retire, effective 1-Jan-24

• Data:

  • Economic:

    • China

      • July industrial profits YTD (15.5%) y/y vs (16.8%) in prior month

        • July industrial profits (6.7%) y/y vs (8.3%) in prior month

    • Australia

      • July retail sales +0.5% m/m vs consensus +0.3% and (0.8%) in June

  • Markets:

    • Nikkei: 545.71 or +1.73% to 32169.99

    • Hang Seng: 174.36 or +0.97% to 18130.74

    • Shanghai Composite: 34.56 or +1.13% to 3098.64

    • Shenzhen Composite: 17.83 or +0.95% to 1900.50

    • ASX200: 44.60 or +0.63% to 7159.80

    • KOSPI: 24.27 or +0.96% to 2543.41

    • SENSEX: 266.18 or +0.41% to 65152.69

  • Currencies:

    • $-¥: +0.06 or +0.04% to 146.5090

    • $-KRW: (0.62) or (0.05%) to 1325.7500

    • A$-$: +0.00 or +0.00% to 0.6408

    • $-INR: +0.11 or +0.13% to 82.6370

    • $-CNY: +0.00 or +0.05% to 7.2937