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StreetAccount Summary - Asian Market Recap: Nikkei (0.75%), Hang Seng (1.34%), Shanghai Composite (1.13%) as of 04:10 ET

Sep 07 ,2023

• Synopsis:

  • Asian equities ended mostly lower Thursday. More losses for the Hang Seng, which is now in the red for the week once again despite the property sector rally; mainland stocks also lower. Japan lower, Australia dragged down by commodity stocks post China's trade data. India broke to four-week highs, Thailand the only other benchmark to show a gain. US futures lower, Europe opened lower. although mostly pared. US dollar steady, more yuan weakness, other currencies flat. Treasury yields mixed. Brent futures consolidating around $90/bl, WTI at $87. Precious metals down, iron ore leading industrial metals lower post China trade numbers.

  • Robust service PMI provided more evidence the US economy was still in good shape, with the good news interpreted as bad news by investors who pushed Treasury yields up and equities down on fears of higher-for-longer rates. The weak handover affected Japanese stocks in particular, which arrested an eight-day winning streak, but most regional benchmarks were also under pressure. Hong Kong and China pulled lower by China trade data that showed imports and exports contracted again albeit at a slower pace in August over July's contraction. A positive aspect of the data was new orders, which turned positive for first time in five months.

  • The PBOC set daily yuan midpoint higher-than-expected once again but the currency continues to trade near its lowest since 2007. Taiwan became the latest emerging Asia country to report an uptick in headline inflation as food and energy prices impacted local prices. Japan's forex reserves for August showed little change, indicating the BOJ was inactive in supporting the yen last month. Malaysia's central bank kept its base rate steady at 3.0%, as expected. A South Korean thinktank said it saw exports showing signs of improvement.

  • ICBC (601398.CH), China Construction Bank (601939.CH), Agricultural Bank of China (601288.CH) and Bank of China (601988.CH) said they would lower interest rates for existing mortgage holders from 25-Sep. A US House Representative has called on the US Commerce Department to end all technology exports to SMIC (981.HK) following the discovery of new chips in Huawei phones that could violate trade restrictions. SK Hynix (000660.KS) said it was looking into how its chips ended up in Huawei's phones.

• Digest:

  • China trade mostly in line, Section 301 tariff exemptions extended as US/EU mull new steel levies:

    • Customs exports fell 8.8% y/y in August, compared to expectations of a 9.2% decline and follows 14.5% drop in the previous month. Marginally larger positive surprise in import weakness, down 7.3% vs consensus 9.0% and prior 12.4%. Confirms slower pace of contraction as predicted in the Reuters consensus poll, though sample featured a wide range of export forecasts (4%~15% declines). Early takeaways ranged from relatively positive (Bloomberg), amid other signs of easing pressures, to neutral (Reuters) though both pointed to domestic demand growth as key to declaring a turning point. USTR announced further extension of exclusions to China Section 301 tariffs until year-end. Follows comments from Commerce Secretary Raimondo to CNBC yesterday that she does not expect any changes until the ongoing review is completed. China Daily reported China continues to lobby for all Section 301 tariffs to be scrapped. Later, Bloomberg sources indicated US and EU working on new tariffs aimed at excess steel production from China and other countries with primary focus on China imports benefitting from non-market practices.

  • China plans to expand iPhone ban to state agencies and companies:

    • Bloomberg reported China seeks to broaden ban on iPhones in sensitive departments to state agencies and firms. Added several agencies have begun instructing staff not to bring iPhones to work, affirming some earlier media reports. Restrictions likely to extend to state-owned enterprises in a far broader reach. Likely be a culmination of a yearslong effort to restrict foreign technology use in sensitive environments amid Beijing's self-reliance push. Still unclear how extensive the ban will be though article says it may vary depending on agency or company. Apple (AAPL) likely to take hit if move materializes as China contributes 20% of its revenue and hosts majority of global iPhone manufacturing, which CEO Tim Cook calls relationship with China "symbiotic." Noted iPhones still among China's bestsellers, while there is growing efforts to step up domestic technology. Patriotic fervor swept across China's social media about Huawei's latest smartphone, which China views as much needed victory over US sanctions (Bloomberg)

  • Malaysia central bank keeps base rate steady again:

    • Bank Negara Malaysia kept its overnight policy rate (OPR) on hold at 3.0% Thursday as forecast by almost all economists, and keeping in trend with other AsiaPac-ex Japan central banks. Bank said headline and core inflation should continue to ease in H2 after dipping to two-year low 2.0% y/y in July. Added economic growth outlook remains subject to downside risks from slowing momentum in major economies, higher inflation, geopolitics and sharp tightening in financial market conditions. These should be offset by supportive growth in employment and wages, along with improvement in tourism sector. However, analysts said bank will need to support economy with Q2 GDP growth slowing to 2.9% y/y, its lowest since mid-pandemic, while outlook is murky given export decline, China economic slowdown, persistent labor market slack. Consensus expects BNM to keep OPR steady for remainder of 2023 given ringgit stabilized and inflation back to below target.

  • BOJ's Nakagawa says easing remains appropriate for the time being:

    • In a speech, BOJ board member Nakagawa said Japan's economy is making progress amid signs of a shift in corporate price/wage setting behavior, though conditions for the achievement of the price stability target have yet to reached and hence believes it appropriate to maintain easing for the time being. Echoing other board members' emphasis on high uncertainties, outlined inflation risks on both sides -- positive feedback loop between actual and expected inflation could lead to upside surprise, while progress in corporate cost pass-through may pause or even reverse. This year's shunto wage talks yielded the biggest increases in three decades though the outlook depends on the corporate environment and warrants further attention. Risks to the economic outlook were weighted towards the external environment, including high inflation/rate hikes abroad (albeit easing) and geopolitical risks centered around the war in Ukraine. Main domestic risk seen to be private sector longer term growth expectations, though some of this was also tied to how Japan adapts to changing supply chain structure stemming from geopolitics and the pandemic.

  • Asia headline inflation prints reaccelerate in August:

    • Headline inflation in Emerging Asia appear to be rising again as higher food and energy costs push August CPI readings higher to give regional central banks fresh headaches amid slowing economic growth. Taiwan latest to post seven-month high y/y headline inflation of 2.3% from July's 1.9%, above central bank target range (FocusTaiwan). Follows higher headline inflation readings in Indonesia (3.3% from 3.1% y/y), Philippines (5.3% from 4.7%), South Korea (3.4% from 2.3%), Thailand (0.9% from 0.4%), Vietnam (3.0% from 2.1%). Core inflation remains on downward trajectory in all these countries giving central banks, governments time to address headline inflation with fiscal measures, economists say. Adverse weather and tighter global commodity supplies (especially in rice post India's export curbs, and wheat following Russia's blockade of Black Sea ports) impacting EM Asia inflation baskets that overweight food more relative to developed markets. Energy costs also higher; oil prices hit 10-month highs this week hinting September headline inflation reading could remain elevated.

  • Notable Gainers:

    • +5.5% 267250.KS (HD HYUNDAI Co.): CEO Chung Ki-Sun reportedly meets with Aramco chairman Yasir Al-Rumayyan and PIF president to discuss business cooperation

    • +1.5% 9432.JP (Nippon Telegraph & Telephone): subsidiary NTT DOCOMO makes tender offer to acquire INTAGE Holdings

    • +1.2% 035420.KS (NAVER): Samsung reportedly to adopt HyperCLOVA X in semiconductor development

    • +0.5% 6701.JP (NEC Corp): reportedly acquires 50.1% stake in Japan Asset Management, terms undisclosed

    • +0.3% 000660.KS (SK Hynix): reportedly looking into how its chips got into Huawei's latest phone

    • +0.1% 3106.JP (KURABO INDUSTRIES): DMG MORI agrees to acquire Kuraki Co from Kurabo Industries for ¥4.50B

  • Notable Decliners:

    • -5.4% 6472.JP (NTN Corp): to issue ¥22.00B zero coupon convertible bonds due 2025, sets initial conversion at ¥339.5

    • -1.0% 096770.KS (SK Innovation): confirms subscription price of its 8.2M-share offering at KRW139,600/sh to raise KRW1.143T

• Data:

  • Economic:

    • Japan July

      • Leading economic index 107.6 vs consensus 107.8 and revised 108.8 in prior month

        • Coincident index 114.5 vs consensus 114.2 and revised 115.6 in prior month

    • China August

      • Trade balance $68.36B vs consensus $73.90B and $80.60B in prior month

        • Exports (8.8%) y/y vs consensus (9.2%) and (14.5%) in prior month

        • Imports (7.3%) y/y vs consensus (9.0%) and (12.4%) in prior month

    • Australia July

      • Trade balance A$8.04B vs consensus A$10.05B and revised A$11.32B in June

        • Exports (2.0%) m/m vs (1.7%) in June

        • Imports +2.5% m/m vs (3.9%) in June

  • Markets:

    • Nikkei: (249.94) or (0.75%) to 32991.08

    • Hang Seng: (247.91) or (1.34%) to 18202.07

    • Shanghai Composite: (35.72) or (1.13%) to 3122.35

    • Shenzhen Composite: (34.73) or (1.76%) to 1936.86

    • ASX200: (86.10) or (1.19%) to 7171.00

    • KOSPI: (15.08) or (0.59%) to 2548.26

    • SENSEX: 69.52 or +0.11% to 65950.04

  • Currencies:

    • $-¥: (0.19) or (0.13%) to 147.4660

    • $-KRW: (0.23) or (0.02%) to 1334.3100

    • A$-$: +0.00 or +0.01% to 0.6383

    • $-INR: (0.14) or (0.17%) to 83.1720

    • $-CNY: +0.01 or +0.11% to 7.3253