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StreetAccount Summary - Asian Market Recap: Nikkei +0.95%, Hang Seng (0.39%), Shanghai Composite (0.18%) as of 04:10 ET

Sep 12 ,2023

• Synopsis:

  • Asian equities finished mixed in Tuesday trading. Hang Seng rallied mid-morning on positive developments in its property sector but still closed in the red. Mainland markets also down. Japan's Nikkei rallied to offset most of yesterday's losses, Australia also bounced off its lows to finish higher. Taiwan and several Southeast Asia markets up; South Korea among the losers today. India rebounding off record high however still higher for eighth straight session. US futures drifting lower, Europe paring early gains. Dollar a little stronger, AUD, yen and yuan all giving up some of yesterday's gains. Treasury yields mixed, JGBs also mixed but 10Y stayed above 0.7%. Crude blends higher. Iron ore at six-month high, other industrial metals flat; precious metals lower.

  • Asia equity markets largely directionless ahead of US CPI data Wednesday that could give strong directional clues as to the Fed's next move, as well as that for Treasury yields, the US dollar and US equity markets. Asia equity traders tuned into US CPI but also waiting for Chinese retail sales and investment data Friday for more hints of improvement - or otherwise - in China's economy. Today, two Chinese property developers won approval to extend due bond payments. But sentiment still fragile with more economists downgrading their FY China growth estimates while a second local news outlet called for a cut to banks' RRR rate.

  • Elsewhere, Australian business confidence improved but consumer confidence fell to pessimistic levels not seen since the worst of the pandemic. Analysts warned the yen was still vulnerable to weakening - and government intervention - because of movements in the dollar. Singapore's money laundering probe may have inadvertently exposed a loophole in MAS's AML rules.

  • Softbank (9984.JP) is set to close the order books on its ARM Holdings IPO after subscription now ten times oversubscribed. Mitsubishi Chemical (4188.JP) said it was considering a joint venture and separate listing for its petrochemical unit. Alibaba's (9988.HK) CEO said he will prioritize AI in group revamp. Country Garden (2007.HK) won approval from creditors to extend repayment on six yuan bonds by three years. Sino Ocean Group (3377.HK) said creditors of associate company Sino Ocean Capital have agreed to a 90-day grace period for an onshore bond. Iron ore billionaire Gina Rinehart's Hancock Prospecting confirmed it had bought a 7.72% stake in Albemarle (ALB) target Liontown Resources (LTR.AU), may push for board seat. Ionic Rare Earths (IXR.AU) said it received a UK government grant to develop a rare earth recycling facility to supply Ford's EV production facility. Air New Zealand (AIR.NZ) said continued problems with Pratt & Whitney engines will cause significant disruption.

• Digest:

  • Country Garden granted more debt repayment extensions on onshore bonds:

    • Reuters sources said Country Garden (2007.HK) won approval on debt repayment extensions on six out of eight onshore bonds by three years. Notional value worth total CNY10.8B ($1.48B). Bloomberg indicated voting deadline for the remaining two notes originally due in October have been delayed to Tuesday night from Monday. Follows majority vote on 1-Sep to approve a three-year extension for a CNY3.9B note. Key focus was on $22.5M interest payment on two dollar bonds on 5-Sep just within grace period. Share price rallying Tuesday, though reports reaffirmed that a resolution remains distant. According to Country Garden's interim financial statement, it had CNY108.7B of debt due within 12 months with cash level around CNY101.1B as of June-end. Still has at least five coupon payments on offshore bonds due this month, including two relatively sizable dollar bond coupons worth $15M due 17-Sep and $40M on 27-Sep. Following the dollar coupon payment, Bloomberg noted bonds still trading at deeply distressed levels, reflecting expectations of an eventual restructuring or liquidation rather than a state rescue.

  • Economists expect further RRR cuts after China credit demand improved:

    • State-owned SecuritiesDaily cited several economists saying PBOC expected to cut RRR for second time this year after August credit data beat expectations, showing signs of stability. Minsheng Bank chief economist Wen Bin foresaw RRR cut in Q4 in policy coordination to stabilize liquidity, credit and cut costs. Golden Credit Rating strategist Wang Qing eyed a cut in September as policies would be continued on the easing side to strengthen recovery momentum. Another state paper SecuritiesTimes noted rare occasion PBOC announced August credit data during midday rather than market close, highlighting authorities acted timely to prevent risk of unilateral overshooting. Added more time needed since raft of counter-cyclical policies announced in August, while acknowledged market sentiment would fluctuate as pessimistic expectations are amplified and causing market overshooting. Article called for more policy signals and better communication with market participants to consolidate growth after macroeconomic indicators have shown positive improvements.

  • Singapore money laundering probe may have exposed MAS licensing loophole:

    • Cross-border financial agents have aided money launderers to quickly transfer funds into Singapore through web of remittance houses, potentially evading Monetary Authority of Singapore (MAS) controls, and setting stage for S$1.8B ($1.3B) money laundering scandal in city, according to AsiaSentinel report. Singapore Single-family offices (SFO), set up to manage wealth of same family, found to use remittance houses that often bypass MAS-regulated banking transfers; structure facilitated money laundering operation by one SFO, Golden Eagle, which has since widened to MAS requesting 'unusual or suspicious' transaction details from all Singapore's financial institutions (Bloomberg). MAS currently examining changes to its anti-money laundering (AML) rules to close loophole but proposals in pipeline for more than 12 months; meanwhile number of SFOs increased to 1.1K from 400 in two years to end-2022. AML probe said to call into question Singapore's wider economic model that includes "safe-hub" financial reputation just as it prepares for generational leadership change (FT).

  • Australian consumers deeply pessimistic, but business conditions holding up:

    • Australian consumer confidence fell further into deeply pessimistic territory in September despite RBA keeping cash rate unchanged for a third straight month. Cost pressures appear to be intensifying with respondents' assessment of family finances deteriorating to the lowest since 1992. More households also less inclined to buy a major item (Bloomberg, The Australian). Survey points to further weakening in consumption after Q2 GDP data showed household savings ratio declined to lowest since 2008. In contrast, Australian business confidence and conditions picked up in August. Firms reported very high levels of capacity utilization while lead indictors remain positive with forward orders ticking higher. While firms continue to report cost pressures, Inflation indicators eased with both labour cost and final price growth softening over the quarter.

  • Yen and yuan still vulnerable to selling pressure despite Monday's rally:

    • Better-than-expected Chinese economic data and BOJ Governor Ueda comments on rate tightening spurred yuan and yen rallies Monday but analysts say both currencies remain vulnerable to further weakness. Despite China's economic data showing signs of stability (Bloomberg), and PBOC threats to punish forex market disruption (FT), sentiment over China's economy and particularly its property sector, remains fragile. Tuesday, Sino-Ocean Capital bondholders rejected motion to extend principal and interest payments, highlighting sentiment still uneasy over recovery prospects (Bloomberg). Meanwhile, Japan's 5Y bond auction today will be first test of demand post Ueda saying BOJ may have enough data by year-end to take a decision on ultra-low interest rates. But analysts said real catalyst won't come until 2024, when spring wage negotiations are complete (Bloomberg). Until then, US data, including Wednesday's CPI numbers and upcoming Fed decisions, more likely to drive US-Japan yield differentials, leaving yen vulnerable to weakening and even government intervention (Bloomberg).

  • Notable Gainers:

    • +84.6% 3377.HK (Sino-Ocean Group Holdings): creditors of Sino-Ocean Group Holdings associate Sino-Ocean Capital agree to 90-day grace period for onshore bond

    • +3.9% 4188.JP (Mitsubishi Chemical): reportedly planning JV, separate listing of petrochemical unit

    • +3.9% 2007.HK (Country Garden Holdings): creditors reportedly agree to extend six Country Garden Holdings onshore bonds by three years

    • +3.5% 2207.TT (Hotai Motor): reports August consolidated revenue NT$22.86B, +31.2% y/y

    • +2.7% 7532.JP (Pan Pacific International Holdings): reports August all stores sales; domestic retail companies +10.3% y/y

    • +2.0% 9984.JP (SoftBank Group): ARM Holdings reportedly plans to close IPO order book earlier than anticipated due to elevated demand

    • +1.9% 4568.JP (Daiichi Sankyo): presents results from primary analysis of phase 2 DESTINY-Lung02 trial of Enhertu; results simultaneously published

  • Notable Decliners:

    • -21.3% 3186.JP (Nextage Co.): president Koji Hamawaki resigns; chairman appointed replacement

    • -15.8% 7013.JP (IHI): Raytheon Technologies issues update on Pratt & Whitney's PW1100G engine

    • -6.1% 1801.HK (Innovent Biologics): 68.0M-share secondary priced at HK$34.92/sh through Morgan Stanley

    • -2.1% 6723.JP (Renesas Electronics): commences previously announced tender offer for Sequans Communications

    • -1.9% 9988.HK (Alibaba Group): reportedly to make AI, user experience its "core strategies"

• Data:

  • Economic:

    • Australia

      • August NAB business conditions +13 vs revised +11 in July

        • Business confidence +2 vs revised +1 in July

      • September Westpac-MI consumer sentiment 79.7 vs 81.0 in August

  • Markets:

    • Nikkei: 308.61 or +0.95% to 32776.37

    • Hang Seng: (70.56) or (0.39%) to 18025.89

    • Shanghai Composite: (5.72) or (0.18%) to 3137.06

    • Shenzhen Composite: (1.64) or (0.08%) to 1951.27

    • ASX200: 14.60 or +0.20% to 7206.90

    • KOSPI: (20.30) or (0.79%) to 2536.58

    • SENSEX: 84.35 or +0.13% to 67211.43

  • Currencies:

    • $-¥: +0.14 or +0.10% to 146.7290

    • $-KRW: +1.34 or +0.10% to 1326.8800

    • A$-$: (0.00) or (0.33%) to 0.6433

    • $-INR: +0.00 or +0.01% to 82.9760

    • $-CNY: +0.00 or +0.05% to 7.2934