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StreetAccount Summary - Asian Market Recap: Nikkei (0.52%), Hang Seng +2.28%, Shanghai Composite +1.55% as of 04:10 ET

Sep 22 ,2023

• Synopsis:

  • Asian equities mixed Friday. Japan's Nikkei and Topix both down though off intraday lows following BOJ meeting. Greater China stocks rebounded and outperformed region. South Korea lower, Taiwan higher, ASX flat, southeast Asia mostly higher except Vietnam, India trading lower. S&P 500 and Nasdaq futures both higher, Europe opened lower. Treasury yields slightly lower as well as JGB yields. Dollar stronger against yen, which extended losses after BOJ Governor Ueda's press conference. Crude oil, precious metals rebounding.

  • Prospects of "higher-for-longer" by global central banks deepen. Ensuing bond market volatility has pushed 10Y Treasury yields to highest level since 2007. Some strategists see rates continuing to rise with upward pressure coming from strong economy and labor markets, and sticky inflation. BOJ dominated Asia headlines today with the bank left policy settings unchanged as widely expected and maintained forward guidance. Noted core inflation has slowed as it kept outlook unchanged. Governor Ueda pushed back against policy normalization speculation in his press conference. Downplayed NIRP remarks in his Yomiuri interview and warned of risk of acting too soon. Also noted high uncertainties, adding BOJ not in a position where it can see inflation goal met in a sustainable manner so to patiently maintain ultra-loose monetary policy.

  • In other developments, Japan core inflation broadly steady near 3% in August though BOJ implications limited. Japan flash PMI signaled factory activity contracted further this month and service sector growth slipped to eight-month low. Japanese finance minister Suzuki said government won't rule out any option in countering excessive volatility in FX markets. China considers relaxing foreign stake caps in onshore listed companies. JPMorgan to add Indian government securities to its EM bond index. Striking Chevron LNG workers to end their industrial action in Australia. India-Canada diplomatic row continues to worsen.

  • Nippon Television Holdings (9404.JP) will acquire 42.3% stake of Studio Ghibli. Toshiba (6502.JP) is considering reintegrating four main subsidiaries as it seeks to streamline operations and speedily restructure after going private. Alibaba (9988.HK)'s logistics arm Cainiao is planning to file for HK IPO as soon as next week. Moody's has put China Jinmao Holdings (817.HK) and China Vanke (2202.HK), two of the few remaining China investment-grade developers on watch for downgrade. Midea Group (000333.CH) to file for Hong Kong IPO next month.

• Digest:

  • BOJ on hold as expected, Ueda says still too early to foresee price stability achievement:

    • BOJ unanimously voted to keep short and long term rate targets unchanged, matching expectations. JGB fixed-rate purchase operations to continue at 1% yield. Observed core inflation has slowed, mainly due to impact of government energy relief policies, though remains at around 3% owing to cost passthrough while inflation expectations have sown some upward movements again. Outlook remained unchanged with core CPI still expected to decelerate as price hikes reflecting past increases in import costs taper off. Thereafter, inflation seen turning positive again on the back of improving fundamentals. Re-emphasized extremely high uncertainties surrounding the outlook, justifying patience in maintaining easing. No changes to forward guidance, which retained easing bias. Governor Ueda's press conference offered little to advance the debate, reaffirming BOJ is not at a stage where they can foresee achievement of price stability, but when that time comes, they will consider ending YCC or NIRP (Nikkei). Added it is still too early to evaluate the effects of July tweaks. Ueda refrained from commenting on yen.

  • China considers relaxing foreign stake caps to attract global funds:

    • Bloomberg reported China is mulling easing foreign ownership limits in mainland publicly traded companies to lure global investors who have been fleeing its capital markets. Cited people with knowledge that authorities may allow higher overseas ownership in Shanghai, Shenzhen, and Beijing as part of push to further open up market and enhance trading. Noted current rule caps total foreign ownership to 30% and subjects single foreign shareholder to 10%. Move is still in early stage and lacks details. Noted foreign investors dumped record amount of A-shares in August and net selling set to continue this month. Early takeaway is initial influx might be slow as global investors are still worried about China's economy, while coincidentally reducing risk of spikes in volatility driven by sudden capital inflows. Separately China's two biggest cities Shanghai and Beijing pledged to ensure free cross-border money transfers for foreign businesses, also seen as efforts to win back foreign investors as FDI in the country slumps (Bloomberg).

  • Japan flash PMIs soften in sluggish finish to Q3:

    • Flash manufacturing PMI was 48.6 in September, following 49.6 in the previous month. Marks the fourth straight month in contraction and the weakest level in seven months. Output, new orders and exports all registered stronger declines. Finished goods inventories returned to growth as backlogs fell at a faster pace. Input prices strengthened while output price inflation remained steady. Services PMI logged a similar decline to 53.3 from prior 54.3, indicating the softest momentum since the start of of the year. Output and new orders saw weaker growth while exports swung to contraction. Downturn in employment dragged aggregate hiring to declines, outweighing stronger growth in manufacturing. Service inflation metrics broadly eased. Composite PMI slid to 51.8 from 52.6 as aggregate new order growth came close to stalling, accompanied by waning optimism about the outlook. Commentary noted findings suggest potential for softening demand and activity in coming months.

  • Japan inflation broadly steady, service prices consolidate at 2% for the first time in three decades:

    • Core CPI rose 3.1% y/y in August, compared to consensus 3.0% and follows 3.1% in the previous month. Ex-food & energy inflation was steady at 4.3% as expected. Energy drags strengthened further to 0.84 ppt from prior 0.74 ppt driven mostly by sharper declines in electricity and gas prices. Elsewhere, acceleration in accommodation was offset by slower gains in household and leisure-related durables, while non-fresh food prices logged steady gains in further signs of stabilization. Service price inflation logged back-to-back increases of 2.0% for the first time in about 30 years. Main drivers were dining, household-related services and communications/leisure. Recall that BOJ board members have recently noted core inflation has retreated from its recent peak, though degree of expected moderation has become unclear after latest statements took out language specifying forecasts below the 2% inflation target. Still, near-term implications from CPI data are limited with no market calls for BOJ policy moves for the rest of the year. Moreover, board members including Governor Ueda have flagged a possible reassessment of the prospects for achieving the inflation mandate sometime around year-end.

  • Bond markets facing some headwinds:

    • Hawkish Fed meeting continues a turbulent stretch on bond markets that has seen yields rise sharply along the curve. Fed's updated dot plot conveyed a stronger commitment to its higher-for-longer stance, prompting traders to raise their bond yield forecasts (Bloomberg). With crude rallying to a 10-month high and some strategists upgrading oil prices forecasts to above $100, prospect of longer period of high energy prices set to push up near-term inflation. While central banks typically look through short-term energy fluctuations, economists warn of upside risk to core inflation if firms begin to pass on higher costs (Bloomberg). Recent macro data reflective of resilient economies (IMF recently upgraded global growth forecasts), characterized by lingering tightness in labor markets and sticky inflation. Supply another bond market headwind with Fed QT ongoing and Treasury Department ramping up issuance.

  • Notable Gainers:

    • +36.2% 1516.HK (Sunac Services Holdings): Sunac China Holdings releases results of selection of mandatory convertible bonds and Sunac Services shares by scheme creditors

    • +15.8% 1952.HK (Everest Medicines): Kezar Life Sciences enters into agreement with Everest Medicines to develop and commercialize zetomipzomib in Greater China, South Korea and Southeast Asia

    • +13.5% 9404.JP (Nippon Television Holdings): Nippon TV to acquire stake in Studio Ghibli and make it a subsidiary

    • +6.3% 138040.KS (MERITZ Financial Group): launches KRW240.00B share buyback, to run from today to 29-Mar-24

    • +0.6% 1071.HK (Huadian Power International): reports Jan-Aug power generation 154,506 GWh, +4.2% y/y

  • Notable Decliners:

    • -3.3% 532296.IN (Glenmark Pharmaceuticals): to sell 75% stake in Glenmark Life Sciences to Nirma for INR56.52B or INR615/share

    • -2.3% 507685.IN (Wipro): CFO Jatin Pravinchandra resigns to pursue other professional goals, effective 30-Nov

• Data:

  • Economic:

    • Japan

      • September Flash Manufacturing PMI 48.6 versus 49.6 in prior month

    • New Zealand

      • August Trade Balance (NZ$2.3B) versus (NZ$1.2B) in prior month

  • Markets:

    • Nikkei: (168.62) or (0.52%) to 32402.41

    • Hang Seng: 402.04 or +2.28% to 18057.45

    • Shanghai Composite: 47.73 or +1.55% to 3132.43

    • Shenzhen Composite: 35.90 or +1.91% to 1913.53

    • ASX200: 3.60 or +0.05% to 7068.80

    • KOSPI: (6.84) or (0.27%) to 2508.13

    • SENSEX: (79.53) or (0.12%) to 66150.71

  • Currencies:

    • $-¥: +0.74 or +0.50% to 148.3120

    • $-KRW: (5.43) or (0.41%) to 1335.0400

    • A$-$: +0.00 or +0.22% to 0.6431

    • $-INR: (0.29) or (0.35%) to 82.8270

    • $-CNY: (0.01) or (0.12%) to 7.2992