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StreetAccount Summary - Asian Market Recap: Nikkei (0.26%), Hang Seng +1.58%, ASX +0.41% as of 04:10 ET

Oct 06 ,2023

• Synopsis:

  • Asian equities mixed Friday. Hang Seng outperformed amid strong gains in property and tech stocks. Mainland China remains closed. Nikkei logged mild losses. ASX and South Korea recorded moderated gains. Taiwan higher. Southeast Asia mixed. India trading higher. US futures flat. Europe had a higher opening. Treasury yields ticked higher ahead of US nonfarm payrolls tonight. Dollar stronger against yen and won. Crude higher while hovering near August lows and set for another weekly decline. Mild gains in industrial and precious metals.

  • Relatively uneventful trading session during Asian hours as markets prepare for US payrolls report. Rate backup being seen as potential obstacle to a soft landing as financial conditions tighten, and consumers and businesses face higher borrowing costs. Also discussions around risk of a policy mistake given lagged effect of past rate hikes. At the same time, rising yields or back of bond vigilantes seen aiding Federal Reserve in its efforts to tame inflation by diminishing need for further action.

  • In regional developments, RBI left its key rates unchanged as expected with five of six committee members voting to maintain a hawkish stance of "withdrawal of accommodation." Near-term inflation forecasts were revised up with Governor Das stressing need to return inflation to 4% target midpoint. Added RBI might consider selling government bonds in open market to withdraw liquidity. Japan wage growth missed consensus though household spending unexpectedly rebounded. RBA noted financial stability risks elevated. Biden reportedly planning to meet China's Xi in San Francisco next month. Comes as US set to soon tighten restrictions further on exports of US chipmaking to China. Ahead of IMF updated economic forecasts next week, Managing Director Georgieva talked up increased probability of a global soft landing.

  • Softbank (~9984.JP~) likely to sell shares worth up to $105M in India's PB Fintech (~543390.IN~) via block deals. Sunac China (~1918.HK~) shares extended gains for third straight session after obtaining HK court approval for offshore debt restructuring proposal. VinFast Auto (~VFS~) reported Q3 revenue more than doubled from a year ago while most of sales went to an affiliate company.

• Digest:

  • RBI keeps key policy rate unchanged for fourth straight time, as expected:

    • Reserve Bank of India (RBI) MPC decided unanimously to keep repo rate unchanged at 6.50% as widely expected. Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) also left unchanged at 6.25% and 6.75%. Governor Shaktikanta Das said monetary policy focus remains to align inflation at 4% target, which he says high inflation as major risk to macroeconomic stability and sustainable growth. Five out of six MPC members voted in favor of retaining policy stance of "withdrawal of accommodation" to ensure inflation progressively aligns with target while supporting growth. RBI retains India FY24 (ending Mar-2024) inflation forecast at 5.4%, also keeps GDP growth forecast for FY24 at 6.5%. Added country focuses on macro stability while external sector remains manageable. Said domestic economic activity demonstrates resilience on the back of strong demand and India is poised to become growth engine of the world.

  • Tightest financial conditions in a year eases pressure on Fed:

    • Fed's higher-for-longer message helped kick off latest backup in bond yields as markets moved to price in greater probability of another rate hike by year-end and pare back 2024 rate cut expectations. However, there thoughts extent to which financial conditions have tightened is doing the Fed's job for it and lessens need for further rate increase, particularly given pickup in concerns about a hard landing brought on by a Fed policy mistake. San Francisco Fed's Daly (non-voter) said backup in yields roughly equal to another rate hike, suggesting a diminishing need for another increase (FT, Reuters). Her comments echoed those of Atlanta Fed's Bostic (non-voter) and Cleveland Fed's Mester (non-voter) this week acknowledging tighter financial conditions and need to monitor effects on economy (Yahoo). CME's FedWatch shows markets pricing in ~20% chance of rate hike by year-end, down from ~42% a month ago.

  • IMF sees better chances for global soft landing, US brokerages begin revising up China GDP forecasts:

    • In a speech, IMF Managing Director Georgieva suggested an increasing probability of a global soft landing following resilience in H1 mainly owing to surprising strength in services demand and tangible progress in the fight against inflation. Still cautioned the recovery is slow and uneven, noting IMF global forecast remains well below the long-term average. Highlighted US, India and several other EM economies as standouts, though noted US the only major economy where output has returned to its pre-pandemic path. Continued to stress inflation fighting as the top priority with inflation likely to remain above target for some time, while cautioning that avoiding premature policy easing is paramount. Cited new IMF analysis showing growing importance of inflation expectations as a driver for actual inflation. Reiterated urges for fiscal austerity to restore budget buffers against future shocks, adding that tighter fiscal policy can also support monetary policy efforts against inflation. Bloomberg reported US banks including Citigroup and JPMorgan have raised China GDP growth projections to 5% this year, following a series of downgrades, on the back of recent stronger data. Noted emerging views that cyclical momentum has bottomed out with help from policy support. Article noted key focus on strength in China holiday activity.

  • Japan wage growth remains mild, household spending beats:

    • Nominal average wages rose 1.1% y/y in August, compared to consensus 1.5%, following revised 1.1% in the previous month. Real wages fell 2.5%, little changed from a revised 2.7% slide in July and remaining negative for the 17th straight month. Growth in scheduled earnings edged up, offset by a downturn in special payments. Overtime payments rose moderately even as actual overtime hours worked remained steady. Total working hours also flat on the year. Recall BOJ board members continue to note significance of this year's shunto wage hikes and have shifted attention to next year's talks for proof of sustainability. August household spending fell 2.5% y/y, better than expectations of a 3.9% decline and follows prior month's 5.0% drop. Translated to 3.9% m/m rebound, more than recouping the 2.7% slide in July. While strength was led by sharp volatility in housing component, core spending (ex-housing) GDP input still expanded 2.2% owing to added support from transport & communication, education and culture & recreation -- consistent with ongoing post-Covid recovery in social activities. Smoother BOJ consumption activity index increased 0.6% m/m, leaving Q3 trajectory marginally positive, though driven by growth in goods spending while services on track to decline for the second straight quarter.

  • Biden-Xi meeting plans solidifying as US finalizes chip making equipment curbs:

    • Washington Post cited senior officials indicating White House has begun planning a Biden-Xi meeting for the APEC San Fransisco summit in November. Article only noted mutual desires to re-establish direct dialogue between leaders, with nothing specific that might signal a breakthrough. Echoed prior reports noting progress in recent months with White House describing high level talks as "candid, substantive and constructive" while the US side believes China wants to participate. With little prospects for a breakthrough, an academic suggested a meeting would still be an improvement, even if only symbolic. Story recalled geopolitics remains the main issue while US opioid crisis also likely a source of tension as most fentanyl is made in Mexico using precursor chemicals from China. Separately, Reuters reported updated rule curbing exports of US chipmaking equipment to China is in the final stages of review in a sign the Biden administration is poised to soon tighten restrictions on Beijing. Sources said revisions would add restrictions and close loopholes in rules first unveiled last year that prompted backlash from Beijing and further strained relations with Washington.

  • Notable Gainers:

    • +11% 1918.HK (Sunac China Holdings): announces fulfilment of all restructuring conditions; scheme becomes effective

    • +1.9% 2317.TT (Hon Hai Precision Industry): expects significant growth in Q4 compared to Q3

    • +1.4% 823.HK (Link REIT): reports Q1 tenant sales growth +4.4% y/y

    • +0.9% 4151.JP (Kyowa Kirin): proposes to acquire Orchard Therapeutics at $16/ADS for $387.4M cash; additional $1 contingent value right will be paid for a total of $17/ADS if OTL-200 is approved by FDA

    • +0.7% 4732.JP (USS Co.): reports preliminary Q2 used car auction data, vehicles consigned +14.6% y/y

  • Notable Decliners:

    • -0.05% 9984.JP (SoftBank Group): reportedly preparing to sell 2.54% stake in PB Fintech via block trades

• Data:

  • Economic:

    • Japan

      • August

        • Nominal average wages +1.1% y/y vs consensus +1.5% and revised +1.1% in prior month

          • Real wages (2.5%) y/y vs consensus (2.1%) and revised (2.7%) in prior month

        • Household spending (2.5%) y/y vs consensus (3.9%) and (5.0%) in prior month

          • Spending +3.9% m/m vs (2.7%) in prior month

  • Markets:

    • Nikkei: (80.69) or (0.26%) to 30994.67

    • Hang Seng: 272.11 or +1.58% to 17485.98

    • Shanghai Composite: 0.00 or 0.00% to 3110.48

    • Shenzhen Composite: 0.00 or 0.00% to 1910.28

    • ASX200: 28.70 or +0.41% to 6954.20

    • KOSPI: 5.13 or +0.21% to 2408.73

    • SENSEX: 355.76 or +0.54% to 65987.33

  • Currencies:

    • $-¥: +0.38 or +0.25% to 148.8700

    • $-KRW: +1.66 or +0.12% to 1348.0000

    • A$-$: (0.00) or (0.04%) to 0.6367

    • $-INR: (0.15) or (0.18%) to 83.2160

    • $-CNY: (0.00) or (0.04%) to 7.1976