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StreetAccount Summary - Asian Market Recap: Hang Seng +0.18%, Shanghai Composite (0.44%), ASX 200 +0.23% as of 04:10 ET

Oct 09 ,2023

• Synopsis:

  • Asian equities ended lower Monday in thin trade. Mainland China benchmarks lower as they marked to market post last week's holiday, Hong Kong ended slightly higher to continue last week's positive momentum. Elsewhere stocks struggled in the face of a stronger USD; India extended opening losses, Southeast Asia mostly lower, Australia an exception to end higher. South Korea, Taiwan, Japan markets closed. US futures lower but not sharply so, Europe opened down. US dollar higher, yen steady, yuan strengthened. Crude blends surged at the opening before dropping back, gold higher, industrial metals mixed. Cryptocurrencies lower.

  • Asia markets reacting with calm to Hamas' attack on Israel over the weekend although a rush to havens propelled the dollar modestly higher and created a headwind for regional equities. Holidays and a typhoon-induced half day in Hong Kong thinned out trading but a small drop in US futures and only a modestly lower opening in Europe hints at equities awaiting further developments. Currencies relatively more volatile with the cyclical AUD worst off, and in the oil markets where WTI and Brent both jumped 5% at one point before settling back. Bonds that are trading are little changed with the US market closed for Columbus Day and Japan on holiday to reduce liquidity to a trickle. Risk of Middle East escalation focusing for now on Hezbollah's response and broader widening of conflict to include Iran.

  • In regional developments, China data showed strong Golden Week holiday activity and tourism revenue on a y/y basis but was lower than expected; house sales over the holiday fell to underscore the structural problems in the economy despite recent promising activity data. Meanwhile, flow data showed global investors continue to reduce their exposure to China.

  • A share sale plan between China Evergrande NEV (0708.HK) and NWTN (NWTN) was halted due to "significant uncertainties" tied to the group. Country Garden (2007.HK) faces two more bond payment deadlines totaling $66.9M) on Monday before a 30-day grace period is triggered. HSBC (5.HK) is to buy Citigroup's (C) China onshore consumer wealth business with AUM of $3.6B. Samsung Electronics (005930.KS) and SK Hynix (000660.KS) will be allowed to supply US chip equipment to their China factories indefinitely without separate US approvals. Barito Renewables Energy (BREN.IJ) surged as much as 25% in its trading debut in Jakarta before settling back.

• Digest:

  • China Golden Week activity surges from last year, but slow to recover pre-pandemic levels:

    • Press cited official data showing strong Golden Week holiday activity with tourism revenue totaling CNY753.4B ($103B), up 130% y/y and surpassed the pre-pandemic level by 1.5% (Bloomberg). Total travelers increased 71% y/y to 826M. However, these were short of tourism ministry projections for just under 900M travelers spending more than CNY780B. Average daily international travel reached 1.477M, equivalent to 85.1% of 2019 levels and nearly quadruple the 2022 average, though below official projection of 1.58M (Reuters). Takeaways were cautiously optimistic with most of the focus on pre-pandemic comparisons, noting key metrics slow to recover. Spending per tourist was still 2% below 2019, indicative of lingering Covid scarring effects. However, SCMP was more upbeat, highlighting Meituan saw average daily spending for services and retail spiked 153% while dine-in services grew 254% over 2019, making this year's extended holiday the busiest in five years. Cinema box office takings exceeded CNY2.6B vs CNY1.5B last year, though remains far below pre-pandemic. Dongwu Securities suggested this can partly be attributed to travel demand crowding out interest in movies. Still, noted that travel consumption insufficient to offset real estate weakness and called for more policy support including debt reduction and loosening of regulations.

  • Israel declares war after Hamas launches surprise missile attacks, incursions from Gaza:

    • Israeli government declared war and ordered retaliation against Hamas, following surprise attack against Israeli towns on weekend that was deadliest incursion since Yom Kippur war 50 years ago. Hamas' attack left at least 700 people dead, scores wounded while several Israelis were taken as hostages (AP). Key concern is that Hamas' attack and Israel's response leads to wider conflagration after Hezbollah fired rockets into northern Israel (Reuters). Other reports note Iran helped Hamas orchestrate attacks in a bid to scuttle progress towards Israel/Saudi peace deal. US boosting its readiness with deployment of aircraft carrier USS Gerald R. Ford along with cruisers and destroyers to Eastern Mediterranean (AP). However, Congress dysfunction may stymy near-term efforts to provide more aid to Israel (Politico). While markets have typically ignored geopolitical tensions, a wider conflict that draws in major oil producing nations is being seen as a potential upside catalyst for oil prices (Bloomberg).

  • China home sales during Golden Week holiday fall from last year:

    • Survey data from China Index Academy tracking 35 cities shows daily sales of new homes by floor area during Golden Week holiday (29-Sep to 6-Oct) were 17% down y/y. Separate survey of eight major cities by China Real Estate Information Corp. (CRIC) shows daily sales of existing properties dropped 8% y/y over the period. Bloomberg cited analyst view that much of China's housing market was muted during holiday except in a few top-tier cities where sales were more resilient. CRIC data showed sales of new homes more than doubled in Shanghai and Guangzhou, suggesting slew of support measures unlocking demand in most sought-after areas (Reuters), however fell by 50% in Tier-3 and Tier-4 cities, raising doubts over whether previous measures were sufficient to revive sector. Some attributed sluggish sales to tourism surge, meanwhile many potential homebuyers were withholding sales and waiting for further easing measures.

  • Global investors remain wary of Chinese equities despite better data:

    • Nikkei discussed ongoing caution among global investors toward Chinese equities despite signs of economic improvement as analysts said concerns about government policies and the property market turmoil dampen sentiment. Reported that foreign investors sold net CNY80.1B ($10.97B) of Chinese A-shares in Q3 while noting Hang Seng Index remains below the January peak reached after the relaxation of Covid restrictions. Article highlighted the contrast between these flows and positive consensus earnings forecasts. A-share average daily turnover fell to its lowest since July 2020, while IPO proceeds dropped 69% m/m which HSBC attributed to recent regulatory changes that tightened fundraising rules aimed at support prices of existing shares. Also cited Morgan Stanley saying this month that active long-only fund managers cut China allocations to the lowest since 2020. Standard Chartered told Nikkei that investors were holding off until they see clear signs of China taking serious steps to address the property market. Other anecdotes indicated bears inclined to sell into strength with few signs of dip-buying interest, while others await clear signs of inflow momentum before participating.

  • Rising JGB yields stimulates speculation of further YCC tweaks:

    • Nikkei discussed emerging speculation that BOJ might further revise YCC at the October MPM as elevated US Treasury yields pull JGB 10y closer to the current effective cap of 1%. Cited BNP Paribas view of a rising probability for the upper limit to be extended to 1.5%. Noted expectations of easing exit begets further rise in yields, which warrants additional YCC tweaks before ending NIRP. Article recalled last week's BOJ operations (upsized JGB purchase operation with added fund-supplying against pooled collateral) may reflect central bank's surprise at the speed of yield rises. Suggested that yen weakness is a dilemma for BOJ as persistence with YCC would encourage further widening of US-Japan rate differentials. If BOJ seeks to curb yen depreciation, then it must acquiesce to higher JGB yields. Cited a BOJ source remarking that board members as per usual can only make decisions based on analysis of economy, inflation, and financial markets, whereby lack of clear defense of YCC could be interpreted to mean they might tolerate higher yields. For now, concerns not imminent with 10y yield yet to hit 1% though story suggested BOJ would need to respond in some way if that threshold is tested.

  • Notable Gainers:

    • +97.2% 665.HK (Haitong International Securities Group): Haitong Securities offers to take Haitong International Securities private at HK$1.52/share

    • +20.0% 300122.CH (Chongqing Zhifei Biological Products): signs agreement with GSK on exclusive distribution, joint promotion of Shingrix

    • +3.6% 000625.CH (Chongqing Changan Automobile): reports September vehicle production 251,277 units, +13.2% y/y

    • +1.7% 300957.CH (Yunnan Botanee Bio-Technology Group): acquires 48.6% stake in Yuejiang Investment for CNY485.5M cash

    • +0.3% 688599.CH (Trina Solar): guides 9M net income attributable CNY4.56-5.58B vs year-ago CNY2.40B

  • Notable Decliners:

    • -7.9% 1310.HK (HKBN Ltd.): guides FY net income approx. (HK$1.30B) vs FactSet HK$158.8M

    • -5.3% 601888.CH (China Tourism Group Duty Free): reports preliminary Q3 net income attributable CNY1.33B vs FactSet CNY1.42B

    • -2.7% 539254.IN (Adani Energy Solutions): acquires Sangod Transmission Service (STSL) for undisclosed cash consideration

    • -0.3% 5.HK (HSBC Holdings): Citigroup to sell China consumer wealth portfolio to HSBC Bank China

• Data:

  • Economic:

    • No economic data today

  • Markets:

    • Nikkei: Closed

    • Hang Seng: 31.42 or +0.18% to 17517.40

    • Shanghai Composite: (13.55) or (0.44%) to 3096.92

    • Shenzhen Composite: (1.64) or (0.09%) to 1908.64

    • ASX200: 16.00 or +0.23% to 6970.20

    • KOSPI: Closed

    • SENSEX: (417.57) or (0.63%) to 65578.06

  • Currencies:

    • $-¥: (0.07) or (0.05%) to 149.1550

    • $-KRW: +8.44 or +0.63% to 1352.7900

    • A$-$: (0.00) or (0.45%) to 0.6355

    • $-INR: +0.13 or +0.16% to 83.2400

    • $-CNY: +0.10 or +1.38% to 7.2944