Back to Daily DR Market Summary

StreetAccount Summary - Asian Market Recap: Nikkei +0.11%, Hang Seng (2.32%), Shanghai Composite (1.83%) as of 03:10 ET

Jan 30 ,2024

• Synopsis:

  • Asian equities started brightly but faded over the day to finish mixed. China exchanges ended sharply lower after a poor overnight futures session. Losses in South Korea and Taiwan, India also lower. Japan ended flat after a higher open, Australia missed the negativity and ended higher. Southeast Asia largely higher. US futures mixed, Europe opened higher as it caught up with late US gains. US dollar lower but no big movement in Asia currencies. Treasury yields mixed. Industrial metals lower with coal prices seeing notable declines in China trading. Precious metal and crude futures supported.

  • Asia markets drifted lower over the day despite a positive opening after a lower-than-expected Treasury sale boosted bonds and equities in the US in their final hour of trading, and sent the S&P 500 to another record high. The exception was Hong Kong, which gapped lower after its futures fell sharply overnight with investors starting to question the long-term implications of China Evergrande's winding up order, particularly on future FDI and minority share/bondholder rights. Big questions over how or whether mainland Chinese courts will acquiesce to Hong Kong court decisions, and preference of local over foreign debt holders still unanswered. Not helping overseas sentiment today was Sino-Ocean saying it would favor domestic over foreign debt owners in a final refinancing.

  • China 10Y government bond yield now at its lowest level since 2002, tracking renewed selling in equity markets and underscoring persistence of skeptical sentiment despite policymaker vows to support markets. Yuan also weaker WTD although tracking US dollar strength, which is back at six-week highs. Elsewhere, Japan's labor market showed signs of tightness, pressing on the yen and JGB yields. Australia's December retail sales were weaker than expected.

  • NTT (9432.JP) and Intel (INTC) will collaborate on mass-production of next generation chips that lower power consumption; will receive ¥45B in ($305M) in support from the Japanese government. Toyota Motor (7203.JP) apologized for testing scandals even as vehicle sales reach record highs. China Evergrande (3333.HK) and China Evergrande NEV (708.HK) stock remained suspended but companies 'acknowledged' Monday's court ruling ordering the group's liquidation. Sino-Ocean Group (3377.HK) told a key group of its dollar bond creditors that it will prioritize its local debt repayments first. Kakao (041510.KS) denied it has discussed selling its stake in SM Entertainment (041510.KS) to NCsoft (036570.KS).

• Digest:

  • China 10Y yield slips to lowest since 2002 on monetary easing hopes:

    • Yield on China's benchmark 10Y sovereign note fell to 2.47%, lowest since 2002, on growing expectations for further monetary easing amid sluggish economic recovery and stock market rout. Bloomberg noted Chinese economy is grappling with extended property market woes and stock market is suffering from weak investor sentiment, calling for policymakers to unleash more monetary stimulus to boost growth. Recall last week PBOC announced 50 bp RRR cut effective on 5-Feb, fueling expectations for interest rate cut as soon as February. Markets also dialing down prospects of longer-term yields given growth in coming years will likely be in a lower range. PBOC Governor Pan also said narrowing of divergent policies between US and China will expand space for China's monetary policy operations, given concerns about yuan volatility. Bloomberg earlier reported China's domestic investors were abandoning equities for safety of bonds as concerns mounted about deteriorating economic outlook which led to sharp stock selloffs. Z-ben Advisors data showed bond funds raised 13 times capital garnered by equity counterparts in December.

  • Evergrande liquidation order seen as big test for overseas investors:

    • Coverage of China Evergrande's (3333.HK) liquidation order by Hong Kong court concentrated on whether it will be followed through in mainland China, and on collapse being wider warning for offshore investors in China. Bloomberg noted while company's shares and bonds traded in Hong Kong, bulk of $242B company assets in mainland China, no precedent exists for winding up company this size. Said unfavorable outcome for foreign investors risks exacerbating already acute pessimism towards China, could undermine Hong Kong's role as fundraising center for Chinese companies. FT said liquidation process will highlight sparse legal protection offshore investors havein China, unclear how/if mainland local governments will acquiesce to orders from Hong Kong to transfer assets to liquidator. SCMP added 2021 agreement between Hong Kong and mainland China over court insolvency proceedings will be tested to limit, offshore investors will likely have to battle onshore creditors for remaining assets.

  • Japan unemployment rate unexpectedly edges lower:

    • Unemployment rate was 2.4% in December, compared to consensus and previous month's 2.5%. Sequential decrease in total unemployment was driven by a sharp drop in labor force participation, mostly as payback for sharp growth in November. Total employment also fell back, though entirely driven by casual labor as regular employment rose notably for the second straight month. Job offers to applicants ratio was 1.27 vs consensus and prior month's 1.28, marking the second straight decline. Slight sequential rise in offers outpaced by applications. In trend terms, offers have logged year-ago declines for the sixth straight month, contrasting with four consecutive increases in applications. However, broader perceptions of labor market tightness intensifying amid heightened attention on this year's shunto labor talks, widely expected to deliver larger pay raises than last year. BOJ has repeatedly stressed that results due from mid-March would be a key input for the assessment that a virtuous wage/inflation cycle is in place, presaging consensus forecast for a short-term rate hike in April.

  • Australian retail sales shrink as consumers pulled spending forward:

    • Australian retail sales fell 2.7% m/m in December, larger than 1.7% decline expected and more than reversing November's downwardly revised 1.6% increase (from +2.0%). Represented largest monthly decline in 12 months, reflecting pull forward of spending to November as consumers took advantage of Black Friday/Cyber Monday discounting. Biggest declines occurred in discretionary goods categories with household items -8.5%, clothing, footwear, and personal accessory -5.7%, and department stores -8.1% seeing particularly heavy falls. Restaurant and takeaway food spending saw smaller decline while food retailing was little changed. Underlying trend continues to track lower with retail sales rising at smallest yearly rate since Aug-2021, reflecting ongoing impact from cost of living pressures. Initial market impact muted with RBA widely expected to leave cash rate on hold in February.

  • China ETF premiums continue to reverberate:

    • Bloomberg discussed Chinese demand for ETFs tracking offshore markets with traders bidding the market at as much as a 40% premium above the underlying assets, triggering trading halts in several ETFs as well as purchase limits. Article noted potential risk of losses as premiums evaporate. The biggest premium of 40% as seen in E Fund MSCI USA 50 ETF QDII, while Nikkei ETF was more than 20%. Distortion linked to Chinese investors' limited channels for overseas equity purchases through QDII. However, unlike other markets, QDII ETF premiums often linger due to the absence of market makers and quota limitations. Bloomberg Intelligence calculated 31 QDII ETFs averaged 3% premium last week compared to 1% last year. Exchange filings showed 16 ETFs tracking foreign stocks or mutual funds with direct exposure capped daily subscriptions this year while six offshore bond funds also set purchase limits. Three ETFs halted trading in recent weeks while dozens have been issued cautions over elevated premiums.

  • Notable Gainers:

    • +4.5% 2689.HK (Nine Dragons Paper Holdings): guides H1 net income attributable CNY200-400M vs year-ago (CNY1.39B)

    • +1.8% 002230.CH (Iflytek): guides Q4 revenue of more than CNY7.5B vs FactSet CNY7.74B

    • +0.1% 9432.JP (Nippon Telegraph & Telephone): Japan to provide ¥45B ($304.5M) of support for Intel-NTT next-gen chip development

  • Notable Decliners:

    • -8.9% 3391.JP (TSURUHA Holdings): enters into exclusive negotiations with OASIS to buy shares in TSURUHA Holdings

    • -1.9% 7205.JP (Hino Motors): reports December global production (11.1%) y/y to 13,395

    • -1.8% 035720.KS (Kakao): denies it is talking about selling SM; reportedly has chosen to dismiss SM executives citing poor governance

• Data:

  • Economic:

    • Japan December

      • Unemployment rate 2.4% vs consensus 2.5% vs consensus and 2.5% in prior month

        • Job offers to applicants ratio 1.27 vs consensus 1.28 vs 1.28 in prior month

    • Australia December

      • Retail sales (2.7%) m/m vs consensus (1.7%) and revised 1.6% in November

  • Markets:

    • Nikkei: 38.92 or +0.11% to 36065.86

    • Hang Seng: (373.79) or (2.32%) to 15703.45

    • Shanghai Composite: (52.83) or (1.83%) to 2830.53

    • Shenzhen Composite: (44.28) or (2.70%) to 1593.12

    • ASX200: 21.80 or +0.29% to 7600.20

    • KOSPI: (1.84) or (0.07%) to 2498.81

    • SENSEX: (280.23) or (0.39%) to 71661.34

  • Currencies:

    • $-¥: (0.14) or (0.09%) to 147.3640

    • $-KRW: (6.99) or (0.52%) to 1326.6200

    • A$-$: +0.00 or +0.01% to 0.6612

    • $-INR: (0.12) or (0.15%) to 83.1213

    • $-CNY: (0.00) or (0.01%) to 7.1798