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StreetAccount Summary - Asian Market Recap: Hang Seng Closed, Nikkei 225 +2.89%, Kospi +1.12% as of 03:10 ET

Feb 13 ,2024

• Synopsis

  • Asian equities finished mostly higher Tuesday. Japan's Nikkei and Topix surged to fresh multi-decade highs on a spike in technology stocks. Strong gains in Seoul on its first day back from a holiday, and more gains in India. Australia lower with medical stocks again dragging. Southeast Asia mixed with Jakarta lower a day ahead of its general elections. Taiwan and Greater China markets still closed. US futures soft, Europe opened higher. US dollar flat, yen and AUD weaker. Treasury yields higher across tenors. Crude higher again, precious metals flat, industrial metals slightly better. Cryptocurrencies better bid with bitcoin maintaining $50K.

  • With Greater China still closed, focus Tuesday on Japan's markets with both main boards reaching new multi-decade highs and the Nikkei briefly surpassing 38K. First, Softbank surged on ARM's near doubling of its stock price in a few days, then other technology stocks were led higher by Tokyo Electron that said sales to China had been much better than expected. Insurance stocks were also very strong. Technology stocks in South Korea also spiked with SK Hynix at fresh year-long highs.

  • In macro developments, RBA's head of economics Kohler reiterated warning that services inflation remains high. Australian consumer confidence recovered but business conditions still soft with inflation metrics worsening. Japan PPI inflation a little hotter than expected. India inflation fell to three-month low, driven by fall in volatile food category, core inflation dropped to lowest in more than four years, while industrial output was better than expected. Ahead tonight, US CPI with consensus looking for headline on 2.9% and core on 3.7%.

  • Tokyo Electron (8035.JP) upped its full-year guidance for the year on the back of strong sales into China. Westports Holdings (5246.MK) is considering external strategic investors to help fund a MYR39.6B ($8.3B) expansion that will lead to a near doubling of capacity. Macquarie Group (MQG.AU) said the head of its commodities business was to step down, while profits would be 'substantially down' from last year. Strike Energy (ATX.AU) said one of its major wells had unexpectedly failed to flow and was substantially overbalanced; shares sharply lower. Woodside Energy (WDS.AU) said it remains open to deals following its failed merger with Santos as it sticks with policy to expand its LNG business.

• Digest:

  • MSCI raises India weighting for Global Standard index:

    • Reuters discussed MSCI's index review for February, highlighting India's weighting in the Global Standard index was raised to an all-time high of 18.2% effective after market close on 29-Feb. Nuvama Alternative & Quantitative Research estimated this could lead to inflows of about $1.2B. Story noted India weighting currently at 17.9%, second behind China, and has nearly doubled since November 2020. Cited thoughts that consistent flows from domestic institutional investors and steady foreign portfolio investor participation could lead to India surpassing a 20% weight by early 2024. Five Indian companies were added -- Punjab National Bank (532461.IN), Union Bank of India (532477.IN), BHEL (500103.IN), NMDC (526371.IN), GMR Airports Infrastructure (532754.IN), with no subtractions. Contrasts with China, which saw five additions and 66 subtractions. Livemint noted weightings for existing India constituents were increased for 12 stocks while two were lowered. One 97 Communications (543396.IN) among those raised and continues to attract attention over regulatory scrutiny starting with RBI's order for Paytm Payments Bank to stop accepting new deposits from March.

  • Japan government to separate NIRP exit from victory against deflation:

    • Nikkei discussed government rhetoric, indicating broadening acceptance of an approaching BOJ exit from negative rates, though Cabinet Office officials stressed this should be separated from a declaration of victory against deflation. Contrasts with some market views they would be linked. Article said government acceptance of a BOJ policy change motivated by adverse impacts from yen weakness. Story noted that with energy subsidies rolling off from May, renewed inflation pressure would reignite backlash against yen depreciation as a function of US-Japan rate differentials. Government disclosed its own prerequisites for declaring a full exit from deflation in 2006 -- CPI and GDP deflator have been met, while GDP gap and unit labor costs still being monitored. Some thoughts declaration should wait at least until Q1 GDP figures are published in May. Timing also an issue as some see an early call would stimulate perceptions the government is advocating for a BOJ policy change. Also, stimulus measures (such as the income tax cuts scheduled from June) are aimed at tackling inflation pains and declaration could be seen as contradictory to policy direction. Still, many see government/BOJ stance against deflation remaining consistent as long as short-term rates return to around zero.

  • Australian consumer confidence off depressed levels, business sentiment soft:

    • Australian Westpac-MI consumer sentiment index climbed to 86.0 in February from 81.0 in January, highest in 20 months. Westpac attributed rebound to falling inflation and reduced expectations of mortgage rate hikes. Also comes after government announced revised tax cut package earlier this month. Survey showed rise in family assessment of current finances (though still at very weak levels), as well as 'time to buy major household item' index. Separately, NAB business confidence rose to +1 in January from 0 in December. Business conditions slipped to +6 from +8. Survey showed fall in trading conditions, profitability, and employment sub-indexes, though all still in positive territory. Forward orders and capacity utilization edged higher. Inflation metrics remain elevated with retail prices rising at quicker pace, while quarterly purchase and labour costs climbed. However, NAB said it anticipates pricing pressures to ease due to lagged effects of slowing economic activity.

  • India CPI inflation eases as expected, industrial production beats:

    • CPI rose 5.10% y/y in January, matching expectations, following 5.69% in the previous month. Food inflation similarly moderated to 8.30% from 9.53%. Unofficial core inflation slowed to 3.61% marking the lowest since 2019 (Bloomberg) after RBI reported 3.8% in December. Food price volatility blurring the underlying picture as noted by RBI last week, though core inflation has undergone broad-based slowing last year. RBI policy statement warned of considerable uncertainty on the outlook for food prices, citing adverse weather, geopolitical impact on supply chains and volatility in commodity prices. Quarterly headline projections seen tracking in the 4~5% range next year with risks evenly balanced, compared with the RBI target of 4%. Guidance remained hawkish, stressing policy "must continue to be actively disinflationary" and MPC remains focused on "withdrawal of accommodation." Industrial production rose 3.8% y/y December, above consensus and prior month's 2.4%. Consistent with sanguine RBI assessment, citing upbeat manufacturing earnings and buoyancy in manufacturing PMI (recall latest figures showed notable improvement in January).

  • RBA's Kohler reiterates central bank's focus on high services inflation:

    • In a speech, RBA Head of Economic Analysis Marion Kohler said will it take time for inflation to return to within target range. Noted while goods inflation expected to be low for a time, services inflation remains high and broad-based. RBA projects only gradual decline as services firms continue to report pressure from labour and non-labour costs. Said decline in services inflation necessary condition for achieving inflation target over time. Did note signs of easing wage pressure in some industries while forecast pickup in productivity will also weigh on labour costs. Expects Australian economy to remain subdued in near-term with cost-of-living exerting greater drag on consumption compared RBA's forecast in November. RBA still assesses labour market as tight though is getting closer to estimates of full employment. Highlighted two key uncertainties RBA is focused on: whether lagged effect of rate hikes affects household consumption to a greater extent, or inflation remaining higher for longer due to factors like greater drawdown of household savings or persistent cost pressures.

• Data:

  • Economic

    • Japan January

      • CGPI +0.2% y/y vs consensus +0.1% and revised +0.2% in prior month

    • Australia

      • January NAB business confidence +1 vs revised 0 in December

        • Business conditions +6 vs +7 in December

      • February Westpac-MI consumer sentiment 86.0 vs 81.0 in January

    • New Zealand Q1

      • 2-year inflation expectations 2.50% vs 2.76% in Q4

      • 1-year inflation expectations 3.22% vs 3.60% in Q4

  • Markets

  • Nikkei: +2.89%

  • Hang Seng: Closed

  • Shanghai Composite: Closed

  • Shenzhen Composite: Closed

  • ASX200: -0.15%

  • KOSPI: +1.12%

  • SENSEX: +0.79%