Feb 15 ,2024
Synopsis:
Asian equities closed largely higher Thursday. Japan's Nikkei closed at fresh 34-year high to erase yesterday's losses and close well above 38K. Taiwan's Taiex was the day's big gainer after TSMC surged on AI optimism, strong January sales. Hong Kong higher for second day, gains in Singapore and Jakarta, the latter on election relief rally. Seoul lower, India struggling for direction. Mainland China bourses remain closed. US futures positive, Europe opened higher. US dollar flat, yen stronger on intervention talk, other currencies flat. Treasury yields mixed, JGB yields notably down. Crude oil lower, precious and industrial metals flat.
Asia markets tracked higher Thursday and with few regional drivers to change direction, largely followed overnight trajectories. This meant more gains for Japan's tech rich sectors, despite data out today showing the economy fell into a technical recession in Q4 as private consumption and capex faltered. Hong Kong's markets gained for a second day with a handful more brokers saying they were leaning more positive towards Chinese equities amid potential wider stimulus from Beijing. Nevertheless, gains were tentative with underlying worries over China's economy keeping overseas investors largely on the sidelines.
Elsewhere, Australian unemployment rate rose by more than expected to its highest in two years; RBA Governor Bullock reiterated services inflation was persistent but Australia well placed on inflation trajectory. Singapore upped its FY export forecast but at the same time lowered its FY 2023 GDP growth figure, both coming just days ahead of its budget. Philippines central bank kept rates at record high, as expected. Indonesia elected former army general Prabowo as President but his party fell to third in legislative elections.
Busy day of corporate news. Japan earnings mixed with Rakuten (4755.JP) a standout after mobile losses narrowed. Sony (6758.JP) a drag following guidance downgrade and PS5 sales projection cut. TSMC (2330.TT) up big in Taiwan following AI-driven sales jump in January. ASX earnings mixed with negative reactions focused on guidance (TLS.AU) and dividend cuts (WHC.AU, TWE.AU). Retail resilience a highlight (WES.AU).
Renesas Electronics (6723.JP) said it would buy software firm Altium (ALU.AU) for $5.9B in cash, its second acquisition inside a month. BHP Group (BHP.AU) flagged a $5.7B impairment charge to cover Samarco dam failure and an impairment charge for its WA nickel unit. Treasury Wine (TWE.AU) H1 earnings met expectations but investors focus switched to March's decision on China's wine tariffs; stock sharply higher. Reliance Industries (500325.IN) is in discussions to purchase a 29.8% stake in Tata Play from Walt Disney Co after its IPO was postponed.
Digest:
Japan economy in technical recession:
GDP unexpectedly contracted 0.4% q/q annualized in Q4, compared to expectations of 1.4% growth. Extends revised 3.3% contraction in the prior quarter and places the economy in a technical recession. Press highlighted 2023 GDP overtaken by Germany as the world's third-largest economy. Domestic demand was softer. Key attention on private consumption and capital spending both declining for the third straight quarter. Broader consumer demand details were mixed -- Solid growth in consumer durables were offset by semi/non-durables, while services logged the first drop since 1Q22. Tourism factor generally affirmed the narrative with foreigner consumption growth at home far exceeding Japanese spending abroad. Elsewhere, residential investment also logged back-to-back declines, while public demand edged lower. Only bright spot was external demand, contributing 0.2 ppt out of the headline 0.1% q/q contraction in headline GDP. Employee compensation posted a marginal bounce after a sharper drop in Q3. Some consolation in a 0.3% q/q rebound in nominal GDP following 0.1% decline in prior quarter with year-ago growth stably positive since 1Q21, while 2023 growth of 5.7% was the strongest since 1991. GDP deflators moderated in both aggregate and domestic demand measures.
TSMC propels Taiwan market to all-time high following January sales update:
Taiwan Semiconductor (2330.TT) having its best day since Jul-2020 as it resumes trade following Lunar New Year holiday break, sending both stock and Taiex to new all-time highs (Bloomberg). Strength attributed to pre-holiday trading update that showed January sales climbed 7.9% and underpinning monthly revenue growth of 22.4%. Analysts bullish on stock with Morgan Stanley raising price target by 9%, citing AI semi's increasing share of revenue, pricing power and 3nm demand. Last month company forecast above-consensus FY revenue growth of at least 20% and March quarter growth of 8% q/q. 3nm revenue in 2024 also projected to triple from 2023. Others agreed re-rating has more room to run amid undemanding valuation, and foundry service's leading position in semiconductor supply chain.
Australian unemployment rate hits two-year high:
Australian employment rose by 500 in January against forecasts for a 25.0K increase and December's 62.7K contraction. Unemployment rate rose to two-year high of 4.1% vs expected 4.0% and December's 3.9%. Composition mixed with full-time job gains offset by loss of part-time positions. More signs labour market tightness is receding with monthly hours worked continuing to shrink and underemployment rate rising to highest since Feb-2022. However, ABS also noted shifting seasonal trends with more unemployment people expected to start job in next four weeks following summer holiday period. Dovish initial reaction with Australian bond yields extending move lower and markets bringing forward expected first RBA rate cut to September from November. Data may provide some comfort to RBA after Governor Bullock said last week labor market conditions remain tighter than is consistent with sustained full employment and target inflation.
Philippines central bank leaves base rate on hold:
Bangko Sentral ng Pilipinas (BSP) kept its benchmark target rates on hold at 6.5% Thursday, as widely expected, as bank waits for further evidence of lower inflation especially around food before considering cuts. Overnight deposit and lending facility rates also held steady. Bank said inflation risks receded but remained tilted to upside, energy and food prices still particularly vulnerable. Economists expect BSP to hold rates steady until Fed has begun its rate cutting cycle, forecast first 25 bps may only come in H2. January headline inflation was 2.8% versus bank's target range 2-4% while GDP growth was faster than in other Southeast Asia nations in 2023, giving BSP time to wait on rates for now. Bank said country's growth momentum remains intact over medium term however recent indicators suggest moderation in near term as tighter monetary policy manifest in economy.
Former army general Prabowo wins Indonesia's Presidential election:
Former special force army general Prabowo Subianto will almost certainly be declared Indonesia's next president after unofficial counts showed him decisively ahead of rivals with 57-59% of votes cast, enough to avoid run-off election (Reuters). 'Quick results' gave Prabowo enough confidence to declare victory Wednesday night. He also won most of Indonesia's 38 provinces including traditional strongholds of opponents however his party Gerindra was only third in legislative count. Challengers Anies on around 25%, Ganjar on 16-17% in average of three independent political agencies' counts (JakartaPost). Prabowo's pledge to continue incumbent President Widodo's policies including moving capital to Borneo from Java, and avoidance of second voting round likely to cheer overseas investors, although worries over Widodo's continued involvement with his son as new VP, as well as Prabowo's human rights record during Suharto era, will be worry to political analysts (FT).
Notable Gainers:
+15.8% 4755.JP (Rakuten Group): reports Q4 non-GAAP operating income (¥3.58B) vs StreetAccount (¥25.91B)
+13.8% 8725.JP (MS&AD Insurance): reports 9M revenue ¥4.948T, +23% vs year-ago ¥4.010T, ordinary profit ¥386.58B, +74% vs year-ago ¥222.22B
+7.9% 2330.TT (Taiwan Semiconductor): reports January revenue NT$215.79B, +7.9% y/y
+7.8% 035720.KS (Kakao): reports Q4 operating profit KRW189.18B vs StreetAccount KRW155.09B
Notable Decliners:
-15.1% 7832.JP (BANDAI NAMCO Holdings): reports Q3 revenue ¥270.03B vs FactSet ¥275.31B, operating income ¥12.80B vs FactSet ¥39.15B; to sell 3.1M share of Toei Animation
-13.6% 4922.JP (KOSE Corp): reports FY revenue ¥300.41B vs guidance ¥305.00B and FactSet ¥304.19B, operating income ¥15.99B vs guidance ¥21.00B and FactSet ¥22.07B
-6.5% 6758.JP (Sony): reports Q3 earnings; guides FY revenue ¥12.300T vs prior guidance ¥12.400T and FactSet ¥12.293T; PS5 sales projection cut to 21M units from 25M
-2.5% 6723.JP (Renesas Electronics): enters into Scheme Implementation Agreement to acquire Altium at A$68.50/share
Data:
Economic:
Japan Q4
GDP (0.4%) q/q annualized vs consensus +1.4% and revised (3.3%) in prior quarter
GDP (0.1%) q/q vs consensus +0.3% and revised (0.8%) in prior quarter
Australia January
Employment +500 m/m vs consensus +25.0K and revised (62.7K) in December
Unemployment rate 4.1% vs consensus 4.0% and 3.9% in December
Participation rate 66.8% vs consensus 66.9% and 66.8% in December
Singapore
Final Q4 GDP +2.2% y/y vs preliminary +2.8% and +1.0% in prior quarter
Markets:
Nikkei: 454.62 or +1.21% to 38157.94
Hang Seng: 65.25 or +0.41% to 15944.63
Shanghai Composite: Closed
Shenzhen Composite: Closed
ASX200: 58.00 or +0.77% to 7605.70
KOSPI: (6.62) or (0.25%) to 2613.80
SENSEX: 31.65 or +0.04% to 71854.48
Currencies:
$-¥: (0.51) or (0.34%) to 150.0910
$-KRW: +1.72 or +0.13% to 1331.8000
A$-$: +0.00 or +0.06% to 0.6496
$-INR: +0.01 or +0.01% to 83.0436
$-CNY: (0.01) or (0.20%) to 7.1639
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