Back to Daily DR Market Summary

StreetAccount Summary - Asian Market Recap: Nikkei +0.35%, Hang Seng (0.54%), Shanghai Composite (0.93%) as of 03:10 ET

Feb 26 ,2024

• Synopsis:

  • Asian equities ended mixed Monday with the main catalysts of the week still ahead. Greater China markets paused in their month-long rally as Shanghai and Hong Kong both fell while Japan's Nikkei reached new record highs in post-holiday trade. There were small gains in Australia and Taiwan, but South Korea dipped. India slightly lower, Southeast Asia also mixed. US futures lower, European markets under some pressure at the open. US dollar unchanged, NZD trading higher on hawkish RBNZ commentary. Treasury yields mixed, JGB and Australian yields fell to multi-week lows. Crude oil, precious and industrial metals under pressure as iron ore fell to four-month lows on low Chinese steel demand.

  • A relatively quiet day in Asia's markets as Japan returned from a holiday on Friday to see new records amid favorable commentary over recent records. China markets reflected ongoing debate over sustainability of February's rally and edged lower with traders cognizant of key earnings and PMI readings due later this week that will gauge the strength of China's stuttering recovery. One data point each for the optimists and pessimists today as Chinese crude oil purchases picked up on higher demand, but steel output has evidently failed to recover last week post the LNY holiday.

  • Elsewhere, South Korea unveiled its 'value-up' program aimed at increasing shareholder value although market reaction suggested it fell short of expectations. Singapore manufacturing production recovered in January from December's contraction but still missed forecasts. A survey revealed India households were spending more on discretionary goods than ever berfore, even in the countryside.

  • Air China (753.HK) is considering increasing its stake in Cathay Pacific (293.HK). Alibaba (9988.HK) affiliate Ant Group outbid Citadel Securities for Credit Suisse's investment bank unit in China although it was still unclear whether the bid would succeed. Alcoa (AA) has made a A$3.4B ($2.2B) all-shares offer for its joint venture partner Alumina (AWC.AU). Walt Disney (DIS) and Reliance Industries (500570.IN) signed a binding agreement to merge their respective media operations in India.

• Digest:

  • Investors remain cautious on China rebound, stimulus still seen moderate:

    • Bloomberg discussed ongoing caution towards China equities despite a raft of policy measures that have helped global outperformance in Hong Kong A-shares this month while CSI 300 has advanced for nine days, the longest streak since 2018. Bullish phase largely framed as temporary, driven by state fund support amid persistent macro headwinds. Noted mainland inflows via Hong Kong Stock Connect running above CNY31B ($4.2B) this month following a record six straight outflows, though seemingly led by offshore accounts of state-owned enterprises. Reasons for upside include cheap valuations and underweight China positioning prompting FOMO pains. However, investors said to remain unconvinced given China market vagaries while few expect the market to quickly recover the 40~50% gap from their 2021 peak. Article suggested lack of remedies for the property slump and deflation, as well as tighter government controls on private sector likely to keep long-term investors away. Furthermore, Reuters cited analyst expectations that China is likely to maintain a gradual stimulus approach as policymakers are thought to be wary of short-term measures that entail longer term ramifications.

  • South Korea unveils "value-up" programme:

    • South Korea's Financial Services Commission (FSC) unveiled its Corporate Value-up Program intended to end 'Korea Discount' of local shares which trade at discount to fundamentals, and peers in Japan, Taiwan (Yonhap). Program to offer companies that prioritize shareholder returns unspecified "bold incentives", tax benefits. Government will also develop new Corporate Value-up Index for funds in Q3 to aid decisions on identifying companies that intend to boost corporate value. Index similar to Japan's Prime 150 Index, linked ETFs to be launched in Q4. Korea Exchange to create department for program, new advisory board to offer companies support; will also publish companies' valuation metrics. Analysts cited by Bloomberg said latest initiative "feels different" to previous programmes as has economic goals rather than social agenda, may also support South Korean stock market's ambition of upgrade to MSCI Developed Market status. Second value-up seminar to be held in May, guidelines finalized by end H1.

  • Japan equity strength seen sustainable, offers tailwind for BOJ rate hike:

    • Nikkei added to discussions about equity strength after Nikkei 225 last week closed at an all-time high. Largely echoed views the bullish phase is not over-extended with flows led by foreign investors optimistic about corporate governance improvements. Nikkei 225 average EPS reached a record JPY2,374 ($15.78) on 22-Feb, up from year-end level of JPY2,270. QUICK consensus sees Nikkei 225 FY23 net profits at JPY40.5T, 9% growth to JPY44.1T in FY24 and another 8% growth to JPY47.5T in FY25. Projections imply decline in PER from 16.2x in FY23 (based on 22-Feb levels) to 13.8x in FY25 -- cited as evidence that expectations have not over-extended. Moreover, article noted perceptions that Japan earnings trajectory still lags behind US peers. A lot of discussion about the yen factor in the context of BOJ rate hike expectations. Some hold a sanguine view, reassured by Governor Ueda's comments that monetary policy would remain accommodative after a NIRP exit. However, Nikkei separately discussed thoughts on the FX vs equity dynamic noting yen depreciation has remained a notable tailwind for stocks, fanned by dovish BOJ rhetoric. Prompted some debate over whether equity strength would support the BOJ's case for a rate hike, though decision should be based on sustainability of inflation.

  • India households spending less on food, more on durable goods:

    • Annual Survey on Household Consumption Expenditure showed average per-capita urban spending at INR6,459 ($77.93) in the year ended July 2023. Last comparison was INR2,630 in 2011-12. Reuters noted 2017-18 survey was withheld due to data quality issues, prompting controversy though government denied it was concealing weak results. Rural spending was INR3,773 vs prior INR1,430. Main focus was on the distribution between food vs non-food -- urban household food spending shrank to 39.2% from 42.6% while rural households fell to 46.4% from 52.9%. Details showed biggest non-food gains came in conveyance and durable goods, the latter now the highest weighted category. Press reports noted the figures add to positive economic growth trends ahead of the May general election with Modi seeking a rare third term (Bloomberg). Government in January projected GDP growth of 7.3% in the year to March which would be the third straight year above 7% and stronger than developed economies, providing key ammunition for the incumbent administration.

  • Inflation readings, China PMIs, and RBNZ meeting among this week's highlights:

    • Focus is back on economic data with attention on latest inflation reads out US and Europe. Street looking for pickup in US core PCE inflation after hotter-than-forecast US CPI and cautious Fed commentary on rate cuts led markets to dial back easing expectations for 2024. However, eurozone core inflation forecast to have fallen below 3% for first time since early 2022. There will be another round of Fedspeak with Williams, Bostic and Daly (all voters) remarking. Treasury auctions another area of focus (mostly short-dated tenors). China manufacturing and non-manufacturing PMIs forecast to show little change in activity this month. Australian monthly CPI may show an uptick in inflation, though not enough to shift prevailing consensus RBA cash rate has peaked. On central banking front, the RBNZ is expected to leave the OCR unchanged though some economists are eyeing retention of its tightening bias amid persistently elevated domestic inflation.

  • Notable Gainers:

    • +10.9% 3391.JP (TSURUHA Holdings): Tsuruha, Welcia reportedly may merge

    • +4.5% 3038.JP (Kobe Bussan): reports January net sales ¥36.91B, +12.9% y/y

    • +3.1% 293.HK (Cathay Pacific Airways): Air China reportedly considers increasing stake in Cathay Pacific

    • +1.5% 8058.JP (Mitsubishi): to divest 49% stake in Exportadora de Sal, S.A. de C.V. to Ministry of Economy of Mexico; terms undisclosed

    • +1.3% 5296.MK (MR. D.I.Y. Group (M)): reports Q4 revenue MYR1.15B, +8% vs year-ago MYR1.07B, EBIT MYR229.4M, +12% vs year-ago MYR204.9M

  • Notable Decliners:

    • -7.8% 3668.HK (Yancoal Australia): reports FY revenue A$7.78B vs year-ago A$10.55B, operating EBITDA A$3.49B vs year-ago A$6.96B

    • -4.6% 8.HK (PCCW Ltd): reports FY cont ops revenue HK$36.35B vs StreetAccount HK$37.35B, EBITDA HK$12.83B vs StreetAccount HK$13.21B

    • -3.7% 1385.HK (Shanghai Fudan Microelectronics Group): reports preliminary FY revenue CNY3.54B vs FactSet CNY3.76B, EBIT CNY744.8M vs FactSet CNY1.21B

• Data:

  • Economic:

    • Japan January

      • Services PPI +2.1% y/y vs consensus +2.4% and +2.4% in prior month

    • Singapore January

      • Manufacturing Production NSA Y/Y +1.1% versus (2.4%) in prior month

  • Markets:

    • Nikkei: 135.03 or +0.35% to 39233.71

    • Hang Seng: (91.12) or (0.54%) to 16634.74

    • Shanghai Composite: (27.86) or (0.93%) to 2977.02

    • Shenzhen Composite: 7.30 or +0.44% to 1677.15

    • ASX200: 9.20 or +0.12% to 7652.80

    • KOSPI: (20.62) or (0.77%) to 2647.08

    • SENSEX: (282.88) or (0.39%) to 72859.92

  • Currencies:

    • $-¥: (0.08) or (0.05%) to 150.4290

    • $-KRW: (0.14) or (0.01%) to 1330.8500

    • A$-$: (0.00) or (0.18%) to 0.6549

    • $-INR: (0.03) or (0.03%) to 82.8640

    • $-CNY: +0.00 or +0.02% to 7.1971