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StreetAccount Summary - Asian Market Recap: Nikkei +0.66%, Hang Seng (1.24%), Shanghai Composite (0.72%) as of 04:10 ET

Mar 19 ,2024

• Synopsis:

  • Asian equities mixed Tuesday. Japanese shares ended higher as BOJ moved away from ultra-easy monetary policy. Greater China declined with Hang Seng underperforming regional peers. Kospi dragged by falls in tech. Taiex mildly lower. ASX eked out gains following RBA hold. India trading lower. S&P 500 and Nasdaq futures lower. 10Y Treasury yield hovering near three-week high. Yen weaker against dollar to over 150 level, Aussie also softer. Crude edging lower. Gold also easing. Bitcoin pulling back.

  • Central bank decisions dominated newsflow. BOJ ended large-scale easing measures and raised rates for first time since 2007, setting policy rate in 0% to 0.1% range, scrapping eight years of negative interest rates, YCC, ETF ad J-REIT purchases. Will continue JGB purchases "with broadly the same amount as before" with flexibility to boost purchases in case of yield spike (recall press reports had also highlighted JPY6T monthly pace). Will gradually reduce amount of commercial paper and corporate bond buying. Reiterated financial conditions to remain accommodative as Governor Ueda highlighted "some distance" between Japanese inflation expectations and the 2% level. Market may need to wait for BOJ forecast report due in April to gain a better idea of where rate is headed.

  • RBA left cash rate unchanged at 4.35% as expected. RBA moderated its tightening bias, no longer making explicit reference to possibility of further rate hikes. Said not ruling anything in or out, adding that rate path remains uncertain after acknowledging moderation in inflation in-line with its forecasts. Language tweak precipitated dovish market reaction after some sell-side previews predicted RBA retaining its tightening bias. In other news, South Korean vice industry minister flagged continued export recovery in March underpinned by chip products while finance minister says government will reduce corporate taxes for companies that raise shareholder returns.

  • AT NVDA GTC, CEO Jensen Huang said China's BYD (1211.HK) will adopt Nvidia's next-generation smart car chip. China Evergrande (3333.HK)'s flagship unit in mainland China, Hengda Real Estate, and group founder Hui Ka Yan penalized by CSRC for inflating results, securities fraud and failing to make timely disclosures. CNOOC (883.HK) has discovered 100m tons of oil equivalent oilfield in Bohai Sea, which has been tested to produce about 742 bbls of crude oil per day from a single well. Bloomberg reported LONGi Green Energy Technology (601012.CH) is cutting as much as 30% of its workforce while company dismisses the magnitude of lay-offs, saying it will "adjust total workforce by 5%".

• Digest:

  • BOJ lifts short-term rate target for the first time since 2007:

    • BOJ voted 7-2 in favor of raising the target short-term rate to around 0%~0.1% from -0.1%, consistent with preceding press leaks. Supplementary material confirmed this would effectively amount to a 10 bp hike. Statement justified the decision with a judgement that a virtuous wage/price cycle came into sight and stable 2% inflation would be achieved toward the end of the projection period of the January Outlook Report (FY25). Bank considers NIRP, QQE, YCC easing framework have fulfilled their roles, declaring an end to the ultra-easing era. But still anticipates accommodative financial conditions will be maintained for the time being. Board members voted 8-1 to maintain JGB purchases at a pace "broadly the same amount as before." Footnote clarified pace currently about JPY6T per month, adding that purchase plans will continue to be announced with a range while taking account of market developments and supply-demand conditions in the JGB market. Purchases of ETFs and J-REITs discontinued, while CPs and corporate bonds will conclude in about a year. Macro background was generally consistent with economists that forecasted a March move, highlighting strong shunto wage hikes to date and anticipates wage growth "highly likely" to continue this year.

  • BOJ Governor Ueda reinforces gradual approach to future tightening:

    • Ueda's comments at the post-meeting press conference reaffirmed a gradual approach to follow-up rate hikes. Essentially explained that today's decision was based on sufficient confidence in achieving stable 2% inflation, but the certainty level has not reached 100%. Also noted there is still some distance to the mandate when viewed through inflation expectations. Suggested further policy action would be considered around the time when BOJ sees the mandate closer to full achievement. Other remarks were predictability circumspect. Sees the new policy rate target as accommodative but refrained from disclosing what BOJ sees as the neutral level, or the terminate rate, given there are a range of estimates. In response to several questions on JGB purchases, flagged a review at some point but too early to say now. Refrained from specifying parameters that would define a BOJ response to a sharp rise in bond yields, though doubted they would set a new upper limit and decisions will be made through discussions with the operations department. Overall, Ueda downplayed the prominence of JGB purchases as an active policy tool, emphasizing the short-term rate is now the focal point. BOJ will consider a policy response if FX movements have a major impact on economy and prices but did not elaborate.

  • RBA leaves cash rate unchanged, drops tightening bias:

    • RBA left cash rate at 4.35%, as expected. In somewhat of a surprise RBA dropped its mild tightening bias, no longer making explicit reference to possibility of further rate hikes. Now says not ruling anything in or out, and rate path that best ensures inflation returns to target in a reasonable timeframe remains uncertain. Sounded more upbeat on inflation, noting encouraging signs inflation is moderating in-line with its forecasts with services inflation expected to cool gradually. Also noted moderation in unit labor cost growth and peak in wage growth. Acknowledged growth slowdown over Q4 with household consumption particularly weak amid inflation pressures. At the same time noted inflation remains high and expected to be some time yet before it is sustainably in target range. Also observed services inflation stickiness in other countries and risk of it playing out in Australia. In press conference, Governor Bullock noted RBA making progress on returning inflation to target within forecast period but needs more confidence with risks finely balanced. Said prepared to act (on rates) in either direction but not seeing any reason now to be cutting rates.

  • Japan early market reactions to BOJ rate hike reflect dovish guidance:

    • USD/JPY moved into the 150 level for the first time since 6-Mar following the BOJ announcement, compared to the preceding ~149.3 area. Headline effects on equities biased to the upside with earlier softness put down to profit-taking after yesterday's sharp gains. Positive direction largely a function of yen depreciation adding to underlying optimism toward corporate fundamentals. There were also some indications that with the increasing certainty of a rate hike yesterday, the passage of a major risk event is freeing up trading conviction. Yet, press discussions repeatedly noted a BOJ move had been largely priced in and attributed lead-up volatility to position adjustments -- banks notably one of the few declining sectors in Topix today. There was much attention on press leaks foretelling ETF purchases would be discontinued, though this was not a notable catalyst. JGBs broadly firmer led by 10y~20y zone. Key through-line across asset classes was that BOJ statement reaffirmed accommodative financial conditions will be maintained for the time being. Recall that economist previews flagged guidance as a potential risk factor. Not much incremental from Governor Ueda's press conference, basically reinforcing a gradual approach to future policy moves tied to full achievement of the inflation mandate.

  • Hedge funds maintain big yen shorts ahead of BOJ meeting, large repatriation flows seen unlikely:

    • Reuters reported hedge funds only slightly reduced short yen positions ahead of the BOJ meeting, reflecting expectations a rate hike won't shift the underlying dynamics unless there are follow-up moves and yield differentials narrow. Cited CFTC data showing net shorts reduced by 16,521 contracts to 102,322 in the week ended 12-Mar. Follows drop of almost 14K in the prior week. Current levels are down about 20% from the peak of 133K in late February, which was the largest in more than six years. Attention turns to press conferences held by BOJ Governor Ueda Tuesday and Fed Chair Powell Wednesday. Separately, there were fairly broad expectations that Japanese investors unlikely to repatriate offshore funds en masse following a rate hike (Reuters), offering a stabilizing factor for USD/JPY. Bloomberg Markets Live Pulse Survey showed only about 40% of 273 respondents saw likelihood of repatriation flows. Skepticism stems from wide yield differentials with Japan asset performance still lagging behind offshore alternatives.

  • Notable Gainers:

    • +9.3% 1368.HK (Xtep International Holdings): reports FY revenue CNY14.35B vs FactSet CNY14.37B, operating income CNY1.58B vs FactSet CNY1.48B

    • +6.6% S08.SP (Singapore Post): completes strategic review; group to be reorganised into Singapore, Australia and International business units

    • +1.5% 9433.JP (KDDI Corp): to acquire 53.4% stake in ELYZA as part of capital and business alliance

    • +0.2% 4185.JP (JSR Corp): Japan Investment Corporation to commence tender offer for JSR Corp starting 19-Mar at ¥4350/share

  • Notable Decliners:

    • -7.3% 772.HK (China Literature): reports FY revenue CNY7.01B vs StreetAccount CNY7.08B, operating income CNY709.3M vs StreetAccount CNY718.9M

    • -7.3% 2359.HK (WuXi AppTec): reports FY revenue CNY40.34B vs StreetAccount CNY40.50B; guides FY24 revenue CNY38.3-40.5B vs FactSet CNY47.64B

    • -2.6% 601012.CH (LONGi Green Energy Technology): reportedly rumors of company planning a 30% cut to its workforce were false, LONGi is reportedly expected to adjust its total workforce by 5%

    • -2.4% 656.HK (Fosun International): reportedly evaluating sale of remaining stake in Millennium bcp

• Data:

  • Economic:

    • Japan

      • January Industrial Production m/m (revised) (6.7%) versus consensus (7.5%) and (7.5%) in prior month

  • Markets:

    • Nikkei: 263.16 or +0.66% to 40003.60

    • Hang Seng: (207.64) or (1.24%) to 16529.48

    • Shanghai Composite: (22.17) or (0.72%) to 3062.76

    • Shenzhen Composite: (7.73) or (0.43%) to 1795.72

    • ASX200: 27.40 or +0.36% to 7703.20

    • KOSPI: (29.67) or (1.10%) to 2656.17

    • SENSEX: (580.06) or (0.80%) to 72168.36

  • Currencies:

    • $-¥: +1.22 or +0.82% to 150.3680

    • $-KRW: +0.08 or +0.01% to 1338.7900

    • A$-$: (0.00) or (0.69%) to 0.6514

    • $-INR: +0.03 or +0.04% to 82.9767

    • $-CNY: 0.00 or 0.00% to 7.1982