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StreetAccount Summary - Asian Market Recap: Nikkei +0.18%, Hang Seng (2.16%), Shanghai Composite (0.95%) as of 04:10 ET

Mar 22 ,2024

• Synopsis:

  • Asian equities closed mainly lower Friday. Losses greatest in Hong Kong, which ended the week lower despite rally hard Thursday; mainland markets also lower Friday. Losses for Australia, South Korea, and Southeast Asia. India a few points higher despite weakness in IT stocks, Japan's benchmarks higher although the Nikkei failed to decisively break through 41K. US futures turning lower, European markets opened with small losses after late dip on Wall Street. US dollar notably stronger again with most Asia currencies including the yuan under pressure. Treasury and JGB yields mixed, CGB yields remain near historical lows. Crude oil, industrial metals and gold all lower.

  • Asia equities ex Japan under renewed pressure Friday with little in the way of follow through from developed market records overnight. More concerns over the state of China property sector with further sharp falls in the Hang Seng mainland property index today in the wake of Moody's credit rating downgrade to Vanke last week, and data Monday that showed further declines in property investment during Jan-Feb.

  • The yuan also under attack today, falling to four-month lows following a notably lower fixing this morning by the PBOC, and a technical breakout to the upside. China state banks seen selling dollars in onshore market to slow pace of depreciation but clear signals Beijing is on the cusp of letting the yuan depreciate further. Elsewhere, BOJ policy outlook still in focus following national CPI data showed core prices higher y/y albeit in line with forecasts. South Korea producer inflation rose 1.5%, its biggest increase since April last year.

  • Isuzu Motors (7201.JP) is to produce EV pickup trucks in Thailand. Japan Airlines (9201.JP) and Korean Air (003490.KS) bought a total of 52 Airbus (AIR.PA) A350 planes as well as JAL ordering 11 A321s as the European company made further inroads into traditional Boeing markets. Sharp (6753.JP) is considering the downsizing of its LCD business. Alibaba (9988.HK) sold 30.8M ADRs in Bilibili (9626.HK, BILI) at $11.60 per share, a 5.5% discount to Wednesday's closing price to raise $360M. Samsonite (1910.HK) is considering dual listings its stock in the US but will raise less than $500M, according to reports.

• Digest:

  • Yuan snaps to four-month low:

    • Offshore yuan under pressure in Asian trade Friday, falling to lowest against dollar since mid-Nov 2023. PBOC reducing daily yuan midpoint by most since early February, viewed as a sign of authorities relaxing grip on the currency after weeks of range-bound price action. However, Reuters sources noted China state banks seen selling dollars in onshore market to slow pace of depreciation. Yuan weakness also considered a function of broader dollar strength with cross-currency dynamics likely playing a role as yen and Swiss franc remain notably lower this week following BOJ and SNB decisions. While authorities' rhetoric on yuan has not shifted (commitment to keep it basically stable), PBOC has recently touted scope for additional RRR cuts (Bloomberg). While China left unchanged MLF rate and LPRs this month, economists have reaffirmed calls for modest reductions. Also expectations of new liquidity via Pledged Supplementary Lending (PSL) facility with estimates ranging up to CNY1T to support housing and infrastructure.

  • Economists see BOJ hiking again in July or October:

    • Bloomberg's economist poll showed dispersion among views on when BOJ will hike again. Twenty six percent predicted an October rate hike while 23% picked a July move. However, ~70% saw risk to their base case that the BOJ will hike by July. July vs October rate hike debate was discussed by Nikkei this week with October hike viewed as likely scenario given it would follow expected Fed rate cut in May or June, and would give time for BOJ policymakers to assess inflation outlook following NIRP exit. Governor Ueda reiterated financial conditions to remain accommodative and that pace of tightening will be gradual. However, 55% of respondents saw greater risk of Ueda moving faster if yen depreciation continues. Yen trading near lowest levels since 1990 and is increasingly grabbing attention of government with Finance Minister Suzuki saying officials watching FX moves with high sense of urgency. Survey median pegged 155 per dollar handle as likely trigger point if officials choose to intervene.

  • Japan core inflation rebounds, though largely due to base year effects:

    • Japan core nationwide inflation rebounded to in-line 2.8% y/y in February from 2.0% in January that was softest read since Mar-2022. Marked first time Japan core inflation has risen in four months, partially reflecting base year effects with electricity price declines narrowing significantly as energy subsidies that were introduced in Feb-2023 are phased out Ex-fresh food and energy series fell to 3.2% from 3.5% in prior month, lower than consensus 3.3% and weakest read since Jan-2023. Overall inflation rose to 2.8%, higher than prior month's 2.2% and consensus 2.9%. Closely watched services inflation unchanged from prior month. Governor Ueda flagged additional rate hikes if inflation overshot expectations and presented upside risks to inflation expectations, However, mostly in-line February inflation rebound not considered material enough to prompt hawkish repricing given influence of base-year effects. Attention shifts to March Tokyo core CPI, due out on 29-Mar, for clearer read on inflation trajectory.

  • China equity market rebound showing signs of stalling:

    • China equity rebound from late January lows showing signs of stalling, prompting more debate around outlook. Morgan Stanley noted A-share investor sentiment has been mostly flat in recent weeks with little change after Monday's better-than-expected Jan-Feb activity data. Saw market remaining range-bound over near-term, arguing upcoming economic data likely to show sequential weakening while consensus earnings estimates continue to face downward pressure. UBS contrasted this year's equity market rebound with 2015/16 recovery, noting China's economy facing more serious challenges now amid steeper property market downturn, relatively modest easing steps and consumer caution. Micro comparisons more favorable with healthier balance sheets allowing for greater capital return, earnings more resilient than in 2015/16, and valuations much more depressed. Argued China markets tracking similar path to 2016 when equities slowly ground their way higher. However, also acknowledged upward trajectory depends on improved earnings revision momentum.

  • RBA notes Australian financial system highly resilient:

    • RBA Financial Stability Review noted Australian financial system has high level of resilience and is well positioned to support economy. Noted households experiencing budget pressures but borrowers retain ability to services debts with overall loan arrears low and labor market strong. Saw little evidence of financial stress among owners of Australian CREs and risks to domestic banking system remain contained. Bigger risk stems from domestic spillovers from overseas CRE weakness that prompts international lenders to withdraw funding. However also noted little evidence of this happening at present. Global financial stability risks remain elevated but outlook for global economy has improved with participants increasingly optimistic about soft landing. Review highlighted three key risks that could affect Australian financial stability: further weakness in China's property market, deterioration of overseas CRE markets, and volatility in global asset prices.

  • Notable Gainers:

    • +9.7% 2018.HK (AAC Technologies Holdings): reports FY net income attributable CNY740.4M vs StreetAccount CNY611.1M

    • +5.2% 6753.JP (Sharp Corp): reportedly weighing downsizing LCD business

    • +2.1% 9201.JP (Japan Airlines Co.): guides FY net income attributable ¥90.00B vs prior guidance ¥80.00B and FactSet ¥88.25B; formulates rolling plan 2024; to introduce 42 new aircraft from Airbus and Boeing as part of its fleet renewal plan

    • +0.2% 003490.KS (KOREAN AIR LINES Co.): to invest KRW18.466T (€12.76B) in new mid-to-large passenger aircraft until 2032

  • Notable Decliners:

    • -16.8% 316.HK (Orient Overseas (International)): reports FY net income attributable $1.37B vs StreetAccount $1.50B, EBIT $1.41B vs SA $1.46B

    • -9.4% 5076.JP (INFRONEER Holdings): to issue ¥60B zero coupon convertible bonds due 2029, conversion price is ¥1,897

    • -9.0% 9626.HK (Bilibili): reportedly 30.8M-ADR block sold by Alibaba priced at $11.60/share through Morgan Stanley

    • -7.2% 1910.HK (Samsonite International): plans to launch dual listing; reportedly considering second listing in US; may raise less than $500M

    • -5.6% 2318.HK (Ping An Insurance (Group) Co. of China): reports FY OPAT CNY117.99B vs StreetAccount CNY139.98B

    • -2.7% 883.HK (CNOOC): reports FY net income attributable CNY123.84B vs StreetAccount CNY130.55B

    • -2.5% 1.HK (CK Hutchison Holdings): reports FY revenue (ex associates, JV) HK$275.58B vs StreetAccount HK$281.91B; CMA finds Vodafone-Three merger could leave consumers, business worse off

• Data:

  • Economic:

    • Japan February

      • Nationwide core CPI +2.8% y/y vs consensus +2.8% and +2.0% in prior month

        • CPI excl. fresh food & energy +3.2% y/y vs consensus +3.3% and +3.5% in prior month

        • Overall CPI +2.8% y/y vs consensus +2.9% and +2.2% in prior month

  • Markets:

    • Nikkei: 72.77 or +0.18% to 40888.43

    • Hang Seng: (363.63) or (2.16%) to 16499.47

    • Shanghai Composite: (29.08) or (0.95%) to 3048.03

    • Shenzhen Composite: (22.01) or (1.22%) to 1782.30

    • ASX200: (11.40) or (0.15%) to 7770.60

    • KOSPI: (6.30) or (0.23%) to 2748.56

    • SENSEX: 188.89 or +0.26% to 72830.08

  • Currencies:

    • $-¥: (0.22) or (0.15%) to 151.4300

    • $-KRW: +4.75 or +0.36% to 1340.2000

    • A$-$: (0.01) or (0.84%) to 0.6516

    • $-INR: +0.13 or +0.15% to 83.3378

    • $-CNY: +0.03 or +0.38% to 7.2271