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StreetAccount Summary - Asian Market Recap: Nikkei (1.16%), Hang Seng (0.16%), Shanghai Composite (0.71%) as of 04:10 ET

Mar 25 ,2024

• Synopsis:

  • Asian equities finished with a negative tilt Monday with only Australia and New Zealand posting a gain. Japan's Nikkei and Topix led the way lower while mainland China and Hong Kong gave up early gains to finish down. Seoul and Taipei also in the red, Southeast Asia saw some mild losses. India closed for a holiday. US futures lower, Europe slightly better in early trades. US dollar a softer, pressure on yen lifting while yuan also notably stronger. Treasury yields mixed. Crude blends higher following Russia attacks with WTI back above $80/bl. Precious metals higher on dollar weakness, industrial metals mixed.

  • Asia equities began the week with a mostly negative session amid a lack of strong catalysts and continuing weak sentiment over China. Hong Kong and mainland China stocks saw a bounce first thing as the PBOC showed support for the yuan by setting its strongest upward bias since November while Premier Li also talked up the Chinese economy over the weekend. However, stocks fell in the afternoon as Friday's selling momentum resumed. Sentiment hurt further today by reports Beijing will ban Intel and AMD chips from government PCs and servers.

  • Japan equities saw weakness from the bell but the yen failed to react meaningfully to the country's top forex diplomat saying recent weakness did not reflect fundamentals and reiterated readiness to respond. Traders continue to watch 152 per dollar as a potential intervention trigger. Last week's BOJ move and Taiwan's surprise rate hike also prompted discussion over a shift in preferred Asia forex trades with SGD and AUD seen as vulnerable for split reasons.

  • Kobayashi Pharma (4957.JP) recalled its supplement pills after complaints of kidney issues by its users. Nissan Motor (7201.JP) said it aims to sell 1M more cars over the next three years and will cut EV costs. Baidu (9888.HK) will power Apple's iPhone 16 and IOS 18 to solve AI compliance problems for Apple within China. BYD (1211.HK) said it would slash the price of its car models as its price war with Toyota and Volkswagen steps up; Xiaomi (1810.HK) CEO also suggested the company's cars would be priced below CNY500K. CATL (300750.CH) is working on faster charging batteries for Tesla's Nevada factory. China Evergrande (3333.HK) withdrew its filing for Chapter 15 bankruptcy protection after the appointment of several liquidators for the company.

• Digest:

  • Yuan rebounds, but strategists see potential for more downside:

    • Offshore yuan rebounding on Monday, up 0.5% against dollar after PBOC set daily midpoint with strongest bias since Nov-2023 (Bloomberg). Yuan fell to four-month low Fridayafter PBOC reduced daily midpoint by most since early February, viewed as sign of authorities relaxing grip on currency following weeks of range-bound price action. JP Morgan saw more weakness ahead with yuan fair value already above 2% daily trading limit amid widening US-China yield spreads. Outflow pressures weighing on yuan with SAFE data showing continued onshore net dollar purchases. BofA also noted downside potential if PBOC adopts more laissez-faire stance, seeing risk of USDCNY retesting highs amid dollar support from soft/no landing narrative. UBS argued Beijing to continue with managed depreciation with added pressure coming from China's ongoing property weakness that keeps outflow risks elevated, and China deflation that keeps yield gap wider for longer. View also that higher risk premia being attached to yuan from geopolitical tensions as US election approaches.

  • Chinese premier says country welcomes foreign investments and downplays investor concerns:

    • Speaking at China Development Forum, Chinese Premier Li Qiang said China welcomes global companies to invest and deepen foothold in country. Added government will soon issue new regulations on market access and cross-data flows (Reuters). Li acknowledged risks in property sector and local government debt but said "some difficulties and problems are not as serious as people think." Highlighted Beijing is shoring up policy support to spur growth and steps taken to tackle economic issues have shown positive development. Li stressed China's focus on developing advanced manufacturing and technologies. Bloomberg added Li didn't elaborate on how policies can be stepped up, other than what has been announced in NPC earlier. Li will also skip meeting with global business executives in attendance including Apple's Tim Cook, but press reports noted President Xi might instead meet with them. Reuters reported IMF MD Georgieva said China faces "fork in the road", relying on old policies that have worked or reinvesting itself for a new era of high-quality growth.

  • Japan's NIRP exit viewed as a tailwind for economy, markets:

    • Japan equities strengthened through BOJ stimulus exit to post new record highs with support attributed to removal of policy uncertainty, yen weakness and dovish guidance. Corporate earnings have been a key pillar of the rally with Nomura noting deflation escape allowing firms to implement price increases that have contributed to index-level profit growth. Added that while higher interest rates imply increased interest repayments, that is balanced by boost to index EPS from recovery in bank (interest) income. Current yen weakness benefiting export-oriented sectors, but yen appreciation seen aiding sectors reliant on domestic demand. JP Morgan also discussed tailwinds from NIRP exit, including better allocation of capital given past distortion in pricing of duration and credit risk. Cited experience in US when rates were lifted in suggesting that steeper JGB curve may not necessarily translate into higher equity risk premia. Positive impact on Japanese bank interest earnings could incentivize more risk-taking and credit creation, while return to more normal policy settings seen encouraging reduction in savings rates.

  • Favored Asia currency trades switch as Japan and Taiwan hike, other central banks look to ease:

    • Long-standing Asia forex strategies that favored using yen as carry to fund higher-yielding trades may be set to change as BOJ ends NIRP, other Asia central banks look to ease, China's economic recovery remains questionable. Bloomberg noted last week's surprise interest rate hike in Taiwan and BOJ's move strengthened yuan's appeal as funding currency given yuan's low volatility and limited upside risk. Quoted analyst saying investors now looking for alternatives to dollar-based strategies amid signals Fed to move more slowly on cuts than previously forecast. Separate Nikkei article discussed potential for yen intervention at 152 per dollar post last week's depreciation. Bloomberg also noted Singapore dollar's potential to weaken as economists speculate MAS could ease policy as early as April, with SGD's Asia dominance potentially ending. Australia dollar also under pressure as bearish bets reach record highs on concern over China's economic recovery, Beijing's loosening grip on yuan Friday (Bloomberg).

  • BOJ January minutes featured discussion on exiting stimulus measures:

    • BOJ minutes from 22-23-Jan meeting noted members agreed inflation likely to be above 2% through FY24 and underlying inflation likely to gradually increase toward price stability target toward end of projection period. Some members saw high likelihood 2024 wage talks would produce pay growth above last year. Members agreed if virtuous cycle is confirmed BOJ would likely weigh whether to continue with easing measures such as NIRP. One member saw Japan policy flexibility reduced if overseas central banks began cutting interest rates, adding BOJ should not miss current window of opportunity to exit. Many members saw high likelihood of financial accommodations remaining accommodative beyond NIRP exit, with some arguing it is unnecessary for Japan to rapidly tighten policy. Some expressed view JGB purchases to continue with one saying BOJ needed to devise measures to prevent rapid rise in long-term interest rates. Another member said BOJ needed to take time to consider treatment of ETF holdings once purchases discontinued.

  • Notable Gainers:

    • +5.7% 3690.HK (Meituan): reports Q4 adjusted net income CNY4.38B vs FactSet CNY2.93B, revenue CNY73.70B vs FactSet CNY72.53B

    • +3.6% 010130.KS (Korea Zinc Co.): reportedly plans to take over management rights of Sorin from Young Poong following partnership split

    • +1.3% 1088.HK (China Shenhua Energy): reports FY net income attributable CNY64.63B vs guidance CNY62.70-65.70B; FactSet CNY63.30B

    • +0.1% 7181.JP (JAPAN POST INSURANCE): announces reinsurance of whole-life annuity plans under Postal Life Insurance policies; guides FY net income attributable ¥82.00B vs prior guidance ¥72.00B and FactSet ¥82.46B

  • Notable Decliners:

    • -15.1% 1958.HK (BAIC Motor): reports FY net income attributable CNY3.03B vs FactSet CNY4.66B, revenue CNY197.95B vs FactSet CNY198.75B

    • -6.2% 9962.JP (MISUMI Group): reports February sales ¥29.60B vs year-ago ¥29.93B

    • -1.7% 1099.HK (Sinopharm Group): reports FY revenue CNY596.57B vs StreetAccount CNY606.49B

    • -0.2% 9202.JP (ANA HOLDINGS): ANA, Nippon Yusen extend effective date of share exchange offer for Nippon Cargo Airlines to 1-Jul

• Data:

  • Economic:

    • Singapore February

      • CPI +3.4% y/y vs consensus +3.3% and +2.9% in prior month

        • Core inflation +3.6% y/y vs consensus +3.4% and +3.1% in prior month

        • CPI +1.1% m/m vs (0.7%) in prior month

  • Markets:

    • Nikkei: (474.31) or (1.16%) to 40414.12

    • Hang Seng: (25.83) or (0.16%) to 16473.64

    • Shanghai Composite: (21.73) or (0.71%) to 3026.31

    • Shenzhen Composite: (33.14) or (1.86%) to 1749.15

    • ASX200: 41.30 or +0.53% to 7811.90

    • KOSPI: (10.99) or (0.40%) to 2737.57

    • SENSEX: 0.00 or 0.00% to 72831.94

  • Currencies:

    • $-¥: (0.13) or (0.09%) to 151.2530

    • $-KRW: (4.91) or (0.37%) to 1339.6200

    • A$-$: +0.00 or +0.23% to 0.6529

    • $-INR: (0.11) or (0.13%) to 83.4986

    • $-CNY: (0.02) or (0.33%) to 7.2051