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StreetAccount Summary - Asian Market Recap: Nikkei +0.09%, Hang Seng +2.36%, Shanghai Composite (0.08%) as of 04:10 ET

Apr 02 ,2024

• Synopsis:

  • Asian equities ended mixed Tuesday with little clear direction again. Hong Kong led the gainers as it caught up following two days off, Taiwan's Taiex was also strong and the Kospi added a few points. Elsewhere mostly lower as Australia gave up early gains, India is down and Southeast Asia was mixed. Japan continued its recent soft patch with the Topix lower and Nikkei flat. US futures down, Europe opened slightly better. US dollar consolidated overnight gains, most Asia currencies unchanged. Treasury yields mixed. Crude higher, gold regained some lost ground, iron ore leading gains in industrial metals. Cryptocurrencies sharply down.

  • Reverse out those markets playing catch-up for Easter holidays and Tuesday was a largely negative day for Asia equities. The Hang Seng broke above 17K briefly before settling back and Taiwan's tech shares were once again a bright spot. But elsewhere equities tilted lower as Australia and Japan both gave up early gains as markets followed US futures down. Asia stocks also battling higher Treasury yields and a strong dollar again with the DXY index back above 105 as traders cut the odds of a Fed rate hike in June to below 50%. Notable overnight movement in forex markets leading to Japan finmin warning over volatility to cap yen weakness; PBOC seen supporting yuan; and Bank Indonesia intervening on rupiah behalf after it dropped to four-year low.

  • In macro developments, March RBA minutes showed board agreed it was appropriate to leave rates on hold last month with data evolving largely as expected. Australia PMI for March showed continued contraction among manufacturers. India PMI revised lower following flash estimate but still at 16-year high 59.1. South Korea inflation remained at 3.1% as expected.

  • China Southern Airlines (600029.CH) said it wants to add 17 international routes including to Europe and the Middle East. Xiaomi (1810.HK) said it had received 90K in orders for its first electric car within first 24 hours of launch; shares sharply higher. Hanwha Ocean (042660.KS) has offered to buy Austral (ASB.AU) for A$2.825 per share although regulatory approvals may hinder deal. Treasury Wine (TWE.AU) said it would resume the distribution of wine in China after Beijing removed tariffs on Australian wine.

• Digest:

  • RBA minutes show board agreed appropriate to leave rates on hold:

    • March RBA minutes noted board agreed appropriate to leave rates unchanged, and unlike previous months they gave no indication they debated rate hike. Noted economic data moderating broadly as expected, indicating inflation gradually returning to target and labor market moving towards conditions consistent with full employment. Noted demand continues to exceed supply but gap closing relatively quickly, while labour market still tight though has eased further. Highlighted upside risks from more persistently elevated inflation if excess demand persists for longer than anticipated and services inflation proves stickier than assumed. Also warned of implications for monetary policy if productivity does not pick up as assumed. At the same time, saw downside risks if weak consumption continues for longer-than-expected. While upside risks still a focus, board assessed risks had become a little more even. Stressed recent data had not materially changed views on the outlook and that it is not possible to either rule in or out future changes to cash rate.

  • BOJ JGB purchases confirm lower FY24 trajectory:

    • Nikkei cited BOJ data released Monday showing JGB purchases totaled JPY87.6T ($579B) in FY23, down 36% from the prior year's peak, noting market attention is shifting to the timing of a balance sheet run-off. BOJ bought JPY5.93T in March, consistent with guidance in the latest policy statement that signaled the bank would maintain "broadly the same amount" of purchases for now. This points to an annual pace of ~JPY72T in FY24 -- a further 17.8% decline. Also compares to an average JPY95T per year in the decade through FY23 over the QQE era. However, the FY24 projection would still be more than triple the amount before QQE, indicative of a continued accommodative environment. BOJ also extending duration with average term to maturity growing to 6.5 years from around 4~5 years in 2013. Cited SMBC Nikko Securities estimates that redemptions will be nearly JPY6T per month in FY24, which would keep overall bond holdings roughly flat ceteris paribus. A QUICK survey found 73% of respondents expected BOJ to slightly curb purchases of long bonds at FY24-end, while 13% looked for a major cut.

  • Japan stock splits helping to broaden liquidity and investor base:

    • Nikkei top story discussed the nascent growth in stock splits, lowering the minimum entry point for purchase parcels which is attracting interest from individual investors. Article counted 191 split announcements in FY23, up about 60% from the previous year. Monday saw a further 62 launches, the highest number at the start of the fiscal year in a decade. Momentum building amid the revamped NISA program designed to incentivize stock investments among individuals. Average minimum investment in TSE Prime Market names has fallen to ~JPY300K ($1,978), well below the JPY500K targeted by TSE -- even as the Nikkei 225 has reached all-time highs -- which is less than one-sixth of the 1989 average when the index last high a record. Liquidity boost has been notable -- among the 138 companies that split shares between 1-Apr-23 and 1-Jan-24, daily trading volume in Q1 was seven times a year earlier, compared with ~50% rise for the Prime Market aggregate. NTT (9432.JP) stood out with a 33-fold surge. Company also saw a ~70% jump in shareholders to 1.57M. Many analysts anticipate more splits in FY24, though article noted minimum investments remain higher than the US market.

  • Iron ore's sharp retreat viewed as a sign of longer-term weakness in China steel demand:

    • Ongoing fall in iron ore briefly saw Singapore spot prices move below $100t to a 10-month low on Monday before rebounding. Iron ore down ~30% from January highs, reflecting mounting concerns about outlook for China steel and steel input demand. China Iron & Steel Association (CISA) last week urged steel mills to reduce capacity utilization as China's property downturn and weak infrastructure construction activity hamper steel demand (MySteel).While official PMI showed manufacturing expanded in March for first time in six months, separate steel PMI contracted at fastest pace since May 2023. Iron ore stockpiles at Chinese ports also at more than one-year high. Bloomberg highlighted how iron ore's fall is symptomatic of Beijing's efforts to prioritize new economic growth engines over old economy sectors such as property construction. Supply also working against iron ore with Australian and Brazilian iron ore exports projected to continue growing over coming years.

  • Xiaomi shares jump on strong demand for its first EV model SU7:

    • Xiaomi Corp. (1810.HK) shares jumped as much as 16% on first day of trading since it launched sales of first EV SU7 last week. Company said it received orders of nearly 90k units within first 24 hours (Bloomberg), while buyers could face waits of four to seven months for deliveries (Reuters). Analysts noted orders for SU7 came in stronger than expected, which may put it comparable to Telsa's Model 3 as one of best-selling premium EV sedans in China. Citi estimated full-year sales at around 55k to 70k units, while Goldman projected orders may reach 100k this year, which raises questions as how quickly Xiaomi can ramp up manufacturing and deliver the vehicles. Noted global EV market has turned into cutthroat race with China's electrified-car market projected to grow slower for second straight year. Meanwhile Xiaomi's entry is seen as a threat to more established peers, including XPeng (9868.HK) and BYD (1211.HK), which may follow with price adjustments to stay competitive.

  • Notable Gainers:

    • +11.8% 535755.IN (Aditya Birla Fashion & Retail): to evaluate vertical demerger of Madura Fashion & Lifestyle business from ABFRL into separate listed company

    • +8.8% 2388.HK (BOC Hong Kong (Holdings)): reports FY net income attributable HK$34.12B vs StreetAccount HK$32.60B

    • +8.7% 1810.HK (Xiaomi): Xiaomi SU7 officially launched; pre-orders for SU7 reach 50K units within 27 minutes of launch

    • +8.3% 1787.HK (Shandong Gold Mining): reports FY net income attributable CNY2.33B vs guidance CNY2.00-2.50B; FactSet CNY2.13B

    • +2.2% 8725.JP (MS&AD Insurance): guides FY net income attributable ¥350.0B vs prior guidance ¥280.0B and FactSet ¥301.77B

    • +1.1% 042660.KS (Hanwha Ocean): Austal confirms conditional and non-binding indicative proposal from Hanwha Ocean priced at A$2.825/share; Austal is not satisfied that mandatory approvals would be secured, however company is open to further engagement

  • Notable Decliners:

    • -13.1% 2202.HK (China Vanke): reports FY net income attributable CNY12.16B vs FactSet CNY18.62B

    • -10.2% 1193.HK (China Resources Gas Group): reports FY net income attributable HK$5.22B vs FactSet HK$5.62B

    • -7.2% 8227.JP (SHIMAMURA): reports FY net income attributable ¥40.08B vs FactSet ¥40.17B, revenue ¥635.09B vs FactSet ¥636.46B; presents long- and medium-term management plan

    • -0.0% 8306.JP (Mitsubishi UFJ Financial): provides new medium-term management plan for FY24-26; targets FY26 ROE around 9%

• Data:

  • Economic:

    • South Korea March CPI +3.1% y/y vs consensus +3.0% and +3.1% in prior month

      • CPI ex-food & energy +2.5% y/y vs consensus +2.5% and +2.5% in prior month

    • Australia

      • March MI Inflation Gauge m/m +0.1% versus (0.07%) in prior month

  • Markets:

    • Nikkei: 35.82 or +0.09% to 39838.91

    • Hang Seng: 390.10 or +2.36% to 16931.52

    • Shanghai Composite: (2.42) or (0.08%) to 3074.96

    • Shenzhen Composite: (9.55) or (0.53%) to 1779.69

    • ASX200: (9.00) or (0.11%) to 7887.90

    • KOSPI: 5.30 or +0.19% to 2753.16

    • SENSEX: (185.57) or (0.25%) to 73828.98

  • Currencies:

    • $-¥: (0.08) or (0.05%) to 151.6000

    • $-KRW: (3.46) or (0.26%) to 1350.2600

    • A$-$: +0.00 or +0.17% to 0.6503

    • $-INR: (0.01) or (0.02%) to 83.3714

    • $-CNY: +0.00 or +0.05% to 7.2344