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StreetAccount Summary - Asian Market Recap: Nikkei (1.96%), Hang Seng (0.01%), Kospi -1.01% as of 04:10 ET

Apr 05 ,2024

• Synopsis:

  • Asian equities ended lower Friday with sentiment tilting bearish as the day progressed. Losses greatest in Japan amid a strengthening in the yen overnight while South Korea's Kospi also saw some steep declines as defense and battery stocks fell. Falls in Singapore and Australia, Hong Kong flat in a choppy day's trading. Southeast Asia mixed, India hovering near record highs. US futures higher for now, Europe opened much lower as benchmarks caught up with Wall Street's late dip. US dollar regaining some ground from overnight, AUD lower following overnight gains, yen volatile amid numerous comments from officials on recent weakness. Treasury yields higher across tenors, JGB yields mixed. Crude blends steady but Brent still above $90/bl. Precious metals mixed, industrial metals under pressure.

  • A risk-off sentiment dominating Asia trading Friday as oil prices surged to $86-91/bl on Middle East war escalation potential, as well as nervousness ahead of US non-farm payrolls that may re-ignite debate on when the Fed will first cut rates. A strengthening in the yen overnight the catalyst for a selloff in Japan, especially those on the Nikkei 225 that are more sensitive to currency movements. More weight on the yen added today by BOJ Governor Ueda, who hinted a second rate hike could come over the summer, while finance Minister Suzuki and PM Kishida among officials warning authorities were ready to respond to excessive yen moves.

  • In macro developments, the RBI kept its base repo rate unchanged at 6.5% as widely expected, and held its "withdrawal of accommodation" stance unchanged too as a surging economy and easing bank liquidity concerns gave the bank additional wiggle room. Japan household spending fell by less than expected, distorted by leap year effects. Australian trade surplus narrowed with export growth capped by slump in iron ore shipments. Singapore retail sales surged y/y although seasonally adjusted were up by less; Thailand inflation in contraction for a six consecutive month; Philippines food inflation surged by the most in six months.

  • A China Oilfield Services (2883.HK) customer suspended operation of four drilling rigs in the Middle East with impact still under investigation. The merger between CK Hutchison's (1.HK) UK-based telecom unit Three and Vodafone (VOD.L) is to be referred to the local regulator for an in-depth review. Sumitomo Mitsui Banking (SMFG, 8316.JP) and Jefferies Financial are to expand their existing alliance in Canada and work together on cross-border mergers and acquisitions. Hanwha Aerospace (012450.KS) is to spin off its industrial solutions business and semiconductor equipment business from its core defense division; stock sharply lower. Samsung Electronics (005930.KS) said it expects a tenfold increase in Q1 profits as chip demand and chip prices recover.

• Digest:

  • BOJ Governor Ueda signals chance of another rate hike, FX comments contribute to yen strength:

    • In an Asahi interview, BOJ Governor Ueda indicated board members would consider an additional rate hike if the certainty of achieving the inflation target increases further. Noted the probability of reaching the goal would rapidly grow from summer into autumn as wage hikes feed through to inflation. Citing the same article, Reuters noted Ueda said a decision on whether to move this year would be data dependent as well as how much progress Japan makes toward sustainably achieving the 2% target. Despite recent softness in economic data leading to consensus forecasts of a contraction in Q1 GDP, Ueda acknowledged the chance of contraction but said it will likely prove temporary as wage growth accelerates, pushing up real household income. Added there is no need to change their assessment that the economy is recovering moderately. On yen weakness, Ueda signaled that such moves could also serve as a reason to raise interest rates if they push up inflation via higher import costs. Latter quote was cited as one of the catalysts for yen strength early Friday.

  • BOJ's Ueda reaffirms no immediate plans for balance sheet run-off:

    • Nikkei reported Governor Ueda's comments to the lower house financial affairs committee, highlighting discussions on BOJ plans for a balance sheet run-off. Ueda said JGB purchases would eventually be reduced and wants to see a decline in holdings driven by redemptions. In the near term, reiterated that JGB holdings will remain generally steady with current purchases roughly on par with redemptions. On other asset purchases, Ueda acknowledged a variety of views on ETFs, though will take time in evaluating options. In addition to J-REITs, indicated there are no thoughts of immediate drawdowns. Remarks on FX drew most of the attention. While stressing that monetary policy does not directly target yen, reiterated that economic impacts make FX a consideration in policymaking and will pay due attention to developments. Follows clearer quotes in Ueda's Asahi interview, which were cited as contributing to yen strength Friday morning in combination with geopolitical risks and positioning ahead of the US payrolls report as sentiment swung to risk aversion (Nikkei).

  • RBI keeps benchmark interest rate and policy stance unchanged:

    • The Reserve Bank of India held its benchmark repo rate unchanged at 6.5% as widely expected, and also kept its "withdrawal of accommodation" stance rejecting chance to move to "neutral". The bank's MPC voted five to one in favor of keeping rates and stance unchanged. Governor Shaktikanta Das said bank was cognizant of inflationary pressures, last mile of bringing inflation down proving a challenge but "inflation elephant is returning to the forest". Said domestic growth remained strong amid stronger rural demand, moderating inflation, sustained momentum in industrial output, all of which should support domestic consumption. Global economic outlook also improved, monsoon expected to be normal over next three months but geopolitical tensions, adverse weather both upside risks. Liquidity conditions had eased in March with some surplus seen. FY 2023-24 GDP growth advanced forecast 7.6%; 2024-25 FY GDP forecast kept at 7.0%, inflation forecast also unchanged at 4.5%.

  • Japan household spending falls by less than expected, but headline boosted by leap year:

    • Household spending fell 0.5% y/y in February, compared to expectations of a 2.9% decline and follows 6.3% drop in the previous month. However, MIIC supplementary release noted spending fell 2.7% excluding leap year effects. Adjustments did not materially change components aside from a decline in food & beverages though all categories showed weaker momentum relative to unadjusted data. Broader attention has been on suppression from inflation effects. While salaried worker household incomes remained negative in real terms, nominal gross and disposable incomes edged higher for the second straight month while nominal spending rose 3.0% y/y (albeit unadjusted for leap year). BOJ's consumption activity index rose 0.8% m/m, marking the second straight increase and leaves the Q1 trajectory marginally positive. Jan-Feb so far driven by growth in non-durables, outweighing a third straight decline in durables, while services edged lower. Recall that consensus widely looks for a Q1 GDP contraction with temporary auto output suspensions prompted by certification scandals and the Noto Peninsula earthquake cited as the main swing factors. However, prolonged lackluster private consumption has dampened sentiment, amplifying hopes that this year's historic wage hikes will lead to growth real incomes. GDP expected to rebound from Q2.

  • Yen intervention discussions continue:

    • In a Reuters interview Thursday, former FX chief Tatsuo Yamazaki suggested authorities will likely intervene if yen breaks out of a range it has been in for years and falls well below 152 per dollar. Noted the fact that authorities have described recent yen declines as driven by some "speculative moves" suggest authorities are seriously contemplating whether to step in. Argued Japan would not face much scrutiny for intervention because it would not put Japan's exports at a competitive advantage against other countries. Yamazaki said BOJ's lack of confidence in the policy outlook likely offered speculators a reason to sell yen and the bank should have clearly signaled another rate hike this year to keep bears at bay. Meanwhile, others see a higher bar for yen intervention. In a separate Reuters interview, Yamazaki's successor as FX head Hiroshi Watanabe said intervention is unlikely unless yen plunges below 155, citing lower volatility compared to 2022 when the last operation was conducted. Added authorities likely would not see a break of 152 alone as justification for action, whereas 155 would be a psychologically important level and would draw a lot of media attention.

  • Notable Gainers:

    • +14.7% 3918.HK (NagaCorp): reports Q1 operational highlights (gaming); EBITDA $80.3M vs year-ago $60.6M

    • +1.8% 2702.JP (McDonald's Holdings): reports March same-store sales +9.6% y/y

    • +1.7% 066570.KS (LG Electronics): reports preliminary Q1 operating income KRW1.333T vs StreetAccount KRW1.294T

  • Notable Decliners:

    • -16.3% 2883.HK (China Oilfield Services): customer in Middle East suspends operation of four drilling rigs

    • -10.4% 5707.JP (Toho Zinc Co.): notes subsidiary Abra Mining placed into voluntary administration

    • -5.8% 7741.JP (HOYA Corp): reports IT system incident on 30-Mar; while full effects, extent and nature of incident continue to be investigated, systems for some production plants and ordering system for several products have been affected

    • -4.2% 4527.JP (Rohto Pharmaceutical): jointly with Mitsui & Co to acquire Eu Yan Sang International Ltd for SG$800M (¥89.58B)

    • -3.9% 6146.JP (DISCO Corp): reports preliminary Q4 sales ¥86.5B vs year-ago ¥66.6B

    • -1.7% 1.HK (CK Hutchison Holdings): UK's CMA refers Vodafone UK, Three UK merger for an in-depth investigation

    • -0.9% 005930.KS (Samsung Electronics): guides Q1 revenue KRW71.00T vs StreetAccount KRW71.862T

    • -0.9% 373220.KS (LG Energy Solution): reports preliminary Q1 revenue KRW6.129T vs StreetAccount KRW6.382T

• Data:

  • Economic:

    • Japan February

      • Household spending (0.5%) y/y vs consensus (2.9%) and (6.3%) in prior month

        • Spending +1.4% m/m vs (2.1%) in prior month

    • Australia February

      • Building approvals (1.9%) m/m vs consensus +3.0% and (1.0%) in January

    • Singapore February

      • Retail sales nominal y/y +8.4% versus +1.6% in prior month

  • Markets:

    • Nikkei: (781.06) or (1.96%) to 38992.08

    • Hang Seng: (1.18) or (0.01%) to 16723.92

    • Shanghai Composite: Closed

    • Shenzhen Composite: Closed

    • ASX200: (44.00) or (0.56%) to 7773.30

    • KOSPI: (27.79) or (1.01%) to 2714.21

    • SENSEX: (12.96) or (0.02%) to 74214.67

  • Currencies:

    • $-¥: (0.01) or (0.01%) to 151.3310

    • $-KRW: (1.10) or (0.08%) to 1350.3400

    • A$-$: (0.00) or (0.17%) to 0.6578

    • $-INR: (0.30) or (0.36%) to 83.2547

    • $-CNY: (0.00) or (0.03%) to 7.2329