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StreetAccount Summary - Asian Market Recap: Nikkei (1.94%), Hang Seng (2.12%), Shanghai Composite (1.65%) as of 04:10 ET

Apr 16 ,2024

• Synopsis:

  • Asian equities ended sharply lower Tuesday although many indices finished away from their lows. Tech-heavy South Korea and Taiwan shed the most with steep losses also in Australia, Japan and Hong Kong. Mainland China stocks also fell on disappointing economic activity numbers that offset better-than-expected GDP growth data. Southeast Asia all lower, India's markets trading at three-week lows. Thailand closed for a holiday. US futures point to a weak opening, Europe opened sharply lower at month-long lows. US dollar higher again although off its peaks; AUD and offshore yuan notably weaker, yen at 34-year lows, rupee at record low. Crude blends higher early on Middle East escalation but since pared gains. Gold back near record highs, industrial metals trending lower. Cryptocurrencies continuing their selloff although at a decelerated pace.

  • Sharp risk-off session in Asia Tuesday as political tensions in the Middle East remained elevated and the US dollar pushed through to five-month highs. Tel Aviv and Tehran swapping threats following Iran's missile and drone attack, but analysts pointed to Iran's 'telegraphed' launches, and comments that it considered the matter closed, as attempts at de-escalation. Israel also said it is not looking to spark all-out war.

  • Nevertheless, flight to haven assets continued Tuesday as gold re-approached record highs and the US dollar appreciated further for a time before settling back. The latter weakened Asia currencies across the board with the Australia and New Zealand dollars, Indonesia rupiah, India's rupee and South Korean won among crosses finding multi-year, multi-month or record lows. The offshore yuan fell to a five-month low following weaker PBOC midpoint fixing that hinted at a bigger tolerance for yuan depreciation. Yen stable near 34-year low as Finance Minister Suzuki issued another verbal warning noting Japan ready to take all necessary steps to combat extreme volatility.

  • China Q1 GDP growth came in better-than-expected and in-line with stronger Jan-Feb macro data but March industrial production growth and retail sales data were below forecasts. New home prices fell at the sharpest pace in nine years while quarterly industrial capacity utilization fell to its lowest since the Covid era. Central banks in Indonesia and Philippines joined in warnings over currency weakness. Singapore's PM Lee said he will step aside in mid-May for Lawrence Wong to take over in a move that may signal an early general election.

  • Hang Seng Bank (11.HK) asked a Hong Kong court to begin the liquidation of Times China Holdings (1233.HK) over a total of $156M in financial obligations. Private equity groups are said to be losing interest in acquisition of Samsonite International (1910.HK). Jio Financial Services (543940.IN) is to team up with Blackrock for a wealth management and broking joint venture in India. Star Entertainment (SGR.AU) revealed 'bulk processing' of customer due diligence checks, former chair and CEO alleged to have schemed against casino regulator.

• Digest:

  • China GDP beats, activity data mostly disappoint:

    • GDP expanded 5.3% y/y in Q1, above expectations of 4.6% and follows 5.2% in the previous quarter. Sequential growth was 1.6% q/q vs consensus 1.4% and revised 1.2% (from 1.0%) in Q4. Results were more in line with bullish forecasts following stronger than expected Jan-Feb data, though optimism was dampened after early March indicators softened. March activity data were mixed. Industrial production missed with 4.5% growth vs consensus 6.0% and 7.0% in Jan-Feb. Capacity utilization was 73.6% in Q1 vs 74.3% a year earlier. Retail sales growth also disappointed at 3.1% y/y vs consensus 4.8% and prior 5.5%. Most categories remained positive after the conclusion of the LNY holiday period, though catering revenue slowed, and autos declined. Fixed asset investment was the only bright spot, up 4.5% YTD, above consensus 4.0% and prior 4.2%. Infrastructure accelerated to 6.5% from 6.3%, yet closely watched real estate component deteriorated to a 9.5% decline from 9.0%. Details implied main driver was tighter financing conditions while housing sales logged smaller contraction. Urban unemployment rate edged down to 5.2% from 5.3%, matching expectations.

  • China sets weaker yuan reference rate in signal depreciation could continue:

    • PBOC Tuesday set notably weaker daily reference rate for yuan in signal it could allow more flexibility in onshore USD-yuan trading. Analysts said fixing reflects 'reality' of significantly stronger US dollar in recent weeks. Since November, PBOC set parity rate in tight band around 7.10 per dollar; today's 7.1028 per dollar fixing permits onshore yuan to trade within 2.0% range, was trading close to edge of permitted band in early trade Tuesday. Offshore yuan was weaker by 0.2%. Bloomberg reported state-owned banks actively selling dollars to support yuan in onshore market. Noted weaker yuan could benefit China's exporters but may restrict PBOC's ability to ease monetary policy. Article also noted yuan weakening extended declines in Australian dollar, Korean won to multi-month lows after overnight falls post surge in US Treasury yields, US dollar on retail data. Indonesia rupiah also under pressure first thing.

  • China home prices continue to fall in March despite ramped-up measures:

    • New home prices in China extend declines into ninth month in March, dropping 0.3% m/m and matching the drop in February, based on Reuters calculation of NBS data. Meanwhile, prices were 2.2% y/y lower, much faster than 1.4% drop in prior month and were steepest decline since August-2015. 57 out of the 70 cities surveyed reported m/m price drop in new home prices, down from 59 in February; while 69 cities witnessedm/mdeclines in second-hand home prices, up from February's 68. Goldman noted China's housing slump has no end in sight, despite policymakers have been ramping up measures to revive demand and alleviate debt issues (Bloomberg). Many of policies seen as piecemeal and have only limited short-term impact, while worries over home values, unfinished projects and uncertain economic outlook have kept homebuying sentiment at bay, dashing hopes for full-blown recovery during traditional busy season in spring. CNBC noted Nomura's Richard Koo said China needs to convince people that home prices on their way up in order for growth to pick up.

  • BOJ said to be taking more discretionary approach to policy:

    • Reuters sources said BOJ is shifting to a more discretionary approach in setting policy, with less emphasis on inflation after having ended its unconventional easing program in March. While no change is expected at the April 25-26 MPM, markets focused on hints for the next move. A few sources suggested that a BOJ inflation forecast holding around its 2% target in FY26 would not serve as a strong hint of a near-term rate hike. BOJ seen taking a more holistic approach based on the broader set of economic indicators. Article noted many in the market expect another rate hike this year with bets split between July or Q4. Recalled Governor Ueda's recent remarks that a decision would be data-dependent and rates would be adjusted according to the distance towards sustainably and stably reaching 2% inflation. Story said this suggests BOJ could hike rates regardless of its inflation forecasts, as long as it becomes more convinced that stable inflation will be achieved. Ueda's new approach heightens the importance of upcoming data, particularly those on wages and consumption. Analysts anticipate a potential rebound in consumption later this year, supported by wage hikes, summer bonus payments and scheduled government cash payouts around June.

  • Dollar strength complicates Japan propensity for FX intervention:

    • Nikkei extended discussions of yen weakness after USD/JPY moved into the 154 level overnight, marking the highest since June 1990. Story highlighted dollar strength as the main factor. Latest price action was attributed to stronger than expected US retail sales, leading Treasury yields higher. DXY rose to 106, the highest since November 2023. Nikkei's gauge of NEER showed dollar up 1% over the past week, standing out as the only gainer among major currencies. Mizuho Bank cited CFTC data showing speculative long dollar positions totaled $17.6B as of 9-Apr, the largest since September 2022. Geopolitical risks emerged as another factor following Iran's attack on Israel, prompting haven demand (no mention of flight to yen) for dollar as part of broader risk aversion away from equities. While noting markets increasingly bracing for MOF FX intervention, article flagged dollar strength poses headwinds. Reiterated that intervention would have limited impact under these conditions, while inviting scrutiny from G20 peers. As such, traders have continued to sell yen against dollar. Cited a local dealer suggesting that speculators are unlikely to meaningfully reduce long dollar positions while the US-Japan rate gap remains conducive for yen carry trades. Still, markets now testing MOF's tolerance with speculation the line in the sand has moved to 155.

  • Notable Gainers:

    • +6.9% 6594.JP (Nidec): to expand production capacity for water-cooling modules

    • +2.2% 543940.IN (Jio Financial Services): enters into JV with BlackRock for wealth management and broking business in India

    • +2% 097950.KS (CJ CheilJedang): confirms it's reviewing strategic plans for CJ Feed & Care following media reports the animal feed business was likely to be put on the block

    • +1.8% 4902.JP (Konica Minolta): signs MoU with FUJIFILM Business Innovation to explore JV for procurement of raw materials and part

    • +0.01% 300750.CH (Contemporary Amperex Technology): reports Q1 revenue CNY79.77B vs FactSet CNY90.03B

  • Notable Decliners:

    • -9.2% 3086.JP (J. FRONT RETAILING Co.): reports FY revenue ¥407.01B vs FactSet ¥407.74B; issues medium-term business plan for FY24-26 - targets FY26 consolidated business profits ¥52.0B

    • -7% 9831.JP (Yamada Holdings): guides FY revenue ¥1.592T vs prior guidance ¥1.686T, operating profit ¥41.40B vs prior guidance ¥50.50B

    • -4.3% 1910.HK (Samsonite International): PE firms reportedly losing interest in acquisition of Samsonite International

    • -2.7% 005930.KS (Samsung Electronics): receives up-to-$6.4B (KRW8.855T) CHIPS Act grant to expand production in Texas

• Data:

  • Economic:

    • China

      • Q1 GDP +5.3% y/y vs consensus +4.6% and +5.2% in prior quarter

        • Q1 GDP +1.6% q/q vs consensus +1.4% and revised +1.2% in prior quarter

      • March industrial production +4.5% y/y vs consensus +6.0% and +7.0% in Jan-Feb

      • Retail sales +3.1% y/y vs consensus +4.8% and +5.5% in Jan-Feb

      • Fixed asset investment (YTD) +4.5% y/y vs consensus +4.0% and +4.2% in Jan-Feb

      • Unemployment rate 5.2% vs consensus 5.2% and 5.3% in Jan-Feb

      • New house prices (0.3%) m/m vs (0.3%) in prior month (Reuters calculation)

  • Markets:

    • Nikkei: (761.60) or (1.94%) to 38471.20

    • Hang Seng: (351.49) or (2.12%) to 16248.97

    • Shanghai Composite: (50.31) or (1.65%) to 3007.07

    • Shenzhen Composite: (64.24) or (3.77%) to 1638.44

    • ASX200: (140.00) or (1.81%) to 7612.50

    • KOSPI: (60.80) or (2.28%) to 2609.63

    • SENSEX: (623.17) or (0.85%) to 72776.61

  • Currencies:

    • $-¥: +0.11 or +0.07% to 154.3870

    • $-KRW: +4.76 or +0.34% to 1392.8800

    • A$-$: (0.00) or (0.47%) to 0.6417

    • $-INR: (0.05) or (0.06%) to 83.5274

    • $-CNY: +0.00 or +0.01% to 7.2385