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StreetAccount Summary - Asian Market Recap: Nikkei +1.00%, Hang Seng +1.77%, Shanghai Composite (0.67%) as of 04:10 ET

Apr 22 ,2024

  • Synopsis:

    • Asian equities closed broadly higher Monday as a relief rally took hold. Hang Seng was best with with a 1.8% gain with strong gains in Seoul and Singapore. Southeast Asia was higher, India seeing solid gains. Taipei saw more losses to follow on from last week's rout, mainland China stocks remained in the red all day. US futures indicate a higher open, Europe ticking higher at the open with the FTSE100 hovering near a record high. US dollar treading water, AUD stronger, yen and yuan unchanged. Treasury and JGB yields higher across tenors. Crude oil and gold significantly lower on an easing of middle east tensions; industrial metals mixed. Cryptocurrencies gaining.

    • Asia equities largely rebounded in a minor risk-on rally after the weekend passed with no further escalation in the Middle East conflict. Focus returned to macroeconomic and corporate results due later this week with the Fed's preferred inflation and growth parameters due, as well as results from a string of technology-related stocks. Today, the PBOC left its benchmark 1Y and 5Y rates unchanged as expected but analysts repeated they expect future RRR cuts as a preferred method of monetary policy easing.

    • Asia technology stocks still under pressure in the wake of TSMC's outlook statement, Nvidia's 10% stock loss, and the collapse in Super Micro Computer's stock price last week. Monday, Taiwan tech stocks continued to struggle along with Samsung Electronics, although the overall Kospi benchmark rallied after the country's finance minister vowed to follow through with the Value-up corporate reform program. Elsewhere, BOJ Governor Ueda reiterated the bank's policy will remain accommodative and flagged an eventual JGB purchase taper. Economic data was limited to Indonesia trade, which showed a continuing pattern of lower exports.

    • Li Auto (2015.HK) became the latest EV producer to cut car prices as the market-share battle heated up in China. Tencent (700.HK) is to release the "Dungeon and Fighter" mobile game on 21-May following seven years of development by Nexon Games (225570.KS), and several months after receiving a new game licence. Tesla is considering placing a KRWT order for electrodes with LG Energy Solution (373220.KS). Energy Fuels (EFR.CN) is to buy Base Resources (BSE.AU) in a share and dividend deal for an implied equity value of A$375M. Emirates NBD Bank is weighing a bid for India's Yes Bank (~532648.IN~) with proposals from several banks expected to be submitted by the end of April.

  • Digest:

    • Super Micro Computer, Nvidia reverberations extend to Asia tech:

      • Nikkei discussed Asia tech weakness Monday attributed to negative implications from Friday's selloff in the US. While the primary trigger was the 23.1% collapse in Super Micro Computer (SMCI) after delaying in its Q3 results, most Asia names were impacted by direct exposure to Nvidia (NVDA), which dropped 10%. All companies mentioned were tracking notable losses in early afternoon trading Hong Kong time -- SK Hynix (000660.KS), Samsung Electronics (005930.KS), TSMC (2330.TT), ASE Technology (3711.TT). Japan chip bellwether stocks also fell sharply -- Tokyo Electron (8035.JP), Advantest (6857.JP), Renesas (6723.JP). AI names under heavy pressure amid discussions about overextension -- Quanta Computer (2382.TT), Inventec (2356.TT). Article cited KGI Securities Investment Advisory warning that Taiwan tech is vulnerable to a combination of a correction in AI boom, disappointing manufacturing recovery and delay in Fed rate cuts. Latest US weakness follows global reverberations from TSMC's guidance downgrade that triggered broad-based profit-taking in Asia chip-related stocks Friday (Nikkei).

    • Little attention on China LPR fixing:

      • LPRs were unchanged as expected with the 1-year rate at 3.45% and 5-year at 3.95%. Recall the preceding MLF operation left the 1-year rate steady, while speculation of an LPR diversion has dissipated since the surprise record 5y LPR cut in February. Also, yuan weakness featuring more prominently as a perceived barrier against rate cuts, shifting more of the immediate attention on FX policy, though there have been no notable changes in policy rhetoric. Some thoughts PBOC likely to prefer cuts to RRR over policy rates. Broader narrative has shifted as ongoing calls for forceful stimulus has been mixed with recent thoughts that stronger than expected Q1 macro data will lessen the urgency among policymakers to deliver new measures. This view sees only negative data or credit events rekindling focus on growth support. RRR cuts remain on the table after PBOC in March flagged room for further easing. However, while Bloomberg's poll indicated easing expectations increased to 50 bp in H2 as of March from 25 bp in February, a more recent Reuters survey showed expectations were limited to 25 bp in Q3.

    • BOJ Governor Ueda reinforces gradual policy normalization trajectory:

      • Reuters cited additional comments from Governor Ueda in Washington on Friday that BOJ will "very likely" raise rates if underlying inflation continues to gather momentum and begin reducing its huge bond buying at some point in the future. Added that policy must remain loose for the time being as underlying inflation remains "somewhat below" its 2% target, and long-term inflation expectations are still near 1.5%. Reassured they will proceed cautiously while assessing the impact of the March policy changes and then consider further adjustment as deemed appropriate. Reiterated BOJ will scale back JGB purchases, though timing and magnitude are yet to be determined. Said they would take time in searching for a strategy "irrespective of what the data will say in the near future." Latest Reuters consensus poll found two-thirds of economists look for the next rate hike to come this year. Yet views remain divided -- 21 of 61 picked Q3 while 17 of 55 chose Q4. No responses predicted a move before June-end. Separately, 91% expect FX intervention at some level to stem further yen depreciation with 76% pointing to a trigger point of 155 vs dollar.

    • Yen looms over BOJ policy in the near term:

      • Nikkei's early preview of this week's BOJ meeting noted few expectations of follow-up policy changes so soon after the March decision to end NIRP and YCC. MPC seen focusing on financial market developments and confirmation of a virtuous wage/price cycle against the backdrop of inflation risks from yen depreciation. Article suggested yen weakness adding pressure on BOJ to raise rates. Noted currency has fallen about 5 yen per dollar since the March MPM, while fading Fed rate cut expectations entrenched projections the US-Japan rate gap will remain wide. With only 2% of respondents in a QUICK poll looking for another rate hike this week, story cited thoughts that a move now would give the impression that monetary policy is influenced by FX rates. Cited most BOJ internal views that current phase of yen weakness is temporary and hence not expected to impact trend inflation, though some see the possibility that a continuation could push up inflation through various channels. The other main focus will be on the first FY26 inflation forecasts in the Outlook Report, expected to be set at around 2% while an upward revision to the FY24 forecast of 2.4% will be up for discussion.

    • Japan earnings spotlight on semiconductors, autos, domestic demand:

      • Nikkei previewed Japan peak earnings season, starting with Tuesday's results from Nidec (6594.JP), Disco (6146.JP) and Advantest (6857.JP). Broader attention on guidance and shareholder payouts against backdrop of recent turbulence from fading Fed rate cut expectations and escalating Middle East tensions. Nikkei-compiled data shows companies ending their financial year in March are set to post record net profits for the third straight year, supported by Covid reopening, yen weakness and price hikes. In light of the equity correction since the March peak, article suggested reassurance on the outlook from guidance stands to revive optimism. Prospects for semiconductor names are still bullish on the back of smartphone and PC demand in combination with generative AI, while global producers are actively investing in capital. Spotlight to shift to automakers in early May, recalling prior performance was boosted by normalizing semiconductor supplies and yen depreciation. Noted yen has fallen from the average USD/JPY rate of 145 in the previous year, though most firms are bracing for a trough which could translate to smaller FX windfall gains. Theme to shift to domestic demand later in May with results from leisure and transport sectors.

    • Notable Gainers:

      • +5.3% 700.HK (Tencent Holdings): to release 'Dungeon and Fighter' mobile game on 21-May

      • +4.7% 4519.JP (Chugai Pharmaceutical): signs license agreement with Roche for zilebesiran

      • +3.1% 373220.KS (LG Energy Solution): Tesla reportedly to place KRW6T order for electrodes

      • +1.6% 507685.IN (Wipro): reports Q4 consolidated EPS INR5.41 vs StreetAccount INR5.30

      • +0.0% 293.HK (Cathay Pacific Airways): reports March traffic +38.1% y/y

    • Notable Decliners:

      • -8.4% 2015.HK (Li Auto): cuts price of MEGA by CNY30K to CNY530K

      • -2.4% 3034.TT (Novatek Microelectronics): UMC withdraws from Novatek's board for the first time since Novatek separated from UMC in 1997

      • -2.0% 7201.JP (Nissan Motor): revises FY guidance downward; guides FY revenue ¥12.600T vs prior guidance ¥13.000T and FactSet ¥12.837T, operating profit ¥530.00B vs prior guidance ¥620.00B and FactSet ¥620.06B, and lowers volume outlook

      • -1.8% 000001.CH (Ping An Bank): reports Q1 revenue CNY38.77B vs FactSet CNY40.98B, NII CNY25.16B, (22%) vs year-ago CNY32.12B

      • -0.3% 762.HK (China Unicom (Hong Kong)): reports Q1 net income attributable CNY5.61B, +9% vs year-ago CNY5.16B, revenue CNY99.50B, +2% vs year-ago CNY97.22B

  • Data:

    • Economic:

      • No economic data today

    • Markets:

      • Nikkei: 370.26 or +1.00% to 37438.61

      • Hang Seng: 287.55 or +1.77% to 16511.69

      • Shanghai Composite: (20.67) or (0.67%) to 3044.60

      • Shenzhen Composite: (8.30) or (0.49%) to 1678.26

      • ASX200: 81.90 or +1.08% to 7649.20

      • KOSPI: 37.58 or +1.45% to 2629.44

      • SENSEX: 333.89 or +0.46% to 73422.22

    • Currencies:

      • $-¥: +0.02 or +0.01% to 154.6480

      • $-KRW: +3.81 or +0.28% to 1378.5300

      • A$-$: +0.00 or +0.19% to 0.6429

      • $-INR: (0.02) or (0.02%) to 83.3641

      • $-CNY: +0.00 or +0.04% to 7.2425

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