Apr 23 ,2024
Synopsis:
Asian equities ended mostly higher Tuesday. Strong gains in Hong Kong and Singapore; Taiwan and India also higher. Japan held on to a modest rise, Australia and most of Southeast Asia also higher including Malaysia at 22-month peak. South Korea ended a few points lower while mainland China bourses saw losses for a third consecutive day. US futures higher, Europe opened up with FTSE100 at a fresh record high. US dollar dipping slightly, AUD stronger for a time before falling back, yen and yuan quiet. Treasury and JGB yields mixed, CGB 10Y yield breaking to fresh record low. Crude futures slightly higher following recent losses but Brent still below $90. Gold sharply lower again for a second day. Industrial metals mixed.
Asia stocks consolidated gains from Monday with a similar pattern etched out: Hong Kong higher while mainland China stocks were lower, technology stocks mixed in South Korea and Taiwan, Japan's boards saw more nervous gains amid a string of yen intervention warnings. Another 24 hours without an escalation in the Middle East plus a recovery overnight in US-based tech stocks provided fresh support for regional equities, with potential for more positive catalysts later in the week as earnings ramp up and inflation data gets posted. Forex traders also waiting for the next strong catalyst in either the dollar or yen. Today, BOJ Governor Ueda signaled another rate hike was possible if inflation accelerates in line with forecasts while the country's finance minister and a senior ruling party official also warned of currency intervention as the yen hovered near 34-year lows.
Japan flash PMI showed manufacturer sentiment stabilized while services activity strengthened. Australian PMI contracted at slower pace with business activity rising at its fastest rate n two years. India PMI expanded again. South Korean PPI inflation slowed for a second month on a m/m basis, Singapore inflation dipped by more than expected.
Saudi Aramco (2222.AB) is in talks with Hengli Group to buy a 10% plus one share stake in Hengli Petrochemical (600346.CH), and signed an agreement with Rongsheng Petrochemical (002493.CH) for the acquisition of a 50% stake in each other's subsidiary. Xiaomi (1810.HK) said it targeted 100K SU7 deliveries this year with 70K already pre-ordered. Sichuan Baicha Baido (Chabaidao) (2555.HK) fell 27% in its Hong Kong trading debut. Vodafone Idea (532822.IN) successfully raised $2.2B through an equity issue, ending fears it may collapse under a $25B debt burden.
Digest:
BOJ Governor Ueda signals inflation outlook implies more rate hikes:
Reuters reported Governor Ueda's comments in parliament, signaling BOJ will raise rates if trend inflation accelerates in line with forecasts. Added that a forecast change would also be a reason to change policy, though there are no preconceptions about the specific timing and pace. Recall numerous prior reports that BOJ's first FY26 core inflation projection to be published in the next Outlook Report would be around 2%, remaining close to the inflation target for the fifth straight year. Ueda's latest rhetoric echoed remarks in Washington emphasizing the likelihood of rate hikes if trend inflation gathers momentum while also flagging yen depreciation could warrant a policy response if there are meaningful impacts on domestic inflation. However, takeaways remained somewhat mixed as Ueda also reaffirmed the gradual pace of future normalization, noting that policy needs to remain accommodative for the time being with the inflation mandate still yet to be achieved. Earlier speech by board member Noguchi reinforced a dovish tone, confirming he wanted to leave short-term rates negative and downplayed yen depreciation risks as temporary.
US drafting sanctions against Chinese banks for aiding Russia's war effort:
According to media reports, US drafting sanctions against Chinese banks that would cut them off global financial system for aiding Russia's war in Ukraine (Reuters). China's exports to Russia hit record high in 2023 (Reuters), fanning concerns Beijing is sidestepping western sanctions on Moscow by supplying it dual-use goods with Chinese banks facilitating transactions. Reports earlier this week noted Secretary of State Blinken is set to visit China this week with a warning of punitive actions unless Beijing halts shipments of weapons-related material to Russia (FT). Cutting off Chinese banks' access to the dollar viewed as last resort option with US hoping threat alone will convince China to curb its support for Russia. Some doubts whether US would carry out such an action given it would threaten viability of Chinese banks and risk re-rupturing US-China ties. Also thoughts Europe would be more hesitant to go along with the effort given region's close trade and financial links with China.
India manufacturing PMIs expand at fastest rate in 14 years:
HSBC Flash India PMI revealed further economic growth in April as new business orders and output both expanded. April composite index reached 62.2 from March's 61.8, services rose to 61.7 from 61.2, manufacturing stable at 59.1. HSBC economist said services' expansion notable for its domestic and international new orders sub-index, while price inputs also moderated leading to higher corporate margins as customer pass through was also higher. Future readings also appear encouraging as business outlook improved further. Jobs growth most pronounced in manufacturing, steady in services. Data suggested India in line to remain fastest growing major economy in 2024. However ability to pass on prices to customers may mean inflation remains above RBI target, postponing potential rate cuts. Separately, and prior to PMI release, two RBI MPC board members said India needed rate cuts to reach economic growth potential (Reuters).
China MOF supports PBOC trading government bonds, but implications remain unclear:
Bloomberg cited a People's Daily article in which MOF called for increased coordination between fiscal and monetary policy and "improving the mechanisms of base money injection and money supply adjustment." This echoed a compilation of President Xi's statements about finance and economics where he called for the PBOC to gradually increase trading of government bonds in open market operations. Story recalled some analysts initially interpreted this as a signal of quantitative easing, which China has so far avoided. Yet most experts disagreed, arguing instead that the idea was for the PBOC to have an additional tool for liquidity injections and ensure interest rate stability in line with other major central banks. MOF remarks come amid heightened attention on fiscal debt plans as the timetable for this year's CNY1T of special treasury bonds remains unclear. MOF official refrained from providing specifics Monday, only stating that issuance will be launched in a timely manner. Bond sales have been slowed by lack of suitable projects to deploy funds raised last year. According to the article, MOF comments suggest lack of urgency for additional policy support, which could add to market concerns about insufficient stimulus.
Japan flash PMIs show manufacturers stabilizing as services strengthen:
Flash manufacturing PMI was 49.9 in April, up from 48.2 in the previous month. Declines in output, new orders and exports abated, translating to stronger growth in employment. Inventories of working capital and finished goods swung to growth. Inflation metrics also firmer with stronger growth in output and input prices. Services PMI strengthened to 54.6 from 54.1, marking the highest since May 2023. Output and new business logged higher growth. Pace of job growth was steady though the report noted ongoing impetus from capacity constraints. Inflation pressures increased as output prices rose at the fastest in ten years amid cost passthrough. Broad-based improvements left composite PMI at 52.6 vs prior 51.7. Report noted positive forward-looking signals from sustained accumulation of backlogs and pickup in aggregate hiring. Another broad theme was intensifying price pressures amid higher costs and a significant contribution from yen weakness. Passthroughs led to fastest increase in aggregate output prices in a year.
Notable Gainers:
+5.5% 2331.HK (Li Ning): reports Q1 operational update; retail sell-through of LI-NING POS increased by low-single-digit y/y
+2.5% 1810.HK (Xiaomi): targets SU7 deliveries of 100K units this year; founder/CEO Lei Jun says pre-orders for SU7 has reached 70K units as of 20-Apr
+1.9% 3038.JP (Kobe Bussan): reports March net sales ¥44.07B, +10.6% y/y
+0.5% 8306.JP (Mitsubishi UFJ Financial): reportedly considering enhancing its offer for HDB Financial Services over strategic control
Notable Decliners:
-27.5% 2555.HK (Sichuan Baicha Baidao): opens (10.1%) at HK$15.74 in trading debut
-12.0% 300122.CH (Chongqing Zhifei Biological Products): reports Q1 net income attributable CNY1.46B, (28%) vs year-ago CNY2.03B
-8.1% 259960.KS (KRAFTON): SK Square reportedly sells out of Krafton
-7.5% 011200.KS (HMM): decides to exercise KRW100B worth of convertible bonds
-4.9% 532720.IN (Mahindra & Mahindra Financial Services): Mahindra & Mahindra Financial Services discloses fraud detected at one of its branches in the North East
-2.1% 600021.CH (Shanghai Electric Power): public announcement of intention to buy up to 66.4% stake in K-Electric has lapsed
-0.9% 500325.IN (Reliance Industries): reports Q4 revenue INR2.365T vs StreetAccount INR2.324T, EBITDA INR471.50B vs StreetAccount INR424.36B
-0.3% 6758.JP (Sony): reportedly no bids for Paramount Global from Apollo and Sony have been submitted
Data:
Economic:
Japan April flash manufacturing PMI 49.9 vs 48.2 in prior month
Services PMI 54.6 vs 54.1 in prior month
Composite PMI 52.6 vs 51.7 in prior month
India April flash manufacturing PMI 59.1 vs 59.1 in prior month (01:00 ET)
Services PMI 61.7 vs 61.2 in prior month
Composite PMI 62.2 vs 61.8 in prior month
Singapore
March CPI y/y +2.7% versus consensus +3.1% and +3.4% in prior month
Markets:
Nikkei: 113.55 or +0.30% to 37552.16
Hang Seng: 317.24 or +1.92% to 16828.93
Shanghai Composite: (22.62) or (0.74%) to 3021.98
Shenzhen Composite: (3.22) or (0.19%) to 1675.05
ASX200: 34.30 or +0.45% to 7683.50
KOSPI: (6.42) or (0.24%) to 2623.02
SENSEX: 142.55 or +0.19% to 73791.17
Currencies:
$-¥: (0.01) or (0.00%) to 154.8300
$-KRW: (2.70) or (0.20%) to 1376.6300
A$-$: 0.00 or 0.00% to 0.6448
$-INR: (0.07) or (0.09%) to 83.2995
$-CNY: +0.00 or +0.03% to 7.2455
This information and data is provided for general informational purposes only. The Bank of New York Mellon and our information suppliers do not warrant or guarantee the accuracy, timeliness or completeness of this information or data. We provide no advice nor recommendation or endorsement with respect to any company or securities. We do not undertake any obligation to update or amend this information or data. Nothing herein shall be deemed to constitute an offer to sell or a solicitation of an offer to buy securities.
Please refer to "Terms Of Use".
DEPOSITARY RECEIPTS:
NOT FDIC, STATE OR FEDERAL AGENCY INSURED
MAY LOSE VALUE
NO BANK, STATE OR FEDERAL AGENCY GUARANTEE