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StreetAccount Summary - Asian Market Recap: Hang Seng +0.55%, Shanghai Composite +1.16%, ASX +0.70% as of 04:10 ET

May 06 ,2024

• Synopsis:

  • Asia equities traded higher almost everywhere Monday. Mainland China led as it caught up post last week's holidays, Hong Kong higher after a choppy start. Solid gains in Sydney and Taipei on read through to Friday's close on Wall Street. India and Southeast Asia all higher. New Zealand the outlier with a sharp loss. Japan and South Korea closed for a holiday. US futures higher, Europe with a bright start. US dollar unchanged, yen weaker against multitude of crosses, offshore yuan weaker and onshore stronger as it marks to market following break. Crude prices higher, gold up and silver up notably, industrial metals supported. Cryptocurrencies higher.

  • Asia equities higher Monday largely thanks to a strong performance on Wall Street Friday, and in particular the Nasdaq, which helped Asia tech-orientated boards to outperform Monday. Few regional drivers of note to change market direction either which see upwards as a point of least resistance for now. New Zealand an outlier with a loss on its main board on disappointing results at heavyweight Spark, India underperforming on new RBI draft guidelines on project financing. China surged on digestion of reports last week the Politburo was exploring new measures to help the housing sector, and hints of a further RRR cut ahead. The yuan also played catch-up after the PBOC set a strong mid-point first thing.

  • China Caixin services PMI remained buoyant relative to the official series. Mainland press talked up travel activity over last week's holidays but analysts focused on consumption. Yen intervention chatter diminished after US Treasury Secretary Yellen warned over risks to central bank support for currencies. Indonesia Q1 GDP was in line with expectations but BI officials continued to warn it would intervene again to support the rupiah. More dire demographic data out of Japan and South Korea pointed to negative economic impact, particularly surrounding labor in decade ahead.

  • Country Garden (2007.HK) reported contracted sales of CNY3.85B in April, a sharp slide from 2023's CNY22.69B; company to face two bond-payment deadlines this week. Geely Auto (175.HK) is said to be looking at raising $368M in a US IPO of its EV Zeekr unit. Foxconn (Hon Hai Precision 2317.TT) reiterates it expects a rise in Q2 revenue after reporting record April sales. Qantas (QAN.AU) agreed to pay A$100M civil fine and A$20 into a customer remediation program in relation to flight cancellation process.

• Digest:

  • China Caixin Services PMI in expansion for 16th straight month in April:

    • Caixin services PMI was 52.5 in April, in line with consensus and came lower than March's 52.7, still registered 16^th consecutive month in expansion. New business growth, fastest since May-2023, underpinned expansion in April and supported by improved demand and larger customer base. Export business increased at fastest pace in ten months, driven by better external market conditions and growing tourism activity. Payroll numbers dropped for third straight month as work outstanding was little changed. Business confidence rose to highest since December. Average input costs continued to increase, accelerating from March due to higher material, labor and energy costs while output price inflation also higher. Caixin Composite PMI rose to 52.8 in April from prior month's 52.7 as overall business activity expanded at fastest pace since May-2023. Caixin economists highlighted weak expectations remain one of major challenges facing Chinese economy, leading to growing pressure on employment and greater risk of deflation and called for consistent efforts to be made to maintain current economic recovery momentum.

  • Former RBA Governor Lowe warns of two-way risks to rate outlook:

    • In an AFR interview, former RBA Governor Lowe said he still sees two-way risks to the rate outlook after one instance of upside surprise to inflation, underlying inflation pressure remains, and achieving the 2.5% RBA inflation target is not yet guaranteed. Relatively hawkish tilt fits with Macquarie Group chairman Stevens' comments Friday who set a high bar for evidence of stably lower inflation. Meanwhile, recent sell-side notes reflected attention on more balanced RBA forward guidance and particular resonance from the latest policy statement clarifying the Board is "not ruling anything in or out" regarding the path of rates. Rabobank sees two 25 bp hikes in August and November. Citi acknowledged a higher chance of a hike but warned RBA needs to move by June or else faces market credibility issues. Goldman Saches attributed only a 20% probability of a restart to the tightening cycle, sticking with their main scenario of one 25 bp cut in November. Nomura pushed back the first 25 bp rate cut to November from August and sees the cash rate at around 3.60% by mid-2025. ANZ continues to look for a November cut while noting risks skewed later rather than sooner, while projecting total 75 bp easing. CBA shifted their rate cut forecast to November from September and now sees only one 25 bp ease, compared with 75 bp previously.

  • Mainland China listed firms' net profits log first decline in five years:

    • Nikkei cited DZH data showing ~5,200 non-finance companies listed in mainland China logged aggregate net profits of CNY2.85T ($394B) in 2023, down 3% from the previous year and marks the first decline in five years. Weakness extended into Q1 with a 5% drop. Story noted property sector drags bled into other industries combined with deflationary headwinds. Notably, property companies posted a net loss of CNY13.5B last year for the first year in the red going back to 2000. Steel companies reported a 13% decrease in net profit last year and nonferrous metal earnings fell 29%. Oil and chemicals suffered an 18% decline. Main bright spot was autos, where 282 companies, including parts suppliers, logged a 48% increase to CNY131.5B. Article noted capital efficiency stagnant with ROE declining 0.7 ppt to 7.7%, lagging behind Japan and the US tracking above 9% and 18%, respectively. Separate Nikkei report highlighted bank net interest margin compression with 39 out of 58 lenders falling below the warning line of 1.8%.

  • Indonesia Q1 GDP in line but BI warns on currency:

    • Indonesia's economy expanded 5.1% in Q1 as government subsidies and holiday spending spiked; growth was in line with consensus estimates and fastest quarterly expansion in more than ten years. However, on q/q basis, economy contracted 0.8% against forecast of +1.6%; analysts warned slowdown may reflect tighter household budgets amid inflation, high interest rates. Economists also noted Q1 spending boosted by one-off election spending that pushed public consumption up 20% y/y, and Ramadan holiday spending that was one quarter earlier than normal. Cash distribution for low-income households, salary hike for civil servants prior to election also contributed to one-off boost. Separately, FT reported Bank Indonesia official said bank was "readying for the worst" in face of hawkish Federal Reserve and rupiah weakness. Said bank would provide more support for rupiah following rate hike and direct intervention last month.

  • China-EU trade tensions percolate during Xi's visit:

    • Bloomberg cited a La Tribune Dimanche interview with French President Macron, calling for an update of economic ties with China ahead of Xi's State visit. Macron cited China's excess capacity in many areas and large exports to Europe. Meanwhile, Reuters sources indicated European Commission has warned BYD (1211.HK), SAIC (600104.CH) and Geely (175.HK) they have not supplied sufficient information for its anti-subsidy investigation where lack of compliance could lead to tariff hikes. China Chamber of Commerce to the EU said the reported allegations of non-cooperation were unfounded and added companies viewed some of the EU's demands as excessive. Follows investigation into China's procurement of medical devices launched last week (Reuters), adding to existing probes launched last month into wind turbines and solar panels. In response, China has opened an anti-dumping probe on brandy imported from EU, nearly all of which comes from France (Reuters). Another Reuters discussion noted lack of EU consensus on their China stance could undermine diplomatic influence.

  • Notable Gainers:

    • +8.3% 2038.HK (FIH Mobile): reports Q1 net income (HK$20.4M) vs year-ago (HK$52.3M)

    • +7.4% 2015.HK (Li Auto): reports 18-Apr to 5-May orders of more than 41K L6 vehicles

    • +6.3% 2317.TT (Hon Hai Precision Industry): reports April revenue NT$510.90B, +19.0% y/y

    • +2.6% WBC.AU (Westpac Banking): reports H1 NPAT ex-items A$3.51B; A$1B increase in share buyback program to A$2.5B

  • Notable Decliners:

    • -7.1% 500114.IN (Titan): reports Q4 standalone EPS INR8.85 vs FactSet INR9.55

    • -5.0% 543396.IN (One 97 Communications (Paytm)): president/COO Bhavesh Gupta resigns for personal reasons, effective close of business 31-May

    • -2.9% 688002.CH (Raytron Technology): assessing impact of US adding subsidiary to Specially Designated Nationals list

• Data:

  • Economic:

    • China April

      • Caixin services PMI 52.5 vs consensus 52.5 and 52.7 in prior month

        • Caixin Composite PMI 52.8 vs 52.7 in prior month

  • Markets:

    • Nikkei: Closed

    • Hang Seng: 102.38 or +0.55% to 18578.30

    • Shanghai Composite: 35.90 or +1.16% to 3140.72

    • Shenzhen Composite: 36.33 or +2.07% to 1792.41

    • ASX200: 53.40 or +0.70% to 7682.40

    • KOSPI: Closed

    • SENSEX: 35.60 or +0.05% to 73913.75

  • Currencies:

    • $-¥: +0.79 or +0.52% to 153.8580

    • $-KRW: +3.59 or +0.26% to 1359.6900

    • A$-$: +0.00 or +0.11% to 0.6622

    • $-INR: +0.09 or +0.11% to 83.4729

    • $-CNY: (0.02) or (0.33%) to 7.2132