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StreetAccount Summary - Asian Market Recap: Nikkei +1.57%, Hang Seng (0.53%), Shanghai Composite +0.22% as of 04:10 ET

May 07 ,2024

• Synopsis:

  • Asia equities ended tilted higher Tuesday with the MSCI Asia Pac ex Japan index near two-year high. Strong gains for South Korea and Japan as they returned from a break, Taiwan also sharply higher. Australia closed at its daily highpoint post RBA decision. Southeast Asia mixed, Malaysia at two-year high, Thailand also gained. Greater China mixed as Hong Kong broke a 10-day winning streak while mainland boards hugged the flatline. India down as PSU banks weigh for a second day with local board volatility at 15-month high. US futures higher, Europe opened with modest gains. US dollar edging higher, AUD lower on RBA, yen and yuan unchanged. Treasury yields mixed, JGB yields lower. Crude oil higher, precious metals lower, industrials mixed.

  • Asia stocks gained for a second successive day on read through to a strong showing on Wall Street overnight, with tech stocks again following the Nasdaq higher. Renewed optimism the Fed will cut rates this year behind the move in the US; Treasury yields fell alongside the dollar, giving Asia exporters extra support Tuesday. The RBA held steady on rates, as widely forecast with the accompanying statement also largely within expectations however the market interpreted the developed as dovish to send the Australian dollar lower and equities higher.

  • Further weakness in the yen after currency diplomat Kanda hinted authorities would not intervene in the short-term while the won also dipped just as data revealed the largest drop in forex reserves in nearly two years post forex intervention. Yuan weakened marginally just as holiday activity data showed spending surpassed pre-pandemic levels but home sales nearly halved year on year.

  • Nintendo (7974.IN) said it will announce its successor to Switch by the end of this fiscal year. Geely (175.HK) is to close US bookbuilding for its Zeekr EV unit's IPO one day early. Nio (9866.HK) signed a deal with rival EV maker BYD (1211.HK) to source batteries priced at a lower range to compete with Tesla. Hankook Tire & Technology (161390.KS) is to acquire a 25% stake in Hanon Systems (018880.KS) from Hahn & Company for around KRW1.6T. Louis Dreyfus topped Olam Agri's (VC2.SP) offer for Namoi Cotton (NAM.AU) Cotton by 1c per share, valuing the company at around $91M.

• Digest:

  • No surprises from RBA, cash rate unchanged:

    • RBA left cash rate unchanged at 4.35% as widely expected. Incremental developments largely reflected higher than expected Q1 CPI data. Headline surprises underscore outlook uncertainties and RBA sees process of returning inflation to target unlikely to be smooth. Near term inflation projected to be higher than market expects due to recent rise in domestic petrol prices and surprising strength in services inflation which was highlighted as the key uncertainty. RBA semi-annual inflation forecasts revised notably higher this year at 3.8% though still foresees moderation over 2025/26. Key language on guidance expanded on the March statement, noting inflation is easing but more slowly than expected and remains high. Reiterated Board expects it will be some time before inflation is sustainably in the target range and added that it will remain vigilant to upside risks. Retained guidance that path of interest rates that will best ensure inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out. Governor Bullock at her press conference revealed a rate hike was discussed but Board believes rates are at the appropriate level to bring inflation back to target.

  • China May Day holiday spending picture mixed, home sales slump:

    • Reuters cited government data showing domestic travelers spent CNY166.9B ($23.1B) over the May Day holidays, up 13.5% from pre-pandemic levels in 2019. Spending was also 12.7% higher than a year ago as the tourism ministry recorded 295M domestic trips as policymakers promoted the restoration of transport capacity since Covid restrictions were fully lifted. However, Reuters estimated per-person spending was CNY565.7, down 11.5% from pre-Covid. Subdued propensity to spend continues to dampen hopes for a rebound in consumer demand. Analysts noted a tendency toward cheaper short-haul international and domestic trips. Box-office sales of CNY1.53B roughly matched last year's CNY1.52B, according to China Film Administration figures. Separately, Reuters highlighted a China Index Academy survey found average daily home sales during the holiday tumbled 47% from a year earlier and were down ~30% from pre-pandemic. Sales fell in 19 of 22 surveyed cities compared to last year with major cities of Guangzhou and Shanghai down more than 60%. Article recalled Politburo meeting last week reaffirmed efforts to clear housing inventory while analysts expect more easing policies and local governments to buy more housing stock from developers to turn them into subsidized housing.

  • South Korea FX reserves fall notably on intervention:

    • Reuters reported South Korea official FX reserves fell $5.99B m/m in April to $413.26B, marking the sharpest decline since September 2022. BOK cited market stabilizing efforts, fall in FX deposits of financial institutions as well as valuation effects. Article recalled won reached a major psychological level of 1,400 to the dollar in mid-April, prompting authorities to issue warnings against excessive volatility. Intervention attention peaked as South Korea Finance Minister Choi Sang-mok met with US and Japan counterparts in the first trilateral finance meeting and told the press that Seoul is "thoroughly" monitoring developments in the FX market with scenario-based response plans in place. Added that FX market messaging would be conveyed through international cooperation and the joint meeting was part of that effort. Not much follow-through until the latest FOMC meeting that prompted an adhoc Finance Ministry meeting which recognized high uncertainties on rate cut prospects among major economies as well as the possibility of greater market volatility due to the Middle East situation. Officials vowed "bold market stabilization measures against excessive volatility."

  • Australia federal budget to show lower gross debt:

    • Reuters cited a Treasury announcement that the federal budget will show a decline in gross national debt this year alongside lower forward projections for peak debt ratios. Gross government debt expected at A$904B ($598B) for the fiscal year ending 30-Jun, A$152B lower than initial forecasts, according to an extract of the budget due for release next Tuesday. Translates to ~$80B in interest payment savings over the next decade, with gross debt ratio topping out at 35.2% in 2026-27 vs prior peak of 35.4% in 2027-28. AFR noted Treasurer Chalmers pitched the budget as focused on fighting inflation at the front end and economic growth thereafter. Chalmers played down the notion the government is tightening fiscal policy to answer calls from economists to support RBA efforts to curb high inflation. Pointed to a range of structural pressures on fiscal outlays, such as aged care, defense, healthcare, interest costs and NDIS. AFR's main preview of specific policies said second round of power bill discounts likely. Government will also implement much-scrutinized changes to stage three income tax cuts. Longer-term growth strategy taking shape in the form of a Made in Australia agenda including subsidies for renewables and tech startups.

  • Asia sector PMIs show continued growth in most sectors but cost pressures a concern:

    • S&PGlobal sector PMIs showed growth in 13 of 18 sectors over April, software & service expanded at fastest monthly pace in 17 years. Automobiles & auto parts, household & personal products also expanded alongside banks, real estate sectors. On negative side, forestry, metals & mining, and healthcare services saw biggest contraction. Although most sectors saw increased output, employment levels slipped; two-thirds of sectors shredded jobs in April or added no positions. All sectors posted rising input prices while output prices raised in 15 sectors with mining, forestry and banks all lowering charges. Separate April PMI data published Tuesday showed cost pressures weighed on service activity in Japan with prices rising at fastest pace in ten years. High-cost pressures also seen in Australia SME activity with overall growth in sector sustained at fastest pace in two years.

  • Notable Gainers:

    • +3.2% 9983.JP (FAST RETAILING CO.): reports April Japan Uniqlo same stores + online net sales +18.9% y/y

    • +2.7% 2379.TT (Realtek Semiconductor): reports April revenue NT$10.07B, +21.9% y/y

    • +1.5% 2333.HK (Great Wall Motor): reports April sales volume 94,796 units, +1.8% y/y

    • +0.3% 377300.KS (Kakaopay): reports Q1 operating profit (KRW9.70B) vs FactSet (KRW10.15B)

  • Notable Decliners:

    • -17% 161390.KS (HANKOOK TIRE & TECHNOLOGY Co.): to acquire 25% stake in Hanon Systems from Hahn & Company for KRW1.368T

    • -3.1% 1972.HK (Swire Properties): discloses Q1 operating statement

    • -2.9% 6758.JP (Sony): Paramount reportedly formally opens negotiations with bidding group led by Sony Pictures Entertainment and Apollo; bid reportedly faces significant antitrust hurdles to get past federal regulators

    • -2.2% 8058.JP (Mitsubishi): reports FY revenue ¥19.568T vs FactSet ¥19.824T

• Data:

  • Economic:

    • Australia March

      • Retail Sales M/M (0.4%) versus (0.4%) in prior month

    • Japan April

      • Final services PMI 54.3 vs preliminary 54.6 and 54.1 in prior month

      • Composite PMI 52.3 vs preliminary 52.6 and 51.7 in prior month

  • Markets:

    • Nikkei: 599.03 or +1.57% to 38835.10

    • Hang Seng: (98.93) or (0.53%) to 18479.37

    • Shanghai Composite: 7.02 or +0.22% to 3147.74

    • Shenzhen Composite: 4.36 or +0.24% to 1796.77

    • ASX200: 110.90 or +1.44% to 7793.30

    • KOSPI: 57.73 or +2.16% to 2734.36

    • SENSEX: (426.87) or (0.58%) to 73468.67

  • Currencies:

    • $-¥: +0.14 or +0.09% to 154.0390

    • $-KRW: +3.04 or +0.22% to 1358.5400

    • A$-$: (0.00) or (0.40%) to 0.6596

    • $-INR: (0.08) or (0.10%) to 83.4847

    • $-CNY: +0.00 or +0.05% to 7.2178