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StreetAccount Summary - Asian Market Recap: Nikkei +0.41%, Hang Seng +2.30%, Shanghai Composite +0.01% as of 04:10 ET

May 10 ,2024

• Synopsis:

  • Asia equities ended mostly higher Friday. Hong Kong's Hang Seng saw another surge to approach 19K for the first time since November as bank and financial stocks spiked sharply. Mainland bourses leaned lower by the close. Japan gapped higher at the open but closed well off their highs. Modest gains for Australia, Taiwan and South Korea. Singapore best in Southeast Asia, India slightly higher but has underperformed this week. US futures higher, Europe strong in the opening hour with the DAX at fresh record highs. US dollar consolidating overnight losses, yen, AUD weaker, yuan stable. Treasury yields mixed. Crude futures higher again, precious metals and industrials supported.

  • Hang Seng spiked sharply higher on reports Beijing was considering a dividend tax waiver for shares bought via StockConnect. Value plays outperformed notably with banks, financials, REITs and oil & gas names moving higher while IT and internet took a back seat for a day. Property stocks also higher despite authorities warning a country-wide easing of property restrictions was not a possibility. Nevertheless, sentiment for China's markets turning positive with the Hang Seng posting its third consecutive week of gains.

  • On the negative side, more US trade sanctions likely after a report the White House was poised to launch tariffs on Chinese EVs, batteries and solar cells as early as next week. Regional macro newsflow was light: Japan household spending fell on a y/y basis again but moderately improved m/m to give hope to the downturn ending while New Zealand manufacturing output contracted for a 14th straight month.

  • Geely Auto's (175.HK) EV unit Zeekr priced its New York IPO at $21 per share the top end of its range to raise $441M. TSMC (2330.TT) April sales rise 60% y/y on AI-related products. OCBC (OCBC.SP) launched an unconditional offer for the 11% of Great Eastern Holdings (G07.SP) it does not own at S$25.60 per share. Singapore Air's (C6L.SP) budget carrier blamed recent cancellations on a spare parts shortage linked to disrupted supply chains.

• Digest:

  • HKSE says no comment on reported China dividend tax waiver:

    • HKSE in reply to ShanghaiSecuritiesNews said it has no comment on media reports that Chinese regulators are mulling a proposal to exempt individual investors from paying dividend taxes on Hong Kong-listed stocks bought via Stock Connect. Bloomberg sources said CSRC and State Taxation Administration are reviewing a plan submitted by Hong Kong to waive 20% tax on dividends from such transactions, aiming to avoid double taxation and align fairer arrangements for investors both in Hong Kong and mainland. Comes as Hong Kong strives to revive market after yearslong downturn, coupled with recently announced supportive measures by CSRC. Recall Hong Kong SFC Chairman Tim Lui first flagged such suggestion in March during NPC session, which he also called on Beijing to lower investor threshold to allow greater participation. SFC CEO Julia Leung said city looking to implement changes this year. Analysts said move seen as positive for Hang Seng and would help support southbound flows and benefit high-yielding sectors. Hang Seng Mainland Banks Index rose close to 5% Friday and HSI also set to close at eight-month high.

  • Biden administration set to impose tariffs on Chinese EVs, battery and solar equipment:

    • Bloomberg reported Washington is poised to announce decision on China tariffs as early as next Tuesday (14-May), targeting key strategic sectors including EVs, batteries and solar equipment with new levies. Noted decision seen as result of review of Section 301 tariffs first imposed under Trump administration while targeted approach different from across-the-board hikes sought by Trump. Added move if substantiated will be one of Biden administration's biggest moves in economic race with Beijing and build on call in April to raise tariffs on Chinese steel and aluminum, launch of fresh probe into Chinese shipbuilding. Recall Reuters reported Commerce Secretary Raimondo said US could take "extreme action" and ban Chinese connected vehicles or impose restrictions on them after national security investigation. Biden administration also under pressure from Republican lawmakers to restrict Chinese electric vehicle imports from Mexico (Reuters).

  • China relaxation of home purchase restrictions gaining traction:

    • Xinhua discussed the relaxation of property purchase restrictions in several cities as part of ongoing policy support. Highlighted Hangzhou and Xian announcements fully removing restrictions related to home purchases. Prospective buyers no longer need to meet criteria such as local residence permit (hukou), local social security as well as the number of apartments each buyer is allowed to buy. Noted such relaxations were implemented in Chengdu in late April, which greatly stimulated housing market of the May Day holidays. Article implied these steps represent follow-through from the latest Politburo meeting on 30-Apr when members called for policies to clear housing inventory. However, Reuters noted initial reactions among analysts were lackluster, noting that optimism toward rule relaxations alone have waned given inefficacy at reviving demand. Moreover, measures seen as symbolic for cities outside of the four major capitals. Xinhua piece noted Beijing among other cities offering conditional relaxation of rules on additional property purchases.

  • Japan household spending beats in March, but Q1 remains sluggish:

    • Household spending rose 1.2% m/m in March, contrasting with expectations of a 0.3% decline. Follows 1.4% growth in the previous month and marks the second straight sequential increase. After MIIC ceased providing seasonally adjusted breakdowns, attention defaults to BOJ real consumption activity index, which fell 0.3% m/m in March, partially reversing a 1.7% rise in February. For GDP implications, Q1 edged down 0.1% q/q after contracting 0.6% in the prior quarter. Big drag from Q1 durable goods, tumbling 11.6% q/q, reflecting temporary auto production and shipment halts amid certification scandals. Marginally outweighed moderate growth in non-durables and services. Developments were generally in line with consensus forecasts looking for sluggish private demand to drive a Q1 GDP contraction. Hopes for consumption have shifted to this year's historic wage hikes awarded at this year's shunto negotiations, expected to push up economy-wide wage aggregates from around June. Also coincides with the implementation of temporary income tax breaks that will provide an extra boost to household disposable incomes, though energy subsidies set to expire in May.

  • Japan manufacturers log record profits but guidance cautious on year ahead:

    • Nikkei top story highlighted TSE Prime manufacturing companies' aggregate net profits grew 23% in the year ended March to a record JPY14.8T ($95B). Total includes 170 firms that reported results through Thursday. Nonmanufacturing earnings up 7% to JPY11.6T as manufacturing growth eclipsed nonmanufacturers for the first time since FY21. Manufacturer net profit margin also at a record high of 6.7%. Article cited price hikes and weak yen as the main tailwinds. Also, growth in sales volume has allowed companies to weather China's economic slowdown and Fed rate hikes. Auto sector accounting for the bulk of manufacturing earnings after Toyota's (7203.JP) net profit doubled. Nissan (7201.JP) earnings grew 90%, mainly owing to US demand. Manufacturing strength raising hopes for positive macro implications through wages and job creation. However, story noted upstream sectors under increasing pressure to raise prices due to labor shortages and wage hikes. Companies more broadly cautious on the outlook for the coming year amid risks stemming from China slowdown, restrictive central bank policy and FX pressures.

  • Notable Gainers:

    • +9.3% 9766.JP (KONAMI): reports FY revenue ¥360.31B vs FactSet ¥349.30B, operating profit ¥80.26B vs FactSet ¥77.62B

    • +8.1% 6367.JP (DAIKIN INDUSTRIES): reports FY operating profit ¥392.14B vs FactSet ¥387.66B; declares year-end dividend ¥130/share vs guidance ¥120/share

    • +7.1% 251270.KS (Netmarble): reports Q1 operating profit KRW3.7B vs FactSet (KRW9.51B)

    • +4.0% 4452.JP (Kao): reports Q1 revenue ¥365.80B vs FactSet ¥355.67B, operating income ¥21.98B vs FactSet ¥18.78B; reiterates FY guidance

    • +3.7% 9434.JP (SoftBank Corp): reports Q4 operating profit ¥144.10B vs StreetAccount ¥117.28B

    • +2.9% 3401.JP (Teijin): second round of bidding for Teijin's 55.1% Infocom stake reportedly scheduled for May with Sony Music Entertainment also in talks with Integral Corp about potential bid to buy all Infocom shares

    • +1.7% O39.SP (Oversea-Chinese Banking Corp.): reports Q1 net profit SG$1.98B vs StreetAccount SG$1.82B; launches unconditional general offer for Great Eastern Holdings at SG$25.60/share cash

    • +1.6% 2914.JP (Japan Tobacco): reports Q1 operating income ¥215.82B vs FactSet ¥213.87B; reiterates FY guidance

  • Notable Decliners:

    • -12.9% 9024.JP (Seibu Holdings): reports FY net income attributable ¥26.99B vs FactSet ¥40.81B; issues long-term strategy to FY35 and FY24-26 mid-term management plan

    • -12.2% 7735.JP (SCREEN): reports Q4 revenue ¥157B vs FactSet ¥153.13B, operating profit ¥30.40B vs FactSet ¥28.77B; reveals medium-term plan, targets net sales ¥1.8T in total over three years

    • -4.7% 6752.JP (Panasonic): reports Q4 operating profit ¥40.7B vs year-ago ¥54.4B

• Data:

  • Economic:

    • Japan March

      • Household spending (1.2%) y/y vs consensus (2.4%) and (0.5%) in prior month

        • Spending +1.2% m/m vs consensus (0.3%) and +1.4% in prior month

      • Current account balance ¥3,398.8B vs consensus ¥3,489.6B and revised ¥2,644.2B in prior month

  • Markets:

    • Nikkei: 155.13 or +0.41% to 38229.11

    • Hang Seng: 425.87 or +2.30% to 18963.68

    • Shanghai Composite: 0.23 or +0.01% to 3154.55

    • Shenzhen Composite: (12.83) or (0.71%) to 1783.77

    • ASX200: 27.40 or +0.35% to 7749.00

    • KOSPI: 15.49 or +0.57% to 2727.63

    • SENSEX: 142.15 or +0.20% to 72546.32

  • Currencies:

    • $-¥: +0.14 or +0.09% to 155.6360

    • $-KRW: (0.27) or (0.02%) to 1365.8200

    • A$-$: (0.00) or (0.20%) to 0.6608

    • $-INR: +0.00 or +0.01% to 83.4983

    • $-CNY: +0.00 or +0.06% to 7.2242