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StreetAccount Summary - Asian Market Recap: Nikkei +1.39%, Hang Seng +1.59%, Shanghai Composite +0.08% as of 04:10 ET

May 16 ,2024

• Synopsis:

  • Asian equities ended higher almost everywhere Thursday. Australia's ASX led the gainers on employment data that increased chances of a rate cut before year-end. Strong gains in Japan, Taiwan and South Korea. Hong Kong also spiked on a catch up to yesterday's newsflow on property; Southeast Asia all higher as the US dollar dipped. India the sole main board showing a small loss. US futures point to more gains at the open, Europe with small losses at the open. US dollar lower with most Asia currencies strengthening further following overnight gains; AUD weaker on jobs data. Treasury yields mixed, JGB yields all lower along with other Asia sovereigns ex Australia. Crude oil, industrial metals and precious metals all well bid; silver at three-year high.

  • Asia stocks stronger across the region again today, ex India that continues to wobble over general election worries. Australia led, buoyed by higher-than-expected jobless figures that fit into the narrative the RBA will have to cut sooner rather than later. The same news weighed on the AUD, which had reached near-YTD highs overnight on a lower US dollar. Elsewhere, stocks driven by relief headline and core US inflation had broken their recent hotter-than-expected trend. Fed Fund futures now show a 33% chance of a July cut, and almost 100% by September. This pushed Treasury yields lower, including in Asia, and sent the dollar tumbling to the benefit of most Asia currencies.

  • Japan's economy contracted by more than expected in Q1 weighed down by falls in private consumption, capex and external demand; March retail sales and industrial output also contracted. Australian employment data mixed with rebound in headline jobs overshadowed by surprise jump in unemployment rate. China developers rallying following report Wednesday Beijing was considering asking local governments buy unsold homes. Hang Seng Mainland Properties index up 5% alongside rally in developer junk bonds. Philippines central bank kept base interest rate on hold as expected but raised the possibility of an August rate cut.

  • China Vanke (2202.HK), Shimao Group (813.HK), Sunac China (1981.HK), Sino-Ocean (3377.HK) among the property developers to see their stock price surge on reports Beijing was considering asking local governments to buy up unsold property. SK Innovation (096770.KS) is considering the sale of its battery materials unit SKIE Technology. Singapore Airlines (C6L.SP) warned increased competition, geopolitics and supply chain problems would be headwinds going forward, even as it posted record high profits. Coal India (533278.IN) and NMDC (526371.IN) are among the companies that will be searching for critical minerals assets overseas as they look to secure supply lines, according to a government official.

• Digest:

  • Japan Q1 GDP weaker than expected:

    • GDP contracted 2.0% q/q annualized in Q1, weaker than consensus 1.5%. Previous quarter was revised to flat from 0.4% growth. Details were more in line in terms of the main drags, confirmed to come from private consumption (third straight decline), capex and external demand. Private residential investment was also weaker. Partial mitigation from mild growth in public demand and positive contribution from private inventories. Employee compensation fell back in a continuation of the recent up-and-down quarterly pattern. Nominal GDP expanded 0.4% q/q annualized, implying sequential inflation was the underlying factor. In year-ago terms, GDP deflator rose 3.6% in Q1 after 3.9% in Q4, domestic demand deflator rose 2.6% following 2.1%. Soft growth momentum was generally attributed to the Noto peninsula earthquake and temporary suspension in auto production and shipments tied to the Daihatsu certifications scandal. Going forward, monthly JCER survey for May showed Q2/Q3 projections were revised up moderately to 2.10% and 1.80% respectively. Attention turning to mid-year growth momentum amid confluence of expiring energy subsidies in May, temporary income tax cuts scheduled to take effect in June, against backdrop of wage hikes expected to be implemented in earnest around June.

  • Surprise jump in Australian unemployment rate:

    • Australian April employment rose 38.5K versus consensus for a 23.7K increase and March's revised 5.9K drop. Unemployment rate climbed to 4.1% - highest since January, compared from March's upwardly revised 3.9% (from 3.8%) which was also consensus. Driven in part by surprise lift in participation rate to 66.7% from 66.6%. Job composition was weak with part-time employment gain of 44.6K offsetting 6.1K fall in full-time positions. Underemployment and underutilization rates also climbed over the month while hours worked stalled. Futures pricing in ~50% probability of RBA rate cut by December, marking abrupt pivot from hawkish repricing of recent weeks (Bloomberg). April's unemployment rate above the 4.0% RBA forecast for H1 and comes after Wednesday data showed Q1 wage inflation unexpectedly slowed, adding to signs labor market is softening amid restrictive monetary policy. However, also thoughts rise in jobless rate will reverse in May due to seasonal dynamics that similarly played out earlier in 2024 (Financial Review).

  • China property stocks and bonds rise sharply on reports of government to buy unsold homes:

    • Shares and bonds of Chinese property developers jumped on Thursday after Bloomberg's report that Beijing is mulling plan for local governments nationwide to purchase millions of unsold homes from distressed builders to shore up support for beleaguered sector. Hang Seng Mainland Properties Index up by 4.7% in catch-up trade after a holiday on Wednesday and CSI 300 Real Estate Index was 3.5% higher Thursday. Bloomberg added average price of Chinese HY dollar bonds has risen by 2.1 cents so far this week and on track for biggest weekly gain in seven months. Some of China Vanke's (2202.HK) dollar bonds poised for largest daily gain since November while its shares gained 14.8%. Market watchers noted government policy, though details still murky and yet to be finalized, is heading in right direction. Recall many cities in China have lifted home purchase restrictions in recent weeks to spur sales but large number of unsold homes due to weak demand seen as key issue (Bloomberg).

  • China activity data seen broadly improving:

    • Ahead of tomorrow's release, Bloomberg consensus looks for some pickup in all headline activity metrics for April. Industrial production seen rising 5.5% y/y, following 4.5% in the previous month. Previously reported manufacturing PMIs were buoyant. But trade tensions remain an overhang amid criticisms from US/EU over China's overcapacity. Retail sales projected to expand 3.7% following prior 3.1%, though pace remains weaker than before the pandemic. CPCA data showed retail auto sales fell 5.8% as consumers wait for more discounts amid ongoing price competition. Government has implemented a trade-in program to encourage upgrades for big-ticket items focused on cars. Fixed asset investment likely expanded 4.6% YTD, edging up from 4.5% in Jan-Mar. Yet real estate component could have dropped 9.7%, deepening from 9.5% in Jan-Mar, reflecting ongoing market turmoil. Infrastructure investment likely remained a support factor as proceeds from last year's additional CNY1T sovereign bond issuance still being spent. Article suggested outlook further supported by fiscal headroom, after government announced this year's CNY1T special treasury bond issuance will run through mid-November, while local governments still have more than 70% of this year's LGSB quota unused.

  • Philippines central bank leaves base rate unchanged, leaves door open for August cut:

    • Bangko Sentral ng Pilipinas (BSP) kept its benchmark overnight borrowing rate at 6.5%, as widely expected and flagged by finance secretary Ralph Recto earlier this week. BSP Governor Eli Remolona said Thursday BSP may pivot to easing policy as soon as August as price risks moderate. Said bank was "somewhat less hawkish" than before, rate cut could come in Q3 or Q4; added once bank starts easing it may also consider resuming reduction in banks' RRR. Bank's board members had previously expressed concern over inflation, which increased for fourth consecutive month in April albeit still inside BSP's target range of 2-4% as food prices spiked. Bank also cognizant of peso weakness YTD on stronger dollar as well as recent dip on Q1 GDP growth data that indicated weak consumer. Philippine-China tensions in South China Sea had also weighed on currency.

  • Notable Gainers:

    • +46.2% 3377.HK (Sino-Ocean Group Holdings): China reportedly proposing to have local governments purchase unsold homes

    • +9.1% 6098.JP (Recruit): reports Q4 revenue ¥843.7B vs StreetAccount ¥838.47B, adjusted EBITDA ¥111.9B vs StreetAccount ¥106.08B

    • +5.4% 4612.JP (Nippon Paint Holdings): reports Q1 operating profit ¥42.66B vs FactSet ¥40.05B

    • +3.8% 700.HK (Tencent Holdings): reports Q1 revenue CNY159.50B vs FactSet CNY158.17B

    • +2.2% 032830.KS (Samsung Life Insurance Co.): reports Q1 net income attributable KRW622.09B vs FactSet KRW554.48B

    • +0.5% 361610.KS (Sk Ie Technology Co.): SK Innovation confirms reviewing various options including stake sale in SK IE Technology

  • Notable Decliners:

    • -10.2% 1910.HK (Samsonite International): reports Q1 revenue $859.6M vs StreetAccount $887.7M

    • -5.7% 7182.JP (Japan Post Bank): reports FY net interest income ¥715.7B vs year-ago ¥796.3B

    • -4.2% 9988.HK (Alibaba Group): reports Q4 adjusted EBITDA CNY30.81B vs FactSet CNY32.93B

    • -1.0% 8411.JP (Mizuho Financial): reports FY net interest income ¥887.61B vs FactSet ¥880.43B

• Data:

  • Economic:

    • Japan

      • Q1 GDP (2.0%) q/q annualized vs consensus (1.5%) and revised 0.0% in prior quarter

        • GDP (0.5%) q/q vs consensus (0.4%) and revised 0.0% in prior quarter

      • March final industrial production +4.4% m/m vs preliminary +3.8% and (0.6%) in prior month

        • Operating ratio +1.3% m/m vs (0.5%) in prior month

        • Production capacity (0.2%) y/y vs +0.1% in prior month

      • March final retail sales (1.2%) m/m vs preliminary (1.2%) and +1.7% in prior month

    • Australia April

      • Employment +38.5K m/m vs consensus +23.7K and revised (5.9K) in March

        • Unemployment rate 4.1% vs consensus 3.9% and revised 3.9% (from 3.8%) in March

        • Participation rate 66.7% vs consensus 66.6% and 66.6% in March

  • Markets:

    • Nikkei: 534.53 or +1.39% to 38920.26

    • Hang Seng: 302.82 or +1.59% to 19376.53

    • Shanghai Composite: 2.50 or +0.08% to 3122.40

    • Shenzhen Composite: 5.13 or +0.29% to 1764.71

    • ASX200: 127.60 or +1.65% to 7881.30

    • KOSPI: 22.66 or +0.83% to 2753.00

    • SENSEX: (438.32) or (0.60%) to 72548.71

  • Currencies:

    • $-¥: (0.40) or (0.26%) to 154.4840

    • $-KRW: (10.56) or (0.78%) to 1343.1200

    • A$-$: (0.00) or (0.20%) to 0.6685

    • $-INR: +0.02 or +0.03% to 83.4865

    • $-CNY: (0.00) or (0.03%) to 7.2166