Back to Daily DR Market Summary

StreetAccount Summary - Asian Market Recap: Nikkei (0.34%), Hang Seng +0.91%, Shanghai Composite +1.01% as of 04:10 ET

May 17 ,2024

• Synopsis:

  • Asian equities mixed Friday. Greater China markets advanced and outperformed regional peers, boosted by sharp gains in property-related stocks after China unveiled broad rescue package to shore up property market. Nikkei, Kospi and ASX all closed lower. India trading higher. Treasury yields little changed. Dollar slightly stronger against other majors, crude and gold both edging up, copper advancing to new record high, bitcoin also higher.

  • Raft of China macro developments dominated news flow on Friday. Beijing announced its most forceful attempt to rescue property market, easing mortgage rules and encouraging local governments to buy unsold homes from developers for conversion into affordable housing. Came after data earlier today showed home prices fell at the fastest pace in a decade and real estate investment logged a deeper contraction through April. China activity data also mixed with industrial production growth coming in stronger-than-expected on acceleration in auto output. However, retail sales growth unexpectedly slowed amid weak car sales. Fixed asset investment underwhelmed amid slower growth in infrastructure investment. Mixed data offset somewhat by stimulus hopes with CNY1T special bond issuance commencing Friday with strong demand for the inaugural tranche worth CNY40B of 30Y bonds and tying into expectations of follow-up monetary easing.

  • Overnight Fedspeak pushed higher-for-longer message with Mester, Williams and Barkin echoing view more evidence needed inflation is progressing towards 2% target. However, softer US CPI, manufacturing, and retail sales data this week has led market to price in at least two rate cuts this year. Dovish repricing accompanied by a downshift in bond yields and fall in dollar index to a one-month low. In other developments, Malaysia economy grew faster than expected in Q1, helped by household spending and turnaround in exports. Philippine central bank head said less hawkish stance may put pressure on peso but it has not affected local currency yet. Slump in Singapore's key exports eased in April from March.

  • Toshiba announced job cuts of up to 4k domestically as the industrial conglomerate accelerates restructuring. Toyota (7203.JP) was forced to repeatedly halt production in its Mexico plant in February and March after suppliers hit by worker shortages. Ping An Insurance (2318.HK) is weighing options to lower its 8% stake in HSBC (5.HK)

• Digest:

  • PBOC removes mortgage floor rate, lowers minimum downpayment ratio:

    • In a series of announcements, PBOC removed the floor rate on mortgage loans for first and second home buyers. Lowered the minimum downpayment ratio to 15% for first home buyers and 25% for second purchases. Central bank also cut the rate on personal housing provident fund loans by 25 bp. Follows a State Council meeting Friday in which Vice Premier He Lifeng called for new measures to support the housing market (Xinhua). While reaffirming ongoing priority on housing construction and delivery, He also urged local governments to resolve idle residential land through disposals, and suggested jurisdictions in cities with large housing inventory to buy a portion at "reasonable prices" that can be used as affordable housing. Attention turns to a joint regulatory meeting including PBOC, housing ministry and National Financial Regulatory Administration on policies to ensure housing delivery set for 4:00 pm local time. CSI 300 real estate sector up more than 6%. Headlines came shortly after latest data showed home prices fell at the fastest pace in a decade and real estate investment logged a deeper contraction through April.

  • China activity data mixed, hopes turn to fiscal support as bond issuance commences:

    • Industrial production rose 6.7% y/y in April, above consensus 5.5% and follows 4.5% in the previous month. Autos accelerated to double-digit growth, while EVs, integrated circuits continued to growth by more than 30%. Solar cells also continued sharp growth. Steel products were broadly negative. Retail sales climbed 2.3%, below consensus 3.7% and prior month's 3.1%. Catering revenues slowed, while declines in autos, apparel and cosmetics contrasted with respective YTD gains. Communication equipment and leisure products remained strong. Fixed asset investment increased 4.2% YTD vs consensus 4.6% and 4.5% in Jan-Mar. Infrastructure slowed to 6.0% from 6.5%. Real estate deteriorated more in line, down 9.8% vs consensus 9.7%, following 9.5% in Jan-Mar. Details were relatively stable though housing sales, financing and construction starts remained in deep contraction. Unemployment rate fell to 5.0% vs consensus and prior month's 5.2%. Recall Q1 GDP was stronger than expected though activity data showed momentum finished the quarter notably soft. However, stimulus hopes were rekindled on this week's announcement the CNY1T in special treasury bond issuance would commence Friday. This also sparked expectations of a follow-up RRR/policy rate cut to offset the resulting liquidity drain.

  • China home prices fall at fastest pace in April in over nine years:

    • New home prices in China were down 0.6% m/m for tenth consecutive month, worse than 0.3% in March and registered fastest decline since Nov-2014, based on Reuters calculation of NBS data. Meanwhile prices were lower 3.1% y/y, also faster than 2.2% drop in March and at steepest pace since Jul-2015. 64 out of the 70 cities surveyed reported monthly price drop in new home prices, up from 57 in March; while 69 cities witnessed m/m declines in second-hand home prices, same with March. Weak data added pressures on authorities as they intensified efforts to shore up beleaguered sector but few signs of paying off. Recall top leaders pledged in politburo meeting on 30-Apr to explore ways to clear unsold house inventories. Bloomberg added latest effort was State Council would convene a meeting with financial regulators, local governments and state banks to discuss proposal to have local governments buy millions of unsold homes.

  • China kicks off sales of special sovereign bonds amid strong demand:

    • China started issuance of this year's CNY1T ($138B) special sovereign bonds with 30Y auction primarily targeting institutional investors that attracted demand of 3.9 times amount on offer. First tranche worth CNY40B of 30Y special sovereign bonds was sold at average yield of 2.57%, versus median forecast of 2.55% in Bloomberg survey. Investors were expecting robust demand at the auction, despite challenges over long-duration bonds including fears of oversupply and PBOC warnings that yields were too low. Buying sentiments supported by expectations of further monetary easing and lack of other investible assets amid still weak economic outlook. PBOC-backed Financial News citing analysts said in front-page report that reasonable range of long-term yields likely to be between 2.5% to 30% from normal operation of market in recent years and long-term growth expectations. Regular 30Y yield inched up to around 2.58% after special bond sale. Added bond sales come amid signs that Beijing is prioritizing efforts to shore up support for property sector that's main drag on economy.

  • Awaiting China's response to Biden's tariff hike:

    • President Biden's announcement of tariff hikes on Chinese imports this week prompting follow-up discussions about potential China retaliation after Commerce Ministry vowed to take unspecified "resolute measures." While China is expected to respond, trade experts urging Beijing to proceed cautiously amid potential for economic blowback from tit-for-tat retaliation (FT). Analysts at Rhodium speculated on potential China retaliation measures, such as targeting certain critical minerals, imposing export restrictions on products US identified for tariff exclusions, devaluing yuan, or engaging in non-trade actions such as denying some multinationals access to Chinese markets. China may also target products from politically sensitive US industries or electorally important US states (Barron's). Key risk is that tariff response kicks off a cycle of retaliation with negative consequences for global trade, particularly with EU mulling its own tariffs on Chinese EVs and former President Trump vowing to broaden tariffs on Chinese imports if he wins November election.

  • Notable Gainers:

    • +34.3% 6666.HK (Evergrande Property Services Group): PBOC cancels mortgage rate floors for first and second home purchases at national level

    • +2.3% 9888.HK (Baidu): reports Q1 non-GAAP EPADS CNY19.91 vs StreetAccount CNY15.84, revenue CNY31.51B vs FactSet CNY31.34B

    • +1.7% 402340.KS (SK Square Co.): reports Q1 operating profit KRW323.79B vs year-ago (KRW639.03B)

    • +1.1% 7267.JP (Honda Motor): to invest ¥10T vs previously advised ¥5T on EVs, software over next decade; Toyota, Nissan, Honda and others reportedly to partner on software development for next-generation vehicles

  • Notable Decliners:

    • -7.3% 329180.KS (HD Hyundai Heavy Industries Co.): HD Korea Shipbuilding & Offshore Engineering Co. sells 2.7M shares in HD Hyundai Heavy Industries for KRW349.65B via block deal

    • -2.2% 5.HK (HSBC Holdings): Ping An reportedly looking at options to reduce its stake in HSBC

• Data:

  • Economic:

    • China

      • April

        • Industrial production +6.7% y/y vs consensus +5.5% and +4.5% in prior month

          • Retail sales +2.3% y/y vs consensus +3.7% and +3.1% in prior month

          • Fixed asset investment (YTD) +4.2% y/y vs consensus +4.6% and +4.5% in prior month

          • Unemployment rate 5.0% vs consensus 5.2% and 5.2% in prior month

        • New house prices (0.6%) m/m vs (0.3%) in prior month (Reuters)

          • House prices (3.1%) y/y vs (2.2%) in prior month

    • Singapore

      • April Non-Oil Domestic Export NSA Y/Y (9.3%) versus (20.8%) in prior month

        • Non-oil exports +7.6% m/m vs consensus +7.9% and (8.4%) in prior month

    • S. Korea

      • April Unemployment Rate 2.8% versus 2.8% in prior month

    • New Zealand

      • Q1 PPI Input +0.7% versus +0.9% in prior quarter

      • Q1 PPI Output +0.9% versus +0.7% in prior quarter

  • Markets:

    • Nikkei: (132.88) or (0.34%) to 38787.38

    • Hang Seng: 177.08 or +0.91% to 19553.61

    • Shanghai Composite: 31.63 or +1.01% to 3154.03

    • Shenzhen Composite: 20.88 or +1.18% to 1785.59

    • ASX200: (66.90) or (0.85%) to 7814.40

    • KOSPI: (28.38) or (1.03%) to 2724.62

    • SENSEX: 401.20 or +0.54% to 74064.92

  • Currencies:

    • $-¥: +0.46 or +0.30% to 155.8590

    • $-KRW: +6.25 or +0.46% to 1355.9800

    • A$-$: (0.00) or (0.18%) to 0.6660

    • $-INR: (0.09) or (0.11%) to 83.3948

    • $-CNY: +0.00 or +0.01% to 7.2192