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StreetAccount Summary - Asian Market Recap: Nikkei (0.85%), Hang Seng (0.13%), Shanghai Composite +0.02% as of 04:10 ET

May 22 ,2024

  • Synopsis:

    • Asian equities mixed in quiet Wednesday trade. Nikkei underperformed while Kospi and ASX little changed. Greater China mixed with mainland slightly higher while Hang Seng lower for second day. Taiex outperformed. India trading higher. S&P 500 futures edging down ahead NVDA's earnings and FOMC minutes. US Treasury yields higher across tenors, 10Y JGB yield hit 11-year high of 1% while New Zealand curve bear flattening following hawkish RBNZ. Dollar stronger against yen, kiwi rallying. Crude and gold pulling back, copper also weaker after hitting record high, iron ore hit three-month high on China demand, bitcoin little changed.

    • Monetary policy decisions from New Zealand and Indonesia are key focus points in Asia. RBNZ with a hawkish hold after Committee discussed rate hike at today's meeting and warned rates need to remain restrictive for longer than anticipated in February. Updated OCR track modeled higher terminal rate and delayed projected rate cuts further into 2025. Central main concerns revolved around upside risks to demand from proposed tax cuts and concerns over sticky domestic inflation. Bank Indonesia stood pat at today's policy meeting as widely expected as it keeps an eye on rupiah stability and inflation. Decision in line with central bank's pre-emptive, forward-looking stance to keep inflation in check and currency stable. BOK previews also see South Korea's central bank on hold Thursday after Governor Rhee appeared to dampen prospects of a rate cut.

    • Japan exports rose for fifth straight month in April, growth driven by autos and chip components, while weak yen contributed to rebound in imports and pushed its trade balance into deficit. Japan core machinery orders unexpectedly rose amid big increase in manufacturing demand. China's ultra-long special treasury bonds surged on exchange debut and triggered trading suspensions. China's commercial lenders rush to offer loans to state-owned companies to buy unsold homes. G7 finance chiefs meet in Italy to find common ground on Russian assets and China.

    • Panasonic (6752.JP) CEO Yuki Kusumi said the company is looking to more than double its domestic production of EV batteries to supply potential customers like Mazda (7261.JP) and Subaru (7270.JP) and improve the performance of its Japanese factory. TSMC (2330.TT) and ASML (ASML) have ways to disable chipmaking machines in the event if Beijing launches invasion of Taiwan. Severe turbulence hit a Singapore Airlines' (C6L.SP) Boeing 777-300ER aircraft from London to Singapore, leaving one dead and multiple injuries.

  • Digest:

    • RBNZ leaves OCR unchanged, but forecasts lean hawkish amid inflation concerns:

      • RBNZ left OCR unchanged at 5.50% as expected, but policy statement and updated forecasts unexpectedly leaned more hawkish. Central bank retained guidance that rates need to remain restrictive for a sustained period, but committee also discussed hiking rates today and agreed rates need to remain restrictive for longer than anticipated in February. Also warned of policy may need to be tightened if wage and price setters do not align with low productivity growth rates. Aligned with an updated OCR track that revised up end-2024 terminal rate by 10 bp to 5.7% from 5.6% peak modeled in February, while delaying projected rate cut further into 2025 - this as some sell-side previews had forecast a dovish revision. Statement noted upside risks to demand from proposed tax cuts and noted higher proportion of government expenditure to potential output implied disinflation pulse weaker than forecast in February. Committee acknowledged fall in Q1 inflation but noted non-tradeabales inflation higher than forecast and price increases for some components like insurance and rents expected to temper projected fall.

    • Nikkei 225 seen higher at year-end despite cautious corporate guidance:

      • Reuters consensus forecast looks for Nikkei 225 to rise to 40,750 at year-end, up 4.6% from Tuesday's close. Benchmark has been hovering below 40K since the beginning of April after hitting a record intraday high of 41,087.75 on 22-Mar. Share buybacks and unwinding cross-shareholdings driven by the push for governance improvements underpinning recent strength. Article noted gains capped recently as companies issued modest earnings forecasts at the peak of earnings season this month. While initial reactions to guidance were cautious, secondary takeaways were more sanguine based on views that corporate projections were conservative to start the year and likely to be upgraded. Uncertainties about yen performance vs dollar has also hurt equity market sentiment, but some strategists said the negative impact of the currency's possible gain against the dollar will be limited. Nikkei expanded on this theme, noting foreign inflows into Japan equities have waned lately amid ongoing speculation of FX intervention.

    • China rally accompanied by improving breadth, but mainland investors mostly driving flows:

      • China equities tracking for another positive month with MSCI China up more than 8% month-to-date. Amid ongoing debate whether rally has room to run, bulls continue to point to China's still-large valuation discount to historical averages and global benchmarks, justified by earnings growth potential from nascent economic stabilization, policy support measures and strategic focus on new economy sectors. Rally accompanied by broadening breadth with around half of MSCI China's index now above 200 DMAs, consistent with expectations more sectors will contribute to gains over coming months (Bloomberg). At the same time, rally skeptics argue gains being driven largely by liquidity, momentum and policy headline effects with China's economy struggling for traction, property market in deep downturn and geopolitical risks elevated. Reuters also highlighted how mainland investors primarily driving inflows with foreign flows relatively tepid and favoring other markets such as India and Japan.

    • Japan exports miss on weaker volumes, machinery orders beat:

      • Customs exports rose 8.3% y/y in April, below consensus 11.0% and follows 7.3% in the previous month. Autos remained the biggest driver alongside semiconductor making equipment and chip components. Shipments to US and China continued to grow while EU fell. Imports also grew 8.3%, closer to consensus 8.9%, rebounding from a 5.1% decline in March. Main drivers were crude oil, aircraft and computers, outweighing sharp drop in coal. However, nominal figures continued to mask softer volumes showing exports declining for the third straight month and a subdued bounce in imports. BOJ real trade indices showed Q2 export trajectory lagging somewhat behind imports, marking a relatively negative start to GDP external demand. Core machinery orders rose 2.9% m/m in March, contrasting with an expected 2.0% decline, following 7.7% growth in February. Sharp growth in manufacturing demand moderately outweighed drop in nonmanufacturing. Headline left Q1 up a solid 4.4% q/q and survey projection points to a 1.6% decline in Q2 reflecting mild weakness in both manufacturers and nonmanufacturers. Broader outlook for Q2 growth momentum seen positive as consensus looks for a firm GDP rebound after a disappointing Q1.

    • China policymakers vow to eliminate systemic risk:

      • Reuters, citing CCTV, reported Vice Premier He Lifeng pledged to control intertwined risks in the property sector, local government debt and small local financial institutions. Added Beijing will also seek to prevent systemic risks and crack down on illegal financial activities. Echoed remarks from Premier Li Qiang highlighting the role of the financial sector in serving the real economy and urged efforts to promote the sector's high-quality development (Xinhua). Li underscored the need to complete the reform of local financial management mechanisms on schedule, strengthen regular supervision over local financial institutions, and guard against the bottom line of no systemic financial risk. Comments follow last week's announcement of a series of policies to support the housing market, generally regarded as the strongest measures to date. Economists saw the measures as a meaningful step in the right direction, though impacts largely depend on implementation and more follow-through will likely be required to clear excess housing inventories.

    • Notable Gainers:

      • +13.2% 9868.HK (XPeng, Inc.): reports Q1 non-GAAP EPADS (CNY0.21) vs FactSet (CNY2.04); guides Q2 deliveries 29-32K, +25.0-37.9% y/y

      • +7.3% 1137.HK (Hong Kong Technology Venture): proposes to launch buyback up to 100M shares at HK$2.15/share

      • +1.6% 3549.JP (Kusuri No Aoki Holdings): Activist Oasis increases holding to 9.67% from 6.83%

      • +1.6% 543396.IN (One 97 Communications (Paytm)): reports Q4 net income attributable (INR5.50B) vs FactSet (INR5.81B)

    • Notable Decliners:

      • -13.1% 780.HK (Tongcheng-Elong Holdings): reports Q1 results, GMV CNY65.90B vs SA CNY67.00B

      • -2.6% 9618.HK (JD.com): prices upsized offering of $1.75B convertible senior notes

      • -0.7% 6762.JP (TDK): announces long-term vision & new medium-term plan; targets net sales ¥2.700T in FY ending Mar-27

  • Data:

    • Economic:

      • Japan

        • April trade balance (¥462.5B) vs consensus (¥297.0B) and revised ¥387.0B in prior month

          • Exports +8.3% y/y vs consensus +11.0% and +7.3% in prior month

          • Imports +8.3% y/y vs consensus +8.9% and revised (5.1%) in prior month

        • March core machinery orders +2.9% m/m vs consensus (2.0%) and +7.7% in prior month

          • Survey projection (1.6%) q/q in Q2 vs actual +4.4% in Q1

    • Markets:

      • Nikkei: (329.83) or (0.85%) to 38617.10

      • Hang Seng: (25.02) or (0.13%) to 19195.60

      • Shanghai Composite: 0.57 or +0.02% to 3158.54

      • Shenzhen Composite: 4.19 or +0.24% to 1784.69

      • ASX200: (3.60) or (0.05%) to 7848.10

      • KOSPI: (0.72) or (0.03%) to 2723.46

      • SENSEX: 197.84 or +0.27% to 74151.15

    • Currencies:

      • $-¥: +0.24 or +0.16% to 156.4000

      • $-KRW: (0.88) or (0.06%) to 1363.4900

      • A$-$: (0.00) or (0.11%) to 0.6660

      • $-INR: (0.15) or (0.17%) to 83.2433

      • $-CNY: +0.04 or +0.52% to 7.2015

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