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StreetAccount Summary - Asian Market Recap: Nikkei (1.17%), Hang Seng (1.38%), Shanghai Composite (0.88%) as of 04:10 ET

May 24 ,2024

• Synopsis:

  • Asian equities ended lower almost everywhere Friday as the region carried through the negative momentum from Wall Street overnight. Hong Kong fell again to record its worst week since January and mainland markets also fell again. Australia fell for a fourth consecutive day, Seoul and Taipei were also down. Japan was lower but off its trough. Southeast Asia was all lower, India is slightly higher with the Sensex at fresh record highs. US stock futures mixed, Europe opened sharply lower. US dollar a touch lower from overnight gains, little movement of note in Asia currencies. JGB yields mixed but 10Y maintaining 23-year highs above 1.0%, Treasuries mixed. Crude contracts lower again, precious metals mixed, industrial metals lower.

  • Stronger-than-expected US PMIs, hawkish Fed minutes, and 'higher-for-longer' talk from various Fed officials was enough to push US Treasury yields higher overnight and, with them, the US dollar. This in turn made Asia currencies weaken notably overnight, weighing on Asia equity performance Friday. No major regional catalyst to change the narrative either so many benchmarks gapped down at the open and stayed low all day. On a weekly basis, Asia equities saw their worst week since January with the MSCI Asia Pac ex Japan index down around 1.7% as Hong Kong closed Friday.

  • Macro newsflow was light: Japan nationwide core inflation slowed in-line with expectations to its lowest since January, coming after April Tokyo core inflation fell sharply to below BOJ's 2% target. Yet speculation of a rate hike continues with weak yen adding to upside inflation risks. BOJ rhetoric also supported expectations of another hike. Malaysia inflation fell in April, Singapore industrial output fell again but at a softer pace than of late, Taiwan's unemployment level fell to its lowest in 24 years.

  • Alibaba (9988.HK) formally announced a private offering of $4.5B aggregate principal of 0.50% convertible senior notes dated 2031 with a conversion price around 30% above the last reported ADS price. Several CNOOC (883.HK) subsidiaries have entered an exploration and production concession contract for five oil fields off Mozambique. China Vanke (2202.HK) said it had swapped some insurance-held debt into asset-backed securities as it looks to further delay payments. Samsung Electronics' (005930.KS) HBM chips are said to be failing Nvidia tests because of heat and power consumption problems. Adani Enterprises (512599.IN) is mulling an equity issuance with an approval to be discussed at its upcoming board meeting.

• Digest:

  • Japan core inflation moderates in line:

    • Nationwide core CPI rose 2.2% y/y in April, matching expectations, following 2.6% in the previous month and marks the softest reading since January. Ex-fresh food & energy inflation also eased in line to 2.4% from 2.9%. Energy contribution turned slightly positive, technically a result of narrower declines in gas prices, though broader energy group edged positive in year-ago terms. Elsewhere, main drags came from ongoing deceleration in non-fresh food and accommodation prices. Goods inflation decelerated to 3.1% from 3.3% while closely watched services slowed to 1.7% (softest since May last year) from 2.1%. Recall that Tokyo core inflation was skewed down by local high school tuition subsidies. Broader attention has turned to impacts from yen weakness after BOJ Governor Ueda signaled rate hikes could be warranted if FX factor contributes notably to domestic inflation pressures. CGPI figures showed yen-denominated import prices accelerating through April after having swung positive in February. Hawkish BOJ MPM discussions flagged the possibility of a rate hike trajectory faster than what is currently priced in markets.

  • BOJ Governor Ueda continues to look beyond GDP volatility as markets eye QT:

    • According to Reuters, BOJ Governor Ueda told reporters in Stresa ahead of the G7 finance leaders' summit that the main global focus will be on confirming a US soft landing. On Japan, Ueda remarked recent data have not impacted their economic assessment after Q1 GDP came in below expectations. On the outlook from Q2, Nikkei cited additional comments that real wage growth will undergo recovery on the back of nominal hikes, auto suspension situation will improve, while also projecting inflation pressures from higher import costs will subside. Meanwhile, market discussions surrounding BOJ JGB purchases remained hawkish after Thursday's tranche targeting 1y~3y went undersubscribed for the first time since the introduction of unconventional easing in April 2013 (Nikkei). Amid QT speculation, some suggestions that dealers had already lightened short-end positions and were reluctant to sell more inventory to BOJ. Complications notably sustained market expectations that purchase amounts will need to be reduced further after the 13-May operation was unexpectedly downsized, dovetailing with calls for a formal tapering announcement as early as the June MPM.

  • China investor appetite for sovereign bonds and other yielding investment remains strong:

    • Lot of discussion lately about China investor appetite for sovereign bonds.Recentdemand focused on short end of the curve, though long end buying also inviting scrutiny after China issued first CNY40B of CNY1T special bond quota last Friday. Issue met with strong retail demand and saw securities trade up to 25% higher, resulting in trading halts and prompting warning from state media against engaging speculative activity (Bloomberg). Comes after PBOC earlier this month expressed discomfort with falling yields in arguing long-term rates would eventually rise amid an improving economy and increased issuance (Bloomberg). While China has mounted efforts to discourage investors from parking assets in deposits, sizable proportion of funds has instead been redirected to other haven alternatives. Bloomberg-compiled data showed bond tracking ETFs saw $428B of inflows in April - most since December. Yield compression has also contributed to investors bidding up dividend paying companies with CSI Dividend Index up 14% year-to-date, outperforming main index (SCMP).

  • Japan NISA investors buying Magnificent Seven, high dividend:

    • Nikkei conducted hearings from major Japanese retail brokerages on investment trends through the NISA scheme in April. While purchases of offshore single-stocks totaled a relatively small JPY42.8B, article highlighted meaningful color on allocations outside of index trackers with the eMAXIS Slim All Country fund remaining the core benchmark. Among foreign equities, Magnificent Seven names were among the most popular. Nvidia (NVDA) was the standout at JPY4.6B or 10% of flows, followed by Tesla (TSLA), Microsoft (MSFT), Arm (ARM) and Apple (AAPL) -- all making the top ten investments. Some interest in crypto-related names just outside the top ten, as well as high-dividend plays such as British Amercian Tobacco (BATS.LN). Among ETFs, Vanguard US high dividend yield ranked second behind Nvidia. Article noted single stock trading still in nascent stage since the scheme was revamped in January. Investment trusts still accounted for 57% of total NISA flows, while domestic single stocks made up 39% and foreign stocks at just 4%.

  • Japan life insurers rejuvenated by positive rates, limited reverberations from casualty data sharing:

    • Nikkei aggregated FY results from the 16 leading life insurers, revealing underlying earnings growth of some 40% y/y, prompting many to hike policy holder/shareholder payouts. Outlook further supported by the prospects for higher rates, conducive for increased allocations toward ultralong JGB investments. FX hedge risk remains the main overhang. Meanwhile, muted reactions to Thursday's headlines the four major casualty insurers -- Tokio Marine & Nichido Fire Insurance (8766.JP), Sompo Japan Insurance (8630.JP), Mitsui Sumitomo Insurance and Aioi Nissay Dowa Insurance -- admitted to sharing contract information of their auto insurance customers with their competitors, following a recent series of scandals exposing industry-wide compliance issues (Kyodo). Data included customer names, insurance policy numbers, types of insurance, maturity dates and premium amounts. Report recalled these firms were issued with regulatory business improvement orders in December over the collusion of insurance premiums for corporate customers and government agencies.

  • Notable Gainers:

    • +3.6% 9899.HK (Cloud Music): NetEase reports Q1 results, Cloud music revenue CNY2.03B vs StreetAccount CNY1.94B

    • +2.5% 883.HK (CNOOC): subsidiaries enter into petroleum exploration and production concession contracts for five offshore blocks in Mozambique

    • +0.1% 011790.KS (SKC Co.): subsidiary Absolics to receive $75M (KRW102.3B) subsidy from U.S. Department of Commerce

  • Notable Decliners:

    • -23.1% 9926.HK (Akeso Inc): reportedly AK112, EGFR-TKi for treatment of non-small cell lung cancer China's phase III clinical data fall short of expectation

    • -11.4% 9626.HK (Bilibili): reports Q1 results, mobile games revenue CNY982.8M vs FactSet CNY1.01B

    • -11.2% 2423.HK (KE Holdings): reports Q1 results, new home transaction services CNY4.92B vs SA CNY5.87B

    • -11.2% 6504.JP (Fuji Electric Co.): reveals FY26 medium-term management plan; targets FY26 revenue ¥1.250T vs FactSet ¥1.286T

    • -4.9% 9898.HK (Weibo Corporation): reports Q1 adjusted EBITDA $133.0M vs StreetAccount $133.3M

    • -3.1% 005930.KS (Samsung Electronics): company's HBM chips have reportedly been unable to pass Nvidia's tests for use in its AI processors due to issues with heat and power consumption

    • -0.6% 9988.HK (Alibaba Group): announces private offering of $4.5B aggregate principal amount of 0.50% Convertible Senior Notes due 2031, initial conversion rate is equivalent to initial conversion price of around $105.04 per ADS

• Data:

  • Economic:

    • Japan April

      • Nationwide core CPI +2.2% y/y vs consensus +2.2% and +2.6% in prior month

        • CPI excl. fresh food & energy +2.4% y/y vs consensus +2.4% and +2.9% in prior month

        • Overall CPI +2.5% y/y vs consensus +2.4% and +2.7% in prior month

    • New Zealand April

      • Trade balance NZ$81M vs revised (NZ$476M) in March

        • Exports (2.6%) y/y vs +3.8% in March

        • Imports (0.7%) y/y vs (25.0%) in March

    • Singapore

      • Q1 GDP y/y (Final) +2.7% versus consensus +2.7% and +2.7% in prior quarter

      • April manufacturing production y/y (1.6%) versus (9.2%) in prior month

  • Markets:

    • Nikkei: (457.11) or (1.17%) to 38646.11

    • Hang Seng: (259.77) or (1.38%) to 18608.94

    • Shanghai Composite: (27.52) or (0.88%) to 3088.87

    • Shenzhen Composite: (19.26) or (1.10%) to 1734.80

    • ASX200: (84.20) or (1.08%) to 7727.60

    • KOSPI: (34.21) or (1.26%) to 2687.60

    • SENSEX: 103.16 or +0.14% to 75521.20

  • Currencies:

    • $-¥: +0.08 or +0.05% to 157.0400

    • $-KRW: (0.07) or (0.00%) to 1368.5500

    • A$-$: 0.00 or 0.00% to 0.6604

    • $-INR: (0.28) or (0.34%) to 83.0923

    • $-CNY: +0.00 or +0.04% to 7.2446