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StreetAccount Summary - Asian Market Recap: Nikkei (0.11%), Hang Seng (0.03%), Shanghai Composite (0.46%) as of 04:10 ET

May 28 ,2024

• Synopsis:

  • Asian equities ended mixed in a quiet day's trade. Mainland China boards among the fallers as real estate names fell while Hong Kong gave up early gains to end flat. South Korea and India also flat, Japan's Nikkei and Topix also little changed. Australia's ASX fell. Southeast Asia was mixed. US futures higher, Europe higher in early trades. US dollar down, some strength in AUD, elsewhere currencies flat. Treasury yields mixed, JGB 10Y yield remained above 1.0%. WTI crude higher on geopolitical concerns but Brent is flat; silver spiking higher, industrial metals supported. Cryptocurrencies lower on reports Mt Gox exchange's bitcoins coins look set to be sold.

  • Asia markets in a holding pattern ahead of key economic data later this week with many boards hugging the flatline for most of the day. The Hang Seng received an early boost from news Shanghai is to lower house-buying restrictions, the first-tier one city to announce such measures. But mainland property stocks eventually finished lower amid concerns the measures would yield little success. Not much else to excite investors today so the overarching themes of China's wobbly recovery combined with regional reinflation dynamics, central banks' tight monetary policies, and currency gyrations prevailing for now.

  • In what few macro developments there were, Australian retail sales rebounded by less than expected with underlying trend remaining weak. Japan services PPI inflation quickened by most in 32 years, coming amid heightened BOJ sensitivity to homegrown pricing pressures but all of the country's underlying inflation measurements were below 2.0% in April. Malaysia producer prices rose to more than a year high, Thailand unemployment rose again.

  • Tohoku Electric Power (9506.JP) said its one of its Onagawa Nuclear Power Plant units will restart in September. China Vanke (2202.HK) sold a parcel of land in Shenzhen at a more than 27% discount as it seeks to shore up its cash balances. HYBE (352820.KS) is to sell 755K SM Entertainment (041510.KS) shares in a block sale, leaving it with a 9.4% stake. Adani Energy Solutions (539254.IN) and Adani Enterprises (512599.IN) are to raise several billion dollars via QIPs for infrastructure development. Life Insurance Corp of India (543526.IN) is considering the acquisition of health insurance firms, according to reports.

• Digest:

  • China Politburo adds to cautious rhetoric on systemic risks:

    • Politburo convened Monday, stressing prevention and diffusion of financial risks is a major challenge that must be overcome to achieve high-quality development. Xinhua recalled this was an extension of President Xi's calls in January on the need to prevent and defuse financial risks, particularly systemic risks. Members discussed so-called trial provisions aimed at strengthening financial oversight across the board, alluding to strong punitive measures against illegal activities. Politburo discussions follow recent attention on systemic risks among senior leadership. Vice Premier He Lifeng pledged to control intertwined risks in the property sector, local government debt and small local financial institutions (Reuters). Added Beijing will also seek to prevent systemic risks and crack down on illegal financial activities. Premier Li Qiang 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 (Xinhua).

  • China's Shanghai city announces property easing measures:

    • China's financial hub Shanghai announced property easing measures, ten days after central government rolled out rescue package to shore up support for beleaguered sector (SCMP). Downpayment ratios for first-time buyers cut to 20% from 30%, and to 35% from 50% for second-home buyers. City will cut minimum interest rates on first home mortgage to LPR minus 45 bp, compared to LPR minus 10 bp previously. Social insurance and income tax payment requirements for non-Shanghai residents will be loosened. Needy families will also be eligible for housing subsidies for upgrade. CRIC data showed Shanghai has inventory of new homes of around 8M square meters, which could take more than a year to digest. Before Shanghai announcement, Yicai reported large Chinese cities were already seeing signs of growing interest in buying property. Meanwile S&P Global cautioned China's rescue measures could pose risks to banks operating in lower-tier cities as home prices in smaller cities are expected to drop about 14% through 2024/25, pushing some into negative equity positions (Reuters).

  • China's property rescue measures face familiar constraint - banks' willingness to lend:

    • Positive headline effects from China property rescue efforts continue to fade as measures invite discussions about their limitations. Key constraint remains bank willingness to lend amid concerns over impact on profitability and interest margins. China Securities Journal highlighted how more than CNY900B of development projects under "whitelist" have been approved yet actual amount lent has been significantly less, with banks expressing concerns over risky nature of projects and need to control NPL ratios. So-called "whitelist" of development projects eligible for financing was announced in January (Bloomberg). Meanwhile S&P warned Monday that reducing downpayment ratios and removing mortgage floor rate may lead to temporary rise in property demand, but expectations of continued fall in small city housing prices may tip those buyers into negative equity (Reuters). That would result in increased defaults, limiting banks' ability to absorb losses given removal of floor rate.

  • Australian retail sales remain weak:

    • Australian retail sales rose 0.1% m/m in April, rebounding from March's 0.4% fall but weaker than 0.2% increase forecast. Discretionary goods categories mixed with household items (+0.7%) and department store (+0.1%) retailing seeing growth but clothing, footwear, and personal accessory (-0.7%) retailing shrinking. 'Other retailing' climbed 1.6% while spending on cafes, restaurants and takeaway services rose 0.3%. ABS release noted earlier Easter and different timing of school holidays contributed to volatility in turnover over March and April, but underlying trend remains weak. Recall RBA revised down near-term GDP growth forecast, anticipating consumption growth to remain subdued for most of 2024. Added recovery in consumption expected to take longer to materialize amid pressures from interest rates and inflation. Recent sentiment surveys show consumer confidence remains depressed, with cost of living measures announced in May budget offering little reprieve. At the same time, markets pricing in only ~30% chance of rate cut by year-end amid sticky domestic inflation.

  • Attention on China, Japan, South Korea summit defaults to geopolitics:

    • Joint statements released after the China-Japan-South Korea trilateral summit contained few implications for markets as expected. Leaders concurred on importance of cooperation in IP. Japan aims to have candid talks on the future shape of a trilateral FTA, though specifics were light apart from brief mention of an RCEP-plus agreement. Subsequent remarks by China Premier Li Qiang indicated enthusiasm towards stronger trade ties, while lobbying Japan and South Korea to "reject external disruptions" (Xinhua). Attention defaulted to geopolitics, where Kishida expressed serious concern over North Korea's nuclear and missile activities and military cooperation between Russia and North Korea, reaffirming denuclearization of North Korea and the stability of the Korean Peninsula is the common interest of the three countries. Kishida also vowed Japan will continue severe sanctions against Russia and strong support for Ukraine. On Middle East conflict, three leaders concurred on efforts towards resolution, sharing the importance of realization of a sustainable ceasefire and the support of a "two-state solution".

  • Notable Gainers:

    • +80.7% 2505.HK (EDA Group Holdings): China Lesso unit EDA Group opens +35.5% at HK$3.09/share on HKEx in trading debut

    • +10.8% 9506.JP (Tohoku Electric Power): Onagawa Nuclear Power Plant Unit 2 on track to restart around Sep-24

    • +0.9% 8725.JP (MS&AD Insurance): reportedly to invest 60% from sale of cross-shareholdings in M&As, 20% in shareholder returns

    • +0.1% 532538.IN (UltraTech Cement): UCMEIL to make partial conditional cash offer to acquire a further 158.0M-shares of RAKWCT

  • Notable Decliners:

    • -9.6% 7278.JP (EXEDY Corp): launches 16.2M-share secondary offering for holder Aisin Corp

    • -5.3% 041510.KS (S.M. Entertainment Co.): HYBE to dispose of 755K S.M. Entertainment shares at KRW90,531/share

    • -1.5% 9613.JP (NTT DATA Group): agrees to acquire 59% stake in GHL Systems for MYR1.08/share

    • -0.9% 1336.HK (New China Life Insurance): New China Asset's president Zhang Chi was reportedly taken away in last few days

    • -0.5% 500295.IN (Vedanta): reportedly considering share sale that could raise up to INR85B as soon as June

    • -0.2% 656.HK (Fosun International): ABN AMRO Bank to acquire German private bank Hauck Aufhäuser Lampe from Fosun International for €672M

• Data:

  • Economic:

    • Japan April

      • Services PPI +2.8% y/y vs consensus +2.3% and revised +2.4% in prior month

    • Australia April

      • Retail sales +0.1% m/m vs consensus +0.2% and (0.4%) in March

  • Markets:

    • Nikkei: (44.65) or (0.11%) to 38855.37

    • Hang Seng: (6.19) or (0.03%) to 18821.16

    • Shanghai Composite: (14.47) or (0.46%) to 3109.57

    • Shenzhen Composite: (18.91) or (1.08%) to 1728.93

    • ASX200: (21.60) or (0.28%) to 7766.70

    • KOSPI: (0.14) or (0.01%) to 2722.85

    • SENSEX: (55.57) or (0.07%) to 75334.93

  • Currencies:

    • $-¥: (0.10) or (0.06%) to 156.8790

    • $-KRW: (9.53) or (0.70%) to 1358.0000

    • A$-$: +0.00 or +0.48% to 0.6659

    • $-INR: +0.10 or +0.12% to 83.1619

    • $-CNY: +0.00 or +0.04% to 7.2461