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StreetAccount Summary - Asian Market Recap: Nikkei (0.22%), Hang Seng +0.22%, Shanghai Composite +0.41% as of 04:10 ET

Jun 04 ,2024

  • Synopsis:

    • Asian equities ended mostly lower Tuesday. India stocks sharply down on a tighter-than-expected election count. South Korea, Taiwan and Australia all with losses, most of Southeast Asia also down. China and mainland China boards bucking the trend to trade higher. US futures mixed, Europe down in early trades. Dollar consolidating overnight losses, Asia currencies mostly weaker except the yen, which is building on overnight strength. Treasury yields higher, JGB yields down. More falls in crude oil futures on talk OPEC may rollback production cuts. Precious metals lower, industrial metals down including a sharp selloff in iron ore.

    • Asia focus Tuesday on India's general election which is seeing a closer than expected count although PM Modi's BJP-led alliance has already secured a majority in declared seats. Eventual tally will be well short of 400 seats analysts said the markets may have priced in; rupee and IGBs also lower. The Nifty 50 and Sensex indexes were down around 8% at one stage but both have rallied modestly since as traders welcomed the BJP alliance gaining a majority in parliament.

    • In other developments, South Korean inflation slowed by more than expected, potentially opening the door for the BOK to ease rates later this year. Markets eyeing signals China property support measures working to stabilize real estate market after data showed pace of declines in new home sales slowed last month. Southeast Asia PMIs showed manufacturing output at highest level in more than a year, continuing trend seen in readings published yesterday.

    • Resona's (8308.JP) CEO said the company will 'aggressively reform' through digital investments and acquisitions. MMG (1208.HK) will tap the market via a two-for-five fully underwritten rights issue to raise HK$9.1B. Hyundai Motor (005380.KS) posted a slide in May domestic car sales to 62K units. Zee Entertainment (505537.IN) is considering a fundraising round via a share sale and QIP.

  • Digest:

    • India stocks fall sharply as vote counts indicate narrower BJP win than expected:

      • India stocks extending losses Tuesday to more than reverse gains Monday as early election counts indicate narrower election win for Modi and his BJP than exit polls had suggested. BJP-led NDA alliance now at almost 300 seats but INDIA alliance with higher-than-expected 226. Bloomberg earlier cited analyst saying market was priced for BJP majority of 400 seats in 542-seat parliament with any substantial miss potentially leading to market correction across assets. BusinessStandard analysis also suggested opposition INDIA bloc had exceeded exit polls although will still fall well short of majority. Sensex and Nifty both down almost 6.0% in broad selloff as labor and land reforms likely to prove more difficult to push through. PSU Banks - biggest gainers Monday - falling most followed by energy stocks; rupee down 0.4% against USD, yield on IGB 10Y spiked higher from 12M-long low Monday although now stabilized.

    • South Korea inflation dips raising hopes of a BOK rate pivot:

      • South Korea May inflation fell more than expected to 2.7% y/y from April's 2.9% in April, core inflation at 2.2% from 2.4%. BOK said downward trend in price rises likely to continue but warned it needs more time to see if prices converge towards its 2.0% target. Economists noted BOK confident economy can weather weak won, which adds to imported energy price pressure, as export growth remains strong but inflation print means bank should start signaling readiness for rate cut soon (Bloomberg). Recent dip in oil prices could ease imported inflation while strong US economy, China recovery, semiconductor boom should keep exports elevated; will combine to support policy pivot perhaps in Q3. However, bank may yet look for headline inflation below 2.5% before acting; Statistics Korea data showed certain food items spiking sharply on poor harvests, daily necessities price gauge at 3.1%, and will monitor volatile oil prices (Yonhap).

    • Early indications China home sales stabilizing following property support rollout:

      • Early signs China property support measures working to stabilize real estate market. According to data from China Real Estate Information Corp, pace of declines in new home sales narrowed to 33.6% y/y in May from 45% in April (Bloomberg). China Vanke (2202.HK) announced value of home sales rose 11.5% m/m in May, outpacing 3.4% increase among 100 largest developers tracked by China Real Estate Information Corp according to Bloomberg. City-level figures have also highlighted recent pickup in homebuyer interest in development projects as well as existing homes at China's major cities (Bloomberg). Comes as home purchasing restrictions were loosened last week with several cities also lowering downpayment ratios and mortgage floor rates. While headline effects of Beijing's policy announcements in early May drove rally in developers, shares have retreated recently amid skepticism measures will result in a sustainable housing market recovery. Declining household income and weak consumer sentiment considered major obstacles to revival of housing demand.

    • JGB market eyeing July BOJ rate hike, market functioning improves moderately after scrapping YCC:

      • Nikkei cited QUICK bond market survey for May which found modal forecast of 42 out of 110 picking July as the likely timing of a BOJ rate hike. This was followed by October with 35 respondents and September with 16. Article was vague on how rate cut views align with expectations of a tapering in JGB purchases (recall prior reports indicated notable speculation of some announcement in June or July). Only cited anecdotal thoughts that indications of progress toward tapering by the June MPM would help stabilize investor caution and hence stem the rise in yields. Another suggested the downsized purchase operation last month before a formal MPC decision opened the path for a rate hike in June or July. Nikkei also discussed the latest BOJ Bond Market Survey that showed headline DI for bond market functioning improved to -24 in May from -29 in February. While this marked the best result since Feb-2022, article noted market views that progress remains incomplete with the index still deeply negative. Fairly broad-based improvements in details though to be partly a reflection of BOJ's decision in March to end YCC. Projections for 10-year JGB yield point to 1.10% in FY24-end (vs 1.00% in Feb), 1.20% in FY25 and 1.25% in FY26.

    • Japan auto industry takes another hit to credibility as certification scandals expand:

      • Nikkei discussed how the latest certification scandal expanding to previously unaffected companies is further undermining the reputation for quality in the industry. In all, Toyota (7203.JP), Mazda (7261.JP) and Yamaha (7272.JP) have suspended shipments of six currently produced models over safety testing irregularities in their applications for the model certification required for mass production. Toyota itself is set to shut down two production lines run by subsidiary Toyota Motor East Japan on Thursday, potentially hitting more than 1,000 parts suppliers. Irregularities have been discovered dating back to 2014. As of the end of April, Toyota had shipped a total of roughly 1.7M units of the seven models with problematic data, some of which have been discontinued. The investigation is ongoing, with the full results expected in late June, and more models could end up being affected. Discussing potential systemic risks, Nikkei cited Teikoku Databank figures showing the broad supply chain surrounding Japan's eight leading automakers includes 59,193 companies as of May dealing a combined turnover of almost JPY42T ($267B) while Toyota alone comprises 39,113 firms for turnover of JPY20.7T.

    • Notable Gainers:

      • +16.9% 6055.HK (China Tobacco International (HK)): guides H1 net income attributable to increase by at least 30% y/y

      • +11.9% 4348.JP (Infocom): Teijin confirms considering selling shares in Infocom

      • +1.9% 9880.HK (UBTECH Robotics): signs strategic cooperation agreement with Dongfeng Motor unit

    • Notable Decliners:

      • -13.6% 1208.HK (MMG Ltd): proposes 2-for-5 fully-underwritten rights issue at HK$2.62/share to raise HK$9.08B

      • -11.1% 2333.HK (Great Wall Motor): reports May sales volume 91,460 units, (9.5%) y/y

      • -9.0% 1171.HK (Yankuang Energy Group): reports placement of 285.0M-shares at HK$17.39/share

      • -4.3% 8308.JP (Resona): reportedly to aggressively reform through digital investments and acquisitions

      • -2.3% 005380.KS (Hyundai Motor): reports May domestic sales 62,200 units vs year-ago 68,680 units

      • -0.8% 6869.JP (Sysmex): Japan's FTC reportedly conducts on-site inspection of Sysmex over alleged bundling sales practices

  • Data:

    • Economic:

      • Australia Q1

        • Business inventories +1.3% vs consensus +0.7% vs (1.7%) in Q4

          • Company profits (2.5%) vs consensus (0.9%) and revised +7.1% in Q

        • Current account balance (A$4.9B) vs consensus A$5.2B and revised A$2.7B in Q4

          • Net exports to subtract (0.9) ppt from Q1 GDP vs consensus (0.7) ppt subtraction and +0.6 ppt addition to Q4 GDP

      • South Korea

        • May CPI +2.7% y/y vs consensus +2.8% and +2.9% in prior month

          • CPI ex-food & energy +2.2% y/y vs consensus +2.2% and +2.3% in prior month

    • Markets:

      • Nikkei: (85.57) or (0.22%) to 38837.46

      • Hang Seng: 41.07 or +0.22% to 18444.11

      • Shanghai Composite: 12.71 or +0.41% to 3091.20

      • Shenzhen Composite: 7.81 or +0.45% to 1726.92

      • ASX200: (23.90) or (0.31%) to 7737.10

      • KOSPI: (20.42) or (0.76%) to 2662.10

      • SENSEX: (3,876.67) or (5.07%) to 72592.11

    • Currencies:

      • $-¥: (0.80) or (0.51%) to 155.3040

      • $-KRW: +3.84 or +0.28% to 1375.7500

      • A$-$: (0.00) or (0.35%) to 0.6656

      • $-INR: +0.38 or +0.46% to 83.4817

      • $-CNY: +0.00 or +0.02% to 7.2438

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