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StreetAccount Summary - Asian Market Recap: Nikkei (0.89%), Hang Seng (0.10%), Shanghai Composite (0.83%) as of 04:10 ET

Jun 05 ,2024

• Synopsis:

  • Asian equities ended mixed Wednesday. India markets rallying post Tuesday's sharp selloff with notable gains in consumer-orientated sectors. Strong gains in South Korea backed by auto and battery stocks, Taiwan also higher on tech stocks. Australia and most of Southeast Asia gained, Japan and mainland China boards stayed in the red all day while the Hang Seng gave up strong early gains to end just below the flatline. US futures higher, Europe opened with solid gains. US dollar flat, yen noticeably weaker, yuan weaker, AUD stronger. Treasury yields higher across tenors, JGB yields all lower. Crude contracts now higher after being lower all day, precious metals also higher, industrial metals down.

  • India stocks again taking center stage in Asia Wednesday, as the Nifty and Sensex indexes rallied after two of Modi's allies confirmed they would remain part of the NDA governing alliance, giving the grouping enough of a majority to form a coalition government. Nevertheless, poorer-than-expected result for PM Modi and the BJP means lower potential for Modi to pass labor and market reforms promised in its manifesto.

  • In other developments, Australian Q1 GDP growth missed expectations though details encouraging as consumption growth picked up. RBA Governor Bullock said bank won't hesitate to hike again if inflation doesn't come down quickly. China Caixin services PMI expanded by more than expected and fastest since Jul-2023, driven by pickup in new business. South Korea Q1 GDP revised higher in-line with forecasts. Thailand's cabinet approved a support package for its tourism industry including limited legalization of casinos. Singapore retail sales for May contracted unexpectedly.

  • Suntory Holdings (2587.JP) has priced a $500M dollar bond as it looks to expand overseas. Cathay Pacific's (0293.HK) CEO is considering adding more routes in Belt and Road destinations. Meituan (3690.HK) is considering a convertible bond issuance but regulatory approval remains pending. Nio (9866.HK) received regulatory approval for a third factory in China. Trip.com (9961.HK) is to raise $1.3B in convertible bonds due in 2029 to help repay debt, expand overseas, fund buyback of $400M ADRs. LG Energy Solution (373220.KS) has signed a MoU with Analog Devices to strengthen the competitiveness of its battery management systems. Vanguard International Semiconductor (5347.TT) and NXP (NXPI) are to establish a joint venture and build and operate a 300mm fab plant in Singapore.

• Digest:

  • Modi's BJP to lose parliamentary majority in blow to reform program:

    • India PM Modi set to retain power as head of BJP-led NDA coalition government, but his BJP party lost majority in parliament, dealing significant blow to planned economic reforms. For first time in ten years, BJP must rely on three regional parties, which have uneven loyalty track record to BJP. With most seats counted, BJP will win 240 of 543 seats (more than 50 fewer than in 2019) and NDA alliance parties 53; Congress-led 'INDIA' coalition on 234 seats (TimesofIndia). Political analysts said BJP's failure to win majority will make it more difficult to implement economic policy, will make Modi beholden to allies. FT cited one saying voters "punished" Modi for overreaching, may mean country could return to 1989-2014 alliance, negotiated-style government. BJP appears to have lost support in Hindi-speaking strongholds; unemployment, inflation, growing inequality, army recruitment, and divisive election campaign may have alienated voters in some regions (BBC).

  • China Caixin Services PMI marks fastest growth in ten months:

    • Caixin services PMI was 54.0 in May, beating forecasts of 52.6 and higher from April's 52.5. Data in expansion for 17^th straight month and was highest since Aug-2023. Incoming new work increased at quickest pace since May-2023. Rate of expansion for export business was most pronounced in a year. Payroll numbers expanded for first time in four months with rate of employment growth at fastest since Sep-2023, while anecdotal evidence pointed to improvements in both domestic and external market conditions with additional staff hired. Backlogged work continued to decline. Average input costs increased with rate of inflation accelerated to fastest in 11 months due to higher input material, labor and transport costs. Average prices charged increased at fastest since Jan-2022. However, confidence level dropped to seven-month low amid growing concerns over global economy. Caixin Composite PMI rose to 54.1 in May from 52.8 in April as Chinese business activity expanded for seventh successive month and at fastest pace in a year. Caixin economist noted Chinese economy is generally stable and remains on track for recovery while pointing to pressure on employment and weaker demand than supply as prominent issues. Weak expectations remained drag.

  • RBA Governor Bullock says won't hesitate to hike again if inflation is sticky:

    • Appearing before a Senate committee, RBA Governor Bullock said won't hesitate to hike cash rate if inflation doesn't come down quickly enough or begins to go up (Financial Review, The Australian). Reiterated board's low tolerance for another delay in returning inflation to target, though also noted potential for rate cut if weaker-than-expected economy exerts more downward pressure on inflation. RBA emphasized board's data-dependent stance, highlighting importance of Q2 CPI (31-Jul), GDP and monthly employment figures. Questioned on budget, Bullock said RBA would look through temporary effects of government energy rebates, though would assess stimulatory impact of federal and state budgets when updating August forecasts. Her comments appear to suggest August will be 'live' meeting for a rate hike if central bank delays CPI target timeline beyond end-2025 it currently predicts. While markets have again priced out likelihood of another rate hike, rate cut not being fully priced in until Jun-2025.

  • Australian GDP weaker-than-expected, but consumption growth picks up:

    • Australian Q1 GDP growth unexpectedly slowed to 0.1% q/q from 0.2% in prior quarter (also consensus). Brought yearly rate of growth down to 1.1% vs consensus 1.2% and Q4's 1.5% increase. Marked weakest growth since NSW and Victoria lockdowns in Q3-2021. Details were mixed with main drag coming from net exports though this was driven by stronger imports as companies rebuilt inventories following prior quarter run-down. Household consumption growth rose to 0.4% from 0.1%, reflecting not only spending on essential items such as rent, utilities and health, but also increases in discretionary categories such as travel, sporting and music events. Signs of softer labor market with employee compensation registering smallest growth since Q3 2021, pulling down household income growth to weakest since Q4-2021. Household savings ratio dropped as consumption growth outpaced small rise in income. Increased government spending made positive contribution to growth, though capex a drag amid pullback in mining investment.

  • Japan wage growth shows early signs of pickup, scheduled earnings strongest since 1994:

    • Nominal average wages rose 2.1% y/y in April, above consensus 1.8%. Follows revised 1.0% in the previous month and marks the biggest increase since June 2023. Details were also encouraging as the main driver was scheduled earnings growth of 2.3%, the highest since 1994 (Bloomberg). Meanwhile, overtime payments fell at a steady pace and special payments logged mild growth. Real wages still slid 0.7% vs an expected 0.9% decline, though was the smallest contraction since December 2022. Amid somewhat mixed base effects, seasonally adjusted indices showed nominal cash wages grew 0.7% m/m, the strongest since May 2023, as contracted earnings logged 1% growth for the first time in at least two years. Total hours worked contributed to some extent, rebounding 1.7% m/m to reverse the prior month's decline. Limited bounce in overtime hours implied some contribution from scheduled shifts. Attention has shifted to the transmission of this year's historic shunto wage hikes through the broader economy and whether such momentum is enough to outpace inflation. Recall that prior discussions pointed to this wave taking place in earnest from around June.

  • Notable Gainers:

    • +19.9% 9983.HK (Central China New Life): declares special dividend CNY0.241/share; record 9-Jul, payable 18-Jul

    • +4.6% 9984.JP (SoftBank Group): Elliot reportedly rebuilds stake worth over $2B (¥311.29B) in SoftBank; pushes company to launch $15B (¥2.334T) buyback

    • +4.5% 373220.KS (LG Energy Solution): signs MoU with Analog Devices to strengthen the competitiveness of its battery management total solution

    • +4.2% 500440.IN (Hindalco Industries): subsidiary Novelis postpones IPO due to market conditions

    • +3.2% 7453.JP (Ryohin Keikaku): reports May domestic LFL directly managed stores + online store sales +3.5% y/y

  • Notable Decliners:

    • -14.5% 2433.JP (Hakuhodo DY Holdings): reports Q4 revenue ¥300.47B vs FactSet ¥324.65B [2 est, ¥319.20-330.09B]

    • -7.5% 6920.JP (Lasertec): activist short seller Scorpion Capital issues report

    • -3.1% 8308.JP (Resona): reportedly planning to sell ¥170B worth of cross-shareholdings by end of fiscal 2029

    • -2.1% 9961.HK (Trip.com Group): to issue $1.3B convertible senior notes due 2029, to repurchase up to $400M of ADSs; initial conversion price is $66.46/ADS

    • -0.8% 3690.HK (Meituan): reportedly working on potential convertible bond issuance with Bank of America, Goldman Sachs

    • -0.5% 6869.JP (Sysmex): confirms on-site inspection by Japan FTC on suspicion of violations of Antimonopoly Act

• Data:

  • Economic:

    • China May

      • Caixin services PMI 54.0 vs consensus 52.6 and 52.5 in prior month

        • Caixin Composite PMI 54.1 vs 52.8 in prior month

    • Japan

      • May final services PMI 53.8 vs preliminary 53.6 and 54.3 in prior month

        • Composite PMI 52.6 vs preliminary 52.4 and 52.3 in prior month

      • April average nominal wages +2.1% y/y vs consensus +1.8% and revised +1.0% in prior month

      • Real wages (0.7%) y/y vs consensus (0.9%) and revised (2.1%) in prior month

    • Australia Q1

      • GDP +0.1% q/q vs consensus +0.2% and +0.2% in Q4

        • GDP +1.1% y/y vs consensus +1.2% and +1.5% in Q4

    • South Korea Q1

      • Revised GDP +1.3% q/q vs preliminary +1.3% and revised +0.5% in prior quarter

        • GDP +3.3% y/y vs preliminary +3.4% and revised +2.1% in prior quarter

  • Markets:

    • Nikkei: (347.29) or (0.89%) to 38490.17

    • Hang Seng: (19.15) or (0.10%) to 18424.96

    • Shanghai Composite: (25.80) or (0.83%) to 3065.40

    • Shenzhen Composite: (20.59) or (1.19%) to 1706.33

    • ASX200: 31.90 or +0.41% to 7769.00

    • KOSPI: 27.40 or +1.03% to 2689.50

    • SENSEX: 1,645.75 or +2.28% to 73724.80

  • Currencies:

    • $-¥: +1.19 or +0.77% to 156.0870

    • $-KRW: (3.52) or (0.26%) to 1370.9300

    • A$-$: +0.00 or +0.23% to 0.6661

    • $-INR: (0.19) or (0.23%) to 83.3906

    • $-CNY: +0.01 or +0.07% to 7.2449