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StreetAccount Summary - Asian Market Recap: Nikkei +0.55%, Hang Seng +0.28%, Shanghai Composite (0.54%) as of 04:10 ET

Jun 06 ,2024

  • Synopsis:

    • Asian equities ended mixed Thursday. Strong gains for technology-leaning benchmarks in Taiwan, Australia and Japan; China stocks mixed with mainland markets lower, and Hong Kong ending slightly higher. India gaining for a second day, Southeast Asia mixed. South Korea closed for a holiday. US futures steady, Europe firmly higher at the open. US dollar slightly lower, Asia currencies mixed. Treasury yields edging higher, JGB yields lower. Crude oil and precious metals higher, industrial metals mixed.

    • Asia stocks ended mixed despite a bright start across the region. Taiwan's Taiex reached fresh record highs after TSMC announced a share buyback program, Japan's Nikkei benefitted from read through to overnight gains but stocks well off their highs by the close; China's boards responding with uncertainty on Vanke and Evergrande developments just as an index that tracks the sector moved closer to a bear-market.

    • India stocks higher for a second day after PM-elect Modi secured agreement from NDA partners for a coalition government but they have already stated they are looking for input into the government's agenda. RBI decision tomorrow unlikely to be influenced by election outcome with no-change on rates widely expected. In other developments, BOJ board member Nakamura backed maintaining current policy settings on data published since post March's meeting. Australian exports shrank amid slump in ore and coal shipments but imports fell sharply too.

    • Asia Cement (China) Holdings' (743.HK) parent company, Asia Cement, has offered to take the company private in deal worth around HK$1.63B. China Vanke (2202.HK) said it will fully repay a dollar bond due Friday, its final offshore debt obligation of 2024. Country Garden's (2007.HK) Hong Kong liquidation hearing was again adjourned to July with no explanation given by the court; stock remained suspended. Longi Green Energy Technology (601012.CH) and Trina Solar (688599.CH) confirmed they have both started to wind down operations in Southeast Asia because of US trade barriers. TSMC (2330.TT) launched a share buyback program worth NT$4.16B and approved a capex plan of $17.36B capex plan.

  • Digest:

    • BOJ Governor Ueda keeps policy narrative on normalization path:

      • According to Reuters, Governor Ueda told parliament that BOJ continues to parse market developments since the March policy changes though justified reducing JGB purchases as part of the policy normalization process. Added BOJ will move "cautiously" in determining when and by how much it raises short-term interest rates "to avoid making any big mistakes." Other newswires quoted Ueda as saying inflation expectations must be around 2% as a precondition for achieving the price stability target and current expectations remain below 2%, repeating remarks made since the March decisions. In all, latest BOJ rhetoric did not move the needle much in terms of policy expectations. JGB 10y yield has declined steadily this week, though largely correlating with US Treasuries. Today's strength was helped by a firmer than expected 30y auction as BOJ policy speculation has subdued market sentiment toward incoming supply. Main catalyst remains the surprise downsized JGB purchase operation on 13-May, triggering forecasts for buying reductions to be formalized in BOJ policy as early as this month's MPM. However subsequent operations were unchanged and latest press reports suggested board members may only discuss the topic next week.

    • BOJ board member Nakamura favors maintaining current policy settings for time being:

      • In a speech, board member Nakamura affirmed support for terminating ETF purchases at the March MPM (as noted in the policy statement), though opposed removing NIRP/YCC until confirming small firms' capacity to raise wages. Based on subsequent data including the March BOJ Tankan, suggested it is appropriate to maintain current policy settings for the time being. Conveyed a cautious outlook for the household sector compared with MPC consensus, suggesting inflation might not reach 2% from FY25 onwards amid longstanding structural/demographic headwinds, bottoming out of savings rates reflecting increased consumer frugality. Went into a detailed discussion of challenges faced by small business and remains unconvinced of the overall sustainability of wage hikes. Also argued that 30 years of inertia from a corporate cost-cutting mentality was unlikely to change in the next two years and called for structural reforms that promote confidence in strong growth expectations, essentially through instilling dynamism in corporate and household sector dynamics. Overall, remarks came as the most bearish on the economy among recent BOJ speeches. Recall that Noguchi was the other dissenter at the March MPM though later voiced support for the broader normalization trajectory.

    • New Modi government may have to rework 100-day agenda to accommodate empowered partners:

      • New India government may have to rework its 100-day policy agenda after failing to secure overall parliamentary majority but agreeing on collation government with NDA partners, according to India media (Mint). Two alliance partners, TDP and Janata Dal, said plan is to discuss 100-day agenda with all coalition partners; TDP added new agenda must "align with own manifesto", third partner said it would like to "reshape agenda taking our input into consideration". Coalition partners were not part of previous 100-day agenda discussions. Analysts cited by Mint said new government still likely to continue with investment-led growth agenda, priorities can be adjusted but broad economic trajectory will be unchanged. TDP won second highest number of seats in parliament, is demanding senior ministerial positions but also widely regarded as moderating voice to BJP (Reuters). Second Mint article suggested NDA alliance partners may receive two senior positions in central government.

    • China property stocks slump from May high amid doubts over support package:

      • Bloomberg's BI gauge of Chinese developer shares dropped as much as 3.2% Thursday, extending losses from mid-May high to around 20%. Hang Seng Mainland Properties Index and CSI 300 Real Estate Index also down around 14% and 12% respectively from 17-May high amid skepticism over China's support measures for beleaguered sector. Recall markets initially cheered broad support package in mid-May, including relaxation of mortgage rules and urging local governments to buy unsold homes, but soon doubts emerged about effectiveness of those measures. Despite anecdotal evidence that some of China's biggest cities saw improvements in homebuyer sentiment (Bloomberg) and private surveys showing pace of declines in new home sales narrowed in May (Bloomberg), Goldman Sachs said scale of current policy support won't be a gamechanger and Beijing needs to inject around CNY2T ($286B) into the sector to absorb some 10% of housing inventory and stabilize prices (SCMP). Fitch Ratings also lowered its 2024 China new home sales forecasts.

    • Bonds tracking for longest daily winning streak since late 2023 as markets eye rate cuts:

      • Global bond rally continues with Bloomberg's bond index on track for longest run of gains since November. Curves have become more inverted amid current bond rally as concerns growth outlook reemerge. Falling yields largely a function of a more dovish rate outlook with markets now pricing in ~90% chance of two Fed rate cuts by year-end compared to ~50% chance at end of May. Similar patterns playing out elsewhere with Canadian 10Y yield down almost 40 bp from a week ago as BOC's rate cut accompanied by dovish-leaning tone from Governor Macklem. Some thought BOC's rate cut provides greater reassurance for other central banks to begin their easing cycles before Fed, as collective action may lessen pressure on currencies (Bloomberg). Eurozone yields notably lower with ECB widely expected to cut Thursday and markets pricing in at least two cuts by year-end. Australian yields also down sharply as futures price in ~50% chance of RBA rate cut by December following weak Q1 GDP (vs ~9% at end of May).

    • Notable Gainers:

      • +4.7% 2330.TT (Taiwan Semiconductor): approves capex $17.36B (NT$561.43B); launches NT$4.16B share buyback at NT$598-1,281/share to run until 5-Aug

      • +4.2% 1928.JP (Sekisui House): reports Q1 operating income ¥71.71B vs FactSet ¥64.01

      • +2.6% 3008.TT (LARGAN Precision): reports May revenue NT$3.49B, +32.7% y/y

      • +2.4% 4042.JP (Tosoh Corp): holder Silchester discloses 5.06% stake

      • +1.1% 2317.TT (Hon Hai Precision Industry): reports May revenue NT$550.16, +22.1% y/y

    • Notable Decliners:

      • -12% 743.HK (Asia Cement (China) Holdings): Asia Cement Corp. offers to take Asia Cement (China) Holdings private at HK$3.22/share in cash

      • -5.6% 6770.JP (Alps Alpine Co.): holds management structure reform briefing

      • -2.9% 6920.JP (Lasertec): denies Scorpion Capital's allegation of improper accounting practices

  • Data:

    • Economic:

      • Australia April

        • Trade balance A$6.55B vs consensus A$5.40B and revised A$4.84B in March

          • Exports (2.5%) y/y vs +0.1% in March

          • Imports (7.2%) y/y vs +4.2% in March

        • Housing finance +4.3% m/m vs +3.1% in March

    • Markets:

      • Nikkei: 213.34 or +0.55% to 38703.51

      • Hang Seng: 51.84 or +0.28% to 18476.80

      • Shanghai Composite: (16.61) or (0.54%) to 3048.79

      • Shenzhen Composite: (28.65) or (1.68%) to 1677.68

      • ASX200: 52.80 or +0.68% to 7821.80

      • KOSPI: Closed

      • SENSEX: 455.54 or +0.61% to 74837.78

    • Currencies:

      • $-¥: +0.22 or +0.14% to 156.2910

      • $-KRW: (3.62) or (0.26%) to 1366.2700

      • A$-$: (0.00) or (0.05%) to 0.6644

      • $-INR: (0.01) or (0.01%) to 83.4777

      • $-CNY: (0.00) or (0.02%) to 7.2463

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