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StreetAccount Summary - Asian Market Recap: Nikkei +0.25%, Hang Seng (1.04%), Shanghai Composite (0.76%) as of 04:10 ET

Jun 11 ,2024

  • Synopsis:

    • Asia equities ended mixed Tuesday. Greater China stocks opened lower on weak spending data over the holiday although rallied a little into the close. Australia sharply lower as gold and other miners fell steeply on the gold price correction. Taiwan and Singapore lower. Small gains in South Korea and India. Japan closed mixed, Southeast Asia also mixed. US futures lower. US dollar flat, yen weaker again and above 157 per dollar, onshore yuan weaker. Oil contracts giving up some of their overnight gains, gold and silver continuing recent downward trend, industrial metals also under pressure.

    • China shares markedly lower first thing before an improvement in sentiment in the afternoon session saw some mainland indices settle near the flatline. Four main strands to the negative drivers: weak travel data over the holiday weekend; renewed worries over the property sector following several downbeat reports over Beijing's rescue plan; a Hong Kong court ordered the liquidation of a developer; and the EU's pending decision on EV tariffs. The onshore yuan also fell to seven-month lows with investors speculating again the PBOC will have to do more to provide support sooner rather than later.

    • In other developments, Japan machine tool orders bounced back in May; Japan share buybacks remained a key market tailwind with activity surging in H1 this year. Australia business mood soured for the first time in six months. Philippines exports rose 26% y/y in April, the most in almost three years, but its trade deficit also grew. South Korea exports for the first ten days shrank on fewer workdays; the same report showed the US may overtake China as the country's biggest export destination for the first time in 22 years this month if the trend continues.

    • Daiwa Securities (8601.JP) to increase its stake in Aozora Bank (8304.JP) in two stock transactions from a prominent activist fund. A Hong Kong court has ordered Dexin China (2019.HK) to liquidate, shares suspended but down sharply before announcement. Bain Capital has made an unsolicited takeover offer for Bapcor (BAP.AU). Rio Tinto (RIO.AU) is to buy Mitsubishi Corp's (8058.JP) near 12% stake in Boyne Smelters.

  • Digest:

    • China market tailwinds remain tepid:

      • Bloomberg cited China tourism ministry figures showing domestic travel during the Dragon Boat Festival long weekend rose 6.3% from last year to 110M trips, while total spending grew 8.1% to CNY40.4B. Yet article cited Citi calculations that average per person spending was still 12.3% below 2019 levels. Pattern extends cautious trend since Lunar New Year, including qualitative discussions about cost savings as a reflection of subdued consumer confidence. Separately, Bloomberg discussed emerging expectations that Beijing will announce new measures and additional funding for property market support. Suggested that views were triggered by a State Council statement Friday urging officials to keep an "open mind" over policies to reduce housing inventory. This prompted some thoughts the latest round of easing measures had less of an impact than policymakers had expected after announcements were met with skepticism and progress in several trial programs has apparently been slow.

    • Global hedge funds boosting Japan allocations:

      • Nikkei discussed renewed interest among leading hedge funds in Japan markets. Citing exclusive interviews, Bain Capital's David Gross indicated plans to invest JPY5T ($31.8B) over the next five years, about double the amount of the last five years. Target sectors include healthcare as well as automation/robots as a solution for labor shortages. Blackstone President Jonathan Gray announced plans for investments worth JPY1.5T in corporate value by 2027, roughly matching activity accumulated to date since entering the market in 2007. Gray noted attraction of corporate management priority on ROE with conditions ripened by yen weakness and equity strength. Article recalled Carlyle's announcement in May raising JPY430B for a fifth Japan buyout fund, marking the largest such strategy focused on the Japan market. Carlyle in May acquired KFC Holdings Japan (9873.JP) for ~JPY130B and the new fund will target major deals. KKR plans to investment over JPY1T in Japan over the next decade, building on its $8B investments to date. CVC Capital Partners in February launched an Asia fund worth $6.8B with about 20% earmarked for Japan.

    • Japan share buybacks tracking blowout record pace this year:

      • Nikkei aggregated share buybacks among all listed firms, showing growth of some 60% y/y already over Jan-May to JPY9T ($57.3B). This total already close to the annual record-high JPY9.6T set in 2023. Activity was tracking 50% growth in Jan-Apr, though logged a monthly record of JPY5.8T in May alone, up 1.8-fold y/y. Impetus remains widely attributed to the corporate governance drive to improve capital efficiency prompted by the TSE. Article discussed broad adoption of buyback strategies. Initial governance focus was on improving price-to-book ratios (PBR), but buybacks generally evenly split between firms with PBR below and above 1. Activity also common among companies with both strong and weak earnings growth -- latter encapsulated by Sony's (6758.JP) JPY250B buyback while guiding FY net profits down 5%, and payout effects lifted the share price 8% the following session. Furthermore, growing number (10%) of firms announced buyback plans for the first time. Activity fueled partly by concurrent efforts to phase out cross shareholdings, though corporate management remains under pressure to effectively deploy ~JPY106T in cash on hand.

    • Modi retains much of his old cabinet as partners miss out on big posts:

      • Narendra Modi largely reappointed senior ministers from previous administration, sending signal of policy continuity and ease concerns over direction of new government. Nirmala Sitharaman retained finance ministry in strongest continuity signal, which will give investors comfort according to analyst cited by Reuters. However, Sitharaman still faces task of tweaking policies on tax and welfare to address imbalances in economy, economists said; July budget may give insight to how government will deliver on these tweaks (Bloomberg). In other appointments, Amit Shah retained home affairs, Rajnath Singh defense minister, S Jaishankar keeps external affairs portfolio. Seven other ministers kept old positions, BJP president JP Nadda to take health and family welfare portfolio. NDA allies retained some minor ministries but missed out senior portfolio. One Sikh and one Christian minister was appointed but no Muslims were given portfolios (EconomicTimes).

    • Japan Q2 GDP still seen expanding despite latest auto certification issues:

      • Nikkei discussed the latest revisions to Q1 GDP and drew attention to the near-term outlook. Narrow poll of 10 economists showed average forecast of 2.1% q/q annualized growth in Q2, following the 1.8% contraction in Q1. Rebound seen as a technical function of dissipating temporary effects of earlier auto suspensions among Toyota group companies and the Noto Peninsula earthquake. Meanwhile, underlying growth momentum remains lackluster, and caution was reinforced by yesterday's softer Economy Watchers Survey index in contraction territory for the third straight month. Article also discussed the latest revelations of auto certification irregularities expanding to majority of Japan's major automakers beyond Toyota. This was cited as a notable overhang in the near term, yet overall impacts were seen to be minor given suspended models account for a small proportion of total output. Story noted latest Q2 GDP consensus estimate was down 0.8 ppt from consensus prior to the certification headlines, roughly consistent with specific estimates the scandal would be a drag of 0.5% ppt.

    • Notable Gainers:

      • +6.7% 3377.HK (Sino-Ocean Group Holdings): disposes 64.79% stake in INDIGO II project in Beijing for CNY4B

      • +2.9% 7911.JP (TOPPAN Holdings): reportedly develops component for next-generation semiconductors used in data center servers and AI that can cut manufacturing costs by 50%

      • +0.5% 2330.TT (Taiwan Semiconductor): reports May revenue NT$229.62B, +30.1% y/y

    • Notable Decliners:

      • -3.2% 4523.JP (Eisai): FDA panel votes unanimously that the benefits outweigh the risks for donanemab in Alzheimer

      • -3.2% 3320.HK (China Resources Pharmaceutical Group): CR Sanjiu to sell 51% of Kunming China Resources Shenghuo Pharmaceutical to KPC Pharmaceuticals for CNY1.79B

      • -2.9% 086900.KS (Medy-Tox): preliminary ruling finds no violation by Hugel over import & sale of its Botox products

      • -2.1% 489.HK (Dongfeng Motor Group): reports May vehicle production 138,853 vs year-ago 140,826

      • -0.09% 9433.JP (KDDI Corp): completes up-to-¥300.0B buyback

  • Data:

    • Economic:

      • Australia

        • May NAB business confidence (3) vs revised +2 in prior month

          • Business conditions +6 vs +7 in prior month

    • Markets:

      • Nikkei: 96.63 or +0.25% to 39134.79

      • Hang Seng: (190.61) or (1.04%) to 18176.34

      • Shanghai Composite: (23.23) or (0.76%) to 3028.05

      • Shenzhen Composite: 4.83 or +0.29% to 1684.15

      • ASX200: (104.60) or (1.33%) to 7755.40

      • KOSPI: 4.15 or +0.15% to 2705.32

      • SENSEX: 293.27 or +0.38% to 76783.34

    • Currencies:

      • $-¥: +0.27 or +0.17% to 157.3120

      • $-KRW: +3.18 or +0.23% to 1377.9300

      • A$-$: (0.00) or (0.14%) to 0.6603

      • $-INR: +0.06 or +0.07% to 83.5500

      • $-CNY: (0.00) or (0.01%) to 7.2468

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