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StreetAccount Summary - Asian Market Recap: Nikkei (0.66%), Hang Seng (1.31%), Shanghai Composite +0.31% as of 04:10 ET

Jun 12 ,2024

• Synopsis:

  • Asia equities ended mixed Wednesday in a cautious session ahead of US inflation data and Fed decision. Japan, Hong Kong and Australia among the bourses in the red; South Korea and Taiwan gained on read through to Apple and other tech news overnight. India trading higher to re-approach record highs. Southeast Asia mostly lower. US futures nudging higher, European markets opened with gains. US dollar flat, Asia currencies largely unchanged. Treasuries mixed, JGB yields lower. Crude oil, precious and industrial metals all higher.

  • Asia markets showed some nerves ahead of the key inflation and Fed decision catalysts, with focus firmly on the Fed's 'dot plot', that will indicate members' expectations on future rates. On inflation, economists warn headline CPI could remain sticky at an unchanged 3.4% and core only ease by a fraction, with any significant divergence from market expectations potentially leading to equity, bond and currency volatility. Asia forex volatility already evident with RBI Tuesday joining central banks in China, Indonesia and Malaysia in intervening either directly or verbally to support their respective currencies. Yen traders also on tenterhooks over Fed meeting today and BOJ meeting that begins tomorrow with decision on bond purchases due Friday. Dollar-yen steady today at around 157 per dollar.

  • Substantial pressure on China-listed EVs after China Evergrande's EV unit asked to repay CNY1.9B in incentives and subsidies, and the EC said it would impose a 25% tariff on Chinese EVs from July, albeit a levy that is lower than the 50% some European automakers had been lobbying for. The White House is also considering further restrictions on AI chip technology exports to China. In other macro developments, Japan CGPI accelerated to a nine-month high as import prices strengthened amid yen weakness. China CPI maintained modest increases while PPI declines narrowed. South Korea unemployment data showed some signs of deacceleration in the labor market. Bank of Thailand kept its benchmark interest rate unchanged as widely expected, resisting government pressure to cut.

  • Advantest (6857.JP) said demand for high bandwidth memory used for AI tasks is boosting its memory testing business. China Evergrande New Energy Vehicle (708.HK) has been asked to return CNY1.9B of incentives and subsidies after failing to reach investment, research and sales targets; stock sharply lower. LG Innotek (011070.KS) is set to become one of the major beneficiaries of Apple's new iPhone 16; shares sharply higher. MediaTek (2454.TT) is said to designing Arm-based chips for Microsoft's AI laptops which will be launched next year when Qualcomm's exclusive supply deal expires.

• Digest:

  • European Commission to apply 25% tariff to China EV imports:

    • FT reported European Commission is to apply additional duties of 25% on imported China-made EVs from July, far short of 50% tariff cited by think tank as necessary to effectively curb imports. Despite lower levy, Germany still said to be objecting to 25% tariff on fears it may trigger trade war between China and EU; FT said intense lobbying by Chancellor Scholz's government failed. China exported €10B of China EVs last year, new tariff expected to raise €2B for EU per annum, could cut imports by 125K - around quarter of current total worth €4B. Duties may vary according to producer, will include non-China brands such as Tesla that have factories in China. Article noted Chinese EVs typically cost 20% lower than EU-made models but EU trade commissioner found evidence Chinese carmakers received subsidized loans, tax breaks, cheap land. Chinese EV makers lower in China trading Wednesday although negative newsflow on China Evergrande New Energy (708.HK) also dragging on sector.

  • China inflation largely in line with expectations:

    • Headline CPI inflation was steady at 0.3% y/y in May, compared to consensus 0.4%. Core inflation eased back to 0.6% from 0.7%. Goods prices were flat on the year while services rose 0.8%. Food items were a broad drag, led by beef and mutton, though tied to no major themes in contrast to the past major swings in pork. PPI declines narrowed to 1.4% y/y from 2.5%, virtually in line with consensus 1.5%. Latest figure marks the smallest decrease since February 2023. Narrowing was almost entirely driven by upstream prices reflecting stabilizing raw materials. Downstream declines were marginally smaller, though still marked the smallest since September last year. Some signs of easing drags from food and durable goods. Early takeaways suggested results were benign given PPI remained negative for the 20th straight month, stunting CPI inflation that remains well below the government target of 3%. Inflation dynamics widely viewed as a reflection of weak demand, tying in to calls for forceful stimulus targeting consumption. Recall that optimism toward the latest property market support measures has largely diminished given limited size and scope though hopes remain for follow-up announcements combined with moderate monetary easing.

  • Bank of Thailand keeps base rate unchanged despite government pressure to cut:

    • Bank of Thailand kept is benchmark rate at 2.5% Wednesday, pushing back on government pressure to cut rates. MPC vote was six to one with dissenter voting to cut 25 bp. Consensus expected no change with minority looking for 25 bp cut; dissenting MPC member based vote on lower economic growth, need to alleviate borrowers' debt burden. Consensus recently pushed out timing of first BOT cut to Q4 or beyond as government stimulus plan delayed, inflation ticked higher, fuel subsidies ended. Bank has resisted government pressure to trim rate but some lending banks cut rates 25 bp, lowering pressure on BOT, but leading to underperformance in Thai banks, greater SET index. BOT admitted export uncertainty and government stimulus program need to be monitored in H2. Bank kept FY 2024 GDP growth forecast at 2.6%, FY2025 at 3.0%; headline inflation projection 0.6% and core at 0.5%.

  • US mulling additional curbs on China's access to latest AI technology:

    • Bloomberg sources indicated Biden administration considering new restrictions on China's access to gate all-round (GAA) technology making its way into the market. Article clarified it is unclear when a final decision will be made as policymakers assess the scope. Companies such as Nvidia (NVDA), Intel (INTC), AMD (AMD), TSMC (2330.TT) and Samsung Electronics (005930.KS) looking to commence mass production of chips with GAA design within the next year. Rules would add to numerous curbs on exports of advanced semiconductors and chipmaking tools to China, but story noted Biden pressed for time to introduce new restrictions before the November presidential election. Proposal said to be in the latter stages of the approval process though yet to be finalized amid some opposition to the first version as overly broad and efficacy unclear. Sources added there are early-stage discussions about limiting exports of high-bandwidth memory chips, produced by companies such as SK Hynix (000660.KS) and Micron Technology (MU), though GAA deliberations are more advanced.

  • Next BOK decision on rates will be "delicate and balanced", says governor:

    • BOK Governor Rhee called for balanced approach to next interest rate decision in signal bank moving toward policy pivot later this year as inflation eases (Yonhap). Rhee reiterated bank needs to keep current restrictive policy until assured inflation moving towards bank's target but warned currency rates, geopolitics remain risks over pace of inflation's deceleration. Easing rates too late could lead to market instability as it would hurt domestic demand, lead to rise in delinquency rates. Easing too early could slow inflation's fall, increase exchange rate volatility, could lead to household debt growth. Next decision on rates will be "delicate and balanced". Separate data Wednesday showed South Korea labor market slowed in May in sign job market growth may be slowing. Analysts said this could play into calls for BOK to ease sooner rather than later (Bloomberg).

  • Notable Gainers:

    • +9.4% 011070.KS (LG Innotek Co.): expectations of company becoming biggest beneficiary of Apple's iPhone 16 series

    • +7.3% 3591.JP (Wacoal Holdings): 3D Investment Partners reveals 5.13% holding in company

    • +3.0% 241560.KS (Doosan Bobcat): reportedly to acquire Mottrol

    • +2.4% 2454.TT (MediaTek): reportedly developing Arm-based chip for Windows

    • +0.6% 352820.KS (HYBE Co.): BTS member Jin returns from military service

  • Notable Decliners:

    • -20.9% 708.HK (China Evergrande New Energy Vehicle Group): asked to return CNY1.9B of granted incentives and subsidies

    • -8.2% 9602.JP (Toho Co): May box office revenue in movie theater chain business ¥4.86B, (40.2%) y/y

    • -2.4% 020560.KS (Asiana Airlines): MBK Partners reportedly withdraw from consortium to acquire Asiana's cargo unit

    • -1.9% 2888.TT (Shin Kong Financial Holding): former Shin Kong Life Insurance chairman Wu Dong interviewed by prosecutors over misappropriate use of funds

• Data:

  • Economic:

    • China

      • May CPI +0.3% y/y vs consensus +0.4% and +0.3% in prior month

        • PPI (1.4%) y/y vs consensus (1.5%) and (2.5%) in prior month

    • Japan

      • May CGPI +2.4% y/y vs consensus +2.0% and revised +1.1% in prior month

    • South Korea

      • May unemployment rate 2.8% vs consensus 2.8% and 2.8% in prior month

  • Markets:

    • Nikkei: (258.08) or (0.66%) to 38876.71

    • Hang Seng: (238.50) or (1.31%) to 17937.84

    • Shanghai Composite: 9.42 or +0.31% to 3037.47

    • Shenzhen Composite: 9.76 or +0.58% to 1693.91

    • ASX200: (39.90) or (0.51%) to 7715.50

    • KOSPI: 22.85 or +0.84% to 2728.17

    • SENSEX: 458.62 or +0.60% to 76915.21

  • Currencies:

    • $-¥: +0.15 or +0.09% to 157.2840

    • $-KRW: (4.81) or (0.35%) to 1374.2100

    • A$-$: +0.00 or +0.10% to 0.6617

    • $-INR: (0.05) or (0.07%) to 83.5572

    • $-CNY: (0.00) or (0.01%) to 7.2467