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StreetAccount Summary - Asian Market Recap: Nikkei (0.40%), Hang Seng +0.97%, Shanghai Composite (0.28%) as of 04:10 ET

Jun 13 ,2024

  • Synopsis:

    • Asian equities again ended mixed Thursday with tech shares outpacing other sectors. Strong gains for South Korea and Taiwan, Australia also held onto gains while India is higher again. Japan markets opened brightly but sold off over the day. Mainland China lower but Hang Seng strong in afternoon trade to close higher, Southeast Asia mixed with only Singapore showing a notable gain. US futures mixed, Europe opened lower. US dollar slightly stronger, yen and yuan weaker along with AUD and NZD. Treasury yields all higher, JGB yields down, other Asia sovereign yields lower. Crude contracts lower, precious metals sharply down, industrial metals mixed.

    • A slightly hawkish sounding Fed but cooler inflation combined to push Treasuries and US equities higher overnight as Fed Fund Futures nudged towards indicating two rate cuts before year end versus the Fed's dot plot showing one. The dollar also slid to give nominal support for Asia stocks first thing with many bourses gapping higher. Tech stocks found related support from the Nasdaq and Magnificent Seven surge, leading to Seoul and Taipei outperformance, although the Kospi finished off its highs on reports the country's short-selling ban would be extended for another 10-12 months.

    • The Nikkei and Topix in full BOJ wait-and-see mode today with major boards giving up early gains to finish down. More reports today the BOJ is considering lowering JGB purchases in a staged manner to avoid volatility, with a rate hike more likely in July than this month. Mainland China stocks again under pressure to take the CSI 300 to an almost two-month low following uninspiring travel data from last weekend. The yuan also weakened to fresh six-month lows as investors considered Beijing's next move.

    • In other regional news, Japan MOF business outlook survey showed sentiment among conditions among large manufacturers improved though non-manufacturer sentiment deteriorated. Australian employment data showed headline jobs growth above expectations and unemployment a smidge lower, enough to pare expectations of a RBA rate cut. Major China EV autos higher after EU imposed additional tariffs on EV imports but early analysis noted levies for BYD and Geely are manageable.

    • Sony Group's (~6758.TT~) entertainment unit is to buy Alamo Drafthouse, a US-based chain of dine-in theatres for an undisclosed sum. Chinese car makers including BYD (~1211.HK~) and Geely Auto (~175.HK~) seen weathering EU tariffs of up to 48%; stocks sharply higher. Qantas (~QAN.AU~) is to buy the remaining 49% stake it does not already own of TripADeal for A$140.6M.

  • Digest:

    • BOJ to consider JGB purchase reduction, phased path toward QT:

      • Nikkei top story indicated BOJ will consider trimming JGB purchases as the MPM commences today. Noted that BOJ guided buying pace would remain stable since the March meeting, though now set to discuss a plan to reduce outstanding holdings in stages. Article outlined backdrop of mounting pressure for a rate hike in response to yen depreciation. However, amid signs of economic fragility, suggested the bar for dialing back JGB buying is lower than for a rate hike and latter option would also directly lead to higher variable home loan rates. Furthermore, a QUICK poll conducted in May showed 65% of respondents predicted MPC to reduce JGB purchases at the June MPM. Article also emphasized expectations BOJ would take a gradual approach to minimize market disruptions, likely to be implemented in stages while retaining some buffer range. Current monthly buying pace of ~JPY6T roughly matches redemptions and it would not take much in terms of reductions to imply an effective balance sheet runoff. Hence, trim to JPY5T pace would be seen as aggressive. Recall that other previews widely noted no expectations of a rate hike this month, but forecasts bunching into July.

    • Australian unemployment rate falls, markets pare RBA rate cut expectations:

      • Australian employment rose by 39.7K in May compared to April's revised 37.4K increase and consensus for a 30.0K increase. Compositionally, full-time employment rose by 41.7K while part-time jobs fell by 2.1K. Unemployment rate fell to in-line 4.0% from 4.1% in April. Some of the fall in unemployment explained by higher-than-usual number of people with jobs in April who began or returned to work in May. Underemployment and underutilization rates unchanged while drop in hours worked partly attributed to sick leave. With unemployment rate now in-line with RBA's forecast for H1, some interest in next Tuesday's RBA policy statement and whether board still assesses labor market as tighter than consistent with full employment and target inflation. While markets have priced out additional rate hikes, labor market resilience and sticky inflation concerns reinforcing 'higher-for-longer' rate outlook. Futures pared odds of rate cut by end-2024 to 30% from 36% prior to data and are not fully pricing in rate cut until May 2025 (Bloomberg).

    • PBOC promotes home refinancing plan, no hints of follow-up measures:

      • PBOC summarized a panel discussion held in Jinan on Wednesday to promote the CNY300B ($41B) relending loan facility for affordable housing, attended by Governor Pan Gongsheng and Deputy Governor Tao Ling. Members also reviewed pilot programs of prior rental housing loan support measures. Stressed the importance of the current initiative to help drawdown of housing inventories as well as delivery of housing under the white-list program. Also highlighted ethics that participation should be voluntary and market orientated while strictly avoiding adding to local government hidden debts and preventing moral hazards. Recall that hopes for additional support were reportedly reinforced after a State Council meeting last week urged officials to keep an "open mind" over policies to reduce housing inventory. Comes against the backdrop of underwhelming reactions to the CNY300B program, broadly seen as insufficient, while evidence from trial programs in several cities indicated slow progress (Bloomberg). Prior discussions noted estimates the value of housing inventory glut is in the trillions of yuan.

    • South Korea regulators extend short-selling ban to March 2025:

      • South Korea is to extend county's short-selling ban until end March 2025, in line with requests from ruling party and financial supervisory service (FSS) earlier Thursday. Penalties of up to six times profits made from illegal trades, increased from five-times will be adopted; those making profits of KRW 5B ($3.6M) could face life in prison from previous 30 years. Stricter rules applied in disclosing short positions, individuals caught will be restricted from serving as executives at listed companies or financial firms. Short-sold shares must be bought back within 12 months. Rule changes require parliamentary approval, which is expected (Yonhap). Earlier this week, FSS said it would develop real-time monitoring system for naked short selling by Mar-25, 12 months earlier than planned (Yonhap). Ban not expected to have material impact on stock market as authorities to-date only found KRW211.2B ($156M) of illegal short trades spread between nine global investment banks (Bloomberg).

    • EU to impose tariffs of up to 48% on imports of some Chinese EVs:

      • EU to impose additional tariff of up to 38% on China EV imports from July, coming on top of existing 10% tariff on China EVs (Bloomberg, Reuters). Recall FT reported Wednesday EU would apply 25% tariff on China EVs, though figure would vary depending on producer. Tariffs will range from 17.4% on BYD, to 20% on Geely, and to 38.1% on SAIC. Tariffs will also vary depending on cooperation of the car producers with current EU anti-subsidy probe that began in 2023. EU has also opened separate anti-dumping probes into other imports from China, including clean energy products. Risk of escalation after China repeated it will take all necessary measures to safeguard interests of Chinese companies, having already threatened to retaliate against imports of cars with large engines. According to China state media, Beijing signaled it could impose maximum tariff of 25% on imports of large engine cars (Bloomberg), which may have notable impact on major German car producers.

    • Notable Gainers:

      • +13.1% 036460.KS (Korea Gas): reports May sales volume 2.3Mt vs year-ago 2.2Mt

      • +1.4% 1101.TT (TCC Group Holdings CO.): to launch offer for remaining 11.13% of NHOA S.A at €1.1/sh cash

      • +1.2% 6758.JP (Sony): acquires Alamo Drafthouse Cinema; terms undisclosed

      • +0.6% 004370.KS (Nongshim Co.): to invest KRW229B in new facility

      • +0.0% 460.HK (Sihuan Pharmaceutical Holdings Group): subsidiary Xuanzhu Biopharm reached exclusive licensing cooperation with Livzon Pharmaceutical Factory

    • Notable Decliners:

      • -1.1% 5020.JP (ENEOS): subsidiary plans to commence tender offer for TATSUTA Electric Wire and Cable on 21-Jun

      • -1.1% 8308.JP (Resona): completes 19.6M-share buyback launched from 15-May for ¥20.00B

      • -0.3% 2208.HK (Goldwind Science & Technology): reportedly seeking to sell Baldon wind farm with Omni Win

  • Data:

    • Economic:

      • Japan Q2

        • MOF BSI large manufacturing index (1.0) vs (6.7) in prior quarter

          • Large non-manufacturing index 1.1 vs 3.2 in prior quarter

          • Large all-industry index 0.4 vs (0.0) in prior quarte

      • Australia May

        • Employment +39.7K m/m vs consensus +30.0K and +38.5K in April

          • Unemployment rate 4.0% vs consensus 4.0% and 4.1% in April

          • Participation rate 66.8% vs consensus 66.7% and 66.7% in April

    • Markets:

      • Nikkei: (156.24) or (0.40%) to 38720.47

      • Hang Seng: 174.79 or +0.97% to 18112.63

      • Shanghai Composite: (8.55) or (0.28%) to 3028.92

      • Shenzhen Composite: (10.45) or (0.62%) to 1683.46

      • ASX200: 34.20 or +0.44% to 7749.70

      • KOSPI: 26.72 or +0.98% to 2754.89

      • SENSEX: 281.43 or +0.37% to 76888.00

    • Currencies:

      • $-¥: +0.59 or +0.37% to 157.3000

      • $-KRW: +1.40 or +0.10% to 1372.4300

      • A$-$: (0.00) or (0.23%) to 0.6650

      • $-INR: +0.02 or +0.02% to 83.5399

      • $-CNY: +0.01 or +0.16% to 7.2508

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