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StreetAccount Summary - Asian Market Recap: Nikkei (1.83%), Hang Seng (0.03%), Shanghai Composite (0.55%) as of 04:10 ET

Jun 17 ,2024

  • Synopsis:

    • Asian equities ended mostly lower Monday. Japan markets under pressure all day and finished near their lows as exporters and tech stocks underperformed. Greater China mixed as Hong Kong ended flat, Shenzhen was higher but Shanghai's main board lost more ground. South Korea and Taiwan lower. Most of Southeast Asia closed for a holiday but Thailand sank to fresh four-year low ahead of key political-linked court decisions. US futures mixed, Europe opened with gains. US dollar flat, Asia currencies largely unchanged although some weakness in the AUD. Treasury yields higher across tenors, JGBs mixed. Crude futures, precious and industrial metals all lower.

    • Asia markets tilted lower over the day following mixed cues from Wall Street Friday. Greater China absorbed a mixed set of activity and housing data with some weakness in blue-chip stocks in Shanghai, and in Hong Kong where energy stocks underperformed as crude prices dipped. CGB yields and yuan were both slightly lower. May activity data showed industrial production growth slowed by more than forecast and fixed asset investment growth unexpectedly fell amid a steep decline in property investment. New home prices also registered a steeper fall in May. Retail sales a bright spot with growth picking up by more than expected.

    • In other news, PBOC left MLF rate unchanged as expected and drained a net CNY55B of liquidity, in a strong signal LPRs will be unchanged later this week. A front-page commentary by PBOC-backed Financial News reiterated there was room for further easing but scope for cuts limited. Japan's machinery orders fell almost 3% in April. Thailand enters a precarious week for politics as four government-related court cases come to a head.

    • Kirin Holdings (4151.JP) has offered to take FANCL (4921.JP) private for ¥220.7B, an over 20% premium to the most recent closing price. The IPO of Hyundai Motor's (005380.KS) India unit could be the country's largest ever listing as it looks to sell a 17.5% stake. L'Occitane (973.HK) owner offers new terms to take the skincare group private, four years after his initial offer. Integral Diagnostics (IDZ.AU) is to buy Capitol Health (CAJ.AU) in a share-based scheme of arrangement. Paytm (One 97 Communications 543396.IN) is in discussions to sell its film and ticketing business to Zomato (543320.IN) as it looks to unload non-core assets.

  • Digest:

    • China economic activity remains soft as real estate downturn deepens:

      • China industrial production growth slowed to 5.6% y/y in May from April's 6.7% and undershot consensus 6.2%. Raw material, automotive, rail, shipbuilding and other transport, and technology saw biggest increase in output. Fixed asset investment (YTD) growth unexpectedly slowed to 4.0% y/y from 4.2% as real estate investment shrunk 10.1% - worse than 10.0% contraction expected and prior month's 9.8% drop. Other housing metrics consistent with a market stuck in a deep downturn following recent rollout of real estate support measures. New home sales by floor area shrank 20.3% y/y, new construction starts fell 24.2% while new home price declines quickened in May. Retail sales a brighter spot with growth of 3.7% y/y outpacing prior month's 2.3% increase and consensus 3.0%. Double-digit growth in household appliances and communication equipment offset decline in auto sales. Accompany NBS commentary noted economy growing with consumption recovering, though domestic demand remains insufficient.

    • PBOC keeps MLF rate unchanged as expected:

      • PBOC conducted a CNY182B ($25.1B) MLF operation and left the 1-year rate unchanged at 2.50%, matching what majority economists expected in a survey by Bloomberg. With CNY237B in maturing funds, it left a net liquidity drain of CNY55B, marking fourth straight month of no liquidity injection via MLF operations. Meanwhile MLF was supplemented by CNY4B injection via seven-day reverse repos. Decision came after Friday data showed new bank lending rebounded far less than expected in May while outstanding loan growth and broad M2 money supply both grew at lowest on record. Reuters citing economists noted PBOC still reluctant to cut rates any time soon with yuan exchange rate in mind, adding central bank would provide more targeted support via relending programs in near future. Front-page article in PBOC-backed FinancialNews noted central bank has reiterated there is still room for rate cuts while earlier policy effects are still emerging and will continue to make counter-cyclical adjustments. However it cautions further rate cuts constrained by both narrowing NIMs for banks and yuan exchange rate.

    • China new home prices fall at steepest pace in May in nearly a decade:

      • New home prices in China were down 0.7% m/m in May and in decline for eleventh straight month, worse than 0.6% drop in April and marking steepest drop in nearly a decade, based on Reuters calculation of NBS data. Meanwhile prices were lower 3.9% y/y, compared with 3.1% slide in April. 68 out of the 70 cities surveyed reported monthly price drop in new home prices, up from 64 in April. Bloomberg added value of existing homes dropped 1% m/m, logging sharpest decline since at least 2011 with adoption of current methodology, meanwhile all 70 cities witnessed m/m declines in existing home prices. Weak data came after China unveiled broad property rescue package last month while it took time to revive demand. Noted skepticism among investors and analysts over whether measures will be sufficient due to limited PBOC funding and slow progress of existing trial programs. Housing glut has been a drag on home prices, turning people away from buying properties. Economists are predicting new measures and additional funding from Beijing given clues revealed in recent cabinet meeting.

    • Chinese appetite for bonds shows few signs of abating despite press warnings:

      • China bond yields continue to face downward pressure with 10Y and 30Y government bond yields down to lowest levels in around seven weeks. Front-end seeing heavier demand with 2Y yield at lowest since May 2020. Bond demand prompted more verbal intervention from mainland press with PBOC-backed Financial News on Saturday warning about duration risk. However, warnings have failed to dent demand with Bloomberg noting special 50Y bond auction drew lower-than-estimated yield and five times more demand than what was offered. With verbal warnings failing to quell demand for sovereign debt, Reuters discussed issues for PBOC if it chooses to physically intervene by selling Treasury bonds. Paucity of supply by central government limits PBOC's ability to sell (it only holds ~5% of circulating bonds). PBOC could engage in short selling though also carries risk of tightened liquidity that puts further handbrake on credit growth. Economists see limited scope for a trend reversal as deflation, low growth and depressed sentiment continues to fuel demand for risk-free assets.

    • Thailand's SET strikes four-year low amid looming politics-linked court decisions:

      • Thailand investors face critical week as four legal cases against ruling party or allies set to come to conclusion. Ahead of decisions, SET index fallen to lows last seen during pandemic as overseas investors take flight. Wednesday, election-winning Move Forward Party faces dissolution in Election Commission complaint over party's promise to reform country's lèse majesté laws (BangkokPost). Second, Former PM Thaksin Shinawatra to be indicted for allegedly insulting royalty linked to same laws. Thaksin supporters pledged to attend Criminal Court Tuesday in show of support in possible prelude to demonstrations if all four cases upheld (BangkokPost). Also Tuesday, Constitutional Court to decide on fate of new 200-member Senate after accepting petition over whether selection process was legal. Finally, PM Srettha accused of appointing former lawyer with criminal conviction to cabinet, faces dismissal if Constitutional Court rules against him (Reuters). Srettha admitted last week court cases affecting stock market, which Monday fell another 1% as foreign investors discouraged by negative sentiment flee Thai markets (BangkokPost).

    • Notable Gainers:

      • +21.4% 4921.JP (FANCL Corp): Kirin offers to take FANCL private at ¥2,690/share

      • +16.1% 6855.HK (Ascentage Pharma): Files for US IPO; Takeda Pharmaceutical signs option agreement with Ascentage Pharma to exclusively license olverembatinib; Takeda acquires 24.3M-shares in Ascentage Pharma at ~HK$24.10/share

      • +10.2% CAJ.AU (Capitol Health): Integral Diagnostics to acquire Capitol Health for implied A$0.326/share

      • +4.4% 012450.KS (HANWHA AEROSPACE): HANWHA AEROSPACE to take 6.8% stake in NextDecade for KRW180.32B

      • +3.9% 005380.KS (Hyundai Motor): Hyundai Motor reportedly to offer up to 142.2M shares (17.5%) of Hyundai Motor India

      • +1.6% 9996.HK (Peijia Medical): Completes audit of FY23 results, results remain same as unaudited results announced on 28-Mar

    • Notable Decliners:

      • -9.3% 9468.JP (Kadokawa): experiencing system failure; restoration of Nico Nico to take more than a month

      • -9.3% 4666.JP (Park24 Co.): Reports H1 net income attributable ¥9.01B, +13% vs year-ago ¥7.98B; reports May Japan Times PARKING net sales ¥14.14B, +8.6% y/y

      • -8.3% 2811.JP (Kagome): To launch 7.5M-share offering through public placement and over-allotment

      • -5.2% CHN.AU (Chalice Mining): Downgraded to neutral from buy at UBS

      • -2.4% AMA.AU (AMA Group): Chair Caroline Waldron and directors Kyle Loades and Kim Stewart-Smith have resigned

  • Data:

    • Economic:

      • China May

        • Industrial production +5.6% y/y vs consensus +6.2% and +6.7% in prior month

        • Retail sales +3.7% y/y vs consensus +3.0% and +2.3% in prior month

        • Fixed asset investment (YTD) +4.0% y/y vs consensus +4.2% and +4.2% in prior month

          • Real estate investment (YTD) (10.1%) vs consensus (10.0%) and (9.8%) in prior month

        • Unemployment rate 5.0% vs consensus 5.0% and 5.0% in prior month

        • New house prices (0.7%) m/m vs (0.6%) in prior month (Reuters)

      • Japan

        • April core machinery orders (2.9%) m/m vs consensus (3.0%) and +2.9% in prior month

      • Australia

        • May ANZ-Indeed job advertisements (2.1%) m/m vs +2.8% April

    • Markets:

      • Nikkei: (712.12) or (1.83%) to 38102.44

      • Hang Seng: (5.66) or (0.03%) to 17936.12

      • Shanghai Composite: (16.74) or (0.55%) to 3015.89

      • Shenzhen Composite: 0.80 or +0.05% to 1690.43

      • ASX200: (24.00) or (0.31%) to 7700.30

      • KOSPI: (14.32) or (0.52%) to 2744.10

      • SENSEX: Closed

    • Currencies:

      • $-¥: +0.19 or +0.12% to 157.6240

      • $-KRW: (4.34) or (0.31%) to 1378.9300

      • A$-$: (0.00) or (0.18%) to 0.6603

      • $-INR: (0.01) or (0.02%) to 83.5389

      • $-CNY: (0.00) or (0.00%) to 7.2550

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