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StreetAccount Summary - Asian Market Recap: Nikkei +1.00%, Hang Seng (0.11%), Shanghai Composite +0.48% as of 04:10 ET

Jun 18 ,2024

  • Synopsis:

    • Asian equities ended mostly higher Tuesday. Tech-orientated indexes outperformed with South Korea, Taiwan, Japan and Australia all finding solid gains. Greater China was mixed with mainland boards higher but Hong Kong lagged despite a late rally into the close. Southeast Asia mostly higher, India boards higher again to reach record highs. US futures higher, Europe opened with gains. US dollar higher, AUD spiking briefly on hawkish hold by RBA, yen weakening to past 158 per dollar. Treasury, JGB yields higher. Crude oil contracts consolidating overnight gains, precious metals gaining, industrial metals mixed. Cryptocurrencies selling off again.

    • Asia markets mostly higher Tuesday after taking cues from Wall Street's fresh record-highs to add to gains, with the tech-rich boards in Seoul, Taipei, Tokyo and Sydney all outperforming. India markets also set fresh record highs as the momentum from PM Modi's general election win continues. Hang Seng lagged as its growth sectors underperformed with the main board flat by the close. The yen weakened to levels that spurred intervention twice last month despite BOJ Governor Ueda reiterating possibility of rate hike in July.

    • RBA left cash rate unchanged at 4.35% as expected, noting rate path is uncertain and that it would not rule anything in or out. Bank of Korea governor Rhee acknowledged inflation in South Korea was falling amid lower fuel and agriculture prices. Singapore's exports fell just 0.1% y/y, its shallowest decline in 20 months. Thailand's former PM Thaksin was formally charged under lèse majesté laws but a second case over the appointment of the Senate was rejected; two other politically-sensitive cases were postponed to July.

    • Eneos Holdings (5020.JP) and Mitsubishi Corp (8058.JP) are considering expanding their alliance to include hydrogen and decarbonized fuels. Shareholders voted to keep Akio Toyoda as chair at Toyota Motor (7203.JP) despite an ongoing safety testing scandal. Seatrium (5E2.SP) admitted it was under investigation by MAS and CAD agencies in Singapore over corruption in Brazil. Vodafone Idea (532822.IN) is set to sell its $2.3B stake in Indus Towers (534816.IN) through block deals to raise funds for 5G rollout, 4G improvements.

  • Digest:

    • BOJ Governor Ueda flags possibility of rate hike in July:

      • Addressing parliament on Tuesday, BOJ Governor Ueda reiterated possibility of a rate hike in July depending on data (Reuters). Added BOJ needs more time to assess whether underlying inflation is tracking to 2% in a sustainable manner, taking into account impact of wage negotiations. BOJ punted to July details on its plans to cut JGB purchases, spurring debate whether it would simultaneously announce a rate hike or delay until a later meeting to avoid market turbulence. Economists split on timing of next rate increase with Reuters poll showing 31% expect July hike, 41% predict October move and just over 20% pegged September. However, Ueda said details JGB purchase reductions and rate hike were separate matters, echoing his post-meeting comments that both could occur together. Ueda on Friday said reduction in JGB purchases may be substantial, while today adding central bank is aiming for predictability (BOJ will collate views from market participants on its plans before presenting details on JGB purchase reductions in July).

    • RBA on hold after discussing case for rate hike amid upside inflation risks:

      • RBA left cash rate unchanged at 4.35% as expected. Statement left open possibility of another rate hike, noting rate path that ensures inflation returns to target in a reasonable timeframe remains uncertain and board is not ruling anything in or out. Will rely on data and evolving assessment of risks, paying close attention to global economic developments, trends in domestic demand, outlook for inflation and labor market. Noted inflation risks remain to the upside, strengthening language from May in noting CPI is above target, while persistence of services inflation is a key uncertainty with pace of disinflation having slowed. Consumption over past year stronger than thought, and is expected to remain supported by tax cuts, lower inflation and wealth effect from rising house prices. Also warned budget outcomes could impact demand, alluding to cost of living relief and energy rebates. In press conference, Governor Bullock said board discussed case for rate hike at today's meeting, though doesn't agree case for tightening is increasing. Awaiting Q2 CPI (late Jul) to determine extent of services inflation, noting narrow path (to getting inflation to target) is getting narrower.

    • Bank of Korea says inflation to moderate but risks remain:

      • Bank of Korea Governor Rhee said Tuesday pace of consumer inflation continues to slow in country, hinting bank may be ready to cut interest rates by year end. Said recent slowdown in oil and agriculture prices mean future retail inflation should slow, in line with bank forecasts made in May. Added whereas consumer pressure on prices likely to stay contained, end of fuel tax cuts and rise in utility costs will add upward inflationary pressure. Consensus sees BOK cutting rates by total 50 bps in Q4 as headline inflation nears bank's target 2.0%; May headline CPI at 2.7%, core 2.2%. Rhee repeated export growth expected to be main driver for FY economic expansion of 2.5%. Said despite downward trajectory, upside pressure remains on geopolitical risks (Yonhap). Rhee also emphasized bank's independence in rate setting after apparent pressure last week from presidential office to start cutting sooner (Yonhap).

    • India markets power ahead despite foreign investor drawdown:

      • Sensex and Nifty 50 indexes opened at fresh records Tuesday following Monday's holiday led by tech and auto makers; follows market exceeding $5T in value for first time last week. Rally in equities continues post re-election of Narendra Modi as PM, while strong economic data, upgrade to outlook by S&P Global Ratings added to medium-term momentum, analysts said (Bloomberg). Record highs come despite foreign portfolio investors selling more than $360M in India equities MTD (EconomicTimes). Analysts said domestic institutional investors remained buyers and now drivers of local markets. Hyundai Motor (005380.KS) said Monday it was prepping IPO of its India unit in what would be country's largest ever listing. Company to sell 17.5% stake in move likely to boost sentiment further (Reuters). Float could be first of 55 before end Mar-25, raising almost $2.5B; five IPOs slated for June alone (Mint).

    • Mixed China activity data and property market slump underscores calls for additional policy support:

      • Takeaways from mixed China May activity indicators noted data added to signs GDP growth slowed over Q2. Negative commentary focused largely on surprise fall in fixed asset investment growth amid drag from a deepening contraction in real estate investment. This corresponded with other housing metrics that revealed more sharp falls in housing construction, starts, sales and prices, fueling thoughts April/May support measures proving insufficient to revive demand with slow implementation and excess debt also acting as constraints. More broadly, data underlined multi-speed nature of China's economy where manufacturing output and exports are among leading growth drivers, but consumption is tepid, inflation muted, credit growth lackluster, and property market depressed. Economists argued more policy is support required to stimulate demand, driving expectations of another rate and RRR cut with July Politburo meeting and Third Plenum viewed as likely catalysts.

    • Notable Gainers:

      • +10.0% 6627.JP (Tera Probe): May sales

      • +6.3% 6762.JP (TDK): Reports solid-state battery materials breakthrough

      • +6.1% BVA.SP (Top Glove Corp.): RHB note

      • +5.1% 4348.JP (Infocom): Reportedly to have reached a final agreement with Blackstone for ¥6000/sh tender offer

      • +4.8% 1176.HK (Zhuguang Holdings Group): To issue 1.63B shares to controlling holder at HK$0.20/share to settle HK$325.0M loan

    • Notable Decliners:

      • -9.0% 5E2.SP (Seatrium): Singapore's CAD begins investigation on potential offences that are related to a corruption case in Brazil

      • -3.0% 4502.JP (Takeda Pharmaceutical): Phase 3 Topline Study for Soticlestat misses primary endpoints

  • Data:

    • Economic:

      • Singapore May

        • Non-oil domestic export y/y (0.1%) versus (9.6%) in prior month

    • Markets:

      • Nikkei: 379.67 or +1.00% to 38482.11

      • Hang Seng: (20.57) or (0.11%) to 17915.55

      • Shanghai Composite: 14.36 or +0.48% to 3030.25

      • Shenzhen Composite: 12.04 or +0.71% to 1702.47

      • ASX200: 77.80 or +1.01% to 7778.10

      • KOSPI: 19.82 or +0.72% to 2763.92

      • SENSEX: 231.33 or +0.30% to 77224.10

    • Currencies:

      • $-¥: +0.41 or +0.26% to 158.1430

      • $-KRW: +2.20 or +0.16% to 1382.4600

      • A$-$: (0.00) or (0.05%) to 0.6609

      • $-INR: (0.08) or (0.10%) to 83.4118

      • $-CNY: (0.00) or (0.01%) to 7.2552

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