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StreetAccount Summary - Asian Market Recap: Nikkei +0.23%, Hang Seng +2.87%, Shanghai Composite (0.40%) as of 04:10 ET

Jun 19 ,2024

  • Synopsis:

    • Asian equities ended mixed Wednesday. Hong Kong surged nearly 3% after the securities regulator promised more reforms. More strong gains in Seoul and Taipei as technology stocks rose sharply. Japan also higher but well off its peaks. Australia finished a few points lower, mainland China stocks also under water. India flat, Southeast Asia mixed with Thailand lower again. US futures mostly unchanged, Europe flat after early weakness. US dollar unchanged, AUD higher, other currencies flat. Treasury and JGB yields lower across tenors, CGB yields sank to near record lows. Crude flat, precious metals slightly lower, industrial metals mixed.

    • Asia equities opened higher as the fresh market records in the US read through to the region, with tech-orientated boards easily outperforming others. Hong Kong boosted by promises from the securities regulator to deepen reform, attract fresh capital, and prevent systematic risks. Taiwan's Taiex spiked almost 2% after another strong technology rally in the US, with TSMC up another 4% today. India markets potentially held back as four block trades went through in a single day, with reports of more in the pipeline.

    • In macro developments, Japan exports rose by the most since late 2022 amid growth in autos and chip shipments, inflated by the weak yen. April BOJ meeting minutes revealed members debated merits of policy response if the weak yen impacts prices and economic outlook. RBNZ chief economist Conway said he expects disinflation to broaden but reiterated need to continue with restrictive policy. PBOC Governor Pan said central bank studying implementation of bond trading scheme, while reiterating scope for further easing.

    • Kaisa Group's (1638.HK) chairman returned to mainland China from Hong Kong for the first time in ten years to get regulatory approval for an offshore debt restructuring plan. Shanghai Fosun Pharmaceutical (2196.HK) is to sell a 58% stake in Gland Pharma (543245.IN) through a series of block deals after being unable to sell it in one round. Vodafone Idea (532822.IN) is looking to raise up to $1.98B from the sale of a 17.98% stake in Indus Towers (534816.IN) in several block trades; Indus stock down sharply.

  • Digest:

    • Governor Pan says PBOC studying implementation of bond trading, monetary policy supports recovery:

      • Addressing Lujiazui Forum in Shanghai, PBOC Governor Pan Gongsheng said China's monetary policy has been supportive to aid economic recovery. Stressed bank will continue flexible use of various monetary policy tools, strengthen counter-cyclical and cross-cycle adjustments, and avoid big expansion or contraction. Pan said policymakers mulling making a short-term rate of PBOC operation as an explicit interest rate target while 7D reverse repo rate is basically serving such function now. Pan signaled PBOC might soon start trading in secondary bond market and emphasizing adding such operations into monetary policy toolbox does not mean quantitative easing but rather creates suitable liquidity environment. Pan mentioned lessons from SVB and warned about duration mismatch and interest risks of large holdings of medium- and long-term bonds by some non-bank financial institutions. Said would maintain a normal upward-sloping yield curve. Pan said slower credit growth is natural while measures taken to regulate market behavior, alleviate resource allocation distortions and reduce idle capital arbitrage will "squeeze" aggregate financial data. Policymakers will also optimize statistical methodology for financial indicators, adding current definition of M1 was established three decades ago and needs to be refined.

    • China securities regulator says it will deepen reform, attract long-term capital into market:

      • In keynote speech at Lujiazui Forum, CSRC chairman Wu Qing said the securities watchdog will unveil eight fresh measures, including offerings, underwritings, merges and incentives, to deepen reform of Shanghai's tech-focused STAR market with focus on promoting hard-core technologies. Wu said CSRC will go all out to promote high-quality development of China's capital market and grow "patient capital", attract more long-term funds into market. On market regulation, CSRC will strengthen regulation of high-frequency trading, OTC derivatives considering retail investors dominate China's equity market, crack down hard on market misbehaviors, urge listed companies to improve disclosure and reward investors with cash dividends and repurchases. Regular will "severely" punish financial fraud of listed companies and encourage whistleblowers. SCMP noted Wu's speech came at a time when rebound in Chinese stocks has shown signs of losing steam with investors concerning about China's economic fundamentals.

    • Japan exports rise by most since Nov-2022, aided by weak yen:

      • Japan exports rose 13.5% y/y in May following 8.3% increase in April, above consensus 12.7% and representing largest gain since Nov-2022. US-bound exports rose 23.9%, China shipments climbed 17.8% while exports to EU dropped 10.1% By product, auto exports rose 13.6% and shipments of chips and chipmaking equipment climbed 16.9% and 45.9% respectively. Imports rose an in-line 9.5% y/y, up from April's 8.3% increase and driven by fuels, and machinery (PCs and parts) purchases. However, weak yen played an outsized role in boosting exports with volumes shrinking on-year. Separate economic data has come in mixed with April machinery orders declining for first time in three months while auto certification scandal looming as a near-term drag and cost of living continues to weigh on consumption. Still, Q2 GDP forecasts looking for a rebound following Q1 contraction, though reflecting dissipation of drag from auto suspensions and Noto earthquake in prior quarter.

    • Japan's government weighs plans to boost issuance of shorter-dated bonds:

      • Bloomberg cited draft proposal from Japan Ministry of Finance outlining plans to boost issuance of shorter-dated bonds with expert panel likely to give their endorsement on Friday. Proposal said necessary to reduce risk by shortening durations, though even this will raise refinancing and interest rate risks for government. Working draft recommended expanding pool of bondholders as much as possible, with one respondent in MOF survey saying banks could become major new holders of the securities as BOJ reduces its ownership. Development comes ahead of July BOJ meeting, where central bank will reveal details of plans to reduce JGB purchases over next 1-2 years. BOJ's holdings of JGBs totaled ~¥590T ($3.7T) at end of March, more than 50% of total. MOF issuance has tended more towards longer-dated maturities over past years as BOJ's JGB purchases and YCC put a cap on long-term yields. However, JGB yield curve has steepened notably over the past year with 10Y and 30Y yields up around 50 and 90 bp respectively, as Governor Ueda embarked on gradual path to normalization.

    • BOJ members debated policy response if weak yen impacts inflation, economic outlook:

      • Minutes from BOJ 25-26-Apr policy meeting noted members favored adjusting rates if there is further change in outlook for economy and inflation, or risks to outlook. Some members noted exchange rate an important factor affecting economy activity and prices, and that policy response would be necessary if there was a change in outlook for prices and economy. One member noted pass-through of yen depreciation to consumer prices seemed to have heightened while others also opined about rise in prices via cost-push factors. Regarding wage and price setting behavior, some members noted possible that firms will proceed with raising prices more than expected ahead of wage hikes in FY25. Regarding other policy settings, members recognized need for BOJ to indicate its intention to reduce JGB purchases with one arguing for reduction in balance sheet size. Members also recognized time is needed to consider treatment of ETF and J-REIT holdings, including potential impact on stockmarket.

    • Notable Gainers:

      • +18.8% 9626.HK (Bilibili): JPMorgan note

      • +9.0% 7211.JP (Mitsubishi Motors): Considering additional shareholder returns

      • +8.9% 1357.HK (Meitu Inc): Chairman Wu Xinhong discloses on-market purchases of 1.0M shares at HK$2.48/share

      • +1.4% 2197.HK (Clover Biopharmaceuticals): Discloses positive preliminary phase 1 result of SCB-1019 in older adult and elderly cohort

    • Notable Decliners:

      • -21.2% 7388.JP (FP Partner): Japan's FSA reportedly to have launched an investigation into transactions with life insurance companies

      • -1.7% 467.HK (United Energy Group): CCB International note

  • Data:

    • Economic:

      • Japan May trade balance (¥1.2213T) vs consensus (¥1.2805T) and (¥462.5B) in prior month

        • Exports +13.5% y/y vs consensus +12.7% and +8.3% in prior month

        • Imports +9.5% y/y vs consensus +9.5% and +8.3% in prior month

      • New Zealand Q1

        • Current account (NZ$4.4B) versus (NZ$8B) in prior quarter

    • Markets:

      • Nikkei: 88.65 or +0.23% to 38570.76

      • Hang Seng: 514.84 or +2.87% to 18430.39

      • Shanghai Composite: (12.20) or (0.40%) to 3018.05

      • Shenzhen Composite: (14.83) or (0.87%) to 1687.64

      • ASX200: (8.40) or (0.11%) to 7769.70

      • KOSPI: 33.41 or +1.21% to 2797.33

      • SENSEX: 48.43 or +0.06% to 77349.57

    • Currencies:

      • $-¥: (0.12) or (0.08%) to 157.7490

      • $-KRW: (2.13) or (0.15%) to 1378.2200

      • A$-$: +0.00 or +0.27% to 0.6670

      • $-INR: +0.03 or +0.04% to 83.4121

      • $-CNY: +0.00 or +0.02% to 7.2560

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