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StreetAccount Summary - Asian Market Recap: Nikkei +0.16%, Hang Seng (0.52%), Shanghai Composite (0.42%) as of 04:10 ET

Jun 20 ,2024

• Synopsis:

  • Asian equities finished mixed Thursday. South Korea rose to fresh 29-month high and Taiwan's Taiex to a new record high as tech shares powered ahead again. Small gains for India's benchmarks, Japan's Nikkei a few points higher, Topix dipped into the red despite a positive start. Greater China markets all down led by Shenzhen, Australia flat. Most of Southeast Asia lower except Indonesia, which traded higher ahead of BI's decision. US futures higher, Europe saw a bounce at the open. Dollar flat, the yuan weaker post PBOC fixing, yen weakened in late trade. Treasury yields higher. Little change in oil contracts, precious metals higher especially silver, industrials seeing support.

  • Asia stocks continued their respective recent courses Thursday as tech-weighted boards outperformed once again. But it was a quiet session overall with the few catalysts on the calendar within market forecasts, and just as several key central bank decisions approached. In regional developments, the PBOC set the yuan midpoint at its weakest level since Nov-23, pushing the off- and onshore yuan to seven-month lows and reviving talk Beijing was loosening its grip on the currency. China also left 1Y and 5Y LPRs unchanged as expected after keeping MLF rate steady on Monday.

  • In other developments, New Zealand GDP showed slight growth in Q1, pulling the economy out of a technical recession, Taiwan export orders for May well ahead of expectations, Bank Indonesia kept its base rate on hold despite weakening rupiah. Japan PM Kishida's cabinet faces a no-confidence vote in parliament but is expected to survive.

  • Nippon Steel (5401.JP) could face rising decarbonization costs if its bid for US Steel (X) is successful, an activist shareholder group has claimed. Activist investor Effissimo Capital revealed it as built a 20% stake in Sanken Electric (6707.JP). Softbank (9984.JP) founder Son says group will ramp up power generation in the US to power generative artificial intelligence projects. SK innovation (096770.KS) and SK E&S may merge to strengthen the balance sheet of Innovation which has been under pressure from its unprofitable EV battery unit SK On. Guzman y Gomez (GYG.AU) stock debuted in Sydney with a 36% gain.

• Digest:

  • Chinese banks leave LPRs unchanged as expected:

    • LPRs were steady as expected with 1y at 3.45% and 5y at 3.95%. Reuters poll showed 21 out of 30, or 70%, market watchers looked for no change to either tenor, down from 82% majority in LPR poll in May. Among remaining nine respondents, seven saw a steady 1y rate but a cut of 5~20 bp in 5y rate, while other two forecast 5~10 bp cut to both rates. Expectations for steady LPR fixings come as MLF rate was unchanged on Monday as PBOC-affiliated Financial News said further rate cuts constrained by shrinking NIMs for lenders and currency exchange rate. Yicai noted various small and medium commercial lenders have cut their deposit rates from June for 3y and 5y time deposits, as well as short-term ones by 10 ~ 40 bp. Meanwhile economists noted yuan has been under heavy pressure recently and rate cuts would drag currency further which policymakers are keen to avoid. UBS expected no MLF rate cuts for remainder of 2024 but a possible reduction of 10~20 bp in LPRs, adding more policy support measures could be rolled out around or after key Politburo meeting in July if overall growth momentum disappoints and property market remains in doldrums.

  • New Zealand emerges from recession amid pickup in consumption growth:

    • New Zealand Q1 GDP rose 0.2% q/q, better than consensus 0.1% and recovering from 0.1% contraction in prior quarter. GDP growth was also in-line with RBNZ's forecast. Brought yearly rate of growth to 0.3%, also better than consensus 0.2% and Q4's 0.3% contraction. Led by pickup in consumption growth and rebound in investment, offsetting drag from exports. By production, construction, and manufacturing among the main drags, balanced by stronger activity in some services. Recall RBNZ surprised markets with a hawkish hold in May and updated OCR forecasts implying greater probability of another rate hike. Main concern revolved around sticky domestic inflation, though subsequent takeaways viewed hawkish messaging more of a jawboning exercise. Chief Economist Conway said Wednesday RBNZ expects disinflation to broaden across non-tradeabales categories, driven a weak economy and a cooling labor market. Markets pricing in rate cut by year-end.

  • Bank Indonesia keeps base rate on hold as fiscal spending concerns resurface:

    • Bank Indonesia kept its benchmark interest rate steady at 6.25% Thursday but delivered a hawkish tone in its accompanying statement as rupiah remained under pressure following recent fiscal spending pledges from incoming President Prabowo. Investors concerned Prabowo will widen country's debt ratios to fund election campaign promises while recent dollar demand for fund repatriation also fueled rupiah selling. Bank's governor Warjiyo said rupiah movements remain manageable, movements in line with policy responses but acknowledged fiscal spending concerns. Added expects rupiah to be stable and pledged market interventions and sale of securities to smooth volatility. Unchanged rate expected by most economists although some had called for 25 bp hike. BI repeatedly intervened in forex markets during June to prop up rupiah, which last week fell below BI's red-line level of 16,300 per dollar. Warjiyo added bank expects FY 24 GDP growth of 4.7-5.5%.

  • Yuan sinks to lowest level in seven months after weak fixing:

    • Onshore yuan fell to lowest against USD since Nov-23 early Thursday after PBOC set its daily reference point at weakest in seven months in sign policymakers loosening grip on currency. Some analysts had been expecting weaker fixing as authorities gradually move toward 7.12 per dollar, allowing tradable onshore yuan to move past 7.26 per dollar to ease depreciation pressure on currency. Analysts said they also expect verbal intervention as Beijing attempts to prevent volatility in forex. Wednesday, PBOC governor Pan signaled more room for monetary easing as dollar's appreciation momentum stalled however rate cut less likely than cut to banks' RRR. Yuan been under pressure since delay of Fed rate cut became evident, added pressure from deteriorating capital outflows following exporters holding US dollar deposits. Offshore yuan also trading at six-month low 7.28 per dollar early Thursday.

  • Japan PM Kishida's Cabinet faces no confidence motion:

    • Japan's main opposition Constitutional Democratic Party of Japan (CDP) submitted motion of no confidence in Japan PM Kishida's Cabinet on Thursday, which is expected to be supported by other opposition parties but ultimately voted down by ruling LDP-Komeito bloc (Kyodo). Comes amid criticism over political funding reforms measures passed Wednesday following scandal in which LDP factions failed to properly report income from fundraising parties and were accused of created slush funds. While lower house election doesn't need to be called until Oct 2025, speculation of Kishida calling snap election have bubbled for months. However, on Wednesday Kishida ruled out a snap vote (Kyodo, Bloomberg). Approval for Kishida's cabinet down to lowest since he came into office in 2021, fueling thoughts LDP could suffer defeat if election were held now. Low poll numbers have also cast doubt about Kishida's prospects of being reelected in LDP presidential race around September with LDP embers also voicing criticisms of his leadership.

  • Notable Gainers:

    • +15.6% 096770.KS (SK Innovation): Reportedly to merge with SK E&S

    • +11.3% 6707.JP (Sanken Electric): Activist fund Effissimo Capital Management reveals 20% stake

    • +5.1% 1503.TT (Shihlin Electric & Engineering): Management provides outlook post AGM

  • Notable Decliners:

    • -7.0% 2138.HK (EC Healthcare): Guidance

    • -5.0% 4544.JP (H.U. Group Holdings): Morgan Stanley MUFG note

• Data:

  • Economic:

    • New Zealand Q1

      • GDP +0.2% q/q vs consensus +0.1% and (0.1%) in Q4

        • GDP +0.3% y/y vs consensus +0.2% and (0.3%) in Q3

    • Singapore Q1

      • Unemployment rate (final) 2.1% versus consensus 2.1% and 2.1% in prior quarter

  • Markets:

    • Nikkei: 62.26 or +0.16% to 38633.02

    • Hang Seng: (95.07) or (0.52%) to 18335.32

    • Shanghai Composite: (12.61) or (0.42%) to 3005.44

    • Shenzhen Composite: (31.79) or (1.88%) to 1655.85

    • ASX200: (0.30) or (0.00%) to 7769.40

    • KOSPI: 10.30 or +0.37% to 2807.63

    • SENSEX: 263.59 or +0.34% to 77601.19

  • Currencies:

    • $-¥: +0.50 or +0.31% to 158.3650

    • $-KRW: +5.70 or +0.41% to 1386.0500

    • A$-$: +0.00 or +0.23% to 0.6667

    • $-INR: +0.18 or +0.21% to 83.5547

    • $-CNY: +0.00 or +0.07% to 7.2593