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StreetAccount Summary - Asian Market Recap: Nikkei (0.09%), Hang Seng (1.67%), Shanghai Composite (0.24%) as of 04:10 ET

Jun 21 ,2024

  • Synopsis:

    • Asian equities ended mostly lower Friday. Losses steepest in Hong Kong that gave up most of yesterday's gains, and mainland China, which closed out a sixth consecutive week of losses. Seoul and Taipei both on the backfoot, India also moving away from record highs. Some small advances in Australia and a handful of Southeast Asia bourses. US futures edigng down, Europe opened with small losses. US dollar higher, yen touched 159 per dollar for a time before strengthening, yuan stable. Treasury yields higher at the short end, JGB yields higher. Crude futures lower, precious metals mixed, industrial metals under pressure.

    • Asia stocks ending another difficult week with losses on Friday even in some of the technology-leaning exchanges that have outperformed of late. Hong Kong saw the worst of the selloff after the PBOC warned on weaker credit growth, underpinning concerns over the stuttering nature of the economic recovery especially among developers. A stronger dollar also created fresh regional headwinds pushing the yen to 34-year lows and close to levels that prompted intervention in April and May. Today Japan's forex diplomat Kanda reiterated the government's readiness to act if needed. Separately, the US added Japan to its currency manipulation watchlist, and called for China to be more transparent in its forex management.

    • In macro developments, Japan core inflation re-accelerated in May and headline inflation also ticked higher. Japan flash PMIs showed manufacturing and services activity weakened while India's readings continued to expand. South Korean export growth over first 20 days of June softened amid weaker demand from China. Canada said to preparing potential new tariffs on China-made EVs to mirror those from the US and EU.

    • Tencent (700.HK) may acquire Ant Group's stake in China's personal credit firm Baihang Credit. Hanwha Systems (272210.KS) and Hanwha Ocean (042660.KS) is to acquire Philly Shipyard (PHLY.NO) for $100M in cash.

  • Digest:

    • Japan core inflation rebounds as economists gauge prospect of July rate hike:

      • Japan core inflation rebounded to 2.5% y/y in May from 2.2% in prior month, just below consensus 2.6%. Overall inflation climbed to 2.8% from 2.5% in April, below consensus 2.9%. Driven by higher oil prices as ex-food and energy inflation eased to 2.1% from 2.4%, less than 2.2% forecast. Renewable energy hike also influenced inflation while end of utility subsidy last month expected to further push up inflation in coming months. Furniture and household items among contributors to rise in inflation while education subsidies offset some of the increase. CPI result adds to case for another BOJ rate hike though economists split on timing (Reuters). Speaking this week BOJ Governor Ueda reiterated possibility of a rate hike in July depending on data, adding BOJ needs more time to assess whether underlying inflation is tracking to 2% in a sustainable manner. However, he also noted announcement of details on plans to reduce JGB purchases did not preclude simultaneous rate hike next month.

    • Japan services PMI swings to contraction for first time since Aug-2022:

      • Japan flash manufacturing PMI fell to 50.1 in June from 50.4 in May. Activity stalled after manufacturing returned to growth for first time in a year last month. June PMI showed new orders and exports experienced faster declines, offsetting output returning to growth for first time in over 12 months. Firms also experienced stronger input cost inflation. Services PMI fell to 49.8 from 53.8, marking first contraction since Aug-2022 as output swung to decline amid labor constraints. New orders saw weaker growth while margin pressures intensified with input cost inflation quickening while output price inflation softened. Services business confidence fell to lowest since Mar-2022. Composite PMI dropped to 50.0 from 52.6. Report may carry negative implications for economic activity over coming months, as new orders continuing a weakening trend. Meanwhile, weak yen and labor constraints contributing to input cost pressures, feeding into BOJ rate hike narrative.

    • Latest weakness in yen and yuan reignites intervention debate:

      • FX weakness in spotlight with yen near 34-year low against dollar, closing in on 160 handle that triggered suspected intervention in April. Japan's FX chief Kanda reiterated readiness to act against excessive moves though there are doubts about repeat intervention with yen's decline over June so far shallower than in April (Bloomberg). Strategists also see limited scope for trend reversal amid persistently wide US-Japan yield gap. Meanwhile, offshore yuan came off six-month lows following stronger-than-expected fixing of daily midpoint. Bloomberg also cited traders who said Chinese banks sold dollars in onshore market. PBOC set midpoint at weakest level since Nov-2023 on Thursday, reviving thoughts authorities loosening their grip on the currency. Comes after PBOC Governor Pan on Wednesday fanned depreciation speculation when noting dollar strength was waning. However, today's stronger fixing fits with pattern observed over recent months where PBOC signals intent to manage pace of decline.

    • US adds Japan to currency manipulation watchlist, calls for more China transparency:

      • US Treasury department added Japan to 'monitoring list' over forex practices citing large bilateral trade and current account surpluses. Report noted Tokyo's forex intervention in April and May, outside timing scope of report, acknowledged intervention was transparent (Nikkei). Other Asia 'monitoring list' members are China, Malaysia, Singapore, Taiwan and Vietnam; excluded South Korea for second consecutive report (Yonhap), Malaysia fulfilled one of three criteria. Two of three conditions must be fulfilled for list inclusion: bilateral trade surplus of at least $15B, current account surplus of 3% of GDP, one-sided currency intervention worth 2% of GDP. Report noted no major trading partner appeared to have manipulated currency last year (Reuters). Report also called on China for greater transparency on exchange-rate policy, noted "anomalies" in country's current account data; said figures from State Forex authorities at odds with China's own customs data, that of other countries. Added China remained outlier among major economies in not publishing intervention data, warrants Treasury's "close monitoring".

    • Canada prepares potential tariffs on Chinese EVs following US and EU:

      • Bloomberg citing people with knowledge reported Canada is preparing potential new tariffs on China-made EVs, following similar moves announced by US and EU. Noted final decisions yet to be made, while government is likely to announce soon start of public consultations. PM Trudeau under pressure both at home and abroad to take action. Recall Ontario Premier Ford accused China of flooding market with cheap EVs and called for federal government to impose at least 100% tariff (Bloomberg). Earlier, Biden administration announced a plan to nearly quadruple tariffs on Chinese EVs to 102.5% while Brussels said it planned to hike tariffs to as high as 48% on some cars. Noted Ottawa's main concern isn't Shanghai-made Tesla cars, but rather cheap models made by Chinese automakers. Trudeau said he had significant conversations about Chinse production at G7 summit last week while spokesperson for Finance Minister Freeland said Ottawa is actively considering moves to counter China's oversupply while protecting Canadian jobs, while Trudeau government has promised to build a domestic EV industry that includes subsidies for new factories.

    • Notable Gainers:

      • +17.0% 4776.JP (Cybozu): Raises guidance

      • +4.9% 4819.JP (Digital Garage): Launches up to 2.2M-share buyback for up to ¥4.0B

      • +4.8% 002673.CH (Western Securities): Plans to acquire controlling interest in Guorong Securities

      • +3.3% 2162.HK (Keymed Biosciences): Discloses safety and efficacy results of CM313 phase I/II study published in NEJM

      • +2.4% 9996.HK (Peijia Medical): Intends to conduct buyback of up to 67.9M share

    • Notable Decliners:

      • -7.7% 4418.JP (Japan Data Science Consortium Co.): Lowers guidance

      • -6.9% 272210.KS (Hanwha Systems): To acquire Philly Shipyard for $100M (KRW138.87B) with Hanwha Ocean

      • -4.8% 012450.KS (HANWHA AEROSPACE): Issues update on K9's Romania export deal

  • Data:

    • Economic:

      • Japan

        • May nationwide core CPI +2.5 y/y vs consensus +2.6% and +2.2% in prior month

          • CPI excl. fresh food & energy +2.1% y/y vs consensus +2.2% and +2.4% in prior month

          • Overall CPI +2.8% y/y vs consensus +2.9% and +2.5% in prior month

        • June flash manufacturing PMI 50.1 vs 50.4 in prior month

          • Services PMI 49.8 vs 53.8 in prior month

          • Composite PMI 50.0 vs 52.6 in prior month

      • India June

        • Flash manufacturing PMI 58.5 vs Final 57.5 in prior month

          • Services PMI 60.4 vs 60.2 in prior month

          • Composite PMI 60.9 vs 60.5 in prior month

    • Markets:

      • Nikkei: (36.55) or (0.09%) to 38596.47

      • Hang Seng: (306.80) or (1.67%) to 18028.52

      • Shanghai Composite: (7.30) or (0.24%) to 2998.14

      • Shenzhen Composite: (1.54) or (0.09%) to 1654.32

      • ASX200: 26.60 or +0.34% to 7796.00

      • KOSPI: (23.37) or (0.83%) to 2784.26

      • SENSEX: (428.42) or (0.55%) to 77050.51

    • Currencies:

      • $-¥: (0.15) or (0.09%) to 158.7690

      • $-KRW: (4.04) or (0.29%) to 1388.6400

      • A$-$: (0.00) or (0.05%) to 0.6653

      • $-INR: (0.13) or (0.15%) to 83.5320

      • $-CNY: 0.00 or 0.00% to 7.2602

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