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StreetAccount Summary - Asian Market Recap: Nikkei +0.95%, Hang Seng +0.25%, Shanghai Composite (0.44%) as of 04:10 ET

Jun 25 ,2024

  • Synopsis:

    • Asian equities ended mostly higher Tuesday. Solid gains for Japan's boards with blue chips and growth stocks outperforming to give the Topix a notable edge over the Nikkei. Also a positive day for Australia in a broad rally as it closes in on record highs. Taiwan paring early losses to close higher, more gains for Seoul. India stocks at fresh record highs, most of Southeast Asia higher. Mainland China boards lower again to reach fresh four-month lows, Hang Seng giving up early gains but still closed slightly higher. US futures mixed, Europe off to a weak start as heavyweights Merck and Airbus fall sharply. Dollar flat, yuan weaker after PBOC set, yen a touch stronger. WTI and Brent both hovering above $80/bl, precious metals mixed, industrial metals supported.

    • Asia markets turned around a wobbly start to finish mostly higher, ex Greater China, as some positive sentiment returned to growth sectors, particularly in Australia and Japan. China markets chose a different path: although the Hang Seng finished slighly higher thanks to late tick higher, it gave up an over 1% gain while mainland markets sank as their IT stocks slid sharply. The moves came just as China's Premier Li gave a robust defense of China's manufacturing overcapacity and warned over further imposition of tariffs. The yuan also fell to a fresh seven-month low against the dollar, prompting speculation of how far the PBOC would allow the currency to weaken. The yen continued to hover near 34-year lows following more verbal warnings from Japan's FX chief Kanda but some FX strategists now forecast it may fall to a 38-year low around 170.

    • In economic developments, Japan services PPI inflation unexpectedly eased from the highest levels since Sep-1991. Australian consumer confidence inched higher but remained deeply depressed amid headwinds from interest rates. South Korean consumer sentiment improved to four-month high as inflation moderated but business confidence slipped amid exporter concerns about a global slowdown. Malaysia inflation crept higher in May.

    • Shimao (0813.HK) has sweetened its offshore debt restructuring term to gain support from creditors as it looks to fend off a Hong Kong liquidation petition. Foxconn (Hon Hai 2317.TT) is to invest $383M in a Vietnam circuit board plant (Reuters). Amara Raja Energy & Mobility (500008.IN) has signed a licensing agreement with a unit of Gotion High Tech (002074.CH) to produce lithium-ion batteries in India.

  • Digest:

    • China 618 sales campaign flops, reaffirming sluggish consumer demand:

      • Reuters discussed sluggish e-commerce sales over the so-called 618 festival last week as further evidence of soft consumer demand. This marked the first annual decline in sales for the campaign since its inception. Article noted the 618 festival was founded by JD.com but embraced by all platforms and is China's second-largest sales event after Singles Day in November. Disappointment partly reflects discounting becoming available year-round since the pandemic, cannibalizing turnover during major sales promotions. Price competition has been seen as a bearish signal, prompting some redistribution of market share while failing to stimulate aggregate growth. Anecdotal evidence reinforced consumers' defensive price-conscious stance. Weak confidence was underlined as the core issue against the backdrop of the real estate slump, stunted wage growth and high youth employment. Article cited some thoughts that private consumption is weak enough to pose downside risk to the government's GDP growth target of around 5%.

    • China encouraging consumption growth via inbound tourism, autos and smart wearables:

      • Xinhua cited a joint circular issued by the NDRC and other government bodies promoting consumption growth in areas including tourism, autos and electronics. Tourism was elevated in importance, signaling that more countries would be opened for travel visa waivers in China and inbound flights would be increased. Mentioned China will launch additional high-quality inbound travel products and services. Called for installation of street signs in foreign languages. Proposed enabling multilingual map/navigation applications and enhancement of ride-hailing services. China will promote acceptance of overseas bank cards in commercial venues. Circular encouraged cities to further relax auto purchase restrictions and increase purchase quotas. Pledged efforts to promote commercialization of autonomous driving. On electronics, policy efforts steering towards consumption of smart wearable devices in areas such as communication, entertainment, sports, health monitoring and mobile payments. Other specific technologies mentioned included flexible displays, supercharging, AI assistants and on-device LLMs.

    • Latest Japan inflation data mixed, but narrative continues to lean hawkish:

      • Services PPI rose 2.5% y/y in May, well below consensus 3.0% and follows revised 2.7% in the previous month. Nikkei's takeaway was hawkish, acknowledging a moderation in accommodation prices though data continues to indicate broadening increases driven by higher payroll costs. Among 146 categories, 109 registered higher prices, far outweighing declines in 20. Article also highlighted technical revisions to the series with the base year shifting to 2020 from 2015, though did not lead to any major trend shifts. The report introduced new subsets differentiating sectors with high and low weightings in personnel costs and both logged increases of 2.5%. Separately, BOJ underlying inflation data showed trimmed mean accelerating to 2.1% y/y from 1.8% in prior month while weighted median picked up to 1.3% from 1.1%. Recall BOJ policy statement continues to project underlying inflation to be consistent with the price stability target around the second half of the projection period currently running through FY26. However, central outlook scenario was somewhat overshadowed by MPC attention to upside risks that might warrant further rate hikes.

    • Markets still see possibility of July BOJ rate hike:

      • Press takeaways from yesterday's BOJ Summary of Opinions gravitated towards the possibility of a July rate hike, highlighting positive rhetoric for an early move (Nikkei, Reuters). Key citation was one member's view noting that upside risks to prices have become more noticeable. This member called for close data analysis ahead of the next MPM, and if deemed appropriate, the Board should not be behind the curve in raising the policy rate as the likelihood of achieving the inflation target increases. Another remark suggested that yen depreciation poses upside risk to the inflation outlook and the risk-neutral policy rate should rise accordingly. The story played up comments regarding FX risks despite other views that this factor currently poses limited policy implications. Yet, with plans to reduce JGB purchases already in motion, article cited some market doubts about a simultaneous rate hike at the July meeting, though Governor Ueda said at his press conference that such a scenario is well within the realm of possibility depending on the circumstances.

    • China facing geopolitical challenges on multiple fronts:

      • At WEF forum in China on Tuesday, Premier Li decried efforts by other countries to target China over dumping of goods such as EVs, warning of negative consequences for global economy (Reuters, Bloomberg). Comes after China and EU agreed to start talks over planned EU tariffs on China EV imports with Bloomberg sources noting Commerce Minister Wang Wengtao hinted to his German counterpart on Saturday Beijing open to lowering exiting tariffs on large-engine car imports if Germany convinces EU not to proceed. Elsewhere, Canada began 30-day consultation period in first step before government can impose tariffs on China EV imports (Bloomberg). Finance Minister Freeland also made mention of broad investment restrictions in Canada's EV industry. Meanwhile, Biden administration stepping up efforts against Chinese telecoms operating in US. Sources familiar with the matter told Reuters Commerce Department investigating China Telecom, China Mobile and China Unicom over data risks, concerned Chinese state-backed firms could exploit access to American data through their cloud and internet businesses.

    • Notable Gainers:

      • +11.2% 8129.JP (Toho Holdings): holder 3D Investment Partners discloses 5.06% stake

      • +7.4% 036570.KS (NCsoft): to spin off QA, game development units into new companies

      • +3.1% 2196.HK (Shanghai Fosun Pharmaceutical (Group) Co.): offers to take Shanghai Henlius Biotech private at HK$24.6/share

      • +1.1% 8227.JP (SHIMAMURA): reports Q1 revenue ¥164.47B vs FactSet ¥162.36B, operating income ¥14.58B vs FactSet ¥14.40B

      • +0.3% 302440.KS (SK bioscience Co.): gets approval for Australian phase 3 clinical trial 21-valent pneumococcal vaccine (GBP410) jointly developed with Sanofi

    • Notable Decliners:

      • -1.1% 601901.CH (Founder Securities): Founder Securities, UBS sell 85.0% stake in Credit Suisse Securities (China)

      • -0.3% 973.HK (L'Occitane International): reports FY revenue €2.54B vs FactSet €2.56B

  • Data:

    • Economic:

      • Japan May

        • Services PPI +2.5% y/y vs consensus +3.0% and revised +2.7% in prior month

        • BOJ underlying trimmed mean inflation +2.1% y/y vs +1.8% in prior month

          • Weighted median +1.3% y/y vs +1.1% in prior month

          • Mode inflation +1.5% y/y vs +1.6% in prior month

      • Australia

        • June Westpac-MI consumer sentiment index 83.6 vs 82.2 in May

    • Markets:

      • Nikkei: 368.50 or +0.95% to 39173.15

      • Hang Seng: 45.19 or +0.25% to 18072.90

      • Shanghai Composite: (13.10) or (0.44%) to 2950.00

      • Shenzhen Composite: (7.46) or (0.46%) to 1609.03

      • ASX200: 105.10 or +1.36% to 7838.80

      • KOSPI: 9.66 or +0.35% to 2774.39

      • SENSEX: 559.88 or +0.72% to 77900.95

    • Currencies:

      • $-¥: (0.15) or (0.09%) to 159.4620

      • $-KRW: +2.42 or +0.17% to 1389.1000

      • A$-$: +0.00 or +0.18% to 0.6667

      • $-INR: (0.05) or (0.06%) to 83.4237

      • $-CNY: +0.00 or +0.04% to 7.2617

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