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StreetAccount Summary - Asian Market Recap: Nikkei +0.61%, Hang Seng +0.01%, Shanghai Composite +0.73% as of 04:10 ET

Jun 28 ,2024

  • Synopsis:

    • Asian equities ended largely higher Friday in a quiet session. Tech names led Kospi and Taiex higher again, and India's boards reached fresh records intraday. Australia's ASX, Hang Seng and Shenzhen were flat, Shanghai Composite saw solid gains but still lower for the week. Some losses in Southeast Asia. For the week, Greater China markets down notably, the rest of the region mixed; monthly returns also saw China decline, while South Korea, Taiwan and India all outperformed. US futures higher, Europe paring early gains. US dollar hovering near recent highs, yen fell through 161 per dollar briefly before strengthening, yuan stronger post modest tightening in morning PBOC fix. Treasury yields mostly higher, JGB yields a tad lower. Crude oil futures higher, gold flat, industrial metals largely unchanged.

    • Asia equities ending the week and month with a subdued session ahead of key US PCE inflation data tonight, China PMIs on Sunday, and a week of key political developments globally with the French and UK general elections the most significant. Substantial press attention on the Trump-Biden Presidential debate this morning (Asia time) with Biden widely seen as performing poorly but little market reaction for now. Notable for the region was the lack of meaningful debate on China.

    • On the macro front, Tokyo core CPI firmer than expected amid acceleration in services inflation; industrial production was also stronger than expected with autos among the main drivers. Unemployment rate was steady. South Korean industrial production unexpectedly shrank amid fall in services output. Australian private sector credit growth slowed in-line.

    • Japan authorities are investigating 76 new deaths possibly caused by Kobayashi Pharma (4967.JP) red yeast rice supplement. Sirnaomics (2257.HK) said it had successfully completed a Phase I clinical study of its pancreatic cancer with positive results; stock up sharply. Sino-Ocean Group (3377.HK) is to face a winding up petition in a Hong Kong high court on 11-Sep but says it expects an agreement on principal terms in due course. Foxconn (Hon Hai Precision, 2317.TT) plans to begin manufacturing AI servers at its India factories, according to press reports. Infosys (500209.IN) CEO settled the Indian regulator's charges of failing to place adequate controls to prevent insider trading.

  • Digest:

    • Japan industrial production, Tokyo core inflation firmer than expected:

      • Industrial production rose 2.8% m/m in May, better than consensus 2.0%, rebounding from a 0.9% decline in the previous month. Main drivers were autos, electric/IT equipment and general-purpose machinery. Shipments were relatively stronger though still left inventories higher. Core capital goods shipments rose moderately. Going forward, METI survey projections look for a 4.8% drop in June (revised from 5.6% last month), followed by a 3.6% rebound in July, pointing to moderate growth in Q2 and a positive start to Q3. Tokyo core CPI rose 2.1% y/y in June, slightly above consensus 2.0%, following 1.9% in prior month. Ex-fresh food & energy inflation edged up to 1.8% vs consensus and prior month's 1.7%. Energy contribution was marginally higher as gas prices turn positive. Elsewhere, household durable and accommodation prices accelerated. Slight fade in goods inflation was outweighed by firmer services. On labor market, unemployment rate was steady at 2.6% as expected. Sequential growth in employment was offset by labor force participation. Main surprise was job offers to applicants ratio, unexpectedly falling to 1.24 from 1.26 with consensus looking for no change. Applications rose notably as offers edged higher.

    • RBA Deputy Governor Hauser says mistake to base policy decision on single CPI print:

      • Speaking late Thursday RBA Deputy Governor Hauser sought to downplay thoughts hotter-than-expected May CPI will necessitate an August rate hike, saying it would be a mistake to base decision on one data point (Bloomberg). Added RBA will weigh suite of indicators at August meeting, including employment, retail sales, business sentiment and Q2 CPI. Hauser's remarks followed earlier speech that did not go into any substantive detail on monetary policy. Several economists changed their views on cash rate following May CPI, now predicting an August rate hike. Market-implied odds of a rate hike by September have risen to ~50%. Some economists now pondering likelihood of multiple rate hikes over coming months, particularly with real rates have fallen this year amid inflation rebound. 2-3 rate hikes would take cash rate to ~5% level that some argue is necessary to get on top of homegrown inflation pressures (Financial Review). Other signs inflation risks are skewing to upside, including tight labor market, coming government stimulus (tax cuts, energy rebates), and resilient consumer spending.

    • China Third Plenum to focus on reforms:

      • Xinhua reported the Third Plenum will be held July 15~18. Preceding Politburo meeting convened Thursday with reforms at the top of the agenda. Members collected opinions on the final version of a blueprint on reform and modernization to be submitted to the plenum. But the summary concentrated on socio-political goals and contained nothing specific relevant for markets. Bloomberg said market attention will focus on the meeting readout for signs of President Xi's long-term roadmap for China's slowing economy and likely to prioritize developing "new productive forces" (namely high-tech development) based on hints in recent state media articles. Also cited Goldman Sachs prediction that policymakers may be consider consumption tax reforms, including broadening the tax base and increasing rates, citing a local media report. This fits with an earlier Reuters article citing policy advisors who flagged changes to fiscal transfers between local and central governments in order to alleviate local government dependence on land sales laid bare by the property crisis.

    • China official manufacturing PMI seen remaining in contraction:

      • Reuters consensus looks for official manufacturing PMI to remain steady at 49.5 in May ahead of the data release scheduled for Sunday. Forecasts ranged between 49.1 and 50.0, indicating limited upside. Discussed mixed results from recent data lacking meaningful signals of a rebound in growth momentum. Positive surprises in exports were downplayed as economists raised doubts about sustainability, not least because of growing trade tensions. Cited Premier Li Qiang's comments at the Dalian World Economic Forum noting that China's economic has maintained an upward trend since the start of the year and expected continued steady improvement over Q2. Recall a Bloomberg survey showed median forecast for 2024 export growth was upgraded to 4.3% from 2.8% last month as China GDP growth projection edged up to 5.0% from 4.9%. Still, article cited a recent Goldman Sachs note indicating increasing skepticism toward the near-term export outlook amid ongoing concerns about Beijing's supply-centric policy support while domestic demand remains weak, and risks compounded by trade frictions.

    • Biden underwhelms in debate with Trump:

      • Biden-Trump debate wrapped up with press takeaways mostly focused on Biden's underwhelming performance that heightened concerns about his age and stirred debate about Democrats replacing him (Politico, NY Times, Bloomberg). CNN flash poll showed viewers thought Trump won 67-33% while Trump's election odds shortened following the debate. Two candidates clashed on a variety of topics in a contentious debate that at times turned personal. Trump pivoted to border security on several occasions in criticizing Biden's management of immigration. Biden jabbed Trump on other issues such as abortion and democracy. Nothing particularly incremental from an economic standpoint with two candidates defending their own records while criticizing the other's record on jobs, inflation and debt. Trump disputed that his proposed tariffs will add to inflation and claimed other countries would pay them. Biden repeated promises to lower housing costs, boost childcare tax credit, and raise taxes on incomes above $400K to bolster social security.

    • Notable Gainers:

      • +7.2% IAG.AU (Insurance Australia Group): On track to report FY24 reported insurance profit and margin around the upper end of guidance ranges

      • +5.3% RCE.AU (Recce Pharmaceuticals): Reports phase I/II data on UTI/urosepsis rapid infusion clinical trial of Recce 327; no serious adverse events

      • +1.9% 2257.HK (Sirnaomics): Completes STP707 Phase I clinical study with strong safety profile and stable disease activity for treatment of pancreatic cancer patients

    • Notable Decliners:

      • -10.7% 3377.HK (Sino-Ocean Group Holdings): To face winding-up petition in Hong Kong High Court on 11-Sep; expects an agreement on principal terms of holistic debt management in due course

      • -7.8% 9468.JP (Kadokawa): Updates on ransomware attack, on track to restore service in early July; downgraded to neutral from outperform at Macquarie

      • -5.7% 6110.HK (Topsports International Holdings): Reports Q1 total retail and wholesale sales registered y/y mid-single-digit decline

  • Data:

    • Economic:

      • Japan

        • June Tokyo core CPI +2.1% y/y vs consensus +2.0% and +1.9% in prior month

          • CPI excl. fresh food & energy +1.8% y/y vs consensus +1.7% and +1.7% in prior month

          • Overall CPI +2.3% y/y vs consensus +2.3% and +2.2% in prior month

        • May unemployment rate 2.6% vs consensus 2.6% and 2.6% in prior month

          • Job offers to applicants ratio 1.24 vs consensus 1.26 vs 1.26 in prior month

        • May industrial production +2.8% m/m vs consensus +2.0% and (0.9%) in prior month

          • METI survey projections (4.8%) in June, +3.6% in July

      • Australia

        • May private sector credit +0.4% m/m vs consensus +0.4% and revised +0.5% in April

    • Markets:

      • Nikkei: 241.54 or +0.61% to 39583.08

      • Hang Seng: 2.14 or +0.01% to 17718.61

      • Shanghai Composite: 21.55 or +0.73% to 2967.40

      • Shenzhen Composite: 4.04 or +0.25% to 1618.07

      • ASX200: 7.90 or +0.10% to 7767.50

      • KOSPI: 13.76 or +0.49% to 2797.82

      • SENSEX: (38.77) or (0.05%) to 79204.41

    • Currencies:

      • $-¥: +0.14 or +0.09% to 160.9020

      • $-KRW: (8.33) or (0.60%) to 1379.0800

      • A$-$: (0.00) or (0.22%) to 0.6632

      • $-INR: (0.03) or (0.04%) to 83.4423

      • $-CNY: (0.00) or (0.04%) to 7.2656

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