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StreetAccount Summary - Asian Market Recap: Nikkei +1.26%, Hang Seng +1.18%, Shanghai Composite (0.49%) as of 04:10 ET

Jul 03 ,2024

• Synopsis:

  • Asia equities ended mostly higher Wednesday. Gains strongest in Japan where the Nikkei moved decisively above 40K, and in Taiwan, which re-approached record highs. The Hang Seng also saw out a solid day but mainland bourses fell amid unusually low volume. Gains in South Korea and Australia, India at record highs with Sensex through 80K briefly, Southeast Asia also rallied. US futures slightly lower, Europe higher in opening trades. US dollar DXY index consolidating below 106, yen at fresh multi-decade lows and nearing 162; yuan weaker post weak mid-point setting first thing. Treasury yields mixed, JGB 10Y yield at 13-year high 1.11%. Crude oil contracts at two-month highs. Precious and industrial metals well bid.

  • Asia markets took their lead from another record-setting session on Wall Street overnight to trade higher, this time backed by a tick lower in the dollar and firmer economic data points. Japan's markets moved to their highest since early April while there was a multi-month record set in Singapore; Taiwan Taiex moved back towards its record high, while India's Nifty and Sensex indices took out new records.

  • Regional developments tailing off with a US holiday tomorrow and NFPs Friday, and European political risk building into the weekend. China Caixin services PMI showed expansion but at a much reduced rate from May. Japan final services PMI was revised lower to reflect a deeper contraction. India's service PMI was revised higher to 60.5 and its composite also accelerated. Australia retail sales were better than forecast and encouraged RBA rate hike talk. The South Korean government upgraded its 2024 GDP growth forecast to 2.6% from 2.2% and pledged support measures for small businesses. The World Bank cut Thailand FY growth forecast on decline in exports, lower government spending.

  • Li Ning's (2331.HK) eponymous founder is considering increasing his stake from the current 10.5% as he wants a bigger say in the company's future strategy. TSMC (2330.TT) is said to be increasing its price for 3/5nm processes used by AI from January next year. Hyundai Motor Company (005380.KS) is looking to raise up to $3.5B from the IPO of its India unit with listing as early as September or October, according to reports. LG Electronics (066570.KS) has acquired an 80% stake in Dutch technology company Athorn for an undisclosed amount. Naver (035420.KS) will not sell its LY stake to Softbank (9984.JP) in the near term, according to Naver's CEO.

• Digest:

  • China Caixin Services PMI shows slowest growth in eight months:

    • China Caixin private services PMI reading expanded in June but at slower pace m/m, underpinning economic activity and other PMI data during month that showed China economic recovery stuttering (S&PGlobal). Services reading fell to 51.2 from May's 54.0, 18th consecutive month of expansion but slowest pace of growth since Oct-23. Private survey matched trajectory of official PMI services sub-component, which fell to 50.2 from 50.5 in May. On plus side, Caixin survey showed new and export orders rose steadily, tourism revenue improved, price pressures eased, backlogs accumulated at fastest pace in two years. But firms cautious over hiring additional staff amid four-year low in confidence as firms fretted over rising competition, softer economic conditions. Pricing pressure limited as raw material, wages and freight costs rose; much of this passed onto buyers but both indicators declined m/m, indicating limited inflationary pressure.

  • South Korea upgrades GDP growth forecast, prepares $18B in small business support measures:

    • Reuters reported South Korean Finance Ministry revised up its 2024 GDP growth forecast to 2.6% from 2.2%, following a three-year low 1.4% in 2023. 2025 growth projected at 2.2%. Exports cited as the main driver, particularly in semiconductors, on the back of growing demand related to AI. President Yoon's speech highlighted increasing burdens on small business due to high interest rates and rising wage/rent costs. Signaled that government has prepared KRW25T ($18B) worth of support measures. Policy loans to be provided with extended repayment periods at lower rates for small firms and self-employed. Finance Ministry also seeking measures to alleviate fixed costs such as rents and utilities. Total financial support for small business to expand by KRW1T in H2. In a boon for the construction sector, government pledged expansion of public investments and policy financing by KRW15T, more than initially planned. Added continuation of efforts to manage liquidity risks related to real estate project financing to stem broader spillover effects. Also signaled tax benefits to supplement its 'Corporate Value-up Program.'

  • BOJ output gap measure remains negative:

    • According to BOJ calculations, Japan output gap was -0.66% in Q1. Prior quarter was revised to -0.03% from +0.02% that initially marked the long-awaited first positive reading since 1Q20. Main drag has been capital input, which has outweighed positive contributions from labor since 2Q22. Going forward, BOJ Tankan factor indicated notable exacerbation in capacity shortages in Q3 reflecting the latest June survey results. While indicating risks skewed to the upside, Tankan proxies have been consistent with a positive output gap for well over a year. Recent BOJ policy statements continue to reflect confidence in a positive turn that would support the case for policy normalization, though has been relatively downplayed compared to past years. Attention has shifted more towards wage hikes and subsequent passthrough to output prices. Latest reading adds to mixed results in broader suite of macro data. Final services PMI was revised to a deeper contraction in June, accentuating the end to a 21-month growth streak and tipped the composite index into contraction for the first time in seven months. Recall Q1 GDP was also revised to a bigger contraction to reflect corrections to construction data inputs. Silver lining came in better-than-expected industrial production with the fallout from auto sector certification frauds looking limited.

  • World Bank cuts Thailand growth outlook:

    • Thailand will grow just 2.4% in 2024, down from a 2.8% forecast made as recently as April, according to World Bank projections largely on weak exports and low levels of public investments made earlier in 2024. Bank forecast growth to return to 2.8% in 2025 as demand improves at home and overseas amid higher government spending. Bank also said despite slowing growth, it supported Bank of Thailand's stance of holding base rate steady in face of opposition by government. Said lingering inflation from lower energy subsidies, lack of clarity on cash handout plan complicated bank's strategy (Bloomberg). Cut to forecast comes day after Thailand's cabinet approved revised debt plan, moving government closer to handing out $13.5B in cash. Second revision will see net borrowings rise by THB276B ($7.5B), just under half of which will be used to fund digital wallet scheme later this year (BangkokPost).

  • Hyundai India could raise as much as $3.5B from IPO:

    • Hyundai Motor Company (005380.KS) could raise up to $3.5B from its India unit IPO, eclipsing previous India record held by Life Insurance Corp of India (543526.IN) listing worth $2.5B in 2024. Prospectus said 142.2M shares or 17.5% of company to be sold, proceeds going to parent HMC in South Korea. Insiders told Bloomberg HMC targeting 'at least' $3B deal size; size, timing of offer still under discussion but listing could come in September, October. YTD, more than $5B raised through India IPOs, 14 more scheduled for H2 to raise combined $11B, far exceeding amount raised in Hong Kong or Seoul, according to Bloomberg. As many as six multi-national companies including LG and Coca Cola also watching HMC India's IPO progress with view to own local unit listing. Follows series of block sales last month including four in single day that got away successfully last month.

  • Notable Gainers:

    • +12.1% 2172.HK (MicroPort NeuroTech): guides H1 revenue CNY400-410M, +34-37% y/y

    • +2.9% 8129.JP (Toho Holdings): holder 3D Investment Partners raises stake to 6.36% from 5.06%

    • +1.4% 2331.HK (Li Ning): Founder reportedly considering increasing stake in Li Ning

    • +1.4% 4689.JP (LY Corp.): Naver reportedly will not sell LY stake to SoftBank Corp in short term

    • +1.4% 9983.JP (FAST RETAILING): reports June Japan Uniqlo same stores + online net sales +14.9% y/y

    • +1.3% 7453.JP (Ryohin Keikaku): reports June domestic LFL directly managed stores + online store sales +14.0% y/y

  • Notable Decliners:

    • -15.9% 3998.HK (Bosideng International Holdings): holder New Surplus International Investment places 400.0M-shares at HK$4.31/share via block trade agreement

    • -12.6% 546.HK (Fufeng Group): guides H1 net income CNY450-600M vs year-ago CNY1.50B

    • +0.0% 066570.KS (LG Electronics): acquires 80% stake in technology company Athom; terms undisclosed

• Data:

  • Economic:

    • China June

      • Caixin services PMI 51.2 vs consensus 53.4 and 54.0 in prior month

        • Caixin Composite PMI 52.8 vs 54.1 in prior month

    • Japan June

      • Final services PMI 49.4 vs preliminary 49.8 and 53.8 in prior month

        • Composite PMI 49.7 vs preliminary 50.0 and 52.6 in prior month

    • Australia May

      • Retail sales +0.6% m/m vs consensus +0.2% and +0.1% in prior month

      • Building approvals +5.5% m/m vs consensus +1.6% and (0.3%) in prior month

  • Markets:

    • Nikkei: 506.07 or +1.26% to 40580.76

    • Hang Seng: 209.43 or +1.18% to 17978.57

    • Shanghai Composite: (14.64) or (0.49%) to 2982.38

    • Shenzhen Composite: (12.68) or (0.78%) to 1608.06

    • ASX200: 21.70 or +0.28% to 7739.90

    • KOSPI: 13.15 or +0.47% to 2794.01

    • SENSEX: 514.26 or +0.65% to 79955.71

  • Currencies:

    • $-¥: +0.35 or +0.22% to 161.7900

    • $-KRW: +1.42 or +0.10% to 1388.1500

    • A$-$: +0.00 or +0.18% to 0.6679

    • $-INR: +0.04 or +0.05% to 83.5320

    • $-CNY: +0.00 or +0.02% to 7.2725