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StreetAccount Summary - Asian Market Recap: Nikkei (0.00%), Hang Seng (1.27%), Shanghai Composite (0.26%) as of 04:10 ET

Jul 05 ,2024

  • Synopsis:

    • Asian equities ended mixed Friday. Hong Kong stocks sliding sharply in the afternoon session as banks and financials weighed heavily, mainland boards mixed amid evidence of state-fund ETF buying. Japan's indexes eased away from record highs, Australia also down slightly. South Korea and Taiwan higher, India lower as banks slip, Southeast Asia mixed. US futures mixed, mainland Europe with a very strong opening hour, UK stocks also higher post election. US dollar lower, yen weaker. Treasury yields mixed. Oil futures down, precious metals higher and industrials mixed. Cryptocurrencies lower after bitcoin broke through key support.

    • Precious few catalysts in Asia today and, with the US also closed yesterday, equities tracking their relative recent trajectories. India markets an exception with the Nifty and Sensex both lower on a decline in market heavyweight HDFC, but are still on course for a fifth consecutive week of gains. China mainland blue-chips down again despite some evidence of the country's "National Team" active in ETFs to shore up stocks, and the PBOC announcing it would tap major financial institutions to borrow bonds in an effort to cap the months-long bond rally.

    • Global equities Thursday reached record highs with gains in US and Europe pillaring the recent rally. UK Friday opening higher following general election win for Labour Party although its landslide win was widely expected. US nonfarm payrolls the focus tonight with futures back to pricing in two Fed rate cuts amid wider signs of a cooling economy. In Asia developments, Japan household spending shrunk by more than expected as cost of living continues to weigh, and Singapore retail sales bounced back in May.

    • SAIC Motors (600104.CH) has asked the European Commission to hold a hearing on its provisional tariffs. Samsung Electronics (005930.KS) forecast Q2 operating profit of $7.52B, a 16-fold increase, on a 23% increase in revenue. SK Square (402340.KS) said to be planning a transformation into a chip investment specialist firm under its new CEO. HDFC Bank (500180.IN) reported a sequential decline in loans and flat deposit growth in Q1; shares steeply lower.

  • Digest:

    • Japan record high stock prices boost sentiment, but ETF outflows may pose near-term risk:

      • Broadly euphoric takeaways after both Nikkei and Topix posted record highs Thursday. Nikkei noted TSE Prime market cap reached JPY1Q ($6.2T) for the first time with 223 out of 1,630 stocks posting all-time highs. While market rally through March was driven mainly by semiconductor names, latest strength characterized by FX tailwinds for manufacturers, while financials buoyed by prospects for rising rates. Some indications that global investors overweight Japan. Nikkei also noted a record 19 companies with market cap in excess of JPY10T, up from 10 at the turn of the year. Compares with just three names during the bubble era in 1989 and the dot.com bubble in 2000. Notable additions were Hitachi (6501.JP) and Mitsui & Co (8031.JP). However, Nikkei separately warned of headwinds next week. Fund managers set to draw down some ETF balances for semiannual distributions to investors. Settlement dates concentrated in 8-Jul and 10-Jul which could see selling of more than JPY1T though most see these flows as already priced in.

    • PBOC taps major financial institutions to borrow bonds to curb rally:

      • PBOC confirmed it has hundreds of billions of yuan worth of medium- and long-term bonds at its disposal to borrow, after signing agreements with several major financial institutions (SecuritiesTimes). Added it would borrow bonds on an open-ended unsecured basis and sell the securities depending on market conditions. Earlier Bloomberg reported PBOC tapped two of China's biggest banks, ICBC (1398.HK) and PSBC (1658.HK), for its plan to borrow bonds. Bloomberg noted OCBC strategist added amount tapped is decent when it comes to monetary operations. Recall CGBs have surged this year as haven assets amid lackluster economic outlook and hopes of rate cuts. Increase in government borrowing to boost fiscal spending and verbal warnings from PBOC failed to quell bond rally. Policymakers see record-low yields as hurting financial stability and weighing on yuan. Still Bloomberg citing multiple market watchers noted some skepticism about PBOC's ability to influence downward pressure on yields as fundamentals driving bond rally are unlikely to change.

    • Japan household spending unexpectedly falls:

      • Household spending fell 1.8% y/y in May, contrasting with expectations for a 0.3% rise, following 0.5% growth in the previous month. Main drivers were electric utilities and mobile phone charges. Accommodation and overseas tourism packages were also drags, contrasting with the boom in inbound tourism. Auto purchases were the main bright spot. In seasonally adjusted terms, spending fell 0.3% m/m, extending a 1.2% decline in the prior month, leaving Q2 trajectory little changed. Implications for Q2 GDP somewhat negative. Latest JCER consensus looks for GDP growth of 0.55% q/q with private consumption also up 0.55%. Results augur for ongoing subdued sentiment towards consumer demand, broadly attributed to higher cost of living and negative real wage growth. Hopes have turned to the permeation of this year's historic wage hikes expected from around June. Coincides with temporary income tax cuts set to provide and additional boost to disposable incomes. Also recall that Prime Minister Kishida has announced more inflation relief stimulus in the works for later this year.

    • Samsung's preliminary Q2 results beat expectations, underpinned by higher chip prices:

      • Samsung Electronics (005930.KS) reported preliminary Q2 operating profit and revenue above expectations. Results underpinned by higher prices for memory chips amid the AI boom while analysts also pointed to earnings support from chip inventory writebacks (Reuters). Results come amid lingering concerns around Samsung's market share in HBM chips, which are still awaiting certification by Nvidia for use in latter's AI processors (Bloomberg). That has put Samsung behind SK Hynix (000660.KS) as main supplier of advanced HBM3 chips to Nvidia, reflected in share price disparity (SK Hynix up 67% ytd compared to Samsung's ~8% advance). Trendforce cited industry sources on Thursday who said Samsung recently received Nvidia certification for HBM3E, paving way for supply negotiations to begin. However, separate media outlets subsequently noted Samsung clarified report was untrue and that Samsung anticipates certification process will be partially complied by end of Q3.

    • Japan automakers draw some attention to cross shareholdings vs buybacks:

      • Nikkei reported Honda (7267.JP) confirmed several major financial firms will unload a total JPY500B ($3.1B) of its shares this month as part of plans to unwind cross-shareholdings. Confirmed an earlier Reuters report. Nikkei recalled Honda launched a JPY300B buyback in May, though has not announced additions prompted by this development. Reuters suggested the existing plan could help to absorb some of the impact. Market sentiment has indicated net positive bias toward potential buybacks to absorb the increase in supply. Nikkei discussed Thursday's sharp gains in Toyota (7203.JP) even after reporting the company has conducted zero buybacks through 30-Jun since launching a JPY1T buyback plan on 8-May. Cited expectations this plan was a defensive measure aimed at counter-balancing cross shareholding flows and the lack of activity was played down. Toyota anticipated to implement buybacks in large size once companies start selling.

    • Notable Gainers:

      • +7.5% 2809.JP (Kewpie): reports H1 revenue ¥236.83B, +7% vs year-ago ¥220.38B, operating income ¥18.88B, +176% vs year-ago ¥6.85B

      • +7.1% 402340.KS (SK Square Co.): reportedly planning to transform into chip investment specialist firm within few years under new CEO

      • +3.0% 005930.KS (Samsung Electronics): reports preliminary Q2 operating profit KRW10.40T vs StreetAccount KRW8.598T; revenue KRW74.00T vs StreetAccount KRW73.569T

      • +2.7% 066570.KS (LG Electronics): reports preliminary Q2 operating profit KRW1.196T vs StreetAccount KRW997.52B

      • +2.0% 006400.KS (Samsung SDI): reportedly in talks about KRW1T long-term contract to supply ESS batteries to NextEra Energy; confirms discussions

    • Notable Decliners:

      • -4.5% 500180.IN (HDFC Bank): reports advances as at 30-Jun INR24.870T, (0.8%) q/q vs FactSet INR25.422T

      • -3.2% 7267.JP (Honda Motor): discloses details of 259.9M-share secondary offering; selling price undetermined

      • -1.2% 2202.HK (China Vanke): SCPG Holdings reportedly sold 48% stake in MEGA mall in Shanghai to GIC

  • Data:

    • Economic:

      • Japan May

      • Household spending (1.8%) y/y vs consensus +0.3% and +0.5% in prior month

        • Spending (0.3%) m/m vs (1.2%) in prior month

      • Singapore

        • May retail sales nominal y/y +2.2% versus (1.2%) in prior month

    • Markets:

      • Nikkei: (1.28) or (0.00%) to 40912.37

      • Hang Seng: (228.67) or (1.27%) to 17799.61

      • Shanghai Composite: (7.63) or (0.26%) to 2949.93

      • Shenzhen Composite: 8.29 or +0.52% to 1590.88

      • ASX200: (9.50) or (0.12%) to 7822.30

      • KOSPI: 37.29 or +1.32% to 2862.23

      • SENSEX: (265.50) or (0.33%) to 79784.17

    • Currencies:

      • $-¥: (0.91) or (0.56%) to 160.7530

      • $-KRW: (9.02) or (0.65%) to 1378.5900

      • A$-$: +0.00 or +0.39% to 0.6732

      • $-INR: (0.04) or (0.05%) to 83.4810

      • $-CNY: (0.00) or (0.05%) to 7.2663

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