Jul 09 ,2024
Synopsis:
Asian equities ended higher Tuesday following a mixed opening. Greater China markets turning around a negative opening to close higher amid evidence of 'National Team' buying although the Hang Seng was flat. Japan's main boards surged to fresh record highs, fresh new records in India and Taiwan; South Korea at multi-month highs, Australia also reapproaching records. Southeast Asia boards all higher ex Thailand. US futures point to a higher opening, Europe lower in opening trades. Dollar flat, yen reclaimed 161 per dollar for a time, other Asia currencies largely unchanged. Treasury yields mixed, JGB yields down, CGB yields also lower. Crude futures lower, precious metals higher, industrials mixed.
Semiconductor shares higher again in Asia Tuesday following Wall Street's lead Monday. More records broken in many national markets including Japan, which saw its Nikkei gain almost 2% although on no new catalyst. Mainland China markets rallying from late afternoon amid probable "National Team" buying with a weight to small caps over blue chips. Hong Kong not participating in the rally although did pare early morning losses.
In macro developments, Australian consumer confidence deteriorated further though business sentiment improved. BOJ bond market discussions said to have discussed several options, including an idea to reduce monthly buying to ¥2-3T. BOK Governor Rhee said late Monday, disinflation expected to continue just days before BOK decides on rates.
ENEOS (5020.JP) is to spin off its shipping business ENEOS Ocean and transfer 80% of the new company to Nippon Yusen (9101.JP) for an undisclosed amount. BYD (1211.HK) said it will build a $1B factory in Turkey to boost its foothold in Europe. China Cinda Asset Management (1359.HK) is planning to raise around $1B in a bond offering with two tenors, its second this year. Guangzhou R&F (2777.HK) received a winding up order in a Hong Kong court over an outstanding loan of $614M in principal and interest. LG Energy Solution (373220.KS) said its Q2 operating profit would likely be almost 58% lower y/y. Bapcor (BAP.AU) rejected Bain Capital's $1.2B takeover bid and appointed a new CEO.
Digest:
BOJ bond market hearings to commence today but unlikely to discuss details:
Bloomberg flagged BOJ bond market hearings with participants kick off today, with three sessions to be held through tomorrow. Market feedback to serve as a gauge for a realistic pace of JGB purchase reductions ahead of a plan to be announced at the July 30-31 MPM. Article said any numbers floated in the hearings will attract close scrutiny though unlikely to come from BOJ officials, which sources say are more interested in listening to market views than building discussions around specific options. Market participants may also be reluctant to share candid opinions with the BOJ in front of their competitors. Cited thoughts BOJ probably already has a plan and hearings are meant to demonstrate caution in proceeding with purchase cuts. Recalled consensus looks for monthly purchases to be curbed to a JPY5T ($31B) from current JPY6T in the near term, and pace to slow further to JPY3T in two years. Adds to recent Nikkei discussions, which have indicated BOJ/MOF seeking to fathom private financial institution demand and capacity to fill the void left by BOJ's withdrawal.
TSMC reaches $1T market cap, analysts see more upside:
Bloomberg discussed latest TSMC (2330.TT) price action after overnight ADR (TSM) gains briefly took market cap above $1T. Noted ADRs continuing to trade at a considerable premium to onshore shares given greater liquidity in ADRs from foreign investors and fungibility advantage. Overnight strength came after Morgan Stanley raised its price target by about 9% and expects a guidance upgrade ahead of next week's earnings. JPMorgan also anticipates a revenue guidance raise. Article noted brokerages join Nomura and Mizuho in the bullish camp. Consensus looks for 36% revenue growth, the fastest since 4Q22. Last month, Bloomberg highlighted arbitrage trades (short ADR/long Taipei) backfiring this year as ADR premiums in Q2 widened to the biggest since 2009. Recalled the peak spread was 30% during the Lunar New Year holiday in February when Taiwan market was closed. This compares with the five-year average of less than 8%. Article indicated no compelling case for a normalization as the popularity of TSMC among foreign investors and ETF inflows into ADRs point to little change in the dynamic.
Bank of Korea governor says disinflation likely to continue as bank meets on rates:
Bank of Korea governor Rhee Monday said bank expected disinflation to continue following recent positive signs. Also warned of heightened forex volatility and increase in household debt. Rhee's appearance before parliament comes before BOK meeting Thursday to decide on rates; bank widely expected to hold base rate steady at 3.5%, according to Reuters poll. Meeting comes amid backdrop of June inflation dipping to 11-month low of 2.4%, albeit still above BOK 2.0% target (Yonhap). Same poll showed most economists expect 25 bp cut in Q4 when Fed also expected to cut. Economists noted inflation likely to see uptick in July as fuel tax cuts are reduced, public service fees rise; bank also likely to be cognizant of uncertainty over fuel prices, weather's impact on food prices, depreciating won and impact of high rates on large construction sector.
Australian consumer sentiment depressed, but business confidence rebounds:
Australia Westpac-MI consumer sentiment index fell to 82.7 in July from 83.6 in June as ongoing concerns about inflation and interest rate hikes offset support from income tax cuts and rebates. Survey showed big deterioration in assessment of family finances and outlook while rate hike expectations rose by most in seven years following hot May CPI. However, this didn't translate to attitudes about economy with 12M economic outlook improving alongside 'time to buy a major item' sub-index. Separately, NAB business confidence index rebounded to +4 in June from -2 in May, highest since early 2023 amid resilient demand. Business conditions eased to +4 from +6, with biggest declines occurring in wholesale, construction, and manufacturing. Activity sub-indexes mixed with trading elevated but profitability softening and employment flat. Forward orders remained negative amid sharp fall in capex. Inflation pressures eased somewhat with labour and purchase cost, and price growth, all falling over the month.
Hong Kong set for busiest week YTD for new listings:
Hong Kong will see six companies debut trading this week after raising combined HK$4.31B ($551M), making it busiest week for IPOs since 18-Dec (Bloomberg). Pickup in listings indicates recovery in activity in Q3 after a slow H1 while average size of IPO this year has dropped to HK$409M from HK$616M in same period of 2023. Last week EY's Global IPO leader George Chan told CNBC that HK's IPO market is set to improve significantly over next five years, starting in H2. Added many macro trends, including high US rates, regulatory scrutiny, slower economic growth and US-China geopolitical tensions which have constrained Greater China IPOs in last three years, are now starting to turn around. Anecdotal evidence from a law firm also indicates strong pipelines for HK in H2 as many firms that were waiting for mainland China listings have decided to switch to Hong Kong. HKEX CEO Bonnie Chan said bourse has received 73 new listing applications YTD, a 50% increase compared to H2 2023, adding 110 IPOs in total are in line.
Notable Gainers:
+1.3% 8630.JP (Sompo): suitors including Generali and Sompo reportedly circling Hiscox
+1.1% 4188.JP (Mitsubishi Chemical): MRNA Moderna and Mitsubishi Tanabe Pharma to co-promote Moderna's mRNA respiratory vaccine portfolio in Japan
Notable Decliners:
-14.1% 3323.HK (China National Building Material): guides H1 net income attributable (CNY2.00B) vs year-ago CNY1.40B
-5.5% 3141.JP (Welcia Holdings): reports Q1 operating profit ¥5.50B, (26%) vs year-ago ¥7.38B
-4.6% 9143.JP (SG Holdings): reports June packages in delivery business 107M, (8.1%) y/
-2.4% 2020.HK (ANTA Sports Products): reports Q2 operational update
-0.6% 5020.JP (ENEOS): to spin off shipping business ENEOS Ocean and to transfer 80% stake in spin-off to Nippon Yusen; terms undisclosed
Data:
Economic:
Australia
July Westpac-MI consumer sentiment index 82.7 vs 83.6 in June
June NAB business confidence +4 vs revised (2) in May
Business conditions +4 vs +6 in May
Markets:
Nikkei: 799.47 or +1.96% to 41580.17
Hang Seng: (0.83) or (0.00%) to 17523.23
Shanghai Composite: 36.92 or +1.26% to 2959.37
Shenzhen Composite: 27.10 or +1.74% to 1588.07
ASX200: 66.50 or +0.86% to 7829.70
KOSPI: 9.62 or +0.34% to 2867.38
SENSEX: 372.14 or +0.47% to 80332.52
Currencies:
$-¥: +0.12 or +0.07% to 160.9120
$-KRW: (2.63) or (0.19%) to 1381.5400
A$-$: +0.00 or +0.09% to 0.6742
$-INR: (0.06) or (0.07%) to 83.4891
$-CNY: +0.00 or +0.03% to 7.2709
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