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StreetAccount Summary - Asian Market Recap: Nikkei (1.11%), Hang Seng (0.91%), Shanghai Composite (0.46%) as of 04:10 ET

Jul 24 ,2024

• Synopsis:

  • Asian equities traded lower Wednesday. Greater China boards once more led the declines as Hong Kong reached three-month lows, Shanghai and Shenzhen at five-month lows. Japan fell again with the Topix underperforming the Nikkei. More losses in Seoul and most of Southeast Asia, India stocks also lower. New Zealand the only board with a gain as bets increase the RBNZ will cut rates next month, Taipei and Manila closed as a typhoon threatens. US futures point to a negative open, Europe opened sharply lower. US dollar flat, yen strengthening across a basket of currencies, yuan weaker, NZD weakened to three-month lows as its sovereign yields tumbled again. Treasury yields mostly higher, JGB yields higher across tenors. Crude better bid, precious metals higher, more losses for base metals.

  • Asia stocks reacting negatively to losses on Wall Street overnight and disappointing earnings from Tesla and Alphabet after hours. Tech-orientated boards saw more selling although impact on MSCI indies may limited with Taipei closed on a typhoon watch. Nikkei and Topix both down again as the yen strengthened to two-month highs against the dollar and broke through a key support line; also strengthened notably against the euro and AUD. Moves come ahead of next week's BOJ meeting and just as a Bloomberg survey showed a majority of economists expect BOJ to keep rates on hold next week and trim JGB purchases by ¥1T. India stocks down for a fourth consecutive day as investors digested the increase to CGT in yesterday's budget.

  • In macro developments, RBA Governor Bullock indicated August's decision will be a close call with Australian inflation more persistent than overseas. Japan flash manufacturing PMI back into contraction amid slide in output and new orders but services swung back to growth. Australian manufacturing PMI stuck in contraction and services slowed as input cost inflation hit 16-month high. India flash manufacturing PMI rose to its highest in three months with its composite also higher again. South Korean consumer sentiment rose to one-year high while business confidence weakened. Taiwan industrial production data released late Tuesday fell but retail sales were better than expected.

  • Shanken Electric (6707.JP) is to sell around 20% of its Allegro MicroSystems (ALGM) shares through a share buyback by Allegro. LG Energy (373220.KS) is in talks with at least three China-based suppliers to make low-cost EV batteries for use in Europe. Nvidia cleared Samsung Electronics' (005930.KS) HBM3 chips for use in processors used in China markets. Nippon Steel (5401.JP) to dissolve its 20-year-old joint venture with Baoshan Iron & Steel (600019.CH) when the contract ends next month.

• Digest:

  • Yen strength reflects growing anticipation of narrowing yield gap:

    • Nikkei discussed recent yen strength, trading at the highest levels versus dollar since early June amid broad-based advance against other crosses. Said to reflect market views that a turning point in BOJ/Fed policies is nearing, translating to easing yield gap expectations. Article included a caveat that this does not rule out the risk of further depreciation, pointing to ongoing uncertainties for some time. No specific catalysts Wednesday. Mitsui Sumitomo's FX desk chief observed long dollar/short yen positions unwinding at a global scale. Also, investors said to be paring or unwinding yen carry trades. Calendar risk was cited as the first factor with both Fed and BOJ meetings scheduled next week on the same dates. While a surprise Fed rate cut is seen unlikely, growing confidence in a September move apparently now stimulating trading activity. On the BOJ side, Nikkei continued to highlight recent government rhetoric in support of policy normalization ahead of next week's MPM that is widely viewed as 'live.' Even if BOJ leaves rates unchanged, momentum may persist under the expectation that a rate hike is drawing closer. Yet, downside risks to yen remain with Japan's trade balance posting deficits for 37 straight months in seasonally adjusted terms while the NISA program has shown notable buying interest in offshore equities. Story also noted disappointment in BOJ JGB purchase reductions could also reignite selling pressure.

  • RBA Governor Bullock says Australian inflation more persistent than overseas:

    • At a Financial Review roundtable on Tuesday RBA Governor Bullock indicated August rate decision will be a close call after noting Australian inflation proving persistent than overseas. Said key inflation driver remains building costs, due to labor shortages and high electricity. Bullock added that demand is slowing but still outstripping aggregate supply, keeping inflation elevated. Her remarks emphasize importance of Q2 CPI (31-Jul) in determining whether RBA hikes in August. RBA has warned about risk of rise in inflation expectations if it is forced to delay inflation target timeline again. June RBA minutes showed board weighed hiking rates last month, citing risk disinflation progress may be slower than forecast. Bullock has said previously RBA is weighing other data points, though recent data on retail sales and employment came in much hotter-than-expected. Recall May CPI prompted some economists to revise their calls and predict an August rate hike. However, markets still pricing in only negligible probability of a rate hike next month.

  • Almost all economists see risk of BOJ rate hike next week:

    • Bloomberg added to the stream of consensus polls in the lead-up to next week's BOJ meeting. Incremental finding was that some 94% of economists saw July as the earliest timing of a rate hike, attesting to heightening attention on next week's MPM. Main scenario calls were largely consistent with prior surveys with 14 out of 48 (29%) picking July, 27% in September and 35% in October. Similarly, consensus looks for JGB purchases to be tapered JPY1T to JPY5T ($32B) per month from August, and down to JPY3T in two years. Yen weakness remains a key point of debate justifying an early move, contrasting with doubts BOJ will raise rates while unveiling its bond purchase reduction plan. On the margins, 22% said FX intervention risk lowers the probability of a rate hike, while 43% saw no impact. Following recent attention on how BOJ would evaluate recent softness in private consumption, 43% said demand is too weak to warrant a rate hike while 49% said spending was sufficiently firm.

  • Japan flash manufacturing PMI falls into contraction as services rebound:

    • Flash manufacturing PMI was 49.2 in July, following 50.0 in the previous month, marking the first contraction in three months. Output swung to declines as new orders fell at a faster pace though export contraction eased. Backlogs logged stronger declines while finished goods inventory build strengthened. Combined with ongoing employment growth, report noted these resulted in spare capacity. Inflation metrics showed stronger growth in input prices (highest since April 2023) while output prices softened to a four-month low, implying incremental margin compression. In contrast, services PMI was 53.9 following prior month's 49.4 reflecting upturns in output, new orders and backlogs. Report highlighted sustained capacity pressures with outstanding business at the highest since March. Weaker inflation in input prices coincided with stronger increase in output prices, in a positive sign for passthrough dynamics. Services strength lifted the composite PMI to 52.6 from 49.7.

  • India business activity strengthens, but accompanied by pickup in inflation pressures:

    • HSBC India flash manufacturing PMI rose to 58.5 in July from 58.3 in June, highest in three months. Outpaced by services PMI, which expanded to 61.1 from 60.5. Flash Composite PMI hit three-month high of 61.4 from 60.9 in June. Activity underpinned by stronger growth in new business and output, reflecting buoyant demand and technology enhancements. Growing backlog of work and capacity pressures helped drive biggest rise in employment in more than 18 years. External demand remained strong with new export orders expanding at second-fastest pace in series' history. Robust activity also translated to rise in inflation pressures with selling prices rising at fastest pace since Feb-2013 amid elevated material and labor costs. While PMI reinforces India's growth story, elevated inflation seen potentially weakening case for an expected RBI rate cut in Q4. Governor Das reemphasized central bank's primary focus on curbing inflation in remarks on Friday (Bloomberg). Comes after India CPI inflation rose to four-month high of 5.08% y/y in June, moving further above RBI's 4% target.

  • Notable Gainers:

    • +10.8% 6707.JP (Sanken Electric): to sell around 20% of its Allegro MicroSystems shares through a share buyback by Allegro

    • +6.1% 6594.JP (Nidec): reports Q1 revenue ¥648.17B vs StreetAccount ¥611.43B, operating profit ¥60.26B vs StreetAccount ¥52.96B; raises guidance; to conduct 2-for-1 stock split

    • +4.7% 1910.HK (Samsonite International): E Fund Management raises stake

    • +0.4% 600019.CH (Baoshan Iron & Steel): confirms acquisition of 50% stake in BNA from JV partner Nippon Steel for CNY1.76B cash

  • Notable Decliners:

    • -23.0% 522.HK (ASMPT): reports Q2 net income attributable HK$135.1M vs StreetAccount HK$216.6M; guides Q3 revenue $370-430M (HK$2.89-3.36B) vs FactSet HK$3.95B

    • -7.4% 7211.JP (Mitsubishi Motors): reports Q1 revenue ¥627.52B vs StreetAccount ¥628.12B, operating income ¥35.52B vs StreetAccount ¥47.13B

    • -6.6% 1929.HK (Chow Tai Fook Jewellery Group): reports Q1 retail sales value growth (20.0%) y/y

    • -2.2% 500034.IN (Bajaj Finance): reports Q1 consolidated net interest income INR83.65B vs StreetAccount INR84.30B

    • -1.6% 352820.KS (HYBE Co.): CEO Park Ji-won reportedly to resign

    • -1.5% 6501.JP (Hitachi): Johnson Controls to sell R&LC HVAC business to Bosch at valuation of $8.1B

    • -0.3% 7203.JP (Toyota Motor): to launch tender offer to buy back shares from four insurers at ¥2,781/share, to run from 24-Jul to 26-Aug

• Data:

  • Economic:

    • India July flash manufacturing PMI 58.45vs 58.3 in prior month (10:30 IT)

      • Services PMI 61.1 vs 60.5 in prior month

      • Composite PMI 61.4 vs 60.9 in prior month

    • Japan July flash manufacturing PMI 49.2 vs 50.0 in prior month

      • Services PMI 53.9 vs 49.4 in prior month

      • Composite PMI 52.6 vs 49.7 in prior month

  • Markets:

    • Nikkei: (439.54) or (1.11%) to 39154.85

    • Hang Seng: (158.31) or (0.91%) to 17311.05

    • Shanghai Composite: (13.42) or (0.46%) to 2901.95

    • Shenzhen Composite: (20.66) or (1.32%) to 1546.29

    • ASX200: (7.40) or (0.09%) to 7963.70

    • KOSPI: (15.58) or (0.56%) to 2758.71

    • SENSEX: (567.03) or (0.71%) to 79862.01

  • Currencies:

    • $-¥: (0.87) or (0.56%) to 154.7160

    • $-KRW: (2.88) or (0.21%) to 1383.1400

    • A$-$: (0.00) or (0.26%) to 0.6599

    • $-INR: +0.00 or +0.00% to 83.7034

    • $-CNY: (0.00) or (0.01%) to 7.2743