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StreetAccount Summary - Asian Market Recap: Nikkei (0.53%), Hang Seng +0.10%, Shanghai Composite +0.14% as of 04:10 ET

Jul 26 ,2024

  • Synopsis:

    • Asian equities ended mixed Friday to cap one of the most volatile weeks in months. Japan markets dipped into the close despite a bright start and ended the week around 3% lower. Greater China was mixed: Hong Kong capped a down week with a small gain while Shenzhen rose and Shanghai fell. South Korea recovered some poise but Taiwan fell as chip stocks caught up with events after being closed for two days. Australia higher, India up substantially, most of Southeast Asia higher. US futures looking firmer, Europe opened with modest gains. US dollar flat, Asia currencies showed some stability with the yen higher overnight and the AUD breaking a nine-day losing streak. Treasury yields mostly lower, JGB yields also down, CGB 10Y yield at record low. Crude contracts unchanged, precious metals firm, more losses for base metals.

    • Asia stocks steadying Friday following a volatile week although a sharp dip into the close in Japan was a concern to end the week. The yen weakened a little overnight and again first thing amid warnings its recent rally could be short lived with the BOJ set to announce rates next Wednesday and the market pricing in only around a 40% chance it will hike. Tokyo core inflation rose to 2.2% from 2.1%, in line with expectations but it was the third consecutive month of price rises. Singapore's MAS held its monetary policy settings steady, as expected, with the accompanying commentary leaned dovish, which caused some of its large-cap banks to underperform; the country's manufacturing output fell unexpectedly although it is a volatile number. Thailand's exports unexpectedly fell in June.

    • Softbank (9984.JP) backed Ola Electric, which has plans IPO, has suspended plans to launch an electric car and said it wants to focus on its e-scooter business. Toyota Motor (7203.JP) said to be reducing August-October global production by around 2% y/y. Grab Holdings (GRAB) has called off its proposed acquisition of Trans-cab nine months after Singapore's competition watchdog raised concerns over the deal. Rio Tinto (RIO.AU), BYD Motor (1211.HK) and LG Energy Solutions (373220.KS) have each submitted proposals for Chile's Althoandinos lithium project.

  • Digest:

    • Some BOJ board members seen endorsing rate hike next week:

      • Nikkei reported some BOJ board members are expected to support a rate hike at next week's MPM. Echoed yesterday's Reuters report indicating MPC would discuss a move. However, hawkish calls set to be countered by strong views they should monitor wage and consumption trends a while longer amid ongoing negative real wage growth. On the July Outlook Report, BOJ sources suggested inflation remains in line with the central outlook and expected to indicate achievement of stable 2% is drawing closer. Recalled yesterday's services PPI rose at the fastest pace in 33 years outside of consumption tax hike effects and stands to support CPI inflation if cost passthrough dynamic continues. Private consumption seen as a notable risk factor, though a BOJ source expressed doubts about precipitous declines given a rate hike would still leave real rates at a low level combined with incoming support from temporary income tax cuts, semiannual bonuses and broadening wage raises. Article reemphasized recent polls showed July rate hike calls limited to 23% with the majority of forecasts concentrated in September and October.

    • China 10Y bond yield falls to record low following series of rate cuts:

      • China 10Y bond yield fell to 2.17%, new record low following PBOC rate cuts this week (Bloomberg). Ten-year rate down from high of ~2.22% earlier this month, as verbal warnings and PBOC preparations to sell bonds fail to halt rally that has driven bubble concerns. Plays into view downward pressure on bond yields more a function of China's economic weakness than any semblance of speculative excess. Some economists see yields making new lows amid a dovish policy outlook with Goldman Sachs predicting 10Y rate falling to 2.1% by year-end. Notes upside risks to yields from PBOC intervention and ramp in bond issuance, but sees limited scope for meaningful rate upswing given subdued credit demand and deflation risks. Heightened risk aversion continues to direct money towards haven assets as tepid growth outlook leaves households and businesses with diminished propensity to consume or invest. Repeated bouts of stimulus losing potency with China's credit impulse back near three-year low (Bloomberg).

    • Tokyo core inflation in line, supported by energy prices:

      • Tokyo core CPI rose 2.2% y/y in July, matching expectations. Follows 2.1% in the previous month and marks the highest since March. Ex-fresh food & energy inflation was 1.5% (lowest since August 2022) vs consensus 1.6% and prior month's 1.8%. Energy contribution increased 0.33 ppt on the month reflecting sharper growth in electricity and gas prices as government subsidies diminished. Elsewhere, notable movers skewed negative amid deceleration in non-fresh food, accommodation and mobile phones. Goods prices rose a steady 4.1% while services slowed to 0.5% from 0.9%. Latter follows sharpest increase in services PPI since 1991 outside of consumption tax hike effects. BOJ policy implications limited as recent attention has shifted to concerns surrounding the weakness in private consumption. Recall the BOJ main scenario has already incorporated expected upward forces from higher crude oil prices and the waning effects of government energy subsidies. Press sources indicated BOJ sees inflation broadly remaining on track to meet the target. Recent Reuters report indicated BOJ likely to trim its FY24 GDP growth forecast, largely reflecting technical revisions to source data following construction input errors, with limited signal value. Inflation projections said to be generally maintained.

    • Singapore's MAS leaves monetary policy settings unchanged:

      • Monetary Authority of Singapore kept its monetary policy settings unchanged for fifth consecutive meeting Friday, lowered its inflation outlook, said FY 2024 economic growth would be close to potential 2-3% rate. This is higher than government's 1-3% FY growth range. MAS maintained appreciation rate of S$NEER policy band, and kept band width and slope unchanged as it juggles declining inflation, resilient economic growth, appreciating Singapore dollar. Bank said core inflation should step down 'more discernibly' in Q4 to around FY 2024 average 2.5-3.5%, and 2.0% in 2025; expects FY headline inflation to be between 2-3% from 2.5-3.5% previously. Decision in line with Bloomberg survey expectations. Bank noted stable economic activity in country's major trading partners, saw further gains on lowering of interest rates globally, IT investments but geopolitical and trade conflicts could damage confidence, add to production costs (BusinessTimes).

    • China expands equipment trade-in program:

      • Xinhua cited an NDRC announcement Thursday, earmarking about CNY300B ($42B) in ultra-long special treasury bonds to expand an existing large-scale equipment trade-in program. Broader coverage will include energy power, old elevators, operating ships, trucks, agricultural machinery and new energy buses. Central government budget will also provide CNY20B in interest subsidies to encourage financial institutional support. CNBC described the move as China's most targeted measures to date for boosting consumption. Cited thoughts this was an important follow-through action from the Third Plenum, which included a vow to achieve its annual economic goals, though lack of specific policies disappointed markets. Article noted the policy at least doubles subsidies for new energy and ICE vehicle purchases to CNY20,000 and CNY15,000 per car, respectively. Officials noted Thursday that about 800,000 elevators in China have been used for more than 15 years, and 170,000 of those had been used for more than 20 years. For home renovations, white goods and other household appliances, the document said each consumer could receive subsidies of up to CNY2,000 for one purchase in each category. Securities Times reported local governments continuing efforts to ease car purchases restrictions noting several major cities have yet to implement the initiative fully.

    • Notable Gainers:

      • +11.4% 316140.KS (Woori Financial Group): reports Q2 net operating revenue KRW2.732T vs StreetAccount KRW2.584T, PPOP KRW1.662T vs SA KRW1.537T

      • +10.9% 6702.JP (Fujitsu): reports Q1 revenue ¥830.03B vs FactSet ¥802.55B, operating profit ¥21.39B vs StreetAccount ¥12.28B

      • +6.7% 7751.JP (Canon): reports Q2 revenue ¥1.168T vs StreetAccount ¥1.065T; raises FY guidance

      • +6.4% 055550.KS (Shinhan Financial): reports Q2 operating income before expenses KRW3.934T vs StreetAccount KRW3.791T, PPOP KRW2.481T vs SA KRW2.343T

      • +3.9% 4519.JP (Chugai Pharmaceutical): reports Q2 core revenue ¥315.9B vs FactSet ¥275.53B

      • +3.3% 6823.HK (HKT Trust & HKT): reports H1 net income attributable HK$1.99B, +2% vs year-ago HK$1.95B

      • +2.8% 051900.KS (LG H&H): reports Q2 operating profit KRW158.5B vs StreetAccount KRW155.03B

      • +0.3% 532755.IN (Tech Mahindra): reports Q1 EPS INR9.60 vs StreetAccount INR10.00

    • Notable Decliners:

      • -23.5% 1797.HK (East Buy Holding): announces departure of celebrity livestreamer Dong Yuhui, effective today; sells Time with Yuhui brand to Dong for CNY76.6M cash

      • -10.0% 1590.TT (Airtac International Group): reports Q2 revenue NT$8.43B vs FactSet NT$8.81B

      • -9.9% 3711.TT (ASE Technology Holding): reports Q2 operating income NT$9.02B vs FactSet NT$9.32B

      • -3.7% 7203.JP (Toyota Motor): reportedly plans to reduce Aug-Oct global production to 2.54M units, (2%) y/y

  • Data:

    • Economic:

      • Japan

        • July Tokyo core CPI +2.2% y/y vs consensus +2.2% and +2.1% in prior month

          • CPI excl. fresh food & energy +1.5% y/y vs consensus +1.6% and +1.8% in prior month

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

      • Singapore

        • June manufacturing production y/y (3.9%) versus +2.3% in prior month

    • Markets:

      • Nikkei: (202.10) or (0.53%) to 37667.41

      • Hang Seng: 16.34 or +0.10% to 17021.31

      • Shanghai Composite: 4.16 or +0.14% to 2890.90

      • Shenzhen Composite: 22.18 or +1.43% to 1569.59

      • ASX200: 60.10 or +0.76% to 7921.30

      • KOSPI: 21.25 or +0.78% to 2731.90

      • SENSEX: 1,146.32 or +1.43% to 81186.12

    • Currencies:

      • $-¥: +0.01 or +0.00% to 153.9380

      • $-KRW: +1.41 or +0.10% to 1385.1300

      • A$-$: +0.00 or +0.31% to 0.6557

      • $-INR: (0.03) or (0.04%) to 83.7207

      • $-CNY: +0.02 or +0.24% to 7.2496

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