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StreetAccount Summary - Asian Market Recap: Nikkei (0.68%), Hang Seng +0.75%, Shanghai Composite (0.48%) as of 04:10 ET

Sep 13 ,2024

• Synopsis:

  • Asian equities finished mixed Friday. Among the gainers were South Korea, Taiwan, Australia and Singapore. Hong Kong also higher but mainland bourses lower. Losses for Japan and India. US futures a few points ahead, Europe opened with solid gains. US dollar slipping, notable strength in the yen and yuan, quiet elsewhere. Treasury yields mostly lower, JGB yields at month-long lows, CGB yields hovering near record lows. Crude oil, industrial and precious metals all higher.

  • Asia equities finished a directionless week with a mixed Friday. The optimism on Wall Street not quite making it to Asia's trading day although technology stocks outperformed on read across to Nasdaq's gains. Mainland China stocks continued to languish near five-year lows while Hong Kong's growth sectors led the Hang Seng higher. Ahead this weekend, China August activity data, which is expected to show further weakness in retail sales, industrial production and fixed asset investment. Late Thursday, President Xi urged government officials to work to achieve China's 2024 growth target but gave no new plan or stimulus detail.

  • Few fresh catalysts to change the greater narrative today for Asia assets with the weakening dollar providing a decent tailwind for stocks, particularly in Southeast Asia, and sovereign yields continuing to tumble. For the week, Greater China markets fell slightly, Japan was mixed while Indonesia and India saw fresh record highs.

  • Private equity group MBK has partnered with Young Poong (000670.KS) and launched a $1.5B tender offer for Korea Zinc (010130.KS); both stocks substantially higher. Taiwan Mobile (3045.TT) has acquired 32.2M or 11.86% of Systex Corp (614.TT) through a block trade. Adani Group stocks under pressure following another report from Hindenburg Research that said Swiss prosecutors have been investigating the company over money laundering allegations.

• Digest:

  • Weak economy, easing expectations continue to exert downward pressure on China bond yields:

    • China 10Y yield fell to fresh record low of 2.075% on Friday, even as traders noted state lenders selling 10Y special bond for days (Bloomberg). Suggests PBOC actions falling short as macro data continues to come in weak and support calls for more policy support. President Xi reinforced those expectations after urging government officials Thursday to achieve 2024 growth target (Bloomberg). Projected drop in issuance seen further dampening yields. BofA noted net bond supply totaled CNY1.85T in August due to larger issuance at central and regional level. However, without additional measures such as deficit target upgrade, sees net supply averaging ~CNY800B in remaining months of 2024, well below comparable period a year ago. Still, one source of demand appears to be fading with Bloomberg citing analyst data showing net purchases of wealth management products (WMPs), which have been a major source of demand for bonds, dropped 90% m/m in August to a third of 2024 average. Cash raised by bond funds also 70% below June peak, signaling administrative hurdles and deposit rate stabilization helping to slow demand.

  • Beijing approves plan to raise China's retirement age:

    • China is set to raise retirement age for men to 63 from 60, and for women to 58 from between 50 and 55, first such increase in retirement age since 1978. Bloomberg cited Xinhua news agency saying lawmakers endorsed plan to gradually delay retirement, starting process on 1-Jan 2025. SCMP reported earlier this week Standing Committee of the National People's Congress discussed plans after CCP proposed retirement age be lifted in "voluntary and flexible" manner. However, report triggered angry comments on social media in which sluggish job markets frequently raised. Hitherto, China's retirement age had been among world's lowest but 2008 proposals to raise retirement age failed to reach legislative stage. Bloomberg noted delayed access to benefits system and larger tax base will help relieve pressure to fund pensions given sharply contracting birth rate. Article also cited analyst who said plan could exacerbate youth unemployment as older workers will stay in jobs longer.

  • China focus on activity data, holiday spending:

    • Bloomberg previewed August activity data slated for release Saturday. Consensus forecasts pointed to little change in momentum, partly due to extreme weather. Industrial production seen up 4.7% y/y, softening from 5.1% in the previous month. Referenced the official manufacturing PMI remained in contraction for a fourth straight month as output component swung to declines. Retail sales growth expected to slow to 2.5% from 2.7% as a function of unfavorable base effects and bad weather. Fixed asset investment predicted to expand 3.5% YTD, edging down from 3.6% in Jan-Jul. Article did not include a separate estimate for real estate investment, instead noting CREIC data showing a major acceleration in new home sales declines as an indication of waning support from the property rescue package unveiled in May. Economist GDP forecast revisions have skewed back to the downside and short of the government's 5% target. Bloomberg separately discussed attention on spending activity over two upcoming holidays -- Mid-Autumn festival Sep 15-17 and Golden Week Oct 1-7. Noted some encouraging signs from growth in pre-booking data, though propensity to spend remains in question as consumers are still seen budget conscious.

  • China banks to lower mortgage rates as soon as this month:

    • Bloomberg sources indicated China banks poised to cut mortgage rates on outstanding loans totaling more than $5T as early as this month, though timeline yet to be finalized. Some homeowners may receive up to 50 bp in immediate relief. Followed an earlier report that authorities are considering a plan to allow borrowers to renegotiate terms before January, when banks typically reprice mortgages. Proposed cuts said to come in two steps totaling about 80 bp. Article noted mortgage rates have fallen to a record-low this year though hasn't benefitted most homeowners given recalibrations won't happen until January. Cited CREIC figures in late-August showing the average rate on existing mortgages at 4%, above the 3.2% on new loans for a first home and 3.5% for a second home. According to Shenwan Hongyuan Group calculations, homeowners stand to save more than CNY300B in annual interest expenses from an 80 bp cut. Translates to a ~9% saving on monthly payments for a baseline household with a CNY1M 30-year mortgage. However, article also noted this would add to pressure on banks with NIMs already at a record-low 1.54% at June-end, well below the 1.8% threshold viewed as the level necessary to maintain reasonable profitability.

  • India retail inflation stays below 4% to give RBI breathing room:

    • India's retail inflation rose slightly in August but remained below RBI's target of 4.0% for second consecutive month. Headline reading 3.65% versus July's 3.54% y/y, consensus 3.50% (BusinessStandard). RBI has said repeatedly it won't consider rate cut until inflation settles below 4.0% for prolonged period; governor Das said Friday RBI would not get "carried away" with some dips in inflation and urged global monetary authorities to remain prudent as inflation still posses a risk (Bloomberg). RBI said previously it expects India CPI to increase in September to around 5.0% as services demand increases. Analysts said tick higher in August headline CPI but to below target gives bank breathing room before next rate meeting in October. For August, food prices rose 5.66% versus July's 5.42% as vegetable, fruit, cereals prices spiked sharply; core increased marginally to 3.44% from 3.41%; house price rises consistent at 2.7% y/y.

  • Notable Gainers:

    • +30.0% 000670.KS (Young Poong): To launch tender offer for up-to-3.0M Korea Zinc shares at KRW660,000/share

    • +20.0% 6184.JP (Kamakura Shinsho): Earnings

    • +19.8% 010130.KS (Korea Zinc Co.): Receives tender offer from Young Poong and Korea Corporate Investment Holdings

    • +6.8% 1766.JP (Token Corp): Earnings

    • +5.8% 6214.TT (Systex): Taiwan Mobile acquires 32.3M shares via block trade

  • Notable Decliners:

    • -7.9% 4384.JP (Raksul): Earnings

    • -7.6% 3475.JP (Good Com Asset): Earnings

    • -7.3% 2929.JP (Pharma Foods International): Earnings

    • -4.7% 4503.JP (Astellas Pharma): FDA publishes safety warning for rare occurrence of serious liver injury with Veozah

• Data:

  • Economic:

    • Japan July

      • Final industrial production +3.1% m/m vs preliminary +2.8% and (4.2%) in prior month

        • Operating ratio +2.5% m/m vs (3.1%) in prior month

        • Production capacity (0.8%) y/y vs (0.6%) in prior month

  • Markets:

    • Nikkei: (251.51) or (0.68%) to 36581.76

    • Hang Seng: 128.70 or +0.75% to 17369.09

    • Shanghai Composite: (13.03) or (0.48%) to 2704.09

    • Shenzhen Composite: (16.06) or (1.08%) to 1476.26

    • ASX200: 24.20 or +0.30% to 8099.90

    • KOSPI: 3.32 or +0.13% to 2575.41

    • SENSEX: (31.42) or (0.04%) to 82931.29

  • Currencies:

    • $-¥: (1.03) or (0.72%) to 140.7920

    • $-KRW: (9.99) or (0.75%) to 1327.4900

    • A$-$: (0.00) or (0.10%) to 0.6716

    • $-INR: (0.00) or (0.00%) to 83.9268

    • $-CNY: (0.02) or (0.31%) to 7.0951