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StreetAccount Summary - Asian Market Recap: Hang Seng +0.31%, ASX +0.31%, TAIEX +0.42% as of 04:10 ET

Sep 16 ,2024

• Synopsis:

  • Asian equities ended mixed Monday in a quiet day's trading. The Hang Seng dipped lower first thing post weak economic data but traded back to the flatline by the close. There were small gains in Australia and Taiwan, India is trading flat, while New Zealand and Singapore ended slightly lower. Japan, mainland China, South Korea among the boards closed for a holiday. US futures a few points higher, Europe higher in the first hour of trade. US dollar lower, yen strengthening to 14-month lows against the dollar, AUD and EM currencies mostly stronger. Crude futures higher, precious metals mixed, base metals under pressure.

  • Asia equities showed early signs of volatility first thing but stabilized over the day as Hong stocks pared its early losses and Australia's ASX held onto gains. India's benchmarks also stable as traders absorbed the country's largest IPO for the year while semiconductors supported Taiwan. China released another round of soft China economic activity data over the weekend, reinforcing doubts over whether the country can reach a 2024 growth target of "around 5%". Industrial production, fixed asset investment and retail sales growth all missed expectations while property prices fell again. FDI YTD also accelerated its decline, underpinning the long-term nature of the economic slowdown. Multiple economists made further downgrades to their GDP growth forecasts following the data.

  • Market reaction at the bell was to sell equities but the possibility of stimulus moving nearer brought buyers back in. Meanwhile, China government bond yields returned to record lows, complicating the PBOC's attempts to cap the recent bond rally. The US dollar weakened notably over the day to reapproach two-month lows as hopes for a 50 bps rate cut gained following prominent FT and WSJ articles over the weekend. Yen strengthened toward to 14-month low while other Asia currencies also strengthened too as hopes for a rate cut in the US and regionally increased.

  • Nippon Steel (5401.JP) faces a 23 September review deadline for its bid to buy US Steel. Genting Bhd's (3182.MK) sole Malaysia casino faces closure if an Islamic party wins Pahang state in next month's election. Auckland Airport (AIA.NZ) placed NZ1.6B worth of shares to help fund construction of a new domestic terminal.

• Digest:

  • Weak August activity data increases risk of China missing its 2024 growth target:

    • China industrial production growth slowed to 4.5% y/y in August from July's 5.1%, worse than forecast 4.8% growth. Commodities (cement, steel and crude), and autos the main drags. Retail sales growth weakened to 2.1% y/y from 2.7%, also below consensus 2.5% and weighed down by weakness in car sales. Fixed asset investment growth (ytd) weakened to 3.4% y/y from 3.6%, softer than forecast 3.5%. Growth driven largely by the state, offsetting slight contraction in private investment. Unemployment rate also unexpectedly rose to 5.3% from 5.2%, Broad growth slowdown in August attributed to weather-related disruptions, though also symptomatic of China's ongoing economic weakness that adds to signs GDP growth set for another sequential slowdown in Q3. Amid increased risk of government falling short of its 2024 target growth of ~5%, President Xi on Thursday urged efforts to ensure that goal is met. While that fed into speculation of more policy support, there is also a growing sense that authorities are falling further behind the curve as deflation risks become more pervasive.

  • China property downturn deepens amid soft credit demand, PBOC vows efforts against deflation:

    • China's property market downturn shows no signs of letting up after real estate investment (ytd) declined another 10.2% y/y in August, unchanged from July and worse than 10.0% forecast. August home prices shrunk another 0.7% m/m according to Reuters calculation, unchanged from July and bringing yearly drop to 5.3% y/y from 4.9%, biggest fall since May 2015. Other property metrics painted similar picture with residential sales by floor area shrinking by another 20% y/y and new construction starts sliding 23%. Credit demand remains weak alongside a contracting property market after new loans rebounded to CNY900B in August from CNY260B in July, below consensus CNY1.02T. Rebound attributed to seasonal factors as growth in outstanding loans and TSF slowed further. M2 money growth held at 6.3% y/y, but narrower M1 measure shrunk by most on record. Bloomberg sources last week reported banks set to cut mortgage rates as early as this month. However, more efforts likely needed as economists continue to call for further cuts to RRR and policy rates. On Friday PBOC released rare statement vowing to implement targeted policies to combat deflation (Bloomberg).

  • Yen strengthens against dollar to highest since mid-2023:

    • Yen strength the main story in FX markets with currency rising to highest against dollar since mid-2023. Comes as markets weigh prospect of 50 bp Fed rate cut on Wednesday while BOJ Governor Ueda seen repeating normalization rhetoric at Friday's post-meeting press conference. This is increasing attention on Treasury-JGB yield differentials with US 2Y premium narrowing by ~50 bp since mid-August. FX strategists anticipate yen to continue appreciating. Nomura recently revised down its USDJPY forecast, eyeing end-2025 target of 135 (from 140 previously). Apart from hawkish BOJ rhetoric, Nomura saw oil price weakness improving Japan's terms of trade, reducing yen selling pressure. Positioning continues to swing in yen's direction with speculative net short contracts shrinking from late August highs and asset manager net longs hitting highest since Mar-2021, according to latest CFTC data. Options traders also betting on further yen strength (Bloomberg). Still, yen seen vulnerable to downside volatility in short-term depending on whether Fed's policy stance upends market's dovish outlook for fed funds rate.

  • No respite for China equities as growth weakens and policy support falls short:

    • Weak August economic activity and property data heightening market concerns about China's growth outlook. Equity benchmarks extended losses last week with CSI 300 now down 14% from May highs to lowest since early 2019. Property developers bearing brunt of the selling with Hang Seng Mainland Properties index down 41% from May peak. Morgan Stanley noted A-share sentiment dropped again last week average daily turnover falling and technicals deteriorating further. Earnings sentiment remains depressed with consensus estimate downward revisions picking up pace following another underwhelming reporting season. China equities experienced another ~$3B in outflows in August from active and passive funds. In contrast, deflation risks, subdued credit demand and heightened risk aversion continues to drive sovereign yields to record lows, even as PBOC steps up efforts to combat bond rally. While growth risks seen increasing urgency for fresh policy support, equities have largely shrugged off piecemeal efforts so far with positioning expected to remain defensive absent meaningful stimulus.

  • Markets await Fed and BOJ meetings:

    • FOMC meeting the main event this week with key question revolving around whether it cuts by 25 bp or 50 bp. Odds of 50 bp cut rose on Friday following press reports suggesting decision will be close call, though most economists anticipate 25 bp cut. Some thought market reaction will be informed in large part by how Chair Powell spins 25 or 50 bp cut in his press conference. Updated dot plot will shape expectations surrounding near-term rate path with futures pricing in ~114 bp of easing by end-2024, implying at least one 50 bp cut in final three meetings of the year (Bloomberg). Attention then centers on BOJ meeting on Friday. While no policy change is expected, markets will be paying close attention to Governor Ueda's remarks at his press conference and implications for rate trajectory after policymakers recently indicated they remain on track to hike again assuming economy and inflation evolve in-line with expectations. Recent Bloomberg survey showed slim majority of economists expect rate hike in December. Market reaction to size of projected Fed rate cuts seen as potential complication to BOJ rate path amid risk of yen-driven volatility.

  • Notable Gainers:

    • +16.6% 9926.HK (Akeso Inc): Publishes ivonescimab plus ligufalimab as first-line treatment for PD-L1-positive recurrent/metastatic head and neck squamous cell carcinoma at ESMO 2024

    • +12.8% NMT.AU (Neometals): Finnish Vanadium Recovery Project receives EU supported capital injection

    • +12.5% BVA.SP (Top Glove Corp.): Executive chairman acquired 1M shares

    • +4.4% 2142.HK (HBM Holdings): Announces the latest clinical data on the first-in-class fully human anti-B7H7/HHLA2 monoclonal antibody HBM1020 at the ESMO congress 2024

  • Notable Decliners:

    • -12.5% NTU.AU (Northern Minerals): Confirms two-tranche placement to raise A$43M plus A$5M SPP at A$0.019/share

    • -5.7% 9966.HK (Alphamab Oncology): Provides research updates on a Phase I clinical study and a Phase I/II clinical study of JSKN003 for presentation at ESMO 2024

• Data:

  • Economic:

    • China August

      • Industrial production +4.5% y/y vs consensus +4.8% and +5.1% in prior month

        • Retail sales +2.1% y/y vs consensus +2.5% and +2.7% in prior month

        • Fixed asset investment (YTD) +3.4% y/y vs consensus +3.5% and +3.6% in Jan-Jul

        • Unemployment rate 5.3% vs consensus 5.2% and 5.2% in prior month

      • New house prices (0.7%) m/m vs (0.7%) in prior month - Reuters

  • Markets:

    • Nikkei: Closed

    • Hang Seng: 53.03 or +0.31% to 17422.12

    • Shanghai Composite: Closed

    • Shenzhen Composite: Closed

    • ASX200: 21.70 or +0.27% to 8121.60

    • KOSPI: Closed

    • SENSEX: 118.42 or +0.14% to 83009.36

  • Currencies:

    • $-¥: (1.00) or (0.71%) to 139.8220

    • $-KRW: (12.97) or (0.98%) to 1316.5700

    • A$-$: +0.00 or +0.41% to 0.6729

    • $-INR: (0.01) or (0.01%) to 83.8764

    • $-CNY: (0.00) or (0.01%) to 7.0925