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StreetAccount Summary - Asian Market Recap: Nikkei (1.03%), Hang Seng +1.37%, ASX +0.24% as of 04:10 ET

Sep 17 ,2024

• Synopsis:

  • Asian equities ended mostly higher Tuesday but it was another quiet day. The Hang Seng led the region higher with notable gains in property stocks. More modest gains for Australia, Singapore reached 16-year highs just as a plan was unveiled to revamp its exchange. India is a few points higher. Japan equities lost ground although both main boards were well off their lows by the close. Mainland China, South Korea and Taiwan remain closed for a holiday. US futures mixed, Europe higher at the open. US dollar consolidating overnight losses, little movement of note in Asia currencies. Treasuries quiet, JGB yields lower, CGB yields back at record lows. Crude blends higher, precious metals flat, industrials mixed.

  • Asia equities still in a holding pattern ahead of the Fed and BOJ decisions later this week. Holidays also adding to low volumes. Focus today will be on US retail sales data with many analysts saying a wide downside miss to consensus expectations of a 0.2% m/m contraction could pave the way for a 50 bps cut by the Fed Wednesday. Fed Fund Futures indicating a 66% chance of a 50 bp cut, for now. The BOJ widely expected to hold on Friday with Governor Ueda's comments more likely to be a focus. Today, Japan's finance minister repeated rapid FX fluctuations were not desirable with government to examine impact of yen strength on economy. The yen weakened for a time on the comments before settling back at the flatline.

  • In macro developments, Singapore non-oil export growth slowed by more than expected though electronics shipments rose by most since 2010. Indonesia export growth exceeded forecasts. India wholesale inflation rose 1.3% from 2.0% last month. Thailand's government said it would increase borrowing by 8% next fiscal year, just as it rolled out a slightly scaled-back stimulus program.

  • BYD (1211.HK) has taken full control of a Mercedes-Benz joint venture in China that went under the Denza brand. Midea Group (300.HK) rose almost 8% in its Hong Kong listing debut. CapitaLand Investment (9CI.SP) is said to be in talks to buy a 20-30% stake in Club Med from Fosun International (656.HK). Top Glove (7113.MK) stock rose sharply after details of fresh proposed US sanctions on Chinese glove manufacturers was published. Platinum Asset Management (PTM.AU) confirmed it had received an unsolicited takeover approach from Regal Partners (RPL.AU).

• Digest:

  • HKEX CEO says city's IPO market to build on positive momentum:

    • HKEX's (388.HK) CEO Bonnie Chan said momentum in Hong Kong's IPO market is set to carry on as positive signals indicate more upcoming mega deals (SCMP). Added around 100 listing applications currently being processed and there is no shortage of applicants who plan to raise $1B. Bourse hopes to complete all listing work by end-2024 if external conditions permit. Chan made those remarks at listing ceremony for Chinese appliance maker Midea Group (300.HK) while its shares jumped as much as 9.5% from issue price to HK$60 in early Tuesday trading. It is also Hong Kong's biggest listing since Kuaishou Technology's (1024.HK) $6.2B IPO in early 2021 (Bloomberg). Midea's listing vaulted Hong Kong into top five listing venues globally after city dropped to 13^th in H1 while also seen to boost investor confidence amid China's economic and regulatory challenges. Chan added Beijing remains supportive of Hong Kong's status as international financial hub. In addition, Chan said city's secondary fundraising market also on the rise with more than $20B completed in follow-on fundraising YTD.

  • Intel lost Sony PS6 chip supply contract to AMD:

    • Reuters, citing three sources, reported Intel (INTC) lost a contract to design and fabricate Sony's (6758.JP) next-gen PS6 console chips in 2022, dealing a significant blow to Intel's effort to build its fledgling contract manufacturing business. A deal is said to be worth billions of dollars to fabricate thousands of silicon wafers a month and would have been a boon for Intel's foundry business, which was the centerpiece of CEO Gelsinger's turnaround plan. Intel internally said to have estimated the contract could have yielded $30B. Article noted Intel and AMD (AMD) were the final two contenders in the bidding process, though a dispute over Intel's profit per chip blocked Intel from settling on the price with Sony. AMD landed the contract through a competitive bidding process that eliminated others such as Broadcom (AVGO). Story cited a response from Intel strongly disagreeing with the characterization but decline to comment further, adding they have a "very healthy customer pipeline across both our product and foundry business." Current PS5 consoles include custom AMD chips, where a departure would have risked backwards compatibility which was a topic of discussion between Intel and Sony. Article went on to discuss uncertainties surrounding Intel's future having missed the first wave of the AI boom, with still no marquee client in its manufacturing division, which logged $7B in operating losses.

  • Japan LDP leadership election remains a three-horse race, but Koizumi falling behind:

    • Latest opinion polls following the official start of the LDP presidential campaign showed lead changes in preferred candidates with ten days to go before the 27-Sep vote, though three of the top names remained unchanged. Kyodo survey revealed Takaichi as the front-runner with 27.7% support, followed by Ishiba with 23.7% and Koizumi with 19.1%. Notably, subset of LDP members eligible to vote in the election saw Koizumi in the lead (27.9%), Takaichi (21.4%), then Ishiba (19.7%). Follows last week's Nikkei-TV Tokyo poll that showed a different order -- Ishiba (26%), Koizumi (20%), Takaichi (16%). Subset of LDP supporters still saw Ishiba in the lead. Varied results pose some uncertainty given top two candidates will face off in a runoff vote if nobody wins a majority in the first round. Furthermore, disbandment of most party factions adds notably to unpredictability though Kyodo cited political analysts suggesting that internal politics may not change radically, leaving alliances intact. Nikkei discussed Koizumi's decline in ranking (previously first), suggesting party members may be concerned about his lack of experience and debating skills. Also, Takaichi has made clearer statements on her policy stance and appears to be implementing a more coordinated campaign to draw support.

  • FX strategists weigh direction of dollar around Fed meeting:

    • Dollar experiencing sustained weakness with DXY near lowest since mid-2023. Fed meeting seen as key risk event, though FX strategists mixed on likely direction of dollar. With markets pricing in ~64 chance of 50 bp Fed rate cut Wednesday (FT), Morgan Stanley sees short-term dollar upside if Fed cuts by 25 bp as it expects. However, it predicted dollar index weakening thereafter as markets anticipate Fed will need to do more to stabilize labor market. Within this move, dollar strength more likely against EM currencies, reflecting weak global growth dynamic. However, downward pressure on Treasury 2Y yields seen supporting yen against dollar. JP Morgan noted dollar positioning remains short going into Fed meeting, though not particularly so with net put demand having receded since mid-August. Sees dollar at risk of weakening from dovish Fed outcome though recent easing of selling pressure may mitigate that weakness. Barclays FX strategist anticipates dollar rallying 1% ahead of Fed, anticipating stronger-than-expected US retail sales that prompts markets to wind back expected Fed rate cut from 50 bp to 25 bp (Bloomberg).

  • Thailand to boost borrowing to aid economic growth:

    • Thailand's will increase borrowing by 8% over coming fiscal year to boost economic growth, Bloomberg said, citing people familiar with the plans. $33B or 41% of total will be fresh borrowing, used to finance budget deficit, remainder earmarked for refinancing, restructuring of existing debt. Around THB1.3T of funding to be raised through government bond sales, rest financed through treasury bills, savings bonds, bond switches, promissory notes. Government to raise spending by 4.2%, budget deficit forecast to be around THB866B. Details come day after new PM Shinawatra launched details of a scaled-back digital wallet scheme; THB400M ($12B) will launched in two phases starting 25-Sep, second early 2025. 40M people expected to be covered in scheme (Reuters). Separately, Thailand's commerce minister late Monday reiterated calls for BoT to cut interest rates, saying baht was too strong and dragging on exports (BangkokPost). Monday, baht reached strongest in 18 months just as dollar DXY index fell to near ten-month lows.

  • Notable Gainers:

    • +12.6% PTM.AU (Platinum Asset Management): Confirms unsolicited takeover proposal from Regal at 0.274 Regal shares for each Platinum share

    • +7.9% BVA.SP (Top Glove Corp.): US finalizes action on China tariffs

    • +7.8% 300.HK (Midea Group): IPO debut

    • +3.3% CHN.AU (Chalice Mining): Notes WA government approval of strategic project status for Gonneville project

    • +2.4% 9CI.SP (CapitaLand Investment): CapitaLand Investment reportedly in talks to buy 20-30% stake in Club Med from Fosun International

  • Notable Decliners:

    • -6.4% 9603.JP (H.I.S.): Reports Q3 net income attributable ¥9M vs FactSet (¥234.3M)

    • -0.4% AIA.NZ (Auckland International Airport): Confirms completion of bookbuild for NZ$1.2B placement at NZ$6.95/share

• Data:

  • Economic:

    • Singapore August

      • Non-oil exports +10.7 y/y vs consensus +15.0% and +15.7% in prior month

        • Non-oil exports (4.7%) m/m vs consensus (3.3%) and +12.2% in prior month

  • Markets:

    • Nikkei: (378.54) or (1.03%) to 36203.22

    • Hang Seng: 237.90 or +1.37% to 17660.02

    • Shanghai Composite: Closed

    • Shenzhen Composite: Closed

    • ASX200: 19.30 or +0.24% to 8140.90

    • KOSPI: Closed

    • SENSEX: 94.99 or +0.11% to 83083.77

  • Currencies:

    • $-¥: +0.01 or +0.01% to 140.6230

    • $-KRW: (5.25) or (0.40%) to 1316.5900

    • A$-$: +0.00 or +0.12% to 0.6759

    • $-INR: (0.07) or (0.08%) to 83.7765

    • $-CNY: (0.00) or (0.02%) to 7.0924