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StreetAccount Summary - Asian Market Recap: Nikkei +2.13%, Hang Seng +2.00%, Shanghai Composite +0.69% as of 04:10 ET

Sep 19 ,2024

• Synopsis:

  • Asian equities traded higher across the region Thursday. Risk-on prevailing despite some caution in equities and bonds into the close. Japan's Topix and Nikkei led the region with Hong Kong back at two-month highs. Mainland China also well bid. Taipei bounced back, Seoul and Mumbai a little higher. Australia and Southeast Asia pushed higher again, Jakarta at record highs. US futures higher, Europe opened with strong gains. US dollar higher in the morning, now flat; yen pared early weakness, AUD and NZD rallying. Treasury and JGB yields higher across tenors, CGB yields hovering at record lows. Crude contracts higher on EIA inventory data, Middle East tensions. Precious metals breaking to the upside as the dollar reversed, base metals lower. Cryptocurrencies at three-week highs.

  • Asia equities traded higher on all major boards today on read through from Fed's jumbo rate cut overnight. Bonds also higher but several currencies hesitant on follow through from overnight strengthening. Japan's Nikkei boosted by big exporters on a weaker yen although this reversed somewhat in late trade; equities in South Korea and Malaysia also underperformed as the won and ringgit struggled to build on overnight weakness, the Kospi also weighed by a steep decline in SK Hynix post a broker downgrade. The Hang Seng surged amid outperformance in growth and property stocks on hopes the Fed's cut will give the PBOC the room it needs to ease.

  • Volatile movements in the dollar in the aftermath of the Fed announcement and press conference continued into Asia's trading day. The DXY index rallied another 0.3% in Asia's morning session before paring gains and trading near its level 48 hours ago at 100.7. In its wake, the yen weakened but has since strengthened; same pattern for the yuan. Australia and New Zealand dollars higher, EM Asia currencies at 14-month highs. Asia sovereign yields tracked global rates higher although most had bounced from multi-week lows in overnight trading, now showing signs of stalling in late Asia trade.

  • In macro developments Thursday, Australian headline employment growth again came in hotter than expected while the unemployment rate was unchanged as expected. New Zealand Q2 GDP contracted by less than forecast; markets indicating a 50/50 chance of 50 bp RBNZ rate cut in October. The Hong Kong Monetary Authority lowered its interest rate 50 bps, as expected.

  • Sapporo Holdings (2501.JP) has placed its real estate business up for sale. Yuzhou Group (1628.HK) said it obtained approval from statutory majority of creditors for its debt restructuring. Hyundai Motor (005380.KS) is in talks with Alphabet's Waymo to take the manufacturing of Waymo's self-driving vehicles. Zee Entertainment (505537.IN) faces a $940M claim from Disney-owned Star India in a London court for the termination of a cricket broadcasting agreement.

• Digest:

  • China stocks, yuan rise on Fed rate cut fuels more easing hopes:

    • Greater China stocks rebounded from modest early losses on Thursday with Hang Seng outperforming mainland benchmarks. Hang Seng's gain was led by sharp rises in property-related stocks, tech and consumer goods; while in mainland China, real estate and liquor were among the outperformers. There were growing expectations that start of rate cuts in US would give Chinese policymakers more space to stimulate sluggish economy. Reuters citing analysts added investors will scrutinize whether China will slash benchmark lending rates, cut mortgage rates for existing loans, lower RRR, and increase bond issuance to aid economy. Meanwhile yuan hit strongest level against dollar since May-2023. Recall monetary policy divergence and weakening currency have been key constraints limiting Beijing's attempts to loosen policy. Reuters poll of 39 participants showed nearly 70% expected reduction in both 1Y and 5Y LPRs on 20-Sep. Caixin citing analysts noted narrowing of US-China rate spread will certainly help Chinese economy but prospects will hinge more on fiscal policy orientation, improvement in consumer confidence.

  • Japan equities emboldened with yen upside seen limited:

    • Japan equity benchmarks sustained sharp gains Thursday above 2%, largely on the back of a strong open. Autos were among the standouts alongside marine transportation and insurance. Nikkei cited Monex Securities comments that investors had been waiting to see how far yen would advance after the Fed rate cut, though opposite momentum confirmed the limit of upside. Article added optimism that dovish Fed helps to ensure a soft-landing scenario, while uncertainty was lifted after the event. Yen selling being attributed to profit-taking from short USD/JPY positions, encouraged by relatively hawkish takeaways from Fed guidance after Powell clarified the 50 bp cut does not signal a new easing trajectory. Nikkei expanded on the surprising yen weakness theme, summarizing dot plot signaling a moderate pace of easing and the terminal rate looking higher than what some were expecting. Talk of position unwinding drew attention to speculators after CFTC data showed long yen bets were at an eight-year high as of 10-Sep. While noting underlying dynamics remain supportive of yen given the contrast between dovish Fed/ECB vs hawkish BOJ, Fukuoka Financial Group suggested the future path remains data dependent but could see USD/JPY advancing to as high as the 150 area over the remainder of the year.

  • Fed's rate cut puts other central banks in position to ease:

    • Beginning of Fed's easing cycle seen increasing scope for other central banks to push ahead with their own rate cuts (Bloomberg). Key risk factor is volatility in interest rate differentials that spills over to FX markets with exchange rate appreciation having knock on effects on real economy. Particular focus is on emerging market economies that have yet to start their easing cycles with Fed's rate cut putting several Asian central banks in position to ease in coming months (Bloomberg). Central banks with dollar pegs have already followed Fed with HKMA cutting its base rate. Indonesia's central bank surprised with a 25 bp cut late Wednesday. At same time, pace of easing seen lagging Fed with inflation 'last mile' proving harder to overcome in countries such as Australia, India and Philippines while financial stability risks a complicating factor for BOK. While there are thoughts BOJ Governor Ueda may guide expectations to another rate hike, futures pricing in 38% chance of another increase by end-2024 amid market risks from any sudden appreciation in yen (Bloomberg).

  • Australian jobs growth remains strong:

    • Australian employment rose 47.5K in August, stronger than 26.4K forecast and little changed from July's 48.9K increase. Unemployment rate held at 4.2% as expected with participation rate remaining at record high 67.1%. Jobs growth driven entirely by 50.6K increase in part-time employment, offsetting 3.1K fall in full-time jobs. Monthly hours worked rose another 0.4% m/m while underemployment and underutilization rates both rose from July. Strong headline jobs growth underlines economy's ability to continue absorbing large numbers of people entering workforce, even with higher-than-usual number of job vacancies. RBA Assistant Governor Hunter last week noted central bank still assess labor market operating above full employment with one risk being labor demand turning out stronger than RBA anticipates. Data comes ahead of RBA meeting on Tuesday. While it is expected to keep cash rate unchanged, interest will surround whether Governor Bullock hews to her hawkish stance in light of a still-tight labor market. However, markets still pricing in rate cut in December.

  • New Zealand GDP shrinks by less than expected, markets still eyeing 50 bp RBNZ rate cut:

    • New Zealand GDP shrunk 0.2% q/q in Q2, smaller decline than 0.4% projected though worse than 0.1% growth in Q1. Economy contracted 0.5% y/y, little better than 0.6% forecast and reversing 0.5% growth In Q1. Main drag came from exports and inventory drawdown, offsetting positive contributions from government expenditure and household consumption. While GDP shrunk by less than RBNZ projected, New Zealand's economy appears on track for recession with growth forecast to have contracted again in Q3. Broad suite of economic indicators all trending in negative direction with manufacturing and services sectors in deep contraction, house prices shrinking and unemployment rate rising to highest since early 2021, resulting in negative output gap. Inflation also projected to return to 1-3% target band in Q3 2024. RBNZ has already begun its easing cycle with futures pricing in ~75 bp of cuts in final two meetings of 2024, implying at least one 50 bp cut. Economists generally anticipate two more 25 bp cuts by end-2024.

  • Notable Gainers:

    • +12.4% SGM.AU (Sims): Guides Q1 EBIT from Metals businesses around A$55M

    • +11.1% 1628.HK (Yuzhou Group Holdings): Debt restructuring schemes receive approval from requisite statutory majority of creditors at scheme meetings

    • +8.7% LOT.AU (Lotus Resources): Issues Letlhakane uranium project scoping study results; confirms potential to support economically viable long-life operation

    • +5.3% OPT.AU (Opthea): Completes drug substance PPQ campaign validating manufacturing process of Sozinibercept

  • Notable Decliners:

    • -8.6% ALQ.AU (ALS): Guides H1 EBIT slightly ahead y/y but underlying NPAT around (5%) y/y

    • -4.8% KCN.AU (Kingsgate Consolidated): Reports FY NPAT A$199.8M vs year-ago A$4.7M; guides FY25 gold equivalent production 86-97Koz at AISC $1,650-1,800/oz

    • -2.4% 601989.CH (China Shipbuilding Industry): China CSSC Holdings to acquire China Shipbuilding Industry via 1:0.1335 share swap

• Data:

  • Economic:

    • Australia

      • August employment +47.5K m/m vs consensus +26.4K and revised +48.9K in July

        • Unemployment rate 4.2% vs consensus 4.2% and 4.2% in July

        • Participation rate 67.1% vs consensus 67.1% and 67.1% in July

    • New Zealand

      • Q2 GDP (0.2%) q/q vs consensus (0.4%) and revised +0.1% in Q1

        • GDP (0.5%) y/y vs consensus (0.6%) and revised +0.5% in Q4

  • Markets:

    • Nikkei: 775.16 or +2.13% to 37155.33

    • Hang Seng: 353.14 or +2.00% to 18013.16

    • Shanghai Composite: 18.74 or +0.69% to 2736.02

    • Shenzhen Composite: 23.27 or +1.58% to 1497.00

    • ASX200: 49.80 or +0.61% to 8191.90

    • KOSPI: 5.39 or +0.21% to 2580.80

    • SENSEX: 251.91 or +0.30% to 83200.14

  • Currencies:

    • $-¥: +0.31 or +0.22% to 142.5940

    • $-KRW: +3.34 or +0.25% to 1327.6500

    • A$-$: +0.01 or +0.87% to 0.6823

    • $-INR: (0.15) or (0.18%) to 83.6351

    • $-CNY: (0.01) or (0.18%) to 7.0690