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StreetAccount Summary - Asia Weekly Recap: Hang Seng +4.7%, CSI 300 +1.1%, Nikkei 225 +1.5%

Sep 20 ,2024

  • Overview:

    • Asia equities gained steadily over the week, falling into the Fed's rate decision before rallying strongly into the close on Friday. The MSCI Asia Pacific ex Japan index was 2.6% higher by the close in Hong Kong Friday with Japan's Nikkei 225 1.5% higher and its Topix 1.1% stronger. The Hang Seng rallied with steady gains post the Fed's rate cut in hopes the 50 bps reduction in US rates would give the PBOC room to cut rates, although the country's banks kept their LPRs steady Friday to the surprise of some. Beijing is also said to be weighing removing home-buying restrictions to support its beleaguered housing sector. Mainland China boards gained slightly. There were steady gains elsewhere, ex New Zealand: Australia's ASX rose on the back of consumer stocks, South Korea's Kospi advanced but was held back by a broker downgrade to SK Hynix; Taiwan's Taiex gained 2.1%. Southeast Asia benchmarks surged being the most leveraged into the Fed rate cut; Indonesia hit record highs several days, Singapore touched multi-year highs, Thailand's SET also advanced as sentiment improved post the new government's budget.

    • Bond prices rose w/w although were notably lower post the Fed's decision to cut rates. CGB yields fell to record lows in response to domestic economic weakness and possible future looser monetary policy. JGBs were quiet, hovering within a three-month trading band. Asia currencies strengthened in response to the Fed's move and subsequent weakening in the US dollar, except the yen, which weakened notably.

  • Catalysts:

    • The Fed's decision to cut base interest rates by 50 bps caused a jolt to Asia assets in an otherwise sleepy start to the week. The yen weakened after the Fed indicated it was in no rush to cut rates further, boosting Japanese equities at the same time. Several other Asia currencies also weakened in the aftermath, notably the won and ringgit, but others were relatively subdued as many crosses stay anchored to the yuan. Equity markets responded positively as analysts said riskier EM assets are now more attractive in a lower yield environment while Asia sovereign bond yields gained post decision but mostly fell w/w, JGB yields fell to one-month lows and IGB yields to more than two-year lows.

    • Once the Fed's cut was done, focus turned to the timing of when Asia's central banks would start trimming rates. This week, the BOJ held rates steady but Bank Indonesia joined the Philippines in cutting by 25 bps, referencing the stabile rupiah as a reason. Others are likely to follow. Bloomberg noted the Fed's move gives room for Thailand, Indonesia, Singapore, Australia central banks to ease policy before year end. Malaysia and Taiwan are likely to hold, Japan likely to hike. The PBOC will also probably ease to aid domestic economic growth. Markets indicate the RBNZ is likely to ease 50 bps in early October but near-term inflation pressures in India, Philippines are likely to delay easing there, while soaring house prices will likely delay the BOK too.

    • Weak August economic activity in China led several brokers to downgrade their full-year growth forecasts, and reiterate calls for stimulus sooner rather than later. Growth in industrial production, retail sales and fixed asset investment all slowed y/y versus July's figure, and all missed consensus expectations. Credit growth also slowed, and home prices shrank again m/m. Further, analysts warned that, while exports remained resilient, trade sanctions and softening global restocking are set to kick in soon, with many now questioning whether China would manage to get to FY growth of 'around 5%'. At least two brokers lowered their FY growth forecast to 4.7% y/y this week.

  • Corporate Developments:

    • The White House has pushed the review of Nippon Steel's (5401.JP) takeover of US Steel to beyond the US election. CTBC Financial Holding (2891.TT) will revise and resubmit its investment plan for Shin Kong Financial (2887.TT) after the Taiwan regulator rejected its initial bid. BYD (1211.HK) has taken full control of a Mercedes-Benz joint venture in China that went under the Denza brand. 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). Genting Bhd's (3182.MK) sole Malaysia casino faces closure if an Islamic party wins Pahang state in next month's election.

  • Country Equity Performance:

    • Equity markets: Asia Pacific ex Japan +2.6%; Japan Nikkei +1.5%, Topix +1.1%; Greater China: CSI 300 +1.1%, Shenzhen +1.0%, Hang Seng +4.7%; Australia ASX 200 +2.7%; New Zealand NZX50 -1.7%; South Korea Kospi +0.7%; Taiwan Taiex +2.1%; Singapore STI +2.0%; Malaysia KLCI +3.0%; Thailand SET +3.1%; Indonesia JSX +0.8%, Philippines PSI, +5.0%; India Sensex +1.8%, Nifty50 +1.6%.

    • In USD as of 4.15pm HK/SG time 20 September 2024

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