Sep 23 ,2024
Synopsis:
Asian equities mostly higher Monday. Taiwan, mainland China and Korea advanced, Hong Kong pared earlier gains to finish flat, ASX ended lower, Japan closed for a holiday, India trading higher, Singapore climbed to highest since late 2007, Philippines benchmark entered bull market on monetary easing boost, US futures edging up. Treasury yields little changed. Australia and New Zealand yield curve bear steepening. Yen edging up against dollar after post-BOJ declines. Gold slightly down after touching record high. Crude higher. Bitcoin at one-month high.
Greater China equities got a boost after PBOC cut 14-day reverse repo rate by 10 bp ahead of Golden Week holiday that begins 1-Oct. Separately PBOC governor Pan along with two other senior financial regulatory officials will hold a rare briefing on the economy on Tuesday, fueling speculation Beijing is preparing to ramp up efforts to stimulate growth. Meanwhile, takeaways from BOJ meeting and Governor Ueda's press conference leaned mostly dovish with yen losses picking up after he noted upside inflation risks appear to be easing.
In other macro developments. South Korea's exports in first 20 days of September showed growth momentum has stayed strong. Singapore headline and core inflation rose more than expected in August. Indian flash composite PMI shows business activity slowed further in September while confidence strengthened above average level for first time since series' inception in 2012.
TSMC's (2330.TT) executives have visited UAE recently to discuss building a plant complex while Samsung Electronics (005930.KS) also sent a team to the country to explore possibility of having major operations there. Meituan (3690.HK) plans to issue dollar bonds to refinance its offshore debt after its rating upgrade and strong Q2 result.
Digest:
BOJ tempers rate hike stance amid uncertainties:
Press digests following the BOJ meeting consolidated dovish takeaways amid a perceived shift in tone from Governor Ueda's latest comments. Saturday Nikkei front-page article highlighted the key quote indicating board members have "ample time" to assess the timing of the next rate hike. Added that financial markets remain unstable, and BOJ would monitor developments with utmost caution. Also acknowledged that recent yen strength has lowered upside inflation risk. Noted uncertainties related to the US outlook; while a soft landing remains the main scenario, risks have risen somewhat. Furthermore, Ueda said latest data on the domestic economy are tracking their outlook but does not think it warrants an immediate rate hike (Nikkei). Still, basic hawkish stance was reaffirmed, repeating BOJ will gradually raise rates if the data track their forecasts, adding he does not see the 0.50% level as a particular barrier. Article also mentioned politics as another factor amid uncertainties over whether the next prime minister would continue to support BOJ policy normalization (though Ueda refrained from answering questions about the LDP presidential election). Overall, dovish takeaways were galvanized by sharp yen weakness following Ueda's press conference while JGB 5-year yields at 0.505% continue to imply expectations of only one more hike for the remainder of the cycle.
Economist takeaways lean dovish on BOJ:
Economists mostly saw BOJ Governor Ueda's comments leaning relatively dovish from prior rhetoric with the main implication that prospects for an October rate hike have largely diminished. Notably, UBS pushed back their October call to December, citing lingering market volatility that is unlikely to subside by the US presidential election, likelihood that BOJ will follow market expectations for a December move to avoid unsettling markets, and the possibility of a general election in close proximity to the October MPM. UBS looks for further hikes in April and October 2025. Nomura reaffirmed calls for December to be followed by hikes in April and July next year. Morgan Stanley MUFG still looks for the next move in January 2025 while discussing political uncertainties as LDP leadership candidate Takaichi has emerged as notably dovish on monetary policy, posing an obstacle against normalization if she wins. JPMorgan stood out, downplaying dovish interpretations, arguing that Ueda said he still wants rates moving toward neutral and remarks were meant to reaffirm the gradual rate hike trajectory rather than to indicate that his stance has cooled. JPMorgan retained their December forecast while drawing attention to service price revisions around October, impact of minimum wage increases and wage momentum leading up to next year's spring wage negotiations.
Asian central banks in no hurry to follow Fed rate cuts:
Nikkei discussed moderate expectations among analysts for rate cuts in Emerging Asia, contrasting with earlier dovish views. While affirming they now have the room to cut after the Fed's 50 bp rate cut, central banks now seen biding time to monitor ongoing external developments, such as the US presidential election. BofA Hong Kong noted prospects for upside surprise in ASEAN economic growth, warranting a gradual pace of easing. Malaysia cited as an outlier, where they expect no change in rates into next year amid stable inflation and economic growth. HSBC expects RBI to leave rates steady next month, but lower food and oil prices could prompt a cut in December. Article recalled China LPRs were unchanged last week despite stronger market rhetoric on the need for more easing due to deflationary pressures, underscored by rare comments from former PBOC Governor Yi Gang early this month calling for policy measures to fight deflation risk by boosting domestic demand. BOK seen biased toward easing, though held back by the risk that lower rates stand to exacerbate overheating in the property market and aggravate household debt. One exception was Bank Indonesia, which unexpectedly lowered rates before the Fed last Wednesday.
China cuts 14D reverse repo rate amid tight banking liquidity:
PBOC lowered 14D reverse repo rate to 1.85% from 1.95% previously and injected CNY74.5B ($10.6B) of liquidity into its banks via the tool. Move came ahead of China's Golden Week holiday that will last seven days from 1-Oct. Bloomberg noted PBOC usually offers 14-day loans ahead of long holiday. Recall it last provided such lending on 9-Feb just head of week-long LNY break. Cut also follow-through from 10 bp cut in 7D reverse repo rate in July as 14D rate is 15 bp on top of 7D rate. PBOC also injected CNY160.1B via 7D reverse repo while CNY138.7B funds matured. ShanghaiSecuritiesNews reported a total of nearly CNY1.5T funds were to mature this week as PBOC delayed MLF operation to 25-Sep. Cited analysts that banking liquidity facing growing pressure toward end-Sep amid taxation period, start of new quarter and issuance of local government bonds. Many have called for reductions in reserve requirement ratio to free up more funds at lenders. Separately PBOC governor Pan Gongsheng will hold a press conference Tuesday morning on financial support for economic development along with CSRC chairman Wu Qing and NAFR head Li Yunze.
Indian business activity slows further, though companies remain optimistic overall:
HSBC India flash composite PMI eased to 59.3 in September from 60.7 in August, slowest pace for 2024 though still above long-term average. Manufacturing PMI fell to 56.7 from 57.5 in August, weakest since January. Services PMI dropped to 58.9 from 60.9. Growth in new business, orders and export all eased, corresponding with work backlogs expanding at softest pace in more than 2.5 years. However, firms continue to bolster staffing with services employment expanding at quickest pace since Aug-2022 in response to ongoing growth in new orders. Input cost inflation rose marginally in both manufacturing and services, reflecting higher raw material and electricity prices. However, output price inflation slowed for both sectors with implications for margins. Services providers raised prices at weakest pace since Feb-2022. Companies remained optimistic overall with firm generally anticipating to secure new work over next 12 months. Confidence strengthened above average level for first time since series' inception in 2012.
Notable Gainers:
+5.1% 532822.IN (Vodafone Idea): concludes $3.6B (~INR300B) deal with Nokia, Ericsson and Samsung to supply network equipment for 3-years
+4% 2891.TT (CTBC Financial Holding): board decides to terminate planned acquisition of Shin Kong Financial
+2.7% 009150.KS (Samsung Electro-Mechanics Co.): reportedly has developed small all-solid battery to be installed in wearable devices scheduled for mass production in H1 of 2026
+2.5% 207940.KS (SAMSUNG BIOLOGICS): EU's CHMP adopted positive opinion recommending granting of marketing authorisation for Samsung Bioepis' Opuviz, intended for treatment of neovascular (wet) age-related macular degeneration
Notable Decliners:
-29.4% 000670.KS (Young Poong): Young Poong Precision reportedly files lawsuit against five people from Young Poong and MBK Partners for alleged embezzlement
-8.4% 015760.KS (Korea Electric Power): to keep fuel cost adjustment unit price at KRW5/kWh
-3.4% WOW.AU (Woolworths Group): ACCC commences separate proceedings against Woolworths and Coles over alleged misleading 'Prices Dropped' and 'Down Down' claims
-3.3% 2888.TT (Shin Kong Financial Holding): CTBC Financial board decides to terminate planned acquisition of Shin Kong Financial
-0.2% 600519.CH (Kweichow Moutai): proposes CNY3-6B share buyback at up to CNY1,795.78/share to run for 12 months
-0.2% S68.SP (Singapore Exchange): executive Daniel Koh appointed CFO Designate, effective 1-Oct
Data:
Economic:
New Zealand
August trade balance (NZ$2.203B) vs revised (NZ$1.016B) in July
Exports (0.1%) y/y vs +14.0% in July
Imports (1.0%) y/y vs +8.5% in July
Singapore
August CPI +2.2% y/y vs consensus +2.1% and +2.4% in prior month
Core inflation +2.7% y/y vs consensus +2.6% and +2.5% in prior month
India
September flash composite PMI 59.3 vs 60.7 in prior month
Markets:
Nikkei: 0.00 or 0.00% to 37723.91
Hang Seng: (11.46) or (0.06%) to 18247.11
Shanghai Composite: 12.10 or +0.44% to 2748.92
Shenzhen Composite: 2.16 or +0.14% to 1496.82
ASX200: (56.60) or (0.69%) to 8152.90
KOSPI: 8.64 or +0.33% to 2602.01
SENSEX: 224.38 or +0.27% to 84768.69
Currencies:
$-¥: (0.29) or (0.20%) to 143.5640
$-KRW: +5.42 or +0.41% to 1337.9100
A$-$: +0.00 or +0.01% to 0.6808
$-INR: +0.07 or +0.08% to 83.5525
$-CNY: +0.01 or +0.09% to 7.0581
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