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StreetAccount Summary - Asian Market Recap: Nikkei +0.57%, Hang Seng +4.13%, Shanghai Composite +4.15% as of 04:10 ET

Sep 24 ,2024

• Synopsis:

  • Asia equities ended mostly higher Tuesday. Strong gains in Hong Kong and mainland China boards following PBOC moves on monetary policy, support for equity markets. South Korea and Taiwan with solid gains, Japan higher but off its peaks by the close. Australia lower at first but rallied, India flat, most of Southeast Asia finished higher. US futures turning positive, Europe opened with strong gains. US dollar now flat, yuan strengthened on PBOC stimulus, yen weaker on dovish Ueda comments. Treasury yields higher across tenors, JGB yields softer, CGB 10Y yield at record low below 2.0% for a time. Crude oil steeper on Middle East concerns, industrial metals led by copper at two-month highs and a spike in iron ore. Precious metals edging higher.

  • Asia markets supported from the bell this morning by a positive end to Wall Street, then received a significant boost as China stepped up policy support to help support its ailing economy. PBOC trimmed 7D reverse repo rate 20 bp, boosted liquidity substantially by cutting banks' RRR 50 bp, and eased mortgage deposit requirements on second homes. Money market funds to be allowed access to PBOC's swap facility to buy stocks, and the CSRC said it would announce measures to support M&A 'soon'. Finally, the NFRA said it would increase core tier 1 capital at six commercial banks. Market reaction was swift with equity benchmarks seeing their best single day advances in several years, CGB yields sank to record lows, and the yuan rose to 16-month highs against numerous developed market currencies.

  • The yen strengthened following BOJ Governor Ueda saying the bank can afford to observe market and overseas developments before taking next monetary policy step. Japan composite flash PMI fell slightly to 52.5 in September, as services expanded again and manufacturing experienced a mild contraction again. South Korea August PPI slowed to a five-month low. The RBA left its cash rate unchanged at 4.35% as expected, and emphasized at its press conference its focus remained on combating inflation.

  • Nippon Steel (5401.JP) is to sell 2.9 million shares in Posco (0005490.KS) to "improve asset efficiency". Miniso Group (9896.HK) said it will buy a nearly 29.4% stake or $CNY6.3B ($892.9M) in Yonghui Superstores (601933.CH) to become the company's largest single shareholder; Miniso stocks fell substantially. Sun Hung Kai Properties (16.HK) is said to be marketing a new project near Hong Kong's old airport at a 20% discount following last week's interest rate reduction. JB Financial (175330.KS) announced its corporate value-up plan and targets a long-term RoE of 15%.

• Digest:

  • PBOC Governor Pan says China to cut RRR, policy rate and existing mortgage rates:

    • PBOC Governor Pan Gongsheng said at a press conference that central bank will cut banks' reserver requirement ratio by 50 bp in near future to unleash CNY1T liquidity. Added PBOC may slash RRR by another 25 to 50 bp by year-end at appropriate time. PBOC will lower 7D reverse repo rate by 20 bp to 1.5% from 1.7%, guide LPRs and deposit rates to fall in step to preserve stability of banks' interest margins. Pan said China will lower interest rates for existing home mortgages by average of 0.5 ppt. Will cut downpayment ratio for second-home buyers to 15% from 25% nationwide. Pan also said China will allow funds and brokers to tap central bank's funding to buy stocks. Added there is also plan to establish special refinancing for listed companies and major shareholders for share buybacks or increase shareholdings. Pan is joined by CSRC Chairman Wu Qing and NFRA head Li Yunze. Wu said securities regulator will promote entry of various medium and long-term funds, including Central Huijin Investment, into capital market. Li said China will increase core tier 1 capital at six major lenders for first time since 2008. Greater China stocks advanced responding to announcements with Hang Seng China Enterprises 5% higher. Hang Seng Mainland Banks Index and Mainland Properties Index both up by more than 4%. 10Y CGB yield initially fell to 2% for first time on record then rebounded while stimulus package pulled investors away from bond market to equities.

  • RBA on hold, remains vigilant to upside inflation risks:

    • RBA left cash rate unchanged at 4.35% as expected. Statement repeated board is not ruling anything or out with respect to rates and will do what is necessary to return inflation to target in a sustainable manner. Governor Bullock again pushed back against notion of near-term pivot though revealed unlike recent meetings board did not explicitly consider a rate hike at this meeting. RBA anticipates temporary fall in inflation due to energy subsidies, but noted underlying inflation remains too high and data since August policy statement reinforces need to remain vigilant to upside risks. Acknowledged weak Q2 GDP growth, but consumer demand more resilient and labor market conditions remain tight. Highlighted uncertainties in both directions, namely from slower-than-expected pickup in consumption growth, lagged effects of past rate hikes, changes in inflation and wage expectations, geopolitical developments, and softer outlook for China's economy. Bullock acknowledged other central banks cutting rates, but Australian economic circumstances different with disinflation more prevalent elsewhere and RBA cash rate not rising as high.

  • BOJ Governor Ueda reaffirms normalization path with enough time to weigh risk factors:

    • In a speech, Governor Ueda sought to clarify the BOJ's thinking on the future path of policy, repeating the language that rate hikes would be appropriate if underlying inflation is in line with projections as the first order. Added that when underlying inflation is around 2%, it will lessen the need to push up inflation and hence warranting a policy rate closer to the neutral level. Then qualified this basic stance by noting that actual policy conduct must consider various uncertainties rather than follow a predetermined schedule. Stressed caution towards overseas economic risks, particularly in the US with a soft-landing scenario remaining uncertain. Also mentioned FX volatility though noted yen's one-sided depreciation has retraced since August and import price rises have slowed. Reaffirmed a comment from his post-MPM press conference acknowledging that upside risk to inflation from FX factor "has become smaller." Emphasized the need for careful assessment and remarked that "we have enough time to do so." Discussion of economic and price developments were generally upbeat and expressed encouragement by evidence of broadening wage hike passthrough as import price-driven pressure has eased.

  • Japan flash PMIs narrowly mixed:

    • Flash manufacturing PMI was 49.6 in September following 49.8 in the previous month, marking the third straight month in contraction territory. Output dipped back into a slight decline alongside a stronger contraction in exports, outweighing narrower declines in total new orders. Inflation metrics softened with both input and output prices indicating slower increases. Pipeline dynamics were mixed as renewed lengthening in supplier delivery times led to an upturn in input purchases, while finished goods inventories swung to declines from the neutral level. Services sector fared somewhat better with the PMI edging up to 53.9 from 53.7, reaching a five-month high. Output logged stronger growth, though mitigated by softer growth in new orders. Output prices rose at a faster pace as input price inflation weakened, seen as indicative of cost passthrough. Composite PMI declined to 52.5 from 52.9 to mark the third month of aggregate expansion and the report suggested this bodes well for Q3 GDP (JCER consensus looks for 1.75% q/q annualized growth). However, also cautioned that smaller manufacturing backlogs could dampen growth towards year-end in the absence of a pickup in demand. Added that overall outlook optimism eased to the lowest since Apr-22.

  • Strategists mixed on outlook for mainland China equities:

    • China stocks having their best day since February following today's stimulus announcements with Hang Seng China Enterprises index hitting four-month high. While measures viewed as positive for risk sentiment, there remains skepticism whether they will sustain rebound in mainland equities with strategists mixed on outlook for A-shares. Morgan Stanley said it no longer prefers A-shares to offshore. Doesn't expect A-shares to see near-term support from 'National Team' with fund flow momentum beginning to slow since late August/early September. Noted larger downward revisions to consensus earnings estimates for A-share companies with bigger proportion reporting earnings miss compared to offshore counterparts. However, HSBC stuck with its overweight rating on both A- and H-shares, highlighting support from government stimulus efforts aimed at boosting domestic demand. Capital return announcements, particularly among internet platforms, a bright spot with year-to-date dividends and buybacks already exceeding 2023 total and driving forecast yield above 5%. Fed rate cuts also seen supporting stocks.

  • Notable Gainers:

    • +10.2% 601933.CH (Yonghui Superstores): DFI Retail, JD.com sell aggregate of 29.4% stake in Yonghui Superstores to MINISO at CNY2.35/share

    • +6.7% 1171.HK (Yankuang Energy Group): signs bidding agreements for acquisition of Highfield Resources

    • +4.5% 8697.JP (Japan Exchange): guides FY net income attributable ¥57.50B vs prior guidance ¥53.50B and FactSet ¥60.86B

    • +4.1% 175330.KS (JB Financial Group): announces corporate value-up plan; targets mid- to long-term ROE of 15%

  • Notable Decliners:

    • -24.3% 9896.HK (MINISO Group Holding): DFI Retail, JD.com sell aggregate of 29.4% stake in Yonghui Superstores to MINISO at CNY2.35/share

    • -4.2% 4568.JP (Daiichi Sankyo): survival results datopotamab deruxtecan in TROPION-Breast01 did not achieve statistical significance versus chemotherapy

    • -1.6% 271560.KS (ORION Corp (Korea)): reports August net revenue KRW265.2B

    • -0.3% 3391.JP (TSURUHA Holdings): reports Q1 operating income ¥15.11B vs FactSet ¥14.33B

• Data:

  • Economic:

    • Japan September

      • Flash manufacturing PMI 49.6 vs 49.8 in prior month

        • Services PMI 53.9 vs 53.7 in prior month

        • Composite PMI 52.5 vs 52.9 in prior month

  • Markets:

    • Nikkei: 216.68 or +0.57% to 37940.59

    • Hang Seng: 753.45 or +4.13% to 19000.56

    • Shanghai Composite: 114.21 or +4.15% to 2863.13

    • Shenzhen Composite: 59.15 or +3.95% to 1555.98

    • ASX200: (10.90) or (0.13%) to 8142.00

    • KOSPI: 29.67 or +1.14% to 2631.68

    • SENSEX: 70.46 or +0.08% to 84999.07

  • Currencies:

    • $-¥: +0.75 or +0.52% to 144.3630

    • $-KRW: +0.29 or +0.02% to 1334.3400

    • A$-$: (0.00) or (0.09%) to 0.6832

    • $-INR: +0.10 or +0.12% to 83.6441

    • $-CNY: (0.02) or (0.22%) to 7.0362