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StreetAccount Summary - Asian Market Recap: Nikkei +2.32%, Hang Seng +3.55%, Shanghai Composite +2.88% as of 04:10 ET

Sep 27 ,2024

• Synopsis:

  • Asia equities ended very polarized Friday. Strong gains again for Greater China boards with Shenzhen this time leading and Hong Kong seeing another sizable gain too. Japan's Nikkei easily outperformed the Topix but was volatile along with JGBs and yen. Australia was flat, elsewhere, bourses dipped lower as the month and quarter near their end. US futures lower, Europe opened with small gains. US dollar higher; AUD and NZD weaker, offshore yuan breaking through 7.0 per dollar, yen strengthened substantially on LDP election. Treasury yields higher across tenors, JGB yields rising post Ishiba news, CGBs steadied above 2.08%. Crude continued recent selloff, precious and industrial metals lower.

  • Asia equities ending an otherwise strong week with a mixed day's trading. The MSCI gained another 0.7% during Asia trading hours, largely due to the Hang Seng's roughly 2.3% gain to give it a 5.8% gain for the week to end at 2.5-year highs. Not quite the uniform advance today in Greater China though with banks and financials selling off steeply in Hong Kong, and energy stocks dragging in Shanghai. Analyst feedback on the week's stimulus remains overwhelmingly positive albeit with caveats on the depth of promised, but unspecified, fiscal stimulus and housing sector support.

  • Today, the PBOC cut its 7D reverse repo rate 20 bp to 1.5% and announced a 50 bp RRR cut for financial institutions, as flagged by the PBOC earlier in the week. Media sources said China plans to issue around CNY2T ($284B) in special sovereign bonds this year with half going to consumption support programs and the rest for local government debt assistance.

  • Japan's markets closed higher as the yen weakened but closed before hawkish-leaning former defense minister Shigeru Ishiba won the LDP leadership contest and will therefore be the country's next prime minister. The yen weakened substantially on the result while JGB yields turned from losses to gains. Earlier, September Tokyo core CPI inflation eased as expected amid the reintroduction of government energy subsidies. August China industrial profits fell sharply. Taiwan consumer confidence rose to its highest since March 2020, New Zealand consumer confidence at two-year high.

  • Nissan Motor's (7201.JP) share buyback program will include a 195.5M or 5% stake sale by Renault Group. Toyota Motor (7204.JP) said global output fell for a seventh consecutive month in August as the certification scandal rolled on and production was hit by a typhoon. China Mengniu Dairy (2319.HK) saw its share price surge on Beijing's plans to boost local milk production and encourage consumption. Hanmi Pharma (128940.KS) is set to be investigated by the South Korean tax authority over alleged unfair internal transactions. Ola Electric (544225.IN) said it wants to boost sales and servicing, and wants to added more than 10K partners by 2025.

• Digest:

  • PBOC implements cut in policy rate and reserve requirement ratio from 27-Sep:

    • PBOC cut seven-day reverse repo rate to 1.5% from 1.7% and RRR by 50 bp from 27-Sep. Premium of 14D reverse repo rate to the seven-day rate, currently at 15 bp, remains unchanged, which leaves that rate to 1.65% from 1.85%. This is a follow-up from what Governor Pan announced at the press conference on 24-Sep, in which he didn't specify the timeframe for the cuts. Pan said this round of RRR reduction would free up CNY1T ($142.4B) for new lending and signaled there might be another such cut of 25 to 50 bp before year-end. Weighted average RRR for financial institutions stood at around 6.6% after the cut. Central bank said it aims to create favorable monetary and financial environment for China's stable economic growth. Readout from Politburo meeting on Thursday chaired by President Xi said China to enhance counter-cyclical adjustments in both fiscal and monetary policies.

  • China said to be planning another $284B in special sovereign bond issuance this year:

    • Reuters, citing two sources, reported China plans to issue special sovereign bonds totaling about CNY2T ($284B) this year as part of fresh stimulus measures. Finance Ministry plans to issue CNY1T mainly to fund consumption support programs. Some of the funding will be used to boost trade-in subsidies for consumer goods and large-scale business equipment. Proceeds will also provide a monthly allowance of about CNY800 per child to all households with two or more children, excluding the eldest. Another CNY1T to be issued separately to provide local government debt assistance. Sources suggested some of the fiscal measures could be unveiled as soon as this week. Report follows positive takeaways from the Politburo meeting signaling stronger efforts to achieve the government growth target of about 5% and stop declines in the housing market. Also fits with the Politburo's pledge to make good use of ultra-long special treasury bonds and LGSBs to support government investment and necessary fiscal spending should be guaranteed. Finance Ministry and other government bodies were said to have been working on fiscal stimulus measures in recent weeks. Sources added that authorities plan to ramp up financial support for small and medium-sized businesses in phases, such as employment subsidies and tax relief.

  • Ishiba wins LDP leadership election in runoff, set to become next prime minister:

    • In a televised vote, Ishiba beat Takaichi in a runoff by 215 to 194. Results were fairly close in the end with Ishiba ahead among Diet members by 189 to 173 as well as prefectural ballots by 26 to 21. Yen faded rapidly on the results as the market had been mulling prospects for a Takaichi victory after recent remarks in opposition to a near term BOJ rate hike. Ishiba's victory aligned with Nikkei's latest opinion poll of LDP members conducted Sep 13-15. In the first round, Ishiba garnered strong support among the rank and file. Currently LDP Secretary-General, Ishiba is most known as an expert in defense policy and served as minister in 2007-2008. According to a Nikkei profile, his extensive portfolio also includes minister for agriculture (2008-2009), minister for rural revitalization (2014-2016), LDP policy research council chair (2009-2011). His views on geopolitics carries weight within the LDP and called for an urgent formation of a mechanism for collective security in Asia, adding that an emergency in Taiwan is an emergency in Japan. Ishiba has proposed an Asian version of NATO's security arrangement. On economics/finance, he has endorsed a gradual BOJ policy normalization path after being a longstanding critic of former Governor Kuroda's radical stimulus. Ishiba also said last weekend there was room to raise corporate taxes, coming as one of the more fiscally hawkish comments among the leading candidates.

  • China's industrial profits fall for first time since March:

    • Industrial profits fell sharply by 17.8% y/y in August, compared with 4.1% gain in previous month. It was first monthly drop since March and the fastest decline in 15 months. YTD growth slowed to 0.5% from 3.6% to CNY4.65T in first eight months. NBS attributed August's decline to high base effect, lack of market demand, high temperature and floods in some parts of the country. Top-line revenue growth in Jan-Aug slowed to 2.4% from 2.9%. Bloomberg said profits dragged down by weaker manufacturing as part of economic slowdown that has prompted a barrage of China stimulus measures. Reading came against backdrop of slower-than-expected increase in industrial production in August (4.5% y/y, vs consensus 4.8% and 5.1% in July), when it extended weakening streak to longest in nearly three years. Slowdown became more apparent as weak earnings showed little sign of imminent consumption recovery. Recall top leaders in China called for stronger fiscal support and other measures to make efforts to meet this year's growth target of around 5%, where signs are mounting that it might miss the goal.

  • Tokyo core inflation eases as expected amid restart of energy subsidies:

    • Tokyo core CPI rose 2.0% y/y in September, matching expectations. Follows 2.4% in the previous month and marks the softest since May. Ex-fresh food & energy inflation remained steady at 1.6% as expected. Virtually all of the softening in core inflation came from energy, where contribution dropped 0.39 ppt on the month, reflecting notable slowing in electricity and gas increases. Renewed energy subsidies took effect, which MIIC estimated to pose a total drag of 0.51 ppt. Few developments elsewhere as non-fresh food prices picked up marginally along with leisure durables. Offset by slower inflation in accommodation and general household durables. Goods prices slowed more sharply than services though both remained positive. Attention has shifted more towards forward-looking risk factors rather than the actual data. Recall the July MPM minutes indicated broad views of upside risks with prior yen depreciation cited as the biggest factor. However, Governor Ueda noted in his latest press conference that subsequent yen rebound has decreased that risk, dovetailing with broader dovish takeaways triggered by other remarks board members have ample time to evaluate the next rate hike. Still, Ueda reaffirmed policy normalization would continue while their assumption holds that inflation will be generally consistent with the price stability target in the second half of the projection period as of the July Outlook Report (through FY26).

  • Notable Gainers:

    • +21.0% 17.HK (New World Development): reports FY core operating profit HK$6.90B vs guidance HK$6.50-6.90B; CEO Cheng Chi-Kong Adrian resigns, effective immediately; sells K11 management business and brand to Adrian Cheng for aggregate consideration of HK$209.0M; intends to sell its stake in Kai Tak Sports Park to Chow Tai Fook Enterprises

    • +4.8% 7201.JP (Nissan Motor): Renault Group to sell up to 195.5M Nissan shares (5% stake) as part of share buyback program announced by Nissan

    • +1.5% 700.HK (Tencent Holdings): reportedly to dispose of its stake in Dream11's parent Sporta Technologies for over $150M (CNY1.05B)

    • +0.6% 3591.JP (Wacoal Holdings): to acquire Bravissimo Group in UK for £45.7M (¥8.50B) in cash

  • Notable Decliners:

    • -7.2% 128940.KS (Hanmi Pharmaceutical Co.): South Korean National Tax Service reportedly probes Hanmi group over suspected unfair internal transactions

    • -2.4% 034220.KS (LG Display): to sell all of LG Display Guangzhou to TCL CSOT to KRW643.22B (CNY3.43B)

• Data:

  • Economic:

    • China Jan-Aug

      • Industrial profits +0.5% y/y vs +3.6% in Jan-Jul

        • August industrial profits (17.8%) y/y vs +4.1% in prior month

    • Japan September

      • Tokyo core CPI 2.0% y/y vs consensus +2.0% and +2.4% in prior month

        • CPI excl. fresh food & energy +1.6% y/y vs consensus +1.6% and +1.6% in prior month

        • Overall CPI 2.2% y/y vs consensus 2.2% and +2.6% in prior month

  • Markets:

    • Nikkei: 903.93 or +2.32% to 39829.56

    • Hang Seng: 707.72 or +3.55% to 20632.30

    • Shanghai Composite: 86.58 or +2.88% to 3087.53

    • Shenzhen Composite: 99.20 or +6.05% to 1737.56

    • ASX200: 8.50 or +0.10% to 8212.20

    • KOSPI: (21.79) or (0.82%) to 2649.78

    • SENSEX: (287.41) or (0.33%) to 85548.71

  • Currencies:

    • $-¥: (1.58) or (1.09%) to 143.2300

    • $-KRW: +1.12 or +0.08% to 1314.8300

    • A$-$: (0.00) or (0.08%) to 0.6884

    • $-INR: +0.02 or +0.02% to 83.6775

    • $-CNY: +0.00 or +0.01% to 7.0118