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StreetAccount Summary - Asian Market Recap: Nikkei +1.97%, Hang Seng (1.47%), India Sensex (2.02%%) as of 04:10 ET

Oct 03 ,2024

• Synopsis:

  • Asian equities ended mixed Thursday although many bourses remained closed. Hang Seng finished lower in choppy trading but did recover from an early 4% fall. India down at two-week lows. Japan rallied on a significantly weaker yen. Australia ended flat, Southeast Asia mostly lower. Seoul, Taipei and mainland China boards all closed. US futures under pressure, European bourses opened lower. US dollar strengthening to month-long high, yen slightly weaker, yuan weakened and stayed above 7.0 per dollar. Treasury yields higher across tenors. Crude contracts higher on Middle East concerns, precious metals mixed, base metals also mixed with iron ore higher again but copper consolidating recent gains.

  • Asia equities continued their recent volatile streak as Japan bounced back from yesterday's losses and the Hang Seng corrected sharply over the morning before rallying in the afternoon session. Nikkei and Topix higher from the bell following a substantial weakening in the yen overnight after new PM Ishiba's indicated late Wednesday he did not wish to see another rate increase in the short term. There were also dovish comments from BOJ board member Noguchi, adding to more caution in Governor Ueda remarks. The Hang Seng's recent record-breaking rally also partly reversed today after several technicals reached overheated levels, and economists voiced an air of caution over Beijing's recent easing moves and the impact on markets.

  • Elsewhere, equities were quiet with mainland China still on holiday and Taiwan closed for a typhoon. Middle East developments not directly affecting equity or bond markets per se although the risk-off tilt has weighed on sentiment while the higher oil price led to an outperformance in Hong Kong-listed energy stocks. The US dollar also remains somewhat muted in its role as safe haven, instead being pulled around by yen, pound and other developed market currencies, at least for the short term. In other developments, Australia composite PMI fell back into contraction, Singapore PMI fell from two-year high but remained expansive, and final Japan September PMI was revised lower.

  • Toyota Motor (7203.JP) is to postpone the start of EV production to H1-2026 amid a design adjustment and slowing EV sales. Shimao Group (813.HK) has amended the terms of its credit support agreement and extended the early deadline to the end of October. TSMC (2330.TT), Samsung Electronics (005930.KS) and other major chip makers said to be watching supplies of high-quality quartz following production halt in a US mine closed by Hurricane Helene. Westpac Banking (WPC.AU) is to sell its auto finance loan book to Resimac Group (RMC.AU) for around A$1.4B ($963M).

• Digest:

  • Hang Seng slides on Thursday as stimulus-fueled rally takes a pause:

    • Hang Seng pulled back on Thursday after China stimulus-fueled rally pushed index 23% higher from 23-Sep through 2-Oct. HSI at one point fell 4% before paring some losses to finish 1.4% lower. Hang Seng China Enterprises Index fell as much as 4.8%, most in two years and set to snap 13-day run of gains. Hang Seng Mainland Properties index dropped 5.8%. A Bloomberg gauge of Chinese property developers fell as much as 16%, ending five-day winning streak that included 47% surge yesterday. Shimao Group (813.HK) and Sunac China (1918.HK) were among notable decliners. Bloomberg noted hectic trading of Chinese stocks over past week has raised doubts about a bubble as equity benchmarks reached overbought levels. Some strategists took Thursday's slide as normal profit-taking ahead of weekend and mainland market re-opening next week while others said retreat serves as a reality check among traders to reassess FOMO-driven rally. Noted key to further rally will depend on whether Beijing follows up with fiscal policy stimulus after the holiday.

  • Japan PM Ishiba tells BOJ's Ueda that now is not the right time for a rate hike:

    • In a meeting Wednesday evening, Prime Minister Ishiba told BOJ Governor Ueda that he doesn't think the current environment warrants a rate hike (Nikkei, Reuters, Bloomberg). Added hopes for sustainable economic growth while maintaining an accommodative monetary policy trend. Signaled continuation of close coordination between the government and BOJ for the optimal economic and fiscal management (a line used by predecessors since 2013 to affirm the government-BOJ accord). In response, Ueda repeated the key message that BOJ would continue to adjust policy accommodation if economic and price developments move in line with their projections, though he believes there is enough time to evaluate. Noted that monetary policy is currently extremely accommodative and providing solid support for the economy. Asked whether Ueda saw this as a signal of government opposition to rate hikes, he replied there were no specific requests from the Prime Minister. Ishiba's latest remarks extend a change in tack since indicating tolerance for monetary policy normalization in the lead-up to the LDP presidential election. Stance was toned down just ahead of the vote and following his victory, Ishiba's policy platform pitched at his inaugural press conference included an endorsement of continued accommodative conditions.

  • BOJ's Noguchi reaffirms dovish stance:

    • In a speech, BOJ board member Noguchi acknowledged a paradigm shift is under way from the longstanding structural disinflationary mindset. However, cited sluggish real private consumption as an indication that skepticism towards price hikes remains deep-rooted and suggested it will take some time for this to fade and achieve a mindset consistent with the 2% price stability target taking hold throughout society. Until then, Noguchi continued to advocate for patiently maintaining accommodative policies. Mostly backward-looking content included an explanation of his dissention against a rate hike at the July MPM when he argued it was necessary to carefully assess economic tailwinds from wage increases in the data. Still did not see confirmation that underlying inflation had reached 2% or that inflation expectations were anchored at 2%, posing lingering downside risks to the economy. On the other hand, acknowledged that steady progress was under way and was open to the possibility that policy adjustments may be necessary in future depending on the data. Also noted he sensed a disconnect between the BOJ's thinking and market perceptions that contributed to subsequent volatility. Stressed that communication efforts are essential to ensure future policy moves do not lead to undue market turmoil.

  • China rally prompting global investors to siphon funds out of the rest of Asia:

    • Bloomberg cited market watchers in a discussion about the prospects for a reversal of China outflows in favor of other Asian markets such as Japan and Southeast Asia in the wake of Beijing's stimulus blitz. Article noted shift has already started with outflows recorded last week in South Korea, Indonesia, Malaysia and Thailand. Cited BNP Paribas figures showing Japan outflows of over $20B in the first three weeks of September (but latest weekly MOF data showed foreign investors turned net buyers for the first time in seven weeks). Atlantis Investment Management explicitly said they are paring long positions across Asia to fund China purchases, noting this is already a broader trend. Article noted MSCI China has risen more than 30% from its recent trough since the wave of stimulus announcements with trading volumes in China and Hong Kong reaching record highs Monday. Valuations still attractive with MSCI China trading at 10.8 times forward earnings, below the 5-year average of 11.7x. EPFR data showed mutual funds globally have a decade-low 5% allocation in China equities as of August-end. Recall earlier reports indicated global investors have been cautious on the latest China rally, suggesting that much of the momentum is coming from technical short-covering while acknowledging attractive valuations.

  • Room for China equity rally to continue:

    • Strategist commentary on China equity market outlook continues to move in a bullish direction following flurry of well received stimulus announcements. HSBC upgraded mainland China equities to overweight from neutral, believing stimulus measures will be inflection point and major catalyst for an undervalued market (FTSE China forward P/E 18% below FTSE EM, 1 st.d below average). While short covering thought to be propelling market into overbought territory and feeding doubts about rally's sustainability, Deutsche Bank believes CSI 300 will retest 5500 (vs last 4017) as early as 2025, citing support from global fund repositioning, liquidity support from PBOC's swap facility and expected corporate margin uplift as rebound in consumer confidence translates to pick up in spending growth. Similarly, TS Lombard argued rally has more legs, noting while current measures are smaller in scale compared to big bang stimulus of 2008 and 2015/16, signaling effects are amplified by cheap valuations, underweight positioning and improving corporate fundamentals.

  • Notable Gainers:

    • +20.9% 3498.JP (Kasumigaseki Capital): reports FY net income attributable ¥5.02B vs FactSet ¥5.26B; issues 2025-29 mid-term plan; guides FY26 net income attributable ¥15.00B vs FY25 guidance ¥10.00B

    • +8.6% 9024.JP (Seibu Holdings): to consolidate NW Corp by share acquisition; raises H1 and FY earnings guidance

    • +3.7% 9983.JP (FAST RETAILING): reports September Japan Uniqlo same stores + online net sales +22.1% y/y

    • +2.9% 7453.JP (Ryohin Keikaku): reports September domestic LFL directly managed stores + online store sales +13.4% y/y

    • +1.2% 7203.JP (Toyota Motor): reportedly postpones EV production in North America to H12026 from 2025

  • Notable Decliners:

    • -26.3% 813.HK (Shimao Group Holdings): further amends terms of credit support agreement

    • -3.6% 8020.JP (Kanematsu): to launch 5.7M-share secondary offer; price TBD

    • -3.4% 3918.HK (NagaCorp): reports 9M operational highlights (gaming); premium VIP (rollings) $2.64B vs year-ago $3.05B

• Data:

  • Economic:

    • Japan September

      • Final services PMI 53.1 vs preliminary 53.9 and 53.7 in prior month

        • Composite PMI 52.0 vs preliminary 52.5 and 52.9 in prior month

    • Australia August

      • trade balance A$5.64B vs consensus $5.50B and revised A$5.64B in July

        • Exports (0.2%) y/y vs +0.7% in July

        • Imports (0.2%) y/y vs (0.8%) in July

  • Markets:

    • Nikkei: 743.30 or +1.97% to 38552.06

    • Hang Seng: (330.22) or (1.47%) to 22113.51

    • Shanghai Composite: Closed

    • Shenzhen Composite: Closed

    • ASX200: 7.00 or +0.09% to 8205.20

    • KOSPI: Closed

    • SENSEX: (1,573.91) or (1.87%) to 82692.38

  • Currencies:

    • $-¥: +0.11 or +0.07% to 146.5110

    • $-KRW: +5.49 or +0.41% to 1330.5600

    • A$-$: (0.00) or (0.36%) to 0.6860

    • $-INR: +0.03 or +0.03% to 83.9529

    • $-CNY: +0.01 or +0.09% to 7.0451