Oct 04 ,2024
Overview:
Asia equities saw a very mixed week as benchmarks ex Greater China fell but the Hang Seng surged for a second consecutive week in the wake of last week's monetary policy easing. The MSCI Asia ex-Japan index was 0.8% higher as Hong Kong closed for business on Friday, pulled higher by the overweight of Hong Kong-listed stocks in the index. Japan's Nikkei fell 5.6% and the Topix lost 4.4% as they were set against last Friday's sharp increase but reacted positively through the week to dovish comments from new PM Ishiba. The Hang Seng gained 8.5% w/w and is now up almost 31% since the market low in early September although the sharp gains have triggered warnings over valuations and drawn some parallels to 2015's volatility. Mainland China markets also rose in their single day of trading on Monday.
Other regional equity markets were weak as traders responded to rising threats to oil supplies in the Middle East, and a general risk-off sentiment. India markets, particularly exposed to higher crude prices, fell sharply amid some profit taking and talk of a switch to China assets taking place. Dollar-sensitive Southeast Asia also retreated from recent highs, and the tech-heavy South Korea and Taiwan benchmarks were notably lower. Australia and Singapore were all relative outperformers but still lower in absolute terms.
Bond yields rose in line with global trends as sovereigns in Japan, India and China all saw higher yields as strong US economic data dampened expectations for another aggressive Fed move on rates. JGB yields ended at a month-long high after the new PM's dovish comments. Currencies weakened across the board. The yen fell the most while other recent gainers also fell sharply including the ringgit, baht and rupiah; the yuan also weakened with the offshore regaining 7.0 per dollar. The rupee traded at record highs against the dollar on concerns of foreign outflow and rising oil prices.
Catalysts:
The Hang Seng surged for a second week, underpinning the post monetary easing gains of last week but also sparked concerns the rally had raced ahead of economic developments. Some economists warned the easing still needed to be followed up with meaningful fiscal policy support, and market analysts noted extensive short closing coupled with a retail-orientated speculative surge had sent some property valuations in particular beyond pre-Evergrande crisis level. The specter of 2015's boom-and-bust cycle was also mentioned by one broker.
The yen weakened substantially after new Japan PM Shigeru Ishiba told BOJ Governor Ueda this was not the time for a rate hike, adding he hoped for an accommodative monetary policy to achieve economic growth. The dovish comments, which contrasted an earlier statement that hinted at supporting the BOJ's normalization path, pushed JGB yields to one-month highs and the yen lower by almost 3%. The BOJ is now widely expected to hold rates steady at its October meeting after Ishiba called a snap general election for the end of October and market odds of a hike in December now stand at just 22%, according to Bloomberg.
Regional PMIs for September took a sharp downturn, especially in the output and new orders' components. South Korea dropped to a contraction of 48.3 from August's 51.9, and was the starkest of the region's falls with dips in employment and business optimism also notable. Taiwan did post a marginal expansion, but the same pattern in sub-components held. China's official PMI was mixed and the private Caixin survey fell into contraction again. Southeast Asia also reported scaled-back manufacturing conditions ex the Philippines, which had a surge in domestic demand to offset weak international demand.
Week Ahead:
Mainland China markets return from Golden Week holidays with holiday spending data watched for clues on retail sales and consumption. FOMC minutes (Wed) follow the Fed's 50 bp cut in September and several Fed officials are also expected to speak over the week. US CPI (Wed) may carry importance for the 25 vs 50 bp November rate cut debate. The RBNZ (Wed) will decide whether to cut by 25 bp or 50 bp. RBA minutes (Tues) may provide some detail on the central bank's comfort with current policy settings after Governor Bullock revealed the board did not debate a rate hike last month.
Corporate Developments:
Toyota Motor (7203.JP) is to postpone the start of EV production to H1-2026 amid a design adjustment and slowing EV sales. NIO (9866.HK) is to receive CNY3.3B from strategic investors and make a CNY10B investment into NIO China. Rohm (6963.JP) and Denso (6902.JP) are said to be considering a strategic partnership in the semiconductor sector that will include Denso acquiring Rohm shares. JD.com (9618.HK) has renewed the process to list its industrial unit, more than six months after it first proposed the idea. Mitsui (8031.JP) and Wesfarmers (WES.AU) are said to be among the interested buyers of Mineral Resource's (MIN.AU) Perth Basin assets.
Country Equity Performance:
Equity markets: MSCI Asia Pacific ex Japan +0.8%; Japan Nikkei -5.6%, Topix -4.4%; Greater China: CSI 300 +8.5%, Shenzhen +10.7%, Hang Seng +8.5%; Australia ASX 200 -2.2%; New Zealand NZX50 -1.4%; South Korea Kospi -3.1%; Taiwan Taiex -2.8%; Singapore STI -1.0%; Malaysia KLCI -4.2%; Thailand SET -3.2%; Indonesia JSX -4.3%, Philippines PSI, -0.6%; India Sensex -3.9%, Nifty50 -3.9%.
In USD as of 4.15pm HK/SG time 4 October 2024
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