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StreetAccount Summary - Asian Market Recap: Nikkei (1.00%), Hang Seng (9.41%), Shanghai Composite +4.59% as of 04:10 ET

Oct 08 ,2024

• Synopsis:

  • Asian equities traded mostly lower Tuesday, ex mainland China. Steep losses in Hong Kong as investor attention switched to mainland exchanges, then NDRC disappointed; Shanghai and Shenzhen closed with solid gains but well off peaks. Japan closed on its low, losses in Seoul, Taipei and Sydney. Southeast Asia mixed. US futures unchanged, Europe sharply lower in the opening hour. Dollar slightly weaker, onshore yuan weaker following higher mid-point setting, offshore slightly stronger; yen stronger. Treasury yields mixed with 10Y back above 4%. Crude sharply lower with Brent below $80/bl. Precious metals lower, metals mixed as copper sinks but iron ore gained.

  • Asia markets volatile Tuesday as Wall Street's selloff and the underwhelming fiscal stimulus from Beijing pushed markets around. The dip lower in US markets overnight impacted technology stocks most to send Taiwan and Japan's heavyweight stocks down, while Samsung Electronics' weak Q3 results weighed further on South Korea. Shanghai and Shenzhen reopened with several of the larger boards posting a 10%-plus gain shortly after the open however while NDRC briefing announced extended use of ultra-long bonds, little new fiscal stimulus was announced as had been hoped for. This sent mainland boards into a sharp reversal, although stayed positive at the close, and triggered further selling in Hong Kong. The property, enterprises and technology sub-indexes of the Hang Seng all underperformed while the main board ended 9.4% lower.

  • Elsewhere, RBA minutes included scenario discussion where case for rate hike could be made if financial conditions are too loose. Japan real wages declined for first time in three months while household spending contracted by less than forecast. Australian consumer confidence lifted from depressed levels while business conditions turned more positive. Philippines manufacturing output growth grew at slowest pace in five months.

  • Nissan Motor (7201.JP) is to invest into auto tech firm ChargeScape to become an equal investor in a joint venture currently equally owned by BMW, Ford and Honda. WuXi AppTec (2359.HK) raised $500M through the sale of convertible zero-coupon bonds. Hon Hai (2317.TT) admitted getting its EV business off the ground will likely take years. Hyundai Motor (005380.KS) said it will sell 142M shares, or 82.5%, of its overall stake it owns in Hyundai Motor India for its upcoming IPO to raise around $20B. Samsung Electronics (005930.KS) revealed Q3 revenue and profits that missed estimates, apologized for results and said it would look for long-term solutions.

• Digest:

  • China NDRC press conference seen as a disappointment:

    • Officials from China's economic planner NDRC held a press conference on Tuesday morning. Said confident country will achieve its economic targets for 2024 and promised further support for growth, however Bloomberg noted it fell short of unleashing further stimulus in a disappointment to investors who were looking for more fuel in China's stock rally. Officials said China will quicken progress on fiscal spending while reiterating plans to boost investment and increase direct support for vulnerable groups. Added country would continue to issue ultra-long special sovereign bonds in 2025 to support major projects and invest CNY100B ($14B) on strategic areas. NDRC head Zheng Shanjie said China will enhance consistency of macro policy orientation and strengthen counter-cyclical macro policy adjustments. Recall traders were watching this press briefing closely for further steps to lift economy with many expecting additional fiscal stimulus worth trillions of yuan, however Bloomberg noted NDRC doesn't have mandate to announce such new measures as they are within purview of State Council or Ministry of Finance.

  • Mainland China stocks higher on reopening but ended off highs, Hang Seng sinks:

    • Mainland China stocks initially surged on their first day back following holiday but closed well off their peaks after NDRC underwhelmed on fiscal stimulus. Hang Seng ended 9.4% lower after 2% gap lower at open, analysts said some rotation into mainland stocks evident initially before NDRC news kicked in; led lower by heavy falls in financials, internet & IT, other growth factor stocks. Hang Seng China Enterprises index more than 10% lower, worst since 2008, according to Bloomberg, Tech index also down nearly 13%, properties index down more than 15%. Mainland China boards ended positive, Shenzhen ChiNext leads, up 17%; other Shenzhen and Shanghai boards between 3-9% higher after being as much as 11% up shortly after open. Yuan 0.4% weaker post initial NDRC comments, followed weaker mid-point setting by PBOC; CGB yields ended lower.

  • RBA minutes note scenario where rates may need to rise if financial conditions too loose:

    • September RBA minutes noted policy needs to be sufficiently restrictive until there is confidence inflation is moving sustainably towards target range. Repeated not possible to rule in or rule out future changes to cash rate. Discussed scenario where policy may need to be tightened further if consumption growth picks up materially, labor market is stronger than forecast, inflation returns to target more slowly, or even if financial conditions prove to insufficiently restrictive (this scenario has become more plausible given recent easing of financial conditions). Also discussed scenario where financial conditions may need to be less restrictive if growth and labor market weaken significantly more than expected, placing more downward pressure on inflation. Added not necessary to move in-line with other central banks given higher inflation, stronger labor market and less restrictive policy in Australia. Altogether, information since August meeting did not materially alter assessment of economic outlook with aggregate demand above supply. Still anticipates consumption growth picking up alongside disposable incomes with labor market appearing tighter than consistent with full employment.

  • Japan PM Ishiba reaffirms no intention to increase capital gains taxes or revisions to BOJ accord:

    • Nikkei front page article highlighted Prime Minister Ishiba's comments in lower house question time on Monday that he is currently not considering a capital gains tax hike, reaffirming is softer stance since winning the LDP leadership. Added the priority is on continuing to encourage a shift from savings to investment. Did not specifically mention corporate tax changes, noting the ruling coalition's tax panel will discuss reforms based on the goal of forming an economic growth model driven by wage growth and investment. Also deflected a question on tax hikes to fund the defense spending expansion. When asked whether the government and BOJ needs to seal another accord, Ishiba responded that he reaffirmed their coordination with Governor Ueda at their meeting on 2-Oct and not considering a revision. Recall that Ishiba's stance on tax and monetary policies have been the key focal points for the markets. On geopolitics, Ishiba said he will first focus on pressing diplomatic and security challenges, adding that his Asian NATO plan would be a longer-term undertaking (Kyodo). Did not say whether the vision will be among the LDP's campaign promises for the upcoming election. Also noted his envisaged goal of amending a Japan-US agreement that has defined how US troops stationed in Japan should operate will not be realized overnight.

  • Japan wage growth softens, Q3 private consumption tracking marginally positive:

    • Nominal average wages rose 3.0% y/y, compared to consensus 2.9%. Follows revised 3.4% in the prior month, marking the softest growth since May preceding the permeation of the 2024 shunto wage hikes. Main driver was a slowdown in special payments, where weighting diminished as summer bonuses rolled off. In contrast, contracted earnings were broadly better, with scheduled payments reaching 3.0% growth while overtime awards rebounded. Real wages were left down 0.6% vs consensus 0.5%, following revised 0.3% growth in July and marks the first decline in three months. Softer nominal growth combined with a higher deflator, back to its strongest since Oct-23. Total hours worked fell for the second time in three months as lower scheduled shifts added to ongoing declines in overtime. Headline household spending fell 1.9% y/y, better than expectations of a 2.6% drop, following a 0.1% rise in July. Translated to 2.0% m/m growth, rebounding from a 1.7% decline. Household income growth slowed to 2.0% y/y from prior 5.5% as summer bonuses remained elevated yet with stagnant growth. Still, both total and disposable incomes remained positive for the fourth straight month. Follows BOJ real consumption activity index showing a 0.2% m/m decrease, leaving Q3 on a marginally positive trajectory amid attention on whether private consumption maintains positive momentum after the surprising strength in Q2.

  • Notable Gainers:

    • +3.7% 373220.KS (LG Energy Solution): reports preliminary Q3 operating profit KRW448.3B vs StreetAccount KRW442.97B

    • +1.6% 1919.HK (COSCO SHIPPING Holdings): guides Q3 net income attributable CNY21.25B vs year-ago restated CNY5.51B

    • +0.4% 500820.IN (Asian Paints): interested in buying parts of Akzo Nobel if assets become available

  • Notable Decliners:

    • -17.8% 3186.JP (Nextage): reports Q3 operating income ¥2.42B vs FactSet ¥5.84B [1 est]; lowers FY guidance

    • -13.8% 2359.HK (WuXi AppTec): confirms proposed issue of $500M zero coupon guaranteed convertible bonds due 2025; weighing options to keep WuXi ATU business running

    • -6.4% 3141.JP (Welcia Holdings): reports Q2 operating income ¥13.38B vs FactSet ¥16.53B; lowers FY operating income guidance

    • -2.8% 4732.JP (USS Co.): reports preliminary Q2 used car auction data; Nomura Trust and Banking to conduct secondary offer of 14.6M USS shares; to launch up-to-¥10.00B buyback, to run from delivery date of secondary offering to 31-Mar

    • -0.8% 005930.KS (Samsung Electronics): reports preliminary Q3 operating profit KRW9.10T vs FactSet KRW11.146T

    • -0.5% 010130.KS (Korea Zinc Co.): FSS launches probe into tender offers for Korea Zinc over unfair trade concerns

• Data:

  • Economic:

    • Japan August

      • Household spending (1.9%) y/y vs consensus (2.6%) and +0.1% in prior month

        • Spending +2.0% m/m vs (1.7%) in prior month

    • Australia

      • October Westpac-MI consumer sentiment index 89.8 vs 84.6 in September

      • September NAB business confidence (2) vs revised (5) in August

        • Business conditions +7 vs +3 in August

  • Markets:

    • Nikkei: (395.20) or (1.00%) to 38937.54

    • Hang Seng: (2,172.99) or (9.41%) to 20926.79

    • Shanghai Composite: 153.28 or +4.59% to 3489.78

    • Shenzhen Composite: 171.29 or +8.89% to 2098.77

    • ASX200: (28.50) or (0.35%) to 8176.90

    • KOSPI: (16.02) or (0.61%) to 2594.36

    • SENSEX: 440.26 or +0.54% to 81490.26

  • Currencies:

    • $-¥: (0.56) or (0.38%) to 147.6200

    • $-KRW: +2.02 or +0.15% to 1347.9000

    • A$-$: (0.00) or (0.37%) to 0.6731

    • $-INR: (0.05) or (0.05%) to 83.9533

    • $-CNY: +0.03 or +0.40% to 7.0484