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StreetAccount Summary - Asian Market Recap: Nikkei +0.87%, Hang Seng (1.38%), Shanghai Composite (6.62%) as of 04:10 ET

Oct 09 ,2024

• Synopsis:

  • Asian equities outside Greater China ended higher Wednesday. Large mainland China bourses ended steeply lower and are now back where they were on 30-Sep; Hong Kong endured another volatile day and ended steeply lower. Gains seen elsewhere, albeit with most boards off their highs: Japan and Australia all modestly higher, Taiwan supported by an oversize gain at TSMC post sales data. India gaining, Southeast Asia mostly higher. South Korea closed. US futures lower, Europe opened with small losses since pared. US dollar flat, yen weaker, NZD weaker post RBNZ rate cut. Treasury yield lower at the long end, higher at the short. Crude higher, precious metals mixed, copper and iron ore lower on fading China stimulus hopes.

  • Asia stocks saw another volatile session with most boards advancing but finishing off their peaks, while Greater China markets fell sharply. Stocks boosted first thing from the higher finish on Wall Street, only reversing course when US futures began to dip on Google news. Mainland China markets marked steeply lower from the bell post weaker-than-hoped-for holiday spending data as well as follow up from Tuesday's NDRC's disappointing briefing. Reports the finance minister would announce details of a fiscal stimulus package helped for a time but mainland markets still closed well down. Hong Kong also volatile, gapping higher at the open before falling into the close.

  • RBNZ cut OCR by 50 bp as expected. Bank noted economic activity subdued with inflation is converging to target, weighed 25 bp and 50 bp cuts but agreed latter most consistent with its mandate. Reserve Bank of India held interest rate steady as expected but changed its stance to 'neutral' from 'withdrawal of accommodation' in a dovish tilt that may proceed a December rate cut. Japan machine tool orders dropped again but manufacturers sentiment improved. South Korea and India government bonds to be included in FTSE Russell's sovereign bond indexes starting from next year.

  • Honda Motor (7267.JP) says it is open to altering its EV roadmap if demand for pure-battery cars continues to decline. Seven & I (3382.JP) is reported to have received an increased offer price of $47B from Alimentation Couche-Tard. Shin Kong Financial (2888.TT) has secured enough shareholder support for its merger with smaller rival Taishin Financial Holding (2887.TT). Hyundai Motor (005380.KS) is to launch its $3B India IPO next week at INR1,865-1,960 per share. MBK Partners said it will not raise its offer to gain control of Korea Zinc (010130.KS) but would guarantee the employment of executives and employees at the company. Rio Tinto (RIO.AU) finalized a $6.7B deal to buy Arcadium Lithium (ALTM).

• Digest:

  • Chinese stocks tumble, snapping ten-day winning streak:

    • Mainland China stocks fell sharply on Wednesday and snapped ten-day winning streak amid skepticism about Beijing's stimulus measures. CSI 300 down 7%, Shanghai Composite 6.6% lower, Shenzhen 8.2% lower and ChiNext tumbled 10.6%. Hang Seng extended losses from yesterday and was 1.5% lower. Came after Nasdaq Golden Dragon Index fell 6.9% overnight. Reuters citing strategists noted positive sentiment on China assets recently was premised on expectation of a major fiscal stimulus package, however it dissipated soon as there was no such announcement after the holiday. News at 1pm that finance minister is to hold a press conference this Saturday briefly lifted the markets but soon fizzled out. Bloomberg added fund managers are concerned that many stocks have already reached overvalued levels. Added spending during Golden Week holiday was yet to recover to pre-Covid level, suggesting muted consumer sentiment. Plan by shareholders of A-share listed companies to reduce their holdings also dampened the mood. Meanwhile Bloomberg noted leveraged equity positions in China jumped at fastest pace in more than a decade as traders raised more risky bets.

  • China's finance minister to hold briefing Saturday on fiscal stimulus:

    • China's finance minister Lan Fo'an set to hold briefing Saturday to introduce fiscal stimulus measures deigned to shore up economic growth. Investors waiting for finance ministry move following disappointing NDRC announcements Tuesday, which caused Hang Seng to sink almost 10%, mainland benchmarks to retreat from day's highs. Analysts cited by Bloomberg said MoF briefing high profile as NDRC projects and monetary easing can only work with finance ministry spending. Article added investment banks expect stimulus of between CNY2T ($283B) and CNY3T to be announced. Economists quoted by SCMP said central government would need to raise fiscal budget to GDP ratio above 3% amid poor land sales and declining tax revenue to achieve these levels, which would require NPC Standing Committee approval in H2-Oct. Fiscal policy support likely to be used to recapitalize banks, stabilize property market, stimulate consumer.

  • RBI holds benchmark rate unchanged, shifts stance to "neutral":

    • RBI MPC held its policy repo rate unchanged at 6.5% for the tenth straight time, as widely expected. Marginal standing facility kept at 6.75%, standard deposit facility held at 6.25%. MPC, which consists of three RBI and three external members, voted 5-1 to keep rates unchanged. Members voted unanimously to change policy stance to "neutral" from "withdrawal of accommodation", meanwhile said they will remain unambiguously focused on durable alignment of inflation to target while supporting growth. RBI expects headline inflation to moderate, giving it greater confidence on disinflation path later in the financial year. With domestic growth holding up, RBI has space to focus on inflation. MPC maintained inflation forecast for FY25 at 4.5% while Governor Das said CPI in September is expected to see big jump due to unfavorable base effects and pick up in food price momentum. India's GDP growth projection kept unchanged at 7.2% for FY25.

  • RBNZ cuts OCR by 50 bp amid subdued growth outlook:

    • RBNZ cut OCR by 50 bp to 4.75% as expected. Central bank noted economic activity subdued with inflation converging to target. Committee weighed cutting by 25 bp or 50 bp butagreed latter option most consistent with inflation mandate and avoiding unnecessary instability in output and employment. Still considers OCR of 4.75% as restrictive though was vague on pace of rate cuts going forward, noting only that future changes depend on evolving economic assessment. Central bank noted growth is weak amid drags from consumer spending and business investment while high frequency indicators suggest growth to remain subdued in near-term. Recent Quarterly Survey of Business of Opinion showed signs labor market is deteriorating with risk of inflation undershooting 2% target midpoint. Note that RBNZ will have received Q3 figures on employment and inflation before its next meeting in November. While decision drove initial drop in kiwi dollar, New Zealand bond yields were only marginally lower in immediate aftermath.

  • China economists say market stimulus expectations were misplaced:

    • Economist takeaways from Tuesday's NDRC briefing mostly remarked on the ramp in market expectations which were unrealistic in terms of the size and substance of fiscal stimulus while noting NDRC is not the decision-making body to make such announcements. Observed that expectations have ballooned since initial press reports indicated a ballpark figure of CNY2T ($283B). However, Morgan Stanley stood out prescribing a CNY10T economic package to support consumption and clearing housing inventory while acknowledging policymakers' reluctance due to fiscal constraints. HSBC recalled the CNY4T package of 2008 and suggested the same approach is needed, albeit in time. Baseline estimates remain anchored at CNY1-2T in terms of additional ultra-long special treasury bond issuance. Going forward, economists look to potential announcements from the NPC Standing Committee typically in late October or early November. Also on the radar are Ministries of finance, housing or commerce. JPMorgan highlighted MOF given its control of fiscal policy amid building revenue shortfalls, estimated at around CNY1T, which needs to be supplemented by debt or alternative revenue sources. Still, a CNY2T package would only amount to 1.6% of GDP, compared to 12.5% in the 2008 package.

  • Notable Gainers:

    • +6.6% 9787.JP (AEON DELIGHT): reports H1 operating profit ¥7.62B, +5% vs year-ago ¥7.26B; issues FY25-27 mid-term plan

    • +4.7% 3382.JP (Seven & i): Couche-Tard reportedly raised offer for Seven & i to $18.19 (¥2,693)/share from $14.86 (¥2,200)/share last month

    • +4.0% 3037.TT (Unimicron Technology): reports September revenue NT$10.84B, +23.7% y/y

    • +3.4% 6669.TT (Wiwynn): reports September revenue NT$34.50B, +119.7% y/y

    • +3.0% 2382.TT (Quanta Computer): reports September revenue NT$155.10B, +57.9% y/y

    • +1.7% S68.SP (Singapore Exchange): reports Sep total market turnover SG$30.38B, +75% y/y vs year-ago SG$17.34B

    • +1.5% 1407.JP (West Holdings): guides FY operating profit ¥10.60B vs prior guidance ¥11.68B and FactSet ¥9.74B

    • +0.9% 5020.JP (ENEOS): subsidiary JX Advanced Metals applies for IPO on TSE

  • Notable Decliners:

    • -3.8% 2899.HK (Zijin Mining Group): Newmont to sell Akyem operation to Zijin Mining Group for cash consideration of up to $1B (CNY7.071B)

    • -2.0% 7974.JP (Nintendo): holder Public Investment Fund reduces stake to 7.54% from 8.58%

    • -1.1% 9143.JP (SG Holdings): reports September packages in delivery business 107M, (6.5%) y/y

• Data:

  • Economic:

    • Japan October

      • Reuters Tankan manufacturers sentiment index +7 vs +4 in prior month

        • Service sector index +20 vs +23 in prior month

  • Markets:

    • Nikkei: 340.42 or +0.87% to 39277.96

    • Hang Seng: (289.55) or (1.38%) to 20637.24

    • Shanghai Composite: (230.92) or (6.62%) to 3258.86

    • Shenzhen Composite: (181.45) or (8.65%) to 1917.31

    • ASX200: 10.50 or +0.13% to 8187.40

    • KOSPI: Closed

    • SENSEX: 127.14 or +0.16% to 81761.95

  • Currencies:

    • $-¥: +0.34 or +0.23% to 148.5400

    • $-KRW: +1.62 or +0.12% to 1342.9300

    • A$-$: (0.00) or (0.22%) to 0.6729

    • $-INR: +0.01 or +0.02% to 83.9573

    • $-CNY: +0.00 or +0.06% to 7.0637