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StreetAccount Summary - Asian Market Recap: Nikkei +0.57%, Shanghai Composite (2.55%), Kospi (0.09%) as of 04:10 ET

Oct 11 ,2024

• Synopsis:

  • Asia equities ended mixed Friday. Many bourses started brightly but sold off during the day with losses greatest in mainland China. South Korea and Australia a few points lower, India and several Southeast Asia boards also lower. Gains in Taipei and New Zealand. Japan's Nikkei was higher but the Topix fell. Hong Kong remained closed for a holiday. US futures a few points lower, Europe pared opening losses. US dollar a smidge weaker, Asia currencies mostly unchanged. Treasury yields down at the long end, higher at the short. Crude oil contracts down, precious metals higher, base metals mixed.

  • Mainland China stocks broke to the downside Friday ahead of Saturday's finance ministry briefing that will reveal the size of Beijing's fiscal stimulus. Consensus settling on an up-to CNY2.0T package thus its composition will be closely scrutinized amid lingering questions over whether tax relief, consumer support or any direct intervention in the housing sector will be included. China investors also minded of credit and September activity data due over the weekend and next week.

  • Today, Bank of Korea trimmed its base rate by 25 bps as majority of economists expected. Next week, Philippines central bank may also cut rates further but authorities in Singapore, Indonesia and Thailand are likely to hold amid sticky inflation and household debt concerns. India's rupee a notable mover Friday, breaking through INR84 per dollar for the first time following $6B in outflows this month alone as equity reallocation picks up speed.

  • Nippon Steel (5401.JP) is to sell its entire 50% stake in its joint venture plant in Alabama for $1 if its offer for US Steel is successful, taking a $1.55B hit in the process. Hugel (145020.KS) received a favorable ITC ruling in the US over an allegation of unfair practices in botox imports into the US. Adani Power (533096.IN) is likely to keep its power offtake agreement with Bangladesh despite pricing concerns.

• Digest:

  • Bank of Korea cuts base interest rate 25 bps to 3.25% in 'hawkish cut':

    • Bank of Korea cut benchmark interest rate for first time since May 2020 amid cooling inflation, signs of slowdown in runaway house prices. 7D repo rate trimmed 25 bps to 3.25%, as expected by majority of polled Reuters economists, although consensus had tilted dovish in recent weeks after September inflation cooled to 1.6% y/y, below BoK's 2.0% target. Bank said inflation showing clear stabilization trend, household debt started to slow, forex risks eased. Acknowledged economic uncertainties surrounding growth outlook increased since August as domestic demand slowed. Added it expected inflation to remain stable, Seoul house prices to gradually slow along with household debt. Governor Rhee said five board members see rates staying at this level over next three months, said today's decision was 'hawkish cut', bank needed time to assess rate cut impact on financial stability (Bloomberg). Added policy co-ordination required after rate cut to counter potential rise in household debt.

  • China expected to launch up to CNY2T in new fiscal stimulus:

    • Latest Bloomberg survey (n=23) found market participants anticipate fiscal stimulus of up to CNY2T ($283B). Announcement could be made at the highly anticipated MOF briefing on Saturday. Most respondents expect new fiscal stimulus in the next six months if there is no announcement on the weekend. Funding seen most likely coming from special government bond issuance. Article noted any new quotas would be subject to approval from the NPC or Standing Committee. Alternative funding sources include CNY2T in unused issuance quotas at 2023-end, which would not need to go through national legislature. Attention also on deployment of funds amid longstanding calls for policymakers to shift priority to households rather than fixed investments. Respondents suggested an array of measures including targeted subsidies for elderly and poor, consumption vouchers, family support, bolster social safety net and increased trade-in subsidies. Some respondents suggested central government may devote some funds for local government debt assistance. Recalibration of expectations follows disappointment at the NDRC announcements this week as market speculation had ramped up in lead up. Recall that economists noted such expectations were unrealistic and most reaffirmed calls for a baseline CNY1-2T in additional fiscal stimulus citing an earlier Reuters piece.

  • China macro data for September expected to be mixed:

    • China is set to release a series of macro data for September from the weekend through Monday. In credit data, Reuters poll showed September new loans were seen at CNY1.87T ($264.75B), compared with CNY900B in August while falling short of CNY2.31T same month a year ago. Outstanding yuan loans likely rose 8.3% y/y in September, down from August's 8.5% and would mark a fresh record low amid weak household and corporate confidence. Broad M2 money supply growth in September seen at 6.4%, up slightly from 6.3% in August. Total social financing (TSF) likely rose to CNY3.73T from CNY3.03T. September CPI, due Sunday, seen at 0.7% y/y, slightly higher than August's 0.6%, according to Trading Economics. PPI expected to slide 2.6% y/y from 1.8% drop in August with factory-gate prices remaining stuck in deflation since late 2022. On trade front, due Monday, Reuters preview noted exports likely to have risen at slowest pace in five months in September and grew 6.0% y/y, down from 8.7% in August. While imports seen to increase by 0.9% y/y, up from August's 0.5% rise.

  • China market volatility triggering major fund shifts:

    • Bloomberg highlighted a rapid drawdown of wealth management products (WMP) as investors chase the stock market rally. Sources indicated regulators ordered financial institutions to bolster monitoring and were asked to report on their ability to meet short-term redemptions. Recalled similar development took place in late 2022 after a bond market selloff triggered a wave of redemptions. Sources noted it is unclear if further action will ensue, though enhanced monitoring is a precautionary step to pre-empt damage to bond markets. Bloomberg estimated balance of WMPs shrank by CNY1.05T ($149B) from 22-Sep to 6-Oct. Corporate bonds made up about 41% of total WMP balance as of June, while sovereign or quasi-sovereign bonds formed less than 3%. Average yield on three-year AA corporate notes rose more than 22 bp this week to 2.71%, set for the biggest weekly increase in nearly two years, while spread over sovereign notes rose to the highest in a year. Separately, Bloomberg cited a Goldman Sach note stating that hedge funds were record sellers of Chinese shares on Tuesday in the wake of the NDRC disappointment, which included long unwinds and new shorts.

  • Southeast Asia central banks largely to hold rates steady next week, Philippines may cut:

    • Monetary Authority of Singapore (MAS) set to keep monetary policy unchanged Monday by keeping slope, center and width of SGD exchange rate band steady. Analysts instead to watch for dovish comments that could herald looser policy next year (Bloomberg). Bank of Thailand also likely to leave rates on hold despite renewed government pressure to cut amid depressed consumer sentiment (Reuters). Most economists say cut more likely in Q1 2025 unless material downside economic risks emerge before year end. Bank Indonesia expected to hold after surprising with 25 bps cut before Fed announced easing last month. Analysts say it is unlikely to move again so quickly and will wait for further data before cutting again (Reuters). Philippines central bank (BSP) may cut by 25 bps after beginning easing cycle in August. Governor Eli said bank could follow with 25 bps trim next week but government looking to match Fed's 50 bps cut (Bloomberg). BI, BoT, BSP banks announce decisions Wednesday.

  • Notable Gainers:

    • +6.1% 9983.JP (FAST RETAILING): reports FY net income attributable ¥372.00B vs FactSet ¥356.17B; guides upcoming FY operating profit ¥530.00B vs FactSet ¥519.98B

    • +5.6% 145020.KS (Hugel Inc): ITC issues final ruling in favor of Hugel following Medytox's allegation of unfair practices in importation of certain botox products into US

    • +0.4% 011210.KS (Hyundai WIA): selects SMEC-Rylson PE consortium as preferred party for sale of machine tool division

    • +0.2% 002352.CH (S.F. Holding Co.): declares interim dividend CNY0.4/sh and special dividend CNY1/sh

  • Notable Decliners:

    • -6.9% 603529.CH (AIMA Technology Group): chairman and GM Zhang Jian detained by Supervisory Commission

    • -3.6% 9716.JP (NOMURA): reports Q2 net income ¥245M vs year-ago ¥1.68B

    • -2.5% 9503.JP (The Kansai Electric Power): No.3 reactor at Mihama nuclear power plant closed for inspection

    • -1.9% 601238.CH (Guangzhou Automobile Group): to acquire 30% stake in Changan Automobile's Chenzhi Technology for CNY550M

    • -1.4% 3382.JP (Seven & i): cuts FY net income guidance to ¥163B vs prior ¥293B and FactSet ¥277.78B due to sluggish overseas convenience store business

• Data:

  • Economic:

    • No economic data today

  • Markets:

    • Nikkei: 224.91 or +0.57% to 39605.80

    • Hang Seng: Closed

    • Shanghai Composite: (84.19) or (2.55%) to 3217.74

    • Shenzhen Composite: (75.33) or (3.94%) to 1834.94

    • ASX200: (8.50) or (0.10%) to 8214.50

    • KOSPI: (2.25) or (0.09%) to 2596.91

    • SENSEX: (165.34) or (0.20%) to 81446.07

  • Currencies:

    • $-¥: +0.24 or +0.16% to 148.8150

    • $-KRW: (2.52) or (0.19%) to 1348.2300

    • A$-$: +0.00 or +0.09% to 0.6741

    • $-INR: +0.11 or +0.13% to 84.0641

    • $-CNY: (0.01) or (0.17%) to 7.0677