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StreetAccount Summary - Asian Market Recap: Hang Seng (0.75%), Shanghai Composite +2.07% Kospi +1.02% as of 04:10 ET

Oct 14 ,2024

• Synopsis:

  • Asia equities ended mostly positive Monday. Greater China rallied from early losses to end higher but the Hang Seng ended lower. There were solid gains in Australia, South Korea and Taiwan; India also regaining some recent losses. Southeast Asia higher. US futures nudging higher, Europe opened mixed. US dollar slightly higher, yuan weaker, AUD and NZD sharply lower at the open, since recovered. Treasuries unchanged. Crude oil sharply lower, precious metals under some pressure, base metals mixed with iron ore higher on China stimulus hopes.

  • China's markets volatile from the bell Monday following an underwhelming ministry of finance briefing Saturday that left out key financial commitments. The Hang Seng fell sharply after initial volatility before recovering into the lunchbreak, then dipping into the close again; mainland bourses reversed early losses and closed with strong gains as investors gave Beijing the benefit of the doubt after measures announced on Saturday surprised to the upside, offsetting the lack of a final figure. Several brokers also moved to raise their economic growth forecasts in the wake of the fiscal programs announced. The offshore yuan weakened slightly and CBGs were mostly unmoved.

  • China inflation data over the weekend emphasized need for support measures, coming in weaker than expected, while September trade data showed YTD export growth slowed to 2.4% y/y versus expectations of a 6.0% gain; import growth also disappointed. Elsewhere, Singapore GDP growth was stronger than forecasts amid strong rebound in manufacturing while MAS left its policy settings unchanged as expected. India wholesale inflation accelerated to 1.8% y/y in September with a notable increase in food prices responsible.

  • TSMC (2330.TT) is to build more semiconductor plants in Europe as it expands in hedge against Chinese tensions. Hyundai Motor (005380.KS) began selling shares in its India unit as it launched its $3.3B IPO. Flashlight Capital has offered to buy KT&G's (033780.KS) Korea Ginseng Corp for KRW1.9T. Ola Electric (544225.IN) shares came under further pressure Monday on reports it is facing regulatory scrutiny over its recent pricing strategies. TPG Telecom (TPG.AU) is to sell its fiber and other businesses to Vocus for A$5.25B.

• Digest:

  • China finance ministry signals meaningful fiscal expansion, though no headline figure:

    • In a press conference Saturday, Finance Minister Lan Fo'an signaled an upcoming package of targeted incremental fiscal policy measures in the near future to boost the economy (Xinhua). Includes raising the debt ceiling on a relatively large scale to replace hidden local government debt. Lan touted action as the "strongest debt alleviation measure" in recent years. Noted CNY2.3T in funding remains available this year from special purpose bonds (unused quota plus unused proceeds from bonds already issued). Also recalled local government debt limit was increased by more than CNY2.2T in 2023 and CNY1.2T in 2024. Pledged a set of fiscal policy tools to help stabilize the property market, including local government special-purpose bonds, special funds and taxation policies. Local governments will be supported in using special-purpose bonds to reclaim eligible idle land or to expand land reserves if needed. Special bonds will also be utilized to purchase existing inventory for affordable housing. Supportive taxation reforms will also be considered. Special treasury bonds will be issued to support large state-owned commercial banks in replenishing the core tier-1 capital. Despite the content, press takeaways warned the lack of a headline figure apt to prolong market anxiety and volatility (Bloomberg, Reuters).

  • China inflation data softer than expected:

    • Headline CPI rose 0.4% y/y in September, a three-month low, compared to consensus and prior month's 0.6%. Core inflation continued to fade to 0.1% (softest since Feb-21) from 0.3%. Support came entirely from food prices (3.3%) outweighing a marginal decline in non-food prices (-0.2%). Main drivers were fresh vegetables (22.9%) and pork (16.2%). Goods prices were up 0.5% while services edged up 0.2%. Details were soft, featuring declines in clothing, household appliances, transportation and communication devices. NBS noted base effects posed a drag of 0.5 ppt to the headline. PPI fell 2.8%, weaker than an expected 2.5% decline. Follows 1.8% drop in the previous month and marks the fastest decrease since March. Upstream drags remained the main factor, though downstream prices also logged the biggest decline in at least a year. Consistent with strong majority of subsectors in negative territory with several including ferrous processing, autos and electronics. Unfavorable base effects only accounted for 0.5 ppt. Press takeaways were broadly bearish as latest figures reaffirmed deflation risk and underscored stimulus hopes in the wake of the weekend Finance Ministry briefing that lacked a headline figure.

  • Strategists see positive implications for China equities from Beijing's policy pivot:

    • Strategists generally positive on MoF press conference implications for equities. Morgan Stanley viewed signaling effect of policy announcements stabilizing sentiment and fund flows in near-term. PBOC swap facility seen benefiting large-cap A-shares with decent dividend and FCF yields. BofA also positive on signaling effects with more policy expected in coming weeks and into 2025. HSBC maintained forecast for 18-21% China equity index upside, seeing markets receptive to a policy pivot that appears more than temporary. Nomura saw positive momentum continuing in near-term with risk of MSCI China heading closer to bull case target of 78 (vs last 70). Expected fiscal announcements at upcoming NPC Standing Committee meeting shapes as upside catalyst. Still, path ahead for equities may not be smooth after BofA noted 'buy everything' stage has passed with MSCI China P/E mean reversion complete. Price action choppiness more likely absent bazooka stimulus or earnings support with GDP and earnings growth remaining under pressure through H1 2025. HSBC also viewed surging retail participation as risk in light of stepped-up insider selling.

  • China economists look to NPC or State Council to approve stimulus size:

    • Economist takeaways from the MOF briefing were broadly positive, noting the content answers some of the key calls for support. Highlights were guidance for accelerated usage of available fiscal funding, higher debt ceiling, as well as the deployment of proceeds for local government debt assistance, purchases of housing inventory, bank capital injection and welfare support for low-income households and students. Yet, full-scale pivot towards consumer spending stimulus remains absent. Strong commitment was taken as a credible sign that a sizable package is forthcoming. No major surprise about the lack of a headline figure given the legislative process requires approval from the NPC or State Council. Hence, attention turns mainly to the NPC Standing Committee meeting expected at month-end. However, JPMorgan argued the implications for the central budget appears limited in augmented terms. Anticipates an increase in the fiscal deficit target above the implicit ceiling of 3% of GDP, albeit not until the broad economic policies are recalibrated at the Central Economic Work Conference in late Nov/early Dec. GDP forecast implications were mostly limited as they await more details. Only Goldman Sachs announced revisions, upgrading their 2024 forecast to 4.9% from 4.7%, and 2025 lifted to 4.7% from 4.3%. JPMorgan mentioned only modest upside risk to their Q4 forecast of 5.5% q/q, saar.

  • Singapore's MAS leaves policy rates on hold, Q3 GDP grows more than expected:

    • Monetary Authority of Singapore held slope, center and width of Singapore dollar's exchange (S$NEER) rate band steady Monday as expected, keeping SGD on appreciating path to cap import prices. Said expects FY headline, core inflation to average around mid-point of 1.5-2.5% forecast range, added risks to country's inflation outlook more balanced vis-à-vis three months ago, sees imported costs to be broadly stable next year as food supplies stabilize, oil production cuts unwind. Added FY 2024 GDP growth should come in around upper end of current 2-3% forecast range barring weakening in global final demand, close to potential. Separately, Ministry of Trade and Industry (MTI) said Q3 GDP grew 4.1%y/y versus FactSet consensus 3.3%; grew 2.1% q/q from 2.0% in Q2. Ministry said manufacturing expanded 7.5% y/y in Q3 from 1.1% contraction in Q2, construction grew 3.1% y/y from 4.8% y/y growth in prior month.

  • Notable Gainers:

    • +17.7% 046890.KS (Seoul Semiconductor Co.): reportedly wins patent lawsuit

    • +5.0% 033780.KS (KT&G Corp): Flashlight Capital Partners submits letter of intent to acquire Korea Ginseng Corporation for KRW1.9T

    • +1.6% 1216.TT (Uni-President Enterprises): reports September revenue NT$57.85B, +8.4% y/y

  • Notable Decliners:

    • -21.9% 3301.HK (Ronshine China Holdings): reports September contracted sales CNY445.6M; StreetAccount notes year-ago figure was CNY1.17B

    • -9.1% 2020.HK (ANTA Sports Products): reports Q3 operational update

    • -8.5% 540376.IN (Avenue Supermarts): reports Q2 (standalone) profit after tax INR7.10B vs StreetAccount INR7.45B

    • -5.5% 532163.IN (Saregama India): Reliance Industries reportedly in discussions to acquire stake in Dharma Productions

    • -4.1% 3908.HK (China International Capital): under CSRC investigation for negligence in S2C's failed IPO

    • -3.0% 1326.TT (Formosa Chemicals & Fibre): reports September revenue NT$27.51B, (11.3%) y/y

• Data:

  • Economic:

    • China September

      • CPI +0.4% y/y vs consensus +0.6% and +0.6% in prior month

        • PPI (2.8%) y/y vs consensus (2.5%) and (1.8%) in prior month

      • Trade balance $81.71B vs consensus $89.80B and $91.02B in prior month

        • Exports +2.4% y/y vs consensus +6.0% and +8.7% in prior month

        • Imports +0.3% y/y vs consensus +0.9% and +0.5% in prior month

    • Singapore Q3

      • GDP +4.1% y/y vs FactSet consensus +3.3% and +2.9% in prior quarter

        • GDP +2.1% q/q vs +0.4% in prior quarter

    • India September

      • Provisional WPI +1.84% y/y vs consensus +1.90% and +1.31% in August

  • Markets:

    • Nikkei: Closed

    • Hang Seng: (159.11) or (0.75%) to 21092.87

    • Shanghai Composite: 66.58 or +2.07% to 3284.32

    • Shenzhen Composite: 55.29 or +3.01% to 1890.24

    • ASX200: 38.30 or +0.47% to 8252.80

    • KOSPI: 26.38 or +1.02% to 2623.29

    • SENSEX: 545.95 or +0.67% to 81927.31

  • Currencies:

    • $-¥: +0.24 or +0.16% to 149.3840

    • $-KRW: +7.55 or +0.56% to 1356.8700

    • A$-$: (0.00) or (0.27%) to 0.6732

    • $-INR: (0.03) or (0.04%) to 84.0633

    • $-CNY: +0.01 or +0.18% to 7.0790