Oct 15 ,2024
Synopsis:
Asia equities traded mostly higher Tuesday ex Greater China: Solid gains in most Asia markets today although many off their highs by the close. Taiwan led with solid gains in Japan, Australia and South Korea. India trading slightly lower, Southeast Asia mostly higher. Greater China fell abruptly with losses accelerating in Hong Kong in the afternoon session. US futures mixed, European markets also mixed at the open. US dollar lower following IEA comments, AUD, yuan at one-month lows; yen strengthened late on. Treasury yields higher across tenors. Brent and WTI futures sharply lower after Israel ruled out an attack on Iranian oil facilities, bearish IEA comments. Precious metals also lower, industrial metals mixed.
Greater China markets sold off sharply over the day with losses most acute in Hong Kong's afternoon session. Mainland markets steady initially before dipping and while no specific catalyst led to the selloff, poor trade and credit data overnight, added to weak inflation and a disappointing MoF briefing Saturday, combined to place substantial pressure on markets. The yuan was also notably weaker while CGB yields slid in late trade.
Elsewhere, equities supported from positive overnight close on Wall Street with tech stocks gaining on Nvidia's record high end to the day. Oil prices down again in Asia trade to follow overnight losses after Israel said it would not attack Iran's oil or nuclear facilities. Prices taking another leg down late on after IEA said oil market faces sizeable surplus in the new year. Light news day otherwise with focus firmly on China; several regional central bank decisions to follow this week, while analysts warn of risk-off sentiment potential before month end prior to US elections.
Bain Capital has made a binding ¥9,450 per share offer for Fuji Soft (9749.JP), ¥650 per share higher than existing KKR offer. HSBC (5.HK) is investigating expenses and operational controls at its China-based wealth business Pinnacle. Sino-Ocean (3377.HK) said it expects to generate $2.8B in cash over the next decade to repay its new financing instruments. Blackrock and Fidelity were reported to be among the institutional stock buyers of Hyundai Motor's (005380.KS) India unit in a $989.4M pre-IPO sale.
Digest:
China market selloff accelerates as poor economic data, fiscal stimulus plans disappoint:
Hang Seng sharply accelerated selloff in afternoon trade Tuesday, adding to losses over morning as investors responded to weak trade, inflation, credit data, adding to disappointing finance ministry briefing Saturday. At close in Hong Kong, Hang Seng almost 4.0% lower, underperformance in consumption, internet & IT stocks; Hang Seng Enterprises, mainland properties indexes around 4.1% lower. Caixin report Monday cited CNY6T of CGB sale over three years supported sentiment for short time before selloff began. Increasing number of economists say they remain unconvinced of fiscal stimulus plans after MoF declined to give final figure of package (Bloomberg). Yuan down sharply to one-month low following weaker fixing by PBOC Tuesday morning; forex also pressed by spike in US dollar. CGB yields lower with steepest falls in belly of the curve.
China may issue CNY6T in treasury bonds over three years, banks mull lower deposit rates:
Caixin sources said central government may issue an additional CNY6T ($846B) in treasury bonds over three years to fund the stimulus package signaled by the Finance Ministry. Some funds to be allocated to local government debt assistance. The remainder of the article reprised Finance Minister Lan's comments at the weekend briefing, noting local government support would be substantial. Separately, Bloomberg sources said banks set to cut deposit rates as soon as this week in the wake of stimulus announcements. Rates may be lowered by 20 bp for 1-year term deposits and at least 25 bp for longer tenors. Indications follow a record cut to the 1-year MLF rate last month and PBOC Governor Pan said reduction in deposit rates would follow. Article noted this would be the second round of deposit rate cuts this year, after major banks previously moved in July. Banking sector profitability remains a concern as aggregate NIMs were reported at a record-low 1.54% in June-end. Yet Finance Ministry signaled special treasury bonds will be issued to support large state-owned commercial banks in replenishing core tier-1 capital, and Bloomberg previously reported a scale of up to CNY1T ($140.6B).
China loan growth softens to record-low as hopes turn to stimulus:
New loans were CNY1.59T in September, below consensus CNY1.87T and follows CNY900B in the previous month. Outstanding loan growth softened to a new record-low 8.1% y/y from 8.5% vs consensus 8.3%. Total social financing came to CNY3.76T vs consensus CNY3.73T and CNY3.03T in prior month. M2 money supply expanded 6.8% y/y, above consensus 6.4%. Follows 6.3% in July which was just off a record-low 6.2% in June. According to Bloomberg, new corporate loans declined to CNY970B from CNY1.3T a year earlier, while household loans more than halved. Main support came from seasonal quarter-end run-up in lending activity and more than CNY1.5T in government bond issuance. LGSB issuance estimated at over CNY1T for the month, the highest since Jun-22. Data now viewed as backward-looking after a slate of policy support announcements late last month and too early to be reflected in the September data. Article cited doubts that monetary easing measures alone would have much impact on total credit demand, which is a function of broader economic activity that requires a fiscal boost.
China's export growth slows sharply in September:
China's exports rose 2.4% y/y in September, much lower than Reuters forecast of 6.0% and sharply down from 8.7% growth in August. Still exports grew for sixth straight month. Meanwhile imports inched up 0.3%, also below consensus of 0.9% and last month's 0.5% rise. Trade surplus was at $81.71B, lower than $89.80B expected and $91.02B in August. A spokesperson from China Customs acknowledged slowdown in export growth in September, saying it is affected by some short-term volatility factors. Adding extreme weather conditions, including typhoons hitting Yangtze River Delta region, global shipping disruption, container shortages and higher base effects. Bloomberg noted exports are rare bright spot for China's economy this year with total value of shipments through September the second highest on record. Meanwhile import growth is much slower amid sluggish domestic growth, leading to record trade surplus and fueling more trade tensions. Meanwhile the spokesperson said China does not "deliberately" pursue trade surplus. Recent expansion in goods due to China's industrial competitiveness, export resilience and fall in commodity prices have lowered import values.
BOJ rate hike consensus forecast unclear since Ishiba's remarks:
Reuters poll conducted Oct 3-11 found 25 out of 49 (51%) economists look for the policy rate to remain at 0.25% through year-end, edging up from 46% in September. Still, 87% said BOJ would implement a 25 bp rate hike by the end of March next year. Prime Minister Ishiba's recent remarks that the economy was not ready for further rate hikes added another hurdle. Also noted doubts that BOJ would act so soon after the general election and shortly followed by the budget formulation process toward year-end. Survey details were complicated -- Among a smaller sample of 18 economists who predicted higher rates by year-end and also specified a forecast for the next move, only one did not forecast December. Out of another 19 that anticipated a hike next year, or none at all, 14 (74%) saw January as the most likely timing, up from 60% in last month's survey. However, latest JCER poll (26-Sep to 3-Oct) showed 19 of 36 still look for a December move, unchanged from last month. Among them, most anticipate a 25 bp hike, though some are calling for only 10 bp. Recall Ishiba's comments on BOJ policy came on 3-Oct, straddling the two survey periods.
Notable Gainers:
+12.5% 3048.JP (Bic Camera): reports FY operating income ¥24.39B vs FactSet ¥23.07B
+7.4% 9749.JP (Fuji Soft): Bain Capital makes binding offer of ¥9,450/share for Fuji Soft
+5.0% 4519.JP (Chugai Pharmaceutical): FDA grants orphan drug designation to Biomarin Pharmaceutical for vosoritide to treat short stature in Noonan syndrome
+3.0% 010130.KS (Korea Zinc Co.): Korea Corporate Investment Holdings, Young Poong completes tender offer for Zinc Co.; acquires 5.34% stake at KRW830,000/share
+1.9% 002371.CH (NAURA Technology Group): guides Q3 net income attributable CNY1.56-1.79B vs FactSet CNY1.46B
+0.0% NO4.SP (Dyna-Mac Holdings): Hanwha Aerospace, Hanwha Ocean raise offer for Dyna-Mac to SG$0.67/share from SG$0.60/share
Notable Decliners:
-4.4% 300274.CH (Sungrow Power Supply): to launch GDR offering of up to 10% of shares on issue; provides updated dividend policy for years 2024-2026
-2.7% 4443.JP (Sansan): reports Q1 revenue ¥9.58B vs FactSet ¥9.72B
-1.7% 500325.IN (Reliance Industries): reports Q2 consolidated EPS INR24.48 vs StreetAccount INR25.29
Data:
Economic:
Japan August
Industrial production m/m (revised) (3.3%) versus consensus (3.3%) and (3.3%) in prior month
Retail sales NSA y/y +3.09% versus consensus +2.8% and +2.8% in prior month
China September
New loans CNY1.59T vs consensus CNY1.87T and CNY900B in prior month (Monday)
Outstanding yuan loan growth +8.1% y/y vs consensus +8.3% and +8.5% in prior month
Total social financing CNY3.76T versus consensus CNY3.73T and CNY3.03T in prior month
M2 money supply +6.8% y/y vs consensus +6.4% and +6.3% in prior month
Trade balance $81.71B vs consensus $89.80B and $91.02B in prior month (Monday)
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
Markets:
Nikkei: 304.75 or +0.77% to 39910.55
Hang Seng: (774.08) or (3.67%) to 20318.79
Shanghai Composite: (83.03) or (2.53%) to 3201.29
Shenzhen Composite: (39.73) or (2.10%) to 1850.50
ASX200: 65.60 or +0.79% to 8318.40
KOSPI: 10.16 or +0.39% to 2633.45
SENSEX: (220.05) or (0.27%) to 81752.99
Currencies:
$-¥: (0.72) or (0.48%) to 149.1000
$-KRW: +1.64 or +0.12% to 1360.0100
A$-$: (0.00) or (0.28%) to 0.6708
$-INR: +0.01 or +0.01% to 84.0730
$-CNY: +0.03 or +0.39% to 7.1154
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