Oct 17 ,2024
Synopsis:
Asian equities ended mixed Thursday. Greater China markets gave up bright starts to end lower again, Japan's main boards also opened higher only to finish lower. Australia higher as financials gained. South Korea flat, Taiwan a few points higher. Southeast Asia strong. US futures mixed, Europe opened with modest gains. US dollar hovering at overnight highs, AUD recovering a smidge on employment data, other currencies quiet. Treasury yields higher, JGB 10Y nearing 1.0% again, CGB yields lower. Crude oil higher, precious metals mixed, industrials little changed.
Asia markets encouraged by another positive day on Wall Street but the positive sentiment fizzled as investors appeared unimpressed by China's housing ministry briefing. The ministry unveiled a 'white list' of property projects eligible for financing support but neglected to give a figure allocated to local governments to acquire unfinished homes, disappointing investors. Hong Kong mainland property index was sharply lower along with property stocks in the main Hang Seng benchmark. Ahead tomorrow are China GDP and September economic activity data, both of which are expected to underwhelm again, at best.
Australian employment data was higher than expected in a blow to those looking for a RBA rate cut. Japan exports unexpectedly shrunk for first time since Nov-2023 amid sharp declines in auto shipments and a drag from China. Singapore non-oil export growth fell sharply amid noticeable slowdown in growth of electronics shipments.
Sunac China (1918.HK) said it would launch a 489M share top-up program at HK$2.46 per share as it seeks to recapitalize its balance sheet. Hyundai Motor (005380.KS) said the IPO of its India unit was fully subscribed, priced shares at INR1,960, the upper end of its range. TSMC (2330.TT) raised its revenue outlook and posted a 54% increase in quarterly net income. Star Entertainment's (SGR.AU) will have to pay A$15M in fines and see its casino license suspended but it can continue operations in Sydney under government supervision. BHP Group (BHP.AU) said it is on track to meet FY25 production guidance; media reports CEO Henry met South African government officials last week, stoking speculation it may resurrect bid for Anglo American.
Digest:
China pledges CNY4T credit by year-end for unfinished homes:
At a press conference, China's housing minister Ni Hong said country will widen credit scope of so-called "white list" program to CNY4T ($562B) by year-end, part of authorities' top-down plan to ensure unfinished homes delivered to buyers. Added all residential property projects will be included in the program to receive loan support. NFRA Deputy Director Xiao Yuanqi added loans for white list projects stand at CNY2.2T as of 16-Oct and amount will double by year-end. Ni said banks asked to lend to "white list" projects as much as possible and expedite loan issuance process. Ni added government will target to renovate 1M houses in "urban villages". Officials said China's residential market is starting to find bottom. PBOC Deputy Governor Tao Ling said about 50M households expected to save CNY150B in mortgage costs from late October onwards. Bloomberg citing analysts noted market may be disappointed about lack of concrete number that local governments will spend on buying unsold homes. Hang Seng Mainland Properties Index down more than 6.5% on Thursday, erasing all the gains from October.
Japan exports unexpectedly fall as China-bound shipments turn negative:
Customs exports fell 1.7% y/y in September, contrasting with expectations for a 0.5% rise. Follows revised 5.5% growth in the previous month, marking the first decline since Nov-23. Weakness driven by sharp declines in autos, metallurgical fuel and construction/mining machinery. Main support came from strong growth in semiconductor-making equipment. Regional demand was broadly lower as US shipments fell for the second straight month, EU extended declines to six. Asia growth virtually stalled, up 0.3%, the softest in the current 10-month growth stretch. China was the notable swing factor where exports fell for the first time since Nov-23. Imports increased 2.1%, also below consensus 3.2%, following 2.3% in August. Growth driven by PCs, tech parts and drugs, partially offset by lower crude oil. Nominal figures continued to mask ongoing declines in volume -- exports fell for the eighth month while imports logged a second straight decrease. BOJ real trade indices showed exports up 4.0% m/m, outpacing a 1.3% rise in imports, though Q3 growth aggregates finished virtually level, pointing to a neutral contribution to GDP.
Australian labor market continues to run hotter:
Australian economy added 64.1K jobs in September, more than double consensus for 25.2K gain and August's 42.6K increase. Represented strongest monthly jobs growth since Feb-2024 and brought six-month average gain to 47.5K. Headline jobs growth has beaten expectations six months in a row. Unemployment rate unexpectedly held at 4.1% after prior month's was revised down from 4.2%, this as participation rate rose to 67.2% from 67.1%. Composition was strong with 51.6K full-time positions added compared to 12.5K part-time jobs. Indications of labor market slack tightened with underemployment rate falling to 6.3% from 6.5%. Data likely to reinforce perceptions of a labor market that remains tighter than consistent with full employment. September RBA minutes also showed board discussed scenarios where policy may need to be tightened further if labor market is stronger than forecast. RBA will update economic forecasts in November after projecting year-end unemployment rate of 4.3% back in August. Market-implied odds of RBA rate cut in February fell back to 70% from 100% prior to data (Bloomberg).
Singapore non-oil exports slow from August's high, miss expectations:
Singapore's volatile non-oil exports (NODX) slowed in September on a sharp deceleration in electronic products and on steep declines in shipments to Hong Kong, US. Enterprise Singapore data showed NODX grew 2.7% y/y from 10.7% growth in August, versus forecast 9.5%; on m/m basis, exports rose 1.1% from August's 4.7% contraction. Data reflects regular volatility in Singapore's export sector however broad pattern fits others in region including Japan's trade data released Thursday (Bloomberg). Electronics shipments grew 4.0% y/y vs August's 35.1% expansion, non-electronics 2.3% y/y from 3.6%. By country, exports to US, Hong Kong, Japan contracted sharply while those to the EU increased on higher pharma exports; NODX to South Korea, Southeast Asia increased (BusinessTimes). EnterpriseSG had flagged potential for lower exports in H2 last month on lower-than-expected global economic recovery after lowering FY forecast. Data comes days after MAS left its monetary policy settings unchanged, bucking regional trend.
China cyber association calls for probe into Intel products over security, reliability concerns:
Bloomberg reported the Cyber Security Association of China, backed by the Cyberspace Administration of China (CAC) called for an investigation into Intel (INTC) products sold domestically, citing security flaws and high failure rates. Reuters cited the statement posted on WeChat, accusing Intel chips, including Xeon processors used for AI tasks, of carrying several vulnerabilities, concluding that Intel "has major defects when it comes to product quality, security management, indicating that it is extremely irresponsible attitude towards customers." Added that operating systems embedded in all Intel processors are vulnerable to backdoors created by the US National Security Agency. Unclear whether CAC has endorsed the position, but articles noted a ban could further tighten supply of AI chips in China struggling to find alternatives, as well as adding to headwinds for Intel, as China accounted for over a quarter of revenues last year. Reuters said public tenders showed Intel this year secured Xeon orders from several Chinese state-linked agencies for AI applications.
Notable Gainers:
+8.7% 034020.KS (Doosan Enerbility): Amazon investing more than $500M in nuclear energy projects including X-energy; Doosan Enerbility made strategic investment in X-energy in Jan-23
+8.0% 9508.JP (Kyushu Electric Power): Daiwa updates ratings on electric power stocks considering dividend yields; upgrades Kyushu to outperform from neutral seeing higher dividend yield vs most peers
+7.0% 3765.JP (GungHo Online Entertainment): activist Strategic Capital discloses 5.47% stake
Notable Decliners:
-27.3% 1918.HK (Sunac China Holdings): launches 489M-share top-up placement at HK$2.465/share
-17.3% 2202.HK (China Vanke): China's housing minister Ni Hong holds press conference; country to widen credit support under "white list" program to CNY4T
-11.5% 532977.IN (Bajaj Auto): reports Q2 earnings below StreetAccount estimates; analysts generally noted results were in-line with weaker EBITDA margin; many were bearish on muted festive demand
-8.6% 570.HK (China Traditional Chinese Medicine Holdings): take-private offeror seeking consent to extend Pre-Condition Long Stop Date as it is expected it is unlikely to obtain outstanding ODI approvals on or before the date; it remains uncertain whether such consent will be obtained
-1.3% BHP.AU (BHP Group): reports Q1 production; company on track to meet FY25 production guidance; CEO Mike Henry reportedly met South African government officials last week, stoking speculation company will resurrect bid for Anglo American
-0.4% 3382.JP (Seven & i): Alimentation Couche-Tard wants to buy all of Seven & i and isn't interested in a hostile acquisition
Data:
Economic:
Japan
September trade balance (¥294.3B) vs consensus (¥237.6B) and revised (¥703.2B) in prior month
Exports (1.7%) y/y vs consensus +0.5% and revised +5.5% in prior month
Imports +2.1% y/y vs consensus +3.2% and +2.3% in prior month
Australia
September employment +64.1K m/m vs consensus +25.0K and revised +42.6K in August
Unemployment rate 4.1% vs consensus 4.2% and revised 4.1% in August
Participation rate 67.2% vs consensus 67.1% and 67.1% in August
Singapore September
Non-oil domestic export y/y +2.7% versus +10.7% in prior month
Markets:
Nikkei: (269.11) or (0.69%) to 38911.19
Hang Seng: (207.75) or (1.02%) to 20079.10
Shanghai Composite: (33.56) or (1.05%) to 3169.38
Shenzhen Composite: (10.27) or (0.56%) to 1831.88
ASX200: 71.20 or +0.86% to 8355.90
KOSPI: (1.06) or (0.04%) to 2609.30
SENSEX: (478.53) or (0.59%) to 81022.83
Currencies:
$-¥: +0.10 or +0.07% to 149.7430
$-KRW: +4.30 or +0.32% to 1368.8300
A$-$: +0.00 or +0.19% to 0.6679
$-INR: (0.00) or (0.01%) to 84.0419
$-CNY: +0.01 or +0.09% to 7.1259
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