Oct 22 ,2024
Synopsis:
Asian equities ended mostly lower Tuesday. Steep declines in Japan, Australia and South Korea, more modest losses in Southeast Asia and Taiwan; India seeing more losses. Greater China positive with modest gains in Shanghai and Shenzhen, Hang Seng flat. US futures lower, Europe lower in opening trades. US dollar off overnight highs but Asia currencies near unchanged. Treasury yields higher across tenors, JGB yields also higher. WTI futures below $70/bl, precious metals higher, base metals mixed.
Asia markets slipped as risk-off sentiment tightened its grip on the region. A sharp strengthening in the dollar overnight provided the negative backdrop despite Wall Street rallying into its close Monday evening. The dollar up 1% at one point intraday before it tailed off, placing pressure on the yen in particular. Evidence of central bank intervention in India and Indonesia today to support their currencies, and in contrast, only the mildest of comments on yen movements from Japan authorities which itself sparked another mild selloff.
The region's bonds tracking Treasuries lower and pushing yields to multi-week highs as markets wind back chances of another jumbo Fed rate cut. Light newsflow elsewhere. South Korea PPI fell to a 10-month low; New Zealand's trade gap narrowed in September just as local brokers mull whether the RBNZ could deliver a 75 bp cut. Hyundai Motor's India unit debuted in India but the stock underwhelmed and is down around 4%.
KKR confirmed it had extended its tender offer for Fuji Soft (9749.JP). HSBC (5.HK) named its chief risk officer as its new CFO, will change its organizational structure as part of its strategic review. Ambuja Cements (500425.IN) has acquired a 46.8% stake in Orient Cement (535754.IN) for INR81B. Waaree Technologies (539337.IN) IPO of its solar business was fully subscribed within a few hours of its launch on Monday, according to reports.
Digest:
Hyundai Motor India falls on stock market debut:
Hyundai Motor India (544274.IN) stock fell on market debut Tuesday amid lackluster retail demand for shares, and slowdown in India auto sales and consumer spending. IPO oversubscribed at INR1,960/share by 2.4x however retail only bought around half of initial allocation. Stock down 4.0% in early Mumbai trading, initial listing at 1.4% discount to IPO price (BusinessStandard). At INR278.56B ($3.3B), still India's largest ever IPO by amount raised. Other recent India IPOs also proved shaky, Ola Electric (544225.IN) down more than 40% since listing, Bajaj Housing Finance (544252.IN) down more than 20% from post IPO high despite more than doubling on debut. Peers Tata Motor (500570.IN) 24% off 52-week high, Maruti Suzuki (532500.IN) 12% lower on challenging demand for autos, weakening consumer. Separately today, RBI said dip in India consumer strength likely temporary (Reuters). Outlook for India IPOs still positive, Waaree Energies seeking to raise $514M was fully subscribed within hours of offering opening Monday (BusinessStandard).
China share buybacks hit record high amid regulator's push:
Share buybacks on mainland China bourses have risen to record high this year as authorities push for companies to return cash to shareholders (FT). Wind data showed CNY235B ($33B) shares have been bought back YTD, more than double last year's total and far exceeding previous record of CNY133B in 2022. Article cited Goldman strategist's view that buybacks made economic sense for companies with spare cash, considering cheap valuations. Move could also bolster government's finances when it held substantial stakes in companies. Surge in buybacks occurred even before the PBOC latest initiative. Recall bank started CNY300B specialized re-lending facility to help listed companies and major shareholders buy back shares as part of recent stimulus blitz (Bloomberg). Added more than 20 companies, including Sinopec, have announced share buyback plans exceeding CNY10B since scheme announcement Friday. Meanwhile companies have increased dividend payouts, which Goldman estimates Chinese companies have returned more than CNY2T to shareholders through buybacks and dividends in each of last three years. The bank said amount would reach CNY3T this year, as companies heeding CSRC's guideline in April that vowed to strengthen supervision of dividend payouts (Bloomberg).
Japan election risk weighing on equities:
Press reports indicated political uncertainties have begun to emerge as a negative factor for Japan equities. Theme gaining traction as an NHK opinion poll published Monday evening showed Prime Minister Ishiba's cabinet approval rating slid to 41% last week from 44% two weeks ago, viewed as an unconvincing level heading into Sunday's general election. Nikkei reported Monday saw notable selling pressure in utilities and defense stocks, positioning for a scenario where the LDP-Komeito ruling coalition loses majority of the lower house after Asahi Digital analysis noted a coalition victory is in a delicate balance. Brokerage views broadly appear to anticipate a weakening in the coalition's control of the house on the back of the political fundraising scandal. But with a sizable buffer (LDP held 254 seats prior to dissolution, Komeito controlled 32, majority line is 233), the likelihood of an outright election loss subject to debate. Other reports have indicated LDP faces tough competition in many seats. A Kyodo survey found 33.2% of respondents intend to vote for opposition-affiliated candidates in single-seat constituencies, overtaking the 24.6% supporting ruling coalition candidates. LDP remains ahead in the proportional representation ballot at 22.6%, but Constitutional Democratic Party narrowed the gap to 8.5 ppt from 14.0 ppt in the preceding poll.
Japan election uncertainties could complicate BOJ normalization path:
Reuters discussed growing concerns that BOJ policy normalization could face complications if the general election results in a minority government. Given that opinion polls have shown the possibility of the ruling coalition losing its majority in the lower house, the article suggested such an outcome could cost Prime Minister Ishiba's job or force the LDP to look for another party to add to the coalition in order to stay in power. Cited some analysts' views that political instability could well interrupt the BOJ's plans for a smooth normalization path. Added prospects for broader market uncertainties as attention turns to the policy stance of opposition parties that may join the coalition, many of which favor maintaining low rates. Narrative has changed notably since Ishiba dissolved parliament on 9-Oct, when many analysts expected a comfortable victory for the incumbents, providing the new premier with a freer hand on policy. That would have allowed Ishiba to realize a pledge made in a book he published in August to roll back Abenomics radical stimulus policies that included ultra-easy monetary policy. Still, the story noted LDP struggles in the polls have dashed hopes that Ishiba will revert to his own stance and support BOJ policy adjustments given a major election setback could make him vulnerable to attack from dovish members of his own party such as Takaichi, whom Ishiba narrowly beat in the LDP leadership race.
Asia currencies steady following Monday's selloff on Treasury yield spike:
Asia currencies largely steadied Tuesday to follow poor Monday which saw the US dollar appreciate more than 1.0%, pressing on region's forex. AUD and NZD under more pressure Tuesday morning at six week lows, but other EM Asia spots stabile. Dollar at near three-month high post sharp rise in Treasury yields which rose on increased expectations Fed will slow pace of rate cuts; close presidential race adding to risk as Trump win could spark uncertainty, according to analysts (Reuters). Won fell to three-month low while Treasury yield-sensitive yen underperformed, down 4.8% MTD and above 150 per dollar; yen traders wary of any intervention comments. Media reports Bank Indonesia intervening Tuesday to support rupiah, down 2.4% MTD. Other central banks intervened in recent volatile periods including RBI but rupee traded at record low Monday, expected to grind lower over coming months (Bloomberg).
Notable Gainers:
+8.6% 1548.HK (Genscript Biotech): expects to recognize significant FY gain from 18-Oct deconsolidation of Legend Biotech
+1.0% 000150.KS (Doosan): Doosan Enerbility confirms plan to split business, have new entity merge with Doosan Robotics
Notable Decliners:
-19.6% 7599.JP (IDOM Inc): Japan's FSA reportedly has carried out an on-site inspection of Gulliver, investigates business on suspicion of inflating claims
-8.0% 763.HK (ZTE): reports Q3 earnings below FactSet estimates; analysts highlighted gross margin contraction amid unfavorable change in revenue mix
-7.0% 241560.KS (Doosan Bobcat): Doosan Enerbility confirms plan to split business, have new entity merge with Doosan Robotics
-1.6% 535754.IN (Orient Cement): Ambuja Cements to acquire 46.8% stake in Orient Cement at equity value of INR81.00B or INR395.40/share
-1.5% 9749.JP (Fuji Soft): KKR confirms extension of tender offer for Fuji Soft to 5-Nov from 21-Oct
-1.1% 005380.KS (Hyundai Motor): Hyundai Motor India IPO opens at INR1,931 on BSE
-0.4% 5.HK (HSBC Holdings): names chief risk officer Pam Kaur CFO; alters organizational structure to accelerate delivery against its strategic priorities
Data:
Economic:
New Zealand September
Trade balance (NZ$2.108B) vs revised (NZ$2.306B) in August
Exports +5.2% y/y vs (0.1%) in August
Imports (0.9%) y/y vs (1.0%) in August
Markets:
Nikkei: (542.64) or (1.39%) to 38411.96
Hang Seng: 20.49 or +0.10% to 20498.95
Shanghai Composite: 17.76 or +0.54% to 3285.87
Shenzhen Composite: 16.68 or +0.86% to 1953.64
ASX200: (138.70) or (1.66%) to 8205.70
KOSPI: (34.22) or (1.31%) to 2570.70
SENSEX: (568.16) or (0.70%) to 80583.12
Currencies:
$-¥: +0.02 or +0.01% to 150.8620
$-KRW: (2.46) or (0.18%) to 1377.3100
A$-$: (0.00) or (0.13%) to 0.6684
$-INR: (0.00) or (0.00%) to 84.0779
$-CNY: +0.00 or +0.00% to 7.1198
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