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StreetAccount Summary - Asian Market Recap: Nikkei (0.80%), Hang Seng +1.27%, Shanghai Composite +0.52% as of 04:10 ET

Oct 23 ,2024

• Synopsis:

  • Asian equities ended mixed Wednesday. Region led by Hong Kong which rose on market fund proposals, mainland markets also higher. Moderate gains in Australia, India and Singapore; South Korea sharply higher. Losses in Taiwan and Japan. Southeast Asia mixed. US futures slightly lower, Europe paring early gains to trade lower. Dollar higher again, yen weakening sharply with no comment from authorities, other Asia currencies lower. Treasury yield higher across tenors. Crude oil lower, gold at fresh record high, industrial metals mixed.

  • Bond yields continue to rise across the region to track Treasuries that have supported the US dollar and created headwinds for Asia's stocks. Volatility set to continue with US presidential election outcome and Fed rate cut timetable increasingly uncertain while, within Asia, the depth and impact of China's stimulus program still being vigorously debated. Today, an influential China state think tank called for the creation of a $281B stock market stabilization fund and a social welfare program paid for by a special government bond issuance. Approaching NPC and State Council meetings flagged for possible detail and overall headline stimulus figure.

  • In other developments, IMF reduced economic growth forecasts for China, questioning sufficiency of stimulus measures, and cut growth forecasts for Japan, though saw BOJ remaining on normalization trajectory with inflation on track. South Korea consumer sentiment rebounding amid BOK rate cut hopes, September Singapore inflation slightly above expectations, Taiwan September activity data mixed with industrial output dipping but retail sales growing.

  • Activist investor Effissimo Capital Management has disclosed it has acquired a 5.8% stake in Konica Minolta (4902.JP). TSMC (2330.TT) is said to have notified the US government that one of its chips was found in a Huawei product after a Tech Insights dissection. Paytm (One 97 Communications, 543396.IN) received approval from India's payments regulator to restart enrolling UPI users. China Resources Beverages (2460.HK) and Tokyo Metro (9023.JP) both surged on their stock market debuts.

• Digest:

  • China thinktank proposes CNY2T stock market stability fund, stronger inflation target:

    • Bloomberg highlighted an article by The Paper which summarized economic proposals in a Q3 CASS Institute of Finance & Banking report. Advocated for additional fiscal support via special government bond issuance to bolster social welfare as well as a CNY2T ($281B) stock market stabilization fund to purchase blue chips and ETFs. On monetary policy, said PBOC should increase priority on deflation risk and strengthen its inflation target. Offered an example that would see the central bank operate under clear guidance committing to easy policy until inflation is anchored at 2%, assimilating to language used by other central banks. Recall that fiscal stimulus expectations vary though a recent Bloomberg survey found consensus looked for a headline figure of up to CNY2T likely funded by special government bonds, though the story noted there was also about CNY2T in unspent issuance quotas as of 2023-end. Forecasts were largely shaped by an earlier Reuters piece indicating China planning to issue about CNY2T in special government bonds with half allocated to consumption stimulus and the remainder for local government debt restructuring.

  • IMF reaffirms 2024 global growth forecasts, but shaves China, Japan:

    • IMF October World Economic Outlook report showed global GDP growth estimate was unchanged at 3.2% in 2024 as firmer US momentum offsets slower growth in Europe. Asia recalibrations were on the soft side. Japan growth was revised down 0.4 ppt to 0.3%, China downgraded 0.2 ppt to 4.8% (aligning with consensus), while ASEAN was nudged up 0.1 ppt to 4.5%. Emerging Asia was seen as a bright spot on the back of surging demand for semiconductors and electronics, driven by AI investments. Risks to the global outlook seen tilted to the downside amid elevated policy uncertainty. Recalled the financial market volatility in August as an example of how financial conditions could tighten, while further disruptions to the disinflation process could arise from new spikes in commodity prices amid persistent geopolitical tensions, which could prevent central banks from easing policy. Noted a deeper or protracted China property weakness could weaken consumer sentiment and generate negative global spillovers. Trade tensions remain an overhang.

  • Indian stocks under pressure as foreign outflows continue:

    • Nifty 50 Index has slid more than 5% MTD and is on track for worst monthly performance since March-2020. Recent slump of Indian stocks due to continuous selling by foreign investors amid concerns over slowing earnings growth, multiple IPOs and QIPs (EconomicTimes). FIIs net sold INR39.79B ($473M) worth of stocks on Tuesday, taking sales tally to INR836B in October, biggest monthly selling. Meanwhile DIIs pumped INR833B into the market in October, which Goldman strategists noted as providing support so that a large price correction is less likely, though markets could "time correct" over next three to six months. The bank tactically lowered Indian stocks to neutral from overweight (Bloomberg). Meanwhile BusinessStandard citing various analysts noted mid-cap and small-cap may underperform large-cap stocks in coming months. Noted even after recent correction, BSE Smallcap Index still trades at 40-45% premium to Nifty on TTM earnings, and smallcap and microcap risk slipping into deeper correction.

  • IMF's Gourinchas and Secretary Yellen say China's stimulus not meaningfully boost domestic demand:

    • Reuters reported IMF chief economist Pierre-Olivier Gourinchas and US Treasury Secretary Janet Yellen said separately that they had not seen any China stimulus measures so far that would boost domestic demand enough to absorb excess production and boost growth. Gourinchas said recent measures from Ministry of Finance lacked details and therefore were not incorporated into IMF's forecast that lowers its 2024 projection to 4.8% from 5% estimated in July, meanwhile monetary stimulus from PBOC would do little to materially lift growth. Gourinchas added increased exports from China were not primarily due to industrial policies but rather low consumer spending coupled with deteroriating property market that damages household wealth. Yellen agreed on need to boost China's consumer spending and reduce savings as share of GDP, while also took harder view of China's overcapacity, saying Beijing's "utterly enormous" subsidies threaten US manufacturing jobs. Separately, Bloomberg cited JPMorgan chief China economist Haibin Zhu who said Beijing's stimulus blitz is designed more to mitigate risks than to provide broad stimulus in near term, therefore isn't a "game changer".

  • Singapore core CPI remains elevated, justifying tight MAS monetary policy:

    • Singapore's September headline and core inflation readings remained elevated and were marginally higher than consensus expectations. Monetary Authority of Singapore (MAS) last week kept monetary policy tight but with neutral stance, forecasting inflation would ease to 1.5-2.5% next year. Statistics office showed MAS's key gauge, core inflation, rose to 2.8% in September y/y from 2.7% in August, 2.7% forecast; headline CPI 2.0%, below August's 2.2% but above 1.9% forecast . Prices in healthcare, recreation and culture sectors both rose above 4.0%; housing and education also above mean. Transport costs contracted 1.0%, food prices rose 2.6%. On m/m basis, core CPI rose 0.1%, headline up 0.3%. Last week MAS held S$NEER rate band steady and on appreciating path to cap import prices but said inflation outlook more balanced than previous reading, raised hopes of easing in next policy review to follow regional suit.

  • Notable Gainers:

    • +44.9% 9023.JP (Tokyo Metro): debuts +35.8% at ¥1,630/share on Tokyo Stock Exchange

    • +17.5% 9992.HK (Pop Mart International Group): provides Q3 business update; overall revenue recorded increase of +120%-125% y/y

    • +15.4% 2460.HK (China Resources Beverage (Holdings)): debuts +13.5% at HK$16.46/share on HKEx

    • +11.2% 4902.JP (Konica Minolta): activist Effissimo Capital Management discloses 5.81% stake

    • +7.6% 1929.HK (Chow Tai Fook Jewellery Group): reports Q2 update; analysts widely pointed out that Mainland China's SSSG showed improvement in Q2, with decline narrowing compared to Q1

    • +6.1% 8804.JP (Tokyo Tatemono): Activist Palliser Capital owns 1.5% stake in Tokyo Tatemono; suggests company should "identify non-synergistic listed equity investments that should be divested to unlock value"

    • +3.3% 066570.KS (LG Electronics): announces corporate value-up program including newly disclosed ROE targets and buyback/treasurey share cancellation plans

  • Notable Decliners:

    • -6.6% 836.HK (China Resources Power Holdings): launches 168.1M share offering priced at HK$19.70/share through BofA with net proceeds from the subscription amounting to HK$3.89B

    • -5.5% 8218.JP (KOMERI CO.): reports Q2 earnings below FactSet estimates; reiterates FY guidance

    • -4.9% 2331.HK (Li Ning): reports Q3 operational update; retail sell-through of LI-NING POS declined by mid-single-digit y/y

• Data:

  • Economic:

    • Singapore September

      • CPI +2.0% y/y vs consensus +1.9% and +2.2% in prior month

        • CPI +0.3% m/m vs +0.7% in prior month

        • Core inflation +2.8% y/y vs consensus +2.7% and +2.7% in prior month

  • Markets:

    • Nikkei: (307.10) or (0.80%) to 38104.86

    • Hang Seng: 261.20 or +1.27% to 20760.15

    • Shanghai Composite: 16.94 or +0.52% to 3302.80

    • Shenzhen Composite: 2.92 or +0.15% to 1956.56

    • ASX200: 10.30 or +0.13% to 8216.00

    • KOSPI: 28.92 or +1.12% to 2599.62

    • SENSEX: 216.42 or +0.27% to 80437.14

  • Currencies:

    • $-¥: +1.31 or +0.86% to 152.3820

    • $-KRW: +1.16 or +0.08% to 1381.0000

    • A$-$: (0.00) or (0.29%) to 0.6664

    • $-INR: (0.01) or (0.01%) to 84.0756

    • $-CNY: +0.00 or +0.03% to 7.1254