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StreetAccount Summary - Asian Market Recap: Nikkei +0.10%, Hang Seng (1.30%), Shanghai Composite (0.68%) as of 04:10 ET

Oct 24 ,2024

  • Synopsis:

    • Asia equities ended mostly lower Thursday. Sharpest losses in Hong Kong as traders pared yesterday's gains, mainland exchanges also lower. Kospi down as technology stocks fell but SK Hynix gained on results, Taiex also lower. Japan and Australia closed near the flatline, India also trading flat. Southeast Asia mostly lower, Singapore a bright spot. US futures turning positive, Europe opened with gains. US dollar slightly off overnight peaks, yen stronger on finmin comments, quiet elsewhere. Treasury yields higher at the short end, lower at the long. Crude oil, precious and industrial metals higher although iron ore down slightly.

    • Asia equities started brightly but tailed off as the day progressed. Risk sentiment tapering steeply this week as the US Presidential election nears with neither candidate pulling ahead decisively in the polls, raising fears of a razor thin 2000-style outcome in which a winner is not quickly known. Growing market talk of Asia-related catalysts postponed until after the outcome is clear, including the magnitude of China's fiscal policy support, and the BOJ interest rate decision. US election risk also contributing to elevated US dollar, which is adding weight to Asia currencies and equities over the medium term.

    • Today, BOJ Governor Ueda gave few clues as to when or what the bank may do next. The country's finance minister also commented on the one-sidedness of the recent yen move but with little impact on the yen. Elsewhere, RBNZ Governor Orr flagged measured approach to rate cuts amid persistent inflation. South Korea Q3 GDP growth slowed by more than expected amid a drag from exports. Japan flash PMIs showed manufacturing contracted at an accelerated pace, Australia flash indicators showed a degree of stabilization, India flash PMIs ticked higher.

    • Hesai (HSAI) is to sue the US government after the Pentagon reinstated it onto its blacklist of Chinese companies linked to the PLA. Hyundai Motor (005380.KS) said a slowdown in global car demand and warranty costs over its Santa Fe SUV forced it to miss Q3 profit estimates; said it will increase hybrid line up amid EV demand slowdown. SK Hynix (000660.KS) played down fears over an oversupply of ships used in generative AI chipsets, saying production of high-margin HBM chips was limited, demand likely to outpace supply next year. HMC Capital (HMC.AU) is to acquire data center company Global Switch Australia in a A$1.94B ($1.29B) deal.

  • Digest:

    • BOJ Governor Ueda wary of speculation build-up if policy normalization follows very gradual path:

      • Nikkei cited comments from BOJ Governor Ueda at an IMF event in Washington, noting that policy normalization has only just begun while acknowledging attention on the US economic outlook, particularly the labor market, as a key risk factor. While refraining from offering clearer signals, Ueda indicated plans to continue rate hikes. According to Bloomberg, Ueda said he is constantly thinking about the appropriate size and time horizon of rate hikes, taken as reaffirmation of a base hawkish stance. Added that simply waiting isn't necessarily the right solution as sending only cautious signals in the face of uncertainty could lead to undesirable market positioning. Key quote was that a very gradual normalization approach that creates low-for-long expectations could lead to a buildup of huge speculative positions. Article noted Ueda's remarks came after USD/JPY peaked at 153.19. In contrast, Reuters coverage leaned relatively dovish, highlighting another quote that it was "still taking time" to sustainably achieve its 2% inflation target and the goal is still to lift inflation expectations, underlying inflation, and move to a new equilibrium 2% inflation in a sustainable way.

    • SK Hynix posts record earnings, AI tailwinds expected to continue:

      • SK Hynix (000660.KS) Q3 operating profit was KRW7.030T ($5.1B), above StreetAccount consensus KRW6.883T. Revenue was somewhat below expectations at KRW17.573T vs SA KRW18.152. However, the company noted all key metrics, including net profit, were an all-time high. Revenue miss came mainly in NAND, though this segment and DRAM doubled on the year. Cited ongoing strong demand for AI memory centered on data centers and boosted further by expanding sales of premium products such as HBM and eSSD. ASP in DRAM and NAND rose in the mid-10% range q/q. Company predicts strong uptrend in demand for AI server memory to continue next year with high teen percentage growth in DRAM and mid-teens in NAND. Cited generative AI developing into multi-modal form and global tech companies continue to invest in artificial general intelligence. Sees steady growth in PC and mobile markets as AI memories optimized for each device are released. Share price strengthened notably from a weak start to Thursday's session. Press takeaways indicated no major reactions despite the headline milestone, noting shares were already up more than 35% this year and much of the focus was on ties to Nvidia (NVDA).

    • South Korea Q3 GDP weaker than expected as exports decline:

      • GDP expanded 0.1% q/q in Q3, below consensus 0.5%, though still rebounded from a surprise 0.2% contraction in the prior quarter. Main surprise was a 0.4% decline in exports for the first time since 4Q22. External demand drag was compounded by 1.5% growth in imports. Domestic demand was positive overall as private consumption rebounded 0.5% from a 0.2% contraction. In gross fixed capital formation, facilities bounced 6.9% though was largely offset by a 2.8% drop in construction for the second straight decrease. Sector profile showed agriculture and utilities were the main bright spots, manufacturing and services were marginally higher, while construction declined. At the data briefing, BOK official flagged downside risks to their current GDP growth forecast of 2.4% in 2024 (Reuters). Recall the October BOK policy statement noted heightening uncertainties surrounding their GDP growth projections, citing a delayed recovery in domestic demand. Rate cut decision was afforded by stabilizing inflation, slowing household debt growth, and some cessation in FX risks. Noted particular attention on the rate cut impact on household debt, which had been cited as a key hurdle against a rate cut until now.

    • Japan flash PMIs broadly soften:

      • Flash manufacturing PMI was 49.0 in October, down from 49.7 in the previous month, marking the fourth straight month in contraction and a sluggish start to Q4. Details were broadly soft. Output and new orders logged the strongest declines in six and seven months respectively. This led to the first employment decline since February. Backlogs and finished goods inventories fell at a faster pace. Inflation metrics were mixed with stronger output prices and softer input prices. Services PMI fell notably to 49.3 from 53.1, the first contraction in four months and the weakest reading since Feb-22. Output, new orders and exports all swung to declines. Anecdotal responses indicated economic weakness at home and abroad led clients to hold back on new orders. Contrasting inflation dynamics showed stronger input price inflation with softer output prices (slowest increase in 11 months). Broad-based declines left the composite PMI down to 49.4 from 52.0, the first contraction since June. Report did not mention anything specific beyond softer demand conditions amid stubborn inflation. Attention turns to industrial production where latest August data showed surprising weakness, though survey projections pointed to a fast start to Q4.

    • Indian business activity rises in October amid growth in sales and employment:

      • HSBC India flash composite PMI edged up to 58.6 in October from 58.3 in September, outpacing long-term average of 54.7 and was in expansion territory for 39th successive month. Manufacturing PMI rose to 57.4 from September's eight-month low of 56.5. Services PMI climbed to 57.9 from 57.7. Indian businesses indicated sharp increase in new order intakes, fueled by improvement in international demand. Outstanding business volumes rose to greatest extent in three months, resulting a mild pick-up in capacity pressures. While marginal decline in backlogs at goods producers contrasted with fastest accumulation at service providers since May. Hiring activity more pronounced in service economy, which saw quickest increase in almost two decades. Input cost inflation at composite level rose to strongest in three months, and private sector companies raised selling prices at start of October. Manufacturers posted sharpest upturn in 11 years and were most optimistic since July, while sentiment faded at services companies.

    • Notable Gainers:

      • +5.2% 1898.HK (China Coal Energy): reports Q3 revenue with +1.2% y/y growth

      • +4.4% 1928.HK (Sands China): Las Vegas Sands reports Q3 earnings; in a conference call, Las Vegas Sands president Patrick Dumont say Sands China may pay dividends this year

      • +3.3% 7832.JP (BANDAI NAMCO Holdings): revises guidance upward; analysts note revisions account for factors including strong Elden Ring DLC sales, card games performance, contributions from mobile game Gakuen Idolmaster

      • +2.9% 3382.JP (Seven & i): hold IR Day 2024 Autumn; company targeting revenue of more than ¥30T by 2030

      • +1.1% 000660.KS (SK Hynix): reports Q3 revenue below StreetAccount estimates, operating profit ahead

    • Notable Decliners:

      • -11.9% 011070.KS (LG Innotek Co.): reports Q3 operating profit below StreetAccount estimates; analysts note factors including unfavorable FX and intensifying competition weighed on the results

      • -6.2% 9901.HK (New Oriental Education & Technology Group): reports Q1 revenue and Q2 revenue guidance below FactSet estimates; analysts note weaker consumption sentiment is impacting higher-priced offerings

      • -5.2% 005380.KS (Hyundai Motor): reports Q3 revenue and operating profit below StreetAccount estimates

      • -3.4% 338.HK (Sinopec Shanghai Petrochemical): reports Q3 results and 9M operating data

      • -2.5% 6110.HK (Topsports International Holdings): reports Q2 results; total retail and wholesale sales registers y/y low-teens decline; analysts raise some concerns regarding gross margin compression as weaker offline traffic led to higher discounts aimed at clearing excess inventory

  • Data:

    • Economic:

      • Japan October

        • October flash manufacturing PMI 49.0 vs 49.7 in prior month

        • Services PMI 49.3 vs 53.1 in prior month

          • Composite PMI 49.4 vs 52.0 in prior month

      • South Korea Q3

        • Q3 GDP +0.1% q/q vs consensus +0.5% and (0.2%) in prior quarter

          • GDP +1.5% y/y vs consensus +2.0% and +2.3% in prior quarter

    • India October

      • Flash manufacturing PMI 57.4 vs Final 56.5 in prior month

        • Services PMI 57.9 vs 57.7 in prior month

        • Composite PMI 58.6 vs 58.3 in prior month

  • Markets:

    • Nikkei: 38.43 or +0.10% to 38143.29

    • Hang Seng: (270.53) or (1.30%) to 20489.62

    • Shanghai Composite: (22.54) or (0.68%) to 3280.26

    • Shenzhen Composite: (17.75) or (0.91%) to 1938.81

    • ASX200: (9.70) or (0.12%) to 8206.30

    • KOSPI: (18.59) or (0.72%) to 2581.03

    • SENSEX: (26.98) or (0.03%) to 80054.99

  • Currencies:

    • $-¥: (0.50) or (0.33%) to 152.2410

    • $-KRW: (2.97) or (0.21%) to 1377.6000

    • A$-$: +0.00 or +0.27% to 0.6652

    • $-INR: (0.03) or (0.03%) to 84.0723

    • $-CNY: (0.02) or (0.21%) to 7.1112

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