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StreetAccount Summary - Asian Market Recap: Nikkei (2.63%), Hang Seng +0.93%, Shanghai Composite (0.24%) as of 04:10 ET

Nov 01 ,2024

• Synopsis:

  • Asian equities ended lower Friday to bookend a softer week for regional equities. Japan saw the sharpest declines but still held on to weekly gains, other major boards including Australia, South Korea and Taiwan all fell. Some gains on the Hang Seng but it was off its peak by the close, mainland boards were mixed. Southeast Asia mostly lower, India closed for a holiday. US futures higher, Europe higher in opening trades. US dollar a touch stronger, yen weaker but within its week-long trading range. Treasuries mixed. Crude blends higher on reports Iran could escalate attacks on Israel via Iraqi proxies. Precious metals higher, base metals mixed.

  • Asia equities ended a cautious week on the defensive as the risk-off sentiment that has built all week continued. Tech stocks also vulnerable to read across from a selloff on the Nasdaq overnight while a move higher in the yen leaned on Japanese equities all day. China markets boosted early on by private PMI manufacturing data that mirrored the official data yesterday to show a stabilization in output but a notable decline in export orders selling potential trouble for exporters ahead. Additional private data showed China new home sales rose in October for the first time this year to potentially reflect housing stimulus.

  • October PMIs elsewhere in Asia showed stagnation at best and another marked slowdown in Southeast Asia and South Korea where also today, full-month export growth data matched early figures with a pronounced slowdown in shipments, even as semiconductor exports held up. The yen extended gains overnight following Governor Ueda's remarks late Thursday which appeared relatively hawkish on the noted absence of the phrase "ample time" to examine risk before making its next move on rates.

  • Tokyo Gas (9531.JP) is in discussion with Woodside Energy (WDS.AU) over taking a stake in a Louisiana-based LNG export project. Electric Power Development (J-Power, 9513.JP) said it would sell its 50% stake in a US-based gas-fired power company to better improve capital efficiency. Geely Auto (175.HK) said it won't talk privately to the European Commission despite an approach by the EC to begin exclusive talks. The Australian Competition and Consumer Commission has taken Singtel's (Z74.SP) Optus unit to court after it allegedly exploited vulnerable people.

• Digest:

  • BOJ rate hike calls unchanged, December meeting seen as 'live':

    • Economist notes broadly described BOJ Governor Ueda's press conference remarks as meaningfully hawkish, reaffirming the viability of Dec/Jan rate hike calls. At minimum, some thoughts that Ueda's messaging was a deliberate attempt to keep market pricing on side to leave open the option of a near-term policy change and avoid undesirable market disruptions if they proceed. Mainly cited Ueda's retraction of the language that there is "ample time" to deliberate on the next move. Also highlighted another comment that board members will evaluate at each meeting with no preconceptions, interpreted to mean that no MPM has been ruled out. Individual forecasts were unchanged with the December camp notably sticking to their view. JPMorgan suggested BOJ is laying the groundwork for a December move. Deutsche attributed a 70% probability of a December hike. January cohort was also unchanged, though acknowledged the risk of a December move. Morgan Stanley MUFG conceded December risks have risen. Some discussion of Japan/US politics as a risk factor, though was generally discounted as Ueda downplayed this element. Moreover, given there is currently no timeframe for prospective clarity, this would leave BOJ waiting too long until the next move and fall behind the curve. Furthermore, possible scenarios appear to skew balance of risks for yen to the downside, which would be conducive for a rate hike.

  • China Caixin manufacturing PMI returns to expansion, beating estimates:

    • Caixin manufacturing PMI was 50.3 in October, surpassing estimates of 49.7 and returning to expansion from 49.3 in September. Reading echoes NBS official PMI, which showed manufacturing activity expanded for first time since April. New orders increased at quickest pace in four months. Export orders still in decline with smaller rate of reduction from September. Purchasing activity rose. Post-production inventory holdings rose in tandem while some firms started to build buffer stocks anticipating higher demand. But manufacturers still cautious with hiring as employment levels fell at quickest pace in nearly 1.5 years. Both input costs and selling prices rose for first time since July and June respectively. Business confidence improved with gauge for output expectations rebounding to highest level in five months. Caixin Insight Group economist said data showed early signs from China's rollout of policy stimulus in late September, however cautioning labor market under pressure and weak price levels. Added more policy efforts should focus on increasing household income effectively.

  • China new home sales see first monthly growth in 2024 amid stimulus boost, developers' promotions:

    • Data from CRIC showed value of new home sales from 100 biggest property developers rose 7.1% y/y to CNY435.5B, compared with 37.7% drop in September. It also marked first year-on-year growth in 2024. Transactions rose 73% m/m. Sales improvement due to roll-out of new stimulus package, including cutting borrowing costs on existing mortgages, relaxing buying restrictions in top cities and easing downpayment requirements. Developers also handed out more promotions during Golden Week holiday. Top-tier cities witnessed most significant sales jump after easing of homebuying restrictions whereas second- and third-tier cities saw mixed reactions. Bloomberg noted analysts said residential market turned more active in October but more needed to be done to stem decline. Separate survey by China Index Academy showed average new home prices in 100 cities rose 0.29% m/m and 2.08% y/y, compared with rise of 0.14% m/m and 1.85% y/y in September; while resale home prices dropped 0.60 m/m and were in decline for 30^th straight month. They fell 7.27% y/y.

  • IMF says risks for Asia's economy tilted to the downside:

    • IMF October regional economic outlook report for Asia and Pacific warned risk landscape for the region has deteriorated since April from worsening geopolitical tensions, China's property market woes and possibility of more financial market turbulence. Added external demand could be weaker if lagged impact of global monetary tightening in 2021-23 bites more than expected. Persistent downward price pressures from China hurting sectors in neighboring countries with similar export structures and provoking trade tensions. IMF cautioned Beijing's measures to boost manufacturing and exports could only worsen such tensions, whereas more efforts should be focused on adjusting property sector and strengthening private consumption. In addition, escalation in tit-for-tat retaliatory tariffs seen as acute risk that would aggravate trade fragmentation and hurt growth in the region. Also said financial markets pricing in additional, large rate cuts by Fed, smaller cuts by Asian peers and gradual rate hikes by BOJ. Sudden changes in those expectations could cause sharp moves in exchange rates, causing market turbulence.

  • China stock-bond market correlation most negative in more than four years:

    • China's stimulus-driven rally since mid-September a notable contrast with weakness in bond markets after yields had fallen to record lows amid heightened risk aversion. Bloomberg noted 30-day correlation between Shanghai Comp and Bloomberg China Treasury Total Return index at its most negative since 2020. China yield curve has steepened over recent weeks with 30Y yield up almost 20 bp from September lows. At same time, Shanghai Comp remains up 20% from its September lows. Flows have diverged sharply with investors redirecting bond ETP redemptions to stocks and back again when equity market momentum faltered. Fixed income dominated wealth management products experienced CNY1.05T ($149B) in withdrawals alone during two weeks in early October. Conversely, EPFR data showed China equities saw almost $40B inflow in week ending 9-Oct, double previous weekly record. However, that also speaks to heightened volatility in both markets with Shanghai Comp's 30-day volatility measure near highest in over eight years.

  • Notable Gainers:

    • +14.2% 6503.JP (Mitsubishi Electric): reports Q2 results ahead of StreetAccount estimates; analysts broadly highlight sharp rise in air conditioning business's profitability

    • +8.5% 6752.JP (Panasonic): reports Q2 results with revenue and operating income ahead of StreetAccount estimates; analysts widely highlight strong sales of energy storage systems for data centers at Energy segment

    • +5.5% 001570.KS (KUM YANG): to repurchase 10.0M own shares free of charge on 2-Dec; launches 5.9M-share placement at KRW50,700/share

    • +3.2% 090430.KS (Amorepacific): reports Q3 earnings with operating profit ahead of StreetAccount estimates; analysts broadly highlight lower-than-expected China losses

  • Notable Decliners:

    • -24.1% 008930.KS (Hanmi Science Co.): reports Q3 results with revenue and operating profit decline year-on-year

    • -16.4% 6920.JP (Lasertec): repots Q1 results below FactSet estimates

    • -10.8% 4091.JP (Nippon Sanso Holdings): reports Q2 revenue and operating profit below FactSet estimates; analysts generally note core earnings met expectations, highlight one-off loss related to US hydrogen project

    • -9.5% 2015.HK (Li Auto): reports Q3 results; Q4 revenue guidance misses FactSet estimates

    • -9.0% 6702.JP (Fujitsu): reports Q2 revenue and operating profit below StreetAccount estimates

    • -8.9% 1093.HK (CSPC Pharmaceutical Group): guides 9M net income attributable to decrease by (16%) y/y

    • -5.6% 9984.JP (SoftBank Group): Bernstein downgrades Arm Holdings to underperform from market perform citing valuation

    • -3.8% F34.SP (Wilmar International): reports Q3 results with year-on-year EBITDA decline

    • -1.0% Z74.SP (Singtel): ACCC commences proceedings against Optus alleging unconscionable conduct

• Data:

  • Economic:

    • China

      • October Caixin manufacturing PMI 50.3 vs consensus 49.7 and 49.3 in prior month

    • Japan

      • October final manufacturing PMI 49.2 vs preliminary 49.0 and 49.7 in prior month

    • South Korea

      • October trade balance $3.2B vs consensus $4.2B and $6.7B in prior month

        • Exports +4.6% y/y vs consensus +6.9% and +7.5% in prior month

        • Imports +1.7% y/y vs consensus +2.0% and +2.2% in prior month

    • Australia

      • September Housing Finance m/m (0.3%) versus +2.1% in prior month

      • Q3 PPI q/q +0.9% versus +1% in prior quarter

  • Markets:

    • Nikkei: (1,027.58) or (2.63%) to 38053.67

    • Hang Seng: 189.10 or +0.93% to 20506.43

    • Shanghai Composite: (7.81) or (0.24%) to 3272.01

    • Shenzhen Composite: (45.92) or (2.31%) to 1945.84

    • ASX200: (41.20) or (0.50%) to 8118.80

    • KOSPI: (13.79) or (0.54%) to 2542.36

    • SENSEX: 0.00 or 0.00% to 79389.06

  • Currencies:

    • $-¥: +0.61 or +0.40% to 152.6390

    • $-KRW: +4.50 or +0.33% to 1378.3100

    • A$-$: (0.00) or (0.32%) to 0.6560

    • $-INR: (0.00) or (0.00%) to 84.0736

    • $-CNY: +0.00 or +0.07% to 7.1231