Asia Market Update: China plunge protection team restores market calm
***Economic Data***
- (JP) JAPAN DEC VEHICLE SALES Y/Y: 3.1% V 0.3% PRIOR
- (JP) JAPAN NOV LOANS & DISCOUNTS CORP Y/Y: 2.7% V 3.3% PRIOR
- (JP) JAPAN NOV MONETARY BASE Y/Y: 29.5% (2 1/2 year low) v 32.5% PRIOR; MONETARY BASE END OF PERIOD: ¥356.1T v ¥343.7T PRIOR
- (KR) SOUTH KOREA NOV CURRENT ACCOUNT BALANCE: $9.4B V $9.1B PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 116.3 v 115.4 prior
- (PH) PHILIPPINES DEC CPI M/M: 0.2% V 0.5% PRIOR; Y/Y: 1.5% V 1.4%E
***Index Snapshot (as of 05:00 GMT)***
- Nikkei225 flat, S&P/ASX -1.6%, Kospi +0.6%, Shanghai Composite +0.4%, Hang Seng -0.2%, Mar S&P500 +0.2% at 2,013
***Commodities/Fixed Income***
- Feb gold +0.1% at $1,077/oz, Feb crude oil +0.8% at $37.05/brl, Mar copper +0.2% at $2.08/lb
- (SA) Saudi Arabia UN official: Break in ties with Iran will not lead to reduced efforts to broker peace talks in Syria and Yemen - financial press
- (CN) PBoC to inject CNY130B in 7-day reverse repos (largest injection since Sept 8th); Offer yield at 2.25%, unchanged from prior
- USD/CNY: (CN) PBoC sets yuan mid point at 6.5169 v 6.5032 prior; Weakest Yuan setting since Apr, 2011
- JGB: (JP) Japan MoF sells ¥2.19T in 10-yr 1.3% JGBs; Avg yield: 0.254% v 0.320% prior; bid to cover: 3.25x v 3.56x prior
- (KR) South Korea sells 30-yr bonds; avg yield 2.210%
***Market Focal Points/FX***
- After yesterday's China-driven rout, a sense of calm has been restored in China thanks in no small part to intervention steps by authorities. With the key mainland indices unable to finish off the trading day on a circuit breaker halt due to 7% slide in CSI 300 index, the initial 3% drop in Shanghai Composite to mid-October lows was met with forceful response. First, PBoC responded with a CNY130B 7-day reverse repo injection - the largest since early September - while also weakening the Yuan setting in an attempt to prop up exports. Securities regulator CSRC also stepped in, announcing it was considering disclosure rules on stake sales by major shareholders as investors prepare for significant lockup expiry this Friday. Lastly, late-session reports suggested China authorities selectively propped up key market sectors with purchases of shares in steel, banking and other companies. Shanghai Composite ended its morning session up a modest 0.4%.
- Reversal of risk-off flows has likewise been felt in FX majors. Most notably, USD/JPY traded up as much as 60pips from the lows to as high as 119.70. EUR/USD tracked sideways around 1.0830, while AUD/USD was up as much as 40pips from the lows above 0.7210.
- Economic data releases - largely 2nd and 3rd tier - were most active in Japan, where vehicle sales saw a bigger y/y jump in Dec while monetary base expansion slowed. BOJ Gov Kuroda comments cited in local press earlier suggested the central bank is prepared to take "even bolder" steps to reach 2% inflation target. Separately, chief cabinet sec Suga noted Japan is monitoring the situation in China and Middle East.
***Equities***
US equities / ADRs:
- EXEL: Announces positive results from subgroup analyses of the METEOR Phase 3 pivotal trial of cabozantinib in advanced renal cell carcinoma to be presented at 2016 ASCO; +8.6% afterhours
- BIN: Confirms review of strategic alternatives; +6.0% afterhours
- SWHC: Raises Q3 guidance to $0.39-0.41 v $0.28e, R$175-180M v $154Me (guided $0.27-0.29, Rev $150-155M prior); +5.5% afterhours
- RPRX: Reports updates Enclomiphene Program - filing; +3.9%
Notable movers by sector:
- Financials: Evergrande Real Estate Group 3333.hk -0.8% (Dec results, buyback); PAX Global 327.hk +3.0% (agreement for supply of e-payment terminal products)
- Telecom: NTT Docomo +3% (Nomura upgrade)
- Materials: Australia gold miners rise on higher gold prices (NCM +1.8%)
- Healthcare: Bloomage Biotechnology Corp Ltd 963.HK +1.1% (Fy15 Rev to rise)
- Industrials: Geely Auto 175.HK -6.3% (UBS downgrade)