Asian Market Update: Investors shrug soft China figures with focus on PBoC statement and Japan sales tax hike delay
***Economic Data***
- (CN) CHINA APR INDUSTRIAL PRODUCTION Y/Y: 6.0% V 6.5%E; YTD Y/Y: 5.8% V 6.1%E
- (CN) CHINA APR FIXED URBAN ASSETS YTD Y/Y: 10.5% V 11.0%E
- (CN) CHINA APR RETAIL SALES Y/Y: 10.1% (11-month low) V 10.6%E; YTD Y/Y: 10.3% V 10.4%E
- (CN) CHINA APR M2 MONEY SUPPLY Y/Y: 12.8% V 13.5%E (10-month low)
- (CN) CHINA APR NEW YUAN LOANS (CNY): 556B V 800BE (6-month low)
- (JP) JAPAN APR PPI M/M: -0.3% V +0.2%E; Y/Y: -4.2% V % -3.7%E
- (JP) Japan Mar Loans & Discounts Corp Y/Y: 2.6% v 2.3% prior
- (NZ) NEW ZEALAND APR PERFORMANCE OF SERVICES INDEX: 57.7 V 55.1 PRIOR; 4-month high
- (TH) THAILAND Q1 GDP Q/Q: 0.9% V 0.6%E; Y/Y: 3.2% V 2.8%E
- (UK) UK MAY RIGHTMOVE HOUSE PRICES M/M: 0.4% V 1.3% PRIOR; Y/Y: 7.8% V 7.3% PRIOR
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +1.0%, S&P/ASX +0.6%, Kospi +0.1%, Shanghai Composite +0.2%, Hang Seng +1.2%, Jun S&P500 +0.2% at 2,048
***Commodities/Fixed Income***
- June gold +0.4% at $1,278/oz, June crude oil +1.3% at $46.81/brl, Jul copper +0.1% at $2.07/lb
- (CN) PBOC to inject CNY45B in 7-day reverse repos
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5343 V 6.5246 PRIOR; weakest Yuan setting since Mar 3rd
***Market Focal Points/FX***
- Asian equity markets are marginally in the green in spite of selling pressure in the US on Friday and subsequent weekend release of disappointing China retail, industrial output, and fixed asset investment on Saturday. After opening lower, Shanghai Composite is up slightly in the afternoon session as PBoC released a statement assuring that disappointing New Loans and Money Supply figures out on Friday will be reversed. Risk-on was also more visible among FX majors. After falling below 108.50, USD/JPY rallied to 108.90. AUD/USD also rose to 0.7290 after a dip below 0.7250, while NZD/USD was up 30pips from the lows at 0.6775.
- China retail sales fell to an 11-month lows and industrial output was much lower than expected at 6.0%, as the key power generation component returned to negative at -1.7% v +4.0% prior. Earlier after market close on Friday, China also put out its M2 money supply at a 10-month low and New Loans at 6-month lows. Sentiment is resilient however as analysts focus on certain caveats - lending and M2 growth decline are attributed to the impact of swap bonds on the books of LGFVs which will be less prevalent in months to come. PBoC said as much too, noting that lending was restricted in industries facing overcapacity. Also of note in China, rail stocks are firmer after reports that regulators could reduce requirements for city-size urban rail transit to facilitate infrastructure investment.
- Sentiment was also bolstered by renewed speculation about the delay of Japan sales tax increase in a Nikkei report on Friday, even though cabinet spokesperson Suga has once again played down those rumors. Report suggested that the govt could wait as long as April 2019 on expectation of an extra boost to the economy going into the 2020 Olympic games in Tokyo. PM Abe also spoke ahead of the G7 this week, calling for more fiscal stimulus by major economies. Late in the day, Vice Fin Min of International Affairs (currency chief) Asakawa speculated that currency intervention may be an option, though the markets interpreted those remarks as wavering on commitment to take decisive steps, sending USD/JPY pair back below 108.70.
- Energy stood out in the commodity space as June WTI crude oil spiked up 1.5% to $47/brl, matching Friday's highs. Traders are monitoring political upheaval in Venezuela as well as oil delta sabotage in Nigeria impacting supply.
***Equities***
US equities / ADRs:
- RDS.A: Considering a $40B spinoff for non-core assets around the world to help reduce debt after this year's BG Group acquisition - UK press
- AMZN: Planning to expand private-label offerings to certain perishable items including food and household items such as laundry detergent and diapers - financial press
- GOOGL: Said to be faced with a record antitrust fine of about €3B from European commission in the next few weeks - UK press
- QIHU: Said to be valued at $15.7B after privatization funding - Chinese press
Notable movers by sector:
- Consumer discretionary: Samsonite 1910.HK +0.4% (debt financing); Calbee Inc. 2229.JP -4.8% (FY15/16 result); Shiseido Co 4911.JP +9.9% (Q1 result)
- Industrials: Elders ELD.AU -5.2% (H1 result); Nissan Motor Co 7201.JP +0.2% (fine for emission test cheating); CRRC 1766.HK +1.0% (China may cut requirements for urban rail transit development)
- Energy: China Coal Energy 1898.HK +1.7% (Apr result)
- Materials: China Molybdenum Co 3993.HK +7.0% (acquisition consideration); Yokohama Rubber Co 5101.JP -6.4% (Q1 result)
- Technology: Sumitomo Electric Industries 5802.JP +14.9% (FY15/16 result); Lenovo Group 992.HK +4.2% (to invest in AI and robotics)