Asia Mid-Session Market Update: Improving economic data and upbeat remarks suggest neutral central bank stance in China and Australia
***Economic Data***
- (CN) CHINA AUG FIXED URBAN ASSETS YTD Y/Y: 8.1% V 7.9%E
- (CN) CHINA AUG INDUSTRIAL PRODUCTION Y/Y: 6.3% (5-month high) V 6.2%E; YTD Y/Y: 6.0% V 6.0%E
- (CN) CHINA AUG RETAIL SALES Y/Y: 10.6% V 10.2%E; YTD Y/Y: 10.3% V 10.3%E
- (CN) China Aug Fiscal Balance (CNY) -429.3B v +200.2B prior
- (JP) BSI LARGE ALL INDUSTRY Q/Q: +1.9 V -7.9 PRIOR; LARGE MANUFACTURING Q/Q: +2.9 V -11.1 PRIOR
- (AU) AUSTRALIA AUG NAB BUSINESS CONFIDENCE: 6 V 4 PRIOR; CONDITIONS: 7 V 9 PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 118.1 v 114.3 prior
- (KR) SOUTH KOREA AUG UNEMPLOYMENT RATE: 3.8% V 3.6%E; 387K jobs created v 298K m/m
- (NZ) New Zealand AUG Food Prices M/M: 1.3% v -0.2% prior
- (KR) SOUTH KOREA AUG IMPORT PRICE INDEX M/M: -1.9% V -2.8% PRIOR; Y/Y: -8.5% V -7.1% PRIOR; Export Price Index M/M: -1.9% v -2.1% prior; Y/Y: -9.7% v -7.4% prior
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +0.1%, S&P/ASX +0.1%, Kospi +0.6%, Shanghai Composite -0.2%, Hang Seng +0.8%, Dec S&P500 -0.3% at 2,146
***Commodities/Fixed Income***
- Dec gold +0.6% at $1,334/oz, Oct crude oil -0.9% at $45.88/brl, Dec copper -0.4% at $2.10/lb
- SLV: iShares Silver Trust ETF daily holdings fall to 11,231 tonnes from 11,281 tonnes prior
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.6726 V 6.6908 PRIOR
- (CN) PBOC to inject CNY70B in 7-day reverse repos, CNY30B in 14-day reverse repos and CNY60B in 28-day reverse repos (1st time to conduct 28-day reverse repos since Feb)
- JGB: (JP) Japan's MoF sells ¥1.0T in 0.5% (0.2% prior) 20-year JGBs; Avg yield: 0.437% v 0.286% prior; bid-to-cover: 3.33x (lowest since March) v 3.87x prior
- (AU) Australia MoF (AOFM) sells A$150M in 3.0% 2025 indexed bonds; avg yield 0.4106%; bid-to-cover 2.33x
***Market Focal Points/FX***
- Asian equity markets are marginally higher, tracking a bounce-back rally on Wall St after a fairly cautious set of comments from Fed's Brainard balanced some of the more hawkish remarks from Rosengren and Kaplan last week. As the "bookend" Fed speaker entering the quiet period before next week's FOMC decision, Brainard seemingly achieved a halt of momentum for building expectations of an impending rate hike, and fixed income probability of a 25bps move now stands at just 15% vs 24% prior. USD has been under some pressure as a result as well, particularly against the Yen, with USD/JPY falling as much as 50pips below 101.50. AUD/USD and NZD/USD traded in about a 25pip range in Asia below 0.7570 and 0.7370 respectively.
- Key August economic data in China were fairly constructive. Industrial output growth of 6.3% stood out the most as it accelerated to a 5-month high. Power generation component also preserved its momentum, rising 7.8% v 7.2% prior. Retail Sales also topped consensus at 10.6% V 10.2%E, while fixed asset investment showed healthy growth in property investment (+5.4% y/y), construction (+12.2% y/y), and sales value (+38.7% y/y). China Stats Bureau spokesperson did note that while August saw some positive changes in the economy, downward pressure remains large. NBS official added that jobless rate stabilized, housing inventory reduction is running its course, and there is reason for optimism on both external and internal demand. China state researcher Zhu was less optimistic ahead of the data, warning that GDP could slow below 6% in 2018, while recommending that Beijing sets a GDP target 5.5-7.5%.
- In Australia, RBA Assistant Gov Kent said there's a good chance that growth in wages and the rate of inflation will gradually rise in coming months, and that AUD has fallen as much as expected in recent years. Kent added the post-mining boom transition has taken place faster and healthier than expected, and that the worst of a slump in mining investment was over given recent improvement in materials prices. Goldman Sachs' take on the speech was that it signals a neutral RBA policy stance, with no hint of further easing in the pipeline. Australia's upcoming employment and quarterly CPI data will help determine whether expectations of a hold can be sustained.
- After a record magnitude 5.8 earthquake in South Korea earlier today, Samsung, LG Electronics, and Hyundai Motor temporarily halted some production facilities. South Korea Finance Ministry has also announced it is closed monitoring the impact of the quake, while adding the nuclear test by the North has not played a big part in financial markets. President Park has called for more measures to effectively deal with threats from Pyongyang.
***Equities***
US equities / ADRs:
- ISIL: Renesas to acquire Intersil for $22.50/shr or $3.22B cash; +7.3% afterhours
- KTOS: Awarded $54M contract to provide Marine Common Aircrew Trainers (MCAT); +5.9% afterhours
- SANM: Announces $150M stock buyback program (8% of market cap); +3.5% afterhours
- FCX: Anadarko announces $2B acquisition of Freeport McMoRan assets; raises FY16 capex $2.8-3B (prior $2.6-2.8B); FCX -0.4%, APC -2.9% afterhours
- WTW: CEO resigns, effective Sept 30th; -2.6% afterhours
Notable movers by sector:
- Consumer discretionary: Le Saunda Holdings 738.HK +1.9% (Q2 result); FAW Car Co 000800.CN +2.1% (restructuring)
- Financials: China Resources Land 1109.HK -0.5%, China Overseas Land 688.HK -0.2% (Aug result); Woori Bank 000030.KR -2.2% (POSCO not to bid for stake)
- Technology: Mabuchi Motors 6592.JP +2.6% (SMBC raised to outperform); Samsung Electronics 005930.KR +5.4% (HP printer business deal)
- Materials: Evolution Mining EVN.AU +2.9% (affirms guidance); Fortescue Metals Group FMG.AU +2.8% (repayment of loans)
- Energy: China Shenhua Energy Co 1088.HK +1.1% (Aug result); Origin Energy ORG.AU -2.0% (bidders for windfarm development); Santos STO.AU -1.5% (job cut)
- Healthcare: Santen Pharmaceutical Co 4536.JP +4.5% (to buy back shares)