Asian Mid-session Update: PBoC fix weakens Yuan by another 1.6% despite yesterday's claims of "one-off" adjustment; Stocks and EM currencies continue to crater
***Economic Data***
- (CN) CHINA JULY INDUSTRIAL PRODUCTION Y/Y: 6.0% (3-month low) V 6.6%E; INDUSTRIAL PRODUCTION YTD Y/Y: 6.3% V
- (CN) CHINA JULY YTD FIXED URBAN ASSETS Y/Y: 11.2% V 11.5%E (multi-year low)
- (CN) CHINA JULY RETAIL SALES Y/Y: 10.5% V 10.6%E; RETAIL SALES YTD Y/Y: 10.4% V 10.4%E
- (JP) JAPAN JULY PPI M/M: -0.2% V -0.1%E, Y/Y: -3.0% (5-year low) V -2.9%E
- (AU) AUSTRALIA JULY WESTPAC CONSUMER CONFIDENCE INDEX: 99.5 V 92.2 PRIOR, M/M: +7.8% V -3.2% PRIOR (first increase in 3 months; Biggest increase in 6 months)
- (AU) AUSTRALIA Q2 WAGE PRICE INDEX Q/Q: 0.6% V 0.6%E; Y/Y: 2.3% V 2.3%E
- (KR) SOUTH KOREA JULY UNEMPLOYMENT RATE: 3.7% V 3.9%E
- (KR) South Korea July Bank Lending to Households (KRW): 527.8T V 526.7T prior
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 -1.7%, S&P/ASX -1.6%, Kospi -1.7%, Shanghai Composite -0.5%, Hang Seng -1.8%, Sept S&P500 -0.7% at 2,066
***Commodities/Fixed Income***
- Dec gold +0.2% at $1,110/oz, Sept crude oil -0.1% at $43.01/brl, Sept copper -1.2% at $2.30/lb
- (US) API Petroleum Inventories: Crude -0.8M v -2.4M prior (3rd straight draw)
- (JP) BOJ offers to buy ¥70B in JGBs with maturity less than 1-yr, ¥240B in 10-25 yr JGBs and ¥140B in JGBs with maturity over 25-yr
- (AU) Australia MoF (AOFM) sells A$800M in 5.75% 2022 Bonds; bid-to-cover: 2.33x
***Market Focal Points/FX***
- Financial markets are reeling for the 2nd straight session as the turmoil from China devaluation overnight has hardly abated. After the PBoC kicked in the door of the currency regime yesterday, all-the-while professing that to be a "one-off adjustment", Beijing ravaged market sentiment yet again with another 1.6% devaluation in its Yuan fix to 6.33 - the weakest setting since Oct 2012. This time around, PBoC defended its continued intervention as being rooted in analysis of economic data, adding China fundamentals still do not support "continuous" depreciation as there is no economic basis for Yuan's constant devaluation. Late in the session however, a big miss in China July Industrial Output and multi-year low in Fixed Asset Investment seemed to justify PBoC's use of currency lever in defending the economy.
- The market reaction was also exacerbated by the IMF statement seemingly endorsing the PBoC move allowing more market forces to play a role, though adding it would have no bearing on the timing of Yuan being included into the SDR basket. Offshore Yuan is down even more sharply than yesterday, falling over 2.5% to CNH6.55. Regional emerging FX (SGD, KRW, INR, etc) are also at multi-month/years lows, while other EM central banks are raising their currency war deflector shields - Vietnam central bank widened its dong trading band to 2% from 1%, India central bank reportedly intervened against INR selloff, and Korean authorities said they are watching the situation closesly. AUD/USD and NZD/USD are down over 0.5% below 0.7230 and 0.6480 respectively. S&P500 futures are down another 0.6%, while the yield on the US 10-year Treasury Note falls to 2.09% - 3-month lows.
- Lost in the China devaluation shuffle were some related and telling comments from Tokyo. BOJ adviser Kawai noted that any further policy action from the central bank would likely be an easing rather than an exit from QE. In a somewhat outdated set of minutes from July, the BOJ members agreed the easing is exerting its intended effects, though a few did concede that the effects of monetary easing on lowering real interest rates were diminishing.
- Australia's earnings season rolls on, with an update out of Commonwealth Bank. CBA net profit rose 5% to A$9.1B, but NIMs were down 5bps at 2.09% and ROEs fell 50bps to 18.2%. CBA also confirmed the A$5B capital raise to meet regulators' requirements as speculated earlier this week.
***Equities***
US equities / ADRs:
- CDK: Reportedly to explore sale to private equity firms - financial press; +10.3% afterhours
- CYBR: Reports Q2 $0.19 v $0.06e, R$36.4M v $32.3Me; Acquires Cybertinel, terms not disclosed; +1.8% afterhours
- CSC: Reports Q1 $1.14 v $1.01e, R$2.76B v $2.86Be; +0.5% afterhours
- CREE: Reports Q4 -$0.19 v -$0.08e, R$382M v $385Me; -3.0% afterhours
- FOSL: Reports Q2 $1.12 v $0.84e, R$740M v $752Me; -7.1% afterhours
Notable movers by sector:
- Consumer discretionary: China Southern Airlines Co 1055.HK -10.8%, China Southern Airlines Co 670.HK -8.6% , Air China 753.HK -6.5%, Huafu Top Dyed Melange Yarn Co 002042.CN +2.6%, Luthai Textile Co Ltd 000726.CN +10.0%, Fujian Septwolves Industry Co 002029.CN +2.0%, Li & Fung Ltd 494.HK +3.3% (Yuan devaluation); 361 Degrees International Ltd 1361.HK -5.0% (H1 result); Echo Entertainment Group EGP.AU -1.6% (FY15 result);
- Financials: Maoye International Holdings Ltd 848.HK -2.6% (H1 guidance); China Aoyuan Property Group Ltd 3883.HK -0.7% (H1 result); Computershare Ltd CPU.AU -9.2% (FY15 result)
- Industrials: AviChina Industry & Technology Co 2357.HK +4.8% (speculation on parent restructuring); Jiangsu Linyang Electronics Co 601222.CN +1.1% (private placement); Samsung Heavy Industries 010140.KR +0.8% (possible restructuring plan);Xiamen Port Development Co 000905.CN -1.8%(H1 result)
- Technology: Asustek Computer 2357.TW +8.8% (Q2 result); Quanta Computer, Inc. 2382.TW -3.1% (Q2 result); Pegatron Corp 4938.TW -0.1% (July result); CPT Technology Group Co 000536.CN -1.4% (H1 result); Anhui USTC iFlytek Co 002230.CN -1.6% (H1 result); Carsales.com limited CRZ.AU -4.6% (FY15 result)
- Materials: China National Building Material 3323.HK -3.8% (possible bid); MeiHua Holdings Group Co 600873.CN +4.7% (H1 result); Fangda Special Steel Technology Co 600507.CN -3.8% (H1 result); Blue Star New Chemical Material Co 600229.CN +1.4% (H1 result); China Minmetals Rare Earth Co 0 00831.CN-0.4% (H1 result); OZ Minerals OZL.AU -4.3% (H1 result)
- Healthcare: Shanghai Fudan-Zhangjiang Bio-Pharmaceutical Co 1349.HK -4.1% (H1 result); Shandong Dong-E E-Jiao Co 000423.CN -2.1% (H1 result); Humanwell Healthcare Group Co Ltd 600079.CN +4.3%(H1 result); CSL Limited CSL.AU -1.4% (FY15 result); Primary Healthcare PRY.AU +3.9% (FY15 result)
- Energy: Beach Energy BPT.AU -0.6% (update)