Asian Mid-session Update: Regional indices and overseas futures resume collapse as PBoC holds off on more easing
***Economic Data***
- (TA) TAIWAN JULY UNEMPLOYMENT RATE: 3.7% V 3.8%E
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -3.2%, S&P/ASX -3.6%, Kospi -2.0%, Shanghai Composite -8.1%, Hang Seng -3.7%, Sept S&P500 -1.5% at 1,942
***Commodities/Fixed Income***
- Dec gold +0.1% at $1,161/oz, Oct crude oil -2.2% at $39.58/brl, Sept copper -1.9% at $2.26/lb
- USD/CNY: (CN) PBoC sets yuan mid point at 6.3862 v 6.3864 prior setting; 7th straight firmer Yuan setting
***Market Focal Points/FX***
- Risk aversion flows have shifted into an even higher gear as worries over Chinese slowdown, FOMC policy uncertainty, and disinflationary macro environment continue to weigh on sentiment. After last week's 11.5% drop in Shanghai Composite, markets were primed for a more aggressive easing response by the PBoC. Instead, regulators announced that China's national pension fund ($548B net assets) would be able to invest in the stock market. Analysts suggest this may be effective in expanding investor participation and perhaps supporting the local stock market in the longer term, but offers little in terms of immediate boost to lending. There was some speculation that the PBOC is planning to cut RRR ratio by 50bps some time soon, releasing CNY678B into system, but those expectations did not materialize in the immediate term. Shanghai Composite is now negative on the year, falling another 8.5% going into the morning break. Risk off flows also boosted US treasuries, JPY, and Euro at the expense of the USD, commodities, commodity FX, and global stocks. USD/JPY was down some 120pips below 120.80, EUR/USD rose 130pips toward 1.15, AUD/USD fell over 100pips to 6-month low of 0.72, and the yield on US 10-year fell to 4-month lows below 2%. Oil was down another 3% around $39/brl, while US equity futures prints were especially worrisome - S&Ps are down 50pts or 2.5%, Dow Industrials down 415pts or 2.5%, and Nasdaq futures down 3.9% below 4,040.
- Ahead of the upcoming Jackson Hole summit, there is also more uncertainty and noise around the timing of the Fed liftoff as it relates to the latest spike in volatility. Former US Treasury Sec Summers said raising rates in the near term would be a serious error and "threaten all three of the Fed's major objectives - price stability, full employment and financial stability." Australia Treasurer Hockey also called for more transparency from the Fed to calibrate policy. Also down under, RBNZ Dep Gov Spencer said rate hikes are off the table for some time despite the risk of property market spill from the overheated Auckland area. Separately, Japan PM Abe's remarks in Parliament downplayed recent speculation of his rift with BOJ Gov Kuroda, as he noted he trusts Kuroda on monetary policy.
***Equities***
Notable movers by sector:
- Consumer discretionary: Fuyao Glass Industry Group 600660.CN -8.0% (H1 result); Shanghai Lansheng Corp 600826.CN -10.0% (H1 result); Fujian Septwolves Industry 002029.CN -10.0% (H1 result); Dazhong Transportation Group 600611.CN -10.0% (H1 result); Hisense Electric Co Ltd 600060.CN -10.0% (H1 result)
- Financials: Bank of Chongqing 1963.HK -5.2% (H1 result); National Australia Bank NAB.AU -3.4% (Q3 update)
- Industrials: Anhui Expressway 995.HK -2.3% (H1 result); Sichuan Chengfa Aero-Science & Technology 600391.CN -10.0% (H1 result); China Hainan Rubber Industry Group 601118.CN -10.0% (H1 result); Xiamen International Port 3378.HK -7.9% (H1 result); Shenzhen Expressway 548.HK -6.9% (H1 result); Sino-Ocean Land 3377.HK -4.3% (H1 result); Weiqiao Textile 2698.HK -7.4% (H1 result); Brilliance China Automotive Holdings 1114.HK -9.9% (H1 result); Zhengzhou Coal Mining Machinery Group Co 601717.CN -10.0% (H1 result); UGL UGL.AU -4.9% (FY15 result); Boart Longyear: BLY.AU -2.2% (FY15 result)
- Technology: Universal Scientific Industrial Shanghai 601231.CN -10.0% (H1 result); Technologies 600570.CN -10.0% (H1 result)
- Materials: Xinjiang Xinxin Mining Industry 3833.HK -5.8% (H1 result); China National Materials Company 1893.HK -6.6% (H1 result); Anhui Conch Cement 914.HK -8.7% (H1 result); Huaxin Cement Co 600801.CN -10.0% (H1 result); Bluescope Steel BSL.AU +7.8% (FY15 result); South32 Limited S32.AU -4.3% (FY15 result); Fortescue Metals Group FMG.AU -10.1% (FY15 result); Independence Group IGO.AU -5.5% (FY15 result); MACA MLD.AU +3.0% (FY15 result)
- Energy: China Coal Energy 1898.HK -4.8% (H1 result); Huadian Fuxin Energy 816.HK +1.2% (H1 result); Xinjiang Goldwind Science & Technology 2208.HK -7.1% (H1 result); Santos Ltd STO.AU -7.9% (Woodside has no plan to bid); Beach Energy BPT.AU -4.9% (FY15 result)
- Telecom: Citic Telecom International Holdings 1883.HK -3.7% (H1 result); China Unicom Ltd 762.HK -0.7% (H1 result, July result); China Telecom 728.HK -5.0%, China Mobile 941.HK -3.5% (management changes); Chorus CNU.AU -3.2% (FY15 result)
- Utilities: Huadian Power International Corp 1071.HK -3.9% (H1 result); China Datang Renewable Power Co 1798.HK -6.7% (H1 result)
- Healthcare: Sinopharm Group Co 1099.HK -4.8% (H1 result); NIB Holdings NHF.AU -4.3% (FY15 result)