Asian Mid-session Market Update: NZD jumps despite RBNZ rate cut amid focus on overheating housing and recovering inflation; BOK on hold in unanimous decision
***Economic Data***
- (NZ) NEW ZEALAND CENTRAL BANK (RBNZ) CUTS OFFICIAL CASH RATE 25 BPS TO 2.00% (RECORD LOW); AS EXPECTED
- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED
- (NZ) New Zealand Jul Food Prices M/M: -0.2% v +0.4% prior
- (AU) AUSTRALIA AUG CONSUMER INFLATION EXPECTATION: 3.5% V 3.7% PRIOR
- (SG) SINGAPORE Q2 FINAL GDP Q/Q: 0.3% V 0.8%E; Y/Y: 2.1% V 2.2%E; Narrows 2016 GDP target to 1-2% from 1-3% prior
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 closed, S&P/ASX -0.7%, Kospi -0.2%, Shanghai Composite +0.1%, Hang Seng +0.2%, Sep S&P500 +0.1% at 2,175
***Commodities/Fixed Income***
- Dec gold -0.2% at $1,349/oz, Sep crude oil -0.3% at $41.57/brl, Sep copper +0.3% at $2.18/lb
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6255 V 6.6530 PRIOR; 3rd straight firmer fix; strongest Yuan setting since Aug 2nd
- (CN) PBOC to inject CNY100B in 7-day reverse repos
***Market Focal Points/FX***
- Asian equities are mixed in another thin market with Tokyo closed for holiday and little direction coming from the modestly negative day on Wall St. Gold and energy stocks in Australia and China suffered as those commodities fell, while financials/insurance names led the gainers in Hong Kong. FX market was more active given the rate decisions from New Zealand and South Korea - NZD/USD spiked up over 100pips above 0.73 despite the RBNZ rate cut amid expectations of inflation bounce in Q4 and BOK acknowledged some of the recent strengthening in KRW as part of its hold. In other FX majors, USD/JPY was up about 40pips above 101.40, AUD/USD fell about 30pips below 0.77, and GBP/USD returned below $1.30 in 25pip slide.
- RBNZ cut rates to new record low of 2.00% as widely expected in its 6th policy easing since 2015. In its accompanying policy statement, RBNZ added focus on house price inflation becoming "more broad-based across the regions, adding to concerns about financial stability." It deemed headline inflation remaining held back by negative tradables and lower CPI in the near term, but anticipated a rise from Q4 "reflecting the policy stimulus to date and the strength of the domestic economy." Traders interpreted that sentiment as a consideration of postponing future rate cuts, even though RBNZ specifically stated that "further policy easing will be required to ensure that future inflation settles near the middle of the target range." Central bank also updated its 2016-end CPI forecast to 1.0% from 1.3%, but kept its GDP target unchanged to slightly higher in the near term. Economists with ANZ forecast 2 more rate cuts in the easing cycle, ASB saw Nov or Sept cut depending on data, and Westpac said back-to-back cuts are still possible.
- Bank of Korea remained at 1.25% for the 2nd straight month after a surprise rate cut earlier this summer, though expectations of more easing down the line were sustained as Gov Lee acknowledged KRW strength in FX market. Inflation was seen at a low level in the near future before rising toward year-end. BOK also pointed to risks associated with the above-average in household leverage, and while the recent easing was deemed as positive to consumption, the impact has been less pronounced than in the past.
- In corporate news, Westpac reported its Q3 asset quality metrics remaining near cyclical lows and impairment charges to be below H1 average, but also saw a 37bp drop in CET1 ratio and higher insurance claims due to impact of storms. Telstra saw y/y growth on top and bottom lines, but shares traded slightly lower as EBITDA declined while Capex rose.
***Equities***
US equities / ADRs:
- ANW: Reports Q2 $0.32 v $0.23e, R$1.13B v $938Me; +19.1% afterhours
- CHK: Agrees to exit Barnett Shale, asset to be acquired and operated by PE firm First Reserve; announces renegotiation of mid-continent gas gathering agreement; +5.6% afterhours
- IMOS: Reports Q2 $0.02 (unclear if comp**) v $0.12e, R$146.7M v $147Me (2 est); -1.1% afterhours
- SHAK: Reports Q2 $0.14 v $0.13e, R$66.5M v $63.3Me; -9.5% afterhours
- VRX: Said to be under criminal investigation in the US for allegedly defrauding insurers about Philidor - financial press; -12.5% afterhours
Notable movers by sector:
- Consumer discretionary: KEE Holdings Co 2011.HK +5.6% (profit alert); Sun Art Retail Group 6808.HK -1.5% (H1 result); Li Ning Co 2331.HK +6.5% (H1 result); Goodman Group GMG.AU +0.4% (FY16 result)
- Financials: China Galaxy Securities Co 6881.HK +2.1% (July result); Magellan Financial Group MFG.AU +5.5% (FY16 result); Westpac Banking Corp WBC.AU -2.7% (Q3 asset quality update)
- Industrials: Automotive Holdings AHG.AU +7.9% (new CEO)
- Technology: Semiconductor Manufacturing International Corp 981.HK +4.3% (Q2 result); Hon Hai Precision Industries 2317.TW -1.1% (July result); Pegatron Corp 4938.TW -2.2% (July result)
- Materials: Hanwha Chemical 009830.KR -1.3% (Q2 result)
- Telecom: Telstra Corp.TLS.AU -0.7% (FY16 result)