Summary
Asian markets were generally higher, but with little to push the markets, they drifted a bit directionless into mid-day break. USD/JPY started the day with a gap open at 112.06 after PM Abe’s LDP party suffered a blow in the Tokyo Governor elections. Chatter is there will be a re-shuffle of his cabinet by August and he may have to push back planned sales tax hike from Oct of 2019. The Q2 Tankan survey did little to shift the yen, as data came in a bit better than expected and improved from Q1. Japan’s final manufacturing PMI also confirmed expansion.
The China/Hong Kong bond connected opened today. China Caixin manufacturing reached a 3-month higher which helped to bring the Shanghai Composite back into positive territory. PBOC again skipped open market operations for the 7th consecutive day. Financial press speculated on the $7.2B in dividends that offshore Chinese companies will payout in July and its impact on the yuan. Former PBOC member Yu Yongding commented thathigh domestic savings rates, overwhelming concentration of debt among state-owned enterprises, large FX reserves and the largely closed capital account as factors preventing crisis scenarios.
Economic data in Australia showed a dip in May building approvals, even lower than expectations. PMI manufacturing rose to 55 remaining in expansion territory. AUD/USD remained in a tight range; with the next big catalyst on July 4th when the RBA will hold is interest rate decision. They are expected to keep rates on hold at 1.5%.
Politics
(JP) Incumbent Tokyo Gov Yuriko Koike won landslide victory in election with her Tokyo Residents First Party securing 49 out of the 127 seats, and will hold a majority 79 along with its allies including the Komeito party
(JP) Japan PM Abe may reshuffle cabinet as early as August – Japan press
Key economic data
(JP) JAPAN Q2 TANKAN LARGE MANUFACTURING INDEX: 17 V 15E; MANUFACTURERS OUTLOOK: 15 V 14E; ALL-INDUSTRY CAPEX: 8.0% V 7.2%E
(CN) CHINA JUN CAIXIN PMI MANUFACTURING: 50.4 V 49.8E (3-month high)
(AU) AUSTRALIA JUN AIG MANUFACTURING INDEX: 55.0 V 54.8 PRIOR (9TH CONSECUTIVE MONTH OF EXPANSION
(AU) AUSTRALIA JUN CORELOGIC HOUSE PRICES M/M: 1.8% V -1.1% PRIOR
(AU) AUSTRALIA MAY BUILDING APPROVALS M/M: -5.6% V -1.3%E; Y/Y: -19.7% (9TH CONSECUTIVE DECLINE) V -14.1%E
(JP) JAPAN JUN FINAL PMI MANUFACTURING: 52.4 V 52.0 PRELIM
(KR) SOUTH KOREA JUN PMI MANUFACTURING: 50.1 V 49.2 PRIOR
(AU) AUSTRALIA JUN MELBOURNE INSTITUTE INFLATION M/M: 0.1% V 0.0% PRIOR; Y/Y: 2.3% V 2.8% PRIOR
Speakers and Press
China
(CN) Former PBOC member Yu Yongding: Deleveraging poses more of a risk of deflation to China than financial crisis
(CN) PBOC Vice Gov Pan Gongsheng: Bond link shows China’s will to enhance Hong Kong as a financial hub; foreign issuers have strong interest in yuan bonds in China
Japan
(JP) Japan Fin Min Aso may be in violation of minister code for purchasing golf membership – Japan press
(JP) Japan Chief Cabinet Sec Suga: Abe administration to continue prioritizing the economy
(JP) Nikkei explores BOJ outlook report expected on July 20th: inflation forecasts could be revised down to around 1% for FY17 from 1.4% in the April report, while FY18 could be lowered to ~1.5% from 1.7%
Asian Equity Indices/Futures (00:30ET)
Nikkei +0.2%, Hang Seng +0.1%, Shanghai Composite +0.0%, ASX200 -0.3%, Kospi -0.3%
Equity Futures: S&P500 +0.2%; Nasdaq +0.3%, Dax +0.2%, FTSE100 +0.1%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.1426-1.1403; JPY 112.57-111.97; AUD 0.7695-0.7667; NZD 0.7345-0.7315
Aug Gold -0.3% at 1,238/oz; Aug Crude Oil +0.3% at $46.19/brl; Sept Copper -0.1% at $2.70/lb
(CN) PBOC skips open market operations (7th straight skip)
(CN) PBOC SETS YUAN MID POINT AT 6.7772 V 6.7744 PRIOR
(KR) Bank of Korea (BOK) sells KRW0.70T in 6-month monetary stabilization bonds; avg yield 1.33% v 1.30% prior
USD/CNY Analysts suggest the $7.8B in dividend payments due by China’s offshore listed companies in July will put downward pressure on the yuan
Asia equities notable movers
Australia
Fairfax Media, FXJ.AU Confirms it has ended private equity talks and plans to proceed with domain separation; Guides FY17 EBITDA A$262-266M; -10.3%
Japan
Daiichi Sankyo, 4568.JP Top-line results from Phase 3 Global Clinical Development Program evaluating Mirogabalin in pain syndromes met primary endpoint; -2.3%
Hong Kong/China
Casino names all lower after June Macau gaming rev was lower than expected, attributed to China President Xi’s visit to Hong Kong the last week of the month
China Jicheng Holdings,1027.HK Names in David Webb’s "50 HK stocks not to own"; -23%
Hangzhou Tigermed Consulting,300347.CN Guides H1 Net CNY109-125M, +40-60% y/y; +10%
