Asia Summary
Markets traded higher as regional focus remained on North Korea’s ICBM launch. South Korea and the US stepped up their stance against North Korea actions, including rhetoric and joint drills. Overnight Russia and China agreed to work together on North Korea action. The UN Security Council will meet later today to discuss the situation. The Won gained 0.3% against the dollar to 1,147; Yen also saw a surge against the dollar testing 112.82. Financial press explored the view that the Fed could announce balance sheet reduction in September.
Overnight the PBOC released its quarterly meeting statement, reiteratingto pursue prudent neutral monetary policy. PBOC also affirmed its stance to continue to tighten down on regulation and use tools available to keep liquidity basically stable. By mid-day offshore USD/CNY rose 0.18% to 6.7940, heading towards the first gain in 3 days against the USD. PBOC also skipped open market operations for the 9th consecutive day, the longest streak since April. China State Council approved an increase in Hong Kong’s Renminbi Qualified Foreign Institutional Investors (RQFII) quota to CNY500B (prior CNY270B).
Key economic data
(CN) CHINA JUN CAIXIN PMI SERVICES: 51.6 V 52.8 PRIOR (13-month low)
(JP) JAPAN JUN SERVICES PMI: 53.3 V 53.0 PRIOR (22-month high); COMPOSITE PMI: 52.9 V 53.4 PRIOR
(KR) SOUTH KOREA JUNE FOREIGN RESERVES: $380.6B V $378.5B PRIOR
(NZ) New Zealand Jun QV House Prices Y/Y: 8.1% v 9.7% prior (weakest gain since March 2015)
(AU) AUSTRALIA JUN AIG PERFORMANCE OF SERVICE INDEX: 54.8 V 51.5 PRIOR (6-month high)
(SG) Singapore Jun PMI: 50.7 v 51.4 prior (lowest reading since Oct 2016)
(HK) HONG KONG JUN PMI: 51.1 V 50.5 PRIOR
(NZ) NEW ZEALAND JUN ANZ COMMODITY PRICE M/M: 2.1% V 3.2% PRIOR
Speakers and Press
China
(CN) China Economic Monitoring and Analysis Center of the National Bureau of Statistics deputy Dir Pan Jiancheng: China H1 GDP growth expected to hit 6.8-6.9% – Chinese Press
(CN) Xinhua Op Ed discusses recent liquidity conditions in China; suggests the PBoC’s recent suspensions of open market operations was indicative of abundant liquidity with no manifestation of a June-end liquidity crunch this year
(CN) Moody’s: Growth in China’s shadow banking is slowing due to coordinated government action to contain systemic financial risks
Korea
(KR) North Korea leader Kim Jong Un: Will not put nuclear and ICBM on negotiating table until US abandons its hostile policy against North Korea
(KR) South Korea’s Joint Chiefs of Staff (JCS): missile units of South Korea and the US carried out joint ballistic missile drills in the East Sea at 7 am local time (2200 GMT on Tuesday) in response to the North Korea’s repeated ballistic missile provocations
Asian Equity Indices/Futures (00:30ET)
Nikkei -0.1%, Hang Seng +0.4%, Shanghai Composite +0.3%, ASX200 -0.3%, Kospi +0.1%
Equity Futures: S&P500 +0.0%; Nasdaq -0.1%, Dax +0.0%, FTSE100 +0.1%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.1369-1.1345; JPY 113.35-112.82; AUD 0.7624-0.7603; NZD 0.7297-0.7276
Aug Gold +0.8% at 1,228/oz; Aug Crude Oil -0.2% at $46.97/brl; Sept Copper +0.1% at $2.68/lb
(AU) Australia (AOFM) sells A$800M in 3.25% 2029 bonds; avg yield 2.72% v 2.5171% prior; bid-to-cover 4.47x v 4.16x prior
(CN) PBOC reports State Council approved an increase in Hong Kong’s Renminbi Qualified Foreign Institutional Investors (RQFII) quota to CNY500B (prior CNY270B)
(CN) PBOC skips open market operations (9th consecutive skip)
USD/CNY *(CN) PBOC SETS YUAN MID POINT AT 6.7922 V 6.7889 PRIOR (3rd consecutive weaker setting)
(CN) China MOF sells 1-yr upsized bonds at 3.4629%, bid to cover 2.27x ; 10 year upsized bonds at 3.5661% v 3.59%e, Bid to cover 4.2x
Asia equities notable movers
Australia
Vocus Communications, VOC.AU To grant KKR non-exclusive due diligence in connection with previously announced A$3.50/share bid; +2.4%
Flight Centre,FLT.AU Guides FY17 Underlying pretax profit A$325-330M (guided A$300-330M on May 4th); +8.7%
Pepper Group,PEP.AU Confirms non-binding proposal from KKR worth A$3.60/share; -6.9%
Liquefied Natural Gas,LNG.AU Magnolia LNG secures A$1.5B commitment from Stonepeak; +26.8%
Japan
Toshiba, 6502.JP Consortium may delay closing on purchase of Toshiba’s chip unit due to court decision – Japan press; -1.4%
Hong Kong/China
China Unicom, CHU UPDATE: Morgan Stanley Cuts CHU to Underweight from Overweight, price target: HK$10.00; -4.5%
Tencent, 700.HK Introduced restrictions on minors playing mobile games, including its most popular, Honor of Kings (HoK), following articles published on People.cn; -3%
Xiamen ITG Group Corp,600755.CN NAVs of the 5 funds, with ~CNY1.3B of total assets under management, have fallen to levels that trigger forced liquidation – filing; -2.9%
US Session Highlights
US markets closed for 4th of July holiday, to re-open today
