Asia Summary
Asian equity markets opened the session mixed ahead of key events, including China’s 19th Communist Party National Congress, which started today and the country’s Q3 GDP data which is due tomorrow.
In Japan, the Nikkei and Topix indices opened slightly higher. If these indices are able to hold onto gains it would be the 12th and 8th straight rise, respectively. Tire manufacturer Bridgestone has gained over 1% after unveiling its medium term targets.
Japan’s steel sector is broadly lower after outperforming in the prior session. Kobe Steel, Nippon Steel and JFE Steel have all declined by over 1.5%. In the retail space, Fast Retailing has gained over 1%. Shipbuilders in Japan are broadly lower amid reports that Nippon Yusen is facing delays regarding the replacement process for one of its cruise ships.
Iron-ore miner BHP has declined on the session, after affirming its FY18 production forecasts and reporting Q1 iron ore output that missed market expectations. The company said that production in the quarter was impacted by a fire that occurred at its Mt Whaleback screening plant in June. Amid the BHP report, iron ore miners Rio Tinto and Fortescue have traded slightly lower.
Australian infrastructure company, Lend Lease, has declined over 10% on its H1 guidance. Gaming company Crown Resorts has dropped over 5% amid whistleblower concerns. Meanwhile, supply-chain logistics firm Brambles has gained over 2%, after reporting 6% sales growth in Q1. Besides this, the company also noted a rebound in its US pallets business.
Some weakness has been seen in the South Korean chip sector. Samsung Electronics has declined on the session, while Hynix has traded lower by over 3% on above average volume. The latter is due to report earnings next Thursday on Oct 26th.
China’s small-cap ChiNext index has opened the session higher, amid the start of the National Congress. According to an official from China’s FX regulator (SAFE) the yuan exchange rate is expected to have a more stable foundation following this event. China’s President Xi said the government will maintain overcapacity reductions and deleveraging efforts.
Looking ahead, China’s Q3 GDP data is due to be released on tomorrow’s session. According to one poll, y/y GDP is expected at 6.8%, even as PBoC Gov Zhou was quoted as saying H2 GDP growth was seen reaching 7%. China last had a y/y GDP reading of at least 7% in Q2 2015.
In terms of the ongoing New Zealand government coalition talks, First Party MP Patterson said his party was ‘getting close’ to making a decision. Late yesterday, First Party Leader Peters said he wanted a decision before the end of the week.
The Aussie has seen some volatility ahead of the upcoming China growth figures and Thursday’s release of the Sept employment change data.
Bank of Japan (BoJ) member Sakurai made comments in which he noted that the central bank’s 2% inflation target will help stabilize FX rates, while the popularity of E-commerce is contributing to price competition among firms. In other central bank news, the Bank of Korea (BoK) is widely expected to leave rates unchanged at Thursday’s policy meeting. However, according to a recent note by a tier 1 brokerage firm, the central bank could raise rates in 2018. The Bank of Korea last raised rates in 2011.
Fed’s Harker, seen by some as a hawk, said he expected three rate increases in 2018. These comments are similar to recent remarks by Fed official Rosengren and echo what was seen in the most recent NY Fed primary dealer survey.
Meanwhile the US Treasury, in its Semi-annual Currency Report, removed Taiwan from its ‘watch list’, but said Asian countries including China, Japan and South Korea should remain on its monitoring list. That being said, the Treasury concluded that no major trading was considered a currency manipulator.
Following the US equity close, IBM rose over 4% in the afterhours, despite reporting its 22nd straight quarter of declining revenues. In Q3, the tech giant’s results exceeded market expectations and the company affirmed its FY earnings forecast. US companies due to report results on Wednesday include Alcoa, American Express, eBay and United Continental, among others.
Markets in Malaysia, Singapore and Sri Lanka are closed on today’s session in observance of national holidays.
Key economic data
(AU) Australia Sept Westpac Leading Index m/m: +0.1% v -0.1% prior
Speakers and Press
Japan
(JP) Japan Trade Min Seko: Japan to offer $10B in financing for LNG projects
(JP) Bank of Japan (BOJ) member Sakurai: price moves are still weak and far from 2% target; important to continue with powerful easing under current framework
Korea
(KR) South Korea Finance Ministry Official: US putting S. Korea on currency monitoring list was expected; currency market movements should be market oriented
US Treasury Semi-annual currency report: No countries were named as currency ‘manipulators’, China, Germany, Japan, South Korea and Switzerland were kept on the monitoring list. Taiwan was removed from the watch list.
China/Hong Kong
(CN) China President Xi: China will continue to grow at medium to high speed – work report at 19th National Congress
(CN) China FX Regulator SAFE: Expect yuan exchange rate to have more stable foundation after party congress
(CN) Yuan not likely to see sharp depreciation, reaffirms currency to be basically stable – China Securities Journal
(HK) According to Centaline Hong Kong 2017 homes sale may reach new record of HK$186.9B – HK press
(CN) Follow Up: China Total holding of US Treasuries: $1.20T v $1.17T prior (largest increase since July 2016, 7th consecutive purchase) – part of TIC Flows
Australia/New Zealand
(AU) According to MinEx Consulting Australia gold production to peak in 2021
US
(US) Fed’s Harker (hawk, voter): Sees one more rate increase in 2017 and 3 in 2018 – financial press
Asian Equity Indices/Futures (00:00ET)
Nikkei +0.1%, Hang Seng +0.0%; Shanghai Composite +0.3%; ASX200 +0.1%, Kospi -0.2%
Equity Futures: S&P500 +0.0%; Nasdaq100 +0.1%, Dax +0.1%; FTSE100 +0.1%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.1781-1.1765; JPY 112.27-112.13; AUD 0.7858-0.7842;NZD 0.7178-0.7160
Dec Gold +0.3% at $1,289/oz; Nov Crude Oil +0.5% at $52.13/brl; Dec Copper +0.1% at $3.20/lb
(CN) China PBOC injects CNY300B in combined 7-day and 14-day reverse repos v CNY190B prior; injects net CNY270B
USD/CNY *(CN) PBOC SETS YUAN REFERENCE RATE AT 6.5991 V 6.5883 PRIOR
(CN) China MoF sells 2-yr bonds; avg yield 3.5619% v 3.58%e
(JP) Japan MoF sells ¥1.897T in 1-yr JGBS, avg yield -0.1687%; bid-to-cover 5.25x
FCG.NZ Bank of New Zealand cuts 2017-18 milk price forecast to NZ$6.30 from NZ$6.75/kg milksolids
(CN) China sells 5-yr bonds at 3.73% (highest yield since May 2014)
Equities notable movers
Australia/New Zealand
BHP.AU Reports Q1 Iron Ore Production (attributable basis) 55.6Mt v 58.6Mte v 57.6Mt y/y; -1%
LLC.AU Guides H1 Australia construction unit EBITDA lower y/y due to under performance of a small number of engineering projects; -9%
ADO.AU Receives Positive Assessment of Battery IP; +111%
PRT.AU Reports Q1 ad Rev -19.1% y/y; -15%
Japan
5713.JP Said to expand production of EV batteries – financial press; +4.1%
China/Hong Kong
1030.HK Privatization plan not approved; +6.8%
