Landslide NO vote in Greek referendum weighs on stocks, euro

Asian Mid-session Update: Landslide NO vote in Greek referendum weighs on stocks, euro; Shanghai Composite supported by stabilization fund, IPO suspension

Economic Data

- (HK) HONG KONG JUN HSBC PMI: 49.2 V 47.6 PRIOR (3-month high; 4th consecutive month of contraction)

- (AU) AUSTRALIA JUN ANZ JOB ADVERTISEMENTS M/M: 1.3% V 0% PRIOR

- (AU) AUSTRALIA JUN TD SECURITIES INFLATION M/M: 0.1% (4-month low) V 0.3% PRIOR; Y/Y: 1.5% (3-month high) V 1.4% PRIOR

Index Snapshot (as of 02:30 GMT)

- Nikkei225 -1.6%, S&P/ASX -1.3%, Kospi -1.2%, Shanghai Composite +2.9%, Hang Seng -3.0%, Sept S&P500 -1.2% at 2,044

Commodities/Fixed Income

- Aug gold +0.3% at $1,167/oz, Aug crude oil -3.5% at $54.99/brl, Sept copper -2.7% at $2.56/lb

- (CN) China may lower fuel prices by CNY60/ton on July 7th - Chinese press

- (IR) Iranian official: Iran exports currently around 1.2M bpd; Would reach 2.3M after sanctions are lifted - financial press

- (KR) South Korea Finance Ministry sells 3-yr bonds at average yield of 1.83%

- USD/CNY: PBoC sets yuan mid point at 6.1172 v 6.1160 prior setting (weakest Yuan setting since June 10th)

Market Focal Points/FX

- When Greek govt blindsided European negotiators last week with surprise declaration of a referendum on the terms of the bailout, early polls and pundits projected a narrow victory for the YES camp, the reset of negotiations, and the likely death of Syriza govt. The situation is vastly different just a week later. A resounding NO vote - 61.3% to 38.7% - will undoubtedly embolden the demands of PM Tsipras as Euro leaders prepare to hold more talks over the next few days, though it remains unclear how much more willing the creditors will be to offer Greece a sweeter deal. First order of business is the ECB Monday meeting on whether to lift the ceiling on the ELA to rescue the Greek financial system before it runs out of cash, and early reports suggest that is unlikely to happen.

- German officials have already been vocal in expressing the need for a hardline stance in the Greek crisis. EU Parliament Pres Schulz said the NO vote will certainly require introduction of a new currency which Athens is not even preparing to consider. Bundesbank head Weidmann also estimated the cost of the Grexit already doing major damage to Germany's budget estimated in the billions of euros. The contagion of the Greek vote will also be closely monitored via the peripheral spreads, and ECB's Coeure has already remarked the ECB is prepared to do more for price stability. Short-term, July 20th becomes a key date, since that is the next major deadline for Greece to pay back €3.5B to the ECB to avoid a formal default and risk complete freeze out by the central bank. Limiting a longer term political contagion is perhaps an even more critical task for European official, and here the focus will likely turn to Spain, where the Syriza sympathizer Podemos is in a dead-heat race with the established parties with six months to go to Parliament elections. More clarity should emerge in the coming 48 hours after the ECB meeting Monday and Euro leaders summit Tuesday.

- Market impact from Greek developments has been largely negative, but Shanghai Composite was a big gainer with an initial open up 7.8%. After another over 10% loss last week that marked a 30% correction in just 3 weeks, policymakers stepped in over the weekend to support stocks with more concrete measures. CSRC announced it would set up a market stabilization fund whereby 21 Chinese brokerages will be asked to provide 120B yuan ($19.3B) for the fund to invest in blue chip ETFs. Other reports suggested China will suspend IPO registrations for 28 companies this week, though subsequent comments suggested the suspensions should not be considered permanent. On Sunday, CSRC added it was prepared to use all needed liquidity to stabilize the stock market, injecting capital into CSRC-owned China Securities (CSF), which will then use the funds to expand brokerages' business of financing investors' stock purchases. Heading into the break, Shanghai Composite was well off the highs to trade up 2.2%, as investors determine the funds may not be sufficient in the context of the overall market turnover.

- In notable economic data, Hong Kong PMI rose to a 3-month high but remained in contraction for the 4th straight month, as resident economist said the declines in output and new orders were more modest while employment deteriorated. Australia's ANZ inflation rose, but the bank chief economist said that "significant job losses are still forthcoming as several large resource projects are completed." Bank of Japan Gov Kuroda commentary was on point with the latest stance, noting economy continues moderate recovery, and the central bank is prepared to make adjustments in response to upside and downside risks.

- Currency market response to Greece has been predictably USD and JPY positive at the expense of EUR and AUD. EUR/USD initially fell 120pips below 1.0980 but bounced to 1.1040, EUR/JPY fell over 200pips below 134 before a rebound to 135, USD/JPY was down as much as 100pips at 121.90, and AUD/USD fell nearly 50pips below 0.7470 to multi-year low. Gold initially rose $7 to $1,174 but then erased those gains later in the day.

Equities

Notable movers by sector:

- Consumer discretionary: Wanda Cinema 002739.CN -10.0% (H1 result); Bic Camera Inc 3048.JP -0.4% (9-mo earnings speculation)

- Consumer staples: China Modern Dairy 1117.HK -10.9% (acquires jv stakes)

- Financials: CITIC Securities 600030.CN +6.1%, Haitong Securities 600837.CN +6.7%, Guotai Junan Securities 601211.CN +6.9% (investment in blue chip ETFs, to halt lending securities for short selling); ICBC 601398.CN +4.9%, BoCom 601328.CN +7.5%, Bank of China 601988.CN +6.1%, CCB 601939.CN +4.8% (major brokers to allocate funds into blue chip ETFs) ; China Vanke Co Ltd 000002.CN +6.1% (June result, A-share repurchase); Dalian Wanda Commercial Properties Co. 3699.HK -5.4% (H1 result, files for A-share offering); Sealand Securities Co 000750.CN +8.9% (H1 guidance)

- Industrials: Tosoh Corp 4042.JP -9.2% (to issue new shares)

- Technology: Toshiba 6502.JP -2.7% (speculation to revise down prior earnings)

- Energy: Guodian Technology & Environment Group 1296.HK -7.0% (profit warning)

- Materials: Citic Resources 1205.HK -12.4% (profit warning); China Molybdenum Co Ltd 3993.HK -5.5% (to bid for mining assets)