China markets worry on increased regulation pledge from President Xi

Asia Mid-Session Market Update : China markets worry on increased regulation pledge from President Xi; economic data comes in strong

Asia Summary

- Markets opened mixed in the wake of US data on Friday that showed weaker than expected retail sales and inflation; supporting the view that the next rate hike could be gradual. Markets remained thin with Japan closed for a holiday; Japan did report four Chinese ships near the disputed islands. Markets in China opened slightly lower before falling nearly 5% on the promise of greater coordination of financial regulation and the strengthening of weak links in supervision. The loses were later reversed when Q2 GDP, June industrial production and retail sales came in strong.

- Over the weekend China held the National Financial Work Conference (held once every 5-yrs) where President Xi pledged that the PBOC would play a stronger role in defending against risks, calling for more work on safeguarding the financial system and modernizing its regulatory framework. Xi also said prudent monetary policy should be firmly implemented and the PBOC should take a stronger macro-prudential policy role (prudent policy was announced in Dec 2016). China kept with its open market operations adding back in the 14-day to Friday’s use of the 7-day. In Australia The APRA is expected to announce new stricter rules for banks this week, that are expected to cause the banks to raise capital.

 

Key economic data

- (CN) CHINA Q2 GDP Q/Q: 1.7% V 1.7%E; Y/Y: 6.9% V 6.8%E; YTD Y/Y: 6.9% V 6.8%E

- (CN) CHINA JUN INDUSTRIAL PRODUCTION Y/Y: 7.6% V 6.5%E; YTD Y/Y: 6.9% V 6.7%E

- (CN) CHINA JUN RETAIL SALES Y/Y: 11.0% V 10.6%E; YTD Y/Y: 10.4% V 10.3%E

- (CN) CHINA MAY FIXED ASSETS EX RURAL YTD Y/Y: 8.6% V 8.5%E

- (SG) SINGAPORE JUN NON-OIL DOMESTIC EXPORTS M/M: -2.7% V -4.0%E; Y/Y: 8.2% V 5.2%E; ELECTRONIC EXPORTS Y/Y: 5.4% v 8.3%E

- (NZ) New Zealand Jun Services Performance of Services Index: 58.6 v 58.8 prior

- (UK) UK JULY RIGHTMOVE HOUSING PRICES M/M: 0.1% V -0.4% PRIOR; Y/Y: 2.8% V 1.8% PRIOR

 

Speakers and Press

China

- (CN) China Premier Li: Need to have moderate credit growth and keep liquidity basically stable - National Financial Work Conference

- (CN) China National Bureau of Statistics (NBS) revises methodology by including contributions from healthcare, tourism, and new economy sectors

- (CN) China top graft-buster Wang Qishan attacks ruling Communist Party's members: Party political culture remains "unhealthy" and governance weak even after five years of renewed effort to fight the problem

- (CN) China’s National Development and Reform Commission (NDRC) to hold a meeting with major coal producers today and may urge them to boost production for summer peak consumption season - Chinese press

- (CN) China Stats Bureau (NBS): Prudent and neutral monetary policy will provide necessary liquidity in the economy, but also prevent rise in debt levels

Australia/New Zealand

- (NZ) RBNZ Deputy Gov Bascand: Lower external debt is encouraging; lower NZD would help rebalance growth and reduce debt further

Korea

- (KR) South Korea Defense Min proposes military talks with North Korea

 

Asian Equity Indices/Futures (00:30ET)

- Nikkei closed, Hang Seng 0.6%, Shanghai Composite -0.1%, ASX200 flat, Kospi +0.4%

- Equity Futures: S&P500 flat; Nasdaq +0.1%, Dax flat, FTSE100 flat

 

FX ranges/Commodities/Fixed Income (00:30ET)

- EUR 1.1475-1.1457; JPY 112.69-112.40; AUD 0.7835-0.7808; NZD 0.7360-0.7316

- Aug Gold +0.2% at 1,230/oz; Aug Crude Oil +0.3% at $46.69/brl; Sept Copper +0.3% at $2.70/lb

- (CN) China PBoC OMO: injects CNY170B in 7 and 14 day reverse repos v CNY100B in 7-day reverse repos prior

- (CN) PBOC SETS YUAN REFERENCE RATE AT 6.7562 V 6.7774 PRIOR

- (KR) Bank of Korea (BOK) sells KRW0.6T in 6-month monetary stabilization bonds; avg yield 1.32% v 1.33% prior

- (KR) South Korea sells 10-yr Govt bonds; avg yield 2.265%

 

Asia equities notable movers

Australia

- Redflow Ltd,RFX.AU Announces strategic review; To raise up to A$10.5M in equity; +13.3%

-Prima BioMed,PRR.AU To receive additional milestone payment from Novartis; +7.7%

- Blackham Resources,BLK.AU Reports Q2 gold production 15.7K oz v 14.9K oz q/q; -13.5%

Hong Kong/China

- Best Pacific International ,2111.HK Guides H1 Net profit to decline up to 30% y/y, cites lower than expected revenue from elastics business and higher costs; -24.8%

 

Friday US Session Highlights

- Friday’s trade largely pivoted off soft readings for US consumption and consumer prices. June retail sales fell into negative territory across all categories, with the control group missing expectations by 0.4%. The core CPI (0.1%) fell short of expectations for a fourth consecutive month. New car prices (-0.3%) fell for the fifth straight month, and used car prices (-0.7%) fell for the sixth month in a row. The news put a bid into Treasury markets and a modest pressure on yields. The Greenback fell across the board. The lower rates pushed up gold prices along with REITs and Utilities. Banks and financials fell in light of decent earnings reports and conservative management commentary on the outlook. Technology stocks have continued to gain traction, keeping the NASDAQ on pace for its best week in over two months.