Bessent on FX as JP evaluates reserves mgmt and PBOC Advisor hints at rate cuts

Asia Market Update: Tech VOL amid market instability, esp KR; Bessent on FX as JP evaluates reserves mgmt and PBOC Advisor hints at rate cuts; FDX drops.

General trend and developments

- Volatility remained the theme, even as Kospi and Nikkei started out positively. Kospi initially pared back half of its -10% losses yesterday, before turning sharply negative again, plunging to be down as much as -1.7% before stemming the red ink to be up 3.8% at time of writing. Samsung and Hynix, which initially rebounded +10% and +5% respectively fell to +3.5% and -3.6%. (Samsung’s initial gains helped by its $58B share buyback announcement for equity-bonuses of employees. Meanwhile Hynix updated its US listing plans by filing ADR-linked new share sale plan with Korean regulators.

- Kospi volatility continues on a series of compounding factors such as concerns on memory pricing power going forward, over-leveraged retail investors and leveraged ETFs, eyes now more critically examining levels of Capex, potential AI windfall taxes by the govt, SpaceX share indigestion, labor concerns, and a volatile Won (KRW).

- US Treas Sec Bessent said that the concept of a strong dollar concept is 'distinct' from currency gains.

- Reports today that Japan is looking to "improve" management of its $1.3% FX reserves, in a draft startegy document.

- Volatility not helped by a refocus on Japanese carry trade with the Yen near 40-year lows, a warning from former BOJ official Shirai the Yen could fall to 165 on another Fed rate hike - all amid the threat of intervention and little guidance out of the US Fed, with Chair Kevin Warsh, Waller and Goolsbee the only members who have spoken publicly since the FOMC meeting on June 16-17.

- Gold continued to fall back towards the $4,000/oz mark with Silver again threatening to test the $60/oz mark, a level not seen since Dec, 2025 during its historic runup.

- Ratings a net negative for both Indonesia and South Korea equities as MSCI once again extended its formal review of Indonesia’s 2026 market classification out to November of this year but warned that it would be cut (from emerging market to frontier market) if there is no sufficient economic progress and “profound investability concerns” around disclosure. MSCI also chose to Not upgrade South Korea to 'Developed market status,' remaining in the category of Emerging Market due to FX concerns; Namely the Won not being deliverable offshore and insufficient onshore liquidity during FX trading hours, particularly overnight.

- Indonesian bourse rose but the Rupiah again threatened falling back to 18.000/USD, while the Korean Won weakened to 1,540.

- Fedex down -6% after hours and overall -10% for the day despite reasonable guidance. Fuel costs for Q1 notably +66% likely a key factor in their reduced Q1 gross margins.

- Iran and the US continue to publicly differ on matters such as nuclear inspections and control of the Strait of Hormuz, but traffic continues to flow. However, the FT warned that almost 1,200 cargo ships are still stranded, with $125B worth of goods.

- With oil trading down at levels not seen since the start of the Iran conflict, Pres Trump leveled criticism at the big US oil companies for not dropping their pump prices commensurate with their own sharply lower prices.

- An unnamed “heavy electronics machinery” out of Japan has had two of its employees detained in China. Details still not to hand.

- Ahead of the June Tokyo CPI due this Friday, Japan’s May PPI running hotter at 3.3%, with the prior also revised higher to the same amount.

- Australia May inflation fell on the headline even more than expected to -0.7%, with a -11.9% plunge in automotive fuel prices for the month, but the RBA’s closely monitored Trimmed Mean stayed sticky, well above RBA target. Housing the biggest culprit, followed by food and non-alcoholic drink and transport.

- The most interesting comment out of the BOJ’s Summary of Opinions for last week’s hike was one member (likely the hawkish Tamura, who speaks tomorrow and has frequently put actual figures on the neutral rate in the past) believing the neutral rate in Japan to be around 2%. Overall, as per the BOJ Statement last Tuesday, a strong minority of members are open to further hikes if prices and economy justify.

- BOJ probabilities last night ticked up to 27.5% for rate hike in September, wit October gearing up to 64.0%.

- Japan corporate share buybacks rose past ¥16.2T (~$100B) in Jan-May, a record high for period and already nearing the total for all of 2025.

- Blackstone’s Japan $6B (¥1.0T) investment plans announced last week will be expanded to include $30B in AI data centers in Japan over next three to five years.

- Meanwhile China AI model-maker Z.AI (Zhipu; GML5.2) taking advantage of the renewed interest in Chinese AI models following the Anthropic Mythos / Fable 5 fiasco by looking to raise “billions” in a share sale in Hong Kong.

-The huge turnaround in Tesla May registrations in the EU (+152%) even outdone by the rebound in Japan, +182% y/y.

- China PBOC weakened the CNY fix for a fourth consecutive day, the longest streak since April 2025, amid further pressure on EM currencies such as the Rupiah and Won.

- In South American politics, right-wing Keiko Fujimori (daughter of Alberto Fujimori, President of Peru 1990-2000) poised to win Peru's presidency, initial vote count shows. It would be 8th right wing victory in a row in South and Central America.

- US equity FUTs +0.2% to +0.6% during Asia trading.

Looking ahead (Asian-weighted focus, using Asian time zone)

- Wed Jun 24th: TH Rate Decision, (Wed night, US May Final New Home Sales).

- Thu Jun 25th: AU May Jobs, US Fed Bank Stress Test Results, US May Core PCE.

- Fri Jun 26th: JP Jun Tokyo CPI.

Holidays in Asia this week

- Fri Jun 26th: India.

Headlines/economic data

Australia/New Zealand

- (AU) ASX 200 opens +0.1% at 8,797.

- (AU) Australia May CPI M/M: -0.7% v -0.4%e; Y/Y: 4.0% v 4.3%e.

China/Hong Kong

- (CN) Shanghai Composite opens -0.4% at 4,090; (HK) Hang Seng opens +0.4% at 23,421.

- (CN) PBOC Advisor Huang Yiping: China rate cut could still be on the table in 2026, but unsure if rate cut will definitely occur - comments at "Summer Davos".

- (CN) NVDA Company's banned AI chips said to have doubled on black market in China to >$1.1M [CNY8M] over the past 6 months; cites interviews with various Chinese chip traders - FT.

- (HK) 2513.HK Reportedly said to consider multi-billion dollar share sale in HK (amid the surge in HK listings).

- (CN) China PBOC adviser: Rebalancing of the domestic economy is “a crucial” next step to head off risks to growth [EU market close].

- (CN) China Premier Li Qiang: Increased volatility in international landscape this year - comments at "Summer Davos" Opening Plenary.

- (CN) China fund managers shift to targeted AI stock positioning; notes more concentrated bets related to the ‘industry leaders’ that are capable of delivering orders and addressing capacity bottlenecks – China Securities Journal.

- (CN) SCMP: China biotech ‘surge’ sparks US security concerns - update.

- (CN) China analysts are 'bullish' on the lithium battery sector - Financial Press.

- (CN) Large US brokerage firm raises FY26 China's humanoid robot shipments to 50,000 units v 28,000 units prior.

- (CN) Fund manager Pimco sees China's "export glut" boosting bonds in Emerging Markets.

- (CN) China small banks said to lift WMP benchmark amid outflows pressures - PBOC-backed Financial News.

- (CN) China PBOC sets the yuan mid-point at 6.8195 v 6.8171 prior (weakest level since June 8th, 2026).

- (CN) China PBOC Open Market Operation (OMO): Sells CNY663B in 7-day Reverse Repos; Net injects CNY242B v injects CNY75B prior.

Japan

- (JP) Nikkei 225 opens -0.3% at 69,708.

- (JP) BoJ Summary of Opinions (MPM): According to one BoJ board member, appropriate to continue raising interest rate as financial conditions are accommodative; One member said Neutral rate is ~2%.

- (JP) Japan plans to improve management of $1.3T foreign exchange reserves - Draft Growth Strategy report.

- (JP) Japan electronics company employee detained in China - Asahi.

- (JP) Japan May PPI Services Y/Y: 3.3% v 3.3%e.

- (JP) Asian banks assist Japan Inc.'s syndicated loans to a record high in FY25/26 - Nikkei.

- (JP) Former BOJ official Shirai: Markets expect further rate hikes to 1.5% next year; Yen could move to 165 if US Fed hikes again - (update).

- (JP) Japan Chief Cab Sec Kihara: Lodged diplomatic protest on China drilling rig.

Korea

- (KR) Kospi opens +1.9% at 8,357.

- (KR) 000660.KR Announces plan as soon as today to file ADR-linked new share sale plan with Korea's Financial Supervisory Service (FSS) - Daily.

- (KR) Bank of Korea (BOK) Board Member Hwang: Necessary to closely monitor financial stability risks of house prices, leveraged stock investments.

- (KR) South Korea May Retail Sales Y/Y: 9.0% v 7.2% prior.

- (KR) Follow up: South Korea govt in discussions with Hynix and Samsung next stage investments and locations - Presidential Policy Chief Kim [the co's domestic investment plan is expected to be disclosed on Thurs].

- (KR) South Korea Joint Chief of Staff: North Korean soldier taken into custody.

Other Asia

- (ID) MSCI Releases results of the MSCI 2026 market classification review; Considers Indonesia cut if there is no sufficient economic progress; Extends review to Nov; Doesn't upgrade South Korea to 'Developed market status,' remains in the category of Emerging Markets (update).

- (MY) Analysts debate whether today’s Yuan fix has policy significance: Large Malaysian bank states PBOC's fix on Wednesday has little policy signal - US financial press.

- (IN) RBI Gov Malhotra: Premature to discuss rate hike; If we wanted to prepare the market for rate hike, we would have changed stance from neutral to restrictive; Notes markets are pricing in some rate hikes.

- (ID) Indonesia benchmark equity index rises by 1% following MSCI comments.

- (ID) Indonesia FSA; Will continue with market reforms following MSCI notice (warning of downgrade still present).

- (MY) Malaysia Central Bank (BNM): Recent movements of Ringgit continue to be driven by global developments.

- (MY) Malaysia Dep Fin Min Tong: In final phase of formulating carbon tax policy, to introduce in phases - comments in parliament.

- (TH) Thailand's Baht weakens to as much as 33.425/USD, lowest since May 15th, 2025.

- (TH) Thailand Vice Minister: No pressure to raise interest rates; Economy is stable.

North America

- (US) June Preliminary S&P PMI Manufacturing: 55.7 V 54.6E; Manufacturing output grew at the fastest rate since July 2021 in response to the largest rise in new orders for just over four years; Manufacturing headcounts were cut at the fastest rate since the COVID-19 lockdowns of early 2020 [US market close].

- (US) June Richmond FED Manufacturing Index: 4 v 8e; Volume of new orders: 9 v 17 prior [US market close].

- (US) Treasury $69B 2-year note auction draws 4.189% v 4.071% prior; Bid-to-cover ratio: 2.64 v 2.64 prior and 2.57 over the last 12 auctions [US market close].

- (US) ADP Preliminary Employment Change for 4-weeks ending Jun 6th: +30.8K v +26.5K prior (first pickup in hiring since week of May 2nd) [US market close].

- (US) Pres. Trump: The big Oil Companies are not dropping their price at the pump commensurate with the sharply lower prices they are paying for Oil; I have instructed the DOJ to immediately start looking into this. - post on Truth Social.

- (PE) Right-wing Keiko Fujimori poised to win Peru's presidency in run-off, initial vote count shows.

- (US) Reportedly DOE plan to offer $17.5B of low-interest financing to utilities for Westinghouse AP1000 reactors to speed up construction of 10 reactors in US; Seven utilities have signed formal letters of intent for five available project loans - WSJ [US market close].

- (US) Jun Philadelphia Fed Non-Manufacturing Activity: -25.8 v -16.0e [US market close].

- (US) Majority of the US House votes in favor of bipartisan bill to spur construction of affordable housing, amid severe shortages; Bill to be sent to Pres Trump for enactment.

- (US) Treasury Sec Bessent: Strong dollar concept is distinct from currency gains; US must avoid vulnerability to any foreign chokepoint - prepared remarks to the Economic Club of New York.

- (US) ANTHROPIC.IPO Follow up: Unnamed US official says Mythos found vulnerabilities in US systems - US press.

- (US) Sec of State Rubio to meet with UAE Pres in Abu Dhabi at 11:00am local time.

- (US) Defense groups to meet Trump on Wed as missile production amid struggling output [inline] - FT.

- (US) Weekly API Crude Oil Inventories: -0.8M v -8.3M prior.

- (US) Sec of Defense Hegseth: Golden Dome for America's 1st milestone test is a success.

- (US) Automaker group has warned car cos. may be forced to stop selling cars in California on July 1st without the passage of the domestic violence vehicle technology extension bill - Press.

- (DRC) Democratic Republic of Congo: Number of Ebola case has been raised to 1,094 (prior: 689), including 277 deaths.

- (CA) Bank of Canada (BOC) Gov Macklem: Canada and EU should deepen open trade as US pulls back; Criticize use of tariffs and currency devaluation; Best to adjust imbalances now before reaching a tipping point [US market close].

- (CA) Canada Defense Chief Mcguinty: Canada to send warships to Indo-Pacific in 2026.

- (CU) Follow Up: US targets Cuba mining sector, raising implications for China-linked supply chains - SCMP.

Europe

- (UK) PM Spokesperson Wells: Outgoing PM Starmer agrees no new policies or spending will be initiated until successor appointed; Planning for smooth leadership transition [EU market close].

- (UK) Presumed incoming-PM Burnham will reportedly demote Chancellor Reeves to a lesser Cabinet post - FT [EU market close].

- (UK) BOE's Taylor: An extended hold at this level is very much the correct and appropriately measured policy response that we need; Bank rate is 75bps above my estimate of neutral [EU market close].

- (UK) Chancellor Reeves: Defense investment plan will meet scale of challenges; Defense plan will involve more money, spent effectively [EU market close].

- (UK) Jun CBI Industrial Trends Total Orders: -45 v -33e [EU market close].

- (HU) Hungary Central Bank (MNB) cuts base rate by 25bps to 6.00%; As expected [US market close].

- (DE) Germany expected to cancel plans to build 'biggest' warship since second World War - FT.

Middle East

- (IR) Pres. Trump: Iran has fully and completely agreed to highest level Nuclear inspections long into the future (Infinity!!!) [US market close].

- (IL) Hezbollah says it has complied with the Israel ceasefire “so far”; IDF targeted civilians in South Lebanon attack - press [EU market close].

- (IR) Strait of Hormuz closure strands almost 1,200 cargo ships, with $125B worth of goods - FT.

- (IR) NATO Sec Gen Rutte: Trump is doing exactly what's needed with Iran - Fox News.

- (IR) Pres. Trump: So, I have Iran on the “ropes,” ready to go down for the fall... and the US Senate decides to have a poorly timed and meaningless War Powers Act Vote - post on Truth Social.

- (IR) Two vessels including one VLCC operated by Hyundai Merchant Marine exited Strait of Hormuz [time frame uncertain].

- (QA) Qatar PM Sheikh: Gulf state will resume normal LNG production within weeks - FT.

Levels as of 01:20 ET

Nikkei 225 -0.5%; ASX 200 +0.2%; Hang Seng +0.5%; Shanghai Composite +0.2%; Kospi +3.4%.

Equity S&P500 Futures +0.2%; Nasdaq100 +0.6%; DAX -0.1%; FTSE100 -0.4%.

EUR 1.1385-1.1361; JPY 161.64-161.50; AUD 0.6924-0.6902; NZD 0.5680-0.5651.

Gold -0.9% at $4,072/oz; BTC -0.8% at $62,888; Crude Oil -0.7% at $72.67/bbl; Copper -0.1% at $6.1188/lbs.