Equity indices trade higher, HK outperforms on China’s property support measures

Asia Market Update: Equity indices trade higher; HK outperforms on China’s property support measures; PBOC cut the LPRs; Better AU jobs report shifts focus to Q4 CPI data and Feb RBA meeting.

General trend

- Little impact seen on CNH from PBOC easing and strongest yuan fixing since May 2018.

- China PBOC has continued to ease policy [cut 1-year LPR (as expected), more surprisingly the 5-yr LPR was also cut (first time since early 2020)]; Analysts expect further easing going forward; There is, also, debate about the possible impact of the recent ‘small’ easing moves by the PBOC.

- Chinese government bond yields have been generally quiet.

- UST yields declined ahead of the PBOC’s easing, yields later moved off of the lows.

- AUD/USD has traded modestly higher amid the data, currently off of the best levels.

- Australia’s unemployment rate tumbled to a 13-year low in December, potentially setting the stage for the Reserve Bank to scrap its bond-buying program and bring forward interest-rate increases.

- Next week’s Q4 CPI release for Australia is also a focal point [Jan 25th]. Some analysts have already brought forward their RBA rate hike forecasts ahead of the data.

- NZD lagged amid rise in AUD/NZD and lower bond yields in NZ; NZ also gave COVID update.

- South Korea Dec OECD leading index: 101.2, -0.09 m/m (5th straight decline) [reminder: Aug 26 2021 BOK raised the 7-day repo rate by 25bps to 0.75%-1st rate hike since Nov 2018].

- WTI Crude pared losses after the policy easing by the PBOC [Pemex pipeline said to have exploded; China said to have purchased crude from Iran].

- US equity FUTs extend gains.

- Hang Seng rises over 2%; Mainland Property index rose by over 5% [PBOC cut rates, recent escrow account news initially viewed as positive].

- PetroChina declines on probe related to crude trading.

- Shanghai Composite had a more subdued reaction to the easing measures out of China [Property index pared rise; Financials move higher].

- Nikkei 225 has moved higher after opening slightly down.

- S&P ASX 200 has lagged amid RBA rate hike expectations.

- Thailand bank earnings in focus.

- Companies due to report during the NY morning include American Airlines, Baker Hughes, Travelers, Union Pacific.

- Indonesia Central Bank is expected to leave rates unchanged later today.

- Sri Lanka delivered larger than expected rate hike amid FX concerns.

Headlines/Economic data

Australia/New Zealand

- ASX 200 opened +0.0%.

- (AU) AUSTRALIA DEC EMPLOYMENT CHANGE: 64.8K V +60.0KE; UNEMPLOYMENT RATE: 4.2% V 4.5%E (lowest unemployment rate since Aug 2008).

- (AU) AUSTRALIA JAN CONSUMER INFLATION EXPECTATION: 4.4% V 4.8% PRIOR.

- STO.AU Reports FY21 production 92.1 MMBOE v 89 y/y; Rev $4.7B v $3.4B y/y.

- WPL.AU Reports Q4 Rev $2.85B (record rev) v $0.9B y/y; Production 22.6 MMBOE v 24.9 y/y; To have a non-cash impairment reversal of $582M.

- (AU) Westpac sees Reserve Bank of Australia (RBA) raising rates 15bps in Aug 2022 (prior Feb 2023) and 25bps in Oct.

- QAN.AU Seeking to end employment terms agreement with long-haul cabin crew, would not results in job losses but would cut pay.

Japan

- Nikkei 225 opened -0.2%.

- (JP) Japan PM Kishida confirms declaration of quasi-emergency in Tokyo; to run between Jan 21st thru Feb 13th (as expected).

- 3893.JP To raise prices of tissue, toilet paper by >10% - press.

- 7203.JP Halted production line at Aichi plant due to COVID-19 restrictions and cut production at Tsutsumi factory after 14 workers tested positive – press.

- (JP) Japan Dec Trade Balance: -¥582.4B v -¥787.6Be; Adj Trade Balance: -¥435.3B v -¥744.1Be.

- (JP) Tokyo, Japan confirms has raised virus alert level to highest and Healthcare alert to second highest level.

Korea

- Kospi opened 0.0%

- (KR) South Korea Dec PPI M/M: 0.0% v 0.5% prior; Y/Y: 9.0% v 9.8% prior.

- (KR) North Korea leader Kim presided over party meeting on Jan 19th, indicated he may lift a self-imposed moratorium on major nuclear weapons and intercontinental ballistic missile tests - KCNA.

- 005930.KR Said to be considering withdrawing from LCD business by June 2022 (earlier than the guided ed of 2022) - BusinessKorea.

China/Hong Kong

- Hang Seng opened +0.6%; Shanghai Composite opened -0.1%.

- (CN) China Official: Reiterates to issue policies to encourage births, see big pressure on industrial economy in Q1.

- (CN) China Dec Swift Global Payments (CNY): 2.70% v 2.14% prior.

- (CN) CHINA PBOC MONTHLY LOAN PRIME RATE (LPR) SETTING: CUTS 1-YEAR RATE BY 10BPS TO 3.70% (as expected, 2nd straight cut); CUTS 5-YEAR RATE BY 5BPS TO 4.60% [first cut in the 5-year rate since Apr 2020].

- (CN) China PBOC sets Yuan reference rate: 6.3485 v 6.3624 prior (strongest since May 2018).

- (CN) China PBOC Open Market Operation (OMO): Sells CNY100B in 7-day reverse repos v CNY100B prior; Net inject CNY90B v CNY90B prior.

- (CN) China Securities Journal again speculates that China PBOC expected to cut Reverse Repo Rate (RRR) in Q1 to assist the economy.

- (CN) China Premier Li: To urge effective measures for economic momentum.

- (CN) China Q4 Beige Book: If China maintains its zero Covid policy, Services could face extreme pressure on both the supply and demand side in Q1, with businesses closed down and customers confined at home even due to a single case in their areas.

- 3883.HK Will not make payments on remaining notes due in Jan, exploring opportunities and debt restructuring.

- (CN) China said to be drafting rules to make it easier for property developers to use pre-sale funds in escrow accounts, and could release the rules during the end of Jan – Press (late session yesterday).

- (CN) Follow Up: China Xiangyang Property Association: China Supreme Court and PBOC is urging banks to ensure pre-sales funding is used for construction - press.

Other

- VTAC.SG Singapore first SPAC, Vertex Technology Acquisition Corporation Ltd, IPO retail portion 36x over subscribed.

North America

- (US) Weekly API Crude Oil Inventories: +1.4M v -1.1M prior.

- (CN) US President Biden: Trade advisers are working on Chinese tariffs, uncertain when tariffs could be lifted, not in a place yet to do so.

- (MX) PEMEX Pipeline has exploded in Mexican State Tabasco.

Europe

- (UK) Dec RICS House Price Balance: 69% v 69%e; shortage of homes will drive values higher this year.

Levels as of 00:15ET

- Hang Seng +2.4%; Shanghai Composite +0.4%; Kospi +0.4%; Nikkei225 +1.3%; ASX 200 +0.2%.

- Equity Futures: S&P500 +0.4%; Nasdaq100 +0.6%, Dax +0.4%; FTSE100 +0.4%.

- EUR 1.1365-1.1340; JPY 114.47-114.03; AUD 0.7256-0.7208; NZD 0.6790-0.6764.

- Commodity Futures: Gold -0.2% at $1,840/oz; Crude Oil +0.0% at $85.81/brl; Copper +0.9% at $4.49/lb.