Offshore CNH collapses to 4-mth lows as HK tech index falls 4%

Asia Market Update: Offshore CNH collapses to 4-mth lows as HK Tech index falls 4%; China chipmakers in US reg trouble; AU RBA sees financial risks as manageable; Asian stocks fall back (ex-Nikkei at new 41K high).

General trend

- China’s Offshore Yuan falls to levels not seen since November amid reports of large China state-owned banks seen selling USD for yuan.

- Chinese chipmakers SMIC -5%, Hua Hong -3.5% as US threatens export control sanctions against SMIC for producing chips for Huawei’s new 7nm chip phone.

- New Zealand Feb Trade Deficit narrowed significantly to its smallest level in 20 months.

- Nikkei 225 broke 41,000 for the first time.

- Japan’s National core and headline inflation roughly in-line with estimates but having accelerated significantly m/m, although core-core (ex-fresh food and energy) fell m/m; Japan 2-yr yields rose to 0.205%, highest since Apr 2011.

- Foreign funds last week sold the most Japan stocks since 2019, coinciding with last week’s sell off that saw the Nikkei fall to the 38,000 level.

- The RBA bi-annual Financial Stability Report said that risks remain elevated, but the Australian financial system is proving resilient. The report did make special mention of the Chinese property sector as a potential spillover factor to the rest of the global economy.

- US equity FUTs up slightly during Asian trading.

Looking ahead (Asian time zone)

- Fri Mar 22nd (Fri eve UK Retail Sales).

Holidays in Asia this week

- Wed Mar 20th, Japan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 7,784.

- Reserve Bank of Australia (RBA) Bi-annual Financial Stability Review: Overall financial stability risks remain elevated, but the Australian financial system is proving resilient.

- New Zealand Feb Trade Balance (NZD): -0.2B v -1.0B.

- BAE systems (BA.UK) Contracted by Australia and UK to build Aukus Nuclear Submarine fleet; No financial details disclosed.

- China Commerce Ministry (MOFCOM): To step up cooperation with Australia on clean energy [overnight update].

China/Hong Kong

- Hang Seng opens -0.7% at 16,745.

- Shanghai Composite opens -0.2% at 3,070.

- China RRR cut ‘buzz’ gathers steam – China Daily [follows comments from PBOC official on Thurs.].

- USD/CNY CNH trades at the weakest level since early Nov.

- Large China state-owned banks seen selling USD for yuan - financial press.

- SMIC (981.HK) US Commerce Dept Official: Company may have violated US export controls to produce chip for Huawei phone.

- China Commerce Minister meets with execs from Mercedes, HP - China Commerce Ministry.

- 2 banks in China raised mortgage rates; the banks are located in the Hebei and Guangdong provinces; cites rising home prices; higher mortgage rates are not expected in additional Chinese cities – Securities Daily.

- China National Energy Administration: Targets crude oil production stabilizing above 200M MTs in 2024.

- China Pres Xi to meet US CEOs in Beijing next week (March 27th) – WSJ [overnight update].

- Houthis rebels to allow Chinese and Russian ships through Red Sea – press [overhnight update].

- China Mar Preliminary Retail Passenger Vehicle Sales Y/Y: +3.7% y/y [overnight update].

- China Pres Xi: Reiterates high quality development is our top priority [overnight update].

- China Feb YTD Non-Financial ODI (CNY terms): +10% y/y [overnight update].

- (RU) Several Chinese banks have reportedly stopped accepting payments from Russia in Chinese yuan (CNY) – press [overnight update].

- China PBOC sets Yuan reference rate: 7.1004 v 7.0942 prior.

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repos; Net drains CNY11B v drains CNY1B prior.

Japan

- Nikkei 225 opens +0.3% at 40,942.

- JAPAN FEB NATIONAL CPI Y/Y: 2.8% V 2.9%E; CPI EX FRESH FOOD (CORE) Y/Y: 2.8% V 2.8%E.

- Japan BOJ Gov Ueda: JGB holdings to remain at current levels for time being - Parliamentary testimony.

- Japan releases weekly flows data [period ended Mar 15th]: Foreign buying of Japan equities: -¥1.5T v +¥374.3B prior; Japan buying of foreign bonds: -¥803.9B v +¥1.58T prior (Note: Foreign funds sell the most Japan stocks since 2019).

- Japan Feb Crude Steel Output: 6.99Mts, -3.8% m/m, +1.1% y/y.

- Japan Fin Min Suzuki: BOJ's decision to change policy could squeeze policy expenditures - Japanese press.

- Bank of Japan (BOJ) announcement related to outright bond buying operations: For 1~3 Years; 3~5 Years; 5~10 Years and 10~25 Years.

- Fitch analysts on Japan: Expect further BoJ policy tightening to be gradual [overnight update].

South Korea

- Kospi opens -0.1% at 2,751.

- South Korea Feb PPI Y/Y: 1.5% v 1.3% prior.

Other Asia

- TSM The co. is expected to see a 25% power rate increase in Taiwan; Taiwan plans to raise electricity prices by 11% - Taiwan Press.

- Thailand Central Bank (BOT): MPC to assess durability in near-term momentum, to recalibrate neutral policy stance.

- Taiwan Central Bank (CBC) Gov Yang: Rate hike was mild; Still in a tightening cycle; Interest rates are now at appropriate level - post rate decision conf [overnight update].

- TAIWAN CENTRAL BANK (CBC) RAISES BENCHMARK INTEREST RATE BY 12.5BPS TO 2.000%; NOT EXPECTED [overnight update].

North America

- (US) President Biden expected to award ‘billions’ to decarbonize US heavy industries – US financial press.

- Boeing (BA): Airline CEOs reportedly to meet with Company's Chairman to discuss Jan 5th Alaska Air incident and 737 MAX production issues - US press.

- Fedex (FDX) In Q4 expect y/y profit improvement (as implied by FY guidance) - earnings call.

- Nike (NKE) Guides FY25 H1 Rev down low single digits; Affirms FY24 Rev +1%, Cuts Gross margin +120bps (prior: +1%; gross margin expanding 140-160bps) - earnings call (stock -3% A/H).

- AAPL US Attorney General Garland confirms antitrust suit against Apple for monopolizing smartphone markets (as expected, stock -4%).

- (US) House Speaker Johnson: Despite 1 vote majority in House we need to govern and keep things moving; We will avoid a long shut down - CNBC.

- (US) INITIAL JOBLESS CLAIMS: 210K V 213KE; CONTINUING CLAIMS: 1.807M V 1.82ME.

- (US) Q4 CURRENT ACCOUNT: -$194.8B V -$209.0BE.

- (US) MAR PHILADELPHIA FED BUSINESS OUTLOOK: +3.2 V -2.5E; New Orders: +5.4 v -5.2 prior; Future (6-month) Business Conditions Index: 38.6 v 7.2 prior (highest since 2021).

- (CA) Bank of Canada (BOC) Dep Gov Gravelle: Could be a multiyear process to replenish stock of money market instruments.

- (US) MAR PRELIMINARY S&P MANUFACTURING PMI: 52.5 V 51.8E (3rd consecutive month of expansion); Inflationary pressures gather pace in March.

- (US) FEB EXISTING HOME SALES: 4.38M V 3.94ME; Months supply: 2.9 v 3.0 prior.

- (US) FEB LEADING INDEX: +0.1% V -0.1%E.

Europe

- (UK) BOE Gov Bailey reiterates view that rate cuts 'in play' in upbeat take on UK economy - FT.

- (UR) Russian forces said to have hit Dnipro dam in Zaporizhzhia region with missiles; Also power cuts in Ukraine regions after Russian strikes on energy facilities - press.

- (UK) Mar GfK Consumer Confidence: -21 v -19e.

- (NL) Netherlands Feb House Price Index M/M: 1.0% v 1.2% prior; Y/Y: 4.3% v 1.8% prior.

- (UR) IMF approves $880M for Ukraine with US aid being stalled - financial press.

- (UR) NATO reportedly may soon take on more responsibility from the Pentagon in providing aid to Ukraine; The negotiations are partly driven by fears of Trump’s return to office - Semafor.

- (EU) ECB’s Holzmann (Austria, hawk): Plan to complete ECB term through end-Aug 2025; No decision on whether to seek second term.

- (UK) BANK OF ENGLAND (BOE) LEAVES BANK RATE UNCHANGED AT 5.25%; AS EXPECTED.

- (UK) BANK OF ENGLAND (BOE) VOTED 8-1 (no hawkish dissenters; Dhingra voted to cut rates 25bps).

- (UK) BOE Gov Bailey: Market bets on rate cuts are reasonable.

Levels as of 00:20 ET

- Nikkei 225 +0.3%, ASX 200 -0.2%, Hang Seng -2.8%; Shanghai Composite -1.2%; Kospi -0.3%.

- Equity S&P500 Futures: +0.1%; Nasdaq100 +0.1%, Dax flat; FTSE100 flat.

- EUR 1.0831-1.0869; JPY 151.42-151.87; AUD 0.6522-0.6577; NZD 0.6011-0.6052.

- Gold -0.4% at $2,175/oz; Crude Oil -0.7% at $80.47/brl; Copper -1.1% at $4.0198lb.