Chinese markets shrug off latest regulatory moves

Asia Market Update: Aluminum higher on worries of shortages with coup in Guinea; Japan markets rally on prospects of more stimulus under new PM; Chinese markets shrug off latest regulatory moves, all but Auckland comes out of lockdown.

General trend

- Markets mixed with US holiday ahead, little new catalysts in the session so markets continue to trade off Friday news of weaker US payrolls and expectations that the taper timeline will be adjusted. China holds expo over the weekend saw various comments from PBOC, President Xi and Vice Premier. Markets move higher despite more regulation out of China.

- Currencies traded in a tight range with USD stronger against the majors.

- Yields across the region higher tracking US lead from Friday.

- Japanese market trade higher at the prospect of getting a new PM that would expand stimulus, after Suga unexpectedly stepped down Friday. Currently Defense Min Kono is seen as a favorite.

- China aluminum names traded higher on the news of a coup in Guinea (accounts for more than 50% of China’s imports of bauxite). LME rose to highest since May 2011.

- China Vice premier vows to support private companies.

- China PBOC annual financial system stability report noted that the financial risks in China have decreased and are generally controllable as regulatory measures take hold.

- US Department of energy updated on Louisiana refineries noting that 4 were starting to come back online. Shell noted that Norco was still without power.

Headlines/Economic Data

Australia/New Zealand

-ASX 200 opened 0.0%.

- (NZ) NEW ZEALAND Q2 VOLUME OF ALL BUILDINGS Q/Q: 2.0% V 2.9%E.

- OSH.AU Extends exclusive due diligence with Santos through Sept 13th.

- (AU) Australia sells A$1.0B v A$1.0B indicated in 1.25% May 2032 bonds, avg yield 1.322%, bid to cover 3.52x.

- SOL.AU Guides FY21 (A$) Net 316-328M v 170M y/y; Merger with Milton expect to occur in Oct.

- Looking Ahead: RBA rate decision tomorrow.

Japan

-Nikkei 225 opened +1.3%.

- (JP) Current Japan Foreign Min Kono said to be the favored in polls to replace Suga as LDP Leader – Press.

- 5991.JP Said to plan on increasing chip equipment part production – Press.

Korea

-Kospi opened -0.2%.

- (KR) South Korea company sales to China in 2020 -7% y/y, notes loss of market share – Yonhap.

China/Hong Kong

-Hang Seng opened -0.3%; Shanghai Composite opened 0.0%.

- (CN) China PBOC financial system stability report: Financial risks in China have decreased and are generally controllable as regulatory measures take hold – Xinhua.

- (CN) China Vice Premier Liu He: Policy to support private companies will not change, promises China will support private sector - Xinhua.

- (CN) China researcher: Sees room for cut to RRR or rate in H2 - China Securities Journal.

- CEO Dyukov confirmed plans to move away from the US dollar to the yuan in settlements in China, the latest move in trend that China and Russia are accelerating their de-dollarization push to enhance the security and convenience of China-Russia trade against potential unilateral US sanctions – press.

- (CN) Analysts note that foreign investors have added to their holdings of stocks in Shanghai and Shenzhen every month since Nov 2020, despite China regulatory moves – press.

- (HK) Expected that China Southbond bond link may reveal additional details during the week – Press.

- (CN) China PBOC Deputy Gov Chen Yulu: PBOC will close loopholes in its financial technology regulation, and include all types of financial institutions, services and products into its prudential supervision framework, will include all types of financial institutions, services and products into its prudential supervision framework - China International Finance Annual Forum in Beijing.

- (CN) China Securities regulator (CSRC) Vice Chairman Fang Xinghai: Will improve regulations for companies seeking overseas listings, and enhance channels for foreign investors to participate in China's onshore securities futures market - China International Finance Annual Forum in Beijing.

- 700.HK Analysts note that the release of its new game, League of Legends Mobile, is supposed to have a strong debut on Sept 15th.

- (CN) China PBOC sets Yuan reference rate: 6.4529 v 6.4577 prior.

- (CN) China PBOC Open Market Operation (OMO): Injects CNY10B in 7-day reverse repos v CNY10B in 7-day reverse repos prior; Net drain CNY40B v Net drain CNY40B prior.

Other

- (AU) UN Assistant Sec Gen Hart will put pressure on OECD countries, including Australia, to shut coal industries, noting timeline allows for a transition of coal workers - leaked speech notes for Crawford Leadership Forum.

- (TW) Taiwan scrambled jets Sunday in response to China military activity in its air space - press.

North America

– US and Canada markets closed for Labor Day holiday.

- DIDI Denies report about investment or takeover by China state owned firm.

- (US) US Dept of Energy: 4 oil refineries in Louisiana have initiated restart processes after Hurricane Ida, 5 still have yet to resume operations.

US Markets Friday

- (US) AUG CHANGE IN NONFARM PAYROLLS: +235K V +725KE (below lower-end of analyst expectations).

Europe

- (UK) National Health Services has received additional £5.5B to help with COVID recovery - UK press citing sources in Govt.

- (UK) PM Johnson thought to be looking to push through a tax increase, in order to fund social care; no opposition expected - UK press.

- (UK) According to CBI, UK is facing 2 years of labor shortages, it will not be helped by Govt job retention scheme, no quick fix for training skilled staff - UK press.

- (EU) EU Economic Commissioner Gentiloni (Italy):Watching EU inflation, we should monitor very accurately, but avoid making conclusions too early, the mainstream consensus is on the fact that this inflation is still a temporary phenomenon - press citing Ambrosetti Forum.

Levels as of 01:00ET

- Hang Seng +0.3%; Shanghai Composite +1.0%; Kospi -0.3%; Nikkei225 +1.8%; ASX 200 -0.4%.

- Equity Futures: S&P500 -0.0%; Nasdaq100 +0.1%, Dax +0.0%; FTSE100 +0.0%.

- EUR 1.1887-1.1865; JPY 109.85-109.71; AUD 0.7462-0.7429; NZD 0.7164-0.7136.

- Commodity Futures: Gold -0.3% at $1,828/oz; Crude Oil -1.1% at $68.53/brl; Copper -0.6% at $4.31/lb.