CN/HK equities continue correction
|Asia market update: CN/HK equities continue correction; CN then hints at more measures; RBNZ cuts further 50bps; Focus on TSM Sept Sales / Q3; US FOMC Minutes.
General trend
- After yesterday’s plunge in HK shares and the halving of Chinese equity levels from their opening prices, overnight NY trading saw FXI down -9.2% and EWH -7.8% as the US markets played catch up. FXI traded 299M shares versus the daily average of 52M.
- Then at the cash open Shanghai Composite opened down and kept falling as much as -6.5%, with CSI300 Real Estate index -9%, while the Hang Seng -3.3% and Hang Seng Mainland Properties -6%. China equities set to suffer their first decline at the close in 11 days.
- Then, shortly before this update was due to be sent, China MOF said it would hold a briefing on "intensifying" fiscal policy and economic development, on Sat Oct 12th at 10am local time (02:00 GMT). Hang Seng and Shanghai Composite continued to pare losses, while commodity currencies Aussie and Kiwi as well as Sterling, Euro and USD/JPY all spiked somewhat higher.
- New Zealand’s RBNZ cut the OCR by a further 50bps down to 4.75%, as expected. Nevertheless the Kiwi dollar soon lost -0.6% to test 61c handle. However, Kiwi bond yields barely moved and in fact moved up 2bps a couple of hours after the decision. Kiwi dollar resumed its fall later to be down -0.9%, slicing through the 61 handle while NZ equities +1.5%.
- Reserve Bank of India kept rates paused, as expected.
- Japan 10yr yields hit 0.93%, highest since the bond yield melt down on Aug 5th.
- South Korea bonds at last confirmed to be included in WGBI index from Nov 2025, with analysts and the Bank of Korea itself estimating between $40-70B of WGBI-related funds to flow into Korean Treasury Bonds (KTBs) as a result.
- India was also added to the FTSE Emerging Markets Government Bond Index (EMGBI), within the 6 month period from Sept 2025.
- Singapore Exchange reported a 75% bump in total Sept volume of trading, adding that broad-based commodity gains lift volume to records, following China's stimulus announcements
- US equity FUTs -0.2% to -0.3% during the Asia session.
Looking ahead (Asian time zone)
- Wed Oct 9th (Wed night US FOMC Minutes).
- Thu Oct 10th RBA’s Hunter (Thu night US Sept CPI).
- Fri Oct 11th NZ Sept Biz PMI, KR Rate Decision, IN Oct Industrial Production (Fri night US Sept PPI, Michigan Oct prelim Consumer Sentiment).
Holidays in Asia this week
- Mon Oct 7th China.
- Wed Oct 9th South Korea.
- Thu Oct 10th Taiwan (US Sept CPI).
- Fri Oct 11th Hong Kong (US Sept PPI).
Headlines/economic data
Australia/New Zealand
- ASX 200 opens flat at 8,178.
- Reserve Bank of Australia (RBA) Asst Gov Kent (Financial Markets): RBA to review TTF (Term Funding Facility).
- Australia sells A$500M v A$500M indicated in 3.25% Jun 2039 bonds; Avg Yield: 4.3927%; bid-to-cover 2.72x.
- (NZ) New Zealand central bank (RBNZ) cuts official cash rate (OCR) BY 50BPS to 4.75%; as expected.
China/Hong Kong
- Hang Seng opens +1.7% at 21,290; Shanghai Composite opens -1.8% at 3,427.
- *China MOF to hold briefing about fiscal policy and economic development on Sat Oct 12th at 10am local time - financial press; Said to brief 'intensifying' fiscal policy adjustment.
- China said to propose to EU a €30K minimum price for EV imports from China; EU rejected that proposal [overnight update].
- Mexico's Dep Trade Min Gutierrez: Mexico wants to curb Chinese imports with help from US firms; Mexico is not a springboard from Asia to US – SWJ.
- China Premier Li Qiang: To strengthen policy coordination; vows measures to support businesses [overnight update].
- China sells 3-year and 7-year bonds.
- China PBOC sets Yuan reference rate: 7.0568 v 7.0709 prior.
- China PBOC Open Market Operation (OMO): Injects CNY61B in 7-day reverse repos; Net drains CNY136B v net drains CNY887B prior.
Japan
- Nikkei 225 opens +1.2% at 39,385.
- Former BOJ Exec Dir Maeda: BOJ's next hike likely to be in January.
- Seven & i: Couche-Tard said to send new buyout offer to the co. worth ¥7.0T (~$47B); New proposal is for $18.19/shr vs prior 14.86/shr in cash.
- Japan sells ¥3.5T vs. ¥3.5T indicated in 6-Month Bills; Avg Yield: Avg Yield: 0.0702% v 0.0867% prior, bid-to-cover: 3.21x v 3.42x prior.
- Japan Economy Min Akazawa: Leave monetary policy measures to BOJ; Can't take any risk of deflation returning; Want to judge exit of deflation using various data [overnight update].
Korea
- Kospi closed for holiday.
- Korea Finance Ministry: Expects $56B of inflows due to WGBI inclusion.
- South Korea bonds confirmed to be included in WGBI index by FTSE Russell; effective Nov 2025.
- Korea Finance Ministry: To monitor markets for volatility following inclusion in WGBI bond index - financial press.
Other Asia
- India central bank (RBI) leaves repurchase rate unchanged at 6.50%; as expected; changes stance to neutral.
- Thailand Dep Fin Min Paopoom: "Highly possible" for Bank of Thailand (BOT) to cut rates this year.
- (IN) India added to FTSE Emerging Markets Government Bond Index (EMGBI); Effective in the 6 month period from Sept. 2025.
North America
- Google: US DOJ outlines potential remedies in Google search antitrust case that would limit the co's use of contracts and 'monopoly' profits and other tools to control distribution channels; cites court filing - financial press.
- Boeing (BA): *says offer to union 'withdrawn'; Union confirms offer from Sept 23rd has been withdrawn.
- (US) Fed's Jefferson (voter): Job market cooling is modest but noticeable.
- US Dept of Energy: Awards contracts to six companies to develop highly-enriched reactor fuel.
- (US) Sept NFIB Small Business Optimism: 91.5 v 92.0e.
- (US) Reportedly Biden administration has in recent weeks grown increasingly distrustful of what the Israeli govt says about its military and diplomatic plans in the multi-front war it is fighting - Axios.
- (US) Aug trade balance: -$70.4B V -$70.5BE.
- (US) Weekly Redbook LFL Sales w/e Oct 5th: +5.4% y/y; Sept MTD: +5.3% y/y.
- (US) Treasury's $58b 3-year note auction results: draws 3.878% v 3.440% prior, bid-to-cover ratio: 2.45 v 2.66 prior and 2.58 over the last 8 auctions.
Europe
- ECB's Stournaras (Greece): Sees case for two more 25bp cuts in Eurozone this year and further easing in 2025 - FT.
- (RU) Russian oil firms said to be discussing diesel export ban for non-producers - Russian press.
- (EU) ECB’s Centeno (Portugal, dove): Inflation in Euro-Area has converged towards goal; Easing cycle will be faster than thought in June.
- (PL) Poland Central Bank (NBP) Janczyk: Hope for 100bps of rate cuts in 2025.
- (SE) Sweden Central Bank (Riksbank) Dep Gov Bunge: More confident that high inflation is behind us.
- (LY) Libya National Oil Company (NOC): Daily production reaches 1.13M bpd.
Levels as of 01:20 ET
- Nikkei 225 +0.1%, ASX 200 +0.1%, Hang Seng +0.7%; Shanghai Composite -4.0%; Kospi -0.8%.
- Equity S&P500 Futures: -0.2%; Nasdaq100 -0.3% Dax -0.1%; FTSE100 -0.1%.
- EUR 1.0962-1.0982; JPY 148.01-148.55; AUD 0.6723-0.6761; NZD 0.6076-0.6144.
- Gold +0.1% at $2,638/oz; Crude Oil +0.7% at $74.06/brl; Copper +0.4% at $4.4915/lb.
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