CN officials announce additional property support policies amid mixed data

Asia Market Update: CN officials announce additional property support policies amid mixed data, ultra-long issuance sees strong demand; BOJ bond buys unchanged; CN Apr YTD FDI due tonight/over weekend.

General trend

- (CN) CHINA PBOC ADJUSTS INTEREST RATE FOR COMMERCIAL HOUSING LOANS; SCRAPS NATIONWIDE INTEREST RATES FLOOR FOR 1ST AND 2ND HOMES - PRESS; Lowers loans rate of individual housing provident fund by 25bps [**Note: Last time China cut provident fund loan interest rate in 2022 and 2015.].

- (CN) China's Vice Premier He Lifeng: Local govts can purchase some homes for affordable housing at reasonable prices; China must effectively ensure delivery of homes.

- Ahead of the China monthly data dump new and used home prices fell yet again, and the number of cities recording falling home prices increased to 63 out of 70 (prior was 58). Tier 1 cities of Shenzhen and Guangzhou recorded falls in new home prices of more than -6% y/y.

- In the data dump itself, China industrial production beat expectations, but retail sales came in at a measly 2.3% (the lowest pace since Dec 2022 at the end of the China Covid lock-downs). The diametrically opposing results for production vs retail perhaps an indication that the Chinese economy is continuing to weight itself towards where govt attention and support is going. I.e. Pres Xi's campaign of "New Productive Forces").

- JP 10-yr yields +1.5bps to back up above 0.94%, while USD continued to claw back nearly all of its losses against the Yen suffered two days ago.

- Japan BOJ kept the lower bond purchasing amount in the 5-10 year JGB tenor at ¥425B (¥50B less than up through early May).

- Korean won fell -0.8% in Asian trading, its biggest drop in a month. Other major Asian currencies JPY and CNY were more steady.

- Japanese Fin Min Suzuki noted that he keeps in mind the risk of rising yields weighing on Japan's budget.

- A former Japan BOJ chief economist, Toshitaka Sekine, believes the BOJ may raise rates as soon as June, and overall could hike three times this year.

- Strong demand for China ultra-long-bond initial issuance today, based on the decent yield range and a high BTC. This was the first tranche of what will be a total of CNY1.0T in long-term bond issuance across three tenors (20, 30 & 50 yrs), to be issued by end-Nov 2024.

- US equity FUTs flat during Asian trading.

Looking ahead (Asian time zone)

- Fri May 17th (Fri eve CN Apr FDI YTD).

Holidays in Asia this week

- N/A.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 7,885.

- New Zealand Q1 PPI Input Q/Q: 0.7% v 0.9% prior; PPI Output Q/Q: 0.9% v 0.7% prior.

China/Hong Kong

- Hang Seng opens +0.8% at 19,525; Shanghai Composite opens flat at 3,121.

- China sells CNYB vs. CNY40B indicated in ultra-long 30-year Treasury bonds; Avg Yield: 2.57% (market expected 2.58%).

- China NBS [Stats Bureau] Spokeswoman Liu Aihua comments on Apr data: Some indicators slowed due to high-base comparisons and holiday factors, economic operations were stable.

- CHINA APR INDUSTRIAL PRODUCTION Y/Y: 6.7% V 5.5%E.

- CHINA APR RETAIL SALES Y/Y: 2.3% V 3.7%E.

- CHINA APR YTD FIXED URBAN ASSETS Y/Y: 4.2% V 4.6%E.

- China Apr YTD Property Investment Y/Y: -9.8% v -9.6%e.

- China Apr Surveyed Jobless Rate: 5.0% v 5.2%e.

- China Apr Coal production (371.7Mt, -2.9% y/y) falls to its lowest level since Oct 2022 - financial press.

- Country Garden (2007.HK) Liquidation hearing in HK has been adjourned again (to June 11th) - HK Court statement.

- China housing and financial regulators to hold afternoon press conference later on Fri to discuss housing delivery policies [specific time is uncertain] – Press.

- China Apr New Home Prices M/M: -0.6% v -0.3% prior.

- China yields for ultra-long-bond issuance estimated to be 2.5% to 3.0% - Chinese media.

- Biden administration adds 26 more Chinese textile firms related to Uyghur forced labor to sanctions list – press [overnight update].

- Reportedly US to place 25% tariff on China synthetic graphite ending its exemption; Tariff to be imposed in stages over next two years - press [**Note: China produces ~60% of global synthetic graphite] [overnight update].

- China and Russia reiterate to deepen military cooperation and expand joint drills - joint statement after Putin-Xi meeting [overnight update].

- China PBOC sets Yuan reference rate: 7.1045 v 7.1020 prior.

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repos; Net CNY0B v net CNY0B prior.

Japan

- Nikkei 225 opens -0.9% at 38,561.

- Japan BOJ Gov Ueda: Market value to be the base if BOJ unloads some ETF holdings - Parliamentary testimony.

- Japan Fin Min Suzuki: Vital to continue on with revenue and expenditure reforms - Japanese press.

- Teikoku Databank [TBD]: A majority of Japanese companies see recent Yen weakness as a negative.

- Bank of Japan (BOJ) announcement related to outright bond buying operations: For 1-3 Years; 3-5 Years, 5-10 Years and >25 Years; (lnline with prior purchases).

- Japan sells ¥5.8T vs. ¥5.8T indicated in 3-Month Bills; Avg Yield: 0.0413% v 0.0476% prior; bid-to-cover: 3.62x v 3.38x prior.

- Former BOJ chief economist believes BOJ may raise rates as soon as June - Japanese press.

South Korea

- Kospi opens flat at 2,751.

- Singapore Apr Non-Oil Domestic Exports M/M: 7.6% v 9.2%e; Y/Y: -9.3% v -8.9%e.

- South Korea Apr Unemployment Rate: 2.8% v 2.8%e.

- North Korea said to be re-installing land mines on DMZ border with South Korea - Korean press.

Other Asia

- Malaysia Central Bank (BNM) Gov Ghaffour: Q1 growth driven by private spending, exports; FX actions had positive outcomes.

- Philippine Central Bank (BSP) Gov Remolona: Still hawkish, but less so than before - additional post-rate decision comments.

- Thailand Fin Min Chunhavajira: Deciding policy rate to focus on inflation target [overnight update].

- Philippines Central Bank (BSP) Gov Remolona: May cut rates ahead of Fed; Could cut rates by 25bps in Aug [overnight update].

- PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED AT 6.50%; AS EXPECTED [overnight update].

North America

- (US) Fed's Williams (voter): Need not wait until inflation exactly at 2% to ease policy; Do not see any current need to hike rates.

- (US) APR IMPORT PRICE INDEX M/M: 0.9% V 0.3%E; Y/Y: 1.1% V 0.4%E.

- (US) APR HOUSING STARTS: 1.360M V 1.421ME; BUILDING PERMITS: 1.440M V 1.480ME (1-year low).

- (US) INITIAL JOBLESS CLAIMS: 222K V 220KE; CONTINUING CLAIMS: 1.794M V 1.78ME.

- (US) MAY PHILADELPHIA FED BUSINESS OUTLOOK: 4.5 V 8.0E; New Orders: -7.9 v +12.2 prior (lowest since Jan 2024).

- (US) APR INDUSTRIAL PRODUCTION M/M: 0.0% V 0.1%E; CAPACITY UTILIZATION: 78.4% V 78.4%E.

- (US) Fed’s Barkin (voter): Businesses are still willing to raise prices - CNBC interview.

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: +70 BCF VS. +76 BCF TO +79 BCF INDICATED RANGE.

- (US) Atlanta Fed GDPNow: Cut Q2 GDP forecast to 3.6% from 3.8% prior.

- (US) Fed's Mester (voter): Will take longer to gain confidence that inflation is moving to 2% target; Prudent to keep rates on hold for longer; Expect gradual progress on inflation.

Europe

- (EU) ECB's Schnabel (Germany, hawk): Open to a June rate cut, but urges caution thereafter - Nikkei.

- (EU) ECB's Centeno (Portugal): Inflation fall is being sustained; Nearing 2% ECB target.

- (EU) ECB's de Guindos (Spain): Euro area wage growth is decelerating.

- (EU) ECB’s Nagel (Germany): Interbank transactions may need higher spreads.

- (UK) BOE’s Greene: Paying particular attention to cost pass-through; Inflation persistence has waned since joining the MPC; Burden of proof needs to lie trend continuing to decline.

- (EU) ECB's Kazaks (Latvia): Rate cuts should be gradual and easiest to move at quarterly meetings when projections are released.

Levels as of 01:20 ET

- Nikkei 225, -0.5%, ASX 200 -0.8% , Hang Seng +0.5%; Shanghai Composite -0.1% ; Kospi -0.9%.

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

- EUR 1.0869-1.0854 ; JPY 155.92-155.32 ; AUD 0.6683-0.6658 ;NZD 0.6145-0.6105.

- Gold -0.1% at $2,383/oz; Crude Oil +0.2% at $79.34/brl; Copper +0.5% at $4.9020/lb.