Foreign funds sold record amount of Japan equities last week as Nikkei sold off 2% today

Asia Market Update: Foreign funds sold record amount of Japan equities last week as Nikkei sold off >2% today; CN PBOC pumps massive liquidity; Asian currencies still under pressure; Evergrande group co’s trading halted; Markets look to end-of-week inflation data.

General trend

- Global Funds sold the most amount of Japanese equities on record last week. Foreign investors last week also sold over ¥2.0T of Japanese bonds.

- China PBOC supported the Yuan with another strongest fix on record. Meanwhile ahead of the next week of holidays in China (starting tomorrow) today's OMO net liquidity injection of CNY440B was the highest since Jan 17th when China PBOC net injected CNY504B [largest daily injection since Jan 2019]. So far this week the PBOC has injected a Net CNY1.157T through OMO ops this week, the highest weekly liquidity injection in over 8 months.

- Asian yields continued to follow USTs higher, with Japan 10-yr JGB yields above 0.75% [highest since 2013], and Aussie 10-yrs at 4.4680% rising to highest since 2011.

- Continued pressure on Asian currencies with end-of-month flows likely not helping; India Central Bank said to be selling dollars again, while India overnight TREPS (Treasury Bills repurchases rate) hit 7.24% with no deals in call money markets.

- Crude Oil continued to steam higher in the Asian session, with WTI touching $95, not seen since Aug 2022.

- Trading was halted simultaneously in HK today for Evergrande Real Estate, Evergrande NEV and Evergrande Property Services.

- AU prelim Retail Sales slightly softer than expected, with the AUD recovering some portion of this week’s loses through the Asian session.

- US equity FUTs slight up in Asian trading.

Looking ahead (Asian time zone)

- Tonight US GDP & initial Jobless Claims.

- Fri JP Tokyo CPI, JP Retail Sales, Unemployment & Consumer Confidence.

- Fri night EU CPI, US Core PCE / Personal income & spending.

- Sat CN Official Mnfg & non-Mnfg PMI.

- Sun CN Caixin Mnfg & Services PMI.

Holidays in Asia this week

- Thu Sep 28 Indonesia, Malaysia, South Korea.

- Fri Sep 29 China, Taiwan.

Headlines/economic cata

Australia/New Zealand

- ASX 200 opens +0.1% at 7,035.

- Australia Aug Retail Sales M/M: 0.2% v 0.3%e.

- Australia Q2 Job Vacancies Q/Q: -8.9% v -2.5% prior.

- Australia Treasurer Chalmers: RBA revamp criticism ‘Bizarre’ and 'Wrong' (responding to recent comments by Fmr RBA Gov MacFarlane).

- New Zealand Sept Business Confidence: +1.5 v -3.7 prior.

- New Zealand Aug Filled Jobs M/M: +0.2% v +0.2% prior (5th straight rise) [update].

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2029, 2034 and 2051 bonds.

China/Hong Kong

- Hang Seng opens -0.1% at 17,587.

- Hong Kong’s finance chief hints that the government could soon ease the city’s property cooling measures – SCMP.

- China Aug Swift Global Payments (CNY): 3.5% v 3.1% prior.

- China Trade-Weighted CFETS Yuan Basket Index rises to the highest since late Apr.

- China Financial Regulator: To issue rules on insurance sales.

- Simultaneous trading halt for Evergrande (3333.HK), Evergrande Property Services (6666.HK), Evergrande NEV (0708.HK).

- China's regional lender Shengjing Bank to sell assets to government-backed Liaoning Asset Management for CNY176B ($24B) - financial press (update).

- HSBC to acquire Citi Group's China consumer wealth business that manages over $3B of assets.

- China Foreign Minister Wang Yi: EU's anti-subsidy investigation into Chinese EVs is against international trade principles and is likely to disrupt the global auto industry supply chain.

- China Pres Xi: To enhance effectiveness of attracting foreign capital - state tv (overnight update).

- China Politburo: Will take strong measures to prevent and resolve major risks (overnight update).

- Country Garden (2007.HK) Said to be in talks with US restructuring specialists Houlihan Lokey and CICC for both to become financial advisers and put together an offshore-debt restructuring plan (overnight update).

- China Commerce Ministry (MOFCOM): Resolutely opposes adding Chinese entities on export control list by US; US should immediately correct its wrongdoings (overnight update).

- China reportedly extends tax breaks for small lending firms to end-2027 (overnight update).

- China PBOC advisor: China able to achieve economic growth of slightly more than 5% this year (overnight update).

- China PBOC Open Market Operation (OMO): Sells CNY101B in 7-day reverse repos v CNY200B prior; Sells CNY508B in 14-day reverse repos v CNY417B prior; Net injects CNY440B v Net injects CNY412B prior.

- China PBOC sets Yuan reference rate: 7.1798 v 7.1717 prior.

Japan

- Nikkei 225 opens -0.8% at 32,119.

- Japan releases weekly flows data [period ended Sept 22nd]: Japan buying of foreign bonds: -¥544.4B v ¥880.9B prior: Foreign buying of Japan stocks: -¥3.0T v -¥1.58T prior (Global funds sold most Japan stocks on record last week).

- Foreign buying of Japan Bonds: -¥2.0T v ¥435.2B prior.

- Japan buying of foreign stocks: -¥6.2B v ¥62.6B prior.

- Japan 'high-dividend' stocks decline on ex-dividends (>1,400 companies are trading ex-dividend today).

- Japan Fin Min Suzuki: Declined to comment when asked about any plans for a currency rate check; watching FX with 'strong sense of urgency'.

- Japan 10-year JGB yield rises above 0.75% [highest since 2013], follows rise in UST yields; Japan to sell 2-year JGBs later today.

- Japan PM Kishida confirms to draw up a package on domestic logistics innovation.

- Japanese insurance firms reportedly fixed prices for over 100 clients – Nikkei.

- Japan Ministry suspends wind subsidies to Japan wind development.

- Japan PM Kishida: Will create a tax break for domestic investments in strategic areas such as batteries, EVs and semiconductors (overnight update).

- Japan Aug Final Machine Tool Orders Y/Y: -17.6% v -17.6% prelim (overnight update).

- Bank of Japan (BOJ) offers to buy 5-10 year JGBs at fixed rate of 100bps; Opens window to buy unlimited amount of 10-year JGBs at 1.00% [2nd operation during today's session].

- JAPAN SELLS ¥2.9T IN 2-YEAR JGB BONDS; AVG YIELD: +0.0450% V +0.0110% PRIOR; BID-TO-COVER: 3.27X V 3.21X PRIOR (tail: 1bp vs 1.7bps prior).

South Korea

- Kospi - Korea markets closed for holiday.

- South Korea Central Bank: Says it sold net $5.973B for USD/KRW intervention in Q2 (overnight update).

- North Korean Leader Kim: Increasing production of nuclear weapons is an urgent task.

Other Asia

- Taiwan Aug Monitoring Leading Indicator: 15 v 15 prior.

- Philippine Pres Marcos vows to keep shipping lanes open in South China Sea.

- Philippines Treasury comments on Oct Bond Issuance: To sell combined PHP150B of bills and bonds in Oct (prior PHP180B).

- THAILAND CENTRAL BANK (BOT) RAISES INTEREST RATE BY 25BPS TO 2.50%; NOT EXPECTED.

- Thailand sells THB 12.1B vs. THB 25B indicated in 2.04% May 2025 bonds; Avg Yield: 2.6325%, bid-to-cover: 0.62x.

- Singapore announces S$1.1B Cost of Living support package.

- India Central Bank (RBI) said to have again sold US dollars.

North America

- FRBK Republic First Bancorp and Norcross Braca Group announce signing of Letter of Intent; Includes provision for $75M capital raise.

- (US) US govt is nearly certain to run out of money on Sunday morning; GOP leadership is skeptical that the House will be able to pass the McCarthy-endorsed stopgap funding bill - Punchbowl.

- (US) MBA Mortgage Applications w/e Sept 22nd: -1.3% v +5.4% prior.

- (US) Fed's Kashkari (voter): Consumer spending has remained robust and GDP has continued to outperform which suggests maybe not as restrictive as we think at current level of rates - CNBC.

- (US) AUG PRELIMINARY DURABLE GOODS ORDERS: +0.2% V -0.5%E; DURABLES (EX-TRANSPORTATION): 0.4% V 0.2%E.

- (US) DOE CRUDE: -2.2M V -0.5ME; GASOLINE: +1.0M V -0.5ME; DISTILLATE: +0.4M V -1ME.

- UAW expected to announce new strike targets on Friday at 10:00ET, unless serious progress is made in talks - press.

Europe

- France said to consider windfall levy to control power prices – FT.

- ECB said to be experimenting with generative AI across operations – FT.

- EUR/USD Tests below 1.05 level (1st time since Jan 2023).

- Swiss National Bank (SNB) Pres Jordan: SNB should stick to mandate; Ensuring price stability is our contribution to climate.
-ECB’s Holzmann (Austria, ultrahawk): ECB should raise minimum reserves of commercial banks to 5-10% from current minimum of 1%.

Levels as of 01:20 ET

- Nikkei 225, -1.7%, ASX 200 -0.1% , Hang Seng -0.9%; Shanghai Composite +0.2% ; Kospi -0.2%.

- Equity S&P500 Futures: +0.1%; Nasdaq100 +0.1%, Dax flat; FTSE100 +0.2%.

- EUR 1.0497-1.0517; JPY 149.25-149.64; AUD 0.6344-0.6481; NZD 0.5914-0.5946.

- Gold +0.1% at $1,893/oz; Crude Oil +0.9% at $94.54/brl; Copper -0.3% at $3.6340/lb.