CROSS ASSET: China/HK Equities Firm ON Fresh Policy Stimulus, USD/CNH Higher
May-07 01:57
Headlines have crossed that the PBoC will cut the RRR for banks, injecting 1trln yuan of fresh liquidity, while the 7 day repo rate would be cut by 10bps to 1.40%. PBoC Governor Pan stated this would lead to a 10bps reduction in LPRs. Other policy initiatives were also announced as part of efforts to step up macro policy adjustment. The stock market will be supported, with further encouragement in longer term funds, while policies will also be introduced to aid tariff hit firms.
- China and Hong Kong equities opened up strongly on the news, albeit sit away from best levels. The HSI was last up around +1.5%, we did open up over 2%. The CSI 300 was last near +0.75%, after opening +1.4% firmer. Hong Kong's benchmark is back close to early April highs, while the CSI 300 is tracking similarly.
- In the FX space, the USD has been better supported, with USD/CNH up from earlier lows, last just under 7.2200, with the easing steps from the PBoC likely weighing at the margins. AUD/USD is back under 0.6500 and little changed for the session.
- In the metals space, iron ore is firmer, albeit within recent ranges (last near $98.50/ton), while copper is mixed.
- It comes after earlier morning headlines of US-China trade talks to be held in Switzerland later this week. The fact that fresh stimulus measures have been announced today may reflect China's view that any significant progress on trade with the US may take time to achieve and that the economy will need support.
- The stimulus measures follow the recent Politiburo meeting which focused on the economy, while the PMI surveys pointed to a weaker demand backdrop for Q2 (particularly on the external side).
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ASIA STOCKS: Korea’s Outflows Intensify.
Apr-07 01:49
Global Investors continue to withdraw from Korea with another day of significant outflow alongside Thailand.
- South Korea: Recorded outflows of -$1,283m Friday, bringing the 5-day total to -$4,436m. 2025 to date flows are -$8,530, m. The 5-day average is -$887m, the 20-day average is -$225m and the 100-day average of -$132m.
- Taiwan: Had inflows of +$19m as of the 2nd, with total outflows of -$3,124m over the past 5 days. YTD flows are negative at -$18,247. The 5-day average is -$625m, the 20-day average of -$505m and the 100-day average of -$256m.
- India: Had outflows of -$345m as of 3rd, with total inflows of $24m over the past 5 days. YTD flows are negative -$14,006m. The 5-day average is +$5m, the 20-day average of +$15m and the 100-day average of -$143m.
- Indonesia: Had inflows of $38m as of the 27/3, with total inflows of +$54m over the prior five days. YTD flows are negative -$1,830m. The 5-day average is +$11m, the 20-day average -$33m and the 100-day average -$34m
- Thailand: Recorded outflows of -$185m Friday, totaling -$202m over the past 5 days. YTD flows are negative at -$1,331m. The 5-day average is -$40m, the 20-day average of -$34m the 100-day average of -$19m.
- Malaysia: Recorded outflows of -$74m Friday, totaling -$195m over the past 5 days. YTD flows are negative at -$2,338m. The 5-day average is -$39m, the 20-day average of -$54m the 100-day average of -$37m.
- Philippines: Saw outflows of -$13m Friday, with net outflows of -$14m over the past 5 days. YTD flows are negative at -$229m. The 5-day average is -$3m, the 20-day average of +$1m the 100-day average of -$6m.
CHINA: Central Bank Drains Liquidity via OMO.
Apr-07 01:33
- The PBOC issued CNY93.5b of 7-day reverse repo at 1.5% during this morning’s operations.
- Today’s maturities CNY245.2bn
- Net liquidity withdrawal CNY151.7bn.
- The PBOC monitors and maintains liquidity in the interbank market through the issuance of reverse repo.
- The CFETS Pledged Repo Deposit Institutions 7 Day Weighted Average is at 1.53%, from Thursday’s close of 1.69%
- China’s overnight interbank repo rate is 1.79%, from Thursday’s close of 1.70%.
- China’s 7-day interbank repo rate is 1.70%, unchanged.
US TSYS: Cash Bonds Sharply Richer But Off Bests
Apr-07 01:29
TYM5 is stronger at 113-18, +16+ from closing levels in today's Asia-Pac session, but well off today’s high of 114-10.
- According to MNI's technicals team, focus for TYM5 is on technical resistance at 114-16 (2.000 proj of the Jan 13 - Feb 7 - Feb 12 price swing) after having breached round number resistance (114-03.5 high) on Friday.
- Cash US tsys are 4-14bps richer in Asia-Pac session after Friday’s solid gains.
- S&P 500 futures have pared their decline to less than 3% in today's Asia-Pac session from -5.4% earlier.
- Nevertheless, global markets realise that President Trump's tariff policies are not just a US problem and that a US recession has serious implications for global growth. A raft of Asian economies have reached out to the US looking to remove either levies on US imports or open trade talks. However, China unveiled a 34% duty on all US imports. This remains front centre in the minds of market participants as they attempt to digest the implications of this in the Asian session.
- On Friday, March jobs printed higher-than-expected but this gain was tempered slightly by a down-revision to the prior. The latest profile saw 228k after two weak months (111k Jan, 117k Feb) which in turn followed two booming months (261k Nov, 323k Dec).
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