Article / 26 August 2016 at 1:37 GMT

Morning Report APAC: Japan's CPI falls for fifth straight month

APAC Sales Trading Desk / Saxo Capital Markets


  • Asian stocks are tracking lower this morning, following a dip on Wall Street 
  • The USD was sold off ahead of Yellen's speech
  • Japan's inflation remained negative at minus 0.4% nationally in July


By Saxo APAC Sales Trading

Economic data of the day (Singapore Time; GMT+8)



  • 0630: USD – Federal Reserve's Ester George to meet Fed Up with other Fed leaders invited
  • 22.00: USD – Fed Chair Janet Yellen to Speak at Jackson Hole policy symposium
  • 22.50: GBP – Bank of England's Nemat Shafik speaks at Jackson Hole


Overnight news

United States

  • Durable Goods Orders jumped to 4.4% (Exp. 3.4%) from minus 4.2%. The move was led by strong demand for transportation equipment (up 10.5%) driven by the volatile civilian aircraft and parts category (up 89.9%). Durables Ex Transportation also rose to 1.5% (Exp. 0.4%) and 3.8% excluding defence.
  • Initial jobless claims shed 1,000 to a seasonally adjusted 261,000 (Mkt est: 265,000) in the week ended August 20. The four-week moving average dipped 1,250 to 264,000. Continuing unemployment claims fell 30,000 to 2.145mln (Mkt est: 2.155mln) in the week ended August 13.
  • Markit US Services PMI dropped to 50.9 (Exp. 51.8), the lowest level since February.


Federal Reserve speech

Federal Reserve Bank of Dallas President Robert Kaplan said there was no rush to raise rates but the “case for removing accommodation is strengthening". He said:

  • Action at the September 20-21 Federal Open Market Committee “is not off the table but we need to wait and see”.
  • “Any removal of accommodation should be patient, slow, gradual because we have a number of headwinds."
  • “I don’t think there is a rush. We can afford to be patient” because ’’the neutral rate is lower, certainly lower than is widely understood."


  • Inflation remained negative at minus 0.4% nationally in July. CPI Ex Food and Energy was lower than expected at minus 0.5% YoY (Exp. minus 0.4%). CPI fell for the fifth straight month and is far from the Bank of Japan target of 2%. The pressure on BoJ governor Haruhiko Kuroda is increasing for the next BoJ meeting on September 20-21. 

Foreign exchange


It was very quiet market in the G10 space, with everyone waiting for Yellen's speech starting tonight.

In emerging markets, the choppiness continues and USD sold off overall against Asian currencies ahead of Yellen’s speech. USDZAR continues to be bid and closed just below the resistance of 14.20 to trade very bid and confirmed the break above 14.0000 to trade close to the strong resistance of 14.20. 

USDRUB seems to have found some short-term resistance at the 100d MA at 65.20. 

Foreign exchange movements



USDZAR gamma remains bid. Expect another squeeze higher if spot breaks 14.2000.

We are now seeing good interest to buy USD Calls in the 1-year USDCNH. With the points well supported at +1000, there is room to move much higher on any major risk-off.  


  • Bad-loan ratios at China Construction Bank and Bocom have stopped climbing, after previously rising like clockwork. The nation’s No. 2 and No. 5 lenders also kept provisions above a regulatory minimum of 150% of existing soured credit in the second quarter. Encouraging, but too early to call a tipping point, said Commerzbank's He Xuanlai. Another data point comes today with AgBank. (Bloomberg)
  • US Treasuries: the $28 billion seven-year US note sale had a bid-to-cover ratio of 2.38, compared with an average of 2.51 in the previous 10 sales. Indirect bidders, a class of investors that includes foreign central banks and mutual funds, bought 58.3% compared with an average 60.7% in the prior 10 auctions.
  • Very quiet day in the rates market overall.






  • US stocks slipped lower as investors stayed on the sidelines ahead of much-anticipated Yellen speech. 
  • Healthcare led losses as Mylan NV extended losses to fall 0.7% in the wake of public outrage over the company’s move to hike the price of EpiPen, a lifesaving medication which is widely used to treat anaphylactic shock.
  • Tiffany & Co. surged 6.4% after the high-end jewellery retailer beat fiscal second-quarter profit expectations.
  • Guess rallied 22% on the back of earnings out late Wednesday that beat expectations.
  • Stoxx Europe 600 shed 0.8%, with Germany’s Dax 30 index (down 0.88%) among the biggest decliners, after a key survey showed an unexpected drop in business sentiment in the country. 
  • Drug stocks were hit as drug pricing in the US was in focus, with Hikma Pharmaceuticals and Qiagen down 3.5% and 2.4%, respectively. AstraZeneca lost 1.4%.
  • Facebook’s $19 billion WhatsApp bet may start paying off. Or at least making money. The service is prepping to allow businesses to message users. It’s something Asian services have had success with, most notably China's WeChat.

Asia-Pacific stocks

Hong Kong

Analyst ratings

  • BoCom (3328 HK): Cut to reduce at Nomura
  • Guangzhou R&F (2777 HK): Raised to buy at UBS; cut to neutral at Haitong Intl
  • Mengniu Dairy (2319 HK): Raised to overweight at JPMorgan; raised to outperform at Credit Suisse
  • MGM China (2282 HK): Cut to hold at BNP Paribas
  • Sands China (1928 HK): Cut to neutral at GuoTai Junan
  • Sinotrans (598 HK): Cut to underperform at Daiwa
  • Wynn Macau (1128 HK): Cut to reduce at BNP Paribas


  • CCB (939) 1H net profit RMB133.4b, up 1.15% YoY. NPF loan ratio 1.63%. Net interest inc RMB211bn. Net interest margin 2.32%
  • BoCom (3328) 1H net profit RMB37.66bn, +0.9% YoY. Net interest income RMB68.1bn, -4.1% YoY. The co. to spin-off BoCom Intl to list in HK.
  • Citic BK (998) 1H net profit RMB23.6bn, +4.4% YoY. Net interest inc RMB55.1.Net interest margin 2.05%.
  • CH Life (2628) 1H net profit RMB10.4bn, -67% YoY. Net prem inc RMB284.2bn, +24% YoY.
  • Chalco (2600) 1H net profit RMB57.4mln, +363% YoY. Sales RMB49.7bn, -25% YoY.
  • ZTE (763) 1H net profit RMB1.77bn, +9.3% YoY. Rev RMB47.8bn, +4.05% YoY, of which mainland business RMB27.8bn, +14.1% YoY and intl. business RMB19.95bn, -7.4% YoY.
  • Galaxy Entertainment (27) said they have completed HK$800mln cost control in 1H and will additionally save HK$300mln in labour, promotion and sourcing. They said the opening of new resorts by rivals is positive to Macau in general.
  • PetroChina (857) lowered FY oil production target to 103mln tons, equivalently 898mln barrels. Gas to account for 50% of co’s output by 2020.
  • SH Pharm (2607) 1H net profit RMB1.73bn, +12.9% YoY. Rev RMB59.7bn, +17.16% YoY.
  • Li&Fung (494) 1H core operating profit $156mln, -14.2% YoY. The co. see 2H orders weak as no recovery seen.
  • Alibaba (BABA)’s Ant Financial plans early 2017 HK IPO. Alipay was awarded payment license from HKMA.
  • SHK (16)’s project Grand YOHO 1st phase is expected to receive 16,500 buyer tickets, over-subscribing 52 times.
  • Wanda (3699) 1H core profit RMB2.71bn, +20% YoY. Sales RMB37.6bn, +21.7% YoY.
  • CH Overseas Land & Inv (688)’s One Kai Tak launched 110 flats in the 1st round. Lowest entry was HK$4.9mln.
  • Agile (3383) completed RMB833mln purchase of Foshan City PPTY.
  • YT Reality (75) 1H net profit HK$169mln, -46.3% YoY. Rev HK$46.12mln, -57.2% YoY.
  • CH COSCO (1919) 1H net loss RMB7.21bn vs restated RMB1.97bn profit yr ago. Sales RMB30.9bn.
  • CH Aircraft Leasing (1848) 1H net profit HK$240mln, +105.66% YoY. Rev HK$1bn, +61.49%.
  • BJ Airport (694) 1H net profit RMB905.5mln, +9.5% YoY. Rev RMB4.2bn.
  • CH Railway (390) to invest at least RMB80bn in Guiyang in 5y.



Analyst ratings

  • Daikin (6367 JP): Cut to neutral at Haitong
  • Hoya (7741 JP): Rated new buy at Jefferies
  • Japan Exchange Group (8697 JP): Raised to buy at Goldman
  • Noritz (5943 JP): Raised to buy at Haitong
  • Olympus (7733 JP): Raised to overweight at Morgan Stanley
  • Rinnai (5947 JP): Raised to buy at Goldman
  • Sanwa Holdings (5929 JP): Cut to neutral at Goldman
  • SBS Holdings (2384 JP): Raised to neutral plus at Mito
  • Terumo (4543 JP): Cut to equalweight at Morgan Stanley
  • Tokyo Broadcasting (9401 JP): Cut to underweight at Mitsubishi UFJ Morgan Stanley


  • Capcom (9697 JP): To buy back up to 2.67% of shares for as much as ¥3.3bn
  • Cookpad (2193 JP): Director Yoshiteru Akita cuts stake to 2.4% from 14.7% (see story from May)
  • FamilyMart (8028 JP): Gets FTC warning on bank transfer fees charged to suppliers
  • Kao (4452 JP): To buy back up to 2% of shares for as much as ¥50bn
  • Kintetsu Department Store (8244 JP): Raises 1H net income forecast to ¥800mln from ¥200mln; maintains oper. profit target at ¥900mln
  • Kobayashi Pharma (4967 JP): To buy back up to 2.5% of shares for as much as ¥8bn
  • Nintendo (7974 JP): To acquire 70% of voting rights in Jesnet for ¥4.68bn; to buy videogame wholesale ops from Ajioka


 Analyst ratings

  • Breville Group (BRG@NZ) raised to overweight vs neutral at JPMorgan
  • Southern Cross Media (SXL@AU) raised to outperform at Credit Suisse
  • National Storage REIT (NSR@AU) raised to buy vs hold at Wilsons
  • South32 (S32@AU) cut to sell vs neutral at Citi
  • Ausdrill (ASL@AU) cut to hold from buy at Argonaut Securities
  • AWE (AWE@AU) cut to underperform at Credit Suisse
  • AUB Group (AUB@AU) raised to neutral at Credit Suisse
  • Western Areas (WSA@AU) cut to hold at Argonaut Securities
  • Amcor (AMC@AU) raised to hold vs reduce at Morgans


  • Air NZ (AIR@NZ) sees FY17 pre-tax profit NZ$400mln-NZ$600mln
  • Sky Network TV (SKT@NZ) full-year profit falls
  • Spark NZ (SPK@NZ) considering 10-year retail bond offer
  • Super Retail (SUL@AU) full-year earnings
  • Corporate Travel (CTD@AU) full-year earnings
  • Mayne Pharma (MYX@AU) full-year earnings
  • CC-Amatil (CCL@A) first-half earnings
  • Star Entertainment (SGR@AU) full-year earnings
  • Harvey Norman (HVN@AU) full-year earnings
  • Helloworld (HLO@AU) sees FY17 ebitda A$46mln-A$51mln
  • MYOB (MYO@AU): Macquarie solicits bids for possible A$1.3bn MYOB shr sale
  • Reece Australia (REH@AU) full-year net profit up 16% to A$192.2mln

Source: CIMB / Bloomberg

Japan's core inflation remained negative at minus 0.4% nationally in July. Photo: iStock

– Edited by Gayle Bryant

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