CSOP Regional Market Morning Report 20240604 | Japan implements largest foreign exchange intervention; Demand for Aramco's secondary offering offsets market woes

【Japan】Japan confirmed that it implements foreign exchange intervention.

·         Japanese Finance Minister Shunichi Suzuki says the government intervened in the currency market a little over a month ago to counter excessive currency moves driven by speculative trading, offering the first official acknowledgment of the actions after the ministry disclosed data Friday indicating it spent ¥9.8 trillion ($62.7 billion) to prop up the yen.

·         On May 31, Japan’s Ministry of Finance announced the actual situation of foreign exchange intervention from April 26 to May 29. The total amount of intervention is 9.7885 trillion yen. This reflects the suspected intervention measures of buying yen and selling US dollars implemented on April 29 and May 2, which is another intervention since October 2022. Compared with past interventions under the depreciation of the yen, the scale this time hit a record high. This was a covert intervention that was not announced immediately after the intervention.

【Japan】Japan's all-industrial corporate profits increased by 15.1% from January to March. Corporate profits have achieved positive growth for five consecutive quarters, hitting a record high in the January to March period. The service industry has benefited from the resumption of visitors. Corporate cost-passing has also made progress.

【Saudi Arabia 】Selling pressure on Saudi equity market may mainly be due to the geopolitical tensions and oil price fluctuations: Analyst

Despite the noticeable growth in the profit of companies listed on Tadawul (excluding Aramco) by about 8% in Q1 2024, recording the first growth year-on-year after five consecutive quarters of declines, the recent pressures on Tadawul may not be due only to news of Aramco's secondary offering, as the recent geopolitical tensions in the region and oil price fluctuations and their impact on oil revenues and their impact on the prospects for the economy and local growth may be considered among the key pressure factors recently, said Jassim Al-Jobran, Head of Research at AlJazira Capital.

【Saudi Arabia】Demand for Aramco (ARAMCO.US) 's secondary offering offsets market woes: Analysts

o   A number of analysts said that the selling pressure in May was normal due to Aramco's secondary offering, alongside continued high inflation and interest rates.

o   They also pointed out that the demand for Aramco’s secondary offering was a positive factor in offsetting the negative impacts and returning liquidity to normal levels.

【Japan 】Sony (6758.JT) plans to invest approximately 650 billion yen (approximately US$4.14 billion) in the image sensor field within three years. Sony plans to achieve a return on capital (ROIC) of up to 20% in the chip business starting from fiscal 2027.

【Japan】Nikkei Asia: Japanese electronics group Sharp (6753.JT) and telecom partner KDDI (9433.JT) will convert a factory site in Japan into a data center for AI powered by advanced Nvidia chips, such as the Blackwell series.

【SEA+】Grab (GRAB.US) will likely further its cost-saving efforts in the coming quarters, according to Citi research analyst Alicia Yap.

o   Grab is utilizing generative AI to improve operating efficiencies and manage variable cost structures while scaling the business, with marketing and cloud costs starting to benefit from this.

o   Grab is focused on cost management and prudence in the fintech business, and management believes it could achieve profitability in three years for the digital bank business.

o   Citi keeps its buy rating on the stock with a target price of US$5.00. Grab's ADRs last closed at US$3.67.

【 China 】 WSJ: China's chip maker SMIC (0981.HK) Closer to Commercializing Chip Production at Line Cutting Back on American Tools, Source Says.