Asia-Pacific Markets, US Bond Yields, Australia, Japan, Korea

There will be a surplus of lithium metal in 2023, according to Mattie Zhao, head of basic materials in Asia Pacific at Bank of America Securities.

“We’re also seeing a lot of supply coming from lithium mines as well. We expect 38% growth in lithium supply this year. That’s why 2023 is likely to turn into a lithium overload year,” Zhao told CNBC, adding that she expects electric vehicle growth to slow. In China from 95% last year to 22% this year.

Lithium prices in China are likely to average around 400,000 yuan a ton, before falling to 350,000 yuan in the near term given rising supplies and slowing demand for the metal, it estimates.

“We expect lithium prices to average around CNY 400,000 in China, and then we expect in the near term, probably down to 350,000 to 400,000.”

Lithium prices are currently trading at 382,500 yuan per ton.

– Lee Ying Chan

Seoul-listed stocks traded broadly higher in the Thursday afternoon session, bucking the trend in the Asia-Pacific region.

Investors digested economic data from Wednesday, which showed the country running a narrow trade deficit, when markets were closed for Independence Movement Day – as well as China’s surprise jump in PMI data.

The steel and metals industry saw gains of more than 4.4% while chemicals rose 3.6%.

Hyundai Steel rose 6.43%, Posco Holdings rose nearly 6% and Lotte Chemical rose 3.37%. Automotive names like Kia rose about 4% and shares of electric battery maker LG Energy Solution rose 2.5% after the Tesla investor day.

South Korean trade official Jeong Dae-jin also held high-level talks with China’s Li Fei, according to A Read by the Ministry. The two discussed stabilizing supply chains and called for further cooperation.

Amazon Web Services has announced plans to create an “infrastructure district” in Malaysia and invest $6 billion in the country by 2037.

An AWS “infrastructure area” is a physical location where a company aggregates its data centers.

AWS said the new region and investment reflects the company’s commitment to Malaysia and “serving the significant and rapidly growing demand for cloud services across Southeast Asia.”

Malaysian Prime Minister Anwar Ibrahim called the AWS investment “the largest international technology investment to date” in the country and said it supports Malaysia’s “cloud-first ambitions”.

— Lim Hwi J

Shares of Hong Kong-based Chinese electric car maker Nio fell more than 12% after it reported an expanding net loss of CNY5.79 billion ($838.9 million) for the fourth quarter.

This follows a nearly 6% drop in its US-listed shares Wednesday night after the earnings announcement.

Nio’s share price in Hong Kong is down over 12% year-to-date, and over 55% year-over-year.

South Korea’s manufacturing PMI remained in contraction territory for the eighth consecutive month, coming in at 48.5 for January.

While this was unchanged from the December figure, S&P Global said in its note that this “points to a further deterioration in the health of South Korea’s manufacturing sector.”

It also added the latest PMI data “pointed to further contractions in both output and new orders amid softening global economic conditions and persistent price pressures.”

A PMI reading of 50 indicates expansion, while a reading below 50 indicates contraction.

– Lim Hwi Ji

Japanese financial institutions have indicated interest in buying Japanese government bonds eyeing the Bank of Japan’s potential shift to policy normalization, Nikki mentioned.

Sumitomo Mitsui told the Nikkei that its baseline thresholds are 1% in the 10-year yield and 2% in the 20-year yield, and expected bullish sentiment to follow the central bank to expand yield tolerance.

Mizuho also told Nikkei that domestic investors would buy Japanese government bonds if the central bank were to abolish the yield curve control system altogether, adding that he did not see market turbulence to follow through on the move.

– Jihe Lee

Japanese Cabinet Office Annual corporate survey Forecasts for next year showed sectoral GDP at an average of 1.3%, down from the previous reading of 1.5%.

The survey showed that softer expectations were driven by lower expectations from manufacturers than from non-manufacturers.

Meanwhile, the survey’s five-year forecast improved to 1.2% from 1.0%, marking the highest reading since 2014.

– Jihe Lee

Shares of some Tesla suppliers are trading mixed after shares of the automaker fell more than 5% in after-hours trading.

LG Chem, which supplies battery cells to Tesla, saw a decline of 0.59%. But other suppliers, such as Panasonic, saw its shares rise by 0.43%, and Samsung SDI saw an even bigger rise, to 1.95%.

Then Investor Day Show The company said on Wednesday that it aims to produce 20 million electric cars annually by 2030.

In particular, Tesla has pledged to cut production costs for its cars in half, with chief engineer Lars Moravi say so The company expects to build its next-generation vehicles at half the cost of the current Model 3 or Model Y.

Shares of US-listed Nio fell nearly 4% after the Chinese electric car maker reported a larger-than-expected operating loss of CNY 6,736.1 million ($976.7 million) for the fourth quarter. This is a much larger loss than the previous year.

“While vehicle revenue of RMB14.8 billion (+24% qoq) was broadly balanced, vehicle gross profit margin of 6.8% (down 9.5 bps qoq) was surprisingly on the downside. The company attributed the downturn The sharp margin led to: 1) inventory provisions; 2) accelerated depreciation on production facilities; and 3) losses on supplier purchase commitments for NT1.0 models,” said Morgan Stanley analyst Tim Hsiao, who has an overrated inventory rating.

Citi analyst Jeff Chung noted that the automaker also provided poor steering. He has a Buy rating on the stock, but maintains that it is a high-risk investment “given the company’s startup status, early stages of product delivery, other operational risks, the risk of the original financial investors selling their shares in the future, as well as the stock’s relatively short trading history.”

UBS, on the other hand, is neutral about the stock, calling it “our least favorite EV under our coverage.”

South Korea reported a 12.7% contraction in its January industrial production year on year, marking the fourth consecutive month of decline.

This was a sharper decline than December’s revised figure of a contraction of 10.5%, and also less than economists’ expectations of 8.9%, according to Refinitiv data.

The Korean won strengthened slightly against the US dollar on Thursday, trading at 1304.42.

— Lim Hwi J

Minneapolis Federal Reserve Chairman Neel Kashkari said Wednesday that he is open to the possibility of further rate hikes at this month’s policy meeting, but that he has yet to make a decision.

“I’m open-minded at this point as to whether it’s 25 or 50 basis points,” the central bank official said during an event in his area.

Kashkari, a voting member of the rate-setting Federal Open Market Committee, said the “point chart” of individual members’ future expectations would be more important than what was decided at the March 21-22 meeting.

He noted that his “point” was higher than most FOMC members at the last meeting, when the committee pared back previous highs to a quarter of a point. Kashkari indicated that he is likely to lean back to the hawkish side in light of recent data showing that inflation remains high despite all the interest rate increases over the past year.

“At this point, I haven’t decided what my point is going to look like, but I’m inclined to keep increasing. I’m going to continue to drive the course of my policy,” he said.

– Jeff Cox

The Institute for Supply Management reported on Wednesday that manufacturing remained in contraction during February as production and new orders slowed.

Watch closely ISM Manufacturing Index A reading of 47.7% represented the proportion of companies reporting expansion. A reading below 50% represents deflation.

Economists were looking for a headline reading of 47.8%, according to Dow Jones.

In details, new orders rose but remained declining at 47%, while the production index fell to 47.3%. Most importantly, inflation re-emerged in the sector, with the price index jumping 6.8 percentage points to 51.3%. Employment pushed into contraction territory with a reading of 49.1%.

– Jeff Cox

The 10-year Treasury yield took another boost at 4%, as stocks fell in afternoon trade.

The 10-year was at 4.004% in the middle of the afternoon. The 10-year yield broke through 4% for the first time since Nov. 10 in late morning trade, but fell below that level temporarily. Returns move opposite the price.

Traders have been watching the negative correlation between stocks and the 10-year benchmark’s move to the key psychological level of 4%. Chart analysts say the level is not a significant resistance, but it is significant in terms of influencing investor sentiment.

Technology and growth stocks are particularly sensitive to movements in the 10-year yield. The SPDR Technology Select Sector Fund, which represents tech names in the S&P 500, was down 0.8%.

Bond strategists expect the 10-year yield to continue rising, ahead of the Fed’s March 22 interest rate decision. Any strong inflation data or even jobs data can be a catalyst for a move higher.

Wells Fargo’s Michael Schumacher said the 10-year could easily reach 4.20% in the near term.

—Patti Dome

The 60/40 model, in which investors put 60% of their money in stocks and 40% in bonds, was once the mainstay of a typical investment portfolio. Jim Carron of Morgan Stanley told CNBC if he’s still convinced now that prices are higher for longer.

Professional subscribers can read more here.

– Xavier Ong

The surge in Treasury yields has swept the markets, and investors are now looking to bonds for a yield — especially short-term bonds.

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– Wizen tan