China/HK Weakness Continues, South Korean Stocks Down Sharply On Regulator Warning

On-going weakness in China/HK equities remains the main focus in Asia Pac. US futures have been weighed down by these developments, with Eminis and Nasdaq futures last off by a little over 0.3%. South Korean stocks have also sold off sharply following a regulatory warning. Positive Japan sentiment has only provided a modest offset.

• For the US, there wasn’t much reaction in e-minis to First Republic’s earnings, published after hours on Monday. A quick reminder that the bank revealed a sharper than expected round of deposit outflows during the well-documented tumult that got underway in March, although it noted the situation has stabilised in recent weeks. It also removed previous guidance, chose not to answer any questions on its earnings call and disclosed that it is pursuing “strategic options” re: the shape of the firm going forwards. Weakness in China/HK markets weighed more heavily on US trends.
• Geopolitical worry re: potential fresh U.S. action against the Chinese chip sphere have been a key headline driver of the weakness observed over the last couple of sessions. The CSI 300 has continued to correct lower, off a further 0.50% to 3962, well below the index's 200-day MA. Adding pressure was a report that China is 'urgently' studying ways to boost consumption.
• In HK, the HSI is down 1.62% at the break, with the tech index losing close to 3.5% at this stage.
• The Kosdaq, in South Korea is off by 2.4%, the Kospi 1.6%. The FSS chair stated concerns over the Kosdaq overheating and excessive leverage for investments, which weighed heavily on sentiment. Offshore investors have sold $160.3mn of local shares today.
• Japan shares are modestly higher, the Topix +0.25%, with the tech sector higher following a chip subsidy boost.