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StreetAccount Summary - Asian Market Recap: Nikkei (1.76%), Hang Seng (0.71%), Shanghai Composite (0.09%) as of 03:10 ET

Dec 07 ,2023

• Synopsis:

  • Asian equities lower Thursday. Nikkei sharply down, Hang Seng led China markets lower, Taiex also down, ASX, Shanghai Comp and Kospi logged mild declines, India trading lower, S&P 500 and Nasdaq futures extended declines. Treasury yields rose across the tenor, JGBs also weakened with curve bear steepening, yen saw widespread gains, crude edging up after WTI fell below $70 per barrel for first time since early July, Gold little changed, Bitcoin steady near Apr-2022 highs.

  • Weak handover from Wall Street to Asian markets with S&P 500 notched first three-day losing streak since October on Wednesday while ADP private payrolls showed a smaller-than-forecast rise, reinforcing views US labor market and economy was slowing as inflation cooled down. There was a surprise rebound in China exports in November, attributed to year-end holiday retail demand and base year effects. Meanwhile Imports unexpectedly shrank, underscoring tepid domestic demand. Moody's China ratings outlook change continues to reverberate after agency also cut outlook for eight Chinese banks from stable to negative. Moody's also flagged possible credit rating downgrades for several LGVFs as well as Hong Kong and Macau. Some analysts say outlook change risks fueling foreign outflows and raising funding costs. Also increases pressure on authorities for a more forceful policy response to address structural weaknesses.

  • In other developments, BOJ Governor Ueda told PM Kishida that central bank hopes to check whether wages will rise sustainably, help push up service prices and underpin domestic demand. While flagging different options for rates to target once it exits NIRP. Nothing new from Australian trade surplus widened amid export turnaround. More press articles highlighting bullish outlook for India. RBI was seen to keep status quo on rates on Friday. Thailand's inflation fell to lowest in November in 33 months. Singapore and China plan reciprocal visa-free entry.

  • Sony (6758.JP) aggressively expanded short-term debt in September, up more than three-fold vs March to stockpile PS5 and semiconductors. Moody's cut outlook for eight Chinese banks to negative from stable, including Agricultural Bank of China (1288.HK), Bank of China (3988.HK), China Construction Bank (939.HK), Industrial & Commercial Bank of China (1398.HK), Postal Savings Bank of China (1658.HK). HK billionaire Henry Cheng's family raised stake in New World Development (17.HK) as shares down to 20-year low. Trip.com (9961.HK) says overall booking volume for overseas travel during upcoming Lunar New Year holiday jumped almost 20 times from a year ago, with Japan and Southeast Asia among the most popular destinations.

• Digest:

  • China exports unexpectedly turn positive, imports decline:

    • Dollar-denominated customs exports rose 0.5% y/y in November, compared to expectations of no change. Follows a 6.4% decline in the previous month and marks the first increase in six months. However, Bloomberg noted exports usually see a seasonal tailwind towards year-end, while base effects remain favorable due to the pandemic last year. In contrast, imports surprised to the downside, falling 0.6% vs expected 3.9% growth, following 3.0% increase in October. Early takeaways showed little in terms of read-throughs. Narrative tone was already set by sluggish PMIs. Broader macro attention turning to the Central Economic Work Conference, particularly for guidance on the stimulus trajectory next year. Earlier discussion pieces noted some economists expect the government growth target to remain at 'about 5%' though predicated on stronger policy support. Reuters preview cited analyst views that a cyclical upturn in global electronics forms a key silver lining, which is also lifting South Korea exports.

  • Moody's follows up with more China outlook downgrades:

    • Reuters reported Moody's placed Hong Kong, Macau and swathes of China's state-owned firms and banks on downgrade warnings following yesterday's cut to the sovereign outlook to "negative" from "stable." Eight Chinese banks had their outlook cut to negative. In addition, 26 LGFVs and four state-owned enterprises had their outlook cut and were also placed under review for downgrades, which usually means a decision will be made within three months. All institutions currently maintain "A1" ratings. On broader ramifications, Reuters discussed takeaways noting this will add to financial market drags, increasing pressure on policymakers to deliver more forceful measures to support equities and stabilize the yuan as investor confidence deteriorates. Recalled prior reporting that major state-owned banks ramped up yuan support after Tuesday's announcement and continued to sell dollars for yuan yesterday. Nikkei noted announcement effects in the bond market were muted as outstandings are mostly held domestically and many analysts see a limited effect on yields in the short term.

  • No changes in BOJ Governor Ueda's policy stance, but alludes to various options for exit strategy:

    • Governor Ueda's statement to the upper house committee on financial affairs for the semiannual report on currency and monetary controls indicated no change in policy views. Recall Ueda had already presented last month to the upper house. Reiterated that sustainable and stable achievement of the price stability target is not yet envisaged with sufficient certainty at this point, and it is important to closely monitor whether a virtuous cycle between wages and prices will intensify. Bank will patiently continue with QQE and YCC, aiming to support Japan's economic activity and facilitate a favorable environment for wage increases. Also underlined the YCC tweak in October was aimed at increasing flexibility. Ueda continued to stress that uncertainties to the outlook remain extremely high. There was more attention on Q&A remarks that there are various options to phase out easing -- mentioning rates on reserves or returning to the overnight call rate -- though no decision has been made on what the key policy target rate will be once NIRP ends (Reuters). Added that pace of tightening thereafter would depend on economic and financial conditions.

  • Majority of Japanese companies see wage growth of up to 3% next year as achievable:

    • Monthly Reuters corporate survey gauged perceptions of what sort of wage growth was seen as achievable next year, to which, about 60% responded 'up to 3%.' A further 32% saw '3%~5%' as possible. Article recalled Rengo's demands for at least 5% at next year's shunto talks. But the survey found only 5% of respondents saw such growth as achievable. On reasons employers would lift wages, 89% cited the need to secure staff numbers, followed by 65% citing inflation. Only 24% noted they would reward staff for better financial performance. While many companies are raising wages against the backdrop of labor shortages and inflation, they cited higher energy costs as the main headwind (67%), followed by difficult financial performance (49%), and 39% noted uncertainties surrounding the economic outlook. On FX, 47% saw USD/JPY 'up to 150' as acceptable for the business environment with the remainder preferring lower levels. Article noted this indicates renewed yen weakness from current levels at ~147 would increase strains on 70% of firms. However, their actual forecasts were spread fairly evenly from 150 to 130.

  • RBI expected to continue rate pause amid strong growth, inflation risks:

    • Reserve Bank of India (RBI) widely expected to hold repo rate unchanged at 6.5% for fifth straight time when MPC meeting concludes Friday (MINT). RBI last hiked in February but seen continuing hawkish stance with retention of phrase "withdrawal of accommodation." Upside inflation risks from elevated food prices and stronger-than-expected Q3 GDP growth among factors seen leaving RBI with comparatively hawkish policy bias (Economic Times). Economy grew 7.6% y/y during Jul-Sep, fastest among major economies. Inflation eased to four-month low in October at 4.87% y/y, down from 5.02% in September and closer to RBI's 4% target. October MPC minutes highlighted headline inflation above tolerance band while alignment was getting interrupted. Economists also don't foresee more rate hikes in this cycle with growth momentum likely to slow in H2FY24 (Oct-Mar) and core inflation contained. Economists eyeing dovish pivot later in 2024 with Deutsche flagging June for a possible rate cut. However, timing would be conditional on Fed (MINT).

  • Notable Gainers:

    • +10.6% 1725.HK (Hong Kong Aerospace Technology Group): board resolves to proceed with potential dual listing in Middle East

    • +5.1% 8630.JP (Sompo): records ¥86.0B gains on sale of investment securities; updates on FY guidance

    • +4.2% 020560.KS (Asiana Airlines): European Commission sets new provisional deadline of 14-Feb to hand down decision on Korean Air-Asiana merge

    • +0.7% 028260.KS (Samsung C&T): activist investor Palliser Capital pushes company to consider making several potential changes

    • +0.1% 2501.JP (Sapporo Holdings): activist investor 3D Investment Partners raises stake to 11.73% from 10.56% in company

  • Notable Decliners:

    • -8.7% 5838.JP (Rakuten Bank): 24.6M-share secondary priced at ¥2,470/share

    • -6.9% 6324.JP (Harmonic Drive Systems): announces 4.4M-share secondary (for holder Toyota Motor) through SMBC Nikko, Morgan Stanley

    • -1.2% 2007.HK (Country Garden Holdings): reports November contracted sales CNY6.11B; StreetAccount notes year-ago figure was CNY26.01B

    • -0.9% 2303.TT (United Microelectronics): reports November revenue NT$18.79B, (16.7%) y/y

• Data:

  • Economic

    • China

      • November trade balance $68.39B vs consensus $54.90B and $56.53B in prior month

        • Exports 0.5% y/y vs consensus 0.0% and (6.4%) in prior month

        • Imports (0.6%) y/y vs consensus +3.9% and +3.0% in prior month

    • Australia

      • October trade balance A$7.50B vs consensus A$7.75B and A$6.79B in September

        • Exports +0.4% m/m vs (1.4%) in September

        • Imports (1.9%) m/m vs +7.5% in September

  • Markets:

    • Nikkei: (587.59) or (1.76%) to 32858.31

    • Hang Seng: (117.37) or (0.71%) to 16345.89

    • Shanghai Composite: (2.73) or (0.09%) to 2966.21

    • Shenzhen Composite: (4.95) or (0.27%) to 1850.20

    • ASX200: (5.10) or (0.07%) to 7173.30

    • KOSPI: (3.31) or (0.13%) to 2492.07

    • SENSEX: (77.02) or (0.11%) to 69576.70

  • Currencies:

    • $-¥: (1.80) or (1.22%) to 145.5370

    • $-KRW: +4.49 or +0.34% to 1319.6300

    • A$-$: +0.00 or +0.14% to 0.6561

    • $-INR: (0.04) or (0.04%) to 83.3380

    • $-CNY: (0.00) or (0.01%) to 7.1448