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StreetAccount Summary - Asian Market Recap: Nikkei (1.68%), Hang Seng (0.07%), Shanghai Composite +0.11% as of 03:10 ET

Dec 08 ,2023

• Synopsis:

  • Asian equities mixed Friday. Nikkei extended losses for second day amid fallout from BOJ pivot speculation. Greater China mixed with Hang Seng touched a new 13-month low while mainland China logged mild gains, Kospi and Taiex both advanced, ASX edged up, India adding to gains after RBI rate decision, southeast Asia higher with Singapore outperforming, S&P 500 and Nasdaq futures slightly lower, Treasury yields higher across tenors, JGBs extended declines with bear steepening, Yen off highs after touching 141 level overnight, crude higher, gold little changed, bitcoin marginally higher.

  • Yen rally dominated headlines as traders raised bets on Bank of Japan tightening with markets now pricing in almost even chance of December policy change. Governor Ueda's comment monetary policy management would "become even more challenging from end of year and heading into 2024", stoked speculation for NIRP exit as soon as 19-Dec. However, noted normalization dynamic is not new and some thought outsized yen move a function of positioning and heightened Fed pivot expectations. Most economists also still expect a NIPR exit by April. Meanwhile Japan's Q3 GDP contracted faster than thought amid drag from private consumption and investment. Other figures showed real wages shrunk at a slower pace, household spending turned negative (m/m) and bank lending growth edged higher.

  • RBI stood pat on key rates for fifth consecutive time and maintained a hawkish stance of "withdrawal of accommodation"; bank also raised growth forecast for FY24 while Nifty 50 and Sensex hit new record highs. South Korea logged current account surplus for sixth consecutive month in October helped by jump in exports. US nonfarm payrolls previews expect data to reflect cooling but still resilient labor market. China to release CPI and PPI data on Saturday, which are expected to show deflationary pressures persisted in November.

  • Toshiba (6502.JP) and Rohm (6963.JP) will collaborate to manufacture power semiconductors in a bid to strengthen their position in high-demand components for electric vehicles. Tencent (700.HK) unveiled big-budget console game "Last Sentinel", while its major shareholder Prosus dumped 514k shares to reduce stake to 24.99%. Santos (STO.AU) confirmed preliminary takeover discussions with Woodside Energy (WDS.AU) in a deal that would create oil and gas company potentially worth A$80B, the two could sell assets to overcome antitrust hurdles.

• Digest:

  • RBI keeps key policy rate steady for fifth straight time, as expected:

    • Reserve Bank of India (RBI) MPC decided unanimously to keep repo rate unchanged at 6.50% for fifth consecutive time, as widely expected. Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) also left unchanged at 6.25% and 6.75%. Decision came in light of easing inflationary pressure and robust growth in H1FY24, driven by manufacturing and construction sectors. MPC maintained policy stance of "withdrawal of accommodation" with five out of six members in favor to ensure inflation progressively aligns with target while supporting growth. Governor Shaktikanta Das warned monetary policy must remain actively disinflationary and noted 4% inflation target is yet to be reached. Core inflation has been easing, while near-term outlook clouded by upside risks due to food inflation, Governor Das second such warning in a month. RBI raised real GDP growth for FY24 to 7% from 6.5% while retained inflation forecast at 5.4%.

  • Japan GDP revisions surprise to the downside:

    • Q3 GDP was revised to a larger 2.9% q/q annualized contraction, compared to consensus 2.0% and follows first preliminary estimate of 2.1%. Main driver was a bigger drag from private inventories, now accounting for 0.5 out of the 0.6% q/q contraction in GDP. Recall economists largely discounted the signal value of inventories after the first print. Private consumption was also adjusted slightly lower. Following the MOF corporate survey results, private capex was revised to a marginally smaller decline, though contribution to GDP was unchanged. Public and external demand contributions were also unchanged in q/q terms. Recall Nikkei flagged annual revisions could blur the picture. Adjustments to prior quarters left Q2 at 3.6% q/q annualized growth (vs prior 4.5%), Q1 at 5.0% (vs 3.7%), and 4Q22 at 1.0% (vs -0.2%). Latest figures still showed outsized strength in H1, leaving the basis for expected negative payback in H2 intact. Narrative surrounding subdued consumer demand against the backdrop of falling employee compensation also remains unchanged. However, real GDP data was downplayed to some extent given inflation feedthroughs to varying individual component deflators. Q3 nominal GDP was revised to flat from a 0.2% contraction after Q2 was revised up to 10.7% from 10.5%.

  • Japan wage growth, household spending somewhat better than expected:

    • Nominal average wages rose 1.5% y/y in October, above consensus 1.0% and follows revised 0.6% in the previous month. Details were broadly firmer amid acceleration in scheduled earnings and diminished declines in overtime pay. Part-time regular wages also picked up, while aggregate was underpinned by regular workers. Nominal improvement outweighed a larger deflator factor, leaving real wages down 2.3% from a revised 2.9% fall in September. Adding to positive developments, total hours worked turned positive for the first time in four months, mirroring an upshift in scheduled shifts. Declines in overtime hours narrowed. Regular employment growth was steady. Household spending fell 2.5% y/y in October, mildly better than an expected 2.9% decline, after dropping 2.8% in the prior month. Translated to a 0.1% m/m decrease, following a 0.3% rise in September. Ex-housing GDP private consumption proxy fell a weaker 0.7%, marking the first decline in four months. Weakness was led by transport & communications and furniture & household goods. Utilities and food & beverages were also lower. Support came from housing, apparel and education.

  • Kishida administration's political funding scandal mounts:

    • Kyodo, citing a close source, reported Chief Cabinet Secretary Hirokazu Matsuno is alleged to have received more than ¥10M ($70,000) in a kickback from fundraising events hosted by his party faction. Matsuno belongs to the LDP's largest faction which is suspected to have pooled secret funds amounting to over ¥100M. At today's press conference, Matsuno said he has no intention to resign. Prosecutors have started investigating the kickbacks scandal following a criminal complaint alleging that five LDP factions, including Prime Minister Kishida's group, underreported their revenue from political fundraising parties. According to sources, LDP factions have traditionally set their lawmakers quotas for party tickets, usually priced at ¥20,000, and if they surpass their targets, the extra income is returned as kickbacks in some intraparty groups. Latest news follows Kishida's announcement Thursday that he will step down as faction chief in a damage control maneuver (Kyodo). While Kishida's predecessors typically resigned as leaders of their factions during their terms as prime minister to avoid the appearance of patronage-driven politics, he retained the position since assuming office in October 2021.

  • In new agreement with government, RBA to aim for 2.5% inflation target midpoint:

    • Treasurer Chalmers and RBA Governor Bullock announced new Statement on Conduct of Monetary Policy. Central bank will continue to flexibly target 2-3% inflation, but in a change will set monetary policy to achieve 2.5% midpoint. Policy will also be conducted in way that contributes to price stability and full employment. Updated objectives may have significance for RBA's policy bias after its latest projections do not envisage inflation returning to 3% until end-2025 at the earliest. Central bank will update economic projections next February and extend forecast horizon to H1 2026. Economists believe cash rate has peaked though acknowledge risk of another increase in February if Q4 CPI surprises higher and shows services inflation stickiness. However, softer-than-expected Q3 GDP showed cost of living exerting greater drag on consumption, which some expect will drive disinflationary impulse and rule out further tightening. Markets pricing in more dovish outlook with 50% chance of rate cut by Aug-2024.

  • Notable Gainers:

    • +26.5% 2412.JP (Benefit One): Dai-ichi Life to launch tender offer for up to 77.5M shares in Benefit One at ¥1,800/share

    • +6.3% 6963.JP (ROHM Co.): to collaborate with Toshiba on manufacturing power devices with Japan to subsidize up to ¥129.4B, 1/3 of total investment amount

  • Notable Decliners:

    • -8.8% 036570.KS (NCsoft): launches game Throne and Liberty

    • -4.2% 1928.JP (Sekisui House): reports 9M net income attributable ¥141.89B vs year-ago ¥149.82B

    • -0.8% 700.HK (Tencent Holdings): Prosus sells 514K shares, reducing stake to 24.99%

    • -0.4% 139480.KS (E-Mart): reports November revenue KRW1.212T vs year-ago KRW1.242T

• Data:

  • Economic

    • Japan

      • Q3 revised GDP (2.9%) q/q annualized vs consensus (2.0%) and preliminary (2.1%)

        • GDP (0.7%) q/q vs consensus (0.5%) and preliminary (0.5%)

      • October current account balance ¥2,582.8.7B vs ¥2,723.6B in prior month

      • November bank lending +2.8% y/y vs revised +2.7% in prior month

      • October nominal average wages +1.5% y/y vs consensus +1.0% and revised +0.6% in prior month

        • Real wages (2.3%) y/y vs consensus (3.0%) and revised (2.9%) in prior month

      • October household spending (2.5%) y/y vs consensus (2.9%) and (2.8%) in prior month

        • Spending (0.1%) m/m vs +0.3% in prior month

  • Markets:

    • Nikkei: (550.45) or (1.68%) to 32307.86

    • Hang Seng: (11.52) or (0.07%) to 16334.37

    • Shanghai Composite: 3.35 or +0.11% to 2969.56

    • Shenzhen Composite: (2.42) or (0.13%) to 1847.78

    • ASX200: 21.60 or +0.30% to 7194.90

    • KOSPI: 25.78 or +1.03% to 2517.85

    • SENSEX: 139.67 or +0.20% to 69661.36

  • Currencies:

    • $-¥: +0.08 or +0.05% to 144.2070

    • $-KRW: (6.33) or (0.48%) to 1307.6700

    • A$-$: +0.00 or +0.10% to 0.6605

    • $-INR: (0.00) or (0.00%) to 83.3885

    • $-CNY: (0.01) or (0.15%) to 7.1394