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StreetAccount Summary - Asian Market Recap: Nikkei +1.50%, Hang Seng (0.81%), Shanghai Composite +0.74% as of 03:10 ET

Dec 11 ,2023

• Synopsis:

  • Asian equities finished mixed Monday in a choppy day's trading. China markets sold off first thing on poor inflation data only to recover in the afternoon although the Hang Seng stayed in the red. India's Sensex reached record high above 70K before paring gains. Small gains for Seoul and Taipei, Sydney flat after touching three-month highs intraday. Southeast Asia largely lower. US and European futures flat. US dollar higher, yen weaker on hawkish BOJ comments, AUD weaker on China data, yuan at three-month low. Treasury yields higher across tenors. Crude higher, industrial metals mixed, precious metals holding recent gains. Cryptocurrencies still sharply lower although off worst.

  • Asia stocks in a volatile and ultimately mixed day as mainland China stocks produced an afternoon rally to end higher while the Hang Seng remained in the red although off its trough. Consumer price data released over the weekend largely to blame with indications the China consumer portion of the economy was decelerating further. Japan's markets followed Wall Street higher as the yen weakened on higher Treasury and JGB yields post NFPs and doubts over the speed of the BOJ's exit from its ultra-loose monetary policy. India's Sensex reached fresh record high and briefly traded about the 17K for a time post Friday's RBI hold as fresh data showed foreign investors continue to pour money into equity markets.

  • Main catalysts for the week lie ahead in what is likely to be the final week of the year for major economic data releases, albeit an extremely busy one. The US Fed, BoE, ECN and Swiss central banks are all due to meet, while US CPI, and China activity data will likely headline in Asia.

  • Tsuruha Holdings (3391.JP) is said to be attracting interest from Bain, Blackstone and KKR private equity groups. Toyota Motor (7203.JP) is limiting sales on ten of 20 leading models at domestic dealerships due to supply-chain problems and high demand. JD.com (9618.HK) CEO Liu admitted he has not managed the company well in response to an employee intranet post. Li Ning (2331.HK) said it would buy a commercial building in Hong Kong from Henderson Land (12.HK) for a new headquarters but shares dropped steeply. Shares in Dr Reddy's Laboratories (500124.IN) fell sharply after the US FDA issued three "observations" on quality control, faulty equipment, and data integrity. ByteDance-owned TikTok is to invest $1.5B into a GoTo (GOTO.IJ) unit to rescue its shopping business in Indonesia.

• Digest:

  • Indian equities trading at record highs:

    • India's benchmark Sensex rose above 70k level for first time in early Monday trade before paring some gains; Nifty 50 crossed 21k mark as equity market continuing with bullish momentum. Both indexes reached record highs last Friday while RBI raised economic growth forecast to 7% from 6.5% for current fiscal year and kept policy rates unchanged. Strategists noted rally may continue despite high valuations, attributing to inflows from foreign institutional investors, strong domestic institutional buyers and retail investors, booming IPO market supported by economic fundamentals (PTI). Nikkei also discussed how investors were turning to India at expense of China on its high growth expectations. Noted recent rally in MSCI EM ex China index largely driven by India. Investors bet on rise in domestic demand amid growing population and New Delhi's ambition to turn country into manufacturing hub as companies de-risking from China-dependent supply chains. Added Goldman Sachs and Nomura both raised Indian stocks to "overweight".

  • Reasons to think twice on an early BOJ policy move:

    • Reuters, citing three sources, reported recent weakness in consumption has emerged as a fresh source of concern for BOJ policymakers, suggesting market expectations of an imminent rate hike may be over-blown. Recalled markets reacted strongly to Governor Ueda's remark last week the central bank faces a more challenging situation towards year-end and next year. Sources argued this was taken out of context by markets and was not meant to signal an imminent policy shift. One source noted the timing of a move remains up in the air. Similarly, Nikkei's latest BOJ commentary highlighted the risk of market over-reaction to unfamiliar language in central bank's efforts to shift away from surprise strategies in favor of dialogue that carefully lays the path towards the first rate hike in 17 years. Article suggested recent BOJ speeches prompted emerging views board members will signal a move in advance so as to avoid surprises that would cause undue market confusion. One BOJ source said normalization would be implemented after markets have a move fully priced in. Story also mentioned thoughts guidance may be adjusted at the December 18-19 MPM, though BOJ insiders suggested there was no need for revisions after the last change came in April, and with markets already eyeing a tightening pivot.

  • China CPI softest in three years, PPI also weaker:

    • CPI fell 0.5% y/y in November, weaker than expectations of a 0.3% decline. Extends prior month's 0.2% slide and marks the fastest drop since November 2020. Core inflation was steady at 0.6%. Headline was skewed down by food prices stemming from another bout of volatility in pork, which tumbled 31.8% y/y. This drove total goods prices to a 1.4% decrease, outweighing a 1.0% rise in services. Transportation and communications were another source of weakness. PPI deflation also deteriorated to 3.0% y/y from 2.6% in October, vs consensus 2.8%. Downstream drags were notable for the second straight month, where food declines were also a factor alongside consumer durables (autos, computers, communications and other electronics). Upstream price declines also deepened. Bloomberg noted 2023 CPI almost certain to miss the 3% government target. Next year's outlook uncertain given economists' views are divided. However, latest Politburo guidance which included strengthened proactive fiscal policy offered encouragement.

  • Market's dovish rate narrative set to be tested this week:

    • Fed, ECB and BOE meetings this week occur against backdrop of a very dovish rate outlook being priced in by markets (Bloomberg). While some policymakers have backed off their hawkish rhetoric in recent weeks, there are thoughts central banks may temper market expectations of aggressive rate cuts. Fed's updated dot plot may project more rate cuts in 2024 but not by as much as markets are expecting (Bloomberg). Economists also see risk of ECB striking hawkish tone and BOE re-emphasizing its higher-for-longer mantra (Bloomberg). Policymakers facing two contrasting considerations. One is risk that rates remain at currently restrictive levels for too long, threatening soft landing scenario and potentially tipping economies into recession. Other is that prematurely cutting rates when inflation is above target risks reviving pricing pressures and forcing policymakers to backtrack.

  • Japan economists think political shakeup may lower the bar for BOJ tightening:

    • According to Reuters, Prime Minister Kishida told reporters he would take steps to restore trust in his government amid a fundraising scandal, but declined to confirm a media report that he was set to replace four ministers in his cabinet. Chief Cabinet Secretary Matsuno also did not elaborate on the media report, largely repeating his previous remarks that an investigation was under way and he would take appropriate actions. Bloomberg cited takeaways the political shakeup may smooth the path for BOJ to end negative rates given the former Abe faction's strong support to continue ultra monetary easing as one of the three arrows of Abenomics. Cited such views from NRI economist and former BOJ board member Takahide Kikuchi as well as Daiwa Securities' Mari Iwashita, who is among those looking for BOJ to give some kind of tightening signal at next week's MPM. In contrast, UBS economist Masamichi Adachi suggested economics will play a bigger role, noting expected Fed rate hikes will add upward pressure on yen, posing an obstacle against a BOJ move.

  • Notable Gainers:

    • +7.9% 268.HK (Kingdee International Software Group): QIA subsidiary to subscribe for Kingdee International Software Group new shares at HK$10.10/share

    • +5.3% 3391.JP (TSURUHA Holdings): Bain, Blackstone, KKR reportedly considering bidding for TSURUHA Holdings

    • +3.8% 4568.JP (Daiichi Sankyo): EZHARMIA showed clinically meaningful and durable responses in patients with relapsed or refractory peripheral T-cell lymphoma in VALENTINE-PTCL01 phase 2 trial

    • +1.3% 2587.JP (Suntory Beverage & Food): seeking to achieve at least a double value of highball sales in South Korea this year

  • Notable Decliners:

    • -21.3% GOTO.IJ (PT GoTo Gojek Tokopedia): enters strategic e-commerce partnership with TikTok, Tokopedia and TikTok Shop Indonesia's businesses will be combined under the existing PT Tokopedia entity, TikTok has committed to invest over $1.5B

    • -14.7% 2331.HK (Li Ning): to purchase property in Hong Kong for HK$2.21B

    • -2.3% 006360.KS (GS Engineering & Construction): reportedly preparing to sell minority stake in GS Inima

• Data:

  • Economic:

    • China

      • November CPI (0.5%) y/y vs consensus (0.2%) and (0.2%) in prior month

        • PPI (3.0%) y/y vs consensus (2.8%) and (2.6%) in prior month

    • Japan

      • Q4 MOF BSI large manufacturing index 5.7 vs 5.4 in prior quarter

        • Large non-manufacturing index 4.4 vs 6.0 in prior quarter

        • Large all-industry index 4.8 vs 5.8 in prior quarter

  • Markets:

    • Nikkei: 483.94 or +1.50% to 32791.80

    • Hang Seng: (132.88) or (0.81%) to 16201.49

    • Shanghai Composite: 21.88 or +0.74% to 2991.44

    • Shenzhen Composite: 17.58 or +0.95% to 1865.36

    • ASX200: 4.10 or +0.06% to 7199.00

    • KOSPI: 7.51 or +0.30% to 2525.36

    • SENSEX: 74.61 or +0.11% to 69900.21

  • Currencies:

    • $-¥: +1.40 or +0.97% to 146.3440

    • $-KRW: +0.45 or +0.03% to 1318.2500

    • A$-$: (0.00) or (0.33%) to 0.6556

    • $-INR: (0.03) or (0.04%) to 83.3838

    • $-CNY: +0.02 or +0.23% to 7.1795