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StreetAccount Summary - Asian Market Recap: Nikkei +0.16%, Hang Seng +1.07%, Shanghai Composite +0.40% as of 03:10 ET

Dec 12 ,2023

• Synopsis:

  • Asian equities ended mostly higher Tuesday in cautious trading ahead of the main catalysts of the week. Hong Kong closed higher to unstitch yesterday's declines, mainland China boards were mixed. Gains for South Korea and Taiwan, Southeast Asia mostly higher, India paring recent gains to trade lower. Japan mixed with Nikkei ended higher but the Topix lower. Australia closed with a solid gain. US futures higher, European markets opened with small gains. US dollar lower, AUD higher on hawkish RBA comments, yen stronger, yuan flat. Treasury yields lower at the long end, higher at the short. Crude oil higher, precious and industrial metals also finding support. Cryptocurrencies steady.

  • Asia equities tilted to the upside Tuesday in a nervous day's trading ahead of key economic data points from the US and China, and numerous central bank meetings later this week. Hong Kong pared Monday's losses, supported by positive comments from the IMF that said China may reach its 5% growth goal next year as well as the start of China's Central Economic Work Conference with advisers said to be still supporting the 2024 GDP growth target of 4.5-5.5%. India equities slightly lower on profit taking just as the blue-chip Nifty 50 benchmark hit an intra-day record high before slipping back below 21K, and ahead of CPI data later this evening.

  • In macro developments, Japan wholesale inflation fell to its lowest since Feb-2021 but was higher than forecast. Australian business confidence fell to pandemic lows amid slump in retail sentiment and business conditions eased to mid-2022 lows as inflation indicators accelerated. Philippines exports shrank again while imports also fell but at a reduced rate than in recent months.

  • Country Garden (2207.HK) is to avoid default on yuan bonds after most holders of a local note agreed not to demand payment this week. A consortium led by Japan Investment Corp has emerged as the likely favorite for Fujitsu's (6702.JP) controlling stake in Shinko Electric Industries (6967.JP). Li Ning (2331.HK) announced a share buyback plan worth up to HK3B the day after its stock plummeted on a property acquisition report. Sigma Healthcare (SIG.AU) is to merge with Chemist Warehouse, launched a 572.6M share placement programme.

• Digest:

  • China Central Economic Work Conference begins:

    • Reuters cited multiple sources indicating the CEWC began Monday and likely to conclude today. Noted elevated attention against the backdrop of struggling economic growth, deepening housing crisis, local government debt concerns, slowing global growth and geopolitical tensions. Recalled policy tone was set by Friday's Politburo meeting, which signaled fiscal policy would be moderately strengthened and will be "flexible, moderate, precise, and effective." Markets continue to look for stronger stimulus given prior flurry of measures have been only modestly supportive. Government advisers have told Reuters that they would recommend 2024 GDP growth targets ranging from 4.5%~5.5%, with the majority favoring a continuation of this year's target of about 5%. Citied Citi forecasts fiscal deficit target to be 3.8% of GDP and a LGSB quota of CNY3.8T. Recall takeaways from the Politburo meeting indicated more optimism for meaningful fiscal expansion, while reaffirming perceptions of limited scope for monetary easing.

  • PBOC monetary policy set to be "flexible and moderate":

    • ChinaSecuritiesJournal citing economists noted PBOC's monetary policy will be more "targeted" while reductions in interest rates and RRR in sight with structural tools expected to play more active role. Citic Securities economist said wording of "monetary policy to be flexible and moderate" in recent Politburo statement as positive signal, indicating PBOC will step up control when necessary while avoids flood-like stimulus. Golden Credit Rating strategist expected PBOC to frontload policy measures, including cutting policy rates and RRR in H1 2024 to boost domestic demand. Minsheng Bank economist added likely narrowing of US-China rates spread, low price levels and less imported inflation pressure gave room to ease. Meanwhile Bloomberg noted China's real borrowing costs expected to stay high next year amid lingering deflation pressure, which have topped 4% and close to 5%, highest since 2016. Added authorities facing limitations to support economy by making big rate cuts with focus turning to fiscal stimulus. Noted any moderate cut in rates would require commercial lenders to lower deposit rates to preserve profitability.

  • Japan political crisis shaping up to be the biggest since 1988:

    • Nikkei discussed the latest scandal over political fundraising, highlighting the risks of a chain reaction of resignations with many government officials comparing this event with the 1988 'Recruit' incident -- the biggest political scandal in post-war history -- which forced the resignation of then-Prime Minister Kiichi Miyazawa. PM Kishida yesterday pledged to take appropriate action at the right time. With the current Diet session to conclude Wednesday, prior reports indicated Kishida aims to demand mass resignations of senior officials who are members of the LDP faction -- Seiwakai -- headed by former PM Abe which has been at the center of allegations. Party secretary-general Motegi remarked that reports of uniform action against faction members are not necessarily accurate, hinting at the likelihood of pushback. In any case, the article noted few observers believe Kishida will be able to escape the crisis based on personnel reorganization alone. Furthermore, other factions are also implicated including Kishida's own group (Nikkei), challenging the view the issue can be contained by sacking only Seiwakai members. Scandal also complicates the FY24 budget formulation process; if Kishida acts immediately after the close of the Diet session, the budget bill would be passed without a fully appointed cabinet.

  • Consensus still looks for BOJ to remain on hold next week, but a couple now see a January move:

    • Latest Nikkei QUICK consensus poll conducted December 1~6 found 27 out of 28 respondents expect no change in BOJ policy at next week's MPM, consistent with other recent surveys. The one outlier anticipates a revision to the 'overshooting commitment' which pledges to expand the monetary base until stable 2% inflation is achieved. Cited majority views that BOJ cannot declare conditions achieved at this point and still too early to make a call on next year's wage growth. But 26 analysts foresee some sort of policy change by FY24-end with vast majority predicting an end to zero rates. Bulk of these forecasts bunched in April reflecting attention on the inflation trajectory around the turn of the fiscal year alongside clearer signals from the shunto wage talks. Still some debate over whether policy changes will be incremental given views BOJ still wants to maintain an accommodative stance. However, Governor Ueda's latest comments prompted a few to bring forward their forecasts -- Daiwa Securities now sees NIRP ending in January 2024 (from April), Nomura's call was revised to January (from 3Q24).

  • Japan CGPI softens further, well within pre-pandemic range:

    • CGPI rose 0.3% y/y in November, compared to consensus 0.1% and follows revised 0.9% in the previous month. While above expectations, latest reading was the lowest in the post-pandemic phase. Import price index has turned back up (led by fossil fuels), though year-ago changes remain well in negative territory. Export prices tracking broadly stable in contract currency terms, while yen weakness continued to elevate yen-based prices. Moderation was broadly based across most sectors. Immediate implications limited given recent attention on BOJ rhetoric that triggered major moves in yen and JGBs last week. Recall that BOJ board members have observed easing inflation, though remains cautious against the lagged effects from a slow buildup in price hikes. With cost-push dynamic still seen as the primary driver, officials have emphasized the importance of a virtuous wage/price cycle. As a result, bulk of economists are looking for a meaningful tightening move in April, coinciding with the results of next year's shunto wage talks. Yet, market speculation of a possible earlier move continues in reaction to BOJ's openness in discussing their thinking about the normalization path, and magnified by Governor Ueda's remark that policy setting will becoming more challenging at year-end and into next year.

  • Notable Gainers:

    • +4.4% 2331.HK (Li Ning): announce share repurchase plan; plans to repurchase up to HK$3B of company shares

    • +4.3% 2018.HK (AAC Technologies Holdings): Apple suppliers reportedly ready to make 1M units of Vision Pro a year

  • Notable Decliners:

    • -6.1% 5076.JP (INFRONEER Holdings): reportedly to acquire Japan Wind Development from Bain Capital for ¥200B

    • -0.9% 9602.JP (Toho Co): to invest $225M (¥33.10B) for 25% stake in CJ ENM FIFTH SEASON

• Data:

  • Economic:

    • Japan

      • November CGPI +0.3% y/y vs consensus +0.1% and revised +0.9% in prior month

    • Australia

      • November NAB business confidence (9) vs revised (3) in October

        • Business conditions +9 vs +13 in October

  • Markets:

    • Nikkei: 51.90 or +0.16% to 32843.70

    • Hang Seng: 173.01 or +1.07% to 16374.50

    • Shanghai Composite: 12.00 or +0.40% to 3003.44

    • Shenzhen Composite: 2.73 or +0.15% to 1868.10

    • ASX200: 36.30 or +0.50% to 7235.30

    • KOSPI: 9.91 or +0.39% to 2535.27

    • SENSEX: (147.20) or (0.21%) to 69781.33

  • Currencies:

    • $-¥: (0.59) or (0.40%) to 145.5660

    • $-KRW: (4.98) or (0.38%) to 1311.7500

    • A$-$: +0.00 or +0.34% to 0.6589

    • $-INR: +0.03 or +0.04% to 83.3858

    • $-CNY: (0.00) or (0.02%) to 7.1745