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StreetAccount Summary - Asian Market Recap: Nikkei +1.41%, Hang Seng (0.75%), Shanghai Composite +0.05% as of 03:10 ET

Dec 19 ,2023

• Synopsis:

  • Asian equities ended mixed Tuesday. Japan's Nikkei outperformed the Topix and finished on its day-long high post BOJ decision. Australia ended on an 11-month high. Gains for South Korea and Singapore, rest of Southeast Asia mixed. Taiwan flat. Hong Kong led decliners in Greater China, Shanghai Composite closed at 13-month lows. US futures flat, Europe opened slightly higher. US dollar flat, yen much weaker post BOJ, AUD gained on hawkish RBA minutes. Treasury yields mixed, JGB yields down with the long-end hitting multi-month lows. Brent and WTI crude futures higher after Red Sea attacks and suspension of tanker passages, precious metals holding recent gains, industrial metals ticking higher.

  • Asia-ex Japan stocks continued to drift amid a lack of firm catalysts. A mixed overnight session in the US and a negative day in Europe gave little in terms of direction for most Asia bourses while Japan's indices extended gains into the close after the BOJ left rates unchanged. The decision was expected and the forward guidance was also unchanged against some hopes it may have hinted at an end to negative interest rates. Ueda also suggested at the follow-up press conference there is little chance of change in January's meeting.

  • In other developments, RBA minutes showed board debated whether to hike in December and featured discussion on balance sheet normalization strategy. New Zealand business confidence rose to Mar-15 high but inflation metrics climbed; the country's trade deficit shrank in November. Thailand's trade deficit expanded as exports rose less than forecast, Malaysia's trade surplus was the smallest in three years.

  • Nippon Steel (5401.JP) is to buy US Steel (X) for $14.9B in cash, a 142% premium to the previous offer made in August, and beating three rival firms in an auction. Country Garden (2007.HK) said it had set aside up to CNY4.1B for impairment charges. NIO (9866.HK) has entered a $2.2B share subscription agreement with a UAE investment fund for 20% of the company. Evergreen Marine (2603.TT) said it will temporarily stop accepting Israeli cargo and suspend passage through the Red Sea. TSMC (2330.TT) chair Mark Liu to retire in June 2024, CEO Wei proposed as next chair. SQM (SQM) and privately owned Hancock Prospecting are to jointly buy Azure Minerals (AZS.AU) for around A$1.7B ($1.1) in cash. Marubeni Corp (8002.JP) and VinFast (VFS) are to launch a joint venture aimed at recycling used EV batteries.

• Digest:

  • BOJ's Ueda noted there won't be much new information ahead of January MPM:

    • Governor Ueda's press conference remarks remained consistent with the baseline view conveyed in the policy statement and prior rhetoric. Reiterated prospects for inflation accelerating towards target is gradually heightening, but BOJ still needs to determine whether a positive wage/inflation cycle will fall into place (Reuters). Suggested that cost-driven inflation appears to be finally peaking (one of the takeaways among economists from the BOJ Tankan report). Asked about the possibility of a surprise decision, explained that would be a function of new incoming information since the prior meeting and if a significant development were to arise, he could not rule out a surprise. Downplayed perceptions BOJ would navigate policy changes so as to pre-empt Fed moves. Re-emphasized extreme uncertainties on the outlook. And with stable inflation still unattained, difficult to determine an exit strategy with sufficient confidence level. On speculation of a January move, Ueda noted there will not be much more new information by then and would make a decision based on available evidence and updated BOJ forecasts. Also added that the chances of an explicit signal before a policy change were low.

  • BOJ leaves policy settings unchanged as expected:

    • BOJ left policy unchanged as widely expected. Language on policy was identical to the October statement. Economic assessment also remained consistent with prior comments. Observed that CPI inflation has slowed, mainly due to government energy subsidies, yet remains elevated on the back of cost passthrough stemming from prior rise in import prices. Reiterated core inflation likely to remain above 2% through FY24, and then moderate with passthrough dynamic. Underlying inflation seen likely to increase gradually toward achieving the price stability target, supported by a positive output gap and rise in medium-to-long term inflation expectations and wages. Continued to stress extremely high uncertainties surrounding the outlook, justifying patient continuation of easing while nimbly responding to economic/inflation/financial developments. Forward guidance also unrevised, pledging to maintain QQE with YCC for as long as necessary to see stable achievement of the target. Remains committed to expanding monetary base, and also kept its easing bias. Attention turns to Governor Ueda's press conference for any hints of a short-term rate hike in the near term.

  • China seen to leave LPRs unchanged for December:

    • Reuters survey showed 28 market watchers unanimously expected China to leave 1Y and 5Y loan prime rate (LPR) unchanged at monthly fixing on Wednesday after PBOC kept medium-term policy rate steady last week, as MLF rate seen as precursor to any change to LPRs. Noted PBOC ramped up liquidity through last week's MLF loans, injecting a net CNY800B of fresh funds into banking system. Economists said policymakers may wait and see how effective recent fiscal and property support measures are before turning to any rate adjustment, though some still see rate cuts in near future amid weak economic fundamentals and yuan returning to levels that are comfortable to PBOC. Yicai citing Guotai Junan Securities chief economist He Haifeng noted China is more likely to conduct one or two rounds of RRR cuts before rate cut. Recall readout from Central Economic Work Conference noted monetary policy to be "flexible and moderate".

  • RBA debated whether to tighten in December, opted to hold given limited data to justify hike:

    • December RBA minutes showed board debated whether to hike cash rate by 25 bp amid resilient domestic demand and risk of further delay in returning inflation to target. However, decided to hold cash rate steady given limited data since November's meeting did not warrant material revision to outlook, risk of demand slowing more quickly than anticipated, and disinflation traction in other countries. Timely indicators also suggested spending growth remained subdued in Q4. Highlighted encouraging signs of progress towards board's objectives and space to wait for more data before deciding whether to hike again. Minutes also showed board considering current strategy of letting bonds roll off balance sheet, noting exposure to interest rate risk and gradual decline of balance sheet relative to other DM central banks. Also discussed implementation options for any decision to resort to outright QT. Nothing in minutes to really shift consensus view that cash rate has peaked - albeit with risk of February hike depending on Q4 CPI outcome and extent of services inflation stickiness.

  • Indian equity sales boom expected to continue in 2024:

    • Bloomberg noted India market for equity sales is expected to remain robust into 2024 as high valuations attract companies and shareholders seeking funds while price gains lure investors who shun China. Data compiled by Bloomberg showed IPO and follow-on share sales in India have surpassed Hong Kong for the first time in at least 30 years, totaling $24.2B YTD which was helped by gains of around 18% in benchmark index, compared with sharp falls in Hang Seng. Indian IPOs this year, which accelerated in H2 and driven by smaller offerings, also outperformed local benchmark and emerging market peers. Noted Ola Electric Mobility, Emcure Pharmaceuticals among prospects in capital market pipeline while bankers expected interest in IPOs of high-quality companies to be sustained next year and larger IPOs seen to come to market. Meanwhile, IMF sees India's economy to grow at 6.3% in current fiscal year (ending Mar-24) and next, supported by macroeconomic and financial stability.

  • Notable Gainers:

    • +6.1% 9866.HK (NIO Inc): enters $2.2B share subscription agreement with CYVN at $7.5/share for 294.0M ordinary shares

    • +3.9% 2603.TT (Evergreen Marine): will temporarily stop accepting Israeli cargo and suspend passage through the Red Sea for now

    • +0.5% 6503.JP (Mitsubishi Electric): reportedly Mitsubishi Electric to sell ¥45B of cross-shareholdings in FY24

  • Notable Decliners:

    • -10.1% 028670.KS (Pan Ocean Co.): Pan Ocean-JKL consortium named preferred bidder for HMM

    • -3.9% 034220.KS (LG Display): proposes 142.2M-share placement at KRW9,550/share

    • -2.8% 5401.JP (NIPPON STEEL): to acquire U. S. Steel for $55.00/sh cash

    • -0.0% 5201.JP (AGC): AGC subsidiary AGC Automotive Americas reports system failure caused by unauthorized access

• Data:

  • Economic:

    • New Zealand

      • December ANZ Business Confidence +33.2 vs November +30.8

      • November trade balance (NZ$1.23B) vs revised (NZ$1.73B) in October

        • Exports (5.3%) y/y vs (9.3%) in October

        • Imports (15.0%) y/y vs (14.0%) in October

  • Markets:

    • Nikkei: 460.41 or +1.41% to 33219.39

    • Hang Seng: (124.23) or (0.75%) to 16505.00

    • Shanghai Composite: 1.59 or +0.05% to 2932.39

    • Shenzhen Composite: 2.10 or +0.12% to 1807.54

    • ASX200: 62.70 or +0.84% to 7489.10

    • KOSPI: 1.69 or +0.07% to 2568.55

    • SENSEX: 157.27 or +0.22% to 71472.36

  • Currencies:

    • $-¥: +1.53 or +1.07% to 144.3210

    • $-KRW: +4.83 or +0.37% to 1308.5500

    • A$-$: +0.00 or +0.22% to 0.6720

    • $-INR: +0.04 or +0.05% to 83.1904

    • $-CNY: +0.00 or +0.07% to 7.1385