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StreetAccount Summary - Asian Market Recap: Nikkei (1.59%), Hang Seng +0.04%, Shanghai Composite +0.57% as of 03:10 ET

Dec 21 ,2023

Editor's note: Asia Market Wrap will not be published on 25-Dec and will return on 26-Dec.

• Synopsis:

  • Asian equities finished mixed Thursday to follow Wall Street's selloff Wednesday. Japan's benchmarks erased yesterday's gains and led the region lower. Mainland China markets higher although the Hang Seng was flat. South Korea and Taiwan lower, Australia also finished down. Southeast Asia mixed and India trading higher after a weak start. US futures higher, Europe opened lower as it caught up with overnight action. US dollar slightly down, notable strength in the yen and AUD. Treasury yields mostly higher although the 10Y is lower. Crude off overnight peaks on US inventory build. Precious and industrial metals lower.

  • Asia equities with a mixed response to the overnight selldown on Wall Street with the more developed and technology-exposed benchmarks falling the most. Japanese assets continued their unwind from Tuesday's BOJ 'dovish hold' as equities, JGBs and currency crosses all have now largely reversed gains made on the day as economists continue to eye April as the meeting the BOJ will end negative rates. Some strength in China assets but little change in the overall bearish narrative. BofA's recent FMS showed Asian fund managers remained underweight Chinese equities amid expectation of further valuation de-rating. This week, press reports have noted government exploring off-balance sheet fiscal support via issuance of special bonds while data today showed a confusing picture on house prices.

  • In macro developments, Japan government projects above-consensus FY24 GDP growth and positive real income growth next year. Bank of Indonesia kept base rates unchanged as expected. South Korea export recovery continued in first 20 days of December with chip shipments up 19%.

  • The offices of Toyota Motor's (7203.JP) subsidiary Daihatsu were raided by police over an investigation that most of its vehicles were not tested properly for collision safety. Toyo Construction (1890.JP) stock finished steeply lower after Yamauchi Family Office withdrew its tender offer Wednesday. China Aoyuan (3883.HK) has sought Chapter 15 bankruptcy protection in the US to protect the company's assets while it restructures its debt. HSBC (5.HK) faces a fine of at least KRW 10B ($7.7M) from South Korea's Financial Supervisory Service for naked short selling in the country. Samsung Electronics (005930.KS) is to invest around ¥40B ($280M) over five years into a research facility looking at advanced chip packaging.

• Digest:

  • Biden administration discusses raising tariffs on Chinese EVs:

    • According to media reports, Biden administration is considering raising tariffs on some Chinese goods, including EVs, in an effort to protect US clean-energy industry and signal tougher stance on China ahead of 2024 presidential election (Bloomberg, Reuters). Chinese EVs already subject to 25% tariff, while other targets for tariff increases include solar products and EV batteries, as US officials worry American businesses are not able to compete with flood of cheap Chinese clean energy products. White House will debate Trump-era tariffs on roughly $300B of Chinese goods early next year with consideration of lowering duties on some consumer products not seen as strategically important. Raising tariffs on Chinese exports seen complicating efforts by both sides to stabilize relations. Earlier NBC News report noted President Xi told President Biden during their recent summit that Beijing will reunify Taiwan, grabbing attention of US officials given nature of summit aimed at reducing tensions. Reuters also highlighted how US-China relations expected to face ongoing turbulence in 2024 over issues ranging from Taiwan to semiconductors.

  • Japan projects above-consensus FY24 GDP growth:

    • Nikkei reported Cabinet approved FY24 economic forecasts to serve as the macro basis for budget formulation. GDP estimate was revised up to 1.3% from July projection of 1.2%. This would take absolute levels to a new high, surpassing the current record of JPY555T in FY18. Details paint a picture of domestic demand-driven growth with external demand a marginal net drag. Private consumption to expand 1.2% that includes assumption of wage hikes and boost from temporary income tax cuts. Capital spending to grow 3.3% on the back of strong earnings with added support from the broader stimulus package. Article noted government forecasts are higher than consensus (GDP +0.9%) and cited disappointing shunto wage hikes failing to take real earnings positive as a risk factor. Overall CPI projected to rise 2.5% with energy subsidy roll-off to contribute 0.6 ppt. An earlier Nikkei report indicated new Cabinet Office projections for per-capita income to rise 3.8% in FY24 on a combination of lower taxes and higher wages. Of the 3.8% increase, 1.3 ppt to come from tax cuts, and the rest from wage increases. Compares with the FY23 per-capita income estimate of 2.4% growth.

  • Bank Indonesia holds rates steady but cuts still seen some way off:

    • Bank Indonesia (BI) kept its seven-day reverse repo at 6.0% as largely expected by economists and in line with Governor Warjiyo's signal late November bank would likely keep rates elevated for some time. Hold follows surprise hike in October however since then rupiah has stabilized giving BI room to hold. BI also maintained FY 2023 growth forecast at 4.5-5.3% and 4.7-5.5% for 2024; inflation at 2-4%. Said it would strengthen monetary policy mix and work with government to ensure inflation remains in check. Analysts expect BI to keep rates on hold until at least Q3-24 so long as core inflation does not spike, US Fed follows through with rate cuts in 2024. Current account deficit remains a problem for bank but it said today it expects to move to surplus in 2024.

  • China's top cities see home sales surge after policy relaxation while some price data in question:

    • Bloomberg citing a HSBC report noted China's top two cities, Shanghai and Beijing, posted sharp increases in home transactions following latest policy easing efforts to revive demand. Noted sales in both new homes and second-hand ones jumped immediately last weekend after two cities announced measures, including lower downpayment ratios, on 14-Dec. However transactions in smaller cities remained low and markets would watch closely for sales figures in subsequent weeks to gauge policy effect as previous efforts to stimulate home sales in August lost momentum in less than two weeks. Meanwhile FT pointed that interviews with real estate brokers showed home sellers in Beijing were cutting prices aggressively, running counter to official statistics that showed housing market remains buoyant in the Chinese capital. Discrepancy also stoked concerns about quality of official statistics over fears that they may be manipulated to meet growth targets and authorities might play down extent of property crisis.

  • Foreign sentiment towards China remains decidedly bearish:

    • Chinese equity markets underperforming global counterparts in December with CSI 300 down ~5% month-to-date. Bearish sentiment remains pervasive among fund managers with December BofA FMS showing underweight calls on China stocks outweighed overweight calls by 9% (SCMP). That left sentiment towards China the most bearish among other Asian markets. While China valuations remain low relative to other benchmarks, 74% anticipate further de-rating and 62% say they will look for opportunities outside China. Chinese assets have experienced heavy outflows in 2023, and trend expected to continue next year. Recent report from Institute of International Finance showed prediction of further $65B in foreign outflows from Chinese stocks and bonds in 2024 (SCMP). Geopolitical tensions remain a top concern among foreign investors, coupled with structural economic problems from property sector downturn, debt overhang and banking contagion risks.

  • Notable Gainers:

    • +23.9% 3932.JP (Akatsuki, Inc.): To allot 1.1M shares to Koei Tecmo Holdings, 1.4M shares to Sony through third-party allotment

    • +2.6% 9939.HK (Kintor Pharmaceutical): Chairman Tong Youzhi acquires 500K shares at HK$1.5475/share

  • Notable Decliners:

    • -12.4% 9688.HK (ZAI Lab): argenx's ADDRESS study fails to meet primary or secondary endpoints

    • -7.5% 138580.KS (BusinessOn Communication Co.): NAVER considering acquisition of 46.9% stake

    • -5.7% 016790.KS (Canariabio, Inc. (016790)): To launch KRW5B placement at KRW5,131/share

    • -4.0% 7203.JP (Toyota Motor): Recalls 1.1M vehicles in North America

• Data:

  • Economic:

    • No economic data today

  • Markets:

    • Nikkei: (535.47) or (1.59%) to 33140.47

    • Hang Seng: 7.32 or +0.04% to 16621.13

    • Shanghai Composite: 16.61 or +0.57% to 2918.71

    • Shenzhen Composite: 16.16 or +0.90% to 1801.50

    • ASX200: (33.80) or (0.45%) to 7504.10

    • KOSPI: (14.28) or (0.55%) to 2600.02

    • SENSEX: 360.95 or +0.51% to 70867.26

  • Currencies:

    • $-¥: (0.40) or (0.28%) to 143.1660

    • $-KRW: +0.20 or +0.02% to 1303.9100

    • A$-$: +0.00 or +0.26% to 0.6748

    • $-INR: (0.01) or (0.01%) to 83.2615

    • $-CNY: +0.01 or +0.12% to 7.1434