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StreetAccount Summary - Asian Market Recap: Nikkei (0.22%), Hang Seng +0.02%, Shanghai Composite +0.68% as of 03:10 ET

Dec 29 ,2023

• Synopsis:

  • Asian equities ended mixed Friday in a quiet session. Hang Seng turned around a weak morning to close flat but still posted a fourth consecutive month of declines and a 14% loss for the year. Mainland markets stronger Friday but also posted a poor annual return. Japan's indices softer again but completed a strong December and outstanding year. Australia's ASX retreated a little from 20-month highs yesterday. Taipei flat but was the outperforming benchmark in emerging Asia in 2024. Singapore again led Southeast Asia Friday, India's benchmarks slightly lower but still set to return record annual returns. South Korea and Thailand closed for a holiday. US futures a few points higher, Europe opened with modest gains. US dollar flat but down almost 5% in Q4, yuan strengthened to seven-month lows. Treasury yields mixed. Crude higher following overnight tumble, precious and industrial metals off recent highs.

  • Asia Pacific-ex Japan completing the year with a solid week and month as bond yields and the US dollar continue to tumble. The MSCI Asia Pac ex-Japan index is up around 4.8% for the year as Hong Kong closed for business Friday, but still a clear underperformer against Japan's Nikkei, up almost 30%, and European and US benchmarks. Notwithstanding the outperforming Kospi, Taiex and India-based indexes, Asia has struggled for most of the year with a disappointing economic recovery in China, a strong US dollar and weak tech cycle, the latter two of which turned dramatically to help propel northern tech-orientated bourses much higher. Strategists broadly expect 2024 to begin with the same drivers although Japan equities may face headwinds from a stronger yen as the BOJ prepares to exit negative rates.

  • In macro news Friday, South Korean inflation fell in December, tracking BOK's long-term outlook. PBOC MPC statement said will implement prudent and targeted policy with aim of increasing consumer prices. Official PMIs on Sunday forecast to show manufacturing remain in contraction while non-manufacturing ticked higher.

  • Rakuten (4755.JP) said more than 6M had signed up for its mobile services as of this week. The RBI has approved ICICI Bank (532174.IN) subsidiaries' acquisition of up to 9.95% of capital in various banks.

• Digest:

  • China official manufacturing PMI likely in contraction for third consecutive month:

    • Reuters poll showed China's official manufacturing activity likely contracted for third consecutive month in December. Median forecast pointed to 49.5, compared with last month's 49.4. Noted economists still see soft demand for manufactured goods and said PMI in contraction would embolden calls for more policy support. Recall recent economic data has been mixed with industrial profits recording nearly 30% jump in November, partly helped by favorable base effect, but CPI in November came softest in three years and new bank lending also rose less than expected last month. Mid-term report on China's 14^th five-year plan (2021-2025) published by parliament noted country will strive to expand domestic demand, ensure speedy recovery and promote stable growth. Bloomberg added local officials in China's richer provinces vowed to take lead in driving growth, pledging to speed up infrastructure investment, grow high-value-added sectors. Standard Chartered economist also expected rich provinces to avoid setting a lower growth target than 2023 but cautioned difficulty in achieving it amid waning favorable base effect.

  • South Korea inflation falls in line with BOK forecasts:

    • South Korea December headline inflation rose 3.2% y/y, fifth consecutive month reading above 3.0% but below November's and consensus forecast of 3.3%. On m/m basis, headline prices unchanged. Core inflation slowed to 2.8% y/y, also below forecasts but rose slightly on m/m basis. Contraction in headline CPI driven by deflation in transport costs, which fell 1.7% y/y, while alcohol and communication services prices rose below mean (StatisticsKorea); food prices rose 6.2% y/y. For 2024, BOK forecasts inflation will ease at slower pace than previous expectations but reach 2.0% target by year end. For FY 2023, prices grew 3.6%, down from 5.1% in 2022, BOK expects 2.6% for FY2024 (Yonhap). BOK Governor Rhee said last week final mile of inflation fight may be harder but bank still largely expected to begin rate cutting cycle by H2, possibly even before Fed.

  • Key dates during spring wage negotiations set to determine timing of BOJ policy change:

    • Remarks from Governor Ueda and December Summary of Opinions have captured attention this week with policymakers debating timing of stimulus exit and emphasizing importance of upcoming spring wage negotiations. Big firms expected to respond to union wage demands in mid-March, with smaller firms responding over subsequent weeks. Bloomberg noted Rengo will unveil first tally of wage results on 15-Mar.. More comprehensive wage tally that encompasses smaller firms will be available on 4-Apr (BOJ meets on 26-Apr). Ueda told NHK on Tuesday no single event will determine BOJ's decision, but says may be possible for BOJ to make judgment on wages in advance incorporating other indicators such as robust small firm profits, as well as positive trends in consumption and investment. While that leaves open possibility of March rate hike, economists see April as more probable.

  • Yuan seen extending gains in 2024, but path expected to be bumpy:

    • Offshore yuan tracking for a second straight monthly gain against dollar, nearing seven-month high in the process. Depreciation pressures persisted for much of 2023 before sentiment shifted in November as expectations of 2024 Fed rate cuts ramped up. Onshore rate seen extending gains in 2024 with strategists in a Bloomberg poll predicting year-end level of 7.00 per dollar (implying ~1% upside from current levels). Positive outlook based on narrowing of US-China yield gap as Fed pivots to rate cuts. Renewed interest from foreign investors also mentioned as a supportive factor with global flows into Chinese bonds last month the second highest on record. However, some see ongoing downside risks to yuan, including from slowing Chinese economic growth and insufficient stimulus. Geopolitical tensions and unpredictable regulatory environment among other factors seen limiting yuan gains.

  • Notable Gainers:

    • +7.5% 4755.JP (Rakuten Group): number of subscribers for Rakuten Mobile's mobile carrier service surpasses 6M as of 26-Dec

    • +1.7% 2588.HK (BOC Aviation): purchases four Airbus A321NEO and two Airbus A320NEO aircraft; price undisclosed

    • +0.5% 636.HK (Kerry Logistics Network): declares special in-specie distribution of 0.5019 KEX shares for each KLN share

    • +0.2% 4911.JP (Shiseido): chairman/CEO Masahiko Uotani preparing to step down as CEO next year

  • Notable Decliners:

    • -0.4% 5076.JP (INFRONEER Holdings): completes ¥10B buyback, repurchased total of 6.9M shares

• Data:

  • Economic:

    • South Korea December

      • CPI +3.2% y/y vs consensus +3.3% and +3.3% in November

  • Markets:

    • Nikkei: (75.45) or (0.22%) to 33464.17

    • Hang Seng: 3.86 or +0.02% to 17047.39

    • Shanghai Composite: 20.23 or +0.68% to 2974.93

    • Shenzhen Composite: 20.47 or +1.13% to 1837.85

    • ASX200: (23.50) or (0.31%) to 7590.80

    • KOSPI: Closed

    • SENSEX: (183.88) or (0.25%) to 72226.50

  • Currencies:

    • $-¥: +0.00 or +0.00% to 141.4140

    • $-KRW: +5.56 or +0.43% to 1295.4400

    • A$-$: +0.00 or +0.01% to 0.6830

    • $-INR: (0.04) or (0.04%) to 83.1587

    • $-CNY: (0.00) or (0.05%) to 7.1049