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StreetAccount Summary - Asian Market Recap: Nikkei (0.79%), Hang Seng (2.16%), Shanghai Composite +0.27% as of 03:10 ET

Jan 16 ,2024

• Synopsis:

  • Asian equities finished mostly lower Tuesday. Japan broke its long winning streak with the Topix and Nikkei both down. Losses greatest in Hong Kong with the Hang Seng slipping through the 16K support level, mainland markets rallied late to end slightly higher. South Korea, Taiwan and Australia all lower. India seeing some weakness. Southeast Asia mixed. US futures sharply down, Europe opened with losses. US dollar notably higher, yen, AUD and yuan all weaker. Treasury yields higher across tenors, JGB yields also higher. Crude oil futures flat, Precious and industrial metals were mixed.

  • Continued weakness in Greater China stocks Tuesday, today led lower by Hong Kong's growth sectors and property stocks although the losses were across the board with the main Hang Seng index ending near its day-low. Reports today Beijing has again told institutional investors to avoid selling stocks while its $1.2T wealth fund vowed to play a role in stabilizing stocks. Notable today, mainland benchmarks rallied strongly into the close while the Hang Seng sold down. Ahead Wednesday is China GDP and activity data, which is forecast to show some improvement in overall growth but stuttering progress on the activity front.

  • Today, Japan producer price inflation was flat for the first time since Feb-21, relieving pressure on the BOJ that had been under pressure on rates; bank forecast to cut near-term core inflation forecasts next week. Australian consumer sentiment still at depressed levels amid cost-of-living pressures. Late Monday, India wholesale price inflation hit a nine-month high on elevated food prices while data today showed its trade deficit hit a three-month low in December.

  • The Japan transport ministry has revoked the certification for three Daihatsu Motor (Toyota Motor, 7203.JP) vehicles following the collision safety test results. Baidu (9888.HK) has denied it has provided its Ernie ChatGPT to any institutions and clarified it is available to the general public. Country Garden (2007.HK) said it expects China's property market to remain weak in 2024 and the company could face more 'severe' challenges. Rio Tinto (RIO.AU) said it expects China investment in infrastructure, automotive and manufacturing will offset weakness in property this year.

• Digest:

  • China regulator tells some investors not to sell as equity rout resumes:

    • FT citing traders and investment managers noted CSRC has reimposed restrictions, via so-called window guidance, on some securities companies, telling them not to sell stocks, as regulators try to stabilize market following steep decline since start of 2024. Recall regulator had been issuing such private instructions that prevent some institutional investors from being net sellers of equities on certain days since October, which helped stoke a short-lived rebound in final week of 2023. Reuters reported last Monday that restrictions were removed on growing redemption pressures on smaller mutual funds. However steep falls in stocks in first weeks of 2024 led to a sudden U-turn by CSRC, which market watchers said was distorting market and undermining confidence, adding net sales restrictions unlikely to lift investor sentiment. Meanwhile Bloomberg added China's SWF vowed to help with risk mitigation and market stabilization this year, a sign of state companies playing a bigger role in bolstering stock market, as state-run funds known as "national teams" used to buy up stocks on large scale during previous downturns.

  • India stocks' premium over China nears record high:

    • Bloomberg noted India stocks' valuation premium against China trading near record highs following divergent performance over past year in two principal indices. Said MSCI India trades at 157% premium over China equivalent, just short of record reached in Oct-22. India index backed by solid consumer growth, solid earnings against China with property market problems, deflation. Geopolitical pressures also adding to poor sentiment around Greater China. In terms of underlying valuation, PE ratio for MSCI India at 22 times versus 8.6 times in China. Valuations last reached this divergence just before end of Covid restrictions in China last year. Cited analyst saying although India expensive, can continue to outperform with strong EPS growth. In past 12 months, MSCI China index fallen 26.4%, MSCI India up 21.6%, pattern continued into 2024 with performance delta around 7.5%.

  • China Q4 GDP growth seen picking up with activity data mostly lackluster:

    • Ahead of tomorrow's data releases, Bloomberg consensus looks for GDP growth of 5.3% y/y in Q4, better than 4.9% in the previous quarter. This would leave a 5.2% expansion for 2023, meeting the government growth target of 'about 5%.' December activity data seen mixed with industrial production up 6.7% y/y following 6.6% in November. Retail sales growth expected to slow to 8% from 10.1%, fixed asset investment steady at 2.9% for Jan-Dec to mark the softest pace in three years. Real estate investment declines expected to worsen slightly to 9.5% from 9.4%. With attention turning to the outlook, Reuters survey showed GDP growth expected to slow to 4.6% in 2024 and 4.5% in 2025. Q4 consensus matched Bloomberg, while adding sequential growth seen slowing to 1.0% q/q from 1.3% in Q3. Real estate still seen as the main drag going forward. Calls for stimulus remain entrenched with limited prospects for a recovery in private consumption and exports, as well as ongoing deflation risk. Hopes still lie mostly in stronger fiscal support, though story cited thoughts of an increasingly likely RRR cut after PBOC kept the MLF rate unchanged yesterday, defying expectations for a 10 bp reduction.

  • Japan producer prices weakest since 2021:

    • CGPI was unchanged on the year in December, following a 0.3% rise in the previous month. While above expectations for a 0.3% decline, current figure still marked the softest reading since February 2021. 2023 aggregate rose 4.1%, notably lower than the record 9.8% in 2022 going back to 1980. Index monthly levels have stabilized throughout 2023 alongside export prices in local currency terms, while import prices remain well below the 2022 peak. Domestic breakdown showed mixed developments. Heavily weighted food & beverages logged a steady rise, transportation equipment saw a mildly lower increase, while petroleum & coal picked up somewhat. Recall that stickier than expected inflation readings last year stimulated speculation that BOJ policy normalization may come sooner rather than later. With momentum now slowing, attention has shifted to BOJ's growing confidence in prospects for stable inflation accompanied by wage growth. Expectations for a January move have diminished since the Noto Peninsula earthquake though April still seen as the most likely timing, coinciding with shunto results and next major forecast updates in the April Outlook Report.

  • Australian consumers remain deeply pessimistic:

    • Australia Westpac-MI consumer sentiment index fell to 81.0 in January from 82.1 in December, showing consumers remain deeply pessimistic. Marks lowest January read outside of early 1990s recession with Australians still pressured by cost of living and higher interest rates. Fewer respondents expect further rate hikes following recent developments (December RBA hold, lower inflation), but assessment of family finances deteriorated further while 'time to buy a major household item' and sub-index unchanged at very weak levels. Data likely to strengthen expectations of RBA keeping rates on hold in February after November inflation fell by more than expected. While upcoming Q4 CPI shapes as an important consideration for RBA, bar for another rate hike has risen amid global disinflation momentum and with other central banks having since flagged an end to their tightening cycles. Markets pricing in at least RBA two rate cuts in 2024 with first occurring in early H2.

  • Notable Gainers:

    • +5.2% 002371.CH (NAURA Technology Group): guides FY net income attributable CNY3.61-4.15B vs FactSet CNY3.68B, revenue CNY20.97-23.10B vs FactSet CNY20.76

    • +4.4% 3035.TT (Faraday Technology): reportedly to buy Aragio Solutions for $20.0M

    • +0.4% 9888.HK (Baidu): clarifies on media reports regarding its AI system ERNIE Bot

    • +0.0% 1992.HK (Fosun Tourism Group): reportedly near sale of Thomas Cook to eSky

  • Notable Decliners:

    • -17.5% 271560.KS (ORION Corp (Korea)): PAN ORION Corp to acquire 25.7% stake in LegoChem Biosciences for KRW548.49B in cash

    • -0.7% 4684.JP (OBIC Co.): clarifies media report regarding 9M result; confirms FY guidance remains unchanged

    • -0.7% 8630.JP (Sompo): FSA reportedly to issue Sompo business improvement order over fraudulent insurance claims by Bigmotor

• Data:

  • Economic:

    • Japan December

      • CGPI 0.0% y/y vs consensus (0.3%) and +0.3% in prior month

    • Australia January

      • Westpac-MI consumer sentiment 81.0 vs 82.1 in December

  • Markets:

    • Nikkei: (282.61) or (0.79%) to 35619.18

    • Hang Seng: (350.41) or (2.16%) to 15865.92

    • Shanghai Composite: 7.70 or +0.27% to 2893.99

    • Shenzhen Composite: (0.56) or (0.03%) to 1743.02

    • ASX200: (81.50) or (1.09%) to 7414.80

    • KOSPI: (28.40) or (1.12%) to 2497.59

    • SENSEX: (316.87) or (0.43%) to 73011.07

  • Currencies:

    • $-¥: +1.24 or +0.86% to 146.1080

    • $-KRW: +18.45 or +1.41% to 1331.8100

    • A$-$: (0.01) or (1.09%) to 0.6615

    • $-INR: +0.08 or +0.10% to 82.9564

    • $-CNY: +0.01 or +0.11% to 7.1700