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StreetAccount Summary - Asian Market Recap: Nikkei (0.03%), Hang Seng +0.75%, Shanghai Composite +0.43% as of 03:10 ET

Jan 18 ,2024

• Synopsis:

  • Asian equities ended mixed Thursday. Hong Kong's markets ended higher on a potential technical bounce following yesterday's rout, and Taiwan closed higher as TSMC beat. South Korea and several Southeast Asia bourses also slightly higher. Mainland China reversed a significant loss in the morning session to end higher in a final-hour rally. India and Australia lost ground. US futures lower Europe flat in early trades. US dollar off its recent highs, Asia currencies a little stronger. Treasury yields higher at the short end, lower at the long, JGB yields higher. Crude, precious and industrial metals edging higher.

  • Asia markets still reeling from currency headwinds caused by a bond yield surge around the world, and China's disappointing economic data yesterday. On bonds, Fed, ECB and even a handful of Asia central banks have tempered expectations for rate cuts in the short term and just 140bp of Fed cuts are now priced in for this year versus 175 bps just a few weeks ago. This has pushed yields and the US dollar to weeks-long highs, pressing on Asia currencies. China's economic data yesterday revealed a stable consumer but a deepening crisis in almost everything connected to property, reviving discussions over when and how stimulus will come without too many clues as to the answer coming from Beijing.

  • Overnight, Premier Li downplayed prospects of large-scale easing while thus-far announced carved-off policy measures have been met with skepticism, leading some overseas investors seeing China as 'un-investable.' In other developments today, Japan core machinery orders much lower than expected, tracking below Q4 survey projection and follows the Reuters Tankan survey that showed a dip in manufacturer sentiment. Australian employment contracted sharply against expectations for a slight increase while jobless rate unchanged as forecast. Hawkish remarks from RBI Governor Das at Davos but he remained upbeat on economic growth.

  • Country Garden (2007.HK) has sold a stake in an Australian residential project, nearing a complete exit from the country. China Petroleum & Chemical Corp (386.HK) and BP (BP.L) have signed a MoU to strengthen cooperation in fuel sales, oil & gas trading and upstream activities. TSMC (2330.TT) profit and revenue dropped less than feared in Q4 while both grew on a sequential basis. BHP Group (BHP.AU) has warned of cost cutting and potential writedowns after the price of nickel drops 45%. HDFC Bank (500180.IN) is seeking a Singapore bank licence to grow its overseas business. Zee Entertainment (505537.IN) CEO is to give up his role in any potential final merger agreement with Sony Corp's India unit (6758.JP).

• Digest:

  • China Premier Li downplays major stimulus this year:

    • Bloomberg cited comments from Premier Li Qiang in Davos that were interpreted as the clearest signals yet that policymakers remain averse to large-scale stimulus. Li touted China's ability to meet its 2023 growth target without flooding the economy with "massive stimulus." Added that officials did "not seek short-term growth while accumulating long-term risk." Article noted comments follow bearish takeaways from latest macro data highlighting deflation and persistent real estate overhang. Hence, markets set to continue debate on how much policy support will be implemented this year. While fiscal policy is expanding, size of debt issuance under consideration would be limited relative to the size of China's economy and may reflect efforts to shift debt burdens away from local governments rather than providing broader stimulus. Recalled an earlier report that China was considering CNY1T ($139B) in ultra-long bond issuance, which markets shrugged off. Story reiterated prospects for PBOC easing remain relatively limited.

  • Unconvincing China data sustains subdued growth expectations:

    • Press takeaways following the China GDP and activity data reinforced longstanding concerns about the economy. Bloomberg noted that while GDP achieved the government growth target, data failed to shake off several of the problems most persistently weighing on domestic demand and confidence -- deflation and real estate sector weakness. After inflation reports showed CPI falling for the third straight month, Q4 GDP deflator also declined for the third straight quarter. Housing market data remained weak throughout 2023. Demographic headwinds intensified with the population declines accelerating last year and birth rates at a record low. Nikkei highlighted 2023 nominal GDP in dollar terms fell for the first time in 29 years while its 16.9% share of the global economy shrank for the second straight year and suggested it may be peaking. Reuters cited the China Beige Book International survey remarking the disappointing Covid recovery is over, and any meaningful acceleration will require a major global upside surprise or more active government policy. Story reiterated expectations the 2024 growth target will be kept at around 5%, but analysts remain skeptical even with additional stimulus.

  • Chinese traders keep chasing Japanese stocks despite warnings:

    • ChinaAMC Nomura Nikkei 225 ETF was suspended from market open for an hour for second day after issuer China Asset Management said secondary trading price of fund is significantly higher than underlying net asset value and cautioned investors that they may suffer significant loses if "invest blindly". Both days saw shares touch daily limit of 10% when trading resumed at 10:30 am local time before edging lower as Chinese investors turned to Japanese market after Nikkei 225 hit 34-year high while major indexes in China touched new multi-year lows amid concerns over economy and lack of confidence. Premium of the ETF approached 20% earlier this week before dipping to 10%, while prompting hedge fund manager to warn of short-selling risk (Yicai). Noted most Chinese investors don't have overseas stock accounts and face capital controls, making ETFs one of best tools to gain exposure to foreign equities (Bloomberg), while Chinese fund houses have to allocate more Qualified Domestic Institutional Investor quota to onshore Japan ETFs to curb further divergence of prices from underlying.

  • Japan machinery orders well below expectations:

    • Core machinery orders fell 4.9% m/m in November, notably weaker than expectations for a 0.8% decline, following 0.2% rise in the previous month. Main driver was a sharp drop in manufacturing (led by IT equipment, metal products), while core nonmanufacturing edged lower (real estate) as majority of sectors were negative. Core orders now tracking below the Q4 survey projection of 0.5% q/q growth. Elsewhere, government and overseas orders both rebounded from weakness in the prior month. Results follow the January Reuters Tankan survey which showed subdued business confidence reflected concerns about the China macro outlook, geopolitical risks and inflation pressure -- all adversely impacting capex demand. But little developments overall since the latest BOJ Tankan survey that reaffirmed strong growth in FY24 investment plans. BOJ board members remain upbeat on the outlook based on strong corporate earnings, but Nomura has highlighted the growing divergence between bullish projections and actual investment. Much of the attention going to pressure for productivity enhancements to counter intensifying labor shortages.

  • Sharp decline in Australian employment reinforces RBA rate outlook:

    • Australian economy lost 65.1K jobs in December, contrasting with expectations of a 15.0K gain and November's upwardly revised 72.6K increase (from 61.5K). Marked biggest drop in employment since Sep-2021. Unemployment rate unchanged at an in-line 3.9% as participation rate eased to 66.8% from 67.2%. Fall driven by 106.6K decrease in full-time positions while part-time jobs rose by 41.4K. Smoothing out month-to-month volatility, jobs growth averaged 16.7K a month over Q4, smaller than prior quarters and consistent with a cooling labor market. Data reinforces expectation cash rate has peaked with RBA seen on hold in February. While upcoming Q4 CPI shapes as an important consideration for RBA at next month's meeting, bar for another rate hike has risen and markets continue to price in two rate cuts by year-end.

  • Notable Gainers:

    • +21.9% 532466.IN (Oracle Financial Services Software): reports Q3 consolidated EPS INR85.13 vs year-ago INR50.44, revenue from operations INR18.24B, +26% vs year-ago INR14.49B

    • +8.1% 601138.CH (Foxconn Industrial Internet): Foxconn and HCL reportedly set up chip packaging and testing venture in India

    • +6.7% 051900.KS (LG H&H): reports FY operating profit KRW486.98B vs guidance KRW470.0B and StreetAccount KRW479.61B, revenue KRW6.805T vs guidance KRW6.900T and StreetAccount KRW6.915T

    • +2.7% 002460.CH (Ganfeng Lithium Group): to acquire no more than 5% stake in Mali Lithium from Leo Lithium for no more than $65M

  • Notable Decliners:

    • -10.5% 540005.IN (LTIMindtree): reports Q3 revenue INR90.17B vs StreetAccount INR90.46B, EBIT INR13.86B vs StreetAccount INR14.21B

    • -5.8% 540133.IN (ICICI Prudential Life Insurance): reports Q3 standalone EPS INR1.57 vs FactSet INR2.41

    • -1.3% 4568.JP (Daiichi Sankyo): USPTO invalidates Seagen patent in dispute between Daiichi Sankyo and Seagen

    • -0.4% 8411.JP (Mizuho Financial): reportedly aims to double AUM to $1T (¥148T) in a decade

    • -0.2% 9201.JP (Japan Airlines Co.): confirms chairperson Yoshiharu Ueki to retire, effective 1-Apr

• Data:

  • Economic:

    • Japan

      • November core machinery orders (4.9%) m/m vs consensus (0.8%) and +0.7% in prior month

    • Australia

      • December employment (65.1K) m/m vs consensus +15.0K and +61.5K in November

        • Unemployment rate 3.9% vs consensus 3.9% and 3.9% in November

        • Participation rate 66.8% vs consensus 67.1% and 67.2% in November

  • Markets:

    • Nikkei: (11.58) or (0.03%) to 35466.17

    • Hang Seng: 114.89 or +0.75% to 15391.79

    • Shanghai Composite: 12.17 or +0.43% to 2845.78

    • Shenzhen Composite: 3.76 or +0.22% to 1702.45

    • ASX200: (46.60) or (0.63%) to 7346.50

    • KOSPI: 4.14 or +0.17% to 2440.04

    • SENSEX: (366.51) or (0.51%) to 71134.25

  • Currencies:

    • $-¥: (0.37) or (0.25%) to 147.7930

    • $-KRW: (6.88) or (0.51%) to 1338.5700

    • A$-$: (0.00) or (0.02%) to 0.6552

    • $-INR: (0.06) or (0.07%) to 83.1448

    • $-CNY: (0.00) or (0.01%) to 7.1772