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StreetAccount Summary - Asian Market Recap: Nikkei +0.77%, Hang Seng +0.49%, Shanghai Composite (1.08%) as of 04:10 ET

Oct 29 ,2024

• Synopsis:

  • Asia equities ended mixed Tuesday. Among the markets to see gains were Japan, Hong Kong, Australia and South Korea. Mainland China boards remained in the red along with those in Taiwan, India and much of Southeast Asia. US futures moving higher, Europe opened with solid gains. US dollar flat, yen stronger, other Asia currencies weaker. Treasury yields higher across tenors. Crude futures higher, precious metals also up, base metals led lower by iron ore on higher inventory levels. Cryptocurrencies higher with bitcoin at five-month high.

  • Asia markets drifted Tuesday amid a lack of firm catalysts to change the overarching narrative. Global bond yields continue to rise taking the lead from Treasuries, worried a Trump presidency could reignite inflation and slow global growth. US dollar remained at elevated levels Asia time Tuesday, but several Asia currencies including the AUD and NZD weakened again. Japan's Nikkei and Topix defied the stronger yen to trade higher and despite the continuing political upheaval to follow the weekend's election. The Hang Seng closed higher, albeit still within its recent range, boosted by sharp gains in several EV stocks after the China government announced its agencies would increase purchases of new EVs. After the close in Shanghai, a state-media report said China's new round of debt swaps could be worth CNY6-10T.

  • Elsewhere, Japan's unemployment rate fell to its lowest since January and Singapore unemployment fell to its lowest in 18 months. The Bank of Korea said it was 'highly likely' FY GDP growth would be lower than its previous forecast. The White House finalized curbs on US investments in China advanced tech, largely mirroring June's proposal.

  • Nippon Paint (4612.JP) is to buy US-based resins manufacturer AOC from Lone Star Fund for $2.3B. HSBC (5.HK) is to buyback $3B shares and reported better-than-expected earnings on wealth fees and inflow of Hong Kong customers. Luckin Coffee (LKNCY) is planning a re-launch in the US as its comeback from fraud scandal continues. POSCO (005490.KS) and JSW Group of India are to build an integrated 5M tonne capacity steel mill in India that will include EV battery materials and renewable energy production. TSMC (2330.TT) has severed shipments to Chinese chip designer Sophgo over allegations it was trying to supply components to Huawei.

• Digest:

  • Japan equity strategists see market in wait-and-see mode after election:

    • Japan equity strategy takeaways from the election mostly indicated a wait-and-see stance on the market outlook and views were balanced. Morgan Stanley MUFG saw the possibility of near term drags from the uncertainties posed by the lack of a majority government. Noted markets declined in two-thirds of cases where the ruling party failed to secure a majority in the six previous lower house elections since 1979. Yet, clarification of economic policies seen triggering a market rally. There was broader consensus that policy direction is more meaningful than political realignment, with signs pointing to looser fiscal policy. JPMorgan suggested investors will likely continue to monitor developments until the 5-Nov US presidential election. Following press discussions about the risk of foreign portfolio outflows, Nomura quants highlighted speculative trends, observing macro funds are moderately short Japan equities. Hypothetically saw scope for sizable additions to shorts if CDP-led coalition forms government, though seen as unlikely. Also said CTAs have already pared positions and currently generally neutral, indicating limited scope for momentum selling in the case of a major correction. Goldman Sachs concurred that foreign inflows have reversed significantly since the volatility over Jul-Aug, leaving positioning relatively clean, and will likely remain so until there is more clarity on political and geopolitical risks.

  • December BOJ rate hike calls starting to fade amid political uncertainty:

    • Nikkei discussed emerging perceptions that post-election political instability will translate to market turbulence, posing a hurdle against BOJ rate hikes alongside uncertainties surrounding the US presidential election. While reaffirming expectations of no policy change at this week's MPM, December forecasts are now under scrutiny. Cited Dai-Ichi Life's thoughts the election outcome will prompt a slower normalization pace and sees a rate hike by year-end as difficult. Nomura Research Institute maintained their January call, though acknowledged that LDP must incorporate policies from opposition parties to gain their support, posing a constraint against rate hikes. Still, other views hinge on FX developments as some argue that yen weakness would help to justify a hike. Article noted BOJ policy is not directly influenced by politics but cannot avoid at least some macro level impact from subsequent financial market instability. StreetAccount notes that a couple of economists have reaffirmed January rate hike forecasts since the election result, though the bulk -- particularly those predicting a December move -- have yet to announce updates. Recall that consensus polls prior to the election continued to show a slight majority still looked for a December rate hike until a Reuters survey indicated balance of forecasts edged into early next year.

  • Analysts expect China's new round of debt swaps may reach CNY6T to 10T:

    • Securities Times citing analysts reported China's new round of debt swaps may reach CNY6T to 10T ($840B to $1.4T). Article said local governments may restart issuing "swap bonds" or continue issuing "special refinancing bonds" and "special bonds for new specialized projects" to mitigate risk of local debt defaults, helping local authorities put more resources in economic development and public welfare. Ministry of Finance plans to lift debt limit for swapping local governments' hidden debt, marking largest local debt relief measures in recent years. Recall finance minister Lan Fo'an announced such measures at press conference on 12 October without giving a headline figure (Bloomberg). Vice finance minister Liao Min reiterated last week that size of this round of fiscal policies will be "quite large" (Bloomberg). TMTPost citing a state media-affiliated account noted Beijing will announce key details of stimulus measures in November once approved by nation's top legislature NPC Standing Committee, scheduled to meet from 4 to 8 November.

  • Bank of Korea warns again on economic growth as exports slow:

    • BOK Governor Rhee said Tuesday South Korea FY economic growth "highly likely" to be lower than bank's earlier estimate of 2.4% because of export slowdown. Rhee told parliamentary audit hearing it growth more likely to be 2.2-2.3% despite export values holding up but one-off factors such as auto worker strikes, increased competition hurt shipments (Yonhap).Growth warning was bank's second since it cut interest rates earlier in October, comes after Q3 growth lower than expected amid softer export growth over summer (Reuters). Rhee's comments will add to speculation bank could cut rates again earlier than expected however he added "not urgent" to map out economy-boosting measures and bank is mindful of won movements. Added enough ammunition to intervene in forex market. Separately, President Yoon said important to respond promptly to forex rates, supply chain disruption, oil prices from having negative impact on economy (Bloomberg).

  • China EV stocks rise amid government pledge to purchase more vehicles:

    • Chinese EV stocks in Hong Kong jumped on Tuesday after Xinhua reported central government agencies will increase their purchases of new-energy vehicles, citing a government document issued in late September that EVs should account for no less than 30% of new cars purchased annually in principle and price per vehicle should not exceed CNY180k ($25.2k). It also recommended measures including construction of charging infrastructure. News boosted Chinese EV makers' ADRs in US on Monday, which saw NIO (NIO) rise 10.8% and XPeng (XPEV) gain 9% overnight. Rally extended to Hong Kong today as NIO (9866.HK) jumped more than 10% and XPeng (9868.HK) 3.7% higher. Zhejiang Leapmotor (9863.HK) also notably higher. Separately, China and EU agreed last Friday to hold further technical negotiations soon on possible alternatives to tariffs on Chinese EVs (Reuters).

  • Notable Gainers:

    • +14.3% 4612.JP (Nippon Paint Holdings): to acquire AOC for $2.30B (¥334.08B); deal expected to contribute ¥15-17 on annualized EPS basis from the first year

    • +5.4% 7013.JP (IHI): AKUMA to acquire IHI PACKAGED BOILER; terms undisclosed

    • +3.0% 6988.JP (Nitto Denko): reports Q2 results with revenue ahead of StreetAccount estimates; revises exchange rate assumptions, but leaves FY guidance for revenue and operating income unchanged

    • +3.0% 5.HK (HSBC Holdings): reports Q3 EPS $0.34 ex-items vs consensus $0.30; reaffirms guidance; intends to initiate a share buy-back of up to $3B

    • +0.9% 034730.KS (SK): provides value-up plan; targets ROE 8% for 2024-26

  • Notable Decliners:

    • -12.6% 5332.JP (TOTO Ltd): reports H1 results; lowers FY revenue and net income attributable guidance; analysts broadly mention China conditions are weaker-than-anticipated

    • -3.1% 530965.IN (Indian Oil Corp.): reports Q2 standalone EPS INR0.13 vs year-ago INR9.42

    • -2.2% 386.HK (Sinopec (China Petroleum & Chemical)): reports Q3 results with revenue down (10%) y/y; analyst broadly mention earnings impacted by inventory losses and highlight wider y/y losses at chemicals

    • -2.0% 532454.IN (Bharti Airtel): reports Q2 consolidated net profit ex-items INR39.11B vs StreetAccount INR45.65B; CEO Gopal Vittal to step down, effective 1-Jan-2026; COO Shashwat Sharma appointed as CEO designate

    • -1.4% 883.HK (CNOOC): reports Q3 results with revenue down (14%) y/y; analysts broadly note earnings were solid despite typhoon season

    • -0.7% 241560.KS (Doosan Bobcat): reports Q3 revenue below FactSet estimates; analysts generally highlight weak demand

    • -0.6% 086790.KS (Hana Financial): to launch KRW150.00B buyback, to run from 11-Nov through 12-May-25; provides value-up plan; maintains ROE of 10% or higher

• Data:

  • Economic:

    • Japan September

      • Unemployment rate 2.4% vs consensus 2.5% and 2.5% in prior month

        • Job offers to applicants ratio 1.24 vs consensus 1.23 vs 1.23 in prior month

  • Markets:

    • Nikkei: 298.15 or +0.77% to 38903.68

    • Hang Seng: 101.78 or +0.49% to 20701.14

    • Shanghai Composite: (35.79) or (1.08%) to 3286.41

    • Shenzhen Composite: (29.65) or (1.48%) to 1972.93

    • ASX200: 27.70 or +0.34% to 8249.20

    • KOSPI: 5.37 or +0.21% to 2617.80

    • SENSEX: (120.36) or (0.15%) to 79884.68

  • Currencies:

    • $-¥: (0.12) or (0.08%) to 153.2070

    • $-KRW: +2.17 or +0.16% to 1385.0000

    • A$-$: (0.00) or (0.27%) to 0.6565

    • $-INR: +0.01 or +0.01% to 84.0781

    • $-CNY: +0.01 or +0.18% to 7.1389