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StreetAccount Summary - Asian Market Recap: Hang Seng +0.30%, Shanghai Composite +1.17%, Kospi +1.83% as of 03:10 ET

Nov 04 ,2024

• Synopsis:

  • Asian equities finished largely higher Monday. Region led by South Korea that gained on likely abandonment of capital gains tax on small stock accounts. Taiwan, Greater China and Australia all higher. Southeast Asia mixed, India sharply lower. Japan closed for a holiday. US futures higher, Europe opened with solid gains. US dollar sharply lower, yen stronger. Crude prices higher on delay to OPEC+ production cuts and Middle East tensions. Precious metals mixed, iron ore seeing losses but copper higher.

  • Asia equities higher on balance Monday as optimism over China's NPC announcement on fiscal stimulus spend, and a lower US dollar provided tailwinds. China's NPC began today with estimates of fiscal stimulus ranging from CNY6T to CNY10T with funding likely to be allocated to local government debt restructuring and the acquisition of unfinished homes. US dollar fell after polling ahead of Tuesday's Presidential election appeared to tilt in favor of Kamala Harris. However, the race remains too close to call and many Asia investors continue to stay on the sidelines, leading to a relatively quiet day's trading. India equities a notable decliner as foreign investors continued their recent exodus amid more gloomy earnings reports.

  • Oil and gas names dragged on Hong Kong after crude prices spiked in response to reports Iran may be planning another strike on Israel, and that OPEC+ countries had agreed to extend voluntary output cuts until December. Elsewhere, South Korea's main opposition party dropped resistance to scrapping capital gains tax on investments. India's final PMI reading showed manufacturing returned to expansion during October.

  • Mitsubishi Corp (8058.JP) and Nissan Motor (7201.JP) are to establish an autonomous driving and EV battery joint venture. BYD (1211.HK), XPeng (9868.HK), and Geely Automobile (175.HK) all delivered strong EV deliveries for October, boosting stock prices. NIO (9866.HK) said it will sell its first hybrid car only to overseas customers including those in Europe. Alchip Tech (3661.TT) sold 450K shares to MediaTek (2454.TT) in a placement, 150K further shares to private equity group Achi Capital.

• Digest:

  • StreetAccount Event Preview: China NPC Standing Committee meeting

    • NPC Standing Committee scheduled to convene Nov 4-8 amid heightened attention on stimulus. Official statement expected to be published in the afternoon of the 8th, and details to be disclosed by state media. While there is still no clear consensus on the size of the fiscal package, the floor now looks to be CNY6T ($842B) over multiple years and upwards of CNY10T reflecting the range of latest headline figures reported in the press. Notably, uncertainty remains over what details will be announced this week amid thoughts the full plan may not be disclosed until the NPC full session in Mar-25 or even later. Still, an announcement this week of a supplementary budget is seen as viable. Here, estimates gravitate towards CNY6T over multiple years focusing on local government debt swaps. While an increase in the debt ceiling could be announced in principle, specifics may not become clear until the Central Economic Work Conference in mid-December. Furthermore, outcome of the US presidential election stands to have a notable impact on the total stimulus size with Nomura predicting a Trump victory would see the stimulus package inflating to the high side of expectations, equating to 3% of GDP per year, while a Harris win might be closer to 2% of GDP.

  • India factory activity growth accelerates in October:

    • HSBC India final manufacturing PMI rose to 57.5 in October from 56.5 in prior month, also slightly above flash reading of 57.4. Output growth accelerated, boosted by faster increases in total new orders and international sales. Companies noted quicker increase in order book volumes that were stronger than long-term average. New export orders showed stronger growth following weakest uptick in 1.5 years in September. Inflation metrics rose too with input price inflation rising to three-month high while output prices increased at solid rate that outpaced the series trend. Respondents cited freight, labor and materials as key sources of price pressures. Manufacturers also increased hiring and reported first decline in backlogs in over a year. There was also further increase in quantities of purchases. Business also getting more optimistic about future output volumes due to expectations of continued strong consumer demand, new product launches and sales pending approval.

  • Indian markets brace for US election fallout after worst month for stocks since early 2020:

    • Indian stocks recorded biggest monthly drop since Mar-2020 with Nifty 50 losing ~6% over October. Markets experienced outflow pressures with foreign investors pulling more than $10B, largest since Mar-2020 and paring year-to-date inflows to just $2B (FT). Expensive valuations (MSCI India forward P/E trading at 24x), weak earnings (more companies missing estimates than beating) and signs of waning economic momentum thought to have encouraged foreign investor shift from India to China. Indian bonds have also come under pressure with foreigners pulling $700M last month, first withdrawal in six months following relentless period of inflows as the securities were added to global indexes (Reuters). US election an additional risk factor for markets with Reuters citing RBI sources who warn of potential for sharp outflows from a Trump victory, putting RBI in state of readiness to defend rupee after currency hit all-time low in October. Specifically, there are concerns about secondary impact of tariffs, such as increased import inflation that keeps RBI restrictive for longer. Larger China stimulus could also extend trend of foreign funds repositioning from India to China.

  • Japan earnings so far showing softer manufacturing profits:

    • Nikkei top story recapped Apr-Sep earnings results to date and found net income deteriorated in 74 out of 156 firms, representing the highest proportion since 2020 during the Covid pandemic. Manufacturers attracting most of the attention, particularly automakers, amid China macro headwinds. Aggregation covered 30% of the sector by number and 50% of market cap. In contrast, businesses tied to AI boomed. Companies with US exposure also saw softening. Yen averaged 152 vs dollar during the period, down 11 on the year. Yet this was not enough for many companies to offset weakness elsewhere. Notable mentions were Mitsubishi Motors (7211.JP), which reported a 44% drop in net profit, weighed by falling demand in Thailand and increased marketing costs in the US amid intense competition. Kyocera (6971.JP) earnings fell 36% facing lackluster sales of electronic components to European automakers, which face pressure from inexpensive Chinese EVs. Materials sector also impacted with Tokyo Steel Manufacturing (5423.JP) reporting narrower margins on steel products as weak China demand led to increased supply in surrounding regions. In contrast, burgeoning AI demand has been a boon for the likes of Advantest (6857.JP), whose net profit surged 170% on the strength of its testing devices for chips used in generative AI. Article noted earnings outlook increasingly clouded, highlighting this week's US presidential election and potential ensuing market volatility.

  • Kospi rises as main opposition party drops resistance to scrapping capital gains tax on small stock accounts:

    • Kospi rose more than 1.0%, Kosdaq small cap index more than 3.0% in early trading Monday to outperform region after Democratic party, which controls South Korea's National Assembly but is in opposition to government, said it would support government plans to scrap capital gains tax on financial instruments (Yonhap). Had previously opposed scrapping, saying it would benefit rich, weaken tax revenues; said changed view as it could not ignore 15M stock investors who rely on South Korea's stock market, which is in "too difficult a position". Retail investors account for two-thirds market turnover, had backed government move to scrap planned tax that had been weighing on sentiment. Plan was to see 20% tax starting 2025 on stock investments over KRW50M ($36.5K), earnings on KRW2.5M from other financial investments; government earlier this year announced it would scrap tax but needed National Assembly approval (Bloomberg).

  • Notable Gainers:

    • +12.8% 1801.HK (Innovent Biologics): terminates deal to sell 20.4% stake in Fortvita for $20.5M (HK$160M) to Lostrancos

    • +7.4% 3661.TT (Alchip Technologies): reports Q3 revenue and EPS ahead of FactSet estimates; places 450K shares to MediaTek, 150K shares to Achi Capital at NT$1,627/share

    • +6.0% 039130.KS (Hanatour Service): China to implement trial visa-free policy for passport holders from countries including South Korea

    • +5.7% 002594.CH (BYD Co.): reports October vehicle production volume 536,134 units vs year-ago 307,014 units

    • +3.7% 2333.HK (Great Wall Motor): delivers 23,917 vehicles in October, +20% y/y

    • +2.2% 500520.IN (Mahindra & Mahindra): Goldman Sachs adds to APAC Conviction List - Directors' Cut; Kotak Securities upgrades to buy from add

    • +1.3% 601012.CH (LONGi Green Energy Technology): Morgan Stanley upgrades to overweight from equal-weight

  • Notable Decliners:

    • -5.8% 008770.KS (HOTEL SHILLA Co.): reports Q3 results with revenue and operating profit below StreetAccount consensus; TR operating profit also misses estimates

    • -4.2% 532977.IN (Bajaj Auto): reports October vehicle sales 480K vs StreetAccount 486K

    • -0.6% 096770.KS (SK Innovation): reports Q3 results with revenue and operating profit below StreetAccount consensus

• Data:

  • Economic:

    • Australia October

      • ANZ-Indeed job advertisements +0.3% m/m vs revised +2.3% September

  • Markets:

    • Nikkei: Closed

    • Hang Seng: 61.09 or +0.30% to 20567.52

    • Shanghai Composite: 38.19 or +1.17% to 3310.21

    • Shenzhen Composite: 38.38 or +1.97% to 1984.22

    • ASX200: 45.80 or +0.56% to 8164.60

    • KOSPI: 46.61 or +1.83% to 2588.97

    • SENSEX: (1,316.20) or (1.65%) to 78407.92

  • Currencies:

    • $-¥: (0.94) or (0.62%) to 152.0680

    • $-KRW: (9.31) or (0.67%) to 1371.1100

    • A$-$: +0.00 or +0.47% to 0.6591

    • $-INR: +0.02 or +0.02% to 84.1045

    • $-CNY: (0.03) or (0.39%) to 7.0949