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StreetAccount Summary - Asian Market Recap: Nikkei +1.11%, Hang Seng +2.14%, Shanghai Composite +2.32% as of 03:10 ET

Nov 05 ,2024

• Synopsis:

  • Asia equities ended mostly higher Tuesday but volumes again were notably muted. Greater China gained the most with Shenzhen outperforming but with 2%+ advances for Shanghai and Hong Kong to trade at the top of their recent ranges. Japan also higher following it's break yesterday while there were gains in Taiwan and most of Southeast Asia. Australia closed lower, India adding to recent losses. US futures positive for now, Europe opened flat. US dollar turning weaker, gains in AUD and NZD, yen now flat. Treasuries mixed. Oil, precious metals and base metals all steady. Cryptocurrencies higher.

  • Asia equities saw a second consecutive day of gains but trading was again subdued ahead of the final day of voting in the US Presidential election as well as the NPC announcement on fiscal stimulus plans due later this week. US election remains too close to call with volatility still expected if the result is disputed or very narrow, although there was another favorable Harris poll overnight that opened some daylight between the candidates. Yet investors remain unsure, leading to subdued action in Asia assets and low trading volumes.

  • Today, China's Premier Li said he was confident China would reach its "around 5%" FY growth target, while a separate news report said the NPC Monday discussed fiscal support would center on raising local government debt ceiling to allow for refinancing of hidden debt. China markets further supported by China Caixin services PMI, which rose to a three-month high amid growth in new business inflows and export business. Elsewhere, the RBA left its cash rate unchanged as expected with messaging re-emphasizing patience in face of sticky underlying inflation and a tight labor market. South Korea inflation fell to lowest since Jan-2021 with core inflation down to lowest since Sep-2021, though economists expect BOK to hold in November. RBNZ noted risk of economy weakening significantly, but financial system well placed.

  • Kaisa Group (1638.HK) is looking to sell its Hong Kong headquarters as it looks to ease its funding pressure. Sunac China (1918.HK) is meeting with some domestic bond investors to explore second restructuring plan with final version expected by end-Nov. SK Hynix (000660.SK) has announced development of a 48GB, 16-layer HBM3E just as Nvidia asks it to accelerate development of HBM4 chips earlier. Singtel (Z74.SP) was breached by Chinese state-sponsored hackers this summer as part of broader campaign against telecom companies around the world.

• Digest:

  • RBA leaves cash rate unchanged with underlying inflation still too high:

    • RBA left cash rate unchanged at 4.35% as expected. Repeated board not ruling anything in or out (with respect to rates) and that sustainably returning inflation to target within reasonable timeframe remains highest priority. Statement on Monetary Policy showed CPI forecasts tweaked lower though trimmed mean inflation still not expected to return inside 2-3% target band until Dec-2025. Noted underlying inflation remains too high, reinforcing need to remain vigilant to upside risks (main concern remains elevated services inflation). Downgraded GDP growth forecasts with consumption recovery expected to begin later than outlined in August. However, aggregate demand growth proving more resilient and indicators suggest labour market conditions remain tight amid ongoing excess labour demand. RBA assessed risks to activity and inflation as broadly balanced. At her press conference, Governor Bullock said board still needs convincing inflation is returning sustainably to target, adding that another trimmed mean print of 0.8% q/q in Q4 would mean inflation is not tracking to 2-3% band. However, also left open door for rate cut, for example if consumption turns out weaker than expected.

  • NPC Standing Committee discusses local government debt swaps:

    • Xinhua summary of the first day of proceedings at the NPC Standing Committee meeting briefly mentioned discussions included a proposal to raise the local government debt ceiling to replace hidden debts, though there were no details. Bloomberg reprised latest expectations of a debt swap ranging between CNY6T ($845B) and CNY10T over several years. Recalled Finance Minister Lan Fo'an initially signaled China would launch its biggest effort in years to address risks from local government debt. Yet, forecasts compare with an IMF estimate of the total amount at about CNY60T. Measure would still be meaningful as local governments have been widely reported to be facing a funding shortage for critical outlays including employee salaries and construction projects. Cited Tsinghua University estimates that delayed payments to companies and employees account for 10% of GDP, or about CNY13T. Story recalled an earlier report indicating Beijing was considering allowing local authorities to issue up to CNY6T in bonds through 2027 for debt refinancing. Lan said in October that local authorities will be allowed to use proceeds from special bonds to buy unsold homes to reduce housing inventory. Still, absence of broader stimulus discussion was noted and prompted some thoughts that fiscal support may be limited to guidance.

  • China services growth rises to three-month high:

    • Caixin services PMI was 52.0 in October, well above consensus 50.5 and September's 50.3. Rate of growth was fastest since July and extended expansion into 22nd month. Improvements in underlying demand and market conditions underpinned growth in new businee inflows with rate of expansion rising for first time in four months. There was solid increase in export business amid rising interest from markets including US. Service providers raised staffing levels marginally for second consecutive month however still saw a quicker accumulation of backlogs. Average input prices rose due to higher material and energy costs but rate of inflation was at three-month low. Selling prices stabilized after falling in the two prior months. Business confidence rebounded from September low to highest since May. Caixin Composite PMI came at 51.9, up from 50.3 in September, remaining in expansionary territory for 12th straight month as both manufacturing and services sector continued to expand. Caixin Insight economist noted improvement in data as an early sign of stimulus impact, meanwhile cautioned labor market still under pressure and subdued price levels.

  • South Korea inflation softest since January 2021:

    • Headline CPI rose 1.3% y/y in October, compared to consensus 1.4%. Follows 1.6% in the previous month and marks the lowest reading since Jan-21. Main drag came from transportation reflecting lower oil prices. However, core inflation also eased to 1.8% from 2.0%, the lowest since Sep-21, indicative of broader moderation in pressures. Newswires cited Finance Ministry remarks predicting inflation will remain below 2% in November. Developments coincide with broader softening in macro data. Surprising drop in Q3 GDP exports have reverberated, prompting BOK to signal a downward revision to its 2024 GDP growth forecast from current 2.4%. Governor Rhee indicated growth tracking closer to 2.2%. October customs exports also disappointed in a lackluster start to Q4. BOK implications dovish at face value, but Bloomberg noted latest print follows a widely anticipated rate cut in October and most economists forecasting no change at the 28-Nov meeting. Recent consensus poll added expected rate cuts to three 25 bp moves through 2025 from two in the prior survey in recognition of a softer economic growth outlook.

  • Asia markets brace for US Presidential election:

    • Asia assets steady for second consecutive session ahead of final voting day in US Presidential election with results tabulation to begin Wednesday morning Asia time. Many equity benchmarks stuck in two-week trading band ahead of election day (and China's NPC announcement on fiscal stimulus) but dollar broadly stronger, Asia currencies weaker in same period, including rupee falling to record low (Reuters). Sovereign bonds yields also rallied just as data showed heavy investor selling of EM bond ETFs ahead of election (Bloomberg). Past two-weeks market activity attributed to investors pricing in Trump victory, somewhat reversed this week post favorable Harris polls. Asia officials see little difference in candidates' Asia approach (SCMP) but post-election focus likely on Harris/Trump China tariff policy, approach to Taiwan. Harris expected to broadly continue Biden approach to both, Trump expected to increase depth/breadth of China tariffs, has refused to commit to defending Taiwan (Bloomberg). Analysts also attribute recent increase in Chinese military activity around Taiwan (Reuters), North Korean missile launches (Yonhap) to saber-rattling ahead of election.

  • Notable Gainers:

    • +12.8% 8136.JP (Sanrio): reports H1 results ahead of guidance; raises FY outlook

    • +10.6% 8604.JP (Nomura Holdings): reports Q2 results with revenue and operating income growth year-on-year

    • +10.6% 5802.JP (Sumitomo Electric Industries): reports H1 results ahead of guidance; raises outlook for operating income

    • +8.6% 1478.HK (Q Technology (Group)): some Apple suppliers trading higher as Apple reportedly considering push into smart glasses

    • +7.5% 161390.KS (HANKOOK TIRE & TECHNOLOGY Co.): following Q3 results Nomura upgrades to buy from neutral; Hana Financial upgrades to buy from neutral

    • +6.3% 9987.HK (Yum China Holdings): reports Q3 adjusted EPS and revenue ahead of StreetAccount estimates; company increases plans for capital returns from 2024-6 to $4.5B from $3B

    • +6.1% 6752.JP (Panasonic): reports Q2 results with revenue and operating income ahead of StreetAccount estimates; confirms FY guidance

    • +4.5% 4902.JP (Konica Minolta): lowers FY revenue and operating profit guidance citing classification of Precision Medicine as discontinued operation, recording of gain from share transfer of Ambry Genetics, and recent trends in financial results

  • Notable Decliners:

    • -13.2% 7951.JP (Yamaha): reports H1 results with net income attributable decline y/y; lowers FY guidance

    • -9.8% 2282.JP (NH Foods): reports Q2 results below FactSet estimates; confirms FY guidance

    • -7.7% 361610.KS (Sk Ie Technology Co.): reports Q3 results below StreetAccount estimates

• Data:

  • Economic:

    • China October

      • Caixin services PMI 52.0 vs consensus 50.5 and 50.3 in prior month

        • Caixin Composite PMI 51.9 vs 50.3 in prior month

    • South Korea October

      • CPI +1.3% y/y vs consensus +1.4% and +1.6% in prior month

        • CPI ex-food & energy +1.8% y/y vs +2.0% in prior month

    • Singapore September

      • Retail sales y/y +2% versus +0.7% in prior month

  • Markets:

    • Nikkei: 421.23 or +1.11% to 38474.90

    • Hang Seng: 439.45 or +2.14% to 21006.97

    • Shanghai Composite: 76.78 or +2.32% to 3386.99

    • Shenzhen Composite: 63.55 or +3.20% to 2047.77

    • ASX200: (32.80) or (0.40%) to 8131.80

    • KOSPI: (12.09) or (0.47%) to 2576.88

    • SENSEX: (95.59) or (0.12%) to 78686.65

  • Currencies:

    • $-¥: +0.26 or +0.17% to 152.3580

    • $-KRW: +3.67 or +0.27% to 1377.7100

    • A$-$: +0.00 or +0.39% to 0.6610

    • $-INR: (0.05) or (0.06%) to 84.1184

    • $-CNY: +0.01 or +0.11% to 7.1067