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StreetAccount Summary - Asian Market Recap: Nikkei (0.25%), Hang Seng +2.02%, Shanghai Composite +2.57% as of 03:10 ET

Nov 07 ,2024

• Synopsis:

  • Asian equities ended mostly higher Thursday. Among the gainers, Hong Kong and mainland China stocks, led by internet & IT names. Australia, Taiwan and South Korea all ahead, Southeast Asia led by Singapore's bank stocks. India resuming its recent selloff. Japan mixed as Nikkei stayed negative all day but the Topix rose. US futures higher, Europe opened mixed. US dollar slightly lower, yen stronger, AUD & NZD recovering much of yesterday's losses. Treasuries mixed. Crude prices recovering but precious and industrial metals mixed.

  • Asia markets continued to trade around the US election results with a watchful eye on China's NPC announcement on fiscal stimulus due Friday. The latter behind the surge in China-based benchmarks today with optimism the fiscal plan will be at the upper end of estimates given the increased risk of tariffs on potential Trump tariffs. Some froth coming off the US dollar's move higher yesterday, allowing some recovery in Asia-based assets although several of the more dollar- and trade-based markets continued to be under pressure. Philippines' PSE index notably lower after country's Q3 GDP figures also missed forecasts.

  • The yuan strengthened a little today following yesterday's selloff with the PBOC setting its weakest mid-point in almost a year, signaling the bank was prepared to accept some weakness and perhaps even a devaluation in the event of a major tariff hit. China export growth surprised on the upside to reach a two-year high but analysts warned of frontloading ahead of potential tariffs; import growth fell by more than expected amid weak domestic demand. Australia exports contracted 4.3% m/m to an almost three-year low on falling materials shipments; imports were also below expectations.

  • Mitsubishi Motor (7211.JP) is to sell up to 149M shares and up to a 10% stake in Nissan Motor (7201.JP); Nissan cut outlook and said it would restructure with the loss of 9K jobs. Activist investor Oasis has bought a 5% stake in Kokuyo (7984.JP) making it one of the company's largest shareholders. Private equity group KKR has acquired a 33.9% stake in Fuji Soft (9749.JP) through a tender offer, emulating tactic of Bain Capital. Hanwha Ocean (042660.KS), HD Hyundai Heavy Industries (329180.KS), and Samsung Heavy Industries (010140.KS) traded substantially higher on reports Trump and South Korea President Yoon emphasized a close partnership including in shipbuilding.

• Digest:

  • Trump's election win puts China in tariff crosshairs:

    • Donald Trump's election win brings into sharp focus economic consequences of this threat to impose tariffs of at least 60% on China exports (Bloomberg). China shipped $500B to US last year, leaving export sector bracing for significant impact on sales with UBS estimating hit to GDP growth of up 2.5%, reflecting direct 50% impact on exports and indirect 50% impact on consumption and investment (Bloomberg). Tariff escalation could also further chill foreign investment in China while closure of export businesses threatens to increase joblessness. China's retaliatory options limited in comparison though may repeat 2019 strategy of targeted tariffs on US agricultural exports aimed at hurting Trump politically. FX strategists have discussed potential for China to tolerate weaker yuan to partially offset tariff impact, and on Thursday PBOC set yuan midpoint fixing at lowest since late 2023 (Bloomberg). Still, capital outflow considerations and desire for FX stability seen as mitigating factors. Rather, China's response considered more likely to come in form of larger stimulus to blunt negative hit to growth.

  • Asian economies brace for Trump tariff fallout:

    • There has also been some discussion about impact of tariffs on Asian economies with sizable proportion of exports to China and US, particularly if they are also subject to across-the-board 10% tariffs (FT, Nikkei). IMF recently warned of downside risks to Asian economic growth from a tariff war (Reuters), which may heighten currency depreciation pressures if inflationary effect of tariffs limits room for Fed rate cuts and widens US-EM yield premium. Escalation of US-China trade war could also accelerate supply chain repositioning with nations such as India benefiting. Aside from tariffs, Trump has offered incentives for foreign firms to move operations to US, including lower corporate tax rate (Bloomberg), something that may encourage major Asian firms to diversify production offshore. From a geopolitical standpoint, some concern revolves around Trump's stance on Taiwan after he expressed skepticism about idea of defending the island earlier this year. This also ties into questions over his commitment to regional security partnerships

  • FX traders reluctant to test intervention threshold for now:

    • Yen off intraday lows vs dollar Thursday amid a broad dollar pullback, stabilization in Treasury yields and MOF's latest verbal intervention. FX policy chief Mimura described recent moves as "one-sided and drastic," and declared authorities are "ready to take appropriate action against excess moves" (Reuters). Nikkei noted further attempts at the downside were limited by verbal intervention and upcoming FOMC meeting. Still, underlying momentum driven by widening US-Japan yield differentials yesterday as a Trump election victory became apparent. Cited market thoughts that confirmation of a red sweep would add dollar support. Attention on FX heightening also amid a growing chorus of views from former BOJ officials and economists that yen weakness would tip the scales in favor of an early BOJ rate hike. In a Bloomberg interview, former BOJ official Kazuo Momma suggested weak yen might be the only reason for an early move. Concurred 160 level might be the key threshold, though added rate hike timing also depends on public discontent over prospects for stronger inflation via import prices. Follows earlier remarks from former board members Makoto Sakurai and Takahide Kiuchi who both see a January rate hike as the main scenario, but notable yen depreciation would be the swing factor prompting a December move. This echoed the rationale of several economists looking for a January move, while not ruling out December.

  • China's October export growth surges to fastest in more than two years:

    • China's exports rose 12.7% y/y in October, much higher than Reuters forecast of 5.2% and September's 2.4%. Exports recorded fastest growth since Jul-2022 and extended growth into seventh straight month. Meanwhile imports shrank 2.3%, below consensus of 1.5% drop and last month's 0.3% growth. Trade surplus surged to $95.72B, third highest month on record, versus $76.03B expected and $81.71B in September. October's surge in exports buoyed by better weather and steep discounts. Came on backdrop of trade data from South Korea and Taiwan indicating a cooling global demand. Bloomberg also highlighted low base effect. China Customs highlighted rapid growth in electromechanical products exports for first ten months of the year with ships, automobiles and motorcycles topping the list. On imports, China bought less crude oil and agricultural products in October while imports of integrated circuit rose 11.3% y/y in value. Meanwhile SCMP noted Trump's election vow to levy 60% tariffs on Chinese goods has brought much uncertainty to China's trade outlook with economists saying Trade War 2.0 could end Beijing's current growth model with exports and manufacturing as main growth drivers.

  • Prospect of Trump tariffs could upend global rate cut expectations:

    • At a global level, Donald Trump's election victory and policy agenda driving more discussion about implications for monetary policy (Bloomberg). Emerging markets facing renewed currency headwinds from dollar strength may see diminished scope to ease monetary policy as tariffs threaten to reignite inflation pressures. Already signs on Wednesday that some Asian central banks intervened to support their currencies or signaled readiness to do so (Bloomberg). However, policy response may not be uniform with Goldman Sachs predicting additional rate cuts by ECB, SNB and Riksbank, citing hit to European economic growth from Trump's policy agenda. Similarly, economists predict China authorities will be more inclined to ease monetary policy to offset downside growth risks from Trump's proposed tariffs. Policy implications for countries where China is the top export destination more complicated with RBA Governor Bullock saying tariffs could prove inflationary but may also be deflationary if a China economic shock reverberates in Australia.

  • Notable Gainers:

    • +21.8% 042660.KS (Hanwha Ocean): South Korean shipbuilding stocks trading higher reportedly following congratulatory call to Donald Trump from South Korean President Yoon Suk Yeol; Trump conveyed his hopes for close partnership with South Korea, including in shipbuilding

    • +19.4% 2579.JP (Coca-Cola Bottlers Japan Holdings): reports Q3 results; raises FY guidance; launches up-to-¥30B buyback

    • +17.7% 9008.JP (Keio Corp): reports H1 results with revenue and operating profit growth y/y; revises FY guidance upward; to launch up-to-¥15.00B buyback

    • +6.7% 6367.JP (DAIKIN INDUSTRIES): reports H1 revenue and operating income ahead of guidance; revises FY guidance

    • +6.6% D05.SP (DBS Group Holdings): reports Q3 results with net profit above FactSet estimates; board establishes new SG$3B share buyback program

    • +6.3% 508869.IN (Apollo Hospitals Enterprise): reports Q2 earnings ahead of FactSet estimates

    • +4.8% 6869.JP (Sysmex): reports Q2 results ahead of FactSet estimates; revises FY operating profit guidance upward

    • +0.0% 035720.KS (Kakao): reports Q3 earnings with revenue below StreetAccount estimates

  • Notable Decliners:

    • -3.8% 302440.KS (SK bioscience Co.): Citi downgrades to neutral from buy; firm expects no meaningful near-term share price catalysts

    • -2.3% 6645.JP (OMRON): reports Q2 earnings; cuts FY revenue guidance

    • -0.1% 3034.TT (Novatek Microelectronics): guides Q4 revenue NT$24.0-25.0B vs FactSet NT$27.90B

• Data:

  • Economic:

    • China

      • October trade balance $95.72B vs consensus $76.03B and $81.71B in prior month

        • Exports +12.7% y/y vs consensus +5.2% and +2.4% in prior month

        • Imports (2.3%) y/y vs consensus (1.5%) and +0.3% in prior month

    • Japan

      • September average nominal wages +2.8% y/y vs consensus +3.0% and revised +2.8% in prior month

        • Real wages (0.1%) y/y vs consensus +0.1% and revised (0.8%) in prior month

  • Markets:

    • Nikkei: (99.26) or (0.25%) to 39381.41

    • Hang Seng: 414.96 or +2.02% to 20953.34

    • Shanghai Composite: 86.85 or +2.57% to 3470.66

    • Shenzhen Composite: 50.93 or +2.48% to 2100.71

    • ASX200: 26.80 or +0.33% to 8226.30

    • KOSPI: 1.12 or +0.04% to 2564.63

    • SENSEX: (777.04) or (0.97%) to 79601.09

  • Currencies:

    • $-¥: (0.58) or (0.37%) to 154.0380

    • $-KRW: (8.30) or (0.59%) to 1393.5200

    • A$-$: +0.01 or +0.88% to 0.6628

    • $-INR: (0.06) or (0.07%) to 84.3585

    • $-CNY: (0.01) or (0.16%) to 7.1638