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StreetAccount Summary - Asian Market Recap: Nikkei +0.30%, Hang Seng (1.07%), Shanghai Composite (0.53%) as of 03:10 ET

Nov 08 ,2024

• Synopsis:

  • Asian equities mixed Friday. Chinese shares swung to losses as investors awaited outcome of China legislature meeting that is expected to unveil fiscal support. Stocks gained in Australia and Taiwan higher. Nikkei also eked out mild gains. Korea ended lower. Singapore outperforming in southeast Asia. India trading lower. US futures flat. Treasury and JGB yields largely flat, Aussie rates lower across the curve. Dollar stronger against Aussie, won and offshore yuan. Yen also strengthened. Crude and gold both lower. Bitcoin fluctuating near record high.

  • Asian equities pared earlier advance which tracked Wall Street's overnight rise to record highs after Federal Reserve cut interest rates as widely expected. Markets focus turned back to China stimulus as NPC Standing Committee concludes today while traders debated whether any fiscal measures will be enough to counter potential much higher tariffs from upcoming Trump administration. Chinese stocks posted best weekly performances in a month amid hopes that authorities may unveil stronger stimulus package; while both mainland and Hong Kong dipped Friday as some feared of policy undershoot. An NPC Standing Committee press conference was scheduled at 4pm local time. Latest was NPC approved increase of CNY6T in local government debt ceiling to replace existing hidden debt.

  • Elsewhere, Japan's household spending came better than expectations but posted second straight decrease. Japan intervened twice in July to support yuan as it was trading past 160 per dollar. South Korean finance minister said authorities will respond timely if volatility heightens excessively in financial markets. BOK deputy governor said uncertainties are running high surrounding global growth and inflation.

  • Nissan Motor (7201.JP) shares slumped after company announced it will slash 9k jobs and 20% of global manufacturing capacity. CEO to take 50% pay cut. APT Electronics (2551.HK) became second-most oversubscribed IPO in Hong Kong's history. TSMC (2330.TT) posted slowest sales growth in October since February while it will suspend production for some Chinese AI chip customers. Kioxia aims to list on the TSE between December and June 2025.

• Digest:

  • Yen intervention, BOJ rate hike risk offer the only resistance against further depreciation:

    • Nikkei discussed latest yen weakness, making the case that MOF and BOJ policy stand as the only resistance against further declines, bringing a potential 160 level vs dollar back in sight. Yet, despite recent verbal intervention, prevailing view among market participants is that MOF's urgency level is low. Analysis of positioning and flows broadly indicate yen support is moderate at best. Cited CFTC data showing speculative positions have swung back to net shorts after just a few months on the long side. Mizuho Securities suggested stabilization in markets after the US election would be conducive for yen carry trades. Macro funds see slower Fed rate cuts and continuation of China easing as scenarios encouraging yen selling. Article said CTAs may have also turned net sellers after USD/JPY 20-day moving average crossed the 120-day average at the end of October. Real money also lacking conviction. Importers in no rush to buy dollars after the yen rally in Jul/Aug prompted panic buying. Life insurers lacking motivation for FX hedges against foreign bond holdings as yen upside risk recede. Meiji Yasuda Life noted life insurers have lightened foreign bond positions amid rising yields, hence potential yen support from this factor is not as large as the market thinks. Contrarian retail positions among the five major brokerages are net long, but aggregate $130M as of 6-Nov is moderate compared to the $500M on 23-Oct.

  • Japan investors logged record net selling of foreign bonds last week.

    • MOF weekly portfolio flow data for the week ended 2-Nov showed Japan investors sold a record net JPY4,457.9B in foreign long-term debt securities, well above the prior record of JPY3,072.1B in Mar-15. Extended net selling to a fourth straight week. Also sold net JPY1,173.6B in foreign equities, the largest since Oct-22 for the fourth straight outflow. Attention on outbound portfolio flow data has been low lately, though market narrative generally indicated institutional investors lightened positions amid elevated uncertainties toward the outcome of the US presidential election. FX volatility stands as a key catalyst, after USD/JPY troughed at 139.58 in mid-September and rallied beyond 152 by last week. The period also saw intense focus on the size of Fed rate cuts. Recall that fund repatriation was an early theme on domestic equity strength and prospects for BOJ rate hikes, though have not panned out. Details are confined to monthly aggregates through September. Institutions were net buyers of both foreign stocks and bonds for the latest two months. In bonds, only life insurers demonstrated a meaningful pattern with moderate net selling for three straight months.

  • Japan automaker earnings notably weak, also weighing on electronic parts makers:

    • Latest auto earnings continued to disappoint. Most of the attention on Nissan (7201.JP). Q2 key metrics broadly missed, declared no interim dividend and slashed FY guidance. Prompted 9K job cuts and ~20% reduction in global production capacity. Regional drag was led by North America with China also weak, partly owing to EV market struggles, while largely missing out on hybrid segment growth. Dearth of new models coinciding with underlying management issues in the post-Ghosn era (Nikkei). Results rounded out major auto names. Mazda (7261.JP) posted a 67% y/y drop in H1 net profit and also cut FY guidance. Final dividend shaved. Recall Toyota's (7203.JP) miss set the tone, while Honda (7267.JP) disappointment underscored China market drags on the auto sector. Combined with a list of negative factors -- FX headwinds, certification issues and recalls. Softer auto market reverberated to electronics parts makers. Nikkei round-up of sector results found four out of eight major names downgraded FY guidance -- Kyocera (6971.JP), MinebeaMitsumi (6479.JP), Taiyo Yuden (6976.JP), Rohm (6963.JP). Main takeaway was that auto market drags are outweighing AI-related growth.

  • Japan household spending beats, but Q3 private consumption looking softer:

    • Household spending fell 1.1% y/y in September, better than expectations of a 1.8% drop. Follows 1.9% decline in the previous month, marking the second straight decrease. Main factor was auto purchases, posing a drag of 1.49 ppt on the headline. Notable bright spots limited to private university tuition fees (+0.57 ppt), while dining provided marginal support. Auto weakness led to a second sharp drop in durable goods spending, outweighing moderate growth in semi-durables while non-durables edged lower. Disposable incomes swung back to declines for the first time in five months following solid growth over Jun/Jul reflecting the boost from summer bonuses. This was generally consistent with the broader wage data. In seasonally adjusted terms, spending fell 1.3% m/m, reversing 2.0% growth in August. This left Q3 down 0.9% q/q (third straight slide), pointing to soft GDP private consumption. BOJ consumption activity index fell 0.1% m/m, extending a 0.4% decline in August. However, Q3 still rose 0.4% q/q, the second straight increase, owing to sequential carryover effects. Mild growth consistent with latest consensus poll showing Q3 GDP growth expected to slow to 0.7% q/q annualized from 2.9% in Q2 (Reuters). Private consumption seen moderating to 0.2% from prior 0.9%. Cost of living pressures cited as the main headwind.

  • Asia Macro Morning Headlines:

    • Markets:

      • Japan intervened twice in Q3 to prop up yen (Bloomberg)

      • Chinese banks increase cross-border lending for better returns (Bloomberg)

      • Yokohama Bank keen to resume JGB buying as more rate hikes in Japan to come (Bloomberg)

      • South Korea finance minister says government to respond if volatility heightens excessively in financial markets (Bloomberg)

      • Malaysian ringgit strengthen may ebb on risks from Trump's threat of tariffs (Bloomberg)

    • Economy:

      • Japan household spending in September falls for second straight month (Reuters)

      • Japan hotel rate surges in September amid tourism boom (Nikkei)

      • Export-reliant South Korea economy braces for Trump 2.0 (KoreaHerald)

      • Taiwan semiconductor production to hit record this year amid booming AI demand (Nikkei)

    • Central Banks:

      • Fed cuts rates by 25 bp, Powell says he won't resign if asked by Trump (Bloomberg)

      • Trump likely to allow Fed Chair Powell to complete remainder of his term (US News)

      • Hong Kong cuts rate in lockstep with Fed (Bloomberg)

      • RBNZ says Trump 2.0 will be marginally inflationary (NZHerald)

    • Geopolitics/Trade:

      • Trump expected to move quickly and "ruthlessly" in threats to implement steep tariffs as soon as he takes office (FT)

      • Steve Madden to slash China sourcing by as much as 45% amid Trump's tariffs risks (CNBC)

      • Indonesian President Prabowo to visit China before a possible Trump meeting (Bloomberg)

    • Corporate:

      • Nissan pushes for major restructuring, cutting CEO pay and slashing 9,000 jobs (Bloomberg); credit risk jumps to highest in more than 20 years (Bloomberg)

  • Notable Gainers:

    • +14.7% 9868.HK (XPeng, Inc.): receives orders for more than 10K P7+ cars within 12 minutes of launch, according to chairman Xiaopeng He

    • +10.8% 033780.KS (KT&G Corp): reports Q3 operating profit ahead of StreetAccount estimates; discloses value-up plan

    • +7.7% U11.SP (United Overseas Bank Ltd. (Singapore)): reports Q3; posts core NPAT and NII growth y/y; provides outlook for FY25

    • +7.2% 2802.JP (Ajinomoto): reports Q2; raises FY revenue guidance to ¥1.533T vs prior ¥1.527T; announces 1-for-2 stock split and new buyback

    • +5.2% 3563.JP (Food & Life Companies): reports FY results; revises FY26 targets in medium-term management plan

    • +2.2% 4543.JP (Terumo): reports H1 results posting revenue and operating income growth y/y; revises FY guidance upward

  • Notable Decliners:

    • -12.8% 9468.JP (Kadokawa): reports Q2 results; Japan FTC reportedly to issue warning to Kadokawa and its subsidiary for underpaying subcontractors

    • -7% 4911.JP (Shiseido): reports 9M results with y/y decline in core operating income; cuts FY guidance

    • -6% 7201.JP (Nissan Motor): reports Q2 results with revenue and operating income below StreetAccount estimates; lowers FY guidance; plans to reduce global headcount by 9,000

    • -6% G13.SP (Genting Singapore): reports Q3 results with revenue and adjusted EBITDA below FactSet estimates

    • -4.4% 5803.JP (Fujikura): reports H1 results with net income attributable below guidance

    • -0.9% 9888.HK (Baidu): reportedly to announce glasses with built-in AI assistant at Baidu World event next week

• Data:

  • Economic

    • Japan September household spending (1.1%) y/y vs consensus (1.8%) and (1.9%) in prior month

      • Spending (1.3%) m/m vs +2.0% in prior month

  • Markets:

    • Nikkei: 118.96 or +0.30% to 39500.37

    • Hang Seng: (225.15) or (1.07%) to 20728.19

    • Shanghai Composite: (18.36) or (0.53%) to 3452.30

    • Shenzhen Composite: (6.02) or (0.29%) to 2094.69

    • ASX200: 68.80 or +0.84% to 8295.10

    • KOSPI: (3.48) or (0.14%) to 2561.15

    • SENSEX: (31.92) or (0.04%) to 79509.87

  • Currencies:

    • $-¥: (0.23) or (0.15%) to 152.7090

    • $-KRW: +7.12 or +0.52% to 1388.5700

    • A$-$: (0.00) or (0.75%) to 0.6626

    • $-INR: +0.07 or +0.08% to 84.3725

    • $-CNY: +0.02 or +0.29% to 7.1641