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StreetAccount Summary - Asian Market Recap: Nikkei +0.08%, Hang Seng (1.45%), Shanghai Composite +0.51% as of 03:10 ET

Nov 11 ,2024

• Synopsis:

  • Asian equities finished mostly lower Monday although many ended well off their lows. Losses greatest in Hong Kong, which gapped lower at the open and traded sideways for much of the day; mainland markets moved higher. Losses in Seoul, Taipei and Sydney; most of Southeast Asia lower ex Singapore, India reversing early losses to trade higher. Japan's main boards flat. US futures edging higher before a partial holiday today, Europe notably higher in early trades. US dollar a smidge stronger, yen notably weaker on BOJ minutes, yuan also weaker. Treasuries mixed. Crude oil, Precious metals and industrial metals all weaker. Cryptocurrencies higher again, bitcoin at record highs.

  • Asia markets under pressure for much of the day as investors responded with skepticism over Beijing's local government debt swap plan and as the US dollar remained elevated. Late Friday, China announced headline stimulus figure above expectations but it underwhelmed as it focused on local government debt refinancing over consumer support. BOJ meeting minutes partially responsible for the strong dollar / weak yen, which subsequently weighed on Asia currencies; summary described how members were cautious amid uncertainties and were split over when the next hike should be. The rupee fell to another record low amid reports the RBI stepped in to give support, but also just as reports surfaced the central bank may let it weaken.

  • In macro developments, China consumer inflation for October also disappointed but at least showed prices rising; producer prices meanwhile fell deeper into deflation, falling by the most in almost a year. South Korea exports fell 18% y/y in the first ten days of November as a slide in auto exports offset another increase in semiconductor shipments. Year-ahead New Zealand inflation expectations fell to RBNZ 1-3% target midpoint but 2Y expectations rose.

  • Toyota Motor (7203.JP) said it aims to increase China-based production to 2.5M vehicles by 2030, contrasting with other auto manufacturers that have reduced their China output recently. LG Energy Solution (373220.KS) is to supply batters to SpaceX, according to local South Korea media sources. TSMC (2330.TT) has reportedly halted shipments of advanced chips to Chinese companies at the request of the US government. Singapore Airlines (C6L.SP) said it will expand capacity despite previously warning over tougher outlook on increasing competition, reporting lower-than-expected Q2 profits. HMC Capital (HMC.AU) is to IPO its data centers business worth up to A$4B ($2.64B), marking the largest Australian deal since 2021.

• Digest:

  • Japan's Ishiba wins runoff parliamentary vote to stay as prime minister:

    • Japan's incumbent PM Shigeru Ishiba won parliamentary vote Monday afternoon to stay in role despite LDP-led coalition losing parliamentary majority in last month's general election. Ishiba won 221 votes versus rival Yoshihiko Noda with 160, still short of absolute majority but winning plurality after smaller party voted for own leader thus splitting opposition vote (Nikkei). Ishiba to lead minority government however analysts noted Ishiba's weakened position following election, will need support of minor parties to pass legislation including ¥13T ($85B) extra budget to fund economic stimulus package (Bloomberg). Noted failed gamble to hold snap election just weeks after taking office as PM does not bode well for longevity as PM as he will have to concede political ground to minor parties, which may lead to internal LDP revolt. Ishiba now expected to travel to APEC forum in Peru, G20 summit in Brazil while officials attempt to organize meeting with president-elect Trump at end of that trip.

  • Latest China policy measures disappoint, but hope remains for meaningful fiscal response:

    • China NPC Standing Committee meeting considered to have disappointed market hopes for a meaningful response. Main disappointment stemmed from absence of details on consumption stimulus, bank recapitalization and housing inventory de-stocking. However, economists took more nuanced view with estimated CNY500-600B in reduced interest burden seen reducing fiscal pressure on local governments. Moreover, China did pledge more forceful fiscal policy next year with economists anticipating focus on consumer goods trade-in and equipment upgrade programs and increase in social welfare spending. Strategists mixed on implications for equity outlook with UBS expecting more volatility ahead amid ongoing absence of consumer stimulus and looming threat of US tariffs. From a corporate standpoint, earnings recovery has been tepid with Morgan Stanley anticipating continued weakness without forceful reflationary measures. Attention shifts to December Central Economic Work Conference, which may offer more clarity on size and composition of fiscal stimulus in 2025

  • China deflation pressures persist:

    • China October CPI inflation fell to 0.3% y/y from prior month's 0.4% (also consensus). Main drag came from m/m fall in food and energy prices. Excluding volatile items, core inflation rose to 0.2% from 0.1%. Drop in autos/EVs and household appliances were another drag, illustrative of weak domestic demand. PPI shrunk 2.9% y/y, worse than prior month's 2.8% and consensus 2.5%, marking biggest drop in 11 months amid fall in global energy prices and sharper decline in consumer goods prices. Continued deflation pressures contrasted with stronger manufacturing and trade data for October, underlining weak household sentiment and excess supply. Takeaways broadly concurred data underscores need for additional measures to revive domestic demand and kickstart reflation recovery. From fiscal standpoint, economists highlighted consumer goods trade-in and equipment upgrade programs while in terms of monetary policy PBOC has signaled further rate cuts by year-end.

  • BOJ members saw need to conduct policy with caution amid uncertainties:

    • BOJ October Summary of Opinions showed basic view remains that policy normalization will continue if outlook for economy and prices is realized. However, there were varying views on pace of rate hikes amid need to monitor market developments and outlook or overseas economies, particularly US. One member said it cannot be judged that markets are stabilizing with US interest rates and dollar having appreciated amid reduced hard landing risk and speculation surrounding election. One highlighted need to for policy to proceed with caution given domestic and external uncertainties. Given BOJ/Fed policy divergence, there was a view policy normalization could be hindered if rate hikes trigger market shocks. However, others expressed view that BOJ should consider resuming rate hikes after pausing to assess developments in US, and stressed importance of communicating that policy normalization can continue in a gradual manner if economic and price outlook is realized.

  • China semis rally following report US ordered TSMC to halt shipments of AI chips to China:

    • China-listed semiconductor stocks seeing big gains on Monday with SMIC (981.HK) a standout in Hong Kong. Comes after Reuters cited person familiar with the matter who said US ordered TSMC (2330.TT) to halt shipments of AI chips to China from Monday. Department of Commerce issued letter to TSMC imposing controls on exports of 7nm chips or more advanced designs to China. FT first reported the news on Friday. Comes after Reuters sources in late October reported TSMC notified US government one of its chips was found in Huawei AI processor, in apparent violation of US export controls. TSMC suspended shipments to Sophgo, a chip designer in China, after discovery of chip that matched one found on Huawei AI processor. Department of Commerce is investigating how TSMC's chip ended up in Huawei's application. TSMC's new export restrictions were seen impacting Baidu (9888.HK) and Alibaba (9988.HK), which have made big investments in semiconductors for their cloud applications.

  • Notable Gainers:

    • +11.8% 6383.JP (Daifuku): reports H1 results and revises FY operating income guidance; to launch up to 5.0M-share buyback for up to ¥10.0B

    • +6.0% 6758.JP (Sony): reports Q2 operating income ahead of StreetAccount estimates; raises FY revenue guidance

    • +4.8% 6845.JP (Azbil Corp): reports H1 earnings with year-on-year increase in revenue; to launch ¥15B on-market buyback

    • +4.4% 373220.KS (LG Energy Solution): reportedly to supply batteries to SpaceX

  • Notable Decliners:

    • -13.1% 8113.JP (Unicharm): reports 9M results with decline in net income attributable year-on-year

    • -6.4% 2202.HK (China Vanke): reports October contracted sales CNY21.36B; StreetAccount notes the year-ago figure was CNY31.83B

    • -5.0% 9735.JP (SECOM Co.): reports H1 results with operating income decline year-on-year

    • -3.9% 6326.JP (Kubota): reports Q3 revenue below FactSet estimates; lowers FY guidance

    • -2.5% C6L.SP (Singapore Airlines): reports Q2 earnings with year-on-year decline in operating profit

• Data:

  • Economic:

    • China October

      • CPI +0.3% y/y vs consensus +0.4% and +0.4% in prior month (9-Nov)

        • PPI (2.9%) y/y vs consensus (2.5%) and (2.8%) in prior month

    • Japan

      • September current account balance ¥1,717.1B vs consensus ¥3,421.7B and ¥3,803.6B in prior month

      • October bank lending +2.7% y/y vs +2.7% in prior month

    • New Zealand Q4

      • 2-year inflation expectations 2.12% vs 2.03% in Q3

        • 1-year inflation expectations 2.05% vs 2.40% in Q3

  • Markets:

    • Nikkei: 32.95 or +0.08% to 39533.32

    • Hang Seng: (301.26) or (1.45%) to 20426.93

    • Shanghai Composite: 17.77 or +0.51% to 3470.07

    • Shenzhen Composite: 38.89 or +1.86% to 2133.57

    • ASX200: (28.90) or (0.35%) to 8266.20

    • KOSPI: (29.49) or (1.15%) to 2531.66

    • SENSEX: 221.80 or +0.28% to 79708.12

  • Currencies:

    • $-¥: +1.08 or +0.71% to 153.7140

    • $-KRW: (3.86) or (0.28%) to 1394.3300

    • A$-$: (0.00) or (0.07%) to 0.6578

    • $-INR: (0.01) or (0.01%) to 84.3872

    • $-CNY: +0.01 or +0.11% to 7.1870