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StreetAccount Summary - Asian Market Recap: Nikkei (1.66%), Hang Seng (0.12%), Shanghai Composite +0.51% as of 03:10 ET

Nov 13 ,2024

• Synopsis:

  • Asia equities ended lower almost everywhere Wednesday following a sharp jump in Treasury yields and the US dollar overnight. Steepest losses in Seoul which now sees SEC down more than 10% WTD to a four-year low; Taiex also fell but losses here more measured. Hang Seng down again, mainland markets slightly higher. Both Japan boards ended sharply lower, Australia also lower, India at five-month lows. Southeast Asia saw small gains in places. US futures lower, European bourses down again at the open. US dollar remained at recent highs, Asia currencies quiet although yuan weaker again. Treasury yields resuming their gains, JGB yields up, CGB yields lower. Crude prices flat, precious metals off their peaks, industrial metals continuing their recent slide.

  • Asia markets ended at two-month lows led this time by South Korea technology and industrial export names amid deepening concerns over Trump's potential tariff plans for the region and a slowing domestic economy. Kospi at lowest in more than 12 months with tariffs adding to existing concerns over Samsung Electronics' struggle with AI. Korea Zinc's decision to scrap a share offering also weighed on sentiment. Elsewhere, more negative movement on the Hang Seng as it closed on a key technical support level but mainland stocks won a reprieve to trade slightly higher.

  • In macro developments, Japan wholesale inflation was the strongest since Aug-23. Australia wage price index was slightly softer than expected. South Korea unemployment rate was higher than expectations but job growth pace slowing. India CPI data released late Tuesday showed a surge in vegetable prices to force headline CPI to above RBI's target.

  • Rakuten (4755.JP) has sold a 15% stake in its credit card arm to Mizuho Financial Group (8411.JP) for ¥165B ($1.1B) as it looks to shore up capital. Seven & i (3382.JP) is considering a management buy out as a defense against the unsolicited takeover offer from Alimentation Couche-Tard; will be followed by a group restructuring. Softbank (9984.JP) is to be the first Nvidia customer to receive its new Blackwell chips to build a supercomputer. Korea Zinc (010130.KS) said it would withdraw its 3.7M share offering as it wanted to address shareholder and market concerns over the plan; shares sharply lower. Swiggy (544285.IN) debuted trading in Mumbai post its $1.3B IPO that was three times over-subscribed; stock traded slightly higher.

• Digest:

  • Seven & i said to consider management buyout:

    • Bloomberg sources indicated Seven & i (3382.JP) is considering a management buyout to take itself private in a potential deal worth around JPY9T ($58B). Seven & i shares were suspended following the headlines. Article suggested the deal could be an option for shareholders in the event of a more aggressive pursuit from Alimentation Couche-Tard (ATD.CN) and makes a tender offer. Nikkei also framed developments as a countermeasure against Couche-Tard's bid. Discussions involve Itochu (8001.JP), founding Ito family and existing investors contributing JPY3T, with the remainder coming from bank financing. However, sources said the deal could be difficult given its size and may not proceed if Couche-Tard withdraws its buyout proposal. Nikkei added examination still in early stages and may not come to fruition. While Seven & i has disclosed plans to split the company, MBO would initially seek to acquire the entire business. After the deal closes, new owners would eventually separate 7-Eleven, convenience stores and gasoline stations from other less profitable retail operations. Seven & i statement acknowledged the Special Committee received a proposal from vice president Junro Ito though clarified no decision has been made on any transactions, including with Couche-Tard or third parties.

  • China Singles' Day activity saw higher volumes, though details light:

    • Reuters discussed Singles' Day performance after Alibaba (9988.HK) said it recorded "robust growth" in sales and a "record number" of shoppers. While there were no specific aggregates, Alibaba noted 45 brands including Apple (AAPL), Haier (600690.CH), Midea (000333.CH) and Xiaomi (1810.HK) all surpassed CNY1B ($139M) in GMV. JD.com (9618.HK) also did not disclose specifics though shoppers increased more than 20% y/y. Article cited Syntun estimates that total sales across major e-commerce platforms grew 26.6% to CNY1.44T over the event, which was 10 days longer than last year's. Positive indications were consistent with record-high postal and courier activity on the Monday peak (Xinhua). Parcel numbers were 1.51 times the daily average and up 9.7% y/y. Express deliveries were more than 580M per day since 21-Oct. Still, expectations were subdued by ongoing pessimism toward consumer demand. Discounting has become a regular feature of online shopping since the Covid pandemic and exacerbated by competition from discount-focused platforms such as Pinduoduo and Douyin. Article cited doubts that stimulus announcements had much impact on consumer sentiment. Main bright spot remains big-ticket items owing to the government trade-in subsidy scheme.

  • Japan CGPI inflation continued to build reflecting cost passthrough, yen effects in the pipeline:

    • CGPI rose 3.4% y/y in October, above consensus 2.9%. Follows revised 3.1% in the previous month, marking the strongest since Aug-23. Closely watched import prices fell for the second straight month, though largely owing to favorable base effects. Notably, USD/JPY averaged 4.3% higher over the year amid the sharp shift toward yen depreciation from the 139.58 trough in mid-September. Rice prices were a key contributor, pushing up agricultural produce by 5.0% m/m. Timing explained by scheduled revisions to rice prices in October, though dynamics reflected cost passthroughs, encapsulating broader trends. BOJ Summary of Opinions for the September MPM showed board members observed this development in analysis of Tokyo CPI. One member noted that more than two years have elapsed since yen-based import prices peaked, and with CPI impacts historically maximizing with about a six-month lag, suggesting waning effects from import prices due to run its course soon. During the preceding yen appreciation phase, Governor Ueda had said that upside inflation had subsided, though refrained from affirming a revival of upside risks at his latest press conference. Recall that economists have elevated yen as the key swing factor influencing a decision on a December rate hike.

  • BofA Asia FMS shows China weightings upgraded to second place, behind Japan:

    • BofA Asia FMS showed APAC ex-Japan economic growth expectations continued to outperform the global aggregate, though moderated slightly while global sentiment improved. Contrast was consistent with benign economic surprises relative to US/Euro. Regional one-year inflation expectations swung notably positive. Optimism toward equity gains softened somewhat, though combined 80% still see a positive outlook. Coincided with normalization in profit expectations back toward historical norms. Some elevation in net proportion viewing EPS estimates as too high, though remains below the historical average. However, valuations seen increasingly stretched. Regional breakdown showed China moved to second place in terms of weightings from seventh in the prior survey. Japan remained the clear favorite. India dropped to ninth from fourth. China stance saw notable shift to wait-and-see to 34% from 19%. By sector, Asia ex-Japan remains skewed toward tech hardware and semiconductors. Semis allocation remains tied for first place, though fell to a survey low. China AI/semis, internet, buybacks/dividend cited as the most popular themes. Japan banks and semis were the two most overnight sectors.

  • Surge in India inflation, factory output recovery impedes RBI's dovish trajectory on rates:

    • India October retail inflation rose to 14-month high 6.2% y/y to breach RBI's 2-6% target range, and exceeding consensus at 5.8%. Food item inflation rose 10.9% y/y from 9.2% in September, vegetable prices up 42.1% from 36% last month, cereals and oils prices also rose steeply. Core inflation remained stable near 3.7% although still at 10-month high. Food inflation unlikely to correct before mid-November, according to analysts cited by Reuters. Separate data showed industrial production grew 3.1% in September to reverse August's contraction (BusinessStandard). Combined, data presents headache for RBI, which adopted neutral stance at last meeting leading some economists to forecast December rate cut but this now appears unlikely; Feb-25 now seen as more probable for policy move given FY inflation likely to overshoot RBI 4.5% forecast. High inflation also said to be impacting middle-class purchasing power, contributed to many companies missing earnings estimates last quarter.

  • Notable Gainers:

    • +21.7% 6088.HK (FIT Hon Teng): reports 9M net income from cont'd ops $68.0M, +24% vs year-ago $54.9M

    • +13.8% 6753.JP (Sharp Corp): reports Q2 earnings ahead of FactSet estimates; confirms FY guidance

    • +11.8% 3382.JP (Seven & i): confirms special committee received non-binding, confidential acquisition proposal from VP Junro Ito and Ito Kogyo

    • +8.8% 6465.JP (HOSHIZAKI): reports 9M results with y/y revenue and operating income growth; to launch up to 2.5M-share buyback for up to ¥10.00B

    • +1.5% 4755.JP (Rakuten Group): transfers 14.99% stake in Rakuten Card to Mizuho Financial Group for ¥165.00B

    • +1.2% 8308.JP (Resona): reports H1 results with revenue and operating income growth y/y; to launch up-to-¥20B buyback

    • +0.9% Z74.SP (Singtel): reports H1 results; guides FY25 EBIT to grow low-double digits y/y vs prior guidance high-single to low-double digits

    • +0.9% 8035.JP (Tokyo Electron): reports H1 results ahead of guidance; raises FY outlook

  • Notable Decliners:

    • -17.5% 3659.JP (NEXON Co.): reports Q3 results below FactSet estimates; guides Q4 revenue ¥83.8-94.7B, (1%) - +12% y/y

    • -14.1% 010130.KS (Korea Zinc Co.): withdraws 3.7M-share public offering

    • -3.4% 2049.TT (HIWIN Technologies): reports Q3 results with revenue and operating income below FactSet estimates

    • -2.9% 9984.JP (SoftBank Group): reports Q2 earnings

    • -2.4% 220.HK (Uni-President China Holdings): reports 9M revenue CNY1.64B; StreetAccount notes year-ago figure was CNY1.47B; Goldman Sachs downgrades to neutral from buy

• Data:

  • Economic:

    • Japan October

      • CGPI +3.4% y/y vs consensus +2.9% and revised +3.1% in prior month

    • South Korea October

      • Unemployment rate 2.7% vs FactSet consensus 2.6% and 2.5% in prior month

    • Australia Q3

      • Wage price index +0.8% q/q vs consensus +0.9% and +0.8% in Q2

        • Wage price index +3.5% y/y vs consensus +3.6% and +4.1% in Q2

  • Markets:

    • Nikkei: (654.43) or (1.66%) to 38721.66

    • Hang Seng: (23.43) or (0.12%) to 19823.45

    • Shanghai Composite: 17.31 or +0.51% to 3439.28

    • Shenzhen Composite: 3.45 or +0.16% to 2119.77

    • ASX200: (62.20) or (0.75%) to 8193.40

    • KOSPI: (65.49) or (2.64%) to 2417.08

    • SENSEX: (658.31) or (0.84%) to 78016.87

  • Currencies:

    • $-¥: +0.55 or +0.36% to 155.1700

    • $-KRW: (3.14) or (0.22%) to 1404.9100

    • A$-$: (0.00) or (0.31%) to 0.6519

    • $-INR: +0.02 or +0.03% to 84.4079

    • $-CNY: (0.01) or (0.12%) to 7.2234