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StreetAccount Summary - Asian Market Recap: Nikkei (0.48%), Hang Seng (1.96%), Shanghai Composite (1.73%) as of 03:10 ET

Nov 14 ,2024

• Synopsis:

  • Asian equities ended largely lower Thursday as risk-off sentiment continued. Equities in Japan, Greater China, Taiwan, India and most of Southeast Asia all lower; small gains in Australia, Singapore and South Korea. US futures trending lower, Europe opened with small gains. US dollar higher again but off earlier peaks; yen, yuan, AUD and other Asia currencies all under pressure with several central banks said to be intervening to support local forex. Treasury yields higher across tenors, JGB yields higher, CGB yields found a base. Crude oil under pressure, precious metals led lower by silver as gold hits key support level; iron ore and copper leading base metals lower.

  • Asia markets continue to be driven lower by emerging market risk-off sentiment post Trump's election win. Dollar at highs last seen in November 2023 after Trump appointed more China-hawks to his cabinet, and as concerns grow over the impact of tariffs on inflation and regional trade. Treasury yields higher again today in Asia trading alongside the dollar to increase pressure on regional currencies. Central banks in South Korea and Indonesia today warned on forex volatility, which added to likely RBI support of the rupee and PBOC's 'managed' weakening of the yuan. No word from Japan's finance ministry on yen support despite USDJPY falling to four-month low.

  • In macro developments, Australian employment data showed larger-than-expected moderation in headline jobs growth and unchanged unemployment rate. India wholesale inflation in October increased rose to four-month highs, adding to spike in consumer inflation earlier this week. China tech earnings continue with JD.com reporting later Thursday, Tencent beat on bottom line on gaming growth with management also talking up capital return amid strong FCF generation.

  • South Korea's regulator will continue its probe into Korea Zinc (010130.KS) despite the company withdrawing its offer to issue shares. Kia Corp (000270.KS) said it expects challenging market conditions in the near term in part because of government policies. State Bank of India (500112.IN) and HDFC Bank (500180.IN) will need to maintain an additional capital buffer starting in April 2025 to reflect their systematic risk. Apple supplier Foxconn (Hon Hai, 2317.TT) said reported a 14% increase in Q3 net profit, driven by AI server demand, beating consensus estimates.

• Digest:

  • China better equipped to fight a trade war with Trump this time:

    • FT discussed academic and consultancy views on how China might respond if Trump reignites a trade war. Beijing is now thought to have powerful countermeasures after having been caught off-guard during Trump's first term. Specified the anti-foreign sanctions law and the unreliable entity list. Expanded export control law could be used to weaponize its global dominance in the supply of resources such as rare earths and lithium that are crucial to modern tech. Recent actions described as warning shots -- Skydio sanctions and a threat to add PVH (PVH) to the unreliable entity list -- amid concerns that China country risk is underestimated. On China's part, Trump's campaign threat to impose blanket 60% tariffs on all Chinese imports looms large, especially given the sluggish economy. Beijing University suggested China expected to be open to more direct investment in US manufacturing or shift more output to countries acceptable to the US. A former US trade official said Beijing had been surgical in their response to avoid further eroding international investment sentiment. But that could change if they see 60% tariffs or real hawkish intent by the Trump administration. Still, some believe China countermeasures would do more harm than good to its economy. Possible silver lining that frayed trade relations between US and other countries would drive them toward China.

  • Yen weakens further on US yields, market sees notable Japan-US policy interdependencies:

    • Nikkei discussed latest yen declines now at a four-month low 156 level vs dollar. Main driver remains US yields, where overnight increase was seen as a reflection of Trump fiscal policy expectations outweighing an in-line CPI that cemented a December Fed rate cut (25 bp now 80% priced in). Also exacerbated by confirmation of a Republican sweep. Article cited thoughts the latest yen moves were driven by speculators given most of the selling came in the New York session while corporates are currently cautious. Also noted doubts that Japan would intervene now to avoid US backlash with Trump expected to narrow down his short-list of candidates for Treasury Secretary as early as this week. Latest Nikkei QUICK BOJ Watchers poll (n=25) showed rate hike calls still split between December (12) and January (11). Most of the article was devoted to Japan-US policy interdependencies. Strong majority saw Trump administration affecting Fed policy via inflation implications which would limit scope for further easing. Similarly, majority saw US politics impacting BOJ policy, where continuation of yen depreciation would further encourage policy normalization, though implications would reverse if the US economy lost steam. Domestic political uncertainties also two-sided. Minority government requires support from opposition parties to pass legislation and they have explicitly opposed rate hikes. But they are also calling for stronger fiscal stimulus, which would add to inflation pressure.

  • Emerging Asia currencies dip again as authorities step up warnings over intervention:

    • Emerging Asia currencies slipping further Thursday in response to US dollar reaching one-year high as concerns mount over potential Trump tariffs that could spark another inflationary round, damage regional trade. Dollar surged overnight as confirmation of Republican trifecta emerged and US posted higher m/m CPI (Reuters). Losses greatest today in Thai baht, which is highly sensitive to yuan, over-valued on trade-weighted basis (Bloomberg). Won again under pressure, prompting warning from South Korea finance ministry it would take 'active steps' to address excessive volatility (Yonhap). BOK Governor Rhee also warned forex re-emerged as major factor in rate decisions (Yonhap). RBI and state-run banks known to be active in stabilizing rupee, although not enough to prevent it reaching record low. Yuan also continued to weaken , now at five-month low as analysts speculate PBOC allowing currency to devalue but at measured pace (Bloomberg).

  • Australian unemployment rate unchanged, RBA Governor Bullock says policy to stay restrictive:

    • Australian economy added 15.9K jobs in October, smaller than consensus 25.0K and September's 61.3K gain. Lowest monthly job gain since March and first miss in seven months. Driven by 9.7K increase in full-time positions and 6.2K increase in part-time jobs. Unemployment rate unchanged at 4.1% as expected, corresponding with participation rate slipping to 67.1% from 67.2%. Indicators of labor market slack tightened with underemployment rate falling to 6.2% from 6.3%, lowest since Apr-2023. Growth in monthly hours worked rose to 2.5% from 2.4%, a 13-month high. Overall, data appeared consistent with RBA's observations of persistent labor market tightness after central bank last week noted signs labor market loosening has stalled. Participating in a panel discussion earlier, RBA Governor Bullock said policy is currently restrictive enough and will remain there until central bank believes demand is on a downward trajectory (Investing.com). RBA expected to leave policy unchanged in December and markets not fully pricing in rate cut until mid-2025.

  • Some potentially bullish signals for China equities:

  • • China equities volatile in the weeks leading up to and following US election, with Trump's win (and threat of tariffs), and stimulus disappointment among main factors attributed for the underperformance. Still, some sentiment metrics indicative of a more favorable setup for equities compared to past downturns. Bloomberg noted Shanghai and Shenzhen turnover has remained above CNY2T for seven straight sessions, a record streak. Comes after mainland indexes experienced record turnover throughout October following September's policy pivot. Risk sentiment among retail traders remains elevated with outstanding margin trades having risen to highest since 2015. Correspondingly, household savings fell by CNY570B in October, biggest since April. Meanwhile, 6.8M new trading accounts were created last month, highest monthly total since Jun-2015. Technical momentum also intact with ~90% of CSI 300 index constituents trading above 200D MAs, around highest since Jul-2020 and Apri-2019

  • Notable Gainers:

    • +13.8% 137310.KS (SD Biosensor): launches KRW30.00B buyback

    • +7.0% 505200.IN (Eicher Motors): reports Q2 results with net profit ahead of StreetAccount estimates

    • +5.9% 3923.JP (RAKUS Co.): reports H1 results; raises FY guidance

    • +5.8% 139480.KS (E-Mart): reports Q3 earnings with revenue ahead of FactSet estimates

    • +5.6% 6669.TT (Wiwynn): reports Q3 earnings ahead of FactSet estimates

    • +3.8% 000150.KS (Doosan): initiated buy at Citi with KRW330,000 target price

    • +0.2% 700.HK (Tencent Holdings): reports Q3 earnings with adjusted net income and non-IFRS operating profit ahead of FactSet estimates

  • Notable Decliners:

    • -18.5% 9503.JP (The Kansai Electric Power): launches 148.3M public offering; conducts secondary offer of 29.1M for holder Nomura Securities

    • -18.2% 4527.JP (Rohto Pharmaceutical Co.): reports H1 earnings, operating income down (15%) y/y

    • -3.4% 7735.JP (SCREEN): applies for extension of submission deadline of interim securities report until 14-Jan-25

    • -2.9% 532779.IN (Torrent Power): reports Q2 results; EPS declines y/y

    • -1.1% 175.HK (Geely Automobile Holdings): reports Q3 earnings; net income attributable in line with FactSet estimates

• Data:

  • Economic:

    • Australia

      • October employment +15.9K m/m vs consensus +25.0K and revised +61.3K in September

        • Unemployment rate 4.1% vs consensus 4.1% and 4.1% in September

        • Participation rate 67.1% vs consensus 67.2% and 67.2% in September

  • Markets:

    • Nikkei: (185.96) or (0.48%) to 38535.70

    • Hang Seng: (387.64) or (1.96%) to 19435.81

    • Shanghai Composite: (59.44) or (1.73%) to 3379.84

    • Shenzhen Composite: (59.54) or (2.81%) to 2060.23

    • ASX200: 30.60 or +0.37% to 8224.00

    • KOSPI: 1.78 or +0.07% to 2418.86

    • SENSEX: (62.06) or (0.08%) to 77628.89

  • Currencies:

    • $-¥: +0.26 or +0.17% to 155.7480

    • $-KRW: (5.66) or (0.40%) to 1400.0500

    • A$-$: (0.00) or (0.16%) to 0.6477

    • $-INR: (0.03) or (0.03%) to 84.4047

    • $-CNY: +0.01 or +0.17% to 7.2369