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StreetAccount Summary - Asian Market Recap: Nikkei +0.28%, Hang Seng (0.05%), Shanghai Composite (1.45%) as of 03:10 ET

Nov 15 ,2024

• Synopsis:

  • Asian equities ended mixed Friday to cap a poor week for the region's financial assets. Mainland China equities fell steeply despite promising October economic data, Hang Seng drifted lower to close flat. Australia and Japan boards ended higher, South Korea was slightly lower despite a bright opening, Taiwan edged higher. Southeast Asia was mixed. India closed for a holiday. US futures slightly lower, European bourses in the red in opening trades. US dollar with more gains, AUD and NZD finding a base after multi-month lows yesterday, yen and yuan quiet. Treasury yields higher, JGBs mixed. Oil under pressure with WTI below $70 per barrel. Precious metals resuming recent slide, base metals mixed on China data.

  • Asia stocks failing to find a floor Friday and endured a directionless session although the MSCI Asia Pac ex Japan index did end marginally in the black. However, for the week, all the region's main boards finished in the red, led lower by the Hang Seng and Kospi indexes. China markets responded well at first to activity data that showed retail sales growth popped higher in October while beating expectations, but was offset by a slowdown in industrial output growth and property investment dipped further. House prices also slid again albeit at a decelerated pace.

  • Earnings from China majors have been mixed, adding to the volatility on the Hang Seng, with JD.com on Thursday reporting tepid revenue growth amid ongoing consumer caution. On Wednesday, Tencent beat on bottom line with management talking up capital return. Alibaba set to report later Friday. Elsewhere, Japan Q3 GDP growth slowed in-line with forecasts, consumption surprising higher. Malaysia Q3 GDP growth in-line with early estimate with central bank declaring country was well placed to absorb period of volatility. Thailand set to deploy further fiscal stimulus to sustain growth momentum; Indonesia's central bank intervened to support its currency just as its trade surplus disappointed.

  • JD.com (9618.HK) net income grew 48% in Q3 but missed estimates as consumption weakness in the China economy continued. A second activist investor, Oasis, has bought a 6% stake in Nissan Motor (7201.JP) just as a report emerges that it has a year before hitting a bond maturity wall. BHP's (BHP.AU) CEO said soaring demand for copper will likely drive mergers between mining groups. LG Display (034220.KS) is to invest an additional $1B into its Vietnam-based Haiphong plant, according to a local government source. Samsung Electronics (005930.KS) and its largest labor union reached a preliminary agreement on a pay increase that could end a damaging strike. India product certification agency is to investigate Ola Electric (544225.IN) over service standards and product issues following more than 10K complaints.

• Digest:

  • China activity data mixed, retail sales a notable bright spot:

    • Among the October activity data, main surprise came in retail sales, up 4.8% y/y vs consensus 3.6%. Followed 3.2% in the previous month, marking the strongest growth since the start of the year. Similar growth in ex-autos goods sales, outpacing catering, came as a sign of underlying strength. Big jump in household appliances/AV equipment amid the government trade-in program. Cosmetics also surged, followed by leisure products and communication devices. Autos grew moderately. Building materials fell reflecting ongoing housing market slump. Other headlines were little changed. Industrial production rose 5.3%, below consensus 5.6%, following 5.4% in September. Main growth areas were NEVs, industrial robots and integrated circuits. Broader passenger cars category fell, while smartphones and PCs logged single-digit growth. Fixed asset investment growth remained steady at 3.4% YTD, just below consensus 3.5%. Infrastructure slowed to 4.3% from 4.9%. Real estate declines unexpectedly deepened to 10.3% vs consensus 9.9% and prior 10.1%. Housing sales continued to show mild easing in pace of declines. New construction starts remained down more than 20%. Unemployment rate ticked down to 5.0% vs consensus and prior month's 5.1%. NBS remarked that stimulus continued to show results.

  • China new home prices fall at slower pace m/m in October:

    • New home prices in China were down 0.5% m/m in October based on Reuters calculations of NBS data, slower from 0.7% decline in prior month. Prices have fallen for the 16th consecutive month. In annual terms, new home prices were down 5.9% y/y, compared with September's 5.8% drop. It was the steepest pace since 2015. 63 out of 70 cities monitored by NBS reported m/m price drop in new home prices, compared with 66 in September. 60 cities reported m/m drops in second-home prices in October, compared with all 70 cities were down in prior month. Bloomberg noted value of these homes fell 0.48% m/m, least in more than a year. Top-tier cities including Beijing, Shanghai and Shenzhen all reported higher second-home prices from previous month, indicating some improvements amid China's stimulus push. Meanwhile Patheon Macroeconomics economist noted despite top-tier cities' bottoming out, broader property market recovery is conditional on improving economic outlook.

  • Japan Q3 GDP slightly beats, led by private consumption:

    • Q3 GDP expanded 0.9% q/q annualized, marginally above consensus 0.7%. Follows 2.2% in prior quarter, revised down from 2.9%. Details were somewhat mixed. Main upside surprise came in private consumption led by durable goods, despite employee compensation coming in flat. However, capex and particularly net external demand were unexpected drags. Nominal growth slowed notably though remained positive. GDP deflator eased to +2.5% y/y from prior +3.1%, while domestic demand deflator edged down to +2.3% from +2.6%. Recall that private demand expectations were subdued amid negative real wage growth and typhoon effects/labor shortages. Latest JCER consensus report published Wednesday continued to show GDP growth momentum expected to settle at around the 1% trend. But Q4 seen temporarily picking up to 1.41% from an estimated 1.00% in Q3. Feature topic highlighted strong expectations for the new minority government to focus on wage hikes and cost-of-living relief. Recall latest reports indicated government considering JPY30K handouts to low-income households exempt from residence tax and additional JPY20K per child. Another round of electricity and gas subsidies expected to come into effect January through March. No meaningful progress yet on acceleration of minimum wage hikes. Attention now on LDP-Komeito negotiations with opposition parties on the stimulus package, particularly amid calls to lift the personal income tax-free threshold.

  • US Treasury FX monitoring list mostly unchanged, Japan intervention transparency prevents stronger scrutiny:

    • US Treasury Department published its semiannual report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. Monitoring List remained mostly unchanged and still includes China and Japan. Reiterated calls for increased transparency from China, particularly on intervention activity. Rigorous country analysis continued to scrutinize inconsistencies in balance of payments data and suggested monthly changes in PBOC FX assets do not fully capture intervention methods. Echoed concerns about China's economic imbalances and inadequate support for household consumption while authorities are doubling down on supply-side measures aimed at supporting certain priority industries. On Japan, report concurred yen appreciation between 29-Jul and September-end partly reflected abrupt shift in market expectations for US-Japan rate differentials on the back of softer US economic data in July. Combined with unwinding yen carry trades and sharp selloff in US-Japan equities on 5-Aug, though turbulence quickly reversed thereafter. Noted MOF's disclosure of intervention operations and acknowledged Japan's transparency. Reiterated caution that intervention should be reserved only for "very exceptional circumstance with appropriate prior consultations."

  • Japan earnings falling short of consensus estimates:

    • Bearish tilt in Nikkei's round-up of earnings results, noting 59% came in below market consensus. Still, running tally as of 14-Nov showing fiscal H1 revenues up 5.0% y/y and net profits up 11.2%, both tracking ahead of FY projections pointing to 2.6% sales growth and 0.3% decline in profits. Autos were the standout with 12 out of 13 names including Toyota (7203.JP) missing forecasts amid sluggish China macro and stronger competition in US. Idiosyncratic factors combining with broader cost pressures. Trading houses weighed down by lower commodity prices. Bright spots featured pharmas on the back of strong sales of signature drugs. Electric machinery sector mixed with AI exposure the key divide. Megabank takes were broadly positive after all posted record net profits and upgraded guidance (Nikkei). Attention shifted to deal activity after previews had played up overseas business. Some 70% of regional banks logged better profits and half of them raised FY guidance, albeit some caution towards elevated corporate bankruptcies (Nikkei). Private railway operators mostly upgraded FY guidance on the back of inbound tourism fueled by weak yen (Nikkei). But sector sensing a peak in post-pandemic recovery and attention turning to real estate as the next growth driver.

  • Notable Gainers:

    • +12.8% 7181.JP (JAPAN POST INSURANCE): reports H1 results and raises FY guidance; to launch up-to-¥35.00B buyback

    • +11.6% 9999.HK (NetEase): reports Q3 results; games and related value-added services segment revenue ahead of StreetAccount estimates

    • +8.1% 293.HK (Cathay Pacific Airways): proposes to buy back HK$6.74B 2.75% guaranteed convertible bonds due 2026

    • +6.6% 8411.JP (Mizuho Financial): reports H1 results and raises FY guidance; to conduct buyback for up to ¥100.00B

    • +5.9% M04.SP (Mandarin Oriental International): issues Q3 management statement; revPAR increased y/y across all regions

    • +4.5% 7201.JP (Nissan Motor): Oasis Management reportedly owns stake in Nissan

  • Notable Decliners:

    • -14.6% 4324.JP (Dentsu Group): reports Q3 earnings; lowers FY underlying operating profit guidance

    • -12.1% 373220.KS (LG Energy Solution): Trump transition team reportedly plans to cancel Biden's $7,500 EV tax credit as part of broader reforms

    • -5.5% 175.HK (Geely Automobile Holdings): acquires additional 11.3% stake in ZEEKR from controlling shareholder Geely Holding for $806.1M (CNY5.84B) cash

    • -4.7% 4612.JP (Nippon Paint Holdings): reports Q3 results below FactSet estimates

    • -2.2% 9618.HK (JD.com): reports Q3 earnings with revenue below FactSet estimates

• Data:

  • Economic:

    • China October

      • Industrial production +5.3% y/y vs consensus +5.6% and +5.4% in prior month

        • Retail sales +4.8% y/y vs consensus +3.6% and +3.2% in prior month

        • Fixed asset investment (YTD) +3.4% y/y vs consensus +3.5% and +3.4% in prior month

        • Unemployment rate 5.0% vs consensus 5.1% and 5.1% in prior month

    • Japan Q3

      • GDP +0.9% q/q annualized vs consensus +0.7% and revised +2.2% in prior quarter

        • GDP +0.2% q/q vs consensus +0.2% and revised +0.5% in prior quarter

  • Markets:

    • Nikkei: 107.21 or +0.28% to 38642.91

    • Hang Seng: (9.47) or (0.05%) to 19426.34

    • Shanghai Composite: (49.11) or (1.45%) to 3330.73

    • Shenzhen Composite: (49.62) or (2.41%) to 2010.61

    • ASX200: 61.20 or +0.74% to 8285.20

    • KOSPI: (2.00) or (0.08%) to 2416.86

    • SENSEX: 0.00 or 0.00% to 77580.31

  • Currencies:

    • $-¥: (0.58) or (0.37%) to 155.6940

    • $-KRW: (12.35) or (0.88%) to 1393.6900

    • A$-$: +0.00 or +0.06% to 0.6459

    • $-INR: (0.04) or (0.05%) to 84.4305

    • $-CNY: (0.00) or (0.03%) to 7.2281