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StreetAccount Summary - Asian Market Recap: Nikkei (1.09%), Hang Seng +0.77%, Shanghai Composite (0.21%) as of 03:10 ET

Nov 18 ,2024

• Synopsis:

  • Asia equities ended mixed Monday. Greater China markets again were mixed as Shenzhen sold off sharply, the Shanghai Composite fell a handful of points, while the Hang Seng held on to a gain. Markets in Japan, Taiwan and India all lower, Australia and several Southeast Asia boards higher. South Korea a comfortable outperformer. US futures mixed, Europe slightly lower in opening trades. US dollar rally stalling, Asia currencies largely unchanged. Treasury yields higher. Crude oil contracts, precious and industrials better supported. Cryptocurrencies led by bitcoin above $91K.

  • Asia markets pulled around by local catalysts Monday without a firm regional direction. China benchmarks continued their recent volatility as stocks gained in the morning session following the CSRC release on Friday of guidelines to improve corporate valuations, but partly pared in the afternoon as recent worries over lack of constructive stimulus plans and potential new trade war with the US resurfaced. South Korea's Kospi led the gainers on market-supportive comments from the country's financial authorities and Samsung Electronics' share buyback plans. Japan's markets fell on read through from Nasdaq's selloff Friday and a strengthening in the yen late Friday. BOJ Governor Ueda said today bank will continue to normalize policy if price outlook is realized but was mindful of events in the US.

  • In macro developments, Japan machinery orders fell for a third consecutive month. Thailand's Q3 GDP growth bettered forecasts but the government is still likely to announce its next stimulus phase as soon as Tuesday. Singapore's non-oil exports for October disappointed as shipments from its volatile pharma sector contracted sharply. New Zealand PPI rose the most in two years in Q3.

  • Private equity group KKR made a second tender offer for Fuji Soft (9749.JP) for remaining stake it does not own, company's board urged not to negotiate further with Bain Capital. Alibaba (9988.HK) is aiming to raise around $5B in multi-tranche dollar and offshore China yuan bonds, according to reports. Country Garden (2007.HK) submitted debt restructuring plans to several creditors late last month including a revised cash flow projection, according to a Reuters report. Lotte Corp (004990.KS) denied speculation that it was experiencing a liquidity crisis, called the story "groundless". Samsung Electronics (005930.KS) said it would buy back around KRW 10T ($7.2B) in stock next year, KRW3T before Feb-25. James Hardie (JHX.AU) is considering an equity raise to fund M&A, according to media reports.

• Digest:

  • BOJ Governor Ueda reiterates policy normalization remains on track:

    • In a speech, BOJ Governor Ueda reaffirmed the core message that rate hikes will continue if the outlook projections are realized. Continued to emphasize that policy remains accommodative with real rates negative. Gradual policy adjustments will still support long-term growth and contribute to achieving the price stability target. Qualified the timing of rate moves will continue to depend on forward developments. Comments were broadly consistent with the latest Outlook Report. Private consumption remains a soft spot, though outlook supported by wage hikes. Observing inflation drivers shifting from cost-push to wage growth. Also briefly mentioned underlying inflation -- defined as trend inflation excluding special factors -- appears to be below 2% though still expected to reach the 2% target in FY26. US macro remains at the top of the list of external risk factors. Judgement to be made at each meeting, seemingly further promoting their data-dependent stance as a counter to some external perceptions that board members may have some predetermined timeframe in mind. Press played up attention on today's speech for potential signals for a December rate hike (Reuters). Recall that latest consensus polls continued to show forecasts split between December and January.

  • FX market still doesn't sense urgency on yen intervention from authorities:

    • Nikkei discussed precipitous yen weakness through midday Friday. Article noted market participants still don't see strong warnings from Japanese authorities, though this is partly explained by unfamiliarity of messaging nuances from the recent appointments of Finance Minister Kato and FX policy chief Mimura. Recalled Kato's comment Friday that authorities would take appropriate action against excessive movements, though impact was muted. Yen in the high-156 range marks the threshold that presaged intervention in April. Market viewed 157-160 zone as the actual trigger range. Yet, many believe authorities' tone remains soft considering current levels. Cited thoughts that former finance minister Suzuki's warning authorities "would not rule around any means" to respond was taken as a strong signal, while Kato has remained relatively quiet. Former FX chief Kanda issued verbal warnings on a daily basis in contrast to the so far sporadic rhetoric from Mimura. Story cited a MOF official noting the current situation posing difficulties in market communication. Cited market opinions that Trump's election win has raised the bar for intervention. MOF may also believe intervention would do little to combat broad dollar strength driven by expectations of higher import tariffs and permanent tax cuts.

  • CSRC vows to accelerate capital market reform as Stock Connect program turns ten:

    • SecuritiesTimes reported CSRC Chairman Wu Qing said at HKEX Connect Summit that China's securities regulator is accelerating new round of comprehensive capital market reform and opening. More measures will be introduced in areas such as market opening and cross-border investment facilitation. Added CSRC will create better environment for global investors to invest in Chinese market and work closely with Hong Kong authorities. Vice Chairman Li Ming added CSRC will expand scope of eligible stocks under mainland-Hong Kong Stock Connect, broaden channels for onshore companies to list overseas, and increase openness in futures market. Aims to support introduction of more cross-border ETFs. Bloomberg recapped Stock Connect's ten years of history and noted investors are eyeing access to primary market. Noted program now accounts for almost 7% of mainland daily turnover and as much as 17% of Hong Kong's, covering 43% of available stocks and 90% of market capitalization of the three bourses.

  • Kospi surges on authorities plan to improve corporate valuations, Samsung buyback plans:

    • South Korea Kospi opened more than 2% higher Monday after country's financial supervisory service, Korea Exchange and several financial institutions said recent stock market selloff was excessive given economic fundamentals, vowed to implement policy fund to raise domestic companies' valuation (Yonhap). BOK Governor Rhee also said bank would take 'sufficient and instant' steps to counter market jitters, illegal trading. Kospi supported further by Samsung Electronics (005930.KS) that said it would buyback around KRW10T ($7.2B) over next year; stock up almost 7.0% this morning to add to gains Friday on reports it would spend KRW3T until Feb-25 before deciding on additional deployment strategy. Follows sustained period of stock underperformance amid AI chip struggles (Bloomberg). Kospi reached 52-week low last week on concerns of potential Trump trade tariffs, which also sent won to two-year low. Comes amid fresh economist warnings won could fall further as pressure builds from foreign investor selling, rising Treasury yields (Bloomberg).

  • China activity data seen as encouraging, but questions over sustainability:

    • Economist takeaways from the October activity data were broadly positive, highlighting strength in retail sales and services activity. However, they were unconvinced of the sustainability in underlying growth momentum. Upside surprise in retail sales was mainly explained by policy support from the trade-in program. Consumer demand was also supported by the Singles' Day campaign. Both factors prompted some concerns that demand is being front-loaded, posing the risk of subsequent payback. Official YTD real estate investment figures implied a notable improvement in October in the wake of property support measures. But this could also prove temporary if the pattern following prior rounds of policy announcements continues to hold with housing market sentiment still apparently weak. Moreover, encouraging signs are still patchy when taking stock of the broader set of October data, recalling the disappointments from inflation and credit. GDP forecast implications were limited, though the October data provided a positive start to Q4. Optimists were confident there is enough momentum to sustain Q4 growth to meet the government growth target of about 5% for 2024. Yet, some noted the lack of stronger household stimulus and tariff headwinds from the incoming Trump administration reinforce expectations of slower growth in 2025.

  • Notable Gainers:

    • +6.0% 005930.KS (Samsung Electronics): board approves KRW10T buyback program, to run over next 12 months

    • +5.5% 7453.JP (Ryohin Keikaku): announces three-year rolling plan FY25-27; targets average annual growth rate of 10% in operating revenue

    • +4.6% 9749.JP (Fuji Soft): KKR to launch second tender offer for remaining stake in Fuji Soft at ¥9,451/share; Fuji Soft fully supports KKR's offer and urges the board not to make further negotiation with Bain

    • +3.9% 1055.HK (China Southern Airlines): reports October traffic +16.2% y/y

    • +3.4% 373220.KS (LG Energy Solution): signs MoU with Bear Robotics to exclusively supply cylindrical batteries

  • Notable Decliners:

    • -10.9% 3191.JP (Joyful Honda): to hold underwritten secondary offering of 7.5M shares

    • -7.3% 8304.JP (Aozora Bank): reports Q2 results with net interest income of ¥12.6B; StreetAccount notes the year-ago figure was ¥13.1B

    • -6.6% 004990.KS (Lotte Corp): Lotte Group reportedly experiencing liquidity issues; Lotte Shopping and Lotte Chemical state the rumors are groundless

    • -0.9% 9988.HK (Alibaba Group): reports Q2 results with revenue and adjusted EBITDA below FactSet estimates

• Data:

  • Economic:

    • Japan

      • September core machinery orders (0.7%) m/m vs consensus +1.5% and (1.9%) in prior month

        • Q4 survey projection +5.7% q/q vs actual (1.3%) in prior quarter

    • Singapore

      • October non-oil exports (4.6%) y/y vs revised +0.90% in prior month

        • Non-oil exports (7.4%) m/m vs consensus +2.3% and (0.6%) in prior month

  • Markets:

    • Nikkei: (422.06) or (1.09%) to 38220.85

    • Hang Seng: 150.27 or +0.77% to 19576.61

    • Shanghai Composite: (6.88) or (0.21%) to 3323.85

    • Shenzhen Composite: (43.83) or (2.18%) to 1966.78

    • ASX200: 15.00 or +0.18% to 8300.20

    • KOSPI: 52.21 or +2.16% to 2469.07

    • SENSEX: (241.75) or (0.31%) to 77338.56

  • Currencies:

    • $-¥: +0.36 or +0.23% to 154.7020

    • $-KRW: +2.07 or +0.15% to 1397.1700

    • A$-$: (0.00) or (0.11%) to 0.6455

    • $-INR: (0.08) or (0.09%) to 84.3985

    • $-CNY: +0.01 or +0.19% to 7.2437