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StreetAccount Summary - Asian Market Recap: Nikkei +0.51%, Hang Seng +0.44%, Shanghai Composite +0.67% as of 03:10 ET

Nov 19 ,2024

• Synopsis:

  • Asian equities ended higher across the region Tuesday although most were off their highs by the close. More than 1% gains for Shenzhen, India's Sensex and Taiwan boards; solid gains for Australia and Shanghai's main board. Hang Seng also ended higher for a second day, Southeast Asia also up. US futures higher, Europe opened with gains. US dollar flat, Asia currencies largely unchanged. Treasury yields down at the long end, higher at the short. Crude off overnight highs, precious metals supported again on the weaker dollar, base metals mixed.

  • A quiet day in Asia with no meaningful catalysts to change the narrative or market direction thus benchmarks continued yesterday's momentum higher, supported by a positive end on Wall Street overnight and higher futures today. US markets Monday buoyed by lower Treasury yields, which has given some relief to Asia investors via a marginally weaker US dollar, with several analysts suggesting the 'Trump trade' was showing signs of stalling. China markets continue to underperform despite the main Hong Kong and Shanghai boards trading higher today, with brokers turning increasingly cautious over next year's outlook.

  • Mitsui OSK (9104.JP) and Kansai Electric Power (9503.JP) signed a MoU for the joint study of a liquified hydrogen carrier. Sony Group (6758.JP) is in talks to buy Kadokawa Corp (9468.JP) with a deal potentially to be signed within a few weeks. Alibaba (9988.HK) said its US dollar bonds will be priced between Treasuries plus 90bp and Treasuries-plus 130 bp; its offshore yuan tranche will be priced between 2.9% and 3.8%. Xiaomi (1810.HK) said it would deliver 130K EVs this year, raising its forecast for the third time following a more than 30% increase in Q3 revenue. Minor International (MINT.TB) said it plans to halve more than $7B in liabilities by listing a REIT next year and relying on a tourism recovery to drive profit growth.

• Digest:

  • Markets saw Ueda's speech lacking December rate hike signal:

    • Nikkei discussed BOJ Governor Ueda's speech on Monday that largely repeated prior remarks. While Ueda did not rule out a December rate hike, debate revolved around whether the repetition of prior language was enough to constitute a policy signal. Noted the key line that MPC would evaluate incoming data at each meeting (which seemed to leave the door open for a December move) was not new. Also, another comment that timing of the next move would depend on future developments stuck to the October Outlook Report and phrasing did not strengthen. Cited a couple of takeaways from domestic institutions that Ueda's latest rhetoric did not signal a December hike, and if anything, seemed to indicate reluctance. Money markets implied a 52% probability of a December hike, consistent with earlier consensus polls showing an almost even split between December and January. However, latest monthly QUICK FX survey (n=73) conducted Nov 11-13 found proportion looking for no change in December rose to 67% (prior reading not mentioned) citing difficulties in laying the groundwork for a rate hike with the budget formulation process under way. Political schedule has been a key factor behind expectations for a January move. To be sure, market narrative has shifted with USD/JPY price action, where the latest retreat away from the 160-range seen in the summer led to perceptions that BOJ is in no hurry to move.

  • RBA weighs different scenarios that would warrant change in policy settings:

    • November RBA minutes showed board members had saw no immediate need to change cash rate but recognized importance of being ready to adjust as economic conditions evolve. Minutes devoted section to scenario discussions, with one assumption involving weaker-than-forecast consumption lowering inflation significantly, which would warrant rate cut. Sharper easing of labor market would also warrant looser policy. However, stronger-than-expected consumption recovery might require rates to remain higher for longer while materially more limited supply capacity would necessitate tighter policy stance. Board reiterated minimal tolerance more prolonged period of inflation and remains vigilant to upside risks. Also considered potential for rate cut if inflation declines materially more quickly than forecast but this would require more than one good quarterly CPI print to give board confidence on disinflation sustainability. Affirmed policy needs to remain sufficiently restrictive until inflation is moving sustainably to target but may also need to be adjusted if current settings not as restrictive as judged.

  • Strategists bearish on yuan, but extent of depreciation may depend on PBOC, stimulus:

    • China's yuan under pressure in weeks leading up to and following 5-Nov US election with onshore and offshore rates down ~3% against dollar from September highs to weakest in almost four months. Strategists bearish on outlook for yuan amid prospect of Trump tariffs and shallower Fed easing cycle widening US-China yield gap. USDCNY forecasts from UBS, HSBC and Goldman Sachs for 2025 range from 7.40-7.60, implying 2-5% downside from current levels. Still, degree of yuan weakness may hinge on PBOC's tolerance for depreciation amid thoughts it will stop short of full offset given capital outflow risks, as well as desire for FX stability and RMB internationalization. Lot of unknowns around ultimate tariff rate, and implementation timeline (Goldman Sachs expects US to impose average tariff rate of 20%, most or all to occur in H1 2025). Extent of China policy support another potential offsetting factor amid thoughts more forceful fiscal stimulus will reduce drag on GDP growth and blunt yuan depreciation.

  • Foreign investors pile into IPOs in India for better returns as selling in secondary market continues:

    • Foreign investors' primary market purchases in India, including IPOs and preferential share sales, hit $11.5B YTD, surpassing previous record set in 2021 and more than double the amount in 2023 (Bloomberg). This came as they are pulling record sums from India's secondary market, offloading more than $13B from Mumbai bourses and sending Nifty 50 into correction. Analysts said new share offerings are generating returns at much faster pace while selloffs in secondary market driven by elevated valuations. Added IPOs have risen by average of 24% on debut trading day. Meanwhile Nifty 50 still trading near 20X forward PE after 10% drop from September peak, among most expensive globally. Still high-profile IPOs, including Hyundai Motor India (544274.IN) and Ola Electric Mobility (544225.IN), have struggled. Over the weekend, CLSA strategists said under-ownership of Indian stocks by foreign investors gives India an edge over EM peers and country presents a buying opportunity.

  • Key headwinds keeping Japan equities rangebound:

    • Nikkei distilled market headwinds into three main themes keeping Nikkei 225 in the 38K~40K range. (1) US 10-year yield reached the highest level since June after the retail sales beat and latest comments from Fed chair Powell indicating no rush to cut rates. Higher yields adversely impacting valuations, prompting more selling in high-PER US stocks. Fourth straight decline in Nasdaq also weighing on tech stocks in Tokyo. Trump effects had encouraged expectations of higher inflation and share prices, though latter has started to lag following last week's pullback in Trump trades. (2) Uncertainties surrounding Trump tariff policies hanging over Japanese exporters. (3) Japan earnings season has largely concluded, and profit growth has fallen short of market expectations. Yet, neither has financial performance offered much reason to sell. Attention has turned to Nvidia (NVDA) results due Wednesday as a barometer of AI growth, particularly sales of Blackwell GPUs, where a surprise could prompt equities to break out of the recent range. Earlier market discussions also noted concerns about intensified US-China frictions weighing on the market.

  • Notable Gainers:

    • +23.0% 9468.JP (Kadokawa): Sony reportedly in discussions to buy Kadokawa

    • +5.7% 9961.HK (Trip.com Group): reports Q3 earnings ahead of StreetAccount estimates

    • +5.0% 097950.KS (CJ CheilJedang): reportedly preparing to sell bio business, which could be sold for more than KRW6T

    • +4.7% 6594.JP (Nidec): SMCI announces BDO USA as new independent auditor and files compliance plan with Nasdaq

    • +2.0% BN4.SP (Keppel): secures control over the 13 legacy rigs held by Rigco Holding; Keppel JV to divest two AI-ready hyperscale centre to Keppel DC REIT for SG$1.38B

    • +2.0% 4666.JP (Park24): reports October Japan Times PARKING net sales ¥15.15B, +11.3% y/y

    • +0.2% 941.HK (China Mobile): reportedly looking at buying HKBN for at least HK$5/share

    • +0.2% 271560.KS (ORION Corp (Korea)): reports October net revenue KRW270.2B

    • +0% 002352.CH (S.F. Holding): sets indicative range of 170M-share Hong Kong IPO at HK$32.3-36.3/share; reports October revenue CNY24.10B vs year-ago CNY20.74B

  • Notable Decliners:

    • -3.8% 7832.JP (BANDAI NAMCO Holdings): Sony reportedly in discussions to buy Kadokawa

    • -3.3% 4503.JP (Astellas Pharma): FDA issues complete response letter for Astellas Pharma's IZERVAY sNDA

    • -1.6% 1810.HK (Xiaomi): shares fall despite the company reporting Q3 earnings ahead of FactSet estimates

    • +0.0% 002352.CH (S.F. Holding): sets indicative range of 170M-share Hong Kong IPO at HK$32.3-36.3/share; reports October revenue CNY24.10B vs year-ago CNY20.74B

• Data:

  • Economic:

    • No economic data today

  • Markets:

    • Nikkei: 193.58 or +0.51% to 38414.43

    • Hang Seng: 87.06 or +0.44% to 19663.67

    • Shanghai Composite: 22.16 or +0.67% to 3346.01

    • Shenzhen Composite: 43.08 or +2.19% to 2009.86

    • ASX200: 73.80 or +0.89% to 8374.00

    • KOSPI: 2.88 or +0.12% to 2471.95

    • SENSEX: 1,002.84 or +1.30% to 78341.85

  • Currencies:

    • $-¥: (0.17) or (0.11%) to 154.4970

    • $-KRW: (0.95) or (0.07%) to 1391.0600

    • A$-$: +0.00 or +0.06% to 0.6511

    • $-INR: +0.01 or +0.01% to 84.4155

    • $-CNY: +0.00 or +0.05% to 7.2404