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StreetAccount Summary - Asian Market Recap: Nikkei (0.16%), Hang Seng +0.21%, Shanghai Composite +0.66% as of 03:10 ET

Nov 20 ,2024

• Synopsis:

  • Asian equities mixed in lackluster Wednesday trade. Greater China outperformed with mainland gaining more than Hong Kong. Korea higher too. Taiwan, Australia and Japan all lower. India closed for Maharashtra Assembly Election. Southeast Asia mixed. US futures higher. Treasury yields higher across tenors. Yen weaker against dollar. Crude higher while gold edging down after rebounding earlier. Bitcoin higher.

  • Investors are looking to Nvidia's (NVDA) results later today to gauge the sustainability of AI rally as many see it as bellwether of tech sector. Sentiments also turned more cautious amid renewed escalation in Russia-Ukraine war as Kyiv launched US-made long-range missiles into Russia for the first time. Moscow lowered the threshold for using nuclear weapons on Tuesday.

  • Chinese banks held 1Y and 5Y LPRs unchanged as expected following October's 25 bp cuts. Japan export growth turned positive in October following first negative read in 10 months in September, with rebound driven in part by semiconductor equipment. China-bound exports recovered, though demand in US/EU fell. IMF cut South Korea's growth outlook in 2025 from 2.2% to 2.0% amid trade headwinds. Philippine central bank governor said weak growth may spur rate cut but pause in December cannot be ruled out yet.

  • Tokyo Gas (9531.JP) shares jumped the most since 1987 as Elliott Investment Management disclosed 5.03% stake. Seven & i (3382.JP) shares reached record highs after founding family reportedly looking to complete buyout by end of FY. Sony (6758.JP) rallied alongside a limit-up spike in Kadokawa (9468.JP) following news that Sony is discussing an acquisition deal to bolster its content portfolio. Alibaba (9988.HK) issued first public dollar bonds since 2021 to repay offshore debt and share buybacks. China Mobile (941.HK) in talks on potential acquisition of HKBN (1310.HK)

• Digest:

  • China LPRs unchanged, mounting liquidity demand stimulating easing expectations via other policy tools:

    • LPRs were steady as widely expected with 1-year at 3.10% and 5-year at 3.60%. Reuters poll (n=28) showed unanimous expectations for no change. Forecasters mainly cited the recent rate cuts as part of a raft of policy support measures and were skeptical of further easing for now. Recall LPRs were cut 25 bp last month, more than expected and at the top end of PBOC Governor Pan's guidance range. Trump effects also permeating into China rate policy as higher US yields pressure yuan to limit scope for easing, adding to constraints from banking sector NIM compression. Furthermore, market watchers suspect PBOC inclined to save policy bullets until Trump takes office in January and US policies become clearer. Easing talk has diminished since the latest round of measures. However, takeaways recalled Governor Pan's comments last month signaling the possibility of another 25-50 bp RRR cut by year-end. Separately, China Securities Journal discussed elevated liquidity needs due to increased government bond issuance and peak tax season. Provincial governments have begun or planned issuance of special bonds to replace off-balance sheet debts, where sharp growth stands to add liquidity pressure. Also noted that more than CNY1.8T ($248.7B) of reverse repos are due for maturity this week. PBOC seen utilizing various liquidity management tools, such as the new treasury bond trading scheme. Some thoughts that another RRR cut this year remains an option.

  • Trump trades may be peaking for yen:

    • Nikkei discussed the recent alleviation in yen depreciation pressures as market dynamics continue to revolve around Trump policy implications. Initial optimism on the back of potential tax cuts turning to caution towards higher crude oil supplies and slower US economic growth. Recalled yen weakness reflected widening US-Japan yield differentials as Trump effects drove US yields higher in anticipation of renewed inflation pressures from tariff hikes while tax cuts point to expansionary fiscal policy. But momentum faded this week, noting the yen rebound during the London session yesterday came as Russia revised its nuclear doctrine, prompting risk aversion trades. Article outlined three areas of discussion among market watchers. (1) Higher tariffs stand to pose a drag on US economic growth and may accelerate Fed's rate cut path. (2) Trump's plans for mass deportation of illegal immigrants would deplete consumer demand given their sheer number estimated to be more than 10M. (3) Trump's plan to ramp up domestic oil drilling would lower prices and alleviate yen pressure via import costs. Story also recalled a similar retracement in Trump trades after he won the 2016 election.

  • Seven & i founding family looking to complete a buyout this fiscal year:

    • NHK sources indicated Seven & i's (3382.JP) founding family has established an SPC, which is negotiating with the three domestic megabanks and major US financial institutions to raise more than JPY8T ($51.6B) in funding, aiming to take the company private within the current fiscal year. Also exploring implementation by December-end, though depends on financing and response from Alimentation Couche-Tard (ATD.CN). Developments follow an earlier report that a management buyout is under consideration worth around JPY9T with involvement from Itochu (8001.JP) which has also been approached alongside banks for the current proposal. Compares with Couch-Tard's latest offer valuing the deal at JPY7.2T. Seven & i denied to media that anything had been decided. Latest management strategy remains consistent with the primary goal of delisting the company as a defense against Couche-Tard's advances. With Seven & i's special committee to decide which direction to take, founding family said to have felt that taking the company private in itself was insufficient and concerned their proposal would not be accepted unless they presented a higher acquisition price than the competition. Couch-Tard still seen possibly increasing their bid again to continue the bidding war.

  • Japan trade data firmer than expected:

    • Customs exports rose 3.1% y/y in October, above consensus 2.2%. Rebounded from a 1.7% decline in the previous month, which was the first drop in ten months. Main drivers were semiconductor-making equipment, drugs and scientific optical instruments. Outweighed notable declines in metallurgical fuel, auto parts and iron & steel. Imports edged up 0.4%, also better than expectations of a 0.3% decrease. Follows 1.8% in September and extends growth to a seventh month, albeit the smallest increase in the current streak. Growth in PCs, nonferrous metal ores, communications equipment edged out drags from crude oil, coal and chip components. By region, China-bound exports rebounded, leading to a pickup in Asia growth, while demand in US/EU fell. Headline nominal strength was backed up by volumes as both exports and imports logged gains. Export volume growth was marginal, though marked the first increase since January. Early takeaways noted China stimulus may be a short-term tailwind, though against broader concerns about higher tariffs under the Trump administration. BOJ real trade indices showed exports fell 4.9% m/m after a 4.0% rise in September, while imports fell 2.7% following a 1.3% increase. This leaves exports on a slightly weaker Q4 trajectory than imports, marking a sluggish start to the quarter in terms of GDP implications.

  • IMF lowers South Korea's growth outlook for 2025 amid trade uncertainty:

    • IMF lowered South Korea's economic growth outlook for 2025 to 2% from earlier projection of 2.2%, citing downside risks including slowdown among trading partners, heightened geopolitical tensions and rising commodity prices due to Middle East conflicts. For 2024, IMF saw its GDP expand 2.2%, supported by strong semiconductor exports, while partially offset by weak recovery of domestic demand. It was also down from 2.5% projected earlier (Yonhap). Added inflation has dropped to 1.3% y/y in October and is projected to remain close to target of 2% in 2025. Meanwhile IMF official noted it's still premature to speculate on impact of Trump's policies on Korean economy. Said foreign exchange interventions should remain limited to prevent disorderly market conditions and BOK's gradual monetary policy normalization seems appropriate given high uncertainties. Bloomberg added BOK expected to hold rate unchanged at 3.25% at next week's policy meeting and seen for four rate cuts to bring it to 2.25% by end-2025. An additional 25 bp cut projected in Q1 2026 to send rate below neutral level eyeing for growth.

  • Notable Gainers:

    • +13% 9531.JP (Tokyo Gas): Elliott Investment Management discloses 5.03% stake

    • +11.4% 8630.JP (Sompo): reports H1 results and raises FY guidance; to launch buyback for up to ¥155.00B

    • +9.4% 3888.HK (Kingsoft): reports Q3 results ahead of StreetAccount estimates

    • +7.9% 9898.HK (Weibo Corporation): reports Q3 earnings ahead of FactSet estimates

    • +7.2% 302440.KS (SK bioscience Co.): submits application for phase III clinical trial of GBP410 in Europe through EMA

    • +7% 1310.HK (HKBN Ltd.): confirms non-binding cash proposal from China Mobile Hong Kong Company, discussions are ongoing

    • +6.5% 3382.JP (Seven & i): founding family reportedly looking to complete buyout by end of financial year

    • +6.2% 4967.JP (Kobayashi Pharmaceutical): Oasis Management raises stake to 7.54% from 5.20%; Jefferies upgrades to hold from underperform

    • +3.3% 2891.TT (CTBC Financial Holding): reports Q3 results ahead of FactSet estimates

  • Notable Decliners:

    • -16.7% 9698.HK (GDS Holdings): reports Q3 earnings; revenue misses FactSet estimates

    • -7% 8766.JP (Tokio Marine Holdings): reports H1 results; to start tender offer for 99.7% stake in Integrated Design & Engineering at ¥6,500/share

    • -4.9% 8725.JP (MS&AD Insurance): reports H1 results; ordinary income declines y/y

• Data:

  • Economic:

    • Japan October trade balance (¥461.2B) vs consensus (¥360.4B) and revised (¥294.1B) in prior month

      • Exports +3.1% y/y vs consensus +2.2% and (1.7%) in prior month

      • Imports +0.4% y/y vs consensus (0.3%) and revised +1.8% in prior month

  • Markets:

    • Nikkei: (62.09) or (0.16%) to 38352.34

    • Hang Seng: 41.34 or +0.21% to 19705.01

    • Shanghai Composite: 21.98 or +0.66% to 3367.99

    • Shenzhen Composite: 27.80 or +1.38% to 2037.66

    • ASX200: (47.70) or (0.57%) to 8326.30

    • KOSPI: 10.34 or +0.42% to 2482.29

    • SENSEX: 0.00 or 0.00% to 77578.38

  • Currencies:

    • $-¥: +1.04 or +0.67% to 155.7010

    • $-KRW: (0.72) or (0.05%) to 1392.7700

    • A$-$: (0.00) or (0.19%) to 0.6520

    • $-INR: (0.02) or (0.02%) to 84.3777

    • $-CNY: +0.00 or +0.02% to 7.2412