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StreetAccount Summary - Asian Market Recap: Nikkei (0.85%), Hang Seng (0.53%), Shanghai Composite +0.07% as of 03:10 ET

Nov 21 ,2024

• Synopsis:

  • Asian equities mostly lower Thursday. Japan, Taiwan, Hong Kong and Korea all down with region's tech heavyweights among biggest drags after Nvidia (NVDA) disappointed investors with its slower revenue forecast despite top and bottom line beat in Q3. Mainland China and Australia little changed. India underperforming dragged by US indictment of Gautam Adani. US futures edging lower. Treasury yields lower ahead of US initial jobless claims data release. JGB curve bear flattening. Yen and Aussie both stronger against dollar. Crude and gold up as markets weighed on escalation of Russia-Ukraine war. Bitcoin set fresh record after hitting $97k for first time.

  • BOJ Governor Ueda said central bank will "seriously" take into account FX moves in compiling its economic and price forecasts. Added he can't predict outcome of December meeting as a lot of data between now and 19-Dec meeting. Also in Japan, Prime Minister Ishiba's government is set to unveil $141B economic stimulus package to address challenges from inflation to wage growth.

  • Chinese government advisors are recommending country maintain economic growth target of around 5.0% for 2025 while pushing for stronger fiscal stimulus to mitigate impact of higher US tariffs. South Korea exports returned to growth in first 20 days of November, as growth in chip shipments offset weakness in autos. Came after Taiwan reported yesterday export orders in October beat estimates amid strong demand for semiconductors and servers. RBI Governor Das said central bank's job unfinished until inflation moderates around its 4% target on durable basis. RBI also defended its forex policy and said it doesn't need to undervalue rupee for exports.

  • Gautam Adani indicted in US over $250M in alleged bribes to Indian government officials to secure solar energy contracts. News sparked selloffs in shares of Adani companies, including Adani Ports & Special Economic Zone (532921.IN), Adani Green Energy (541450.IN), and Adani Enterprises (512599.IN). Group withdrew planned $600M dollar bond sale following the developments, with prices on existing notes sliding alongside equities. The allegations threaten to accelerate foreign investors' outflows from India, who've already pulled record sums from local bourses in October.

• Digest:

  • BOJ Governor Ueda emphasizes economic forecasts to factor in FX moves:

    • Reuters cited comments from BOJ Governor Ueda noting the central bank will "seriously" take into account FX moves in compiling its economic and price forecasts. On monetary policy, reiterated the BOJ will reach a decision "meeting by meeting" based on information that becomes available. Added there is still a month to go until the next policy meeting in December and there will be more information to digest by then. December BOJ Tankan due 13-Dec, ahead of the MPM on 18-19. Recall that prior rate hike expectations were in part shaped by the significance of the information available ahead of each meeting. However, with market views still split between a rate hike in December or January, Ueda's prior speech last week that also noted decisions would be month to month was seen by markets as lacking a clear signal for imminent action given the remarks were not new and language did not strengthen. Furthermore, respite in yen depreciation leaves USD/JPY well below last week's high of 156.75 after preceding momentum stimulated speculation that mounting urgency for a policy response raised the chances of a December hike. Recent QUICK FX survey found 67% of respondents look for no rate change in December 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.

  • China advisers call for 5% growth target for 2025:

    • Reuters reported Chinese government advisers are recommending the government should maintain an economic growth target of around 5.0% for next year, pushing for stronger fiscal stimulus to mitigate the impact of expected US tariff hikes. Article noted such a target would be a surprise to markets betting on a slowdown next year. Four of the six advisers who spoke with Reuters favored a target of around 5%, one recommended "above 4%" and another suggested a range of 4.5-5.0%. These advisers will submit proposals to the CEWC next month. Story noted an official target announcement won't be made until the annual parliament convention in March. The most popular view among the advisers is usually adopted although is not always the case and plans could still change before the legislative session. Cited comments from one adviser, government economist Yu Yongding, who advocated for 'about 5%' in combination with more expansionary fiscal policy. Added the fiscal deficit target should definitely exceed the current 3% of GDP. In the first consensus poll since Trump's election victory, respondents estimated the US could impose tariffs of nearly 40% on Chinese imports, which would shave GDP growth by up to 1 ppt. They expect Trump to resist implementing a 60% levy immediately. Average GDP forecasts were unchanged since before the election at 4.8% in 2024 and 4.5% in 2025.

  • Gautam Adani indicted in US over alleged bribery scheme:

    • Gautam Adani indicted in US on Wednesday over $265M in alleged bribes paid to Indian government officials between 2020 and 2024 in order to secure energy contracts that generated $2B in profit over 20 years (Bloomberg, FT, Reuters). Judge issued arrest warrants for both Gautam Adani and his nephew Sagar Adani. Prosecutors allege bribes were hidden from banks and investors that Adani raised more than $3B in loans and bonds from. SEC also filed separate civil lawsuit. Development brings renewed scrutiny on company's business practises after short seller Hindenburg in Jan-2023 claimed it had engaged in accounting fraud and market manipulation. Latest news has sparked heavy selling in shares of Adani units on Thursday, including Green Energy (541450.IN) and Enterprises (512599.IN). Group withdrew planned $600M dollar bond sale following the developments, with prices on existing notes sliding alongside equities (Bloomberg). Also introduces uncertainty over company's investment plans after last week announcing intention to invest $10B in US energy and infrastructure projects (Reuters).

  • Japan stimulus package looks set to be unveiled soon:

    • Nikkei reported LDP-Komeito coalition reached a general agreement with DPP on the stimulus package content. Government plans to submit guidelines for cabinet approval as early as tomorrow. NHK reported authorities eyeing total spending of JPY21.9T ($141.3B) with a supplementary budget worth JPY13.9T. Content largely unchanged, featuring cash handouts to low-income households, reintroduction of electricity and gas subsidies, as well as continuation of gasoline subsidies albeit with tapering. Main concessions were the incorporation of an increase in the income tax-free threshold and lower gasoline taxes, though these will be discussed for FY25 tax reforms. Key outstanding DPP demands include a temporary consumption tax cut to 5%. Recall the coalition lost majority control of the lower house after the election and needs DPP support to pass legislation. Government facing challenges in balancing tax cut calls while preserving fiscal funding. Nikkei discussed concerns that raising the tax-free threshold by JPY750K as proposed by DPP would deplete regional revenues by more than JPY5T. Separately, Nikkei also reported a government advisory tax panel examined cuts to the corporate tax rate since the 2010s and concluded that measures failed to boost capex or wages, with some insinuation that authorities may look to unwind special tax breaks provided to small business.

  • Japan H1 corporate profits reach new highs despite manufacturing challenges:

    • Nikkei earnings round-up as of Tuesday showed H1 aggregate net profits grew 15% y/y to a record ~JPY27.2T ($175B) with 1,074 firms with a March FY-end having reported. Growth was the fastest in three years. Strength in nonmanufacturing such as finance and transportation offset softer manufacturing, including autos. Net profit growth led by insurance, marine shipping (higher freight prices on Middle East conflict) and securities. Banks highlighted as a notable bright spot amid positive rate environment and sales of cross shareholdings. Railway and bus operators supported by inbound tourism. Main laggards were energy, steel and autos. Manufacturers logged first decline since 2020 reflecting slower economic growth in key markets such as China. Automakers faced additional headwinds from competition in China and US. Steelmakers contending with supply glut in China. International steel dumping probes mainly targeting China also enveloping Japanese firms. Global outlook now seen largely based around Trump policies. Recent yen volatility blurring the picture on FX windfalls.

  • Notable Gainers:

    • +2.9% 032640.KS (LG Uplus): confirms appointment of Hong Beom-sik as CEO

    • +1.3% 068270.KS (Celltrion): launches 583K-share on-market buyback

    • +1% 051910.KS (LG Chem): signs MOU with ExxonMobil for up to 100K MTs of lithium offtake

  • Notable Decliners:

    • -18% 512599.IN (Adani Enterprises): SEC charges Gautam Adani and other executives in two actions alleging massive bribery scheme

    • -15.7% 541450.IN (Adani Green Energy): SEC charges Gautam Adani and other executives in two actions alleging massive bribery scheme; Adani Green Energy subsidiaries withdraw USD denominated bond offerings in light of charges

    • -11.7% 1024.HK (Kuaishou Technology): reports Q3 earnings; some analysts express a cautious view on Q4 guidance

    • -8.4% 1060.HK (Alibaba Pictures Group): reports H1 results with a year-over-year decline in attributable net income

    • -2.2% 6758.JP (Sony): Kadokawa confirms potential acquisition by Sony

• Data:

  • Markets:

    • Nikkei: (326.17) or (0.85%) to 38026.17

    • Hang Seng: (103.90) or (0.53%) to 19601.11

    • Shanghai Composite: 2.41 or +0.07% to 3370.40

    • Shenzhen Composite: 1.35 or +0.07% to 2039.01

    • ASX200: (3.30) or (0.04%) to 8323.00

    • KOSPI: (1.66) or (0.07%) to 2480.63

    • SENSEX: (451.21) or (0.58%) to 77127.17

  • Currencies:

    • $-¥: (0.60) or (0.39%) to 154.8330

    • $-KRW: (1.30) or (0.09%) to 1397.3400

    • A$-$: +0.00 or +0.18% to 0.6514

    • $-INR: +0.10 or +0.12% to 84.4682

    • $-CNY: (0.01) or (0.09%) to 7.2386