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StreetAccount Summary - Asian Market Recap: Nikkei +0.68%, Hang Seng (1.89%), Shanghai Composite (3.06%) as of 03:10 ET

Nov 22 ,2024

• Synopsis:

  • Asian equities mixed Friday. Shares in Japan, Australia, Korea and Taiwan all higher while Greater China markets were sharply down as disappointing tech earnings hurt sentiment. India market rallying while most Adani unit stocks rebounding after Thursday's market rout. US futures flat. Treasury yields were also little changed. Dollar stronger against kiwi and yen. Both crude oil and gold higher amid simmering geopolitical tensions. Bitcoin edging closer to $100K.

  • Japan's cabinet set to approve the stimulus proposal Friday. Headline figures confirmed at total JPY21.9T (141.9B) in fiscal outlays with an FY24 supplementary budget of JPY13.9T, which includes mix of cash handouts to low-income households, reintroduction of energy subsidies. Japan core inflation fell by less than forecast in October though ex-food and energy gauge rose by more than expected. Japan flash manufacturing PMI struck in contraction amid steeper decline in output while services PMI edged back to growth.

  • In other developments, China on Thursday announced measures to aid trade sector with financial support for exporters/importers and efforts to expand shipments of agricultural products. Singapore Q3 GDP growth stronger than preliminary read, prompting government to upgrade forecasts for 2024. Latest Reuters poll showed consensus for 50 bp RBNZ rate cut next Wednesday. India flash PMI data showed economic activity little changed in November as services picke dup slightly while manufacturing moderated.

  • Alimentation Couche-Tard's (ATD.CN) chairman said a hostile takeover of Seven & I (3382.JP) "not in the plan". TSE approved a Kioxia listing as a Prime Market constituent on 18-Dec with an estimated market cap of JPY750B. Adani units advancing Friday after $27B wiped out from its market value on Thursday.

• Digest:

  • Japan cabinet approves stimulus plan:

    • Press reported cabinet set approve the stimulus proposal at an irregular meeting Friday evening, though main details were already leaked (Nikkei). Headline figures confirmed at total JPY21.9T ($141.9B) in fiscal outlays with an FY24 supplementary budget of JPY13.9T, consistent with Prime Minister Ishiba's pledge to formulate a larger extra budget than last year's JPY13.1T. Addition of private sector financing takes total package size to JPY39T. Content largely unchanged from prior reports, featuring JPY30K cash handouts to low-income households with additional JPY20K per child, reintroduction of electricity and gas subsidies from January to March, as well as extension of gasoline subsidies albeit with tapering. Other measures include more than JPY10T aid for semiconductor and AI sectors and disaster relief for the Noto region. However, with the content signaled far in advance, attention has moved to FY25 tax reforms after multiple talks between the LDP-Komeito coalition and DPP. Government accepted in principle DPP's demand to raise the income tax-free threshold, though did not specify a target. While this was enough for DPP to endorse the stimulus package, lingering DPP dissatisfaction at the coalition's lack of cooperation leaves questions over the FY25 main budget. DPP is also calling for a temporary cut to the consumption tax to 5% from 10% until real wage growth is sustained.

  • Latest polls add to BOJ rate hike debate:

    • In the wake of inconclusive rhetoric from BOJ Governor Ueda this week, latest Reuters poll (n=52) conducted November 13-21 showed 29 (56%) now calling a 25 bp rate hike in December, up from 49% last month. Consensus view was based on the economy and prices remaining on track with the BOJ's outlook, receding downside global economic risks and yen depreciation. Additionally, 24 of 25 saw Trump's return to the White House as conducive for a rate hike given inflation implication. Slim majority looking for a December move is consistent with other surveys. Bloomberg's last result was 53% in favor of December a month ago. JCER benchmark with a domestic survey sample showed a slight shift in favor of December at 16 out of 35 (14 looked for no change), compared with 12 of 36 last month. However, Nikkei has published some variance depending on the sample. The QUICK BOJ Watchers Survey yielded similar results -- 12 of 25 predicted December and 11 for January -- yet the monthly QUICK FX poll was a notable outlier with 67% expecting no change in December reflecting doubts BOJ would cause disruptions for the government while the budget formulation process is in full swing. Corresponds with modal forecast for USD/JPY at 145-150 at year-end (34 of 99). Recall earlier economist views that a 155-160 range would heighten the chances of a December hike which was breached last Friday, though has fallen back below 155 this week.

  • Japan CPI inflation marginally above expectations:

    • Core nationwide CPI rose 2.3% y/y in October, compared with consensus 2.2%. Follows 2.4% in the previous month, marking the softest since April. Ex-fresh food & energy inflation was also 2.3% vs consensus 2.2% and firmer than prior month's 2.1%. Headlines were consistent with advanced Tokyo figures. Key factor was lower energy contribution, suppressed by government electricity and gas subsidies. This round is scheduled to roll off in October (November billing period), though will be implemented again from January to March next year as part of the stimulus package. Gasoline subsidies separately due to expire in December will be extended at a lower rate. Elsewhere, non-fresh food prices strengthened reflecting fiscal semi-annual price hikes. Overall goods inflation eased to 2.9% from 3.5%. Services inflation edged up to 1.5% from 1.3% albeit driven mostly by the public sector, outweighing slight softening in the private sector. Recall BOJ Governor Ueda's 18-Nov speech noted encouragement at the stability of service prices against the backdrop of easing goods inflation reflecting the dissipation of import price-driven cost pressures. Also observed in the prior Tokyo data that price increases were facilitated by wage hikes as an indication of dynamics shifting toward wage-driven inflation.

  • Japan manufacturing PMI remains in contraction, services index edges back to growth:

    • Flash manufacturing PMI was 49.0 in November, edging down from 49.2 in the previous month. Output fell at the fastest pace since April despite easing declines in new orders and exports, while finished goods inventories fell at a steady pace. Resultant slack in capacity led to a marked decrease in backlogs. Employment also turned negative. Services PMI rebounded to 50.2 from 49.7. Output swung back to growth while new orders expanded at a marginally softer pace. Capacity pressures in contrast to manufacturing prompted stronger employment growth and an upturn in backlogs to an eight-month high. Inflation developments were uniform with both sectors reporting weaker input price inflation, though output prices picked up reflecting cost passthrough. Composite PMI was left at 49.8 vs 49.6 in October. Overall assessment noted demand conditions remained stagnant. Price pressures remained elevated amid high raw materials prices and weak yen, encouraging more cost passthrough. Overall, sluggish manufacturing readings contrast with bullish METI industrial production guidance pointing to sharp growth in Q4. Quarterly GDP growth seen remaining generally around the 1% trend pace, though Q4 may see some support from dissipation of weather events and temporary factory shutdowns that held back Q3.

  • Singapore upgrades 2024 growth forecast to around 3.5%:

    • Singapore Q3 GDP growth was revised to 3.2% q/q from preliminary 2.1% and consensus 2.7%. Follows revised 0.5% in the previous quarter. Translated to 5.4% y/y vs preliminary 4.1% and consensus 4.7%. Economy in first nine months grew a better-than-expected 3.8% y/y. Bloomberg noted that better-than-expected Q3 performance has prompted government to raise growth forecast for 2024 to around 3.5% from range of 2-3% previously estimated. Recall MAS said earlier that Singapore's disinflaion trajectory "well-entrechned" and economic recovery is seen extending into 2025 (Bloomberg). MTI sees 1 to 3% growth in 2025 as resilience in economy could be tested by slowdown in China, trade uncertainties under new Trump administration and other geopolitical tensions. There are signs Singapore's expansion may face more challenges. Exports fell in October amid drop in pharmaceutical shipments and fewer orders from China. Nikkei citing OCBC note highlighted how pharmaceutical industry was a key underperformer amid weakness in nonelectronic exports.

  • Notable Gainers:

    • +8.3% 011790.KS (SKC Co.): SKC subsidiary Absolics to receive up to $100M (KRW139.10B) in potential funding from US Department of Commerce

    • +5.1% 4183.JP (Mitsui Chemicals): has begun developing the recycling technology required to produce high-purity phosphorus materials in Japan

    • +3.7% 051900.KS (LG H&H): provides value-up plan; targets 2030 revenue KRW10T

    • +1.9% 032640.KS (LG Uplus): provides value-up plan; mid-to long-term ROE 8-10%

    • +1.1% 373220.KS (LG Energy Solution): provides value-up plan; targets to double sales in FY28 vs FY23 KRW33.7T

    • +0.8% 3038.JP (Kobe Bussan): reports Oct net sales ¥46.18B, +4.8% y/y

  • Notable Decliners:

    • -8.6% 9888.HK (Baidu): reports Q3 results with non-GAAP EPADS below FactSet

    • -7.7% 004800.KS (HYOSUNG): to be excluded from KOSPI 200

    • -7% 1382.HK (Pacific Textiles Holdings): reports H1 net income attributable HK$106.9M, (14%) vs year-ago HK$124.5M

• Data:

  • Economic:

    • Japan

      • October nationwide core CPI +2.3% y/y vs consensus +2.2% and +2.4% in prior month

        • CPI excl. fresh food & energy +2.3% y/y vs consensus +2.2% and +2.1% in prior month

        • Overall CPI +2.3% y/y vs consensus +2.3% and +2.5% in prior month

      • November flash manufacturing PMI 49.0 vs 49.2 in prior month

        • Services PMI 50.2 vs 49.7 in prior month

        • Composite PMI 49.8 vs 49.6 in prior month

    • Singapore

      • Q3 final GDP +5.4% y/y vs preliminary +4.1% and revised +3.0% in prior quarter

        • GDP +3.2% q/q vs preliminary +2.1% and revised +0.5% in prior quarter

    • India

      • November flash manufacturing PMI 57.3 vs Final 57.5 in prior month

        • Services PMI 59.2 vs 58.5 in prior month

        • Composite PMI 59.5 vs 59.1 in prior month

  • Markets:

    • Nikkei: 257.68 or +0.68% to 38283.85

    • Hang Seng: (371.14) or (1.89%) to 19229.97

    • Shanghai Composite: (103.21) or (3.06%) to 3267.19

    • Shenzhen Composite: (72.10) or (3.54%) to 1966.91

    • ASX200: 70.80 or +0.85% to 8393.80

    • KOSPI: 20.61 or +0.83% to 2501.24

    • SENSEX: 1,183.00 or +1.53% to 78338.79

  • Currencies:

    • $-¥: +0.28 or +0.18% to 154.7950

    • $-KRW: (0.09) or (0.01%) to 1401.1600

    • A$-$: (0.00) or (0.05%) to 0.6508

    • $-INR: (0.06) or (0.08%) to 84.4925

    • $-CNY: +0.01 or +0.14% to 7.2452