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StreetAccount Summary - Asian Market Recap: Nikkei +1.30%, Hang Seng (0.41%), Shanghai Composite (0.11%) as of 03:10 ET

Nov 25 ,2024

• Synopsis:

  • Asian equities ended largely higher Monday. Strong gains for Japan, South Korea and India, Indonesia also notably higher on dollar weakness. Australia closed higher but off its peaks, gains for Taiwan and most of Southeast Asia. Mainland China stocks ended lower, Hang Seng sank again. US futures higher, Europe higher in early trades. Dollar lower, Asia currencies leaning stronger including yuan post strong fixing by PBOC this morning. Treasury yields a little lower, CGB yields at two-month low following yuan setting and MLF decision this morning. Crude futures down, base metals higher and precious metals lower as dollar falls. Cryptocurrencies edging higher now after weak morning.

  • Asia markets ex China started the week on a high Monday following through from Friday's positive end on Wall Street, and on a weaker dollar which provided an additional tailwind. The weaker dollar came after President-elect Trump nominated Scott Bessent to be his Treasury Secretary who is seen as favoring economic and market stability over tariffs and tax cuts. Treasury yields dipped again in Asia trade Monday alongside the US dollar, giving particular support to dollar- and trade-exposed benchmarks in Jakarta, Tokyo and Seoul, the latter also boosted by positive Samsung chip news.

  • China kept its MLF rate unchanged as expected and withdrew a net CNY550B in liquidity. New Zealand Q3 retail sales fell by less than forecast though RBNZ still expected to cut by 50 bp on Wednesday. India's ruling BJP party won an important state election in Maharashtra in a significant boost to PM Modi, with analysts saying the win gives Modi the support he needs to launch new reform. The fallout from the US SEC indictment of Adani Group executives continued with the group saying it had enough cash reserves to cover debt payments and would respond to the accusations once a legal review was completed. Singapore inflation fell to 1.4% in October and core inflation fell to 2.1%, its lowest reading in three years.

  • Seven & i's founding Ito family is said to have approached several US investment funds including KKR and Blackstone to gauge interest for help in funding private takeover of Seven & i (3382.JP). Dai Nippon Printing (7912.JP) said activist group Elliott appears to have 'substantially' lowered its position in the company two years after it built a stake. Sony Group (6758.JP) is said to be working on a handheld console for PS5 games to rival Nintendo's (7974.JP) Switch. Nvidia CEO said the company is fast-tracking the certification of Samsung Electronics' (005930.KS) AI memory chips. Times China Holding (1233.HK) signed a restructuring agreement with ad hoc group of investors but a Hong Kong court ordered company to detail plan more quickly than it wanted. SEC charges against Adani associates stem from a single Adani Green Energy (541450.IN) contract worth around 10% of its business, according to Group CFO. Vedanta Resources (500295.IN) is to go ahead with its second dollar bond offering inside two months despite the US indictment against Adani Group founder.

• Digest:

  • Bond markets process Bessent's past remarks on fiscal restraint:

    • Bonds strengthening in Asian trade Monday as markets digest Scott Bessent's nomination as Treasury Secretary. Bond markets have endured a turbulent run during weeks leading up to and immediately following US election as Trump's economic agenda raised expectations of higher deficits, stronger growth and dampened disinflation momentum reducing impetus for Fed rate cuts. However, markets have stabilized over past week or so with Treasury 10Y yield backing down from high of ~4.45% two weeks ago (Bloomberg). Bessent's nomination drew attention to past remarks on fiscal policy after he expressed concern over debt trajectory. He has criticized current Treasury Secretary Yellen for financing debt at the short-end of the curve and he has voiced support for issuance of ultra-long term bonds (Bloomberg). Pitching deficit to GDP ratio target of 3% compared to 6.4% in FY24, Bessent has stressed need for fiscal restraint in calling for tax cuts to be offset with spending cuts. He has also floated rollback of Inflation Reduction Act and halting President Biden's student loan forgiveness plan.

  • China's exports expected to hit record this year ahead of Trump's second term:

    • Median forecast of Bloomberg survey showed China's export growth will accelerate to 7% y/y in Q4, compared with 5% growth seen in October and would push total exports to $3.548T in 2024, higher than previous record in 2022. Rise in Chinese exports benefits from customers rushing to front-load orders given Trump's threat of 60% tariffs when the new administration takes office in January. Recall China's exports already had a strong start this quarter with October's growth hitting fastest since Jul-2022, putting country on track for record trade surplus of $1T this year(Bloomberg). Exports have been bright spot in China's economy amid weak domestic demand while prospect of trade war might lead Beijing to launch more pro-consumption stimulus measures next year. Reuters reported China's vice commerce minister Wang Shouwen said China would be able to "resolve and resist" impact of external shocks, responding to a question on impact of potential US tariffs last Friday. Added Beijing is willing to talk with Washington to promote bilateral economic and trade relations.

  • Dollar longs continue to build, but some see longer-term risks:

    • Dollar trading around its highest level in two years after capping off an eighth straight weekly gain, longest streak since Sep-2023. Bullish sentiment remains underpinned in large part by Trump's election win, and growth/inflation expectations from an economic agenda of tax cuts and tariffs that drives US yield divergence with other economies. Speculators continue to build positions with long dollar contracts reaching highest since late June according to CFTC (Bloomberg). However, FX strategists argue market still some way off peak dollar bullishness. Deutsche Bank noted market has only priced in ~30% of scenario where Trump enacts maximalist version of his agenda (link). At same time, some are highlighting longer term risks to dollar rally's sustainability. Plurality of respondents in Bloomberg survey noted potential headwinds to dollar from fiscal deficits, fall in real yields due to rise in inflation, and impact on economic growth from tariffs. Recalled situation in 2017 when dollar strengthened 5% from Trump's 2016 election win and January inauguration before retreating ~9% over following year.

  • Gautam Adani summoned by SEC, group to respond to bribery probe after detailed legal review:

    • Adani Group founder Gautam Adani and nephew Sagar, director at Adani Green Energy (541450.IN), given 21 days to respond to SEC's allegation Green Energy paid $265M in bribes to secure solar power contracts (BusinessStandard). SEC indictment said Gautam Adani, seven other defendants paid bribes to India government officials to secure deals worth potential $2B in profits. Adani Group to respond post legal review, once approvals from counsel on sub-judice issues secured (Bloomberg). Post Hindenburg Research's report in 2023, company repeatedly defended its corporate governance standards, US indictment shows prosecutors found contrary evidence (Reuters). Further, company may have concealed bribery scheme from financial institutions, investors indictment says. FT discussed parallels to SEC probe into Brazil's Odebrecht, which involved government corruption allegations, but said new US administration may change charges and noted Adani's pledge to invest $10B in US. Monday, group stocks inched higher to follow two days of losses but bonds slid to 12M low (Reuters). Group also moved to reassure markets it had enough cash to service debt obligations for next 28 months (Bloomberg).

  • BJP and allies win Maharashtra state elections in boost to Modi's policy agenda:

    • India PM Modi's BJP and allies comfortably won Maharashtra state elections over weekend, largely as expected although wide margin of victory came as surprise to some following Congress' showing in this year's general election (TimesofIndia). BJP-led coalition set to win 230 of 288 seats, Congress and allies 46 in India's richest state and home to financial capital Mumbai. Separate elections in mining-orientated Jharkhand state returned 50 seats for Congress party in 81-seat legislature (BusinessStandard). Political analysts said win for BJP in Maharashtra also clear victory for PM Modi after party lost parliamentary majority in general election; will be important for Modi's policy continuation, could support stock rally Monday to follow Friday's surge as central government policy uncertainty dissipates (Bloomberg). Further, analysts said promised welfare measures expected to boost consumption, infrastructure could benefit from pledges on expressway building.

  • Notable Gainers:

    • +14.0% 010120.KS (LS Electric): reportedly expected to sign KRW500B HVDC supply contract with GE-KEPCO JV

    • +13.8% 9009.JP (Keisei Electric Railway): firm affiliated with former Murakami Fund reportedly has recently started buying Keikyu shares and is nearing a 5% ownership

    • +13.7% 336260.KS (Doosan Fuel Cell): signs 20-year Long-Term Service Agreement with Anyang Asam Power for supply of fuel cell power plant equipment

    • +11.1% 9006.JP (Keikyu): firm affiliated with former Murakami Fund reportedly owns less than 1% stake, but that its holdings could increase to 10-20%

    • +5.4% 543320.IN (Zomato): to be added to BSE SENSEX

    • +4.5% 512599.IN (Adani Enterprises): Adani Group CFO says SEC charges relate to one specific Adani Green contract and that none of issuers (ie companies in portfolio or specific issuers that are subsidiaries of public companies) are accused of any wrong doing in legal filing

    • +4.1% 1024.HK (Kuaishou Technology): to be added to Hang Seng Index

  • Notable Decliners:

    • -4.5% 17.HK (New World Development): to be removed from Hang Seng Index

    • -3.0% 2269.JP (Meiji): board approves implementation of 12.7M-share secondary offering

    • -2.8% 500228.IN (JSW Steel): to be removed from BSE SENSEX

    • -0.3% 3382.JP (Seven & i): founding family reportedly seeking help from major US investment funds and has approached funds including KKR, Apollo, and Blackstone to gauge their interest in taking part in its proposed takeover of Seven & i

• Data:

  • Economic:

    • New Zealand

    • • Q3 retail sales (0.1%) q/q vs consensus (0.5%) and (1.2%) in Q2

      • October trade balance (NZ$1.544B) vs (NZ$2.108B) in September

        • Exports +7.5% y/y vs +5.2% in September

        • Imports +3.0% y/y vs (0.9%) in September

  • Singapore October

    • CPI +1.4% y/y vs consensus +1.8% and +2.0% in prior month

      • Core CPI +2.1% y/y vs consensus +2.5% and +2.8% in prior month

• Markets:

  • Nikkei: 496.29 or +1.30% to 38780.14

  • Hang Seng: (78.98) or (0.41%) to 19150.99

  • Shanghai Composite: (3.43) or (0.11%) to 3263.76

  • Shenzhen Composite: 7.98 or +0.41% to 1974.89

  • ASX200: 23.80 or +0.28% to 8417.60

  • KOSPI: 33.10 or +1.32% to 2534.34

  • SENSEX: 825.77 or +1.04% to 79942.88

• Currencies:

  • $-¥: (0.16) or (0.10%) to 154.5810

  • $-KRW: (2.96) or (0.21%) to 1401.4800

  • A$-$: +0.00 or +0.05% to 0.6507

  • $-INR: (0.11) or (0.13%) to 84.3206

  • $-CNY: +0.00 or +0.03% to 7.2455