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StreetAccount Summary - Asian Market Recap: Nikkei (0.87%), Hang Seng +0.04%, Shanghai Composite (0.12%) as of 03:10 ET

Nov 26 ,2024

• Synopsis:

  • Asian equities finished mostly lower Tuesday. Risk-off mood accelerated on Trump tariff reports to send benchmarks in Japan, Australia and Taiwan lower while the Hang Seng gapped lower only to recover to the unchanged mark by the close. Mainland boards were volatile and mixed. India lower on more Adani group selling, Southeast Asia mixed. US futures in the red but volatile, European markets lower in early trades. US dollar higher although off its peaks, yen stronger, AUD and other Asia-ex currencies lower; yuan mixed with offshore weaker again. Treasury yields higher across tenors, JGB yields lower, CGB yields at two-month lows. Crude and precious metals recovering some lost ground, base metals mixed. Cryptocurrencies higher.

  • Asia markets showed structural weakness Tuesday following message by US President-elect Trump that he wants to impose an additional 10% tariff on goods made in China. It sent Treasury yields higher alongside the US dollar, weighing on Asia assets across the board as local currencies weakened. Dollar-exposed and trading stocks worst affected although many off their lows by the close. China benchmarks fluctuated all day and finished mixed but other China assets weakened with sovereign bond yields sliding to re-approach record lows and the offshore yuan to four-month lows.

  • In other developments, the fallout from the SEC's bribery allegations against Adani Green Energy continued with group-listed stocks down sharply again in Mumbai. Group dollar bonds also fell steeply following overnight news TotalEnergies is to pause investments in Adani companies to await developments. Rating agency Fitch also warned Adani Ports' bonds risked being downgraded to junk status following bribery allegations.

  • Nissan Motor (7201.JP) may cut production in the US as it looks to build 100K fewer vehicles there next year; share price also hit by reports Trump will impose 25% tariffs on imports to the US from Canada and Mexico. HDFC Life Insurance (540777.IN) launches investigation after customer data was shared with 'mala fide intent'. Vedanta Resources (500295.IN) have accepted bids worth $800M for two dollar bonds to refinance outstanding debt due in 2028, according to bankers.

• Digest:

  • Trump says will impose 10% tariffs on China, 25% tariffs on Mexico and Canada:

    • In Truth Social Post President-elect Trump announced that as part of his many first executive orders, he will impose additional 10% tariffs on China goods, above any additional tariffs, as well as 25% tariffs on Mexico and Canada (Bloomberg). Trump cited "crime and drugs" pouring into US via those countries and that tariffs will remain in place until drugs and illegal immigrants no longer flow through borders. On campaign trail Trump had promised to impose 25% tariffs on Mexico and China for exporting fentanyl into US (Reuters) as well as tariffs on countries that facilitated flow of illegal immigrants to US (Reuters). He had also threatened across-the-board tariffs of up 20% and at least 60% tariffs on Chinese goods. Announcement comes day after Treasury Secretary nominee Scott Bessent was welcomed by markets in part due to his perceived nuanced stance on tariffs (describing them as negotiating leverage and recommended layering them in gradually). Following Trump's post, Canada released statement highlighting its efforts on border security while China also talked up cooperation with US on counternarcotics. Initial analyst reaction mixed, reflecting views Trump's post an opening gambit to extract concessions and assistance from those countries on issues he outlined (Reuters).

  • Trump tariff reverberations continue in Asia:

    • Nikkei reported Asia export volumes to US tracking a record high this year as measured by shipping containers as companies aim to front-load shipments before tariff hikes are implemented. Goods of all major categories seeing growth with apparel and furniture mentioned as standouts. Developments concentrated in China, which is also expanding shipments from production bases in Vietnam. Tariff effects also leading to similar developments in China imports. With Beijing seen highly likely to retaliate with its own tariffs on US imports in a repeat of the US-China trade war that peaked in 2018, purchases of US soybeans are growing at the fastest pace in a decade. Companies said to be increasing inventories as a short-term response while re-evaluating long-term procurement and production strategies under the assumption of protracted bilateral tensions. Article noted macro implications include a higher cost burden associated with the stockpile build while uncertainty posed by US tariffs would constitute a headwind against capital investment. Separately, Xinhua cited comments from China Premier Li who told a panel including multinational companies that Beijing will continue concrete actions to ensure stable global supply chains. Also reaffirmed more efforts will be made to step up counter-cyclical adjustment.

  • Tariffs expected to drive China GDP growth lower in 2025 but extent may depend on stimulus:

    • More economists coming out with 2025 predictions for China's economy with common discussion points involving Trump tariff impact and China's stimulus response. BofA estimates GDP growth to slow to 4.5% from 4.8% in 2024, reflecting base case scenario where average tariff rate rises from current 20% to 30% in Q2 and 40% over remaining quarters. However, bear case scenario envisages significant trade shock from 60% tariffs on China and 10% across-the-board tariffs that pulls growth down to 3.9%. Similarly, JP Morgan estimated growth falling to just 3.9% in 2025 assuming 60% tariffs imposed in H1. Over weekend S&P forecast China GDP growth slowing to 4.1%. China expected to step up policy support though not enough to fully offset drag from tariffs. Shared view was that China's stimulus response will depend on size and nature of tariffs. Authorities seen favoring modest fiscal expansion complemented by rate and RRR cuts. However, bolder stimulus (larger fiscal deficit ratio and LGSB issuance) seen as an upside growth risk, particularly if geared towards consumption.

  • Japan services PPI inflation stronger than expected, underlying inflation on the soft side:

    • Headline services PPI rose 2.9% y/y in October, above consensus 2.5%, following revised 2.8% in the previous month. Breadth was notable with 112 out of 146 product categories logging increases. Attention went to a recently introduced sub-series of sectors with a high labor cost ratio which rose 3.3%. Fastest since Mar-15, but when consumption tax hikes are excluded, marked a 32-year high. Results were seen as further evidence of labor cost passthrough, consistent with BOJ observations. Separately, BOJ's underlying inflation leaned softer. Trimmed mean slowed to 1.5% y/y from 1.7% (weakest since Mar-22), weighted median was steady at 0.8%, while mode inflation edged down to 1.3% from 1.4%. Still no clarity on the timing of the next rate hike with market forecasts remaining divided between December and January. Inflation data have been relatively stable, reinforcing the BOJ's view that developments remain on track to meet forecasts. Instead, recent debate has been concentrated on uncertainties related to US macro, global market instability, Japan/US politics and yen volatility. Recall that Governor Ueda previously indicated US macro risks have start to dissipate, though last week's comments were inconclusive, leaving press to conclude that rhetoric was sufficient to signal a December move remains a possibility.

  • Adani listed stocks resume slide following bribery allegations:

    • Listed Adani group stocks restarted their recent slide Tuesday with company at center of allegations, Adani Green Energy (541450.IN) down almost 7.0% to bring its WTD losses to more than 14%, MTD losses to almost 44%. Adani Energy Solutions (539254.IN) was 4.0% lower while there were also notable losses at flagship company Adani Enterprises (512599.IN). Adani Ports & SEZ (532921.IN) also fell just as rating agency Fitch said it may cut company's dollar bond rating to junk following SEC's allegations of bribery at Green Energy (Bloomberg). Adani Power (533096.IN) also fell just as Andhra state officials warned it was reviewing terms of power contract it has with Power (BusinessStandard). Stocks' decline enough to pull Sensex and Nifty benchmarks lower Tuesday with bribery allegations potentially evolving into shareholder legal action, according to lawyers cited by Bloomberg.

  • Notable Gainers:

    • +10.9% 532822.IN (Vodafone Idea): India's Union Cabinet reportedly approve waiver of bank guarantees for telecom companies

    • +3.9% 006280.KS (GC Biopharma): doses first patient in global phase I trial of GC1130A for MPS IIIA treatment

    • +3.5% 8227.JP (SHIMAMURA): reports November Shimamura existing-store sales +4.7% y/y

    • +0.3% 2380.HK (China Power International Development): reports October total electricity sold 9.8M MWh vs year-ago 8.1M MWh

  • Notable Decliners:

    • -6.7% 2809.JP (Kewpie): announces FY25-28 medium-term business plan

    • -6.1% 9603.JP (H.I.S.): postpones FY results as Tokyo Labour Bureau investigates subsidiary

    • -3.6% 7201.JP (Nissan Motor): US production reduction reportedly to continue

    • -2.5% 2382.HK (Sunny Optical Technology (Group)): CEO Sun Yang resigns from all positions due to health reasons, effective 26-Nov; executive vice president Wang Wenjie appointed replacement

    • -1.0% 5334.JP (Niterra Co.): to acquire Toshiba Materials for ¥150.00B from Toshiba Corporation

• Data:

  • Economic:

    • Japan October

      • Services PPI +2.9% y/y vs consensus +2.5% and revised +2.8% in prior month

    • Singapore October

      • Manufacturing production y/y +1.2% versus +9% in prior month

  • Markets:

    • Nikkei: (338.14) or (0.87%) to 38442.00

    • Hang Seng: 8.21 or +0.04% to 19159.20

    • Shanghai Composite: (4.00) or (0.12%) to 3259.76

    • Shenzhen Composite: (18.75) or (0.95%) to 1956.14

    • ASX200: (58.20) or (0.69%) to 8359.40

    • KOSPI: (13.98) or (0.55%) to 2520.36

    • SENSEX: (190.78) or (0.24%) to 79919.07

  • Currencies:

    • $-¥: (0.34) or (0.22%) to 153.8640

    • $-KRW: (1.94) or (0.14%) to 1398.4000

    • A$-$: (0.00) or (0.42%) to 0.6477

    • $-INR: +0.01 or +0.01% to 84.2769

    • $-CNY: (0.00) or (0.01%) to 7.2460