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StreetAccount Summary - Asian Market Recap: Nikkei (0.80%), Hang Seng +2.32%, Shanghai Composite +1.53% as of 03:10 ET

Nov 27 ,2024

• Synopsis:

  • Asian equities ended mixed Wednesday. Strong gains for Greater China benchmarks in a broad-based rally. India, Australia and New Zealand all higher. Elsewhere, Japan closed near the bottom of its three-month range. South Korea and Taiwan fell to join most of Southeast Asia. US futures mixed, European markets lower at the open. US dollar weakened on Middle East news, NZD notably higher post RBNZ decision on rates; yen stronger against a basket of currencies but yuan weaker again. Treasury yields mixed. Crude and precious metals stronger, industrial metals also largely higher. Cryptocurrencies bounced back following recent selloff.

  • Asia markets diverged in Wednesday trade as a strong rally in China stocks led the MSCI Asia Pac ex-Japan index higher but technology-orientated boards fell in Taiwan, Japan and South Korea all fell. Directionless day came post more record high closes on Wall Street overnight despite growing alarm over potential impact of Trump's proposed tariffs. US dollar down in Asia trading Wednesday on reports Hamas was seeking a truce in Gaza, propelling several Asia-based risk assets higher. Regional currencies also rallied.

  • In macro developments, RBNZ cut OCR by 50 bp to 4.25% as expected but NZD rallied strongly; statement flagged further easing in early 2025 if economic conditions evolve as expected. Australia October inflation unchanged though trimmed mean measure strengthened. China industrial profits worsened further in October amid persistent deflation pressures.

  • Softbank (9984.JP) will spend up to $1.5B to increase its stake in OpenAI. Sanrio (8136.JP) said it was selling shares in the open market to unwind cross shareholdings and increase liquidity but the stock fell sharply. Samsung Electronics (005930.KS) said it had replaced the heads of its memory and foundry chip units in a management reshuffle aimed at catching up with AI chip rivals. Thai Airways (THAI.TB) said it will raise up to baht 44B ($1.27B) from a share rights offering as a final step to exit a court supervised debt restructuring, and allow the resumption of trading in its stock.

• Digest:

  • RBNZ cuts OCR by 50 bp, Orr says projections consistent with similar move in February:

    • RBNZ cut OCR by 50 bp to 4.25% as expected. Statement flagged further easing in early 2025 if economic conditions evolve as expected. Updated OCR track signaled slower pace of rate cuts next year, modeling rate of ~3.80% by mid-2025. However, RBNZ Governor Orr pushed back against notion updated OCR track signals slower pace of easing in 2025, saying projections consistent with 50 bp rate cut in February, depending on the economy evolving as expected (Bloomberg).According to Monetary Policy Statement, RBNZ expects economic growth to recover in 2025 as lower rates support demand and private investment. However, wage growth assumed to decline further with unemployment rate peaking at 5.2% in Q1 (vs last 4.8%). Measures of inflation converging to 2% target midpoint and expected to remain near there through forecast horizon. However, anticipates inflation picking up from trough of 2.0% in early 2025 to 2.5% in Q3 before falling again. Noted near-term risks to economic outlook from persistence in some inflation components, as well as speed and timing of economic recovery.

  • Yen supported by multiple factors including more Trump tariff reveberations:

    • Yen trading notably firmer Wednesday, returning to the 152 level vs dollar for the first time since 11-Nov. Nikkei noted several factors in play. President-elect Trump's latest tariff plans announced yesterday increased uncertainties about the China macro outlook, prompting a continuation of risk aversion trades. Yen viewed as a haven amid selling pressure in yuan, Mexican peso and Canadian dollar. Recall the risk aversion theme emerged this week as a function of renewed attention on the Ukraine war. Previously, USD/JPY rallied to a peak of 156.75 that fueled stronger speculation of a December BOJ rate hike. Market talk has since subsided this week as yen rebounded but BOJ theme said to remain on the radar as further justification for yen buying. Elsewhere, Prime Minister Ishiba's call to companies to achieve big wage growth at next year's shunto talks (Reuters) was also seen as a reason to buy yen. Flows were also supportive with exporters holding a surplus of dollars and investors unwinding long USD/JPY positions ahead of the upcoming US holiday season. Separately, Nikkei discussed the lack of directional conviction for yen with FX strategist year-ahead forecasts ranging from 140 to 160 reflecting uncertainties over the implications of Trump policies.

  • China's industrial profits' decline continues in October:

    • Industrial profits fell 10.0% y/y in October for third straight month, narrowing from September's 27.1% decline, which NBS attributed to combined effects of existing and new stimulus policies. Said most industries improved from last month, supported by profit growth in equipment manufacturing and high-tech manufacturing. Meanwhile declines in raw material manufacturing and consumer goods manufacturing narrowed much from September due to recovering domestic consumption and strength in exports of industrial goods. Meanwhile Reuters noted some economists attributed October improvement partly to low base effect. Bloomberg noted data provides first evidence of how businesses have fared during full month of activity following Beijing's stimulus blitz in late September. YTD aggregates were still weakas headline industrial profits fell 4.3% y/y in Jan-Oct, deepening from the 3.5% slide in Jan-Sep. Manufacturing profits slid 4.2% from 3.8% drop in Jan-Sep while mining was down 12.7% from -10.7% in Jan-Sep. NBS acknowledged industrial profits remain in decline and said China will continue to implement various policies to consolidate economy and promote recovery of industrial profits.

  • Energy subsidies mask rise in Australian monthly inflation:

    • Australia October inflation unchanged at 2.1% y/y against expectations for a rise to 2.3%. Headline figure again distorted by energy subsidies that went into effect 1-Jul, with electricity prices shrinking 35.6% compared to 24.1% fall in September. Excluding electricity, trimmed mean inflation rose to 3.5% from 3.2% amid pickup in rents, furnishings and household equipment, insurance and recreation categories. Clothing and footwear, health and education eased. Monthly CPI's limitations have diminished its signal importance relative to more comprehensive quarterly print. Recall November RBA minutes noted board required more than one good quarterly CPI print to give it confidence in its inflation forecasts, suggesting focus is on Q4 CPI (late Jan) to confirm disinflation trend before weighing any change in its policy stance. Markets not fully pricing rate cut until mid-2025 and more economists have pushed out their rate cut calls to May from February. Attention now turns to RBA Governor Bullock's speech on Thursday (19:55 AEDT).

  • Singapore's MAS warns on rising trade and geopolitical tensions, domestic household debt:

    • Monetary Authority of Singapore warned over global monetary policy uncertainty amid increased trade friction, geopolitical tensions that could raise probability of adverse shocks. MAS warned in its financial stability review over build-up of "financial imbalances" that included stretched valuations and leveraged investments that could amplify risks. Also said domestic household debt in Singapore was, for time being, offset by higher wages, stronger home balance sheets (BusinessTimes). Other risks included fiscal sustainability concerns, higher-than-expected BOJ rate increases, data that could challenge US soft-landing scenario. Also noted banks' capital positions may be pressured by rising credit costs, declining lending volumes on higher rates and slowing global growth. Report also cited financial firms' survey that showed macro-financial and technology concerns had fallen in six months since previous report, but those over geopolitics and money laundering had risen.

  • Notable Gainers:

    • +18.9% 345.HK (Vitasoy International Holdings): open to potential business collaboration opportunities

    • +3.6% S08.SP (Singapore Post): in exclusive talks with third party over potential sale of Australia business

    • +6.7% 1929.HK (Chow Tai Fook Jewellery Group): reports H1 results with net income HK$2.56B vs implied guidance of HK$2.49-2.68B

    • +3.0% 4661.JP (Oriental Land): Keisei Electric Railway to tender up to 18.0M shares at ¥3,435/share through off-auction buyback

    • +0.9% 3382.JP (Seven & i): Sumitomo, Fortress reportedly considering buying Seven & i's supermarket business

    • +0.1% 6936.HK (S.F. Holding): debuts +0.0% at HK$34.30/share on HKEx

  • Notable Decliners:

    • -14.4% 8136.JP (Sanrio): to launch 25.9M-share secondary offer

    • -3.4% 005930.KS (Samsung Electronics): makes leadership changes including appointing Young Hyun Jun as head of memory chip business and co-CEO

• Data:

  • Economic:

    • China

      • Jan-Oct industrial profits YTD (4.3%) y/y vs (3.5%) in Jan-Sep

        • October industrial profits (10%) y/y vs (27.1%) in prior month

    • Australia

      • October CPI +2.1% y/y vs consensus +2.3% and +2.1% in September

        • Trimmed mean CPI +3.5% y/y vs +3.2% in September

      • Q3 construction work done +1.6% q/q vs consensus +0.4% and +0.1% in Q2

  • Markets:

    • Nikkei: (307.03) or (0.80%) to 38134.97

    • Hang Seng: 443.93 or +2.32% to 19603.13

    • Shanghai Composite: 50.02 or +1.53% to 3309.78

    • Shenzhen Composite: 40.57 or +2.07% to 1996.71

    • ASX200: 47.30 or +0.57% to 8406.70

    • KOSPI: (17.30) or (0.69%) to 2503.06

    • SENSEX: 390.12 or +0.49% to 80394.18

  • Currencies:

    • $-¥: (1.46) or (0.95%) to 151.6240

    • $-KRW: (4.74) or (0.34%) to 1392.5800

    • A$-$: +0.00 or +0.25% to 0.6492

    • $-INR: +0.10 or +0.12% to 84.4205

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