Back to Daily DR Market Summary

StreetAccount Summary - Asian Market Recap: Nikkei +0.56%, Hang Seng (1.20%), Shanghai Composite (0.43%) as of 03:10 ET

Nov 28 ,2024

• Synopsis:

  • Asian equities ended mixed Thursday. Greater China partly reversed yesterday's gains, losses in India, Taiwan and parts of Southeast Asia. Japan bounced back from hitting three-month support level Wednesday, Australia rose to second record high of the week. South Korea's Kospi flat as BOK lowered rates. US futures higher, Europe opened with gains. US dollar higher, yen weakening, other Asia currencies also weaker including the yuan. Treasury yields lower, JGB yields down, CGB yields nearing record lows, South Korea sovereign yields at eight-month low post BOK. Crude prices down, precious metals steeply lower following overnight dollar move. Industrials steady.

  • Asia equities continued in directionless form seen on Wednesday as Greater China and Japan both pared yesterday's moves. Australia notable for its second record high of the week as growth factor stocks surged again to offset losses in energy names. Elsewhere, stocks failing to follow through from losses on Wall Street overnight where strong PCE inflation data weighed, and, as volumes dropped off ahead of US holidays, benchmarks rather drifted into the close.

  • The Bank of Korea cut policy rate by 25 bp, technically in line with consensus although recent economist reports had speculated on a cut following a sharp decrease in October inflation. Commentary leaned cautious with dissenting votes hinting at a slowdown in cuts in 2025. New Zealand business confidence held near 10-year high with inflation pressures also cooling. RBNZ Assistant Governor Silk flagged slower pace of easing in 2025 with likely pauses. Wired and Bloomberg reported US readying fresh semiconductor curbs on exports to Chinese companies but could stop short of earlier proposals.

  • Fast Retailing's (9983.JP) CEO said the firm does not use cotton sourced in Xinjiang province in China. Five Japanese banks said to be considering financing proposals from Seven & i's (3382.JP) founding family for a takeover bid to thwart Alimentation Couche-Tard's offer. BYD (1211.HK) has asked suppliers to lower costs just as a leaked company letter shows the industry price war is set to intensify. Adani Green Energy (541450.IN) said Gautam Adani faces charges in the US over securities law violations.

• Digest:

  • Bank of Korea cuts policy rate by 25 bps to 3.0% to counter economic slowdown:

    • Bank of Korea cut benchmark interest rate 25 bps to 3.0% in clear policy pivot toward supporting economic growth amid signs economy stagnating. Consensus expectations had been for no change but moved toward quarter point cut post sharp fall in October CPI. Trim is second consecutive rate cut, underlining concerns bank has over domestic economy (Yonhap). Governor Rhee said bank needed to exercise caution given forex volatility, will take steps to stabilize currency markets if necessary. Added board had extensive discussion on impact of rate cut on won. Rhee said Trump uncertainty, slowing exports behind rate cut decision, admitted Q3 export volumes much lower than expected. Said rate cut will boost growth by almost 0.1 percentage point. Two MPC board members dissented from majority to vote for no change, indicating slower pace of rate cuts in 2025. Bank also cut FY-24 growth outlook to 2.2% from 2.4% set in August, FY-25 growth of 1.9% from 2.1%; lowered FY-24 inflation projection to 2.3%, FY25 forecast 1.9% from 2.1%.

  • US readies China chip curbs short of earlier proposals:

    • Biden administration is weighing additional curbs on sales of semiconductor equipment and AI memory chips to China, accelerating White House drive to cap Beijing's semiconductor ambitions, according to Bloomberg that cited sources familiar with the matter. However, curbs stop short of earlier proposals as fewer Huawei suppliers added to trade entity list than first proposed, including omission of ChangXin Memory Technologies that is developing AI memory chip technology. Two chip factories owned by SMIC (981.HK) remain on list. Wired earlier reported more than 200 additional entity listings to focus on chip-making equipment manufacturers but handful of chip fabrication companies also included. Bloomberg added sanctions represents partial win for Lam Research (LRCX), Applied Materials (AMAT), KLA (KLAC) that have lobbied against restrictions as they would advantage rivals ASML (ASML.NA), Tokyo Electron (8035.JP). Final control rules may be published as early as next Monday.

  • Japan to issue $44B in JGBs to fund FY24 extra budget:

    • Nikkei leak said government will issue JPY6.69T ($44.16B) in JGBs to fund about half the JPY13.94T FY24 supplementary budget. Tax revenue surplus apparently alleviated the debt burden with FY24 projection revised up by some JPY3.83T from the initial estimate, while additional funds will be drawn from the FY23 surplus and non-tax revenues. JGB issuance will mostly come in the form of deficit-covering bonds. Story was corroborated by Reuters, citing multiple sources, which specified the tax revenue forecast will be revised up to about JPY73.4T from prior JPY69.6T, and also that JGB issuance would be over JPY6T. Supplementary budget is expected to be finalized Friday. JGB market impact was limited given the lack of size. Recall that fiscal policy from FY25 onwards is looming as a bigger risk factor as the LDP-led minority government negotiates with DPP for critical support to pass legislation. Primary attention on how far LDP will concede to raise the income tax-free threshold after party talks concluded with an agreement in principle, but with no specific commitments. DPP is pushing to lift the threshold to JPY1.78M from JPY1.03M. Next biggest item on DPP's stimulus agenda is a temporary consumption tax cut to 5% from 10% until real wage growth is sustained. Recent reports indicated LDP unlikely to meet these demands given the depletion of social security funding.

  • Foreign investors eyeing Japanese companies with undervalued real estate:

    • Bloomberg discussed growing interest among global hedge funds and PE firms in Japanese companies in a bid to unlock undervalued real estate. Latent gains emerging as a theme behind some of the biggest activist campaigns and M&A deals announced in Japan this year. Cited Elliott Investment Management's 5.03% stake in Tokyo Gas (9531.JP) with a real estate portfolio estimated to be worth about JPY1.5T, almost on par with its entire market cap. Unrealized gains stem from properties logged at book value, while market value has been boosted by the recent revival in prices. Cited Goldman Sachs estimates there could be at least JPY25T in unrealized gains among more than 250 Japanese companies whose core business lies outside of real estate, notably in railway, construction and utility sectors. Recall that local press has periodically covered this theme, noting unrealized property gains have swelled to record highs. Recent coverage has come in the context of the current corporate governance push for improved capital efficiency and shareholder returns. With many firms undervalued when considering unrealized property gains, this is seen as a key dormant asset behind cash and cross shareholdings.

  • Tariffs, Trump policy agenda and China stimulus among 2025 themes for Asia:

    • Going into 2025 sell-side strategists have identified common themes influential for direction of Asian economies and markets next year. Tariffs: General expectation that tariffs will contribute to further slowdown in China economic growth next year, though magnitude of slowdown contingent on timing and size of tariffs. Yuan seen facing acutest depreciation pressures, causing related weakness in currencies of Asian countries with large proportion of exports to China such as KRW and TWD. US political environment: Trump's pro-growth agenda of tax cuts and deregulation has created bullish environment for dollar with markets paring 2025 Fed rate cut expectations. Implications for EM equities mixed with strong dollar and higher US yields posing headwinds. However dovish Fed rate path viewed as bullish for EM equities along with any positive surprises in tariff developments. China stimulus: Amid elevated stimulus expectations, markets highly attuned to policy announcements out of December's economic work conference and/or March National People's Congress. Size of stimulus and fiscal policy mix (extent of consumer/domestic demand support) seen as crucial in mitigating tariff-related headwinds.

  • Notable Gainers:

    • +12.8% 8795.JP (T&D Holdings): publishes IR meeting materials; discussions are underway to review the shareholder return policy and enhance cash dividends (starting from dividends for FY ending Mar-26).

    • +12.6% 6525.JP (Kokusai Electric): Biden administration reportedly weighing additional curbs on sales of semiconductor equipment and AI memory chips to China

    • +4.8% 068270.KS (Celltrion): updates on mid-to-long term business outlook; in FY25 targets KRW5T in sales of biosimilar/new drug business

    • +3.0% 3103.JP (Unitika): confirms it is considering exit from unprofitable operations within textile division, following reports that it will withdraw from fiber business

    • +1.8% 3382.JP (Seven & i): five major Japanese banks reportedly considering financing proposed takeover by founding family

    • +1.4% 7203.JP (Toyota Motor): reports October domestic production +8.3% y/y to 306,059

    • +0.5% 532648.IN (YES BANK): MUFG, SMBC reportedly unlikely to pursue Yes Bank acquisition over differences in controlling rights

  • Notable Decliners:

    • -5.4% 3003.JP (Hulic Co.): to launch 85.4M-share secondary offer

    • -4.3% 000660.KS (SK Hynix): announces shareholder return policy for 2025-27

    • -1.0% 883.HK (CNOOC): president Zhou Xinhuai steps down due to work commitments, effective today

• Data:

  • Economic:

    • Australia

      • Q3 private capital expenditure +1.1% q/q vs consensus +1.0% and (2.2%) in Q2

    • New Zealand

      • November ANZ Business Confidence +64.9 vs +65.7 in October

  • Markets:

    • Nikkei: 214.09 or +0.56% to 38349.06

    • Hang Seng: (236.17) or (1.20%) to 19366.96

    • Shanghai Composite: (14.08) or (0.43%) to 3295.70

    • Shenzhen Composite: (12.92) or (0.65%) to 1983.79

    • ASX200: 37.60 or +0.45% to 8444.30

    • KOSPI: 1.61 or +0.06% to 2504.67

    • SENSEX: (976.07) or (1.22%) to 79258.01

  • Currencies:

    • $-¥: +0.69 or +0.46% to 151.8090

    • $-KRW: +4.04 or +0.29% to 1395.3600

    • A$-$: (0.00) or (0.25%) to 0.6482

    • $-INR: +0.06 or +0.07% to 84.4976

    • $-CNY: +0.00 or +0.07% to 7.2519