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StreetAccount Summary - Asian Market Recap: Nikkei (0.37%), Hang Seng +0.29%, Shanghai Composite +0.93% as of 03:10 ET

Nov 29 ,2024

• Synopsis:

  • Asian equities ended mixed Friday. A volatile day in Hong Kong with the Hang Seng advancing almost 2% at one stage before retreating; mainland markets stayed higher. India stocks bouncing again but elsewhere losses dominated including in Japan, Taiwan and especially South Korea, which fell nearly 2% as economic data disappointed. US futures higher in thin trade, Europe opened flat. US dollar a tad lower, yen strengthening to one-month highs. Treasuries largely unchanged, CGB yields hitting lowest in two months and nearing record low again. Crude higher, precious metals surging, industrial metals also supported.

  • Asia stocks continuing their mixed trends Friday with Japan's markets giving up some of their weekly gains on a significantly lower yen, and the Hang Seng defying mainland stocks to end lower. Hong Kong surged in the morning session on hopes the Central Economic Work Conference in December will see more stimulus announced but sold off steeply in the afternoon session amid thin trading volumes. Low volumes also blamed for yen volatility, down more than 1% at one stage as the odds of the BOJ hiking next month increased to 60%.

  • In macro developments, Tokyo CPI showed core inflation rose by more than expected to above 2% target; Japan retail sales and industrial production both came in softer than expected while unemployment rose. South Korea industrial production and retail sales contracted on a m/m basis, underscoring soft economic backdrop that underpinned BOK's 25 bp rate on Thursday.

  • The European Commission has approved the merger of Korean Air (003490.KS) and Asiana Airlines (020560.KS) and will finalize the deal before the end of the year. Mitsubishi UFJ (8306.JP) said it would buy robo-wealth advisor WealthNavi for more than $660M. Hybe's (352820.KS) ADOR label has lost major K-pop band NewJeans, in a move that could spark a potential legal battle.

• Digest:

  • Yen rallies through light volumes as Tokyo CPI beat reignites BOJ rate hike speculation:

    • Yen strengthened in Tokyo hours Friday, reaching the 149 range vs dollar for the first time in a month, mainly attributed to firmer than expected Tokyo CPI data that rejuvenated BOJ rate hike speculation (Nikkei). Flows also supportive with exporters implementing month-end yen buying. However, light volumes during US Thanksgiving leaves market susceptible to erratic price action and potentially exacerbated by stop-losses. Recall that wide range of FX strategists' year-ahead forecasts (140-160) reflects elevated uncertainty over the outlook. Still, market conviction advancing from earlier defensive trading after risk aversion trades (main themes of the week were geopolitical risks in Ukraine war, followed by Trump trades) brought USD/JPY down from latest peak 156.75. Nikkei earlier suggested that diminishing Trump effects brought US-Japan yield differentials back to the fore. US yields tracking lower on the week as latest data were seen leaving the path open for a December Fed rate cut and Fed Fund Futures implied odds creeping back up. BOJ OIS also pointing to a higher chance of a December rate hike at 66% as of Wednesday from roughly 50% a week earlier. While rate hike forecasts remain largely split between December and January, latest rhetoric from BOJ Governor Ueda was viewed as somewhat hawkish on the back of his remark that there will be a considerable amount of data available before the December meeting, prompting greater attention on data releases.

  • Tokyo CPI beats, retail sales miss, labor market data mixed:

    • Tokyo core CPI rose 2.2% y/y in November, above consensus 2.0%, following 1.8% in the previous month. Ex-fresh food & energy inflation was 1.9%, matching expectations, following prior month's 1.8%. Main swing factor was energy contributions, which moderated by 0.24 ppt reflecting waning electricity and gas subsidies. Recall the latest round expired in October, rolling off the data after the November billing period. Government has announced another round from January to March as part of latest stimulus measures. Little change elsewhere as a marginal acceleration in highly weighted non-fresh food supported the headline. Closely watched services inflation edged up to 0.9% from 0.8%. Retail sales edged up 0.1% m/m, also missing consensus 0.4% and marks a muted rebound from the prior month's 2.2% decline. Sharp growth in autos and appliances were offset by comparable weakness in apparel. Unemployment rate was in line at 2.5% vs prior 2.4%. Details were positive with solid sequential employment growth driven by regular jobs, largely absorbing increased participation. In contrast, job offers to applicants ratio improved to 1.25 vs consensus and prior 1.24% as slight sequential increase in offers combined with lower applications.

  • Japan industrial production momentum slowing:

    • Industrial production rose 3.0% m/m in October, below consensus 3.9%, following 1.6% in September. Autos among the main positive drivers along with production machinery and metal products. Tech devices, transport equipment ex-autos and general-purpose machinery fell. Shipments were comparably firm, leaving inventories little changed. Core capital goods shipments rebounded sharply, marking a fast start to Q4. However, METI survey projections now point to unusual back-to-back output declines of 2.2% in November and 0.5% in December, pointing a much softer Q4 growth trajectory than last month. Furthermore, adjusted November forecast of -4.1% would leave Q4 little changed. Most sectors expecting declines in both months with the main value-added industries -- production machinery, transport equipment, tech devices and electrical machinery/IT -- posing the biggest drags for November. All of these segments also anticipating additional declines in December. Relatively bearish pivot conforming to ongoing manufacturing PMI contraction and modest quarterly GDP growth forecasts. Recall the September BOJ Tankan survey was somewhat mixed, though takeaways were generally upbeat on the stability in business conditions while BOJ continues to see domestic macro developments tracking in line with their outlook.

  • South Korea activity data broadly soft, export growth seen waning amid US tariff uncertainty:

    • Industrial production was unchanged on the month in October, weaker than expectations of a 0.6% rise. Follows 0.1% decline in the previous month. Shipments fell notably, leading to a rebound in inventories. Operating rates fell for the second straight month. Construction output fell for the sixth month, marking the longest streak since 2008 (Yonhap). Retail sales fell 0.4%, extending a 0.5% decline in September. Capital investment fell back 5.8% from a 10.1% spike in the prior month, reflecting broad-based weakness in machinery and transport equipment (latter down sharply for a third straight month). Services activity index was the lone bright spot, up 0.3% following a 0.8% slide. Takeaways were broadly bearish. Statistics Korea saw industrial production and services activity remaining relatively steady, though acknowledged retail sales as soft and construction sector facing significant challenges. Overall assessment was that data was suggestive of a potential economic slowdown (BusinessKorea). Sluggish cyclical activity heightening attention on exports. Reuters consensus poll found November exports seen slowing for a fourth straight month to the weakest pace in 14 months on slowing US demand amid tariff uncertainty. Partial 20-day trade data showed export growth still underpinned by semiconductors, though US demand on track for the first decline since Jul-23 while China shipments were positive.

  • Street Takeaways: BOK rate cut

    • Economist takeaways broadly acknowledged the BOK's surprise back-to-back rate cut for the first time since the 2008-09 global financial crisis. Noted prior BOK guidance indicated five of six board members were expecting no further easing over the next three months. Decision was widely viewed as indicative of a shift in focus to economic growth over financial stability with macroprudential policies supporting the latter. Growth risks were underlined by a more dovish policy statement, downgraded GDP forecasts, while Governor Rhee remarked that weak exports (amid intensifying competition and protectionism) and US Republican sweep were surprising. However, policy rate forecast implications were limited as economists had generally anticipated a dovish shift and continue to look for additional 25 bp cuts in Q1 and Q2 next year. BOK seen pausing in January with most expecting the next cut in February. Terminal rate estimates concentrated at 2.25% by year-end. Economists expressed conviction toward the next two cuts, though third cut possibly in the summer seemingly fluid depending on FX and Fed moves. BOK guidance showed an even 3-3 split between members expecting rate cuts over the next three months and those seeing no change. However, some caution that guidance can no longer be taken at face value given prior projections (5-1 seeing rates on hold) proved to be false signal.

  • Notable Gainers:

    • +2.8% 540975.IN (Aster DM Healthcare): reportedly nearing agreement to combine with Quality Care India

    • +1.5% 345.HK (Vitasoy International Holdings): holder Kuang Ming Investments discloses purchase of 2.3M shares on 25-Nov

    • +1.0% 2678.JP (ASKUL Corp): reports November non-consolidated net sales ¥34.40B vs year-ago ¥32.11B

  • Notable Decliners:

    • -20.2% 3103.JP (Unitika): to raise ¥20.00B by issuing class C preferred shares to REVIC; ¥43.0B in debt to be written off

    • -6.0% 17.HK (New World Development): sells New World Sports Development to substantial shareholder Chow Tai Fook Enterprises for HK$416.7M cash

    • -4.1% 352820.KS (HYBE Co.): confirms subsidiary ADOR receives termination notice from NewJeans

    • -2.3% 020560.KS (Asiana Airlines): to finalize Asiana merger transaction by year end

• Data:

  • Economic:

    • Japan

      • November Tokyo core CPI +2.2% y/y vs consensus +2.0% and +1.8% in prior month

        • CPI excl. fresh food & energy +1.9% y/y vs consensus +1.9% and +1.8% in prior month

        • Overall CPI +2.6% y/y vs consensus +2.2% and revised +1.8% in prior month

      • October retail sales +0.1% m/m vs consensus +0.4% and revised (2.2%) in prior month

        • Retail sales +1.6% y/y vs consensus +2.0% and revised +0.7% in prior month

      • October industrial production +3.0% m/m vs consensus +3.9% and +1.6 in prior month

        • METI survey projections (2.2%) in November, (0.5%) in December

      • October unemployment rate 2.5% vs consensus 2.5% and 2.4% in prior month

        • Job offers to applicants ratio 1.25 vs consensus 1.24 vs 1.24 in prior month

    • Australia

      • October private sector credit +0.6% m/m vs consensus +0.5% and +0.5% in September

    • South Korea

      • October industrial production 0.0% m/m vs FactSet consensus +0.6% and revised (0.1%) in prior month

        • Industrial production +6.3% y/y vs FactSet consensus +3.1% and revised (1.4%) in prior month

  • Markets:

    • Nikkei: (141.03) or (0.37%) to 38208.03

    • Hang Seng: 56.65 or +0.29% to 19423.61

    • Shanghai Composite: 30.76 or +0.93% to 3326.46

    • Shenzhen Composite: 33.15 or +1.67% to 2016.94

    • ASX200: (8.10) or (0.10%) to 8436.20

    • KOSPI: (48.76) or (1.95%) to 2455.91

    • SENSEX: 788.14 or +1.00% to 79831.88

  • Currencies:

    • $-¥: (1.01) or (0.67%) to 150.1040

    • $-KRW: +2.73 or +0.20% to 1394.0500

    • A$-$: +0.00 or +0.20% to 0.6511

    • $-INR: +0.08 or +0.09% to 84.5112

    • $-CNY: (0.02) or (0.24%) to 7.2294