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StreetAccount Summary - Asian Market Recap: Nikkei +0.80%, Hang Seng +0.65%, Shanghai Composite +1.13% as of 03:10 ET

Dec 02 ,2024

• Synopsis:

  • Asian equities finished mostly higher Monday following upbeat regional PMI data. Strong gains in Japan, mainland China and Taiwan; Hong Kong, Australia and Singapore also returned solid gains. India and South Korea flat; Jakarta the only major benchmark showing a meaningful loss. US futures lower, Europe opened with losses on worries over political stability in France. US dollar notably stronger on Trump comments on emerging markets; Asia forex declines led by yen while yuan hit four-month low. Bond yields higher across the region except in China, which is seeing its 10Y CGB yield at record low. Crude higher, precious metals sharply lower on dollar strength, industrials mixed.

  • Asia markets started the week with positive momentum following regional manufacturing PMIs that showed a general pickup in activity following several months of contraction. China PMIs were mixed with manufacturing ticking higher but non-manufacturing slipped unexpectedly; analysts warned the mix pointed to necessity for additional stimulus, supporting equities but also weakening the yuan and sending CGB yields down to near 2.0%. Strategists also pointed out China's Communist Party had missed publishing a statement on its November meeting with some questioning whether the meeting had even taken place.

  • Other Asia PMIs generally positive with Taiwan and South Korea expanding, and ASEAN also growing slightly. South Korea's positive pivot tempered by separate data that revealed export growth fell to a 14-month low in November as growth in chip shipments slowed sharply. Elsewhere, BOJ Governor Ueda said rate hikes nearing with economic data on track. Friday's poor India quarterly GDP print and weaker-than-expected PMI reading led to increased calls for the RBI to ease policy as early as this week.

  • Nissan Motor's (7201.JP) CFO Ma is to step down just weeks after the company issued a profit warning and announced it would cut thousands of jobs globally. Korea Zinc's (010130.KS) board will convene a meeting Tuesday to decide whether to hold a shareholder meeting in January to decide on a new slate of directors proposed by its biggest shareholder block. Kaisa Group (1638.HK) has proposed a $12.3B debt restructuring plans that includes a convertible bond and share issuance. Adani Green Energy (541450.IN) said it is reconsidering whether to resurrect its scrapped dollar bond issue between April and June next year.

• Digest:

  • China official manufacturing PMI edges higher as tariff threats loom:

    • Official China manufacturing PMI was 50.3 in November, compared to consensus 50.2. Follows 50.1 in the previous month, marking the second straight month in expansion territory. Output and new orders growth showed some pickup while export declines narrowed. Auto sector was among the outperformers with output and new orders above 54.0 Yet inflation metrics softened; input prices swung back to declines after the prior month's rebound while output prices fell at a faster pace. Large enterprise index fell, though remained in expansion while medium firms improved to neutral and small firm contraction eased. High-tech sector gained notable momentum while consumer goods makers swung to growth. NBS cited back-to-back strong outlook readings (returning to mid-year levels) as a positive signal. In contrast, nonmanufacturing PMI was 50.0 vs consensus 50.3, following 50.2 in October. Activity has tracked around the neutral mark since July. Main drag was construction, notably shifting to contraction, contrasting with stability in services. Composite PMI was steady at 50.8. Takeaways were mildly positive as the data added to tentative signs of recovery since the series of stimulus announcements. However, most of the focus was on prospective tariff headwinds next year under the incoming Trump administration. Subsequent Caixin manufacturing PMI also improved, coming in at 51.5 vs consensus 50.5 from 50.3 in the prior month.

  • China's 10Y yield drops to record low on PBOC easing bets:

    • China's 10-year government bond yield at one point dropped below key psychological 2% to 1.9975% on Monday, record low since at least April-2002 (Cailian). 30Y yield also declined four bp to 2.17% after it fell below its Japanese counterpart on Friday for first time. Bloomberg noted traders ramped up easing bets from PBOC to boost economy, snapping up CGBs as latest round of economic data, from improved PMIs to prolonged property slump, continues to show unbalanced recovery in Chinese economy with looming concerns about escalating tensions with incoming Trump administration. Economists said rally driven by three main factors: expectations of RRR cut as PBOC Governor Pan hinted such move by year-end, supportive liquidity conditions and still-weak economic fundamentals. Noted PBOC added liquidity support and bought net CNY200B of sovereign bonds from dealers in November (Bloomberg). FT added crossover between China and Japan's long-term bond yields showed investors bet Chinese economy might become bogged down by deflation that has long afflicted the latter. Issue might not be easily fixed through fiscal and monetary policy alone which means China possibly remains in a low-yield environment.

  • China skips November Politburo readout, attention turns to December meeting:

    • Bloomberg reported Politburo did not publish a readout for its regular November meeting in a rare omission amid heightened focus on stimulus. This was the first occurrence since May-23. Article said it was unclear whether the meeting did not take place or that members elected not to disclose sensitive matters. Also noted the possibility that state media may release the statement later. While there is no public mandate to meeting monthly, Bloomberg counted Politburo convened in 90% of the time during President Xi's tenure. Attention shifts to the more important December meeting which will presage the Central Economic Work Conference. Recall that markets are looking to year-end policy gatherings for details on stimulus plans as well as meaningful additions from fiscal policy after earlier announcements generally underwhelmed. Economists have noted some fairly strong expectations for an increase to the target for deficit-to-GDP ratio (currently 3%). Also some suggestions that stimulus may be expanded depending on the extent of US import tariff hikes on China under the incoming Trump administration.

  • BOJ Governor Ueda says next rate hikes approaching:

    • In a Nikkei interview, BOJ Governor Ueda said next rate hikes are "nearing in the sense that economic data are on track." However, with market expectations divided on the move between December and January, Ueda has expressed caution about timing and has insisted that he would like to observe domestic wage trends and the political and economic situation in the US. Reiterated the core message that BOJ will "adjust the degree of monetary easing at the appropriate time if we become confident or certain that the economy will move" according to forecast, and "particularly that the underlying inflation rises toward 2%." Wage growth remains a key focus and Ueda is looking ahead to next year's shunto developments. With President-elect Trump returning to the White House, "there is a big question mark left on the outlook for US economic policy," stressing that the BOJ will avoid rushing to raise rates. Remarks on FX leaned hawkish though discussion was more forward-looking, cautioning potential BOJ countermeasures if yen weakens after inflation starts to rise above 2% (seemingly referring to underlying measures). Continued to express uncertainty over neutral rates, estimated to range between -1% and +0.5%. However, suggested for the first time that 2% inflation implies a policy rate between 1% and 2.5%.

  • South Korea trade data disappoint ahead of potential US tariff hikes:

    • Customs exports rose 1.4% y/y in November, below consensus 2.8%, following 4.6% in the previous month. Latest reading confirmed the softest momentum in the current 14-month growth streak (Reuters). Consistent with the 20-day data, exports to US dropped 5.1%, the first decline since Jul-23. China shipments slid 0.6% after partial data were tracking positive, while EU demand grew 0.9%. Semis rose 30.8%, weakest in 11 months, though Yonhap noted nominal value was a November record and trade ministry remains upbeat on this segment. Autos fell 13.6% in the fastest contraction since Jun-20 due to auto parts maker strikes and bad weather delays. Imports also missed, down 2.4% vs an expected 0.4% increase and 1.7% growth in October, marking the first decline in five months. Main focus remains on a potential tariff fallout under the next Trump administration. Recall economists' analysis of the surprise BOK rate cut included reference to Governor Rhee's remark that weak exports (amid intensifying competition and protectionism) and US Republican sweep were notable surprises. These were seen contributing to the change in policy priority to economic growth over financial stability. BOK generally expected to cut rates further by 25 bp per quarter through next summer.

  • Notable Gainers:

    • +25.8% 2238.HK (Guangzhou Automobile Group): signs strategic agreement with Huawei for new EV brand; terms undisclosed

    • +19.6% 010130.KS (Korea Zinc Co.): reportedly to hold EGM 23-Jan to vote on new board

    • +18.3% 9896.HK (MINISO Group Holding): reports Q3 results; adjusted EPADS in line with FactSet estimates

    • +9.2% 1638.HK (Kaisa Group Holdings): proposes $12.27B debt restructuring plan with convertible bonds and share issuance

    • +3.8% 175.HK (Geely Automobile Holdings): reports November sales volume 250,136 units, +27% y/y

    • +2.6% 17.HK (New World Development): CEO Ma Siu-Cheung resigns to pursue other personal commitments; Huang Shaomei Echo appointed replacement

    • +0.4% 7201.JP (Nissan Motor): Stephen Ma reportedly to step down as Nissan Motor CFO

  • Notable Decliners:

    • -10.3% 036460.KS (Korea Gas): South Korean government reportedly plans to reduce budget for Blue Whale oil and gas project

    • -6.6% 4911.JP (Shiseido): provides action plan 2025-2026 for medium-term strategy; targets 7% core operating profit margin in 2026

    • -1.5% 7912.JP (Dai Nippon Printing): to conduct 14.6M-share secondary offer; to launch up to 10.0M-share buyback for up to ¥20.0B to mitigate impact of secondary offer

    • -1.3% 9983.JP (FAST RETAILING): reportedly waiting to see if chairman Tadashi Yanai's comments on Xinjiang cotton affect demand in China as Chinese social networking sites discuss Yanai telling BBC this week that Fast Retailing isn't using cotton from Xinjiang

• Data:

  • Economic:

    • China November

      • Official manufacturing PMI 50.3 vs consensus 50.2 and 50.1 in prior month

        • Non-manufacturing PMI 50.0 vs consensus 50.3 and 50.2 in prior month

        • Composite PMI 50.8 vs 50.8 in prior month

      • Caixin manufacturing PMI 51.5 vs consensus 50.5 and 50.3 in prior month

    • Japan

      • Q3 MOF corporate survey capex +8.1% y/y vs consensus +6.7% and +7.4% in prior quarter

        • Ex-software capex +9.5% y/y vs consensus +8.2% and +9.1% in prior quarter

      • November final manufacturing PMI 49.0 vs preliminary 49.0 and 49.2 in prior month

    • Australia

      • Q3 business inventories (0.9%) vs consensus (0.2%) and (0.1%) in Q2

        • Company profits (4.6%) vs consensus +0.7% and (5.3%) in Q2

      • November ANZ-Indeed job advertisements (1.3%) m/m vs revised +0.7% October

      • October building approvals +4.2% m/m vs consensus +1.3% and revised +5.8% in September

      • October retail sales +0.6% m/m vs consensus +0.4% and +0.1% in September

    • South Korea

      • November trade balance $5.61B vs consensus $5.15B and $3.15B in prior month

        • Exports +1.4% y/y vs consensus +2.8% and +4.6% in prior month

        • Imports (2.4%) y/y vs consensus +0.4% and +1.7% in prior month

    • India November

      • Final manufacturing PMI 56.5 vs flash reading 57.3 and 57.5 in prior month

  • Markets:

    • Nikkei: 304.99 or +0.80% to 38513.02

    • Hang Seng: 126.68 or +0.65% to 19550.29

    • Shanghai Composite: 37.53 or +1.13% to 3363.98

    • Shenzhen Composite: 35.49 or +1.76% to 2052.44

    • ASX200: 11.70 or +0.14% to 8447.90

    • KOSPI: (1.43) or (0.06%) to 2454.48

    • SENSEX: 49.33 or +0.06% to 79852.12

  • Currencies:

    • $-¥: +0.54 or +0.36% to 150.2900

    • $-KRW: +6.51 or +0.47% to 1402.0000

    • A$-$: (0.00) or (0.27%) to 0.6495

    • $-INR: +0.14 or +0.16% to 84.6985

    • $-CNY: +0.03 or +0.38% to 7.2693