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StreetAccount Summary - Asian Market Recap: Nikkei +1.91%, Hang Seng +1.00%, Shanghai Composite +0.44% as of 03:10 ET

Dec 03 ,2024

• Synopsis:

  • Asian equities finished mostly higher Tuesday. Stocks led by Japan's Nikkei and Topix; Seoul and Taipei also strong as tech stocks rallied. Gains for the Hang Seng but mainland China boards mixed. India benchmarks at six-week highs, Australia at fresh record high. Southeast Asia mostly higher. US futures ticking higher, Europe higher as it awaits developments in French politics. US dollar flat, yen weaker, yuan at 12M low. Treasuries mixed, CGB yields eased higher away from 2.0% for now. Crude blends higher, precious metals led by silver on dovish Fed comments, base metals led higher by iron ore.

  • Major Asia markets finished with broad-based gains, buoyed by fresh record highs on US boards overnight plus several news items out of China that hinted at fresh stimulus plans. The Hang Seng had opened lower as news emerged the US had launched AI chip and related chipmaking trade restrictions, but closed with solid gains as the agenda for next week's Central Economic Work Conference revealed attendees would discuss stimulus and the country's GDP target. Separately, the PBOC also declared monetary policy support to promote growth next year, giving financial stocks a boost.

  • However, talk of stimulus also sent the yuan to below 7.3 per dollar for a time, its lowest in more than 12 months although China sovereign bond yields rallied after touching 2.0% yesterday. In contrast, yen rallied to its highest in six weeks as market bets on BOJ hikes later this month, with the currency also sitting precariously on several support lines. Elsewhere, South Korea inflation rebounded by less than forecast in November and held below BOK's 2.0% target leading several economists to forecast more rate cuts in H1-25. Australia GDP partials showed net exports and government spending to make positive contributions to Q3 GDP growth.

  • President-elect Trump reiterated his opposition to Nippon Steel's (5401.JP) takeover of US Steel. China Mobile Hong Kong has offered to take HKBN (1310.HK) private at HK$5.23 per share. A Hong Kong court dismissed winding up proceedings against Shimao Holdings (813.HK) with company saying almost 80% of creditors have agreed to the proposed restructuring. Adani Enterprises (512599.IN) and Adani Power (533096.IN) are among the listed companies that have approached the India market regulator to settle public shareholding allegations from 2020.

• Digest:

  • China Central Economic Work Conference to start next Wednesday:

    • Bloomberg sources said the CEWC will begin next Wednesday and run for two days, consistent with last year's dates. Article noted that party officials likely won't announce when the meeting starts, placing the focus on the release of the readout. As usual, major economic numerical targets won't be revealed until the annual parliament session in March, though CEWC will still attract attention for clues on policy direction. Main expectations heading into the event include a preservation of the official GDP growth target at about 5% despite Trump tariff risk. Some also foresee a higher deficit target, citing UBS estimate of 3.5%-4% of GDP. Slew of recent stimulus announcements have apparently placed growth back on track to meet this year's target, though officials will likely leave headroom to respond to Trump policies. Story also mentioned typical trading patterns around CEWC; historical analysis since 2013 found CSI 300 tends to decline after the readout compared to prior seven days. Immediate attention turns to the preceding Politburo meeting after no statement was published in November. PBOC Governor Pan reaffirmed a supportive monetary policy stance for 2025 (Xinhua).

  • US launches China chip restrictions, Japan semis rally on carveouts:

    • Press reported US Commerce Department launched its plan to curb China's access to essential components for chips and AI though somewhat diluted from earlier proposals as previously reported (Bloomberg, Reuters). Measures added 140 Chinese firms to the Department's entity list. Particular attention on suppliers to Huawei Technologies deemed to "pose a significant risk of becoming involved in activities contrary" to US national security or foreign policy interests. Also expanded existing controls on chipmaking equipment, including products made by US firms at foreign facilities, but with carveouts for key allies, such as Japan and the Netherlands, designed to leave room for these countries to enact their own measures. Articles focused on which multinationals stand to be impacted. Chipmaking equipment rules could hit firms such as Lam Research (LRCX), Applied Materials (AMAT), ASM International (ASM.NA). Software controls could affect Siemens (SIE.GR). HBM2 restrictions pose implications for SK Hynix (000660.KR) and Micron Technology (MU), though industry sources expect only Samsung Electronics (005930.KR) to be affected. Japan semis rallied on the carveout which lifted an overhang on the sector (Nikkei). Closing gains were led by Furukawa Electric (5801.JP) +7.04%, Fujikura (5803.JP) +6.18% and Disco (6146.JP) +6.07%.

  • Yuan drops to one-year low on concerns about weak economy, higher tariffs:

    • Onshore yuan fell as much as 0.4% to 7.2996 per dollar before paring declines Tuesday, weakest level since Nov-2023 as Bloomberg noted traders adding bearish bets on weak China growth amid higher US tariff risks. Offshore yuan at one point hit 7.3148 level, also lowest in 13 months. It came after 10Y CGB yield dropped below 2% to hit lowest level on record on Monday as easing bets drove traders to seek safety of bonds (Reuters) and broad dollar strength (Reuters). PBOC has been boosting support for yuan by setting a stronger-than-expected daily fixing since Trump's victory in early November which saw the largest strong bias on Tuesday since August. Still yuan underperformed Asian peers last month as investors worried that higher US tariffs would worsen China's economic woes in 2025 while effects of Beijing's stimulus blitz in late September were fading and its property market still in a slump. Analysts expect yuan might fall below 17-year low against dollar in 2025 with most bearish ones eyeing a 10% decline.

  • BOJ bond market survey shows mild improvement:

    • Headline BOJ bond market functioning DI was -20 in November following -23 in August, marking the seventh straight rise and highest level since Nov-15. Details were mostly better as a notable increase in the DI for bid-ask spreads stood out over mild improvements in most other components. Median forecasts for 10-year JGB yields (currently 1.07%) pointed to 1.14% at end of Mar-25, 1.20% in June and 1.25% in September. All major tenors seen undergoing a gradual rise. Nikkei said recovery was limited by the moderate pace of BOJ JGB purchase reductions (JPY400B per quarter) which leaves BOJ market share high. Results presage the publication of BOJ's long-term policy review after the Dec 18-19 MPM. BOJ has said the outcome will not have direct implications on near-term monetary policy, though will likely include findings and surveys that justify its plan to steadily proceed with policy normalization (Reuters). Analysis may also include hints on what risks the BOJ may focus on as it continues to taper asset buying and raise interest rates from still-near zero levels. Content expected to highlight key flaws such as how the BOJ's huge asset buying and bond yield cap drained market liquidity, distorted asset pricing, eroded bank profitability and forced financial institutions to increase high-risk lending such as those to the property sector.

  • Lower-than-expected South Korea inflation could pave way for more BOK rate cuts:

    • South Korea consumer inflation rose to 1.5% y/y in November from 1.3% in prior month, but was below FactSet consensus 1.8% and added to concerns domestic economic growth is slowing. Headline rate ticked higher from October's 1.3% partly on high base rate last year, partly on reduction in fuel-tax cuts; core inflation rose 1.9% y/y versus 1.8% in prior month, to indicate underlying prices remained under control (Yonhap). BOK said recent won weakening yet to impact inflation, said December's print could reach 2.0% when added low-base effects included. Economists see South Korea economic growth decelerating amid slowing exports, uncertainty over Trump's dollar policy and subsequent impact on won, declining retail sales and consumer confidence. Lingering credit risks in construction sector added factor, say economists. Add November inflation miss could lead to BOK becoming comfortable with additional rate cuts in H1-25 to add to last week's surprise 25 bp trim (Bloomberg).

  • Notable Gainers:

    • +6.8% 2593.JP (ITO EN): reports H1 results; to launch off-auction buyback for up to ¥3.30B

    • +6.1% 6146.JP (DISCO Corp.): US Commerce Department reportedly has launched its plan to curb China's access to essential components for chips and AI

    • +4.9% 1310.HK (HKBN Ltd.): confirms receiving competing non-binding offer from I Squared Asia Advisors; subsequently China Mobile offers to acquire at HK$5.23/share

    • +4.4% 020560.KS (Asiana Airlines): US Department of Justice reportedly allows Korean Air, Asiana to merge

    • +4.0% 000270.KS (Kia Corp.): Kia Corp. provides value-up plan; targets ROE above 15% for 2025-2027

    • +1.6% 4967.JP (Kobayashi Pharmaceutical): holder Oasis requests EGM over red yeast supplement scandal

    • +1.4% 373220.KS (LG Energy Solution): GM and LG Energy Solution extend battery technology partnership to include prismatic cell development; GM to sell stake in Lansing Michigan Ultium plan to LGES

  • Notable Decliners:

    • -14.1% 2252.HK (Shanghai MicroPort MedBot (Group)): to launch placement of 34.7M new H shares at HK$7.85/sh through JPMorgan and CICC

    • -3.9% 002371.CH (NAURA Technology Group): US Department of Commerce adds 140 firms to entity list for chip export restrictions; US Department of Commerce reportedly has launched its plan to curb China's access to essential components for chips and AI

• Data:

  • Economic:

    • Australia

      • Q3 current account balance (A$14.1B) vs consensus (A$10.9B) and revised (A$16.4B) in Q2

        • Net exports to contribute 0.1 ppt to Q3 GDP vs +0.2 ppt addition to Q2 GDP

        • Public demand to contribute 0.7 ppt to Q3 GDP

    • South Korea

      • November CPI +1.5% y/y vs FactSet consensus +1.8% and +1.3% in prior month

        • CPI ex-food & energy +1.9% y/y vs +1.8% in prior month

  • Markets:

    • Nikkei: 735.84 or +1.91% to 39248.86

    • Hang Seng: 196.03 or +1.00% to 19746.32

    • Shanghai Composite: 14.82 or +0.44% to 3378.81

    • Shenzhen Composite: (2.96) or (0.14%) to 2049.47

    • ASX200: 47.30 or +0.56% to 8495.20

    • KOSPI: 45.62 or +1.86% to 2500.10

    • SENSEX: 501.40 or +0.62% to 80749.48

  • Currencies:

    • $-¥: +0.55 or +0.37% to 150.1420

    • $-KRW: (4.15) or (0.30%) to 1400.9100

    • A$-$: +0.00 or +0.26% to 0.6493

    • $-INR: (0.03) or (0.04%) to 84.6829

    • $-CNY: +0.01 or +0.14% to 7.2820