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StreetAccount Summary - Asian Market Recap: Nikkei +0.07%, Hang Seng (0.02%), Shanghai Composite (0.42%) as of 03:10 ET

Dec 04 ,2024

• Synopsis:

  • Asia equities ended mixed Wednesday. South Korea stocks sank at the open but losses but were capped as BOK and finance ministry assured traders over market support amid martial law uncertainty. Steep losses in New Zealand, Australia off recent peaks. Mainland China benchmarks lower, Hang Seng pared early gains to finish flat. Japan mixed, boards in Taiwan and India higher, most of Southeast Asia also ended higher. US futures higher, Europe opened with small gains. US dollar flat after overnight volatility, AUD and NZD weaker, yen also weakened noticeably, yuan strengthened a little to cap recent losses. Treasury yields mixed, CGB yields declined to below 2.0% on poor services PMI. Crude oil, precious metals higher, base metals mixed.

  • Reverberations from South Korea President's attempt to impose martial law overnight largely limited to country's domestic markets. The Kospi gapped lower only to recover steadily through the day although industrials were still noticeable underperformers by the close. The won recovered from the worst of its overnight losses and sovereign bond yields also bounced back from 2.5-year lows overnight. In political developments, opposition parties submitted an impeachment motion against President Yoon as soon as this Friday as pressure mounted for him to resign before a vote can take place.

  • Elsewhere, China responded to US chip restrictions with export controls on dual-use products to the US with a focus on rare earths. China services PMI expanded but at a slower rate from October's three-month high; India's services and composite PMI ticked slightly lower but both were still firmly in expansive territory. Australia Q3 GDP missed expectations,

  • Mitsubishi Corp (8058.JP) said it may have lost up to $90M in a suspected copper fraud by one of its traders. Rakuten (4755.JP) has begun marketing its third dollar bond offering this year to take advantage of investor appetite for junk-rated debt. Seven & i (3382.JP) proposed management buyout may involve an IPO of its US assets, according to press reports. Lotte Chemical (011170.KS) denied reports over the sale of its construction business. Kakao Corp (035720.KS) stock rose in Seoul as it is viewed as beneficiary from potential removal from Power of President Yoon; POSCO International (047050.KS), Korea Gas (036460.KS), Kepco (015760.KS) among the underperforming stocks.

• Digest:

  • South Korea opposition parties submit impeachment motion against President Yoon:

    • South Korean main opposition parties submitted motion to impeach President Yoon as soon as this Friday following his declaration of martial law that was blocked by lawmakers late Tuesday night (Yonhap). Motion signed by 191 opposition lawmakers with no ruling PP party members voting for it; 200 needed to pass impeachment vote for President. Earlier, Democratic Party said Yoon's action was clear violation of constitution and was "serious act of rebellion, reason for impeachment" (Yonhap). Several opposition lawmakers had overnight called President's actions "tantamount to treason" (KoreaHerald) while largest umbrella labor union said it would strike indefinitely until Yoon steps down (Yonhap). Ruling People's Power Party leader urged Yoon to sack defense chief who proposed martial law over "disastrous situation"; added party was "deeply apologetic" (Yonhap). Senior aides to Yoon offered to resign en masse including national security advisor (Yonhap).

  • BOK to actively stabilize markets, FSC ready to mobilize stock market stabilization fund:

    • In an emergency BOK meeting following the declaration of martial law, board members noted domestic markets have somewhat stabilized after the decree was lifted. In response to underlying market anxiety, board decided to keep all options open and actively take stabilization measures until markets are fully stabilized. Specifics centered on temporary liquidity provisions through irregular repo purchases and expansion of eligible transactions, effective 4-Dec to 28-Feb-25. Operations will be unlimited if needed. FX liquidity to be provided via foreign currency repos and stabilization measures will be implemented in case of any rapid fluctuations. BOK expects market sentiment to gradually stabilize citing solid macro fundamentals, though will closely monitor developments and will actively take additional measures as required. Content aligns with an earlier pledge from financial authorities to mobilize "all possible market stabilization measures," including "injection of unlimited liquidity" (Yonhap). Earlier, Financial Services Commission said authorities are ready to mobilize a KRW10T ($7B) stock market stabilization fund to curb volatility, adding KRW40T can be tapped to stabilize the bond market (Yonhap).

  • China retaliates against US chip restrictions:

    • China Commerce Ministry announced strengthened export controls on dual-use products to US, prohibiting shipments of items such as gallium, germanium, antimony and superhard materials. FT noted this marks a rapid retaliation by Beijing against new export controls from Washington. Several Chinese industry associations including those representing semiconductors and autos jointly voiced strong opposition and urged domestic firms to exercise caution when purchasing US chips (Xinhua). China Semiconductor Industry Association said US arbitrary control measures against China have caused disruptions in the supply chain and increased operating costs for American companies, affecting the stable supply of US chips and making them no longer secure and reliable. FT noted embargoed materials are used in the production of semiconductors, batteries, communications equipment components and military hardware. Suggested latest ban signals President Xi's government is willing to target western economic interests after previously having held back their response to slow the pace of decoupling. Thinktank said immediate impact unclear but warned of the risk that China could add products to the export control list which would have much bigger ramifications.

  • Australian GDP growth misses estimates despite record government spending:

    • Australian Q3 GDP growth rose 0.3% q/q in Q3, missing Reuters consensus of 0.4% and was higher than Q2's 0.2%. Annual growth slowed to 0.8%, slowest since late 2020, compared with 1.1% expected and Q2's 1.0%. ABS noted Australian economy grew for twelfth quarter in a row but has continued to slow since Sep-2023. GDP per capita dropped 0.3%, falling for seventh straight quarter. Growth driven by public-sector expenditure with government consumption and public investment both contributing. Household spending little changed while energy cost relief rebates were treated as shift from household to government expenditure in national accounts. Household savings ratio rose to 3.2%, benefiting from tax cuts and cost-of-living support measures. Bloomberg noted their economists expected growth will remain sluggish and continue contracting in per capita terms as impact of higher rates damps household demand. Added economists at three of the four major banks expect RBA to begin cutting rates in May-2025 while financial markets pricing in almost no chance for a cut in its next meeting on 10-Dec.

  • China services activity expansion slows in November:

    • Caixin services PMI was 51.5 in November, below consensus 52.4 and October's three-month high of 52.0. Data in expansionary territory since Jan-2023. Rate of new business expansion eased from October and was below average. Export business rose at faster pace compared with overall new business but rate of growth also moderated from prior month. Level of outstanding business rose for fourth straight month, resulting in further job creation in service sector, though at marginal rates. Average input costs rose only fractionally while selling prices declined for third time in four months but drops were slower compared with August and September. Business confidence rose to highest level since April as firms were hopeful that better economic conditions and government support could benefit sales. Meanwhile some expressed concerns about global trade outlook and rising competition. Caixin gauge aligns with NBS data that showed non-manufacturing PMI fell to 50.0, compared with consensus 50.3 and October's 50.2. Caixin Composite PMI rose to 52.3 from 51.9, driven by faster expansion in manufacturing sector.

  • Notable Gainers:

    • +8.5% 035720.KS (Kakao): South Korean President Yoon declares and later rescinds martial law; opposition calls for Yoon to step down; Kakao shares rise reportedly as the company has been under regulatory scrutiny since Yoon administration took office

    • +7.1% 7453.JP (Ryohin Keikaku): reports November domestic LFL directly managed stores + online store sales +19.2% y/y

    • +5.8% 142.HK (First Pacific): considers possible spin-off, separate listing of Maynilad Water Services on Philippine Stock Exchange

    • +2.6% 7259.JP (Aisin Corp.): JPMorgan upgrades to overweight from neutral; firm expects company's powertrain business to benefit from regulatory changes in the US

    • +2.4% 9983.JP (FAST RETAILING): reports November Japan Uniqlo same stores + online net sales +12.2% y/y

    • +1.2% 4967.JP (Kobayashi Pharmaceutical): activist investor Oasis reportedly calls on Kobayashi Pharmaceutical to file lawsuit against current and former executives

  • Notable Decliners:

    • -8.5% 6804.JP (Hosiden): to issue ¥10.0B EUR/JPY convertible bonds due December 2031

    • -3.5% 4523.JP (Eisai): JPMorgan downgrades to neutral from overweight; firm believes that availability medical infusion chairs could limit Leqembi sales in the US

    • -2.3% 011170.KS (Lotte Chemical): denies report about sale of its construction materials business

• Data:

  • Economic:

    • China November

      • Caixin services PMI 51.5 vs consensus 52.4 and 52.0 in prior month

        • Caixin Composite PMI 52.3 vs 51.9 in prior month

    • Japan November

      • Final services PMI 50.5 vs preliminary 50.2 and 49.7 in prior month

        • Composite PMI 50.1 vs preliminary 49.8 and 49.6 in prior month

    • Australia Q3

      • GDP +0.3% q/q vs consensus +0.5% and +0.2% in Q2

        • GDP +0.8% y/y vs consensus +1.1% and +1.0% in Q2

  • Markets:

    • Nikkei: 27.53 or +0.07% to 39276.39

    • Hang Seng: (3.86) or (0.02%) to 19742.46

    • Shanghai Composite: (14.16) or (0.42%) to 3364.65

    • Shenzhen Composite: (25.06) or (1.22%) to 2024.41

    • ASX200: (32.60) or (0.38%) to 8462.60

    • KOSPI: (36.10) or (1.44%) to 2464.00

    • SENSEX: 100.91 or +0.12% to 80946.66

  • Currencies:

    • $-¥: +0.89 or +0.60% to 150.4850

    • $-KRW: (3.14) or (0.22%) to 1412.3700

    • A$-$: (0.00) or (0.75%) to 0.6433

    • $-INR: +0.01 or +0.01% to 84.6927

    • $-CNY: (0.02) or (0.21%) to 7.2706