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StreetAccount Summary - Asian Market Recap: Nikkei (0.77%), Hang Seng +1.56%, Shanghai Composite +1.05% as of 03:10 ET

Dec 06 ,2024

• Synopsis:

  • Asian equities finished mostly lower Friday. Greater China benchmarks ended higher on hopes of fresh fiscal stimulus and/or easier monetary policy will be announced next week. But elsewhere, stocks fell including those in Australia, Japan, South Korea and Taiwan. India is flat, a handful of Southeast Asia benchmarks ended higher. US futures lower, Europe opened near unchanged. US dollar flat but AUD and NZD down again. Treasury yields mostly higher. Crude flat, precious metals reversing yesterday's losses. Industrial metals supported. Cryptocurrencies bouncing back a little from overnight losses.

  • Greater China markets ended a largely positive week on a high as brokers speculated over the size of potential interest rate cuts the PBOC may execute, and on possible new fiscal stimulus to be announced at the Central Economic Work Conference next week. But other markets ticked lower on fresh political concerns in South Korea after rumors of a second martial law declaration emerged early on, and President Yoon's own ruling party appeared to turn against him.

  • India markets were flat as RBI kept its base repo rate on hold, as expected, and moved to shore up liquidity by cutting its cash reserve ratio. But it also lowered full-year growth forecasts and said it believed inflation would linger this quarter. Japan's real wages were flat m/m although an improvement from September's number, consumer spending dipped further but at a slower pace.

  • Mitsubishi Heavy (7011.JP) is to sell its forklift unit Logisnext as it looks to boost capital efficiency. TSMC (2330.TT) is in talks with Nvidia over production of its Blackwell AI chips in its new production facility in Arizona. Aelios has made a mandatory conditional cash offer for Suntec Real Estate Investment Trust (T82U.SP) but a broker has recommended it reject the offer.

• Digest:

  • Dovish PBOC policy forecasts look for biggest rate cuts in a decade next year:

    • Bloomberg highlighted some above-consensus PBOC easing forecasts for the seven-day reverse repo rate next year. Cited estimates from Goldmans Sachs, Morgan Stanley and Macquarie looking for 40 bp in total easing, which would be the sharpest annual cuts since 2015. Mizuho calling 60 bp. Compares with most recent Bloomberg consensus of 30 bp. Article discussed two-sided arguments. Supportive factors led by dovish guidance from PBOC Governor Pan. GDP deflator has been negative since early 2023, attesting to deflation risk. Mizuho noted borrowing costs are unreasonably high relative to nominal GDP. Opposing case includes limited scope with banking NIMs at record lows while few think monetary policy alone can provide sufficient stimulus. While most of the onus lies with fiscal policy, Goldman said a broad-based approach is still needed to counteract strong headwinds from weak demand and potential US tariff hikes. Article suggested dovish market expectations may portend a structurally low-rate environment with China bond yields already depressed (10-year hit record-low). PBOC also cognizant of capital flight risk as a consequence of more aggressive easing.

  • RBI holds rates steady, cuts cash reserve ratio, lowers FY GDP forecast:

    • RBI kept its base repo rate unchanged at 6.5%, as largely expected despite growing number of economists calling for cut post disappointing Q2 GDP figures. Bank's MPC voted 4-2 to keep rate steady, voted unanimously to keep 'neutral' stance. Bank trimmed cash reserve ratio 50 bp to 4.0% to address financial sector liquidity issues, Governor Das said move was within bank's neutral policy stance; added bank had conducted variable reverse repo rate operations to support liquidity. Das said food inflation likely to persist in Q3 but could ease in Q4-FY25, warned growing frequency of weather-related events, financial volatility, geopolitics pose significant inflation risks. Noted Q2's economic weakness especially in manufacturing, added high-frequency indicators suggested bottom reached during period but still lowered FY 2025 growth projection to 6.6% from 7.2%, inflation forecast at 4.8% from 4.5%. RBI also to raise interest rate ceilings on foreign currency fixed deposits to attract back foreign investors.

  • South Korea markets dip on rumors of fresh martial law decree:

    • South Korea stocks, sovereign bond futures and won fell steeply for a time Friday morning on reports of second martial law declaration. Opposition lawmakers said to be on high alert for second decree, sending Kospi down 1.8%, won down 0.8%, since recovered. Hours before rumors spread, ruling People's Power Party chief Han Dong-hoon said President Yoon should no longer be permitted to exercise his executive powers after seeing 'damning evidence' Yoon planned to arrest major political leaders as part of initial martial law scheme (KoreaHerald). However, he reiterated did not support opposition impeachment and vote set for Saturday evening. In addition to impeachment, Yoon now also faces police investigation over treason allegations (Yonhap). Comes amid growing anger in South Korea over martial law move Tuesday with major protest scheduled at National Assembly building Saturday ahead of vote (KoreaHerald).

  • Japan wage growth in line underpinned by base pay, household spending beats:

    • Nominal average wages rose 2.6% y/y in October, matching expectations. Prior month revised to 2.5% from 2.8%. Details were positive. Contracted earnings logged highest growth in more than two years as scheduled payments (base pay) grew 2.8%, strongest in nearly 32 years. Overtime payments also rebounded from prior month's decline. Real wages were unchanged vs consensus -0.1% and revised -0.4% in September. Support also came from moderation in the deflator. Strength in wage growth accentuated as total working hours fell for the third straight month with scheduled and overtime shifts both in decline. Household spending fell 1.3% y/y though better than consensus -2.5%. Follows 1.1% decline in September, marking the third straight slide. Core spending GDP input rebounded 2.9% m/m from a 1.3% drop in September, signaling a positive start to Q4. Year-ago figures showed electric utilities and autos were notable contributors. Main breadwinner salaries rebounded 2.8% y/y from prior month's 1.6% decrease. BOJ real consumption activity index fell 0.4% m/m after prior month was unchanged pointing to a soft start to Q4. Durable goods on an upswing, consistent with a recovery in auto purchases, though has proven volatile in comparison to a downtrend in non-durables and mild growth in services.

  • Amid looming trade tensions, Trump picks David Perdue as US ambassador to China:

    • President-elect Trump's tariffs loom as a major theme for markets in 2025 and his administration nominations so far feature several that are considered China hawks, including Marco Rubio as Secretary of State, Mike Waltz as National Security Adviser, Jamieson Greer as USTR and Peter Navarro returning as Trade Adviser. On Thursday Trump chose former GOP Senator David Perdue as US ambassador to China, tasking him with maintaining productive working relationship with Chinese leaders (Reuters, Bloomberg). Prior to serving in senate between 2015 and 2021, Perdue was formerly an executive in Asia and was known for a pro-business stance. However, his appointment as ambassador occurs against backdrop of likely ramp in trade tensions after Trump vowed tariffs of at least 60% on Chinese goods during presidential campaign, and recently threatened additional 10% tariffs on China over fentanyl importation. Some thought Perdue will provide a moderating counterbalance in the administration, having previously stressed importance of cooperation between US and China (CNBC).

  • Notable Gainers:

    • +6.8% T82U.SP (Suntec Real Estate Investment Trust): Aelios makes mandatory conditional cash offer for Suntec Real Estate Investment Trust at SG$1.16/unit

    • +5.2% 1913.HK (Prada): upgraded to buy from neutral at Goldman Sachs; firm believes company has potential to expand market share with respect to retail LFL, new space expansion

    • +1.9% 024110.KS (Industrial Bank of Korea): provides value-up plan; targets ROE 10% or higher

    • +1.7% 517334.IN (Samvardhana Motherson International): to acquire 95% of Atsumitec at equity value of ¥8.5B (~$57M or INR4.83B) in cash

    • +1.0% 2702.JP (McDonald's Holdings): reports November same-store sales +11.6% y/y

  • Notable Decliners:

    • -2.6% 079550.KS (LIG Nex1): holder Artisan Partners decreases holding to 3.89% from 5.02%

    • -0.8% 3008.TT (LARGAN Precision): reports November revenue NT$6.01B, (11.4%) y/y

    • -0.2% 7459.JP (Medipal Holdings): to acquire 20% stake in Teva Takeda Pharma

    • -0.1% 002714.CH (Muyuan Foods): sold 6.4M pigs (including 459K piglets) in November vs year-ago 5.3M

• Data:

  • Economic:

    • Japan October

      • Average nominal wages +2.6% y/y vs consensus +2.6% and revised +2.5% in prior month

        • Real wages 0.0% y/y vs consensus (0.1%) and revised (0.4%) in prior month

      • Household spending (1.3%) y/y vs consensus (2.5%) and (1.1%) in prior month

        • Spending +2.9% m/m vs (1.3%) in prior month

  • Markets:

    • Nikkei: (304.43) or (0.77%) to 39091.17

    • Hang Seng: 305.41 or +1.56% to 19865.85

    • Shanghai Composite: 35.22 or +1.05% to 3404.08

    • Shenzhen Composite: 25.34 or +1.24% to 2064.65

    • ASX200: (54.00) or (0.64%) to 8420.90

    • KOSPI: (13.69) or (0.56%) to 2428.16

    • SENSEX: (58.69) or (0.07%) to 81707.17

  • Currencies:

    • $-¥: +0.11 or +0.07% to 150.2100

    • $-KRW: +3.44 or +0.24% to 1418.6700

    • A$-$: (0.00) or (0.30%) to 0.6431

    • $-INR: (0.01) or (0.01%) to 84.6699

    • $-CNY: (0.00) or (0.05%) to 7.2568