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StreetAccount Summary - Asian Market Recap: Nikkei (0.95%), Hang Seng (2.09%), Shanghai Composite (2.01%) as of 03:10 ET

Dec 13 ,2024

• Synopsis:

  • Asian equities ended mostly lower Friday. Some heavy losses in Greater China as investors reacted to yesterday's work conference. Japan, Australia and most of Southeast Asia lower. India paring early losses to trade higher. Taiwan a few points down. South Korea's Kospi reversed early losses to close higher. US futures inching higher, Europe opened slightly down. US dollar higher once again, yen and yuan slightly weaker. Treasuries higher at the short end, lower at the long. WTI futures higher, Brent lower; precious metals down, base metals also lower. Cryptocurrencies mixed with bitcoin holding $100K.

  • Asia markets responded negatively to a down day in the US Thursday and reads from yesterday's central economic work conference statement, which contained little fresh news or detail of China's stimulus program. Although a proactive fiscal policy, higher deficit ratio, and looser monetary policy in the form of RRR and other rate cuts were reiterated, there were no specifics or figures given. China equities sold off sharply to reverse much of yesterday's gains, while CGB yields fell to fresh record lows with yield on the 10Y at 1.76%, down from above 2.0% last week. South Korea's Kospi finished higher and briefly traded above its close on 3-Dec, the day before President Yoon briefly declared martial law just as more ruling party lawmakers declared they would support the impeachment vote Saturday; analysts said an impeachment would signal an end to the uncertainty for the short term.

  • In other developments, the BOJ Tankan showed a slight improvement in confidence among large manufacturers. It came ahead of next week's BOJ rate decision in which market-implied odds of a hike have fallen just as a Reuters economist survey also showed a majority think it will hold. Overnight, India inflation of 5.5% was lower than expected but analysts concluded it was still too close to the RBI target of 6.0%, effectively pushing out rate cuts; IGB yields inched higher and the rupee edged away from record lows as a result. Ahead over the weekend, China credit data with analysts expecting a doubling of loans m/m.

  • Insignia Financial (IFL.AU) has received a $1.7B takeover offer from Bain Capital. Macquarie Group's (MQG.AU) Asset Management arm has submitted an offer for Axiata's (6888.MK) telecom infrastructure unit that could be worth up to $3.5B. Samsung Electronics (005930.KS) has accused the India competition regulator of unlawfully detaining its employees and seizing data as part of an antitrust probe on Amazon and Flipkart.

• Digest:

  • China CEWC stimulus guidance more substantive, though markets still waiting on size:

    • Xinhua CEWC summary noted authorities endorsed a more proactive fiscal policy and a higher deficit-to-GDP ratio to ensure measures are continuously forceful and more impactful. Pledged to increase issuance of ultra-long special treasury bonds and LGSBs. Reaffirmed a moderately loose monetary policy stance, specifying reductions to RRR and other rates at an appropriate timing to ensure ample liquidity. Chinese language full article added authorities should maintain basic stability of yuan at a reasonable and balanced level (following a report indicating yuan may be allowed to weaken to mitigate US tariff hikes). Key tasks for 2025 include efforts to vigorously boost consumption, improve investment efficiency, and expand domestic demand on all fronts. Urged for implementation of a special campaign to stimulate consumption and efforts to increase household incomes for low and middle end groups. Signaled expansion of the large-scale equipment upgrade and consumer goods trade-in programs. Remained committed to ratchet up property stabilization measures, calling for controlling new supply of land and promotion of a new model for real estate development. Takeaways acknowledged stimulus trajectory though markets still waiting for total size (Reuters). Still, downside risk to 2025 growth appears limited.

  • China sovereign yields hit fresh lows amid growing easing bets:

    • Ten-year CGB yield dropped to as low as 1.765% Friday, below 1.8% for first time ever after policymakers reaffirmed "moderately loose monetary policy stance", highlighting reductions to RRR and policy rates at CEWC. 30Y CGB yield dipped just below 2% to lowest level since 2002. Bloomberg added CGBs set for best weekly gains since early 2020 while Friday's bond rally also reflected strong buying momentum seen throughout the year. Came even after CEWC readout noted China will implement more proactive fiscal policy, raise fiscal deficit and increase issuance of ultra-long special treasury bonds. Bonds benefiting from banks holding much idle cash and expectations of loose monetary environment, as well as asset allocation perspective for Chinese investors where sentiments on equities and property market remain fragile. Added CGB yield curve close to flattest since March in one-to10-year portion, sign of pessimistic outlook on economy.

  • China activity data seen holding up, recovery hopes still lay with stimulus:

    • Ahead of Monday's November activity data, Bloomberg consensus looks for industrial production growth to remain steady at 5.3% y/y, citing ongoing expansion in manufacturing PMIs and notable acceleration in customs exports. Retail sales expected to rise 5.0% following 4.8% in the previous month, though tone skewed cautious amid softer nonmanufacturing activity. Yet hints of stronger policy support for households out of the CEWC offered tentative encouragement. Fixed asset investment likely picked up to 3.5% YTD from prior 3.4%. Real estate component forecast was not disclosed, instead highlighting a fallback in the latest CREIC new home sales data for November as evidence of persistent challenges. Unemployment rate estimated to remain steady at 5.0%. Broader focus was on stimulus. Impacts from prior measures were perceived to have stabilized economic activity, while Politburo/CEWC pledged bolder measures for next year as Beijing braces for a new trade war with US. Indications of a shift in policy focus toward consumer demand provided more hopes for meaningful follow-through. Yet, deflation was still cited as a key risk factor, leaving overall recovery momentum still mixed.

  • Consensus sees BOJ staying on hold next week:

    • In the latest Reuters survey 33 of 57 economists now expect BOJ to leave policy unchanged next week as it assesses overseas risks and next year's wage outlook. Result contrasts with a slim majority looking for a December rate hike in the previous poll. All respondents still anticipate a rate hike of at least 25 bp by Mar-25. Subset of 19 respondents providing monthly forecasts almost unanimously picked January as the likely timing. Analysts said BOJ is monitoring trends for next year's spring wage negotiations and seeking to communicate better about policy changes with market participants through speeches and a branch managers meeting scheduled before its January policy-setting meeting. Cited thoughts that a risk of a December move based on yen weakness has receded. Article recapped recent macro data with sluggish household sector the main sticking point. Median of 31 economists projecting 2025 shunto aggregate wage hikes pointed to growth of 4.7%, somewhat lower than the 5.1% this year but firmer than last year's 3.58%. Additionally, 30 of 32 respondents said President-elect Trump's proposed tariff policies would have negative impacts on Japan's economy.

  • BOJ Tankan on the firm side of expectations:

    • Headline BOJ Tankan large manufacturers business conditions index was 14 in December, slightly better than consensus and September reading of 13. Aggregate was skewed by a 26-pt improvement in petroleum & coal while other sectors were moderately mixed (autos up 1 pt). Large nonmanufacturing index was 33, matching expectations, following 34 in September. Decline was led by retail (down 15 pts) and accommodation & dining (down 12 pts). Small firm indexes logged somewhat better than expected mild improvements. Yet all outlook DIs were softer. Large firm supply-demand conditions also mostly lower. Inflation metrics showed output prices generally little changed amid slight easing in input prices. Broader inflation expectations were unchanged in all time horizons, remaining above the BOJ's 2% target. Large firm FY24 capex projection revised up to +11.3% from +10.6%, constituting an unusual upgrade for this time of year. All-enterprise current profits also revised up on the back of H1 strength, though remained negative at -3.1%. Topline sales growth revised slightly higher. Output gap proxies were benign as employment and production capacity DIs unchanged, though still indicating acute labor shortages.

  • Notable Gainers:

    • +11.2% 3861.JP (Oji): launches up-to-¥50B buyback programme; conducts off-auction buyback for up-to-26.0M shares

    • +6.8% 6966.JP (Mitsui High-tec): reports 9M results with year-on-year revenue growth; maintains FY guidance

    • +4.6% 068270.KS (Celltrion): declares final dividend KRW750/share; StreetAccount notes year-ago KRW500/share

    • +2.9% 9024.JP (Seibu Holdings): raises FY guidance; enters MOU with Blackstone on liquidation of Tokyo Garden Terrace Kioicho; launches up-to-¥70B buyback programme

    • +0.2% 9749.JP (Fuji Soft): to consider Bain Capital's ¥9,600/share offer

  • Notable Decliners:

    • -4.1% 7011.JP (Mitsubishi Heavy Industries): Japanese defense sector trading lower; LDP-Komeito coalition reportedly has decided to postpone the timeline of income tax hike

    • -3.4% 2353.TT (Acer Inc): HSBC downgrades to reduce from hold; firm believes subsidiaries' contribution is still limited

    • -3.1% 3774.JP (Internet Initiative Japan): Jefferies downgrades to hold from buy

    • -0.7% 8053.JP (Sumitomo): reportedly acquires Resource Equipment Indonesia; terms undisclosed

• Data:

  • Economic:

    • Japan

      • December BOJ Tankan large manufacturers business conditions index 14 vs consensus 13 and 13 in September

        • March large manufacturers business conditions forecast 13

      • December large non-manufacturers business conditions index 33 vs consensus 33 and 34 in September

        • March large non-manufacturers business conditions forecast 28

      • FY24 large enterprise capex projection +11.3% vs consensus +10.0% and +10.6% in September

      • Assumed FY23 USD/JPY rate 146.88 vs 145.15 in September

      • December BOJ Tankan 1-year inflation expectations +2.4% y/y vs +2.4% in September

        • 3-year expectations +2.3% y/y vs +2.3% in September

        • 5-year expectations +2.2% y/y vs +2.2% in September

  • Markets:

    • Nikkei: (378.70) or (0.95%) to 39470.44

    • Hang Seng: (425.81) or (2.09%) to 19971.24

    • Shanghai Composite: (69.62) or (2.01%) to 3391.88

    • Shenzhen Composite: (42.47) or (2.01%) to 2070.42

    • ASX200: (34.30) or (0.41%) to 8296.00

    • KOSPI: 12.34 or +0.50% to 2494.46

    • SENSEX: 337.57 or +0.42% to 81627.53

  • Currencies:

    • $-¥: +0.19 or +0.12% to 152.8320

    • $-KRW: +1.69 or +0.12% to 1432.1700

    • A$-$: (0.00) or (0.04%) to 0.6366

    • $-INR: (0.03) or (0.04%) to 84.8091

    • $-CNY: +0.01 or +0.11% to 7.2771