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StreetAccount Summary - Asian Market Recap: Nikkei (0.24%), Hang Seng (0.48%), Shanghai Composite (0.73%) as of 03:10 ET

Dec 17 ,2024

• Synopsis:

  • Asia equities ended mostly lower Tuesday. Broad-based declines persisted in many major benchmarks despite some higher openings. Hong Kong ended lower although was volatile at times; mainland benchmarks ended lower. More steep losses in South Korea as political uncertainty continued, India at two-week lows. Taiwan ended a few points lower, Southeast Asia also down. Australia's ASX the only major benchmark with a gain. US futures ticking lower, Europe down in opening trades. US dollar a little stronger, AUD and NZD weaker again, yen and yuan steady. Treasuries mixed, CGB yields stabilized around record lows. Crude oil, precious and metals all slightly weaker. Cryptocurrencies higher with bitcoin at fresh record high.

  • Asia equities drifted lower over the day with most major benchmarks ending with losses. Some volatility in Hong Kong after Reuters reported Beijing would run a budget deficit of 4% in 2025 from 3% this year, keeping its existing FY growth target of 'around' 5%. China Premier Li also today implored officials to swiftly carry out economic tasks for 2025 with State Council specifically highlighting bond issuance proceeds to boost construction activity. South Korea Kospi leading the region's losses as its political malaise deepened as President Yoon remained defiant and his ruling party refused the appointment of three constitutional court judges that could delay or revoke his impeachment.

  • In economic developments, Singapore's exports returned to growth but shipments to key export destinations fell. Australian consumer confidence retreated following recent recovery as soft Q3 GDP impacted economic outlook. Overnight, India wholesale inflation fell to a three-month low amid moderation in food prices.

  • Alibaba (9988.HK) said it expects to book a $1.3B loss on the sale of its department store unit Intime to Youngor Group. SoftBank (9984.JP) CEO Masayoshi said company will invest $100B in the US over the next four years. China Telecom (728.HK) could face US commerce department scrutiny over concerns it could exploit access to US data through its cloud and internet businesses. Shein is considering asking the UK regulator to waive listing rules that require at least 10% of stock to be sold to the public. Qantas (QAN.AU) said it has reached a settlement with unions for a compensation fund worth A$120M ($76.2M) for former workers sacked in 2020.

• Digest:

  • China said to be planning 4% deficit ratio while maintaining GDP growth target at about 5%:

    • Reuters, citing two sources, reported Chinese leaders agreed last week to raise the budget deficit to a record 4% of GDP next year (vs current 3%) while maintaining a growth target of around 5%. Debt expansion would be consistent with Politburo/CEWC guidance of a "more proactive" fiscal policy. Deficit ratio increase would imply additional spending of about CNY1.3T ($179.4B). Funding said to come from issuance of off-budget special bonds. Article noted targets could still change before the legislative session in March when policies are formally announced. Remainder of the report reprised key points from the Politburo/CEWC readouts. Similarly, President Xi and Premier Li largely reiterated prior announcements without disclosing new details. Recall the key focus heading into the 'Two Sessions' is the size of overall fiscal stimulus. Yet despite the stronger policy language, economists mostly anticipate fiscal expansion to remain moderate and are instead focused on how Beijing will follow through on its pledge to support domestic demand. Some expect an expansion of the existing trade-in scheme for household appliances, which has so far been the only initiative boosting private consumption. But the disappointment in November retail sales reinforced views that additional policies are needed. Furthermore, economists' GDP growth optimism extends only through 1Q25, after which, stimulus effects are expected to wane, and the outlook thereafter depends largely on Trump tariff policies.

  • StreetAccount Event Preview: December BOJ meeting

    • Ahead of the December 18-19 MPM, latest consensus polls have shown a marked retreat in rate hike expectations. Nikkei QUICK survey (n=70) showed 63% looking for BOJ to remain on hold this month. Echoes a Reuters poll (n=57) where 58% saw no change. Recall that a narrow majority had anticipated a December hike, though projections have aligned with swap market pricing in a low chance. Common rationale was Governor Ueda's recent indications he wants to see wage hike developments heading into the 2025 shunto talks. Further monitoring of US economy/policy was also cited. Economist notes from major brokerages reaffirmed their existing calls. December forecasts were mainly based on actual macro developments continuing to track the BOJ's forecasts, while recalling Ueda's prior remarks that US macro risks have subsided. Ueda's Nikkei interview remains the pivotal talking point. January cohort highlighted Ueda's focus on wage hikes as the key new element, while there was still some concern about US uncertainties. Views were also mixed on whether Ueda sought to either prepare markets for a December move or encourage market repricing by repeating the message that BOJ is in no hurry to hike. Overall, economists on either side hedged their baseline predictions to underscore the broader view that a rate hike will most likely happen either in December or January.

  • South Korea political discord deepens as ruling party blocks appointment of constitutional judges:

    • South Korea's Kospi fell sharply for second consecutive day with foreign investors remaining net sellers just as country's political malaise deepened. Country's sovereign bond yields recovered further but won weakened again despite BOK Governor Rhee reiteration today he is not concerned about forex conditions. Ruling People's Power Party Tuesday attempted to delay appointment of judges to constitutional court, boosting chances of court failing to confirm parliament's impeachment of President Yoon. Currently, three seats vacant in court meaning opposition would need all six sitting judges to approve Yoon's impeachment on Saturday (Yonhap). Court said it had sent documents to Yoon's office but it refused to confirm receipt, likely pushing back next steps in trial (Yonhap). First hearing scheduled for 27-Dec with Yoon's defense team saying President will state his position if hearing public (Yonhap). Court has until June to make final ruling.

  • Japan equity market sees record inflows from activist investors this year:

    • Bloomberg analysis found activist investor buying of Japanese equities reached a record this year. Gross buying was at least JPY1T ($6.6B) while net buying is likely to top JPY500B, making this segment the largest source of inflows behind share buybacks. Activists have taken stakes in at least 146 companies, successfully lobbying for disposal of real estate, changes in strategy and buybacks. Flows are replacing net sales from Japanese institutions led by unwinding of cross shareholdings. Article noted analysis only includes publicly disclosed stakes, meaning actual inflows are almost certainly higher. Activists now estimated to hold at least JPY4.8T of Japanese equities, about 0.5% of total market cap of about JPY980T. Fund ranking by size placed Effissimo Capital Management at the top, followed by Silchester International Investors, Elliott Investment Management and Oasis Management. Most market players expect activism to at least maintain momentum next year, partly owing to continued pressure from FSA for companies to end cross shareholdings.

  • China capital market outflows hit record in November:

    • Latest China SAFE data showed capital outflows totaled $45.7B in November, a record high and almost double October's $25.8B (Reuters). Figures tracked separate data on capital flows showing China experienced large portfolio outflows last month in wake of Trump's election victory that sent dollar to highest against yuan in 12 months. Trend seen continuing into 2025 with Institute of International Finance (IIF) predicting another $25B outflow from China, reflecting deterioration in risk sentiment from Trump's threatened 60% tariffs and 10% universal tariff rate. Chinese authorities preparing for turbulence with Reuters sources last week noting authorities considering allowing yuan to weaken in 2025, marking a departure from current stance of maintaining currency stability. FX strategists expect yuan to face continued depreciation in 2025 with Nomura among the more bearish in forecasting USDCNH rising another 4% to 7.60 in Q2, reflecting front-loaded tariff imposition. Insufficient China stimulus and US economic outperformance among other factors expected to contribute to China outflow pressures in 2025.

  • Notable Gainers:

    • +9.3% 4666.JP (Park24): reports FY results with revenue and operating income ahead of guidance and FactSet estimates; reports November sales

    • +4.4% 9984.JP (SoftBank Group): CEO Masayoshi Son reportedly to invest $100B in U.S. over 4 years from 2025-29

    • +3.6% 600177.CH (Youngor Fashion Co.): Alibaba Group to sell Intime's 99% stake to consortium of Youngor and Intime management for CNY7.4B

    • +0.8% 8830.JP (Sumitomo Realty & Development): to launch up to 8.0M-share buyback for up to ¥35B

    • +0.6% 836.HK (China Resources Power Holdings): appoints VP Wang Bo as president, effective today

    • +0.3% 6501.JP (Hitachi): confirms CEO/president Keiji Kojima to become vice chairman, effective 1-Apr-25; EVP Toshiaki Tokunaga appointed replacement

  • Notable Decliners:

    • -4.0% 3697.JP (SHIFT Inc): JPMorgan downgrades to neutral from overweight citing hiring slowdown

    • -2.7% 6902.JP (DENSO Corp.): to strengthen relationship with ON Semiconductor in support of AD, ADAS; intends to acquire onsemi shares on open market

    • -1.8% 271560.KS (ORION Corp (Korea)): reports November net revenue KRW283.3B

    • -1.1% 066570.KS (LG Electronics): reportedly seeking valuation of up-to-$15B (INR1.274T/KRW21.520T) for India IPO

    • -0.6% 4452.JP (Kao): Oasis says Kao has not acted in good faith in engagement with Oasis

    • -0.2% 543904.IN (Mankind Pharma): approves raising of funds up to INR30.00B via qualified institutions placement of equity shares

• Data:

  • Economic:

    • Australia

      • December Westpac-MI consumer sentiment index 92.8 vs 94.6 in November

    • Singapore

      • November non-oil exports +3.4% y/y vs consensus (1.7%) and revised (4.7%) in prior month

        • Non-oil exports +14.7% m/m vs revised (7.5%) in prior month

  • Markets:

    • Nikkei: (92.81) or (0.24%) to 39364.68

    • Hang Seng: (95.01) or (0.48%) to 19700.48

    • Shanghai Composite: (24.85) or (0.73%) to 3361.49

    • Shenzhen Composite: (35.31) or (1.72%) to 2013.78

    • ASX200: 64.50 or +0.78% to 8314.00

    • KOSPI: (32.16) or (1.29%) to 2456.81

    • SENSEX: (977.10) or (1.20%) to 80771.47

  • Currencies:

    • $-¥: (0.02) or (0.01%) to 154.1210

    • $-KRW: +0.49 or +0.03% to 1438.2700

    • A$-$: (0.00) or (0.35%) to 0.6348

    • $-INR: +0.05 or +0.06% to 84.9333

    • $-CNY: (0.00) or (0.02%) to 7.2824