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StreetAccount Summary - Asian Market Recap: Nikkei (0.69%), Hang Seng (0.56%), Shanghai Composite (0.36%) as of 03:10 ET

Dec 19 ,2024

• Synopsis:

  • Asia equities ended lower Thursday although major benchmarks closed off their lows. South Korea with the steepest losses as the won reached 15-year lows amid ongoing political upheaval. Tech stocks in Australia, Taiwan, Japan and India all fell steeply. Greater China mixed with Shanghai and Hong Kong lower but off their troughs, Shenzhen the only major Asia board to see a gain. Southeast Asia all lower. US futures marginally higher, Europe opened sharply lower as it caught up with Wall Street action. US dollar consolidating overnight gains, yen substantially weaker on BOJ decision, won at multi-year low, AUD and NZD also at years-long lows, yuan weakened to 13-month low despite PBOC support. Treasury yields higher, Asia yields also higher ex China. Crude, precious metals and industrial metals all sharply down. Cryptocurrencies recovering from overnight losses.

  • Asia markets fell sharply at the open on read through from Wall Street's losses overnight, and in response to another adjacent round of weakening in the region's currencies. The South Korea won, and Australia and New Zealand dollars under particular pressure, while the yen weakened to five-month lows against the dollar post BOJ decision. Bond yields stronger across the region also, reflecting Treasuries' overnight movement higher on Fed's hawkish statement that reflected just two rate cuts next year from four early this month.

  • In regional developments, the BOJ left its policy rate unchanged as largely expected, citing high uncertainties and need to monitor financial market movements. Governor Ueda later reiterated the need for more data on impact of wage increases, sending yen a further leg lower. New Zealand Q3 GDP contracted by more than expected, prompting markets to price in more RBNZ easing in 2025. South Korea finance minister warned of near-term FX volatility while forex officials later expanded currency swap limits with the state pension fund to support won.

  • Honda Motor (7267.JP) is said to have threatened to end its strategic software partnership with Nissan Motor (7201.JP) if it looked to team up with Hon Hai Precision (2317.JP); Honda also said it would act as white knight to protect Nissan if Hon Hai attempts a hostile takeover bid while HH executives discussing Nissan stake purchase from Renault. CATL (300750.CH) is considering a second listing in Hong Kong that could raise up to CNY 36.5B ($5B) and that could come as early as H1-25. Woodside Energy (WDS.AU) and Chevron have agreed on an asset swap that also includes a $400M cash payment from Chevron to Woodside.

• Digest:

  • BOJ leaves rates on hold, one dissenter called for rate hike:

    • BOJ left the policy rate at 0.25%, consistent with latest consensus polls. Vote count was 8-1; Tamura dissented and proposed a 25 bp hike citing upside inflation risk. Economic assessment was largely unchanged and still anticipates underlying inflation to be consistent with the price stability target in the second half of the projection period (through FY26). Outlook uncertainties remain high, and board members remain focused on impact of financial and FX market developments on the economy. Also reaffirmed expectations that FX factor likely to affect prices more than the past with companies shifting toward raising wages and prices. BOJ also published its long-awaited long term policy review, though there were no notable implications (as expected), and the policy statement said Bank will make use of findings and continue to conduct monetary policy as appropriate. Recall that market rate hike expectations shifted to January after Governor Ueda's recent remark that he is waiting to see wage hike developments heading into the 2025 shunto talks. Relevant information will be drawn from BOJ staff analysis for the quarterly branch managers meeting in early January alongside the regional economic report. Next BOJ meeting scheduled for Jan 23-24. No major surprises from Governor Ueda's press conference. While economic developments remain "on track" with the BOJ's outlook, reaffirmed he needed "a little more time" to assess a range of data, particularly on wage hike momentum.

  • Yuan weakens to 13-month low vs dollar despite PBOC support:

    • Onshore yuan fell for seventh straight session Thursday and hovering at 13-month low. Came after PBOC ramped up support for currency via daily reference rate amid broad dollar strengthen due to Fed's caution over future rate cuts. It set midpoint at 7.1911, which was 1,254 pips firmer than consensus 7.3165, carrying strongest bias since July. Bloomberg noted move a sign of authorities lending support to yuan. Added PBOC had been issuing stronger-than-expected fixings since Trump's election victory, setting soft red line around 7.2. State banks seen to have sold dollars onshore while their offshore branches reduced yuan lending in swap market to tighten liquidity. FX strategists note although PBOC making efforts to restrain upside pressures on USD/CNY, the rate is likely to break to new highs next year amid trade war risk. Complicating yuan's trajectory is China has pledged "moderately loose" monetary policy in 2025, raising expectations of further rate cuts which also drag down CGB yields and widen yield gap with US.

  • South Korea finance minister warns over heightened market volatility:

    • South Korea's finance minister Choi Sang-mok forecast more market volatility in short term following Fed Reserve's hawkish message overnight amid 'significant weakness' in major global currencies (Yonhap). Choi made comment during emergency meeting with BOK Governor Rhee, other financial officials, which has been held regularly since President Yoon's failed martial law decree. Said if volatility becomes excessive, authorities will take 'swift, bold' action to implement stabilization measures. Choi's warning comes as Kospi opened nearly 2% lower Thursday, won slid to below 1,450 per dollar; level last seen during GFC in 2009, with currency pressed in past month by US dollar surge on Trump election and Fed's tempered rate cut expectations, as well as domestic political upheaval, sagging domestic economic figures (Bloomberg). Won is almost 11% weaker YTD, second worst regional performer after NZD with much of weakening in past quarter.

  • Honda-Nissan merger reverberations:

    • Yesterday's reports that Honda (7267.JP) and Nissan (7201.JP) will start merger talks stimulated a flurry of follow-through discussions. Nikkei reported negotiations will start as early as Monday. Much of the article contextualized Hon Hai Precision's (2317.TT) involvement, said to have been preparing to build stake in Nissan and hinted this scenario may have led to a path for Nissan to maintain independence. Other reports this month indicated Hon Hai executives could meet Renault (RNO.FP) CEO Luca de Meo. But Honda warned it would withdraw from its partnership with Nissan if the Hon Hai tie-up materialized. Honda was also considering a white-knight strategy for Nissan if Hon Hai launched a hostile takeover. Nissan mired in poor financial performance, prompting a drastic restructuring plan and management shakeup. Hon Hai was expected to ramp up pressure on Nissan for even more radical restructuring, compelling Nissan to side with Honda as the path of least resistance. Reuters reported Renault officials were open to merger talks amid some speculation over whether Renault might sell its Nissan shares. Reuters cited an S&P analyst note suggesting synergies would take time to bear fruit. Added the deal would be credit-positive for Nissan and negative for Honda, concurring with market reactions that essentially saw the merger as a bailout for Nissan.

  • Economists warn of weaker China exports amid Trump's tariffs:

    • FT summarized various economists who have warned that China's export growth could slow or even contract in 2025 due to Trump's trade policies. Economists widely expect deceleration next year after Chinese exports have grown 5.4% y/y in dollar terms during Jan-Nov, adding it will increase urgency for Beijing to boost support for economy. Goldman Sachs and Capital Economics both expect outright decline for next year while UBS and Nomura see zero growth. Morgan Stanley and ING forecast a much slower pace of growth. Recall at last week's CEWC, policymakers have shifted economic focus to stoking domestic demand, switching priority away from investing in technology and industry that have fueled China's exports (FT). Article also said economists have based their projections for export and GDP growth on range of tariff scenarios. Barclays sees 0.8 to 1 ppt GDP hit under 30% tariffs while Macquarie forecasts 8% drop in exports and 2 ppt GDP decline under 60% levies though its economist cautions that "almost impossible" to predict given uncertainties.

  • Notable Gainers:

    • +12.5% 6412.JP (Heiwa Corp): to acquire golf course operator group Accordia Golf from Fortress Investment for ¥510.00B

    • +10% 000759.CH (Zhongbai Holdings Group Co.): Yonghui Superstores sold combined 9.9% stake from 3-Dec to 17-Dec for CNY440M in total

    • +7.1% 4676.JP (Fuji Media Holdings): Nomura upgrades to buy form neutral citing company's topline growth supported by businesses other than terrestrial broadcasting advertising

    • +2.4% 700.HK (Tencent Holdings): Apple reportedly in early-stage talks with Tencent and ByteDance about integrating their AI models into iPhones sold in China - Reuters, citing sources familiar with the matter

  • Notable Decliners:

    • -20.3% 5707.JP (Toho Zinc): issues business turnaround plan; to raise ¥7.5B via third-party allotment; revises FY guidance

    • -6.6% 3800.HK (GCL Technology Holdings): enters into best-efforts placing agreement for 1.56B-shares at HK$1.00/share through Platinum Broking

    • -0.6% 300750.CH (Contemporary Amperex Technology Co.): reportedly considering secondary listing in Hong Kong to raise at least $5B (CNY36.49B)

    • -0.6% 7911.JP (TOPPAN Holdings): to acquire Thermoformed and Flexibles Packaging business from Sonoco Products for ~$1.8B (¥271.3B)

    • -0.5% 5020.JP (ENEOS): reportedly may list JX Advanced Metals Corp

• Data:

  • Economic:

    • New Zealand

      • Q3 GDP (1.0%) q/q vs consensus (0.2%) and revised (1.1%) in Q2

        • GDP (1.5%) y/y vs consensus (0.4%) and revised (0.5%) in Q2

      • December ANZ Business Confidence +62.3 vs +64.9 in November

  • Markets:

    • Nikkei: (268.13) or (0.69%) to 38813.58

    • Hang Seng: (112.04) or (0.56%) to 19752.51

    • Shanghai Composite: (12.17) or (0.36%) to 3370.03

    • Shenzhen Composite: 7.32 or +0.36% to 2032.85

    • ASX200: (141.20) or (1.70%) to 8168.20

    • KOSPI: (48.50) or (1.95%) to 2435.93

    • SENSEX: (950.36) or (1.19%) to 79231.84

  • Currencies:

    • $-¥: +1.72 or +1.11% to 156.5170

    • $-KRW: (4.36) or (0.30%) to 1450.1100

    • A$-$: +0.00 or +0.28% to 0.6236

    • $-INR: (0.03) or (0.03%) to 85.0703

    • $-CNY: +0.01 or +0.15% to 7.2979