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StreetAccount Summary - Asian Market Recap: Nikkei (0.29%), Hang Seng (0.16%), Shanghai Composite (0.06%) as of 03:10 ET

Dec 20 ,2024

• Synopsis:

  • Asia equities ended largely lower Friday. Steep declines in South Korea, Taiwan and Australia; more measured losses for Japan's Nikkei and Topix, Singapore and India. Mainland China held close to the flatline for most of the day while the Hang Seng dipped into the close. Some gains in Jakarta and Manila. US futures lower, European markets opened with sharp losses. US dollar coming off recent highs, new YTD lows for the AUD, NZD, and won among others before late afternoon rally, the yen a touch stronger. Treasury yields higher at the short end, lower at the long. Crude futures down, precious metals gaining on tad weaker dollar, base metals continuing their week-long slide.

  • Asia equities ending a poor week with further losses on most major boards on follow through from a late sell off on Wall Street and as US futures took a dip in late Asia trading. Hawkish Fed commentary on Wednesday largely responsible for the US dollar strength as Asia central banks rushed to offer support for their own currencies Thursday and again today. Japan officials warned on yen's volatility, leading to some yen strengthening Friday, the RBI stepped into support the rupee again, and South Korea officials moved to allow more overseas corporate borrowing to support the won.

  • In regional news today, China kept its 1Y and 5Y loan prime rates unchanged but yields on the 1Y sovereign bond still fell to below 1%, its lowest level since the GFC, while 10Y yields hovered near record lows. Japan's inflation rose to a three-month high to beat market forecasts and keep the pressure on the BOJ over rates; South Korea PPI also rose to three-month high while Malaysia's prices unexpectedly fell.

  • Nippon Sanso (4091.JP) is to buy Wesfarmers' (WES.AU) Coregas unit for around $480M. Sony Group (6758.JP) has signed a strategic alliance with Kadokawa (9468.JP), will become Kadokawa's largest shareholder. Weimob (2013.HK) and Yankershop Food (002847.CH) among the companies set to benefit from Tencent's (700.HK) new gifting function on WeChat. SK Hynix (000660.KS) has secured $458M in US funding for a new chips packaging facility. Taiwan's China Airlines (2610.TT) split its $12B long-haul fleet order between Boeing and Airbus.

• Digest:

  • Yen selloff checked by MOF verbal intervention amid big bearish swing in market narrative:

    • Yen bounced somewhat off a five-month low 157.87 vs dollar Friday after Finance Minister Kato expressed concerns about latest developments with an eye on speculators (Nikkei). Added stock statements that authorities detecting one-sided sudden price action and will respond appropriately against excessive moves. Momentum driven by expectations of slower Fed easing and BOJ rate hikes following this week's policy meetings, raising prospects for US-Japan rate differentials remaining wide for longer than anticipated. Furthermore, corporate sector seen running a substantial shortage of dollars. In the wake of Governor Ueda's press conference, yen narrative underwent a big bearish swing with some seeing the 160 level back on the horizon (Nikkei). Such momentum indicative of questions over whether BOJ will even move in January. For the FX market, the highlight from Ueda's press conference was a distinct lack of concern about current levels posing upside inflation risk, adding to his patience for more clarity on Trump policy implications and 2025 shunto. Here, Ueda's phrase about wanting "one more notch" before deciding to hike was framed in a somewhat dovish context. Market conditions now harkening back to April, when MOF intervened on the break of 160 with a common denominator in that both phases occurring during holiday periods with seasonally light volumes.

  • China LPRs unchanged as widely expected:

    • Chinese banks left LPRs unchanged as widely expected with 1-year at 3.10% and 5-year at 3.60%. Reuters poll (n=27) showed unanimous expectations for no change. Falling bond yields, depressed NIMs and yuan weakness cited as constraints. US-China yield differentials widest in 22 years this week, sending yuan to a one-year low vs dollar despite the Fed rate cut and PBOC's strong fix. Broader attention on recent easing guidance after Politburo/CEWC notably shifted monetary policy stance to "appropriately loose" next year for the first time in some 14 years alongside more proactive fiscal policy. Still an immediate rate cut was widely seen as unlikely given PBOC just warned financial institutions of risks in bond trading frenzy earlier this week. Meanwhile economists expect 25 or 50 bp RRR cut before year-end based on earlier PBOC guidance. More easing expected for 2025, albeit in moderate size (Jiemian). Bloomberg added 1Y CGB yield fell to 1% for first time since 2009. Monetary policy seen playing a secondary role to fiscal stimulus amid ongoing financial market constraints (though superseded by policy rhetoric asserting there is still room to move), while weak credit demand limits efficacy of support from the monetary side.

  • December BOJ rate hike calls reposition to January or March:

    • Economist takeaways from the BOJ meeting indicated notable surprise at the dovish tone of Governor Ueda's press conference remarks, primarily among those who were forecasting a December rate hike. This cohort adjusted their calls to January or March. Redistribution reflects varied interpretations of the dovishness of Ueda's comments. Shift from Dec to Jan remains based on hard data tracking in line with the BOJ's outlook, Ueda's core message that policy will be adjusted while this condition is met, as well as his recent Nikkei interview indicating the next rate hike is approaching. Also pointed to Ueda's acknowledgement of the risk of falling behind the curve; analysts voiced concern about credibility damage if BOJ continues to delay. Pivot to March prompted by Ueda's attention on wage hike momentum heading into 2025 shunto, as well as ongoing uncertainties (US policies under Trump, domestic fiscal policy). Meanwhile, the January camp mostly reaffirmed their forecasts, leaning on the proximity to the next rate hike, which was reinforced by Ueda's phrasing the BOJ needs "one more notch" before proceeding (Nikkei top story led with this line). Information from the quarterly BOJ branch managers meeting/regional economic report in early January seen as key. Risk scenarios pointed to a delay to March or later.

  • Japan November CPI mostly in line as BOJ looks ahead to 2025 spring wage hikes:

    • Headline nationwide core CPI rose 2.7% y/y in November, compared to consensus 2.6% and follows 2.3% in the previous month. Ex-fresh food & energy inflation edged up to 2.4%, matching expectations, from prior 2.3%. Main factor was energy contributions, which added 0.28 ppt to the headline as electricity and gas subsidies are phased out. Recall that latest stimulus package includes another round to restart in January to March. On the margins, an upturn in gasoline and kerosene prices added another 0.05 ppt combined. Elsewhere, heavily weighted non-fresh food prices picked up further, where latest attention has turned to surging rice prices, up 64.7% translating to contribution of 0.24 ppt. Overseas package tours up 80.8% for a 0.17 ppt contribution, though broader leisure inflation was steady. Headline acceleration was driven entirely by goods (largely reflecting rice surge, semi durables and durables inflation were stable) while services inflation was steady at 1.5%. Recall recent attention on data was elevated, though basically viewed in the context of whether they were tracking in line with the BOJ's outlook. In light of dovish takeaways from Governor Ueda's press conference remarks, focus now shifting to 2025 shunto wage hike developments.

  • Dovish takeaways from BOJ Governor Ueda's press conference:

    • Press takeaways from BOJ Governor Ueda's post-MPM press conference were notably dovish. Nikkei highlighted Ueda voiced little concern about recent yen weakness, nor indicated any urgency to raise rates. Despite USD/JPY approaching levels that previously prompted FX intervention in Apr/May, Ueda appeared to shrug off concerns, noting that import inflation is relatively stable. Nomura took the remarks as extremely dovish; suggested that while Ueda did not rule out a January move, the likelihood may now be much lower than market expectations. Some others speculated that Ueda may be trying to push politicians to ask for a rate hike by allowing the yen to depreciate. Follows earlier opposition to a rate hike among lawmakers including Prime Minister Ishiba. Bloomberg cited additional comments about wage hike developments becoming clearer by March or April, and assessment of Trump policies will take time. Still, he qualified that he doesn't have to wait until all the information is available. Attention shifts to the next round of consensus polls after expectations recently shifted from December to January.

  • Notable Gainers:

    • +23.9% 2013.HK (Weimob): Weimob mini program is reportedly connecting to WeChat mini shops

    • +7.5% 7003.JP (MITSUI E&S): reportedly to build port cranes in Vietnam aiming to capture demand away from China

    • +2.3% 4091.JP (Nippon Sanso Holdings): Wesfarmers to sell Coregas to subsidiary of Nippon Sanso for A$770M (¥75.62B)

    • +0.7% 6758.JP (Sony): signs strategic capital and business alliance agreement with Kadokawa; to acquire new Kadokawa shares and become largest shareholder with 10% stake

  • Notable Decliners:

    • -3.6% 004990.KS (Lotte Corp): clarifies media reports; Lotte Healthcare to hold shareholder meeting on liquidation

    • -1.2% 272210.KS (Hanwha Systems): Philly Shipyard completes previously announced sale of subsidiary Philly Shipyard, Inc. to Hanwha

    • -1.0% 4689.JP (LY Corp.): confirms tender offer to acquire BEENOS for ¥53.81B or ¥4,000/share

• Data:

  • Economic:

    • Japan November

      • Nationwide core CPI +2.7% y/y vs consensus +2.6% and +2.3% in prior month

        • CPI excl. fresh food & energy +2.4% y/y vs consensus +2.4% and +2.3% in prior month

        • Overall CPI +2.9% y/y vs consensus +2.9% and +2.3% in prior month

    • Australia November

      • Private sector credit +0.5% m/m vs consensus +0.5% and +0.6% in October

    • New Zealand November

      • Trade balance (NZ$437M) vs revised (NZ$1.658B) in October

        • Exports +9.1% y/y vs +7.5% in October

        • Imports (3.9%) y/y vs +3.0% in October

  • Markets:

    • Nikkei: (111.68) or (0.29%) to 38701.90

    • Hang Seng: (31.81) or (0.16%) to 19720.70

    • Shanghai Composite: (1.96) or (0.06%) to 3368.07

    • Shenzhen Composite: 9.04 or +0.44% to 2041.89

    • ASX200: (101.20) or (1.24%) to 8067.00

    • KOSPI: (31.78) or (1.30%) to 2404.15

    • SENSEX: (751.95) or (0.95%) to 78466.10

  • Currencies:

    • $-¥: (0.64) or (0.41%) to 156.7930

    • $-KRW: +4.91 or +0.34% to 1450.6300

    • A$-$: +0.00 or +0.12% to 0.6244

    • $-INR: (0.04) or (0.05%) to 85.0223

    • $-CNY: +0.00 or +0.01% to 7.2977