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StreetAccount Summary - Asian Market Recap: Nikkei (0.32%), Hang Seng +1.08%, Shanghai Composite +1.26% as of 03:10 ET

Dec 24 ,2024

• Synopsis:

  • Asian equities ended mostly higher Tuesday. Strong gains in Greater China stocks on special bond issue reports; Hang Seng had also closed higher before news broke. Gains for Australia, Taiwan, India and Singapore. Japan's Nikkei lower but Topix was flat. South Korea Kospi also flat. Southeast Asia mixed. US futures a little lower, Europe opened lightly higher. US dollar flat, no significant movement in Asia forex. Treasury yields in a tight band. Crude oil, precious metals and industrial metals all finding support. Cryptocurrencies lower again.

  • Another positive day for Asia stocks although volumes were again noticeably thin ahead of Christmas holidays in the region. Mainland China benchmarks pared a morning loss into gains after Reuters reported Beijing was considering $411B in special bonds issuance and would boost consumer support by expanding subsidies. Hong Kong traded higher in a truncated session before the news was released. Otherwise, equities taking their cues from Wall Street's overnight session to tick higher with several sizable corporate stories lending support.

  • In economic developments, South Korean consumer confidence fell the most in 16 years amid President Yoon's martial law declaration earlier this month. South Korea's opposition party said it would move to impeach the acting president for not promulgating laws center to Yoon's own impeachment. October BOJ minutes showed members favored conducting policy with caution amid overseas uncertainties. RBA minutes revealed board open to rate cut as inflation moves toward target. Asia markets largely closed Wednesday although mainland China, Thailand and Japan remain open.

  • Honda Motor (7267.JP) announced a share buyback plan of 1.1B shares for up to ¥1.1T just as it formally announced the merger between it and Nissan Motor (7201.JP). Toyota Motor (7203.JP) is mulling the construction of a new EV factory in Shanghai. CFIUS review board has been unable to reach a consensus on Nippon Steel's (5401.JP) proposed acquisition of US Steel, has referred issue to President Biden. SK Group (034730.KS) is to sell its specialty gas producer for $1.9B as it continues to realign its business model. Arcadium Lithium shareholders have approved Rio Tinto's (RIO.AU) $6.7B offer.

• Digest:

  • China plans record CNY3T special treasury bond issuance for 2025:

    • Reuters citing two people with knowledge reported Chinese authorities have agreed to issue CNY3T ($411B) worth of special treasury bonds in 2025 as country ramps up fiscal support to boost economy. The amount, if substantiated, would be largest on record and mark sharp increase from CNY1T issued for 2024 while Beijing prepares to lower impact of potential higher tariffs from Trump administration. Proceeds will be focused on boosting consumption via subsidy programs, equipment upgrades and funding investments in innovation-driven sectors. Sources said CNY1.3T of proceeds would fund programs that involve trade-in initiatives for consumer goods and larger-scale equipment upgrades, important projects that fit national strategy and enhance security capacity. More than CNY1T would be earmarked for investments in "new productive forces", a catchphrase for advanced manufacturing. Remaining amount would be used to recapitalize large state banks as lenders face depressing margins and rising bed debt. Note these ultra-long special bonds generally are not included in annual budget plans. 2025's issuance of such bonds would equate 2.4% of China's GDP in 2023.

  • China's finance ministry reaffirms a more proactive fiscal policy in 2025:

    • China's MoF held National Fiscal Work Conference which reaffirmed "a more proactive fiscal policy" in 2025, previously announced in December's Politburo meeting and CEWC. MoF readout largely regurgitates CEWC statements related to fiscal issues, including country will raise fiscal deficit ratio to intensify expenditure, issue larger scale government bonds, optimize spending structure with focus on improving livelihoods and promoting consumption, continue efforts to prevent and address risks in key areas. A new point MoF added is central government will increase transfer payments to local governments to improve their financial capacity. Boosting domestic demand is listed as top priority for MoF, which pledges to raise basic pensions for retirees and medical insurance subsidies, increase support for trade-in program. It also vows to keep supporting development of modern industrial system, breakthroughs in key core technologies and low-carbon transformation. In view of potential higher tariffs from upcoming Trump administration, MoF said it will actively participate in global economic governance, improve tariff policies and deepen cooperation with countries under Belt and Road Initiative.

  • RBA opens door to rate cut if evolution of data tracks or falls short of its expectations:

    • December RBA minutes showed members viewed it appropriate to begin easing monetary policy if evolution of data further raised its confidence inflation is declining sustainably to target. Noted risk of inflation taking longer to return to target had diminished since prior meeting following subdued Q3 GDP where consumption was weaker than expected. Also noted wage growth had slowed by more than expected. More broadly, board judged underlying inflation and unemployment evolving as forecast in Nov-2023 policy statement, supporting its confidence inflation is returning sustainably to target with reasonable timeframe. However, said too soon to conclude with full confidence amid signs of economic resiliency and uncertainty over level of policy restrictiveness given loosening of financial conditions. Pointed out RBA will have important additional data on labor market, inflation and consumption by Feb-2025 meeting. While takeaways from December policy meeting leaned dovish, markets have since wound back February rate cut odds following hot November jobs data and are not fully pricing in rate cut until April.

  • BOJ members backed rate hikes if outlook is realized, but saw need to proceed with caution:

    • Minutes from October BOJ MPM showed members shared view BOJ should tighten again if economic and price outlook is realized. However, they also favored conducting monetary policy with caution and take time to examine impact of earlier rate hikes on economy and prices. One said if outlook is realized, BOJ could follow path of raising interest rat to 1.0% in H2 of FY25. Members judged FY25 inflation risks as skewed to the upside with some anticipating 2025 shunto talks to produce agreement on high wage growth. FX developments viewed as more likely to affect inflation compared to the past and warranted attention as specific risk to prices. Members saw need to monitor overseas developments, particularly in US, where surge in rates and dollar ahead of November election were inconsistent with view of markets having stabilized. Few members saw upside inflation risk to Japan depending on impact of new administration's policies on prices.

  • Washington launches probe into Chinese legacy chips:

    • USTR announced it would launch inquiry into China-made foundational semiconductors, aka legacy or mature-node semiconductors, confirming an earlier Bloomberg story that Biden administration would conduct such investigation under Section 301, which allows US to impose restrictions on countries with unfair trade practices. USTR Tai added her agency has found evidence China is targeting semiconductor industry for global domination, which enables its companies to expand rapidly and offer artificially lower-priced chips. Reuters added last-minute move under Biden will be handed over to Trump in January for completion and could offer him ready avenue to levy some of the 60% tariffs President-elect has threatened on Chinese imports. Bloomberg noted chips in focus are not as advanced as those powering AI, still they are widely used across broad range of applications including autos, airplanes, medical devices and telecommunications. Washington has already imposed 50% tariff on Chinese legacy chips that starts from 1-Jan. Xinhua reported China called on US to "cease erroneous practices immediately" and Beijing will safeguard its interests.

  • Notable Gainers:

    • +12.2% 7267.JP (Honda Motor): buyback of 1.1B shares, or 23.7% of total issued shares, for up to ¥1.1T; enters MoU with Nissan on collaborative considerations

    • +6.0% 7201.JP (Nissan Motor): signs MoU with Honda on collaborative considerations; new joint holding company scheduled to list Aug-26

    • +3.8% 8227.JP (SHIMAMURA): reports 9M net income attributable ¥33.65B, +2% vs year-ago ¥33.08B

    • +2.4% 103140.KS (Poongsan): chairman Ryu Jin invited to US President-elect Trump's inauguration

    • +0.9% 5401.JP (NIPPON STEEL): government review board reportedly unable to reach final decision on Nippon-US Steel deal; decision to fall to President Biden

  • Notable Decliners:

    • -6.2% 9602.JP (Toho Co): releases 2025 distribution list; list seen as expected and contains no surprises

    • -4.1% 7965.JP (Zojirushi): reports FY net income attributable ¥6.46B vs guidance ¥6.46B; 2025 guidance seen disappointing due to sluggish consumption in China and significant increase in costs

    • -0.1% 7203.JP (Toyota Motor): reportedly looking to build new EV factory in Shanghai for Lexus

• Data:

  • Economic:

    • No economic data today

  • Markets:

    • Nikkei: (124.49) or (0.32%) to 39036.85

    • Hang Seng: 215.16 or +1.08% to 20098.29

    • Shanghai Composite: 42.27 or +1.26% to 3393.53

    • Shenzhen Composite: 23.02 or +1.15% to 2018.12

    • ASX200: 19.30 or +0.24% to 8220.90

    • KOSPI: (1.49) or (0.06%) to 2440.52

    • SENSEX: 122.29 or +0.16% to 78662.46

  • Currencies:

    • $-¥: (0.03) or (0.02%) to 157.1360

    • $-KRW: +5.11 or +0.35% to 1457.1700

    • A$-$: (0.00) or (0.11%) to 0.6241

    • $-INR: +0.09 or +0.11% to 85.2023

    • $-CNY: (0.00) or (0.01%) to 7.2979

• Asia market recap will not be published on 25 December and will return on the 26 December.