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StreetAccount Summary - Asian Market Recap: Nikkei +1.97%, Hang Seng (1.22%), Shanghai Composite +0.71% as of 03:10 ET

Jan 07 ,2025

• Synopsis:

  • Asia equities finished mostly higher Tuesday: Strong gains in Japan's Nikkei while Australia, South Korea and Taiwan also all finished higher. India trading higher. Mainland China boards ended with modest gains but Hang Seng sharply lower. Southeast Asia mixed. US futures lower, Europe slightly lower in early trades. US dollar weaker to follow overnight losses, AUD and NZD continued their overnight bounce, yen flat after early weakening; yuan flat. Treasury yields mixed, JGB yields at highest since July 2011, CGB yields bounced off lows. Crude blends lower, precious metals a little higher, base metals largely unchanged. Cryptocurrencies off overnight highs.

  • Asia equities boosted by a Washington Post report Monday that said Trump was considering watering down his tariff plans and although he later denied the story, the US dollar held on to overnight losses. This provided a tailwind for Asia stocks Tuesday as local currencies received a modest boost. Tech-orientated benchmarks also supported by overnight gains on the Nasdaq with chip stocks again spiking following Nvidia's overnight record-high close, and well-received presentations at CES.

  • The regions bonds also dipped slightly alongside Treasuries to send yields higher again. China sovereign yields bounced from record lows but sentiment still weighing heavily as investors watch for a meaningful uptick in economic activity, and hints from Beijing on the timing of the next round of monetary policy loosening. Currencies also saw a mild bounce overnight and into Tuesday on the weaker dollar with the won outperforming.

  • Mitsubishi Chemical Group (4188.JP) has cancelled plans for a new US-based acrylic resin plant after deciding the plan was not profitable. Nippon Steel (5401.JP) and US Steel have filed a lawsuit against US's government for exercising 'unlawful political influence' over Nippon's proposed deal to acquire US Steel. Taiyo Holdings (426.JP) is said to be considering combining with Japan Industrial Partners to bid for DIC Corp (4631.JP) but DIC denied it had received such an offer. Miniso (9896.HK) said it was planning to sell $500M of convertible bonds to use partly in a share buyback program, partly to open new overseas stores. Sunac China (1918.HK) has informed several of its dollar creditors it is unlikely to meet a September bond maturity deadline as weak sales continue. The US Pentagon added Tencent (700.HK) and CATL (300750.CH) to its blacklist of companies that work with the China military.

• Digest:

  • US adds Tencent, CATL to China military blacklist:

    • Press cited a US Defense Department statement that it added companies such as Tencent (700.HK) and CATL (300750.CH) to a list of firms labelled as Chinese military entities (Bloomberg, Reuters). COSCO Shipping (1919.HK) also named (Bloomberg). Blacklist does not entail specific sanctions but tends to discourage US firms from trading with named entities. Both companies argued the designation was a mistake and denied any military activities. Tencent said there would be no impact on business. Other additions include Changxin Memory Technologies, Quectel Wireless (603236.CH), and Autel Robotics (688208.CH). No major readthroughs, though articles noted the list is periodically reshuffled -- six companies were removed this time -- and firms can appeal the designation. Recalled past successful appeals include Xiaomi (1810.HK) in 2021 and Advanced Micro-Fabrication Equipment (688012.CH) last year. Latest action follows a US Commerce Department proposal for new restrictions on China-made drones including a ban in US citing national security concerns. China added 28 US entities to the export control list, prohibiting trade in dual-use items and also added 10 US firms to the unreliable entities list for selling arms to Taiwan

  • Asia bond yields inch higher but CGBs hover at record lows:

    • Asia's bond yields continued to match trajectory of Treasuries Tuesday with Australia's 10Y yield at six-week high, Singapore sovereign yields reapproaching five-month highs, JGB yields at highest since July 2011. JGBs accelerated following comments Monday by BOJ Governor Ueda signaling interest rates may rise if economic conditions met, and ahead of 10Y bond auction today; yen flat over Tuesday but was volatile (Reuters). Risk sentiment improved in region following rough start to year following reports Trump's tariffs won't be as bad as feared, leading to US dollar weakness. Despite regional bounce, China's sovereign yields hovering near record lows Tuesday as near non-stop rally in CGBs continued. CGB rally, recent selloff in US notes led to record high 300 bp yield differential between two, adding to risk of capital outflow and piling more pressure on yuan (Bloomberg). Yield on 10Y CGB at 1.605% Tuesday, up from intra-day record low 1.59% Monday.

  • Offshore yuan HIBOR rises to more than three-year high:

    • Offshore yuan's overnight funding cost in Hong Kong surges to 8.1% on Tuesday, highest since July-2021. One-month rate also jumped to highest since April, signaling concerns that Beijing's attempt to stabilize currency may lead to tighter liquidity in offshore market (Bloomberg). ANZ Bank FX strategist noted PBOC may keep overnight HIBOR at over 4% for a long time as it wants to prevent currency from sliding toward 7.40 per dollar soon. Onshore yuan weaker again to hit new low since Sep-2023 despite PBOC's strong fix and dollar pullback. Authorities have been using daily reference rate to stem currency losses, meanwhile expectations are growing policymakers will implement other tools to manage currency amid looming tariffs from new US administration. Nomura said PBOC may have shifted to more discretionary approach in determining timing of RRR and interest rate cuts as it is determined to prevent a sharp depreciation and stabilize property, stock market.

  • Nippon Steel, US Steel file lawsuits challenging CFIUS review:

    • Nikkei reported Nippon Steel (5401.JP) and US Steel (X) filed a lawsuit against US President Biden and other senior administration officials for exercising "unlawful political influence" over the proposed acquisition of US Steel. Called for CFIUS to conduct a new review. Separate suit was launched against Cleveland-Cliffs (CLF), CEO Goncalves and USW President McCall for alleged anticompetitive and racketeering activities to thwart the deal. However, follow-up article noted a new CFIUS review would still not guarantee a favorable conclusion, while observers see courts unlikely to accept Nippon's argument. Better prospects for the civil suit to uncover critical evidence of Goncalves and McCall attempts to influence Biden's ruling. Article noted legal battle faces major uncertainties. US government is expected to ask the court to dismiss the case against Biden, and if accepted would mean an immediate loss for Nippon Steel. Nippon CEO Hashimoto at a press conference said they are not considering alternative strategies (Bloomberg). Reuters cited thoughts concurring that lawsuits against Biden are unlikely to be successful though could provide more time to reach a deal with incoming President Trump while recalling Trump's post on Truth Social last month unequivocally opposing foreign ownership of US Steel. Bloomberg cited another Trump post that US Steel stands to benefit from his tariff policies.

  • China's stock exchanges asked large mutual funds to restrict stock selling:

    • China's main Shanghai and Shenzhen stock exchanges asked mutual funds at end of December, first few days of January to restrict stock selling as Beijing attempted to reassure investors. Reuters, citing three sources familiar with the matter, said at least four large mutual funds received calls from exchanges to ensure net buying of stocks; funds not banned from selling stocks but asked to add more positions by end of trading day to net off selling. Guidance given on 31-Dec, 1- and 2-Jan. Follows reports Monday exchanges had met with foreign institutions to boost investor confidence following poor week in which Shanghai Composite lost 5.7%, Shenzhen 7.3% (in USD terms). Article noted exchanges made similar requests last year on stock slump, has become regular occurrence. China markets rattled at start of 2025 with uncertainty over trade tariffs, economic recovery; yuan slumped below 7.3 per dollar, CGB yields at record lows.

  • Notable Gainers:

    • +21% 6755.JP (Fujitsu General): Paloma Rheem to privatize by acquiring 100% stake via on-market tender offer and share transfer from Fujitsu

    • +9.7% 021240.KS (COWAY Co.): JPMorgan upgrades to overweight from neutral following announcement of new shareholder return policy for FY24 and next three fiscal years

    • +8.0% 6971.JP (Kyocera): may sell unprofitable businesses worth ¥200.0B by FY ending Mar-26

    • +6.9% 4626.JP (Taiyo Holdings): reportedly looking at merger with DIC; DIC denies report it has received merger proposal with Taiyo

    • +4.0% 3993.HK (CMOC Group): reports FY production data

    • +1.3% 1590.TT (Airtac International Group): reports December revenue NT$2.78B, +13.7% y/y

  • Notable Decliners:

    • -7.5% 700.HK (Tencent Holdings): US adds to list of companies classified as "Chinese military companies"

    • -5.1% 9896.HK (MINISO Group Holding): offers $500M equity-linked securities due 2032

    • -3.0% 2269.HK (Wuxi Biologics (Cayman)): to sell Vaccines Ireland Facility Assets to Merck's unit MSD International for $500M (HK$3.90B)

    • -2.8% 300750.CH (Contemporary Amperex Technology Co.): US adds to list of companies classified as "Chinese military companies"

    • -1.5% 5401.JP (NIPPON STEEL): together with US Steel files lawsuits against US government, Cleveland Cliffs

• Data:

  • Economic:

    • Australia

      • November Building Approvals M/M (3.6%) versus consensus (0.5%) and +5.2% in prior month

  • Markets:

    • Nikkei: 776.25 or +1.97% to 40083.30

    • Hang Seng: (240.71) or (1.22%) to 19447.58

    • Shanghai Composite: 22.72 or +0.71% to 3229.64

    • Shenzhen Composite: 29.56 or +1.60% to 1879.02

    • ASX200: 27.70 or +0.34% to 8285.10

    • KOSPI: 3.46 or +0.14% to 2492.10

    • SENSEX: 249.98 or +0.32% to 78214.97

  • Currencies:

    • $-¥: (0.22) or (0.14%) to 157.4270

    • $-KRW: (14.41) or (0.98%) to 1448.8500

    • A$-$: +0.00 or +0.51% to 0.6277

    • $-INR: (0.02) or (0.02%) to 85.7073

    • $-CNY: +0.00 or +0.04% to 7.3257