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StreetAccount Summary - Asian Market Recap: Nikkei (0.26%), Hang Seng (0.86%), Shanghai Composite +0.02% as of 03:10 ET

Jan 08 ,2025

• Synopsis:

  • Asia equities ended mostly lower Wednesday although most were off their troughs: Greater China stocks down again as the Hang Seng tested Nov-24 lows. Japan's Topix underperforming the Nikkei with both in the red. Taiwan also down, India trading lower, Southeast Asia mixed. Small gains in Australia and South Korea continued its bounce back. US futures higher, Europe opened mixed. US dollar stronger, Asia currencies largely flat but yuan lower again. Treasury yields mixed, JGB yields higher again, CGBs hovered near record lows. Crude blends higher, precious metals flat, industrial metals tilting lower. Cryptocurrencies lower again after steep overnight losses.

  • Asia stocks followed through from the overnight selloff in the US and ended mostly lower Wednesday while the region's currencies also resumed their selloff following yesterday's modest rally. Few regional catalysts to reverse the broader trends with Asia investors nervously waiting for clarity on Trump's tariff plans and potential Fed rate cut path. Today, the yuan hit a 16-month low despite another stronger-than-expected fixing first thing by the PBOC, and other interventions by state-owned banks.

  • US-China trade relations expected to remain under the microscope for the foreseeable future; today, the Shandong Port Group said it would stop US tankers from berthing while Tencent and CATL said they were considering a challenge to the Pentagon including them on a blacklist. Elsewhere, Australia monthly headline CPI was slightly above consensus but the closely watched trimmed mean measurement fell closer to the RBA target.

  • Renesas (6723.JP) said it will cut its workforce by 'under 5%' and postpone salary increases as it struggles with subdued demand for its chips. Sumitomo Rubber Industries (5110.JP) is to acquire the Dunlop brand for $701M from Goodyear. Tencent (700.HK) and CATL (300750.CH) have threatened legal action over the Pentagon adding their names to a list of blacklisted companies that work with the Chinese military. Samsung Electronics' (005930.KS) Q4 operating earnings missed estimates as AI-chip competition and struggles to fulfill of Nidia orders blamed. BYD (1211.HK) has been accused by the Brazilian regulator of brining hundreds of Chinese workers into Brazil on irregular visas.

• Digest:

  • Australia headline monthly CPI slightly firmer than expected, trimmed mean eases:

    • Headline CPI rose 2.3% y/y in November, compared to consensus 2.2%. Follows 2.1% in the previous month, marking a three-month high. Main drivers were food & beverages, alcohol & tobacco, recreation and culture. Rent increases remained elevated reflecting ongoing market tightness. Yet new dwelling prices moderated more notably, mainly attributed to builder discounting. Offsetting drags came from sharp declines in electricity and auto fuel. In contrast, trimmed mean inflation eased to 3.2% from 3.5%. ABS downplayed the signal value of the headline series, noting fluctuations stemmed from staggered energy rebates, where impact was lower in November than October. Consistent with broader market attention on trimmed mean as a clearer guide for RBA policy. Bloomberg noted softer trimmed mean may allow a rate cut to come sooner rather than later, though economist forecasts remain divided on timing given sticky core inflation and global uncertainties. Comprehensive Q4 CPI aggregates due later this month will be a key input for the next RBA meeting on February 17-18.

  • Yuan hits 16-month low against dollar despite strong FX support:

    • Onshore yuan fell to lowest level against dollar since Sep-2023 to 7.3316 per dollar amid pressures from strong dollar and looming tariffs from Trump 2.0 despite PBOC's stronger-than-expected midpoint guidance. Central bank set Wednesday's fixing at 7.1887 per dollar, more than 1,500 pips stronger than estimates. Bloomberg noted it was strongest bias since April and seen by market watchers as authorities not yet ready to loosen tight grip on currency. State-owned banks continued to scale back yuan lending offshore, making it more expensive to build short positions. Still traders continued to push yuan to brink of weak end of 2% trading band amid pressure from widest yield discount to US and lackluster economy. Beijing trying to avoid disorderly capital outflows that can result in selloff of yuan assets and derail sluggish recovery. Reuters reported UBS expected Beijing to be determined and capable of managing "relatively moderate depreciation" with 7.4 per dollar at least through H1 and 7.6 by year-end if tariff hikes follow through.

  • Samsung Electronics Q4 preliminary earnings disappoint:

    • Samsung Electronics (005930.KS) Q4 preliminary headline metrics were below FactSet consensus. Most of the attention on operating profit miss after analyst forecast downgrades flagged downside risk. Underlying factor remains struggles to keep up with AI chip competition and fulfillment of Nvidia (NVDA) orders. Additional drags from softer prices for lower end chips amid weak mobile chip sales and rising supply of legacy chips in China (Bloomberg). Recalled executives projected demand for smartphone chips expected to remain soft this year. However, Nvidia CEO Huang on the sidelines of the Las Vegas CES expressed confidence in Samsung's ability to resolve quality issues for HBM chips (Nikkei). Bloomberg noted Huang also acknowledged current issues and said, "they have to engineer a new design." In the meantime, discussions highlighted Samsung is falling behind SK Hynix (000660.KS), currently the sole HBM3 supplier to Nvidia. Samsung issued a rare apology in October for its disappointing Q3 performance, noting progress in AI chip supplies to Nvidia, but there have been no updates since (Reuters). This leaves Samsung relatively insulated from AI tailwinds.

  • China expands consumer trade-in programs to boost consumption:

    • Various officials from NDRC, commerce ministry, MoF and PBOC, among others held press briefing announcing that China will expand scope of consumer trade-ins for home appliances to 12 categories from eight in 2024 and will give more subsidies for consumer electronics purchases in 2025, seen as latest effort to revive lackluster domestic demand (Reuters). Microwave ovens, water purifiers, dish-washing machines and rice cookers will be added in trade-in scheme for home appliances. Mobile phones, tablet computers, smart watches and bracelets under CNY6,000 ($818) could receive 15% subsidies. MoF official said central government has allocated CNY81B for consumer goods trade-ins for 2025 so far. Added last year's CNY150B earmarked from CNY1T special treasury bond issuance for trade-ins of cars, bicycles and other goods achieved "positive effects". Bloomberg added China has renewed such subsidy of up to CNY20K for buyers who trade in old vehicle for new EV or plug-in hybrid while people who purchase gasoline car with engine smaller than 2 liters will get CNY15K rebate.

  • Japan business lobby groups bullish on wage hikes:

    • Nikkei reported New Year ceremonies held by major business industry groups featured broadly bullish rhetoric on wage hikes for this year's shunto talks with many companies signaling increases of more than 5%. Keidanren calling on member firms for pay raises including base hikes rather than just bigger bonuses. Guidance so far meeting Rengo's mission statement for average wage hikes of at least 5%. With lagging growth among small firms still a concern, and Rengo calling for increases of at least 6% in this segment, Japan Chamber of Commerce and Industry pledged efforts to encourage wage growth by urging conviction on price increases. Recall BOJ Governor Ueda said wage momentum in the lead-up to shunto would be a key input for a decision on the next rate hike. Press sources flagged New Year corporate rhetoric and BOJ branch managers meeting as the main sources of information. Next attention turns to wage data due tomorrow. In other discussions, Trump policy was cited as the main challenge ahead for business leaders amid concerns about US tariff hikes. SMBC said inflationary policies pose the risk of financial market disruptions. Mitsui & Co indicated higher priority on US investments.

  • Notable Gainers:

    • +12.6% 011790.KS (SKC Co.): displays glass substrates for AI data center applications at CES 2025

    • +10.1% 000100.KS (Yuhan Corp): partner Johnson & Johnson reports overall survival from Phase 3 MARIPOSA study of RYBREVANT plus LAZCLUZE in NSCLC

    • +4.3% 5706.JP (Mitsui Mining & Smelting): to increase production capacity for MicroThin and VSP foil

    • +3.4% 005930.KS (Samsung Electronics): shares rise despite preliminary Q4 results below StreetAccount estimates; operating profit KRW6.50T vs StreetAccount KRW8.385T and revenue KRW75.00T vs StreetAccount KRW77.207T

    • +1.4% 066570.KS (LG Electronics): reports Q4 preliminary revenue KRW22.778T vs StreetAccount KRW22.685T and operating profit KRW146.10B vs StreetAccount KRW368.67B

    • +1.2% 5110.JP (Sumitomo Rubber Industries): to acquire Dunlop brand, comprising trademarks and intangible assets necessary for operations of brand business in Europe, North America and Oceania for consumer, commercial and other specialty tires for $701M (¥110.75B)

    • +0.8% 2303.TT (United Microelectronics): United Microelectronics reports December revenue NT$18.97B, +11.7% y/y

    • +0.8% 1476.TT (Eclat Textile Co.): Eclat Textile Co. reports December revenue NT$3.42B, +27.6% y/y

  • Notable Decliners:

    • -5.0% 2702.JP (McDonald's Holdings): reports December same-store sales (0.4%) y/y

    • -2.4% 6723.JP (Renesas Electronics): reportedly planning to cut less than 5% of its workforce due to weak chip demand and postpone salary increases

• Data:

  • Economic:

    • Australia

      • November CPI +2.3% y/y vs consensus +2.2% and +2.1% in October

        • Trimmed mean CPI +3.2% y/y vs +3.5% in October

  • Markets:

    • Nikkei: (102.24) or (0.26%) to 39981.06

    • Hang Seng: (167.74) or (0.86%) to 19279.84

    • Shanghai Composite: 0.52 or +0.02% to 3230.17

    • Shenzhen Composite: (5.63) or (0.30%) to 1873.39

    • ASX200: 64.00 or +0.77% to 8349.10

    • KOSPI: 28.95 or +1.16% to 2521.05

    • SENSEX: (485.41) or (0.62%) to 77713.70

  • Currencies:

    • $-¥: +0.12 or +0.07% to 158.1740

    • $-KRW: +4.11 or +0.28% to 1459.0800

    • A$-$: (0.00) or (0.19%) to 0.6220

    • $-INR: +0.07 or +0.08% to 85.8662

    • $-CNY: +0.00 or +0.06% to 7.3307