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StreetAccount Summary - Asian Market Recap: Hang Seng (1.00%), Shanghai Composite (0.25%), Kospi (1.04%) as of 03:10 ET

Jan 13 ,2025

  • Synopsis:

    • Asian equities finished lower across the region Monday. Taiwan, South Korea and Australia saw the steepest losses. More declines in Greater China with the main boards lower, although the Hang Seng finished off its trough. Australia, Southeast Asia markets all lower although relative outperformers. India trading sharply down. Japan closed for a holiday but Nikkei futures trading lower. US futures lower again, Europe opened with losses. Dollar DXY index rose to within a whisker of 110 and highest since Nov-22; more losses for AUD and NZD, yen notably stronger, yuan flat as supportive measures announced. Treasury yields mostly lower, JGB and CGB yields a little higher. Crude sharply up after fresh sanctions imposed on Russia; precious metals slightly weaker, pressure on base metals.

    • Asia markets followed through from Wall Street's down day on Friday with losses throughout the region. Technology-dominated markets underperformed while other growth benchmarks underperformed value, ex mainland China. Hang Seng and Shanghai equities continued their poor start to the year although there was some support for bonds and the yuan, following the PBOC and other currency regulators move to support the currency.

    • China trade data today confirmed ongoing narrative that Chinese exports are being 'frontloaded' ahead of any worsening of trade sanctions, sending the trade surplus to a ten-month high. China loan data awaits investors in the next test of how the fall's stimulus measures have impacted the economy. Elsewhere, South Korean exports saw negligible growth in first 10 days of January while manufacturing sentiment remained subdued.

    • President Biden has delayed the enforcement of an order blocking Nippon Steel's (5401.JP) takeover of US Steel to June 2025. Shimao Group (0813.HK) received a liquidation petition from an investment fund over a CNY258M ($35.2M) cross-border loan guarantee provided by the property developer. Infosys (500209.IN) has accused rival Cognizant of anti-competitive behavior and poaching key executives in Texas counterclaim filing. Bain Capital has raised its offer price for Insignia Financial (IFL.AU) to $1.8B, matching an existing bid from CC Capital offer.

  • Digest:

    • PBOC, market regulators pledge to boost support for the yuan:

      • China's foreign exchange committee (CFXC) said it would take steps to deal with 'behaviors disrupting market order', prevent yuan rate from overshooting, increase forex market resilience, all in face of yuan weakening to 16-month low. Body consisting of PBOC, market regulators, financial institutions said would ensure currency stable, yuan to trade at 'reasonable' levels (Bloomberg). PBOC also Monday adjusted rules permitting firms, financial institutions to borrow cash from overseas, known as macro-prudential parameter, raising level to 1.75 from 1.5 (Xinhua). Monday's daily fixing marginally stronger versus Friday's point signaling Beijing not allowing yuan to depreciate rapidly; offshore yuan traded slightly stronger early Monday, CGB 10Y also ticking higher. Separately, PBOC Governor Pan said bank will promote consumption's role in economy and move away from its sole focus on investment, representing a significant shift in the bank's growth model (Bloomberg).

    • Yuan seen headed for slow-burn depreciation:

      • Nikkei discussed the yuan outlook with investors anticipating gradual weakening vs dollar. Main dynamic seen as confluence of PBOC's aim to maintain stability amid pressure from sharply lower domestic rates as well as looming Trump tariffs. Attention heightening as yuan market levels running up against the 2% upper bound from PBOC fixings, which have been mostly unchanged in recent weeks. In addition, policy rhetoric has strengthened emphasis on market oversight. Some analysts still believe Beijing will tolerate a weaker yuan, which could help exporters offset the impact of higher tariffs under the incoming Trump administration. Yet others argue yuan devaluation would likely trigger currency manipulator designation and Trump could easily raise tariffs further. Most agree that any depreciation needs to be gradual as it risks fueling capital flight from China, undermining its ambitions to turn the yuan into a global currency and escalating trade tensions with the US. On PBOC rate policy, yuan pressure limiting room for rate cuts and some suggestion this may explain why earlier guidance from Governor Pan for another 25-50 bp RRR cut by year-end did not materialize.

    • China trade data firmer than expected:

      • Customs exports rose 10.7% y/y in December, above consensus 7.3%, following 6.7% in the previous month. Sequential pickup was expected as a function of front-loading ahead of anticipated tariff hikes under the incoming Trump administration (Reuters, Bloomberg). Imports unexpectedly rose 1.0% vs expected 1.5% decline, following 3.9% drop in November. Similarly, impending US export controls on tech exports to China thought to augur for upside risk in the near term. China trade frictions with US and Europe dominating the narrative following prior scrutiny of Beijing's supply-side focused economic policies leading to exporting its domestic overcapacity. Another theme is that China is also exporting deflation as volume growth is outpacing nominal values. Press noted latest print may well be the final high point for US-bound shipments with Trump returning to office next week. Most notable news lately came in a media report indicating US tariffs may be confined to critical items, though promptly denied by Trump. Biden administration reportedly proceeding with tighter restrictions on AI chip exports (largely aimed at China and Russia) as well as effective bans on the use of China EV tech in US.

    • Strategists remain constructive on China equities amid volatile start to 2025:

      • China markets enduring turbulent beginning to 2025 with CSI 300 off to its worst start to a year since 2016. Persistent deflation risks amid a struggling economy weighing on risk sentiment while Trump's looming inauguration heightening attention on downside risks from tariffs and trade tensions. Meanwhile, stimulus announcements failing to generate much traction amid policy vacuum ahead of March NPC. However, strategists remain constructive with Goldman Sachs maintaining its overweight rating on A- and H-shares, forecasting 20% gain by end-2025 (Bloomberg). Cited tailwinds from improving sentiment and liquidity backdrop, policy support alleviating housing and external headwinds, and continued strong shareholder returns. JP Morgan saw potential for recovery from late January on Trump policy clarity and China policy response that includes long-awaited consumption pivot. UBS anticipates valuation support from earnings growth recovery and fiscal stimulus, with rebound in credit impulse also aiding market performance. HSBC also recently forecast 21% gain for HSCE in 2025, citing support from improved economic prospects and shift in policy tone (Bloomberg).

    • China stimulus rhetoric remains incremental:

      • Vice Finance Minister Liao Min told a press conference Friday that China is poised to implement a clear-cut fiscal policy in 2025 that aims to intensify countercyclical regulation and will be "highly proactive" (Xinhua). Added fiscal deficit will increase significantly in 2025 while keeping an eye on longer term sustainability. MOF will increase transfer payments to local governments to enhance their fiscal capacity, while allocating a larger scale of government bonds, including ultra-long special treasury bonds and local government special bonds. Efforts to focus on expanding scope of special bonds to support the property market. With more attention on private consumption, more support to go towards stabilizing employment and income growth, strengthening the social security system and developing new consumption sectors. Noted ample fiscal policy space and variety of available tools. Further measures to be gradually unveiled. Recall that such guidance was largely announced late last year and markets await full stimulus details at the legislative session in March.

    • Notable Gainers:

      • +16.9% 6666.HK (Evergrande Property Services Group): wins suits against China Evergrande seeking recovery of CNY13.4B deposits seized by banks

      • +6.9% 2777.HK (Guangzhou R&F Properties): reports December total contracted sales CNY1.0B

      • +2.2% 1919.HK (COSCO SHIPPING Holdings): guides CAS FY net income attributable CNY49.08B vs FactSet CNY48.34B

      • +2.2% 139480.KS (E-Mart): chairman Chung Yong-Jin to acquire 10% stake from his mother Myung Hee-lee

    • Notable Decliners:

      • -12.0% 2268.HK (WuXi XDC Cayman): holder STA Pharmaceutical Hong Kong reportedly seeks to sell 37.8M shares at HK$30.855-31.515/share

      • -5.1% 2454.TT (MediaTek): reports December revenue NT$41.68B, (4.6%) y/y

      • -0.3% 2238.HK (Guangzhou Automobile Group): guides CAS FY net income attributable CNY0.80-1.20B vs year-ago CNY4.43B

  • Data:

    • Economic:

      • China

        • December trade balance $104.8B vs consensus $99.8B and $97.4B in prior month

          • Exports +10.7% y/y vs consensus +7.3% and +6.7% in prior month

          • Imports +1.0% y/y vs consensus (1.5%) and (3.9%) in prior month

      • Australia

        • December ANZ-Indeed job advertisements +0.3% m/m vs revised (1.8%) in November

    • Markets:

      • Nikkei: Closed

      • Hang Seng: (190.15) or (1.00%) to 18874.14

      • Shanghai Composite: (7.77) or (0.25%) to 3160.76

      • Shenzhen Composite: 1.18 or +0.06% to 1838.46

      • ASX200: (102.20) or (1.23%) to 8191.90

      • KOSPI: (26.22) or (1.04%) to 2489.56

      • SENSEX: (776.70) or (1.00%) to 76602.20

    • Currencies:

      • $-¥: (0.15) or (0.09%) to 157.5210

      • $-KRW: (5.58) or (0.38%) to 1469.3100

      • A$-$: +0.00 or +0.03% to 0.6150

      • $-INR: +0.33 or +0.38% to 86.5159

      • $-CNY: (0.00) or (0.03%) to 7.3308

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