Jan 15 ,2025
Synopsis:
Asian equities ended mixed Wednesday. Losses for mainland China benchmarks, Taiwan and Singapore. Australia Japan's Nikkei a few points lower, Topix rose slightly. India paring opening gains, Southeast Asia mostly higher. US futures higher, Europe opened with gains. US dollar lower, yen strengthening noticeably post hawkish Ueda comments, yuan flat, some strength elsewhere but rupiah weakened on BI cutting rates. Treasury yields up at the short end, lower at the long. Crude blends, precious metals higher. Base metals mixed as iron ore continued its positive run but copper dipped.
Asia stocks in a directionless session in the absence of strong guidance from Wall Street, and a dearth of significant catalysts regionally. Taiwan's chip-related stocks underperformed on read through to the Nasdaq's losses Tuesday and reports the US could tighten advanced chip exports to China, but elsewhere markets followed recent trends. The Hang Seng gained for a second day following reports Trump was considering staggering tariffs on China imports just as PBOC the accelerated liquidity support with its second-largest net injection via 7D reverse repos on record.
South Korea's political turmoil continued as investigators detained President Yoon and began questioning him over his failed martial law declaration last month. The country's unemployment rate spiked to its highest in 3.5 years, supporting expectations the BOK will ease rates on Thursday. Reuters Tankan showed Japan manufacturer sentiment rose slightly, though outlook unchanged amid China woes and Trump uncertainty. Bank Indonesia lowered its base 7D repo unexpectedly to 5.75% as it pivots to support growth.
Nippon Steel's (5401.JP) vice president says the company wants to work with the Trump administration on a US Steel deal. Country Garden (2007.HK) posted a record loss in 2023 but is expected to post a narrower annual loss in 2024. Tencent (700.HK) and the Guillemot family are considering creating new venture that would include certain Ubisoft assets. The US is to unveil more regulations aimed at preventing advanced semiconductor chips made by TSMC (2330.TT) among others from reaching China. Zijin Mining (2899.HK) and Huafu Fashion (002042.CH) are among 37 Chinese companies added to a list of those banned from exporting to the US because of alleged forced labor practices in Xinjiang.
Digest:
South Korean President Yoon taken into custody on second attempt:
South Korean President Yoon Suk Yeol was detained at his residence by joint probe team in a pre-dawn raid Wednesday, 12 days after repelling initial attempt to detain him over his short-lived martial law declaration in December (Bloomberg, KoreaHerald). Detention confirmed by Corruption Investigation Office for High-ranking officials (CIO), makes Yoon first sitting president to be taken into custody. CIO to focus investigation on insurrection charges, will seek warrant to formally arrest Yoon within 48 hours or he may be released, although CIO may apply for extension to detention for up to 20 days. Yonhap reported police also attempted to detain acting chief of Presidential Security Service for allegedly obstructing investigators. Yoon accused of sending troops to National Assembly to prevent lawmakers from voting down decree; charge not subject to presidential immunity. Yoon's defense to center on martial law declaration being 'act of governance' meant to warn opposition over abuse of legislative power.
South Korea unemployment rate rises sharply:
Unemployment rate was 3.7% in December, a three-and-a-half year high, well above FactSet consensus 2.9% and follows 2.7% in the previous month. Also coming off record lows earlier in the year. Total unemployed rose to 1,081K sa from 787K in November as employment fell to 28.4M from 28.6M. Labor force participation edged up to 69.6% from 69.5%. Other details in non-seasonally adjusted terms showing a 1.9% y/y downturn in temporary workers while daily workers saw declines accelerating sharply to 14.7% from 9.9%. In contrast, growth in regular employees remained largely steady at 1.2%. Skewed weakness in non-regular employment consistent with sector breakdown where main driver was deterioration in construction while commerce edged to deeper declines. Still, manufacturing jobs continued to fall. Headline surprise set to exacerbate broad pessimism on the near-term economic outlook with household sentiment depressed by the ongoing political fallout and recent plane crash.
Bank Indonesia lowers base interest rate 25 bp in surprise move:
Indonesia's central bank (BI) lowered its key interest rate by 25 bps to 5.75% in surprise move, triggering an immediate weakening of rupiah late Wednesday. BI had been expected by economists to keep 7D repo rate on hold as it sought to defend rupiah, which has weakened significantly since dollar began its surge in early November despite repeated BI interventions. Working in BI's favor for cut decision was record high foreign exchange reserves and inflation that was at low end of bank's 1.5-3.5% target for FY 2024. Bank also lowered lending facility 25 bp to 6.5%, deposit facility to 5.0% from 5.25%. Bank said in statement decision consistent with lower inflation forecast, rupiah maintenance and need to boost economic growth; loose policy pursued to increase bank credit and financing to facilitate growth (Bloomberg).
BOJ Governor Ueda also says rate hike up for discussion next week:
Reuters cited comments by BOJ Governor Ueda at a Regional Banks Association of Japan conference, reiterating that board members will raise rates if improvements in the economy and price conditions continue. Also repeated key determinants will be US economic policy and momentum going into the 2025 shunto talks. Noted there was "a lot of positive talk on the wage outlook" out of the BOJ branch managers meeting last week. Thorough data analysis will be compiled in the quarterly Outlook Report and will form the basis of discussions about a rate hike next week. Echoes remarks from Deputy Governor Himino yesterday. Recall Himino pointed to Trump's inaugural address next week (20-Jan) to provide clarity on US policy direction. In the meantime, cited many upbeat views on US growth outlook, hinting that board members may hold positive assumptions. Consensus polls have yet to be updated following dovish takeaways from Ueda's press conference in December, though momentum seemed to be leaning toward a March hike on the margins.
RBI's new governor may let rupee off leash:
Bloomberg and Reuters both reported new RBI Governor Sanjay Malhotra may allow rupee more freedom to move in tandem with Asia peers, and be 'more judicious' in its use of forex reserves to defend currency. Bloomberg, quoting people familiar with regulator's thinking, said Malhotra showed interest in RBI's rupee intervention and not objected to forex support plans however may allow wider gap in closing level of rupee on day-on-day basis if situation warrants it. Reuters, citing three sources, said bank to intervene when necessary to smooth volatility but won't 'go against tide and massively intervene to protect any levels. Article also said Malhotra relatively less involved in day-to-day management of currency, added bank making fewer checks on banks' market activities, allowing more flexibility in currency position sizes. Articles said strategy a departure from former Governor Das on currency policy; also comes as rupee has depreciated around 3% since US Presidential election, reached series of record lows against USD.
Notable Gainers:
+14.0% 6532.JP (BayCurrent Inc): reports 9M earnings with revenue and operating income increase year-on-year
+12.5% 3697.JP (SHIFT Inc): reports Q1 earnings; confirms FY guidance
+5.7% 1448.HK (Fu Shou Yuan International Group): board to consider declaring special dividend at 24-Jan meeting
+4.6% 9602.JP (Toho Co): reports 9M earnings with revenue and operating income increase year-on-year
+3.0% 3968.HK (China Merchants Bank): reports preliminary FY net income attributable CNY148.39B vs FactSet CNY145.78B
+2.5% 2268.HK (WuXi XDC Cayman): reports FY adj net income attributable to exceed +170%y/y vs prior year's CNY412.3M, implying CNY1.11B+
Notable Decliners:
-14.8% 3994.JP (Money Forward): reports FY earnings with revenue below FactSet estimates
-5.9% 2899.HK (Zijin Mining Group): DHS bans imports from additional 37 Chinese companies over allegations of Uyghur forced labor; subsidiaries of Zijin Mining Group among entities added
-4.3% 4443.JP (Sansan): reports Q2 revenue with revenue below FactSet estimates
-3.2% 2333.HK (Great Wall Motor): guides FY net income attributable CNY12.40-13.00B vs FactSet CNY12.70B
Data:
Economic:
Japan
January Reuters Tankan manufacturers sentiment index +2 vs -1 in prior month
Service sector index +31 vs +30 in prior month
South Korea
December unemployment rate 3.7% vs FactSet consensus 2.9% and 2.7% in prior month
Markets:
Nikkei: (29.72) or (0.08%) to 38444.58
Hang Seng: 66.29 or +0.34% to 19286.07
Shanghai Composite: (13.82) or (0.43%) to 3227.12
Shenzhen Composite: (14.71) or (0.77%) to 1901.14
ASX200: (17.70) or (0.22%) to 8213.30
KOSPI: (0.59) or (0.02%) to 2496.81
SENSEX: 98.20 or +0.13% to 76597.83
Currencies:
$-¥: (1.15) or (0.73%) to 156.8190
$-KRW: (1.28) or (0.09%) to 1458.8800
A$-$: +0.00 or +0.23% to 0.6209
$-INR: (0.26) or (0.30%) to 86.2769
$-CNY: (0.00) or (0.02%) to 7.3308
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